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ANTHONY S. COOPER DISTRICT OF COLUMBIA AUDITOR 01 5:97:SDG:SD:k1 OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR DISTRICT'S PURCHASE OF PRESIDENTIAL INAUGURAL TICKETSSeptember 18, 1997 Pursuant to a request initiated by Councilmember Charlene Drew Jarvis, the Office of the District of Columbia Auditor examined the District of Columbia government's purchase of a block of 400 tickets at $150 per ticket for the 1997 D.C. Presidential Inaugural Ball. The District's total cost for a block of 400 tickets was $60,000. OBJECTIVES. SCOPE, AND METHODOLOGY The objectives of this audit were to:
In conducting this audit, the Auditor interviewed officials of: the District of Columbia's Presidential Inaugural Committee (D.C. PIC) which coordinated the ticket purchase; the Office of Tourism and Promotions; the D.C. Committee to Promote Washington (Committee to Promote); and officials of the Clinton Presidential Inaugural Committee. The Auditor reviewed and examined all available files and correspondence pertaining to the $60,000 ticket purchase including the initiation of the transaction; procedures followed in selling the tickets, collecting monies, and depositing monies in appropriate accounts; and methods used to reconcile the account. This audit was conducted in accordance with generally accepted government auditing standards and included such tests of the records as deemed necessary and appropriate under the circumstances. During the 1997 Presidential Inauguration, the Mayor of the District of Columbia appointed a chairperson and a coordinator to the District of Columbia's Presidential Inaugural Committee (D.C. PIC) to work with the Presidential Inaugural Committee (PIC) in coordinating PIC events. These events included the presidential inaugural parade, swearing-in ceremony, presidential inaugural ball, and other events. The D.C. PIC was housed in the same location as PIC at 801 I Street, N.W. The District of Columbia's Office of Emergency Preparedness, in conjunction with the Metropolitan Police Department, Fire Department, Department of Public Works, Department of Human Services, and the Department of Consumer and Regulatory Affairs worked closely with PIC in providing safety, security, and other services during the PIC events. The role of the coordinator of the D.C. PIC was to coordinate the involvement of residents of the District of Columbia in inaugural activities, which included ensuring that invitations were mailed to District residents so that they would be able to purchase tickets to attend the D.C. Presidential Inaugural Ball. Chronology of Events That Led to the Purchase of a Block of Tickets to the Presidential Inaugural Ball The Auditor's review of the chronology of events leading to the decision to purchase a block of tickets to the Presidential Inaugural Ball was based primarily on discussions with the D.C. PIC coordinator and the acting director of the Office Tourism and Promotions. The D.C. PIC coordinator indicated that on or about December 30, 1996, after discussions with the office of the District of Columbia's Congressional Delegate, it was learned that only 50 invitations had been mailed to District residents. A meeting was then held with PIC officials to discuss the issue of mailing additional invitations to District residents so that they would be able to purchase tickets to attend the D.C. Presidential Inaugural Ball. This meeting resulted in D.C. PIC submitting approximately 500 names and addresses on a computer diskette to PIC on or about January 2, 1997. The Director of Outreach at PIC informed the D.C. PIC coordinator that the information submitted on diskette could not be used because it was incompatible with their software. The Director of Outreach at PIC then recommended calling D.C. residents to provide them the opportunity to purchase tickets. Skeptical of this proposed solution, the D.C. PIC coordinator consulted with the acting director of the Office of Tourism and Promotions because she had coordinated activities on behalf of the District government with PIC for the 1993 Presidential Inaugural Ball and other inaugural events. The acting director of Tourism and Promotions indicated that during the 1993 Presidential Inaugural Ball, the District received a block of tickets from PIC to sell for the ball and parade as well as tickets to distribute for the swearing-in, gala rehearsal, and other events. Also, according to the acting director of the Office of Tourism and Promotions, the D.C. PIC coordinator was told that the District could not receive tickets for the ball without purchasing them in advance. It was decided, at this point, to purchase a block of tickets to sell to individuals interested in attending the D.C. Presidential Inaugural Ball. On January 3, 1997, the Mayor submitted a letter to the executive director of the D.C. Committee to Promote Washington requesting a check in the amount of $60,000 to purchase a block of 400 tickets to the D.C. Presidential Inaugural Ball. The source of the $60,000 represented appropriated funds previously transferred to the Committee to Promote. The funds used to purchase the tickets were intended to fund other projects. The Committee to Promote issued a check for the purchase of the tickets on January 6, 1997. According to the acting director for the Office of Tourism and Promotions, the check was then hand carried to the D.C. PIC office. The D.C. PIC coordinator