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SUMMARY OF
ANC IA FINANCIAL AUDIT SUMMARY OF ANC 1A FINANCIAL AUDITThis is the District of Columbia Auditor's report of the financial activities of Advisory Neighborhood Commission (ANC) l A for the period October 1 ,1 993 through September 30, 1 997 (fiscal years 1994 through 1997). The audit is part of a continuing initiative by the Office of the Auditor to review the financial status of each Advisory Neighborhood Commission. The Auditor found numerous deficiencies in ANC lA's internal accounting controls, a lack of accountability for ANC 1 A funds, and a pattern of mismanagement of the Commission's financial resources that resulted in the unauthorized disbursement of over $20,000 for improper and questionable expenditures. The deficiencies identified in this gave rise to the expenditure of funds without proper documentation and, in most cases, the approval of ANC 1A commissioners. There was no assurance that funds disbursed by ANC lA's officers benefited the ANC 1A community or were used for purposes permitted by the ANC law. The ANC 1A officers who authorized these expenditures failed to effectively carry out their fiduciary responsibilities and failed to comply with the ANC law, the Auditor's Financial Guidelines and Procedures, and relevant legal opinions issued by the Corporation Counsel of the District of Columbia. The financial transactions examined by the Auditor warrant further investigation by appropriate law enforcement authorities. The Office of the Auditor recommends the continued suspension of further allocations of District funds to ANC 1A until the Commission accounts for all District funds it has received and spent during the audited period. OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR Deborah K. Nichols Robert W. Tucker Dear Commission Chairperson: Letter Report: Audit of Advisory Neighborhood Commission 1A Pursuant to D.C. Code, Section 1-264(d), the District of Columbia Auditor conducted an audit of the financial operations and activities of Advisory Neighborhood Commission (ANC) 1A. The objectives of this audit were to:
The current audit covered fiscal years 1994 through 1997 (October 1, 1993 through September 30, 1997) and included a review of all available documentation in support of ANC 1A’s financial activities during the period under audit. Where possible, the Auditor interviewed ANC 1A commissioners and officers as well as individuals and organizations receiving monies from the ANC. FINDINGSANC 1A DID NOT MAINTAIN ADEQUATE DOCUMENTATION IN SUPPORT OF ALL DISBURSEMENTSPrevious Recommendation:
Implementation Status of Previous Recommendation:Missing Supporting Documentation In the previous audit, the audit team found that the Commission lacked sufficient supporting documentation for 40 percent of the financial transactions reviewed. During the current audit period, ANC 1A failed to maintain supporting documentation, such as invoices and receipts, for approximately 46 percent of all disbursements reviewed by the audit team. We noted that during fiscal year 1994, the Commission improved recordkeeping in support of financial transactions by maintaining supporting documentation for 72% of its financial transactions. However, during fiscal years 1995, 1996, and 1997 deficiencies in recordkeeping resurfaced and the Commission failed to maintain documentation to support 50 percent or more of its disbursements. Due to the lack of adequate supporting documentation in the files of the Commission, the audit team was not able to verify that each disbursement represented a valid use of ANC 1A funds for public purposes. Table I below presents, by fiscal year, the number of missing supporting documents for the current audit period. TABLE I
Source: Office of the District of Columbia Auditor and ANC 1A financial records. The failure of ANC 1A’s former officers to maintain documentation in support of the ANC's disbursements did not comply with ANC Financial Guidelines and Procedures established by the Office of the District of Columbia Auditor or standard financial management policies and procedures followed by the District of Columbia Government. The Office of the Auditor's guidelines state that prior to disbursing funds, the treasurer must ensure that a voucher package is prepared which contains an original invoice or receipt from the supplier of services or goods. The guidelines also require that all voucher packages must be retained in the ANC’s files for a period of at least seven years. ANC 1A’s former officers failed to adhere to these guidelines. Missing Canceled Checks and Bank Statements Canceled checks and bank statements were also missing from ANC 1A’s files for twelve (12) months beginning April 1995 through March 1996. Because the canceled checks and bank statements were missing, the Auditor could not conduct vital tests of the documentation and could not compare check amounts and payees recorded on quarterly financial reports with amounts and payees on original canceled checks. The lack of supporting documentation and the unavailability of canceled checks and bank statements precluded a full accounting of appropriated funds provided to ANC 1A by the District of Columbia Government. Moreover, the missing financial records may or may not contain evidence of improper financial transactions that were processed inadvertently or intentionally by the ANC’s officers. Table II below identifies the missing canceled checks. TABLE II
