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Executive Summary Purpose Conclusion Major Findings Recommendations Purpose Findings Table of Appendices (Appendices are not available on-line) EXECUTIVE SUMMARYThe purpose of this audit was to evaluate the accounts and operation of the Office Tourism and Promotions (OTP) for fiscal years 1996 and 1997. The audit was initiated as a result of Councilmember Charlene Drew Jarvis' inquiry about the financial relationship between OTP and the D.C. Committee to Promote Washington (Committee to Promote). This included a review of those funds that were paid to the Committee to Promote; an evaluation of the intended purpose of the funds; and an evaluation of the actual use of the funds. The relationship between the Office of Tourism and Promotions and the D.C. Committee to Promote was established as a result of the Reorganization Plan No. 2 of 1992. The legislation provided that OTP would have oversight of the D.C. Committee to Promote as well as the Office of Motion Picture and Television Development. The acting director of OTP, during the scope of the audit, indicated that she inherited the practice of making payments to the D.C. Committee to Promote for OTP's future spending. This was a long standing practice which she did not initiate. These payments stopped after the December 9, 1996 payment of $278,500. It is the Auditor's opinion that the Office of Tourism and Promotions was unable to fulfill its mandate of maintaining oversight of the Hotel Occupancy Tax dollars received by tourism agencies during fiscal years 1996 and 1997. This was due, in part, to a lack of financial and staff resources to oversee the fastest growing and number two industry in the District of Columbia. OTP, however, failed to exercise sufficient oversight utilizing its available resources, resulting in these entities functioning without any ongoing oversight or accountability as mandated in OTP's enabling legislation. The Auditor finds that the Office of Tourism and Promotions circumvented the District's established payment processing system by making payments to the D.C. Committee to Promote Washington for deposit into its bank account for OTP's future use. Further, these funds did not lapse at the end of the fiscal year which violated GAAP principles as adopted by the District government. The D.C. Committee to Promote views itself as a "private" not-for-profit entity. However, because of the nature of the relationship that existed between the OTP and the Committee to Promote, and because the Mayor appoints the Board's Chair and one-half of the Board of Directors, one cannot say that it is purely private. Until the Committee to Promote successfully severs ties to the District government and the Mayor no longer appoint its Chair and members of its Board of Directors, we view them as a "public-private" entity. Recently, the Board of the Committee to Promote took aggressive action to eliminate the potential for the appearance of misuse and abuse of public funds. For example, the Committee to Promote formally abolished the Capital City Program. We applaud the leadership of the Committee in taking this initiative. We encourage further bold initiatives so that history does not repeat itself. The Office of Tourism and Promotions was abolished as of September 30, 1997 as the result of the elimination of its funding in the city's fiscal year 1998 budget.
PURPOSEThe purpose of this audit was to evaluate the accounts and operation of the Office of Tourism and Promotions (OTP) for fiscal years 1996 and 1997. This included a review of those funds that were paid to the D.C. Committee to Promote Washington (Committee to Promote); an evaluation of the intended purpose of the funds; and an evaluation of the actual use of the funds. OBJECTIVES, SCOPE. AND METHODOLOGY The objectives of this audit were to:
The scope of this audit was limited to the accounts and operations pertaining to fiscal years 1996 and 1997. In conducting this audit, the Auditor reviewed "Transmittal for Expenditure" (transmittals) documents, quarterly financial reports, and purchase orders submitted for payment of appropriated funds to the D.C. Committee to Promote Washington. The Auditor also reviewed records maintained at the D.C. Committee to Promote including transmittal documents, bank statements, general ledger statements, copies of cancelled checks and an independent auditor's report for the year ending September 30, 1996. The Auditor reviewed OTP's budget and expenditures for fiscal years 1996 and 1997. Additionally, the Auditor reviewed the Reorganization Plan No. 2 of 1992, which established the Of lice of Tourism and Promotions. The Auditor met with OTP officials and staff, including the former director of the office, officials of the D.C. Committee to Promote, and staff within the Office of the Chief Financial Of ficer. The audit was conducted in accordance with generally accepted governmental auditing standards and included such tests of the records as deemed necessary and prudent under the circumstances. Audit