required PIC officials at that time to sign and acknowledge receipt of the $60,000. However, because tickets were not pre-printed, District officials were not able to obtain the 400 tickets on the same day. A ticket order was generated and the District picked up its tickets several days later around January 9, 1997. According to District and PIC officials, the delay was due in part to inclement weather in Dallas, Texas where the tickets were being printed. THE OFFICE OF TOURISM AND PROMOTIONS AUTHORIZED THE D.C. COMMITTEE TO PROMOTE WASHINGTON TO USE PUBLIC FUNDS TO PURCHASE INAUGURAL BALL TICKETS Appropriated Funds Were Inappropriately Used to Purchase Presidential Inaugural Tickets The acting director of the Office of Tourism and Promotions authorized the D;C. Committee to Promote Washington to issue a check in the amount of $60,000 to purchase a block of 400 inaugural ball tickets at the request of the Mayor of the District of Columbia. Using appropriated funds previously transferred to the Committee and earmarked for another project, the D.C. Committee to Promote Washington issued a check to the Presidential Inaugural Committee for $60,000 on January 6, 1997. Additionally, the acting director of OTP authorized payment for the purchase of promotional items for an inaugural related event totaling $2,850.1 According to the invoice, the acting director purchased 2,500 commemorative writing pens with an imprinted logo stating "We're Glad You're Here Mayor Marion Barry, Jr." In total, OTP authorized the expenditure of approximately $62,850 of District funds on inaugural related expenses. The D.C. Committee to Promote Washington is a nonprofit quasi-public organization that receives a significant portion of its revenues, approximately $2,025,000 annually, from Hotel Occupancy Taxes collected by the District government. According to the Auditor's review of financial information, the Office of Tourism and Promotions transferred approximately $583,446 in District government appropriated funds during fiscal years l996 and l 997 to the D.C. Committee to Promote Washington, Inc. Table I reflects OTP's transfers to the D.C. Committee to Promote Washington for various programs and projects. TABLE I
Source: Office of the DC Auditor, Office of Tourism and Promotions At the time of the inaugural ticket request, OTP had on deposit in the Committee's bank account approximately $110,000. Of that amount, $88,000 was encumbered (check had been generated) for participation in area-wide marketing conducted by the Greater Washington Initiative, leaving an unencumbered balance of only $22,000. In a letter dated January 6, 1997, the acting director of OTP requested that the Committee to Promote, "Please put a hold on the check to the Greater Washington Initiative in the amount of $88,000 until the end of the current month. This timeframe will allow ample time for reimbursement to the Committee from the sale of the D.C. Inaugural Ball tickets. Thank you for your assistance in this process." OTP's directive to the Committee to Promote Washington to cancel payment to the Greater Washington Initiative to allow sufficient funds to purchase the tickets was inappropriate. OTP's request effectively diverted appropriated funds intended for a specific project to another purpose totally unrelated to the transfer. The Committee to Promote cancelled payment to the Greater Washington Initiative and issued the $60,000 check (on January 6, 1997) to the Presidential Inaugural Committee. Despite the OTP acting director's assurance, they were unable to reimburse the D.C. Committee to Promote the full amount by the end of January. The Committee to Promote Washington Issued a Financial Management Policies Agreement to Govern the Transfer of Funds During Fiscal Year 1997 An agreement dated November 1, 1996 entitled, "Financial Management Policies," established the policies governing the D.C. Committee to Promote Washington's receipt and disbursement of funds transferred to it by the District's Office of Tourism and Promotions. Specifically, the agreement states:
Prior to the November 1, 1996 Financial Management Policies agreement, there was no agreement in place officially governing the Committee to Promote's receipt and disbursement of OTP funds. According to the Committee to Promote's former accountant, OTP would transfer funds largely to reimburse the Committee for joint expenses shared by both where the Committee paid the full cost in advance. More recently, however, OTP has maintained a balance of funds in the Committee to Promote Washington's bank account. As a result of this change, the Committee developed procedures to address the receipt, deposit and disbursement of OTP's funds. The Committee to Promote maintains a bank account at Independence Federal Savings Bank for their general fund activity. OTP's transfer of funds were deposited into the Committee to Promote's account where they were commingled with all other deposits made by the Committee. The Auditor verified OTP's transfers to the Committee to Promote by examining bank statements, matching deposit of cash records including deposit slips and copies of checks and money orders. THE OFFICE OF TOURISM AND PROMOTIONS COULD NOT ACCOUNT FOR THE SALE OF ALL TICKETS RESULTING IN A COLLECTION SHORTFALL OF $601 As previously stated, the District of Columbia government through its Office of Tourism and Promotions and the D.C. Committee to Promote Washington expended $60,000 to purchase a block of 400 tickets to enable District residents to attend the D.C. Presidential Inaugural ball. To date, District officials have only collected and deposited a total of $59,399, including a $10 returned money order fee, from the sale of inaugural ball tickets and from a refund issued by the Presidential Inaugural Committee. The refund, which totaled $35,250, was issued on May 1, 1997 to reimburse the District of Columbia government for unsold inaugural ball tickets. Table II presents the District's collections from the sale of Presidential Inaugural Ball tickets and the PIC refund. TABLE II