Source: ANC 1A’s records Despite the absence of numerous canceled checks, the audit team was able to examine Xeroxed copies of the face of some missing checks. However, unless provided directly to the Auditor by a bank, Xeroxed copies of only the face of canceled checks cannot be fully relied upon because of the susceptibility to alteration and the absence of other corroborating evidence. Further, because only the face of the Xeroxed copies were available for review, the audit team was unable to examine the endorsement on the back of the Xeroxed checks to determine the absence of other irregularities. The audit team made only limited findings, in a few instances, based on a review of the Xeroxed copies of the checks. However, in most instances, the Xeroxed copies were unreliable and could not be used to develop findings and conclusions. The Auditor repeatedly requested ANC 1A officers to obtain copies of all missing canceled checks and bank statements from the ANC’s bank, and to have these documents sent directly to the Office of the Auditor. The Office of the Auditor also offered its assistance in facilitating the flow of information necessary for the audit. However, ANC 1A’s officers have not complied with the Auditor’s requests or accepted the Auditor’s offer of assistance. Nevertheless, vigorous independent efforts are being made by the Auditor to obtain the necessary documents. Until such time as these financial records are received and thoroughly reviewed, the Office of the Auditor will not recommend that ANC 1A receive any future quarterly allocations of appropriated District of Columbia Government funds. RECOMMENDATIONS
PERSONAL SERVICE DISBURSEMENTS WERE NOT SPECIFICALLY APPROVED BY ANC 1A COMMISSIONERS AS REQUIRED BY LAWCertain ANC 1A officers violated D.C. Code, Section 1 -264(g) which states in relevant part:
Over $5,000 was disbursed to individuals or organizations as personal service payments without obtaining the approval of a majority of ANC 1A commissioners and without obtaining receipts, invoices and other documentation in support of the disbursements. In other words, these disbursements were not approved by a majority of ANC 1A commissioners during a public meeting and there was no paper trail to justify and support the disbursements. Further, except for six disbursements noted in Appendix I by a single asterisk, the expenditures were not subsequently approved by the Commission. Appendix I provides a listing of the $5,000 in personal service disbursements that appeared to violate D.C. Code, Section 1-264(g). According to explanations provided on canceled checks or quarterly financial reports, the 41 disbursements presented in Appendix I represented payments for services rendered by the payees. However, there were no receipts, no vouchers, no invoices, and no other supporting documentation from which one could ascertain: (1 ) the nature and extent of the services provided; (2) the rate of compensation; (3) the maximum hours of service; or (4) whether the money disbursed was used for a valid public purpose. All ANC disbursements, including those in excess of $50 and those for less than $50, must be supported by receipts, invoices, and other supporting documentation. RECOMMENDATIONS
ANC Made Questionable Payments For Janitorial Services. Flier Distribution, And PostageCustodial or janitorial service was the indicated purpose for a number of the disbursements listed in Appendix I. In some instances, more than one payment was made on the same day to different individuals for the same type of service. For example, on both June 8, 1994 and March 22, 1995, two checks were written on each date to two different entities for providing custodial/janitorial services. No documentation was available in the Commission’s files to support either of these disbursements or to explain why there were two janitorial service payments on the same date, and where the services were performed. Also, in several instances, the amounts paid varied for the same type of service. Flier distribution was another indicated purpose for disbursement on several other checks. The audit team found that, in some instances, the Commission made payments to individuals for distribution of fliers purportedly announcing ANC 1A meetings. During the same period of time, ANC 1A’s officers purchased approximately $1,200 in stamps and bulk mail permits from the U.S. Postal Service. The Commission did not maintain adequate records of the nature of any items mailed with the stamps or bulk mail permits. Without an adequate record of documents mailed, the audit team could not determine whether the stamps were used to mail documents pertaining to ANC 1A or were