Difficulties and Limitations The Office D.C. Auditor encountered several difficulties in conducting the audit of the Office of Tourism and Promotions. The single largest issue was coordination with the D.C. Committee to Promote Washington which had critical information relative to the audit. From the onset, the Auditor encountered difficulties in obtaining information from the Committee to Promote, a non-profit 501(c)6 organization. The Committee to Promote did not allow the Auditor to have full and unrestricted access to its records and books. Since the Auditor was not allowed to obtain information directly from the Committee to Promote's files, the Auditor was unable to make a firm determination as to the reliability of the data provided. Another difficulty encountered in conducting the audit of OTP was classifying expenditures which OTP made outside of the District's FMS to coincide with object categories within FMS. The Office of Tourism and Promotions did not track and summarize expenditures made through the Committee to Promote or expenditures made through the District's FMS to determine total expenditures in budgeted categories such as out-of-town travel, education expenses, motion picture and television, etc. The Auditor, therefore had to review, classify, and summarize transmittals and purchase orders to get a true picture of OTP's spending pattern for fiscal years 1996 and 1997. The Office of Tourism and Promotions was established in accordance with Mayor's Order 93-81 entitled "Implementation of Reorganization Plan No. 2 of 1992, Establishment of the District of Columbia Office of Tourism and Promotions." The reorganization plan was signed by the former Mayor of the District of Columbia on June 21, 1993. Section II of the reorganization plan provided the following:
D.C. Committee to Promote Washington The D.C. Committee to Promote Washington is a non-profit 501(c)6 organization, established in accordance with the District of Columbia Nonprofit Corporation Act and was incorporated on March 26, 1980. In accordance with the by-laws adopted by the Board of Directors of the D.C. Committee to Promote:
Additionally, the mission statement of the Committee to Promote provides that:
Under Reorganization Plan No. 2 of 1992, OTP was given oversight responsibility for the D.C. Committee to Promote Washington and the Office of Motion Picture and Television Development (MPTV). As a result, OTP worked closely and partnered with the Committee to Promote to promote the District of Columbia. The Committee to Promote was directed by the Council of the District of Columbia's Committee on Economic Development to provide financial and administrative support services for OTP by assuming advertising and administrative costs of OTP during fiscal years 1994 and 1995. According to information provided by the Committee to Promote, it has, in the past, provided resources and services to OTP at no cost. Some of the resources and services provided were: of lice space; of lice equipment; full-time staffing (education of ficer); custodian and administrator of private contributions and D.C. government funds; and temporary cash advances by processing and paying OTP vendors. FINDINGSTHE OFFICE OF TOURISM AND PROMOTIONS WAS UNABLE TO FULFILL ITS STATUTORY MANDATE RELATING TO THE OVERSIGHT OF HOT TAX FUNDS The Office of Tourism and Promotions was unable to fulfill its statutory mandate during fiscal years 1996 and 1997. Primarily, OTP failed to maintain adequate oversight of Hotel Occupancy Tax (HOT) dollars provided by the District government to tourism agencies that included the Washington Convention and Visitors Association, the D.C. Committee to Promote Washington, the Washington Convention Center, and the D.C. Chamber of Commerce. Table I outlines the specific requirements of the Office of Tourism and Promotions as contained in Section IV of the Reorganization Plan No. 2. During fiscal years 1996 and 1997, OTP's staff consisted of three full-time equivalents and seven employees on detail from other agencies and the D.C. Committee to Promote, including MPTV's staff. According to industry experts, tourism is the fastest growing and the number two industry in the District of Columbia. OTP's limited staff directly impacted its ability to fulfill its statutory mandate. Further, according to information provided by the D.C. Committee to Promote, tourism generates visitor spending in the District of Columbia of $3.48 billion annually, creating tax revenues of $295 million. During fiscal year 1997, OTP's funding level of $754 thousand and its limited staff resources was not sufficient to permit enforcement of its oversight responsibilities or to effectively carry out its other statutory mandates. Notwithstanding its limited staff and financial resources, the Auditor notes that OTP was negligent in not exercising sufficient oversight. As a result, those entities functioned without any ongoing oversight or accountability except the monthly reports they were required to submit to the Washington Convention Center Authority.
