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I. Commission Chairperson Improperly Diverted and Received Commission Funds II. ANC 1B's Recordkeeping Measures Were Inadequate to Safeguard Its Funds Against Fraud and Abuse III. Commission Failed to Adhere to Regulations and Guidelines IV. Commission Did Not Comply with D.C. Code, Section 1-264(m) in Awarding Its Grants V. Commission Did Not Submit Quarterly Reports Timely VI. Funds Were Received without Council Approval VII. There Were Irregularities in Disbursements for Purchase of Services VIII. Equipment Purchase and Inventory Controls Were Ignored IX. Meetings Were Held and Business Conducted When a Quorum Was Not Present X. Disbursements Were Made When Treasurer Was Not Bonded XI. Commission Improperly Maintained Two Accounts from Which Checks Could Be Written |
SUMMARY
OF ANC 1B FINANCIAL AUDIT This is the District of Columbia Auditor's report of the financial activities of Advisory Neighborhood Commission (ANC) 1B for the period October 1, 1993 through December 31, 1996. The audit is part of an initiative by the Auditor to review the financial status of all thirty-seven Advisory Neighborhood Commissions. The Auditor found numerous deficiencies in ANC 1B's internal financial controls that attributed to the diversion of ANC 1B funds to its Chairperson. Some of the activities identified by the Auditor warrant further review by appropriate investigative bodies. Other deficiencies resulted in the expenditure of funds without proper documentation or approval. There is no assurance that all allocations from the District of Columbia government to ANC 1B benefited the ANC 1B community or were used for their intended purposes. The Auditor will recommend the immediate suspension of allocations of District funds to ANC 1B. A follow-up review will be initiated within 60 days to determine if the ANC has implemented sufficient internal controls to justify, document and support its expenditures. I. The Commission Chairperson Improperly Diverted and Received Commission Funds II. ANC lB's Recordkeeping Measures Were Inadequate To Safeguard Its Funds Against Fraud and Abuse
III. The Commission Failed to Adhere to Regulations and Guidelines
IV. The Commission Did Not Follow the D.C. Code in Awarding All of its Grants
V. The Commission Did Not Submit Quarterly Reports Timely VI. Funds Were Received Without Council Approval VII. There Were Irregularities in Disbursements For Purchase of Services
VIII. Equipment Purchase and Inventory Controls Were Ignored
IX. Meetings Were Held and Business Conducted When a Quorum Was Not Present X. Disbursements Were Made When Treasurer Was Not Bonded XI. The Commission Improperly Maintained Two Accounts From Which Checks Could Be Issued OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR ANTHONY S. COOPER Mr. Nik Eames Dear Mr. Eames: The Office of the District of Columbia Auditor conducted an audit of the financial activities of Advisory Neighborhood Commission (ANC) 1B pursuant to D.C. Code, Section 1-264 (d). The objective of this audit was to determine whether ANC lB's financial accounts and operations were in compliance with ANC laws, guidelines of the Office of the District of Columbia Auditor, and Corporation Counsel opinions. This audit covers fiscal years 1994,1995,1996 and the first quarter (October 1,1996 through December 31,1996) of fiscal year 1997. The Auditor reviewed canceled checks and bank statements where available. The Auditor also reviewed ANC lB's quarterly reports, minutes of meetings, invoices and other related and available documents that supported ANC disbursements and financial activities. An October 11, 1995 audit report issued by the Office of the District of Columbia Auditor covering the period October 1, 1990 through September 30, 1993, contained a number of recommendations for improvements in the financial operations of ANC 1 B. These recommendations are included in the appropriate sections of this report as "Previous Recommendations " along with a status of the implementation of these recommendations. FINDINGS I. COMMISSION CHAIRPERSON IMPROPERLY DIVERTED AND RECEIVED COMMISSION FUNDS Two ANC 1B checks totaling $10,900 were deposited into an account at Columbia First Bank. Checks totaling $10,400 were issued from the account to ANC 1B Chairperson Mary M. Treadwell. The account was established through a series of transactions involving the ANC, the Commissioners who signed the checks, a local law firm, and Commissioner Treadwell. The ANC Chairperson was the common link in an audit trail of ANC funds leading from the ANC's bank account . . . to the local law firm . . . to Columbia First Bank . . . and, eventually, to the ANC Chairperson. The minutes of the December 14, 1994 ANC 1B meeting reflect that the Commission authorized $7,400 for a number of grants relating to the "Banneker Project." Minutes of the March 15, 1995 ANC l B meeting reflect that the Chairperson "asked for permission to contract with [a law firm]," and recommended a fee not to exceed four thousand. Specifically the minutes stated:
Subsequent to this meeting checks totaling $10,900 were written on ANC lB's checking account and made payable to the above referenced law firm. The first check in the amount of $3,500 was written from the ANC's checking account on March 16, 1995. This check was signed by the ANC's 1994 treasurer and vice-chairperson (ANC officers for 1995 were elected at the March 15, 1995 meeting.) The purpose of the check as listed on the quarterly report was "prof. services." The second check in the amount of $7,400 was written from the ANC's checking account on March 20, 1995. This check was signed by the ANC's 1995 treasurer and vice-chairperson. It was listed on the quarterly report as a grant (Banneker Recreation Cent. Project). Additionally in a September 21, 1995 memorandum to the files entitled "circumstances regarding special grant expenditures authorized in December 1994," Ms. Treadwell stated that an unsolicited grant was issued to the law firm. Specifically, she included the following on a list of unsolicited grants:
In an interview with Commissioner Treadwell, she indicated that the $3,500 disbursed to the law firm was payment for an operational guideline document to be used by the ANC in its close-out of ANC grants and for grant guidelines that would assist the ANC. She further stated that $7,400 was to be used by the law firm to disburse the ANC grants to the Pleasant Plains Civic Association, LeDroit Park Civic Association, and Banneker Recreation Center for the Banneker project. The Auditor also interviewed the law firm regarding its involvement with ANC 1 B funds. The firm acknowledged receipt of the $3,500 and $7,400 checks. However, its account of how the money was handled differed from accounts made by Ms. Treadwell. According to the firm, the checks were deposited into an escrow account on March 16 and March 20 at the behest of Ms. Treadwell. It was told that the account was to fund the Banneker Recreation Project and that Ms. Treadwell was the contractor. The firm was unaware that Ms. Treadwell was an ANC 1B officer. The firm's only responsibility was to administer the fund under the sole direction of Ms. Treadwell. The firm indicated that it received no fee for its work but was doing it as a favor for what appeared to be a community enterprise. According to the firm, between March 21 and August 31, it wrote a total of five checks at Ms. Treadwell's direction. All but one was made out to "Mary Treadwell." These checks totaled $10, 400. The law firm fully cooperated with the audit team and allowed the Auditor to examine and make copies of relevant documents relating to ANC 1B funds. Our review of deposit slips and canceled checks indicated that on March 21, 1995, $10,900 was deposited in Columbia First Bank. Four checks totaling $10,400 were issued from the account at Columbia First Bank to Mary Treadwell. Each of the four checks were endorsed in the name of Mary Treadwell. One check for $500 was issued to the Pleasant Plains Civic Association. Commissioner Treadwell did not provide an accounting of these checks to the audit team. Table I below reflects the checks written from the account at Columbia First Bank. TABLE I
This matter will be referred to appropriate investigative bodies for further review. The Commission was negligent in monitoring checks written from its bank account. ANC Commissioners have a fiduciary duty with respect to all funds allocated to the ANC. They have a responsibility to ensure that ANC funds are used for intended public purposes.
II. ANC 1B's RECORDKEEPING MEASURES WERE INADEQUATE TO SAFEGUARD ITS FUNDS AGAINST FRAUD AND ABUSE A. Supporting Documentation for Expenditures Was Not Adequately Maintained
Condition at Time of Audit: Documentation to support the Commission's disbursements was not adequately maintained in the records of the ANC (See Appendix A for fiscal years 1994 through 1997 disbursements by category). Documents were not readily available or easily attainable. Some documents were maintained at locations other than the ANC office, by the Chairperson, and the Commission's accountant. Other documents were stored in unlabeled boxes in the Commission's office. While our audit was in progress, the ANC's office worker attempted to file some of these documents in the ANC's office files. However, at the conclusion of our field work, supporting documentation such as receipts, bills, invoices and other related documents were not available for several disbursements made during the period of our review. Examples of documentation not available for our review included canceled checks for the period October 1, 1993 through January 31, 1995 (See Appendix B), equipment purchases and purchase of service payments.