used by commissioners, in whole or in part, to send personal mail that did not pertain to the business of ANC 1A. Check Issued For Personal Services Was Not Authorized by The Commission, Was Not Supported by Documentation, And Contained a Questionable Endorsement Check number 2158, in the amount of $125, was signed by ANC 1A’s then-chairperson (Lenwood Johnson) and secretary (Anna Bowman). This check was made payable to a Phyllis Davis. The disbursement was not authorized by a majority of ANC 1A commissioners at a public meeting and was not supported by receipts, invoices, or other documentation certifying that the expenditure was a valid public purpose use of ANC funds. Further, ANC 1A’s then-chairperson and secretary could not provide an explanation for the disbursement nor could the audit team discern whether the check was signed before or after it was filled out. The former chairperson and secretary of ANC 1A violated D.C. Code, Section 1-264 (f) which states in relevant part that no expenditure of any amount shall be made without the specific authorization of the Commission. Check number 2158 also contained an improper endorsement. This check was made payable to one individual but was endorsed by another individual, without the endorsement of the individual to whom the check was written. More specifically, the check for $125 was made payable to Phyllis Davis but was endorsed on the back as follows: “Voncelle Manning for Phyllis Davis.” When questioned by the audit team, Ms. Manning could not recall the circumstances surrounding her endorsement of this check. A representative of the bank on which the check was drawn indicated that if a payee of a check wished to transfer a check to another individual, the correct procedure would have been to have the payee (Ms. Davis) endorse the check prior to the transfer. That procedure was not followed with this check. It did not appear that ANC 1A’s officers investigated the propriety of the endorsement on this check, or the circumstances that led to this unauthorized disbursement. At minimum, ANC 1A’s internal control system should have included a procedure that required a review of each month's bank statement and canceled checks by an ANC officer other than the chairperson or treasurer in order to uncover improper disbursements, improper endorsements, or other irregularities and improprieties pertaining to disbursements of ANC funds. An improper endorsement, such as the one on check number 2158, may indicate a number of irregularities including theft, embezzlement, and misappropriation through a real or fictitious payee. Because of the lack of documentation, absence of Commission approval of this disbursement, and the irregularity of the endorsement, ANC 1A commissioners must review the circumstances surrounding the disbursement to determine whether it was for a bona fide public purpose, and, if not, seek restitution of the funds from the individual endorsing the check or the former officers who authorized the disbursement. RECOMMENDATIONS
Salary Disbursements For Office Workers Were Not Always DocumentedANC 1A failed to comply with Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor which state that a payroll register must be maintained to record all paychecks issued to employees. A payroll register should be used to accumulate employees' payroll and related information, including employee earnings and withholdings which must be reported to the appropriate tax authorities. ANC 1A did not have a payroll register and, therefore, could not ensure that accurate payments were being made to the appropriate tax authorities. Also, salary disbursements to ANC lA's office workers were not always supported by an approved timesheet or other appropriate supporting documentation. Without properly approved timesheets or other documentation of hours worked, the Commission could not be assured that salary payments to its office workers represented accurate payment for hours actually worked. Advisory Neighborhood Commission 1A’s documentation to support payments to the office worker (who was employed by the Commission from October 1, 1993 through December 1994) was not available for six (6), or approximately 19 percent, of the 31 payroll disbursements. In 16, or approximately 64 percent, of the 25 instances in which a timesheet was available, an authorized ANC 1A officer’s signature was not present on the timesheet to indicate review and approval of the hours reported as having been worked. Documentation was also not available in the Commission’s files to support eight (8), or approximately 18 percent, of the 45 salary payments to another office worker employed by the Commission beginning in September 1995. RECOMMENDATIONS
DISBURSEMENTS TO ANC 1A COMMISSIONERS LACKED DOCUMENTATIONPrevious Recommendations:
Implementation Status of Previous Recommendations: ANC 1A’s officers continued to make disbursements to ANC 1A commissioners without obtaining receipts or invoices to document and support such disbursements and without obtaining the Commission's prior or post approval, except in the instance of check number 2214. The Commission’s officers also continued the practice of writing checks to commissioners for good and services provided by third parties rather than writing checks directly to vendors and service providers. In training sessions and writ en correspondence, the Auditor has repeatedly informed AN’s that the preferred practice is to write checks directly to the vendor of goods and services and to obtain a receipt to support the disbursement rather than the practice of writing a check that is not supported by appropriate documentation to an ANC commissioner who in turn pays a vendor. In the absence of supporting documentation, there is no assurance that the amount disbursed to the commissioner is, in fact, the amount charged by and subsequently paid to the vendor. In some cases, there is no assurance that a vendor actually exists. The Auditor also found that the Commission did not follow the recommendation made in the last audit report that it seek restitution from commissioners responsible for disbursements that lacked appropriate documentation and authorization. The Auditor will continue to disallow such disbursements and recommend a reduction in these amounts to the ANC’s quarterly allotment. Disbursements totaling approximately $896 were made to several commissioners without adequate justification, supporting documentation, or approval by a majority of ANC 1A commissioners at a public meeting. These disbursements are listed in Table III. TABLE III
Source: ANC 1A quarterly financial reports and financial records. Commission’s Former Chairperson Signed Checks Made Payable to Himself To ensure proper internal control over Commission disbursements, Commission officers should refrain from signing Commission checks made payable to themselves. When Commission officers receive Commission funds by check, the preferred procedure is to have Commission officers other than the payee sign the check. This procedure allows at least two commissioners who are not involved in the transaction the opportunity to verify that the disbursement has been approved by a majority of commissioners and that adequate documentation in support of the disbursement has been presented in advance by the payee. The then-chairperson of ANC 1A, Lenwood Johnson, did not use the preferred procedure of having other Commission officers sign ANC 1A checks made payable to him. Instead, Mr. Johnson was one of the signers of checks totaling $525 that were made payable to him. ANC 1A’s vice chairperson, Pauline Accra, and the Commission’s secretary, Anna Bowman, countersigned these checks with Mr. Johnson. None of the disbursements to Mr. Johnson were supported by documentation that could be found in the Commission’s files, and the purpose of these disbursements was not made clear in written explanations submitted with quarterly financial reports. For example, in a written explanation of check number 2214 for $100, Mr. Johnson stated that he "gave a personal check or cash to pay for janitorial services after 1A town meeting." Check number 2214 represented a reimbursement to Mr. Johnson, however, Mr. Johnson did not provide invoices, receipts or a signed statement from any individual acknowledging receipt of the $ 100 payment. Check number 2214 was signed by Mr. Johnson and the Commission's then secretary, Anna Bowman. Another example involved check number 2147 for $375 which was reported on the April through June 1995 quarterly financial report. The written explanation indicated that Mr. Johnson cashed the check to pay “cash only” trash haulers for a Commission approved neighborhood cleanup. This check was signed by Mr. Johnson and the ANC’s vice-chairperson. The Commission’s files, however, did not contain any documentation that would confirm or support this explanation. Further, no receipts, invoices or signed statements from the individuals who Mr. Johnson indicated performed the services could be found in the Commission’s files. The audit team also could not find any explanations or supporting documentation in the Commission’s files for two $50 disbursements to Mr. Johnson on check numbers 2126 and 2171. RECOMMENDATIONS ANC 1A must immediately discontinue the practice of writing checks directly to ANC commissioners for services performed by third parties. Instead, the Commission must adopt the practice of paying vendors directly for their services.The Commission must obtain and maintain supporting documentation for all disbursements in its files for a period of not less than seven (7) years.The Commission must seek restitution from all commissioners who received disbursements listed in Table III that lacked appropriate supporting documentation such as receipts, invoices, or signed statements from vendors. The Auditor will conduct a follow-up review within 180 days to determine compliance with this recommendation.Commissioners who receive ANC funds by check must refrain from signing checks that are payable to them. Other Commissioners who are not involved in the transaction should sign these checks. PAYMENTS MADE FOR ACCOUNTING SERVICES WERE NOT AUTHORIZED BY A MAJORITY OF COMMISSIONERS AND WERE NOT ADEQUATELY DOCUMENTEDD.C. Code, Section 1-264 (f) states in relevant part that:
Further, D.C. Code, Section 1-264(g) states:
ANC 1A’s then-chairperson, Lenwood Johnson, and vice chairperson, Pauline Accra, violated D.C. Code, Sections 1-264(f) and (g) by authorizing payments purportedly for accounting services totaling approximately $3,000 to Customized Accounting Services and Help, a defunct Maryland-based firm. Neither the services nor the payments were authorized by a majority of ANC 1A commissioners. Invoices submitted by the vendor did not adequately document the services provided to ANC 1A. Additionally, other commissioners did not independently verify the vendor’s scope of work and resulting work product. In fact, the Commission’s files did not contain a contract identifying the services to be provided, the contractor’s rate of pay, or deliverables. As a result of these deficiencies, the Auditor could not determine whether any services were provided to the Commission even though certain ANC officers disbursed almost $3,000 to the firm. These disbursements were made as follows:
TABLE IV
Source: ANC IA quarterly financial reports, financial records and invoices submitted by the payee. RECOMMENDATIONS
GRANT DISBURSEMENTS VIOLATED D.C. CODE, SECTION 1-264(m)Previous Recommendations: ANC 1A provide adequate documentation for all grants/neighborhood enhancement requests. This documentation must include the following items:
ANC IA discontinue the practice of making checks payable to individuals for grants or neighborhood enhancement programs. Implementation Status of Previous Recommendations: ANC 1A’s then-chairperson, Lenwood Johnson, vice chairperson, Pauline Accra, treasurer, Vivian Brown, and secretary, Anna Bowman, violated ANC law by signing checks to disburse funds for grants that did not comply with D.C. Code, Section 1-264(m) which states:
ANC 1A officers continued to make grant disbursements that violated D.C. Code, Section 1-264(m) for the following reasons:
Table V lists disbursements made in ANC 1A officers that there classified on quarterly financial reports as grants. Table V also identifies two disbursements that were not classified as grants but were misclassified on quarterly financial reports. TABLE V
Source: ANC 1A quarterly financial reports and Grant Applications. *denotes that grant applications were found in ANC 1A’s files. Grant applications were in ANC 1A’s records for five (5) of the thirteen (13) grants listed in Table V. However, these grants, identified by a single asterisk in Table V, violated D.C. Code, Section I-264(m) because the grantee never presented the grant request to commissioners during a public meeting of the Commission. A review of minutes of ANC 1 A meetings revealed that only four (4) grants totaling $3,450, or approximately 34 percent of the dollar value of grants listed in Table V, were approved by the Commission. The remaining nine (9) grants totaling $6,790, representing 66 percent of the dollar value of grants listed in Table V, were not approved by a majority of ANC 1A commissioners at a public meeting. The grants approved by the Commission were:
Even the grants approved by a majority of ANC 1A commissioners violated D.C. Code, Section 1-264(m) for one or more of the following reasons: (1) the proposed grantee did not present the grant request at a public meeting of the Commission; (2) the grant was payable to an individual and was thus prohibited as a non-public purpose expenditure; or (3) grant funds were used for a purpose prohibited by law. For example, according to a Corporation Counsel opinion dated January 10, 1986, the grant of $450 to Cardozo Senior High School was prohibited as a “direct grant to a public school.” ANC 1A Awarded Grants to Fund FestivalsA May 26, 1994 Corporation Counsel opinion determined that food and entertainment were not permissible purposes for which an ANC could make a grant. By letter dated August 16, 1994, the District of Columbia Auditor specifically informed ANC 1A of the Corporation Counsel’s opinion and stated that the expenditure of ANC funds for entertainment and food, such as block parties, festivals, and similar activities, was prohibited and would be disallowed during the quarterly financial report review process. However, despite the prohibition, ANC 1A’s treasurer and chairperson signed checks disbursing grants totaling at least $2,900 to fund festivals and similar entertainment type activities. These grants are discussed below:
ANC 1A Failed to Ensure That Grantees Used Grant Funds as The Commission IntendedIn an October 1993 letter to ANC 1A, The Neighborhood Trying (TNT) Block Association requested a grant of $1,500 for rides, decorations, permits, insurance, a school janitor, stationery, printing, and postage for a community fair. Minutes of the ANC IA meeting at which the Commission approved the TNT grant specifically stated that the grant to TNT should not be used for printing, postage, stationary, or food. ANC 1A commissioners did not monitor TNT’s expenditure of grant funds to ensure that the funds were not used for the purposes specifically prohibited by the Commission. While ANC 1A’s minutes indicated that receipts supporting expenditure of the grant funds were to be delivered by TNT to the Commission in June 1994, the audit team did not find such receipts in the ANC’s files. It is unclear how TNT used the grant funds. As a result, the Auditor could not determine whether the grant was used to fund the Association’s operations or was used for a community festival. Also, in January 1996, the Commission’s then chairperson and secretary disbursed $1,700 to Gary B. Rucker and classified the payment on the quarterly financial report as “other.” The Commission’s files did not contain any documentation: 1 ) describing the purpose of the disbursement; and 2) indicating whether the disbursement was a valid ANC 1A expenditure. The check was endorsed by the payee as “Gary B. Rucker, For Deposit Only, Park View PTA.” The Commission should have obtained receipts, invoices, or other adequate documentation to justify and support the disbursement, and to ensure that the funds were spent as the Commission intended. Finally, the Commission’s minutes did not document that the disbursement was approved by a majority of ANC 1A commissioners at a public meeting. According to the ANC’s then-treasurer, the disbursement was for the purchase of an outdoor lighted bulletin board for the Park View Elementary School. The sign was to be used to advertise ANC meetings, school events, and other events. No documentation existed in the Commission’s files to verify that the funds were used as the Commission intended. RECOMMENDATIONS
ANC 1A FAILED TO TIMELY FILE QUARTERLY FINANCIAL REPORTSANC I A violated D.C. Code, Section 1 -264(j) when it failed to file quarterly financial reports with the Office of the Auditor for fiscal years 1997 and 1998, as of the date of this report. D.C. Code, Section 1-264(j) states:
The last quarterly financial report filed by ANC l A with the Office of the Auditor was in April 1997 for the fourth quarter of fiscal year 1996 (July through September 1996). ANC 1A has not filed any further quarterly financial reports with the Office of the Auditor. Many of ANC 1A’s quarterly financial reports were filed late. Table VI below presents information concerning the dates that quarterly financial reports were due in the Office of the Auditor and the actual dates that ANC 1A’s quarterly financial reports were received by the Office of the Auditor. TABLE VI
Source: Office of the District of Columbia Auditor Inasmuch as ANC 1 A has not submitted any quarterly financial reports for fiscal years 1997 or 1998, as of the date of this report, and cannot adequately account for funds previously released to it, the Auditor has not recommended the release of any further quarterly funding allocations to it. The Auditor’s policy, which is consistent with D. C. Code, Section 1-264(j), is not to recommend the release of quarterly allocations to an ANC when it fails to file quarterly financial reports. D. C. Code, Section 1-264(j) states, in relevant part, the following:
As of May 1,1998, a total of $23,642.78 in quarterly funding allocations were being withheld from ANC 1A by the District government pending the submission of overdue quarterly financial reports and missing canceled checks and bank statements. The $23,642.78 consisted of $9,422.78 in fiscal year 1997 allotments that were placed in retainage and $14,220 in fiscal year 1998 allotments. RECOMMENDATIONS ANC 1A must immediately submit all overdue quarterly financial reports and thereafter submit quarterly financial reports by the due date.ANC 1A must submit all outstanding quarterly financial reports before the Auditor will recommend the release of future funding allocations from the District government. ANC 1A FAILED TO COMPLY WITH THE ANC LAW AND GUIDELINES AND PROCEDURES ISSUED BY THE OFFICE OF THE AUDITORI. Checks Were Not Written in Consecutive Order In violation of D. C. Code, Section 1-264(f), at least six checks written by the Commission’s former chairperson, Lenwood Johnson, and vice-chairperson, Pauline Accra, were not written in consecutive numerical order. In other words, cheeks were written out of sequence. ANC 1A’s officers began the practice of writing checks out of numerical order in March 1995. D.C. Code, Section 1-264 (f) states, in relevant part, the following:
Also, the practice of writing checks out of numerical order did not comply with ANC Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor. These guidelines state: “All checks must be issued by the ANC in consecutive order on pre-numbered checks.” Checks should be written in numerical order to more accurately account for each check written and to ensure that each check written is recorded in the financial records of the Commission. One example of a check written out of consecutive order was check number 2228 dated April 6, 1995. Other checks in the sequence were written almost a year later in March 1996. Another example was check number 2222 made payable to “Customized Accounting Services and Help” in the amount of $1,375.90 dated September 13, 1996. Other checks in the sequence were written six months earlier in March 1996. RECOMMENDATION