OTP'S SPENDING OF APPROPRIATED FUNDS OUTSIDE THE DISTRICT'S FINANCIAL MANAGEMENT SYSTEM VIOLATED THE PROCUREMENT PRACTICES ACT OTP's payment of funds to the Committee to Promote, for the purpose of spending outside of the District's Financial Management System (FMS), violated the District's Procurement Practices Act of 1985. This payment methodology allowed the Office of Tourism and Promotions to circumvent the District government's normal payment processing system.1 D.C. Code Section 1-1182.2(d) mandated the following:
District agencies are required to adhere to rules established pursuant to the Procurement Practices Act, and financial management policies and procedures established by the Chief Financial Officer of the District of Columbia (CFO). In financial resource management document No. 96-02, issued on September 20, 1996, the CFO provided that "All expenditures, with the exception of the items listed below, shall first be obligated in the District's Financial Management System (FMS) before being vouchered and paid." Examples of items excluded from the requirements of the September 20, 1996 document include payments for settlement and judgment transactions, court orders, and medical payments for victims of assault crimes. OTP obligated funds for payment to the D.C. Committee to Promote by processing purchase orders and payment vouchers during fiscal year 1996. These payments are presented in Table II below. The Auditor, in a review of the payments made to the Committee to Promote, determined that OTP made these payments for the purpose of procuring goods and services outside FMS. OTP did not adhere to the rules and regulations followed by other District agencies, in processing procurements outside FMS. The payment methodology utilized by OTP did not provide any accountability in the acquisition of goods and services. Additionally, OTP's by-passing of established regulations did not ensure that goods and services were procured in an efficient, effective and economical manner. OTP offered two reasons for paying its bills outside FMS. The former director indicated that the June 21, 1996 payment of $150,000 was to reimburse the Committee for expenses it had incurred on OTP's behalf. In a separate letter directed to the Assistant City Administrator for Economic Development, the former director stated:
In the first instance, the Auditor notes that OTP should not have directed the Committee to Promote to advance funds for its use. Secondly, OTP's assertion that the District's payment process was "too time-consuming" was not sufficient justification to circumvent the District's normal procurement and payment processes. Other District agencies were required to operate within these guidelines and OTP should also have adhered to these requirements. OTP's Funds Deposited In Committee to Promote's Bank Account Did Not Lapse At the End of the Fiscal Year According to a revenue and expense report provided by the Committee to Promote, approximately $23,602 of OTP's appropriated funds remained unspent at the end of fiscal year 1996. Because these appropriated funds were deposited into the Committee to Promote's bank account, they did not lapse at the end of the fiscal year. Instead, they were carried forward and were available for OTP's use in fiscal year 1997. The Auditor found that OTP did not spend the total amount that was transferred to the Committee to Promote during fiscal years 1996 and 1997. In accordance with the District's basis of budgeting and Generally Accepted Accounting Principles (GAAP), unspent appropriated funds lapse and become part of the District's overall general fund balance at the close of each fiscal year. District agencies are not able to carry forward unspent budget authority from one fiscal year to the next. In certain circumstances, agencies are able to place funds in retainage to enable making payments after the official close of the fiscal year. OTP, however, was able to carry forward its unspent appropriated funds because these appropriated funds were deposited into the Committee's bank account. OTP's use of approximately $23,602 in unspent fiscal year 1996 funds, during fiscal year 1997 violated GAAP principles adopted by the District government and adhered to by other agencies. Under normal reporting practices, these funds would have lapsed and would not have been available for OTP's use during fiscal year 1997. As of the third quarter of fiscal year 1997, the Committee to Promote reported OTP had a balance of approximately $ l 4,712 in unspent appropriated funds remaining in their bank account. Because these funds belong to the District government they should be returned for deposit in the general fund.
OTP PROCURED SERVICES TOTALING $330.000 WITHOUT VALID CONTRACTS The Office of Tourism and Promotions failed to contact the District's Department of Administrative Services (DAS), the designated purchasing agent for the District government, to properly procure services that required a contract, from the Committee to Promote. D.C. Code, Section 1-1181.5(d)(l) provides:
Contracts should have been issued for the following services:
OTP's failure to issue contracts to procure these services violated Section 1-1181.5(d)(1) of the District's procurement law. The Auditor notes that a contract was essential to outline the specific agreement between the parties and to properly document the payment required for services rendered. In the absence of a valid written contract, OTP paid funds in advance of receiving goods and services. As a result, OTP did not properly evaluate the Committee to Promote's delivery of services. In one instance, OTP believed it was paying the Committee to Promote for the establishment of a Visitors Center and D.C. Store in Washington, D.C. According to the Committee to Promote, the funds were not used to establish a visitors center. Only $7,500 of $180,000 paid by OTP was used by the Committee to conduct research related to the establishment of a Visitors Center and D.C. Store. Because there was no written contract outlining a specific agreement with the Committee to Promote, funds that were intended for one purpose were used for another. According to unaudited information provided by the Committee to Promote, the balance of $172,500 was used to cover tourism fulfillment costs associated with the 1-800 Tourism hotline and printing of the official D.C. Brochure. The Committee to Promote estimated its costs for these services during fiscal year 1996 exceeded $406,000. Additionally, the Financial and Technical Services division of the Office of the Chief Financial Officer, approved