B. Voucher Packages Were Improperly Maintained The Auditor found that a voucher package to support each disbursement was not maintained by the Commission's treasurer. The date paid and check number was only occasionally entered on the original invoice. None of the invoices reviewed included a statement certifying that the payments were bona fide expenses of the ANC. This was a violation of ANC Financial Guidelines and Procedures issued by this Office which state:
All voucher packages should be retained for a period of at least seven years. The existence of voucher packages for disbursements would have provided an audit trail and would have enabled the Commission to better monitor its disbursements.
C. Voided Checks Were Not Maintained by the Commission
Condition at Time of Audit: During the period of the Auditor's review, six of the eleven checks reflected as void in the ANC's checkbook and quarterly reports were not available for review. The ANC financial guidelines and procedures issued by this office require that voided and spoiled checks must be retained by the Treasurer for the purpose of accounting for consecutively numbered checks belonging to the ANC.
D. Some Checks Were Not Prenumbered by the Bank The ANC violated D.C. Code, Section 1-264(f) by issuing two checks that were not prenurnbered and that were not issued in consecutive order. In March 1995, two counter checks totaling approximately $182 were written on the Commission's checking account. One check in the amount of $88.95 was written to Agile Printing Co. The purpose as reported on the quarterly report was for printing. The other check was written to the then office worker for $92.75. Its purpose, as stated on the quarterly report was for "out-of-pocket expenses." The Auditor did not see approval by a majority of the Commissioners in the minutes of a public meeting for either of these disbursements and we found no supporting documentation for these disbursements. These checks were not taken from the Commission's checkbook but appeared to have been obtained from the bank. The checks were not prenumbered by the bank and the name of the ANC was hand-written on the face of the check. The account number was typed on the top of the check. Both checks were signed by ANC lB's then treasurer and vice-chairperson. D.C. Code, Section 1-264(f) states in relevant part that:
From our review of the Commission's checkbook, we did not find that these checks were recorded in the Commission's checkbook or deducted from the Commission's checkbook balance. Writing checks on the Commission's checking account without using prenumbered checks placed the ANC at risk of not being able to account for all disbursements from its checking account and not being able to obtain an accurate checkbook balance.
E. Documentation Not Available to Determine If Stop Payments Requested
Condition at Time of Audit: At least two checks written during the period of our review were not presented for payment within two months of the date written. The amount of these checks was included on the quarterly report as having been added back to the Commission's checkbook balance. However, the Auditor did not find any documentation in the records of the Commission that the Commission stopped payment on these checks. F. Commission's Checkbook Was Not Adequately Maintained
Condition at Time of Audit: An accurate and up-to-date checkbook balance was not maintained after each financial transaction in the Commission's checking account. The Auditor found periods of almost one year during which the checkbook balances were not recorded. Checks were written from the checking account and the amount of the check, payee, and date were recorded in the checkbook but the balance remaining in the account was not calculated and recorded after the check was written. For example, for almost five months from the period February 2, 1994 through June 28, 1994, over sixty checks were written, but no running balance was recorded in the checkbook after each disbursement. Again, from July 28, 1994 through June 9, 1995, for over ten months, 156 disbursements were made by check but the checkbook was not adjusted after each disbursement. A running checkbook balance would have enabled the Commission's treasurer and other Commissioners to readily determine the Commission's account balance prior to issuing a check. The Auditor found that when the checkbook balances were calculated and recorded after the ten month period as discussed above, the total amount of checks written exceeded the Commission's checkbook balance. This resulted in at least one check written from the Commission's checking account being returned by the bank because the Commission's account contained insufficient funds to cover the check.