Source: Office of the D.C. Auditor, D.C. Committee to Promote Washington As previously stated, the block of 400 tickets cost the District of Columbia government $60,000. As reflected in Table II, deposits from ticket sales totaled $24,159. The PIC ticket refund totaled $35,250. Because deposits, including the refund the District government received from the PIC and a $10.00 adjustment, only total $59,399, there is a shortfall of approximately $601. Based upon the Auditor's reconciliation, the OTP failed to collect payment for approximately 4 tickets (@$150.00 each) totaling $600. As a result, OTP officials did not reimburse the Committee to Promote the full $60,000 that was expended (using funds previously transferred by OTP) to pay for the cost of the inaugural ball tickets. OTP's acting director noted, until recently, the Committee to Promote's accountant indicated that receipts from the sale of inaugural tickets totaled $60,000. This was confirmed by the Committee to Promote. However, the Auditor identified a shortfall and after further review, the Committee determined that a shortfall did exist. OTP should have independently verified this information though its own reconciliation process. DISTRICT OFFICIALS WERE REIMBURSED $35,250 BY THE PRESIDENTIAL INAUGURAL COMMITTEE FOR UNSOLD TICKETS On May 1, 1997, the District of Columbia government received a check from the Presidential Inaugural Committee for $35,250 as reimbursement for 235 unsold inaugural ball tickets. According to District of finials, the Mayor, working through a contact person associated with the Presidential Inaugural Committee organizers, arranged for the check to be delivered after it was determined that the District was unable to sell all the tickets it purchased for the ball. The check was made payable to the D.C. Committee to Promote Washington at 801 Pennsylvania Avenue, N.W. Washington, D.C. 20004. After receiving the check, District of finials then forwarded it to the D.C. Committee to Promote Washington. The check was deposited by the Committee to Promote on May 5, 1997, bringing the total deposits from ticket sales and the PIC refund to $59,399 (including a $10 returned money order fee). Officials from PIC indicated that they did not issue a refund until the District submitted the unsold tickets for their review and inspection. According to PIC officials, the review and inspection consisted of verification that the perforated ticket stub was intact and that the ticket had not been defaced. Table III presents a summary of tickets purchased and sold. TABLE III Source: Office of the DC Auditor DISTRICT OFFICIALS RECORDKEEPING PRACTICES GOVERNING TICKET SALES WERE DEFICIENT RESULTING IN A POOR AUDIT TRAIL The Of lice of Tourism and Promotions' recordkeeping practices for the sale of tickets to the presidential inaugural ball were deficient. OTP officials did not establish any guidelines or written procedures to govern the sale of the tickets or the collection and deposit of cash and related proceeds. Cash collections could not be traced to a payee. Further, OTP failed to maintain adequate records detailing who purchased tickets and the method and amount of payment. As noted earlier, according to the acting director for OTP, the District decided to purchase a block of 400 tickets after receiving numerous inquiries from the public concerning the presidential inaugural ball. Working closely with D.C. PIC, the Office of Tourism and Promotions handled ticket sales during the week. On weekends and during some evenings, tickets were sold out of the D.C. PIC office under the supervision of the D.C. PIC coordinator. According to the D.C. PIC coordinator, security measures at PIC headquarters made it difficult to sell tickets from that office. At the same time, the D.C. PIC coordinator further indicated that "the D.C. PIC office was not a secure location for keeping the tickets and money because of the ease of accessibility to the of flee by personnel in the building." Additionally, officials at OTP indicated that tickets were sold on the day of the Inaugural Ball directly from the Mayor's inaugural parade box. There is no record of who purchased the tickets from the Mayor's inaugural box. OTP's only supporting documentation consisted of several notebook pages containing names and in some cases the number of tickets purchased along with the amount paid. The individual responsible for recordkeeping could not provide a comprehensive accounting of the names of persons from whom monies were collected from the sale of tickets. Initially, the individual assigned to handle the sale of inaugural tickets indicated that she recorded sales information in the notebook to keep track of how many tickets were being sold During her absences, tickets continued to be sold but this detailed information was not always obtained. As a result