OTP's payment of $278,500 to the Committee to Promote. The Financial and Technical Services division's approval of this payment, which included the $88,000 for the Greater Washington Initiative, was inappropriate. Clearly, the $88,000 payment to the Greater Washington Initiative should have been paid directly to the Greater Washington Initiative through the District's FMS and not through the Committee to Promote. Approximately $32,000 of Funds Paid to the Committee to Promote Were Used by OTP to Fund Expenditures That Differed from its Original Purpose The Office of Tourism and Promotions paid the Committee to Promote $583,446 during fiscal year 1996. Of that amount, the Committee to Promote was paid $330,000 to fund special projects, $4,946 as a reimbursement for travel costs incurred by OTP and the balance, $248,500, was deposited for OTP's use. The $248,500 was to be used for the following purposes: $10,000 for employee tuition; $ 10,500 for education programs; $30,000 for out-of-town travel; $88,000 for payment to the Greater Washington Initiative and $ 110,000 for contractual and other services. The Auditor, however, could not confirm the expenditure of funds for the categories identified by OTP. Instead, it appears that OTP authorized the expenditure of funds for different purposes. The Auditor found that approximately $32,000 of the $248,500 were used to fund other expenditures. Table III presents funds that OTP requested for one purpose but used for another. In a September 18, 1997 report issued by this Office entitled, "District's Purchase of Presidential Inaugural Tickets," the Auditor noted that OTP improperly authorized a payment of $60,000 for the purchase of presidential inaugural tickets by redirecting funds previously authorized for a membership payment to the Greater Washington Initiative. OTP's payment of funds for one purpose and subsequent redirection of funds for the payment of other expenditures clearly was inappropriate. Further, OTP's authorization to use funds for purposes other than its original intention, was misleading. THE DISTRICT'S FMS DID NOT ACCURATELY REPORT THE SPENDING PATTERN OF OTP DURING FISCAL YEARS 1996 AND 1997 Because OTP processed vendor payments outside the District's FMS, the FMS expenditure balance in certain budget categories was under-reported. As a result, the District's FMS system did not accurately report the spending patterns of the OTP (including MPTV) during fiscal years 1996 and 1997. The Committee to Promote uses internal transmittals to process payments to vendors. Between fiscal years 1996 and 1997, OTP submitted transmittals (outside FMS) - totaling approximately $249,400 - directing the Committee to Promote to pay for various services and purchases as reflected in Table IV. The Auditor found that all of the transmittal payments were inappropriate and should have been paid through the District's FMS. Because they were not, the FMS expenditure data and balances are distorted. Appendix 1 details the spending by category and reflects the payee, the date the payment was made, and the actual amount of the payment. In addition to transmittal payments processed by the Committee to Promote, OTP paid some expenditures through the District's Financial Management System (FMS). Table V summarizes OTP's total spending, including transmittal expenditures and expenditures paid through the District's FMS for fiscal years 1996 and 1997. FMS reflected expenditures of approximately $1.1 million during fiscal years 1996 and 1997 (see summary in Appendix 2). Had OTP processed its vendor payments properly, FMS expenditures for various categories would have been significantly higher for this time period (excluding personal services expenditures). OTP incurred expenditures of $69,078 in program costs related to the Olympic Torch Relay and Soccer program outside of FMS. OTP reported administrative and general expenditures that totaled $58,353 during fiscal years 1996 and 1997. These expenditures, which consisted of general office purchases of equipment and supplies, as well as contractual services costs, also were not reflected in FMS. FMS also did not accurately reflect OTP's travel expenditures that were paid through the Committee to Promote as directed by OTP. Between fiscal years 1996 and 1997 OTP's travel expenditures totaled approximately $17,800. In total, OTP directed the Committee to Promote to pay approximately $249,400 in transmittal expenditures (outside the District's FMS) using public funds. The expenditures for the Office of Motion Picture and Television Development were also under-reported. MPTV through OTP processed transmittal payments totaling approximately $11,000 outside the District's FMS. As a result, MPTV's expenditures, particularly for contractual services, were under-reported for fiscal years 1996 and 1997. OTP Incurred Questionable Expenditures Totaling Approximately $120,800 The Auditor found that the Office of Tourism and Promotions incurred questionable expenditures totaling $120,797.70. According to the legislation that established OTP, its mission was to develop and implement a coordinated system to attract visitors and provide services in order to increase revenues, develop and expand businesses, and create jobs. Further, the Reorganization Plan No. 2 of 1992 stated that "The Office would coordinate the economic development efforts of the city in the areas of tourism and conventions to better serve those firms engaged in the tourism industry." The questionable expenditures that did not appear to support the mission or carry out the intent of the legislation are listed in Table VI. The expenditures in Table VI did not appear related to OTP's mission and purpose. OTP's former acting director's approval of a $10,000 payment to the Washington World Group for a kickoff embassy program did not have any supporting documentation explaining the purpose of the payment. There was no evidence of what type of service was performed or what benefit was provided to OTP. In the absence of supporting documentation, the Auditor questions whether this was a legitimate expenditure. Additionally, OTP approved the payment of a contractor's travel expenses to attend a conference of the National Academy Foundation held in New York. The expenditures totaled $1,894.23. The contractor was issued a sole source contract by OTP's former acting director to provide legal services and to handle the business plans for a Hospitality Academy under consideration by OTP. While the contract provided for reimbursement of out-of-pocket expenses it did not contain a provision to