G. Commission Did Not Properly Bank Statements
Condition at Time of Audit: The Commission did not accurately reconcile its bank statements to its checkbook. The Commission prepared "bank reconciliations" for 33 of the 39 months reviewed by the audit team. However, only 9 of these 33 reconciliations accurately reconciled the Commission's bank balance to the balance in the Commission's checkbook for that period. For nine of the months, the book balances on the reconciliations did not agree with the checkbook balance. For 15 of the 24 months, running balances were not recorded in the checkbook, therefore the balance on the reconciliation could not be compared with the checkbook balance at the time the reconciliations were completed. A check written on the Commission's checking account was not honored because there were insufficient funds in the Commission's account. Accurate reconciliations could have made the appropriate Commission officials aware of the actual balance in the Commission's checking account. Without an accurate and timely reconciliation of its account, the ANC may be unaware of errors in its account caused by the bank or by the ANC.
H. Reconciliations Were Not Reviewed by Chairman or Vice Chairman of the Commission None of the bank reconciliations reviewed by the Auditor were initialed by the Commission's Chairman or its vice-chairman to indicate a review by a Commission officer. The bank reconciliations also did not contain the signature of the preparer. According to the ANC Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor:
Because there were no signatures on the bank reconciliations, there was no assurance that these documents were reviewed by the appropriate Commission officers. This lack of review may have contributed to the ANC being unaware that there were insufficient funds in the account as discussed earlier.
I. Petty Cash Expenditures Were Poorly Documented
Only $215 of the approximately $3,115 in petty cash reimbursements made during October 1, 1993 through December 31, 1997 could be traced to receipts. The $215 was for reimbursements made to the petty cash account in fiscal year 1996 and the first quarter of fiscal year 1997. A petty cash account is a special money fund maintained in cash for the purpose of making convenient payments for small miscellaneous non-routine purchases. While the Auditor observed numerous receipts from taxicabs, metro card purchases, and other entities, these receipts were in no discernable order, were not attached to a petty cash voucher and were not traceable to specific petty cash reimbursements. The ANC did not maintain a petty cash journal as recommended by this office. For the $215 that we were able to trace to receipts, none of the petty cash summary sheets were signed by the individual receiving the reimbursement nor were they signed by a Commission officer to indicate that a review and approval of purchases from the petty cash account had been conducted. Additionally, the reimbursement request did not indicate how the expenditure related to the business of the ANC. The petty cash fund for ANC 1B was maintained by the office worker who was the primary user of the fund. J. Recurring Petty Cash Fund Reimbursement Checks in the Same Amount Were Questionable In fiscal year 1994, the petty cash account did not appear to have been properly reimbursed. There were 22 petty cash reimbursement checks totaling $1,100, written on the ANC checking account. All of the checks were in the amount of $50. The petty cash fund was an impress fund established at $50. The amount to be reimbursed to the fund should have been based on the actual expenditures from the fund at the time of the reimbursement. Therefore, the amount of the reimbursement check should have varied based on the amount of expenditures from the fund. As such, these reimbursements are highly questionable and should have been more carefully scrutinized by the Treasurer. Guidelines for the operation of an ANC Petty Cash Fund which were issued by this office state that:
These guidelines were not adequately followed.
K. Petty Reimbursement Was Made for More than the Amount Established for the Fund and Was Incorrectly Reported in the Quarterly Report In December 1994, a check was issued to the then office worker in the amount of $548.00 There were no receipts or other documentation to support this disbursement. This check was incorrectly listed on the quarterly report as $48.00. It was also incorrectly recorded on the check book stub as $48.00 although a handwritten notation on the stub stated that the check was actually $548.00. The bank statement for that period stated that the amount of the check was $548.00. The Commission did not have the canceled check in its file and we could not determine if the check was altered after it was written or whether the check was originally written in this amount.