of OTP's incomplete records, the Auditor was unable to develop a complete listing of all the individuals who purchased tickets to attend the ball. This information would have assisted the Auditor as well as OTP in identifying who received tickets without paying. Additionally, the D.C. PIC coordinator developed a Presidential Inaugural Worksheet to record information on individuals and/or organizations interested in attending the presidential inaugural ball. According to the D.C. PIC coordinator, the purpose of the form was to record who bought tickets. A notation was made when tickets were picked-up or if cancellations occurred. However, there was no indication as to the amount received from ticket purchasers or their method of payment. Further, this method of recording was discontinued after a brief period. The D.C. PIC coordinator indicated that these forms were kept in a separate black notebook. However, the black notebook was never made available to the D.C. Auditor. The only worksheets provided to the D.C. Auditor were those in the D.C. PIC coordinator 's files. After indicating the black notebook existed, the D.C. PIC coordinator later indicated that perhaps the book was mistakenly discarded. Notwithstanding the efforts of OTP, as well as the D.C. PIC coordinator, the District's recordkeeping practice for the sale of inaugural tickets was deficient. District officials offered conflicting explanations on what basis tickets were sold. Initially, District officials maintained that tickets were only sold on a cash basis (including money orders and cashiers checks) and that no credit cards or personal checks were accepted. Despite this representation, the Auditor found that personal checks were in fact accepted as payment for the tickets. The acting director of OTP noted that this practice was not widespread but that personal checks were accepted from individuals and companies when she was confident that their checks would not pose a problem for the District. Controls Over the Collection and Deposit of Cash and Related Proceeds Were Inadequate The Office of Tourism and Promotions failed to adequately coordinate and consult with the appropriate District agencies to ensure that the accounting for ticket sales was proper and that its handling of cash and related proceeds were in accordance with established accounting policies and procedures. OTP did not maintain a cash receipts journal containing the name, number of tickets sold to individuals and/or organizations, and the amount of cash collected from each respective sale. OTP indicated that cash and related proceeds were collected and deposited in a lockbox. The lockbox was maintained at OTP in an office desk drawer and collections were kept there until they were submitted to the Committee to Promote Washington for deposit into the Committee's bank account. OTP indicated that deposit and related cash proceeds were submitted to the Committee to Promote Washington daily. The Auditor found that OTP did not always collect funds when tickets were sold. Instead, OTP allowed several individuals and organizations to obtain tickets and submit payments at a future date. Table IV highlights those individuals and organizations who received tickets and were allowed to pay at a future date. TABLE IV
Source: Office of the D.C. Auditor As reflected in Table IV, OTP did not require that all monies from the sale of the presidential inaugural tickets to be paid in cash or equivalent before the event. The presidential inaugural ball was held on January 20, 1997 and funds were collected and deposited for almost five months after the event (see Appendix I). Payments due from the sale of tickets should have been collected by OTP at the time the tickets were sold. Further, these funds which were then submitted to the D.C. Committee to Promote, should have been deposited daily. Table IV reflects that one deposit was made approximately four weeks after the date of the check, two deposits were made two weeks after the date of the check, and two were made approximately one week after the date of the check. In several instances, the Committee to Promote failed to make timely deposits of cash and related receipts submitted by OTP. The timely deposit of cash receipts ensures that cash and related proceeds are adequately protected from theft and pilferage. Additionally, issuing tickets without receiving payment at the time of issuance increased the possibility that the District would not receive payment at all -- which actually occurred. OTP was responsible for the sale of the tickets and the collection of payment at the time of sale. The Auditor reviewed a copy of a letter and invoice dated January 28, 1997, which was submitted by the acting director of OTP to the Chairperson of the Washington Convention Center Authority (WCCA) for the 18 tickets obtained by the WCCA. Despite this, WCCA did not submit payment for the tickets it obtained until May 5, 1997. Further, the Auditor did not see any evidence that OTP submitted invoices to the other individuals/organizations that owed OTP for the tickets. The delay in collection of payment resulted in OTP establishing accounts receivables for the amounts owed based on ticket sales. A cash receipts journal should have been used for recording all receipts of cash. The appropriate entry should have been made for each sale that took place. OTP was negligent in establishing sufficient procedures governing its collection of cash.