provide advance funding for the contractor's expenses. OTP's payment of this contractor's travel costs, including a per-diem for travel expenses, was improper. Further, OTP's payment of these expenditures through the Committee to Promote was improper. OTP's payment to the Greater Washington Initiative totaling $88,000 was questionable. According to OTP's acting director, "OTP was directed to cover this expenditure because they had sufficient funds." The Auditor found, however, this was not a budgeted OTP expenditure. Further, this payment should have been paid through the District's FMS by the appropriate District agency, the Office of Economic Development, not by OTP (through the Committee to Promote). Transactions such as this distort financial reporting. OTP's Former Acting Director Improperly Authorized Payments Totaling $20,610 for DNC/RNC Expenses The $20,610 in payments to EMCEE International, authorized by OTP's former acting director for coordinating Democratic National Convention/Republican National Convention (DNC/RNC) activities, were improper. These payments should not have been paid with appropriated funds (taxpayer funds). Rather, they should have been paid against the private contributions that were raised and deposited in Committee to Promote's account for the purpose of funding DNC/RNC activities. As previously noted, DNC/RNC expenses were covered with donations from private contributions. According to records reviewed by the Auditor, these donations were to be used to support all expenses connected with the District government's trips to the DNC and RNC. The contributions totaled $64,614.30 and the expenses totaled $58,537.34, a difference of $6,076.96. The Auditor notes that the $20,610 was inappropriately charged against OTP's budget authority.
THE COMMITTEE TO PROMOTE WASHINGTON ESTABLISHED A CAPITAL CITY PROGRAM FUNDED WITH GENERAL OPERATING REVENUES INCLUDING HOTEL OCCUPANCY TAXES In 1982, the Committee to Promote established a program entitled "Capital City Program" for the purpose of assisting the District government in promoting tourism. According to the Committee to Promote, the program is funded with general operating revenues including Hotel Occupancy Taxes, as well as private and corporate revenue, totaling $50,000 annually. Since 1982, approximately $750,000 has been designated towards this program. According to a memorandum, dated October 2, 1997, from the executive director of the Committee to Promote, the Capital City program consists of:
The executive director, in the same memorandum, noted that the Capital City Program is now formally abolished in accordance with a resolution that was ratified by the full Board on September 25, 1997. Notwithstanding, the Capital City Program was operational during fiscal years 1996 and 1997, and according to information furnished by the Committee to Promote in an October 2, 1997 memorandum:
Subsequent to the Auditor's receipt of the October 2, 1997 memorandum, the Committee to Promote indicated that the information provided to the D.C. Auditor in that document was incorrect in stating that the Capital City Program was funded exclusively with Hotel Tax receipts. As previously noted, the Committee to Promote states that the source of funding for the Capital City Program is general operating revenues which consist of several sources of revenue including HOT taxes. The expenditure of these funds was directed to the Committee to Promote by OTP's current and former acting directors and the Secretary of the District of Columbia. These expenditures are summarized in the Table VII below. During fiscal years 1996 and 1997, the Capital City Program incurred expenditures of $200,351.43 (see summary in Appendix 3). The Auditor found that expenditures charged against the Capital City Program covered receptions and luncheons hosted by the Mayor, a District official on behalf of the Mayor, and the wife of the Mayor. These expenditures totaled approximately $24,500. Additionally, general and administrative expenses as well as expenses associated with the Mayor's State of the District Address and program activities associated with the Cherry Blossom festivities totaled approximately $26,700. As reflected in Table VII, some of these expenditures were offset with receipts of private donations and reimbursements which were deposited in the Committee to Promote's bank account. Private donations were used to cover the costs of the Democratic National Convention/Republican National Convention (DNC/RNC) and Jazz for Jobs program. Reimbursements were made to the Capital City Program from some travelers on the Korean/Beijing trip. Even though District officials collected receipts to offset expenditures from the RNC/DNC trips and the Jazz for Jobs program, the Auditor believes that this methodology raises questions pertaining to the proper reporting of expenses and contributions. For instance, the Jazz for Jobs fundraiser was held in coordination with the Mayor's birthday celebration. The Capital City Program's records indicate that the Mayor's Constituency Services Fund was reimbursed $557.57 by the Capital City Program. This transaction raises concerns about the relationship between the Capital City Program and the Mayor's Constituency Services Fund. After allowing for the receipt of private donations and reimbursements, the Capital City program's expenditures totaled approximately $68,318.40. The Auditor notes that, notwithstanding the receipt of private donations to offset costs, the D.C. Committee to Promote's establishment of a Capital City Program may have been inconsistent with the legislation governing HOT revenues. The Auditor found that the Committee to Promote did not establish separate accounts to govern the receipt of HOT funds, District government funds (public funds), private donations, and corporate contributions. Rather, the Committee to Promote commingled all funds in a single account maintained at Independence Federal Savings Bank. Because the Capital City Program consisted of receipts from private contributors and included a disbursement to the Mayor's Constituency Services Fund at the direction of the Office of the Secretary, and the Office of Tourism and Promotions, this raises concerns about its financial and political status. As of the third quarter of fiscal year 1997, the Auditor estimated that the Capital City Program had an account balance of approximately $31,681.60. Back to top of page Capital City Questionable Expenditures The Capital City Program incurred questionable expenditures totaling $43,473.60. Hotel Occupancy Taxes are levied to provide funds to support, in part, tourism, conventions and promotion of the District of Columbia. D.C. Code, Section 47-3206, entitled "Washington Convention Center Authority Fund" states the following:
In a review of the Capital City program expenditures, the Auditor questioned expenditures charged against this category and how they met the intent of the law to support conventions, tourism, and promotion of the District of Columbia. The questionable expenditures are presented in Table VIII. Expenditures Funded by Private Contributions Through the Capital City Program The Capital City Program incurred administrative expenditures in managing DNC/RNC and Jazz for Jobs program initiatives. While the expenditures were charged to the Capital City Program, these initiatives were offset with receipts from private contributions. The deposits were made to the Capital City Program and as expenses were incurred, OTP, as well as the Office of the Secretary, authorized the payment and checks were issued. Table IX presents those expenses that were covered by private contributions through the Capital City Program. The Mayor along with District officials attended the DNC/RNC events in Chicago and San Diego respectively and incurred expenditures of $58,537. These expenditures were charged to the Capital City Program but were covered with private contributions raised by the District government. In addition, the Mayor and a delegation of District officials traveled to Beijing and Seoul Korea and hosted local receptions for Beijing officials, and incurred travel costs of approximately $30,066. A portion of these expenditures were offset with reimbursements of travel costs. The Auditor found that the expenditures charged against the Capital City Program could have been funded with appropriated revenues that the Office of the Mayor receives for reception, entertainment and other related purposes. When originally made in 1982, the D.C. Committee to Promote's decision to fund a $50,000 Capital City Program for the District government, above the funds authorized by D.C. Code, Sections 1-355 and 1-356, was not a prudent business decision because it duplicated existing funds established by District legislation. The Mayor is authorized to receive $25,000 for a Ceremonial Fund in accordance with D.C. Code, Section 1-355 which states:
In addition to the $25,000 ceremonial appropriation, the Mayor is authorized an additional $2,500 under D.C. Code, Section 1-356 which states:
In total, the Mayor of the District of Columbia had at his discretion approximately $77,500 consisting of HOT funds, ceremonial funds and discretionary funds to use for receptions, entertainment, travel, and related activities during both fiscal years 1996 and 1997.
OTP's ACTING DIRECTOR RECEIVED AN ADVANCE OF $10.000 FOR THE SEOUL, KOREA/BEIJING TRIP OF WHICH ONLY $955 WAS USED FOR THAT PURPOSE A Portion of the Funds Advanced Remained Outstanding For Approximately One Year The acting director of OTP requested from the Committee to Promote and received an advance of $10,000 from the Capital City account to cover expenses during the Mayor's November 11-20, 1996 travel to Seoul, Korea and Beijing, People's Republic of China. Of the $10,000 advanced, approximately $955 was used to cover miscellaneous expenses. Another $2,564 was used to provide advances to members of the delegation to cover incidental expenses which were to be reimbursed upon return. Initially, the Auditor was unable to reconcile receipts totaling the $10,000 advance. Subsequently, the OTP acting director submitted information supporting the deposit of a check to cover the outstanding advance of $300, as well as a check for $48.40 to reimburse the Committee's account for the amount that was overpaid. Table X provides a reconciliation of the $10,000 advance based on documentation provided by OTP. According to the transmittal requesting the advance, the funds were requested to cover expenses for a press briefing, a breakfast briefing, and for other official functions The Auditor did not find that the funds were used exclusively for these purposes. As reflected above in Table X, over half of the funds advanced were used to fund expenses associated with a luncheon for diplomatic wives hosted by the Mayor's wife. According to the Auditor's reconciliation, OTP's acting director returned with approximately $6,300 cash. These funds were used to purchase money orders and cashiers checks for payments to vendors to cover expenses associated with the diplomatic wives luncheon. OTP's acting director indicated that she was instructed by the Committee to Promote's accountant to pay vendors using cashiers checks and money orders because of a delay in obtaining checks through the Committee to Promote. Notwithstanding, the money returned from the Beijing delegation should have been redeposited in the Capital City account (Committee to Promote's bank account) and new checks issued to cover expenses. Additionally, the funds that were used as advances for members of the delegation traveling to Beijing, were not reimbursed timely. In one instance the reimbursement was not made until approximately eight (8) months after the travel occurred. That reimbursement was not made until July 11, 1997, after the initiation of the audit. In another instance, the reimbursement was not made until November 17, 1997, approximately one year later. According to OTP's acting director, the reimbursements were not made pending the location of receipts to support expenses. The Auditor found that OTP's acting director was overpaid approximately $48.40. This occurred, in part, because the reconciliation was not completed timely and because several adjustments were improperly made. OTP's acting director, relying on the Committee to Promote's accountant, indicated she believed that the balance was reconciled and that no outstanding monies were due except for the $300 advance. The Auditor notes, however, that it was the responsibility of the OTP acting director to properly reconcile the $10,000 that was advanced for purposes of covering travel expenses, not the Committee to Promote. The Auditor found that the acting director of OTP received approximately $12,375 (including the $10,000 advanced for Beijing) in cash as advances for out-of-town travel. The Auditor believes that it is not a good business practice for one individual to receive large sums of cash for distribution to others when traveling. Each individual on official travel should request an advance through the District's FMS. in accordance with the District's travel policies and procedures.