III. THE COMMISSION FAILED TO ADHERE TO REGULATIONS AND GUIDELINES A. Sixteen Percent of the Checks Reviewed Were Signed by Only One Commission Officer Of the approximately 160 checks examined by the audit team, approximately 26, or 16 percent, were signed by only one ANC officer.. Twenty-two of the twenty-six checks were signed by the vice- chairperson, who is now deceased, during fiscal year 1995 and the first 5 months of fiscal year 1996. Two were signed by the treasurer in fiscal years 1995 and 1996, and two were signed by the secretary in fiscal years 1995 and 1996. Nineteen, or 73 percent, of the 26 checks issued with only one signature were payable to the individual who was the ANC 's office worker from October 1993 through March 1996. The issuance of checks signed by only one officer violated D.C. Code, Section 1-264(f) which states that "any expenditure made by check shall be signed by at least two officers of the Commission." The Auditor also found that, in June 1994, the ANC's then treasurer and vice-chairperson requested the Commission's bank to acknowledge one of their two signatures as an authorized signature by the full Commission. The stated reason for this request was that "on numerous occasions signers were unavailable to provide a second signature." The Auditor was unable to determine if any checks were issued in 1994 with only one signature because canceled checks written on the checking account during 1994 were not in the Commission's files. We also found one check that did not contain any signatures. This check was in the amount of $49.00, dated February 23, 1995, payable to the then office worker for petty cash.
B. Some Checks Were Not Signed by the Chairperson Nor the Treasurer Over 62 of the checks reviewed by the audit team were not signed by the Commission's treasurer nor its Chairman. They were signed by the Commission's secretary and vice-chairperson. This was in violation of D.C. Code, Section, 1-264(f) which states in relevant part that:
C. ANC 1B Did Not Have a Spending Plan in its Files for Fiscal Years 1994 and 1995
Condition at Time of Audit: Commission minutes did not reflect that the Commission developed and submitted an annual fiscal year spending plan to the Mayor and Council for fiscal years 1994 and 1995. According to Commission minutes, the fiscal year 1996 spending plan was approved by the Commission in June 1996, eight months into the fiscal year. There was no documentation to reflect that the spending plan was submitted to the Mayor and Council of the District of Columbia as required by D. C. Code, Section 1- 261(n) which states:
IV. COMMISSION DID NOT COMPLY WITH D.C. CODE SECTION 1-264(m) IN AWARDING ITS GRANTS The Commission violated D.C. Code, Section 1-264(m) because none of the seventeen grants totaling $28,513 awarded between October 1, 1993 and September 30, 1996 complied with this section of the code. According to D.C. Code, Section 1 -264(m):
None of the grants awarded were properly presented by the grantee at a public meeting of the Commission with a quorum of Commissioners present. Four of the grants were presented by the grantee at a Commission meeting, however, these meetings did not have a quorum of Commissioners present. Table II identifies the grantees and the grant amount disbursed for each fiscal year. TABLE II
Some grantees submitted written requests in the form of a letter or on a grant request form.Other grants were awarded without a solicitation from the grantee but were awarded instead pursuant to a Commissioner's request. Five, or 30 percent, of the seventeen grants were voted on and approved by the Commission at meetings when a quorum of Commissioners were not present. The approval for four additional grants were reflected in minutes that were not signed by the Commission's Secretary.
A. Some Grants did not Provide a Public Benefit Grants totaling approximately $1,563 did not appear to provide a public benefit as required by D.C. Code, Section 1-264 (m) and Corporation Counsel opinions. Grants totaling $750 were awarded to D.C. Public Schools. The Office of the Corporation Counsel determined that ANC's may not make direct grants to a public school. The grant to Westminster Neighborhood Association was awarded to provide funds to purchase meals and other food items. According to the documentation from Mother Dear's Community Center, the $513 was awarded to assist the Center in its Family Day Activities. According to the General Accounting Office's Principles of Federal Appropriation Law, "Appropriated funds are not available for entertainment, including free food, except under specific statutory authority."