The Auditor concludes that OTP's transfer of District government appropriated funds outside the appropriation control process was inappropriate. In doing so, OTP, bypassed the regular review and approval process required for payment of expenditures. OTP transferred appropriated funds to the Committee to Promote reportedly for specific programs and projects, however, they diverted a portion of these funds and used them to purchase the Presidential Inaugural Ball tickets. OTP further authorized payment of $2,850 to pay for commemorative writing pens as contribution to a joint effort organized by the Washington Convention and Visitors Association to welcome tourists to Washington, D.C. The Auditor further concludes that the controls governing the tickets sales and the collection of cash and related proceeds were lax and deficient. There were no established policies and procedures to govern the sale of the tickets and no complete records on who purchased tickets and their method of payment. OTP could not account for the sale of all tickets resulting in a collection shortfall of $601. The absence of adequate controls governing the ticket sales raises a number of possibilities as to the reason for the shortfall. The tickets could have been given away, cash or checks could have been lost or misplaced, or cash could have been diverted. This determination could not be made based on the information that was available. This audit has raised some serious concerns about the relationship between the Office of Tourism and Promotions and the D.C. Committee to Promote Washington. Particularly, the transfer of funds that were earmarked for a specific project but diverted and used to cover other expenditures such as the purchase of the Presidential Inaugural Ball tickets. As a result of this audit, the Office of the D.C. Auditor is conducting an audit of all appropriated funds received and expended by the Committee to Promote on behalf of the Office of Tourism and Promotions. Further, the Auditor will examine in detail all funds transferred to the Committee to Promote; the intended purpose of the transferred funds; and the actual use of the funds. Respectfully submitted, Anthony S. Cooper PRESIDENTIAL INAUGURAL TICKETS
Source: Office of the D.C. Auditor On September 16, 1997, the Office of the District of Columbia Auditor transmitted this report, in draft, to the Acting Director, Office Tourism and Promotions. Comments on our draft report were received from the Office of Tourism and Promotions on Thursday, September 18, 1997. Where appropriate, changes to the final report were made to reflect the comments. The comments in their entirety are included with this report. Government of the District of Columbia September 18, 1997 Mr. Anthony S. Cooper Dear Mr. Cooper: After reviewing your draft report entitled, "District's Purchase of Presidential Inaugural Tickets", I would like to provide the following comments for your revision and corrections in the final report: The Office of Tourism and Promotions (OTP) did have verbal guidelines to govern the sale of the tickets and deposits of cash and related proceeds. Prior to the sale of tickets, the acting director briefed the DC PIC coordinator and all OTP staff involved in the sale of tickets and handling of monies for the inaugural tickets on the prescribed procedures and processes to be followed in managing the sale and receipts of all monies. As the acting director, I consulted with the staff and monitored the process daily. The few times that personal checks were received, they were immediately brought to my attention for approval. The individuals responsible for the sale of tickets were required to adhere to the following instructions:
Exasperating this situation is the fact that OTP does not have on staff a financial person. OTP always relied on the expertise and support of the financial staff from the D.C. Committee to Promote in processing and tracking financial transactions. However, unfortunately, on the last day of ticket sales, these procedures were not completely followed primarily due to my inadvertently having left the notebook at the office.. Regarding the recommendations mentioned in the report, the following actions have already been implemented: At the beginning of FY 97 and prior to this audit, OTP had discontinued the practice of transferring appropriated District government funds to the D.C. Committee to Promote. As you are aware, initially the D.C. Committee to Promote provided documentation regarding a shortfall of $118.00 in the ticket sales, which was rectified. Later, the auditors discovered an additional shortfall in the amount of $601.00. The Committee disagreed with that amount. At that point, I asked representatives from the Committee to Promote and the auditors office to meet and resolve the discrepancy. Subsequently, they both determined that the amount due was $601.00. All appropriated dollars have been paid to the Committee to Promote for deposit. There exists no outstanding balance on ticket sales. I await a copy of the revised report including these revisions. Please contact me when it is available at 727-4511. Thank you.
1. The commemorative pens were purchased by OTP as part of a joint effort organized by the Washington Convention and Visitors Association to welcome tourists attending the 97 Presidential Inaugural festivities and events. Souvenir bags containing the pens along with other items purchased by other organizations were prepared and given to District taxi drivers for distribution to tourists. 2. The $10 return item fee represents charges for a money order that was returned for insufficient funds. 3. Tickets dispersed include tickets that were sold and approximately 4 tickets that are unaccounted for. 4. The Auditor performed a count of the tickets in the possession of District officials and verified 235 unsold tickets in the possession of the Former D.C. PIC coordinator, on April 22, 1997 at the Office of the Secretary of the District of Columbia. 5. The money order from Community Credit Union Services, dated April 2, 1997, replaced the money order dated January 15, 1997 which was returned in the amount of $300. |
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