OTP CIRCUMVENTED THE DISTRICT'S ESTABLISHED TRAVEL REGULATIONS OTP did not follow District travel regulations in completing a "Request and Authorization for Official Travel" (FMS431) document. OTP officials and staff traveled and incurred expenses of approximately $17,794 during fiscal years 1996 and 1997 for travel that was processed through the Committee to Promote. OTP staff traveled to Brazil, Argentina, Chile, and other destinations. OTP officials were not required to comply with District regulations in submitting a reconciliation of travel expenses when processing travel through the Committee to Promote. They were not required to submit a Travel and Related Expenses Voucher (FMS432). OTP's acting director indicated that they used the State Department's per-diem rates when traveling outside the United States. However, as employees of the District government, OTP's staff was required to follow District travel regulations. Travel Document Was Improperly Altered A transmittal for expenditure dated June 4, 1996 was submitted to the Committee to Promote by OTP's former acting director to cover his travel costs to attend a conference in Istanbul, Turkey. The expenditure totaled $863.00. After further review, the Auditor discovered that the travel was for the District's former Chairman of the Council of the District of Columbia. Based upon the Auditor's initial review of the documentation, it appeared that the travel was for the former director. A subsequent review revealed that this appearance was misleading. The invoice from the travel agency, which was attached to the transmittal, did not contain the name of the individual traveling. In addition, the ticket information which was printed on the invoice also did not state the name of the individual that was traveling. After comparing this travel invoice to others from the same firm, the Auditor concluded that information had been deleted. A duplicate copy of the travel invoice was obtained directly from the vendor. This confirmed that the travel document had been altered. According to the documentation obtained directly from the travel agency, the ticket to Istanbul, Turkey was purchased for the former chairman of the Council of the District of Columbia rather than the former acting director of OTP as alleged. The expenditure was initially charged to the Office of Tourism and Promotions during fiscal year 1996 and then later reclassified and charged against the Capital City Program at the direction of the OTP's acting director. The Auditor notes that this misrepresentation of information was improper.
EMPLOYEES DETAILED TO OTP VIOLATES CHAPTER 8. SUBPART 9.3 OF THE DISTRICT PERSONNEL MANUAL OTP's staff during fiscal years 1996 and 1997 consisted in part of seven (7) individuals detailed from various District government agencies and the Committee to Promote. Personnel actions were not completed for any of the individuals detailed to OTP. During fiscal year 1996, OTP had an official full- time staff complement of four (4) through April 1996 and only three (3) for the remainder of fiscal year. During fiscal year 1997, OTP had an officially authorized staff of three. In addition to its authorized FTE level of three (3) during the latter half of fiscal year 1996 and all of fiscal year 1997, four (4) employees were detailed from the Department of Housing and Community Development (DHCD), the D.C. Committee to Promote, and the Office of Economic Development. Table XI presents a listing of those employees detailed to OTP. The above District government employees' detail to OTP violated the provisions of Section 9.4 of the District's DPM which states the following:
Each of the employees detailed to OTP was detailed in excess of the 30 days as outlined in the District's DPM, Chapter 8. None of the employees detailed were reported on a Request of Personnel Action form 52. Further, there was no of ficial copy of the description of the position for detail nor was there any narrative of the assignments under the detail or any detail dates. The employees were simply detailed with verbal approvals. There was no evidence that any follow-up actions were performed to determine if the employees were performing adequately under their respective details. Further, the D.C. Office of Personnel did not ensure that the details ended within the appropriate time frame. None of the details were extended in accordance with the personnel procedures. The individuals on detail were simply allowed to remain on detail indefinitely. Employee on Detail to OTP Violated Grant Guidelines The Auditor reviewed a report from the Federal Housing Administration about the District's Community Development Block Grant's (CDBG) Economic Development Loan Program. The review identified a DHCD employee, detailed to OTP, who was being paid with CDBG funds despite the fact that no CDBG activities were being performed. According to the federal review, the employee on detail to OTP, but paid with CDBG funds, violated 24 CFR 570.206 (a)(1), entitled "Program Administration Costs." The employee was detailed for the period January 97 - September 97. The employee is a DS 14-4, with an annual salary of $60,138. The prorated amount of the salary that was charged improperly to the grant totaled approximately $41,265, according to the federal review.