V. THE COMMISSION DID NOT SUBMIT QUARTERLY REPORTS TIMELY ANC 1B violated D C. Code, Section 1-264 (j) by not filing its first quarter, fiscal year 1997 (October 1, 1996 through December 31, 1996) financial report with the Office of the D. C. Auditor. This report was due on February 13, 1997 and was over thirty days late at the conclusion of our field work. D.C. Code, Section 1-264(j) requires the Commission treasurer to prepare a quarterly report and file it with the District of Columbia Auditor within 7 days of Commission approval. Further, at least eleven of the twelve quarterly financial reports ANC 1B was required to file with the Office of the D.C. Auditor for the period October 1, 1993 through December 31, 1997 were filed after the due date. Reports for the first and second quarters of fiscal year 1996 were both submitted over twelve months late. Reports for each quarter of fiscal year 1996 were all filed on March 6, 1997. Table III presents the due dates for ANC lB's quarterly financial reports to be submitted and the actual date they were submitted to this office. TABLE III
1The report was first received in the office on November 13, 1996. It was returned to the Commission because it did not contain appropriate documentation and resubmitted to this office by the Commission on March 6, 1997. Quarterly reports should have been submitted to this office on a timely basis in order to ensure that the allocations provided to the ANC by the District government were monitored and are were properly accounted for by the ANC. The submission of these reports and subsequent review by this office forms the basis for the release of funds to the Commission.
VI. FUNDS WERE RECEIVED WITHOUT COUNCIL APPROVAL Advisory Neighborhood Commission 1B violated D.C. Code, Section 1-261(1) by accepting contributions in excess of the $400 limit without obtaining authorization from the Council of the District of Columbia. According to D.C. Code, Section 1-261(1):
On October 2, 1995, $500 was deposited into the ANC's checking account. An additional $200 was deposited on October 10, 1995. No documentation was available that provided the source of these funds. Additionally, the Commission did not receive authorization from the Council of the District of Columbia to receive funds in excess of the $400 limit. Based on our review of minutes, it appears that the ANC received donations for a "W street block party." These funds were then used to provide funding for expenditures related to this block party. These included sound system, music, trophies, plaques, and transportation. Based on a Corporation Counsel opinion, disbursements for block parties were prohibited. The minutes do not reflect the Commissioner's approval for these expenditures. Additionally, we did not find documentation in the form of receipts and invoices to support disbursements for this activity. Funds received by the ANC from any source become ANC funds and are subject to the rules, regulations, and guidelines that govern the expenditure and accountability of public funds.
VII. THERE WERE IRREGULARITIES IN DISBURSEMENTS FOR PURCHASE OF SERVICES During the period October 1, 1993 through December 31, 1996, ANC1B wrote checks totaling approximately $65,000 in purchase of service payments. Approximately $52,000 was disbursed for office help while approximately $8,500 was disbursed for the services of a CPA. The disbursements for office help included payments to two different office workers for different periods of time at different rates of pay for substantially the same services. The first office worker provided services from the beginning of our review in October 1993 to March 1996 and was compensated a rate approximately two and one-half times that of the second office worker. The second office worker provided services from April 1996 through the period of our review. Table IV reflects purchase of service payments made for each fiscal year and the type of service provided. TABLE IV
A. Disbursements Were Made Without Specific Prior Approval From The Commission The Commission violated D.C. Code, Section 1-264 (g) by not approving purchase of service payments. The ANC also did not approve the rate of compensation, and the maximum hours of service for any of the purchase of services arrangements. D.C. Code, Section 1-264(g) states:
We did not find minutes that reflected approval for the initial hiring of the first office. According to a review of disbursements, the first check issued to this office worker during our period of review was in December 1993. In July 1994, the minutes reflected that the ANC approved a resolution to extend the "staff consultant on an as needed basis to be determined by the Commission not to exceed December 31, 1994." The rate of pay was not voted on by the Commission. Minutes also reflect that the Commission did not approve the number of hours the staff consultant was to work. An additional extension of ninety days was approved by the Commission in December 1994. A review of minutes subsequent to December 31,1994, did not show that the Commission voted to extend the services of the consultant beyond this ninety day period. However, the first office worker continued to be paid through March 1996. The Commission also did not approve the rate of pay and maximum hours of service for the second office worker. The disbursements shown in Table IV as "other" represent payments reported on the ANC's quarterly reports as purchase of service payments that are not supported by any documentation. These also represent unapproved and questionable disbursements. B. Disbursements For Purchase of Service Included Payment to A Bail Bondsman In fiscal year 1995 a $500 check was written on the Commission's account to Stancil and Stancil. Stancil and Stancil is identified as a bail bondsman. There was no documentation in the files of the Commission related to this disbursement. There was also no discussion or approval in the minutes of the Commission for this disbursement.