THE COMMITTEE TO PROMOTE HAS FILED A FRIENDLY LAWSUIT AGAINST THE DISTRICT GOVERNMENT FOR $192.000 At the instruction of officials the Financial and Technical Services division of the Of fice of the Chief Financial Officer, the Committee to Promote has filed a $192,000 friendly lawsuit against the District government. The suit is the result of an agreement negotiated between OTP and the Committee to Promote. The agreement was negotiated by OTP's acting director and the executive director of the Committee to Promote to cover fulfillment services during fiscal year 1997. In a memorandum dated May 20, 1997, the executive director of the D.C. Committee to Promote wrote to the acting director of OTP regarding tourism fulfillment. The memorandum stated:
The Committee to Promote submitted an updated invoice to OTP dated August 25, 1997. The invoice stated:
According to officials in the CFO's Office of Financial and Technical Services division, $190,000 has been put in retainage for fiscal year 1997. OTP's acting director indicated that the $40,000 increase in costs was attributable to OTP's payment for an employee detailed from the Committee to Promote. The retainage was approved to provide adequate funds in the event the lawsuit is decided in the Committee to Promote's favor. CONCLUSIONThe relationship between the Office of Tourism and Promotions and the D.C. Committee to Promote was established as a result of the Reorganization Plan No. 2. The legislation provided that OTP would have oversight of the D.C. Committee to Promote as well as the Office of Motion Picture and Television Development. It is the Auditor's opinion that the Office of Tourism and Promotions was unable to fulfill its mandate of maintaining oversight of the Hotel Occupancy Tax dollars received by tourism agencies during fiscal years 1996 and 1997. This was due, in part to, a lack of financial and staff resources to oversee the fastest growing and number two industry in the District of Columbia. OTP, however, failed to exercise sufficient oversight utilitizing its existing resources resulting in these entities functioning without any ongoing oversight or accountability as mandated in OTP's enabling legislation. The Auditor finds that the Office of Tourism and Promotions circumvented the District's established payment processing system by making payments to the D.C. Committee to Promote Washington for deposit into its bank account for OTP's future use. Further, these funds did not lapse at the end of the fiscal year which violated GAAP principles as adopted by the District government. The Office of Tourism and Promotions was abolished as of September 30, 1997 as a result of the elimination of the office's funding in the fiscal year 1998 budget. Respectfully submitted, TABLE OF APPENDICESAppendices are not available on-line. Appendix 1 OTP-Out-Of-Town Travel Expenditures Fiscal Year 1996 Appendix 2 FMS-Out-Of-Town Travel Expenditures Fiscal Year 1996 Appendix 3 Capital City-General Expenditures Fiscal Year 1996 1. The Committee to Promote deposited OTP's funds in its bank account maintained at Independence Federal Savings Bank. This permitted OTP to request checks and make payments to vendors without a&Bring to the normal payment cycle required by the District's FMS. The Auditor did not find that OTP obtained three quotes, or processed the required purchase order or payment voucher. 2. Of the $88,000 paid for membership with the Greater Washington Initiative, $60,000 was diverted and used to pay for Presidential Inaugural tickets. The $60,000 was subsequently redeposited into the Committee to Promote's account and payment was made to the Greater Washington Initiative. 3. The $137.42 payment to the National Seminars Group represented a duplicate payment to this company. OTP initially paid the $137.42 on 5/28/96 and again on 6/13/96. The District should obtain a refund of the duplicate payment that was made in error. 4. The $2,673.10 includes $300.00 that was not paid until November 17, 1997, approximately one year after the Beijing/Korean travel. According to information submitted to the Auditor, the Committee to Promote received this check on November 17, 1997, and deposited this payment on November 21, 1997. The $48.40 reimbursement from OTP's acting director was also deposited on this day. |
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