C. Consultants Did Not Have Signed Written Agreements
Condition at Time of Audit. The Commission did not obtain signed written agreements to support any of its personal service disbursements. The accountant did sign an agreement in 1992, however, this agreement was not updated to include all of the duties performed by the accountant. There were no minutes in the Commission's files which indicated the rate of pay, specific duties and responsibilities, and length of contractual services or that the agreements were presented to and approved by the Commission for any of its purchase of service payments (including the accountant). D. Office Workers were Improperly Treated as Independent Contractors not Employees For each of the fiscal years under review, the office workers were treated as independent contractors and not employees for purposes of compensation. Compensation was paid without deduction for the appropriate payroll taxes such as federal and state income taxes and social security taxes. The Internal Revenue Service has ruled that contractors who provide services that are continuous and routine in nature must be classified as regular employees and not as independent contractors. The Commission is responsible for making the appropriate tax withholdings. The Office of the District of Columbia Auditor has cautioned ANCs to carefully evaluate the status of its workers. This advice has been provided through training sessions, individual discussions with ANC officers, and in correspondence with ANCs. If personal services are improperly classified, the ANC could be liable for overdue taxes and interest. E. No IRS Form 1099 Was Prepared by the Commission for Purchase of Services Payments The Commission did not prepare IRS Form 1 099s for any of its independent contractors receiving ANC payments during the period of our review. According to Internal Revenue Service (IRS) regulations, a Form 1099 should be issued for payments, in excess of $600, to independent contractors. F. Payments to the First Office Worker Were Not Monitored Disbursements made to the ANC's first office worker from October 1993 to March 1996 were not monitored or authorized by the Commission. The Auditor reviewed typed memoranda to the ANC chairperson from the office worker. Each memoranda contained dates, times and hours worked, and total payment due. However, there were no signatures or initials on the memoranda by either the office ANC chairperson or any other ANC 1B Commissioner. There was no indication that anyone reviewed or verified the information contained on these unsigned memoranda. Yet in several instances, the amount of the checks issued to the office worker corresponded with the amounts reported on these unapproved and unverified memoranda. Payments were sometimes in excess of what was reported on the memoranda. The Auditor also found instances in which payments were made to the first office worker but there were no memoranda indicating hours worked. The Auditor found all time and attendance sheets from the second office worker, except one. Approximately 75 percent of these time and attendance sheets were initialed or signed by the Commission Chairperson, however, the sheets were not signed by the office worker. In the Auditor's review of this data from the first of vice worker, we found several areas of serious and troubling concerns. A discussion of these areas follow:
G. Disbursements to Accountant Were Not Approved and Accounting Services Were Inadequately Performed During the period of our review, the Commission wrote checks totaling approximately $8,500 for the services of an accountant. The Auditor could not find documentation in the files of the Commission for approximately 34 percent of these disbursements. The Accountant's invoices reviewed by the Auditor were not initialed or signed by Commission officers or members to indicate their review and approval of the invoices for payment. According to the accountant's November 1996 invoice, the following services were performed:
While this invoice is for November 6, 1996, many other invoices reviewed by the audit team were similar, and indicated that similar services were preformed each month. Although all of these services were included on the invoice, we question whether all of these services were preformed each month as indicated on the invoice. We found that:
The accountant has provided services to the Commission since at least June 1992 at the rate of $27.50 per hour. (We did not review disbursements prior to October 1, 1993, as they were not within the scope of this audit). The agreement signed by the accountant required only the preparation of quarterly reports. However, the accountant performed several additional functions resulting in added cost to the Commission. We did not find minutes that approved this expansion of services.
VIII. EQUIPMENT PURCHASE AND INVENTORY CONTROLS WERE IGNORED A. Commission Did Not Maintain an Inventory of Equipment The Commission purchased approximately $8,600 of equipment but did not maintain a written inventory of the purchases. According to a review of canceled cheeks, all of the equipment purchases were made in fiscal year 1994. Table V below reflects the purchases that were made. TABLE V
An inventory of equipment may be needed in the event of theft. An inventory would also enable the Commission to maintain accountability and control over items purchased.
B. Documentation Not Available for Disposition of the Digital Answering Machine We found that the digital answering machine purchased during fiscal year 1994 by the Commission was no longer in use by the Commission. The Commission currently uses an answering service provided by the telephone company. No documentation was available during our field work to indicate the location or disposition of the digital answering machine. C. Purchases Were Not Approved by Commission No documentation existed in the minutes of the ANC to document that the Commission approved the expenditure of the $8,600 in purchases of any of the equipment included in Table V. This is in violation of D.C. Code, Section 1-264(f) which states that "no expenditure of any amount shall be made without specific authorization of the Commission." D. Invoices and Receipts Were Not Available for $2.959 in Equipment Purchases Documentation was not available to support the purchase of the ADT system or the payment of $500 made to the then Commission Chairperson for an air conditioner. The checkbook stub indicated that the payment to the Chairperson was for an air conditioner. No other documentation such as invoices, receipts, or bills were available to support this payment. We noted that the Commission does have a window air conditioner in its ANC office but we were unable to determine how, where, or when the unit was obtained. The invoices for the purchase of the ADT system could not be located in the records of the ANC. The Commission did have a security system and we reviewed several invoices for the maintenance and repair of the system. IX. MEETINGS WERE HELD AND BUSINESS CONDUCTED WHEN A QUORUM WAS NOT PRESENT Advisory Neighborhood Commission 1B held only two meetings in calendar 1996 and, according to the minutes of these meetings only one of the meetings had enough Commissioners for a quorum. Yet the Commission conducted business of the Commission. X. DISBURSEMENTS WERE MADE WHEN TREASURER WAS NOT BONDED In calendar year 1995, ANC1B disbursed over $67,700 and in calendar year 1996 over $18,800 was disbursed without its treasurer being bonded. This was in violation of D.C. Code, Section 1-264(c) which states:
XI. COMMISSION IMPROPERLY MAINTAINED TWO ACCOUNTS FROM WHICH CHECKS COULD BE WRITTEN ANC 1B violated D.C. Code, Section 1 -264 (b) because it maintained a checking account as well as a money market account from which checks could be written. D.C. Code, Section 1-264(b) states in relevant part that:
According to the December 14, 1994 minutes, the Commission approved a resolution to "secure 60% of current cash assets in interest bearing securities." The "executive body" was given responsibility for consummating the arrangement. Two certificates of deposit (CD) were purchased on December 22, 1994, one for $23,000 to mature in twelve months and the other for $12,000 to mature in 24 months. The $23,000 CD was redeemed after six months. The proceeds, less an early withdrawal penalty of $112 were deposited partially in the ANC's checking account while the balance was used to open a money market account on June 28, 1995. The $12,000 CD was also redeemed early- after eighteen months. These proceeds, less an early withdrawal penalty, were deposited into the Commission's money market account in June 1996. Transfers from the Money market account have been made to the ANC's checking account. According to officials Riggs Bank of Washington, where the money market account was maintained, up to three checks per month may be written from the account. This technically violates D.C. Code, Section 1-264(b). However, during our audit, we found no checks/withdrawals that were made on the money market account other than the transfers that were traced to the checking account. ANC 1B must improve its monitoring of its financial operations and the maintenance of its financial records and accounts. Recommendations made by the Office of the District of Columbia Auditor in its October 11, 1995 report on ANC 1B have not been implemented. Funds have been diverted from ANC 1B to its Chairperson. Other disbursements were not properly documented and approved. There is no assurance that all allocations from the District of Columbia government issued to ANC 1B have benefited the ANC 1B community. Finally, all ANC Commissioners have a fiduciary duty to safeguard ANC funds against fraud and abuse. ANC 1B Commissioners must begin a vigilant effort to establish controls and accountability in order for this Commission to continue to receive funding. The Auditor will recommend the immediate suspension of future allotments until a follow-up review of ANC lB's compliance with the Auditor's recommendations has been completed. Respectfully, Anthony S. Cooper There are two appendices: "ANC 1B Report of Financial Activity by Fiscal Year," FY1994-FY1997; and "Advisory Neighborhood Commission 1B: Cancelled and Voided Checks Not in Commission Files" |
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