II. Checkbook Was Not Consistently Maintained and Bank Statement Balance Was Not Reconciled to Checkbook Balance Previous Recommendations:
Implementation Status of Previous Recommendations: The Commission’s officers continued to write checks without maintaining a ledger in which to record all disbursements. Further, the Commission did not maintain a running balance of funds available to it after each disbursement and deposit. The Financial Guidelines and Procedures issued by the Office of the Auditor state that
The Commission’s former treasurer and former chairperson failed to consistently reconcile the check book balance to each bank statement balance. When bank reconciliations were prepared, they were not signed or initialed to identify the preparer or the reviewer. The failure to consistently prepare and review bank reconciliations did not comply with Financial Guidelines and Procedures issued by the Office of the Auditor. Bank reconciliations should have been performed in order to detect errors that may have been made by the bank, and to detect deliberate or inadvertent mistakes that may have been made by commissioners who had access to the Commission’s checkbook and related financial records. As part of the reconciliation process, canceled checks returned with bank statements should have been examined to determine whether the canceled checks agreed with the amounts, dates, and payees recorded on the check stub. RECOMMENDATIONS
III. Voided Checks Were Not Consistently Maintained in the Commission’s Files ANC Financial Guidelines and Procedures issued by the Office of the Auditor state:
Advisory Neighborhood Commission 1A did not comply with ANC Financial Guidelines and Procedures issued by the Office of the Auditor in that all voided checks reported on the Commission’s quarterly financial reports were not maintained in the Commission’s files. Voided checks must be maintained in the Commission’s files for a period of at least seven (7) years to account for all check numbers, to ensure that checks labeled as voided were not used to improperly disburse ANC funds, and to ensure that voided checks were actually mutilated to prevent future use. Fifteen (15) checks were identified as voided during the period under audit. Three, or 20 percent, of the voided checks were not available for review by the audit team. Also, the audit team found that check number 2222 was mislabeled as a voided check on the January through March 1996 quarterly financial report. However, the Auditor's review of ANC 1 A’s canceled checks revealed that check 2222 had not been voided but rather had been signed by the Commission's then chairperson, Lenwood Johnson, and vice-chairperson, Pauline Accra, and made payable to “Customized Accounting Services and Help” for $1,357.90. This check was also written out of numerical sequence, and the disbursement was not approved by ANC 1A commissioners. In light of the numerous irregularities surrounding this disbursement, serious questions are raised concerning the legality of the disbursement and whether it was a legitimate expenditure of appropriated funds. The Auditor could not account for all ANC 1A check numbers. Some canceled checks: (1) were not listed on quarterly financial reports; (2) were not available in the files of the Commission; and (3) were not categorized in financial documentation as being canceled, unused, or voided. Therefore, there is no assurance that all disbursements of ANC I A funds and all ANC checks have been accounted for in the Commission’s financial records. RECOMMENDATIONS ANC 1A must maintain all voided checks in the files of the Commission. Additionally, the Commission must account for all Commission checks.The Office of the Inspector General investigate the circumstances surrounding the disbursement of check number 2222 to determine whether it was a legitimate expenditure of District appropriated funds. IV. Minutes of Commission Meetings Not Properly Identified District of Columbia Code, Section 1-262(b) states that each Commission shall meet in a public session at regular intervals. Further, the disbursement of ANC funds must be approved by a majority of commissioners in a public meeting and recorded in the minutes of the Commission. The Auditor may disallow any disbursement of ANC funds not approved by a majority of commissioners in a public meeting. Therefore, ANC 1A must clearly identify the nature of each meeting, especially those that are public meetings conducted pursuant to D.C. Code, Section 1-262(b). According to the Auditor’s review, none of the minutes for ANC 1A meetings were identified as public meetings. Minutes from three (3) of the meetings were identified as “Special” meetings. Two sets of minutes did not specify the nature of the meeting. The remaining seventeen sets of minutes were identified only as “business” meetings. The Auditor reviewed the minutes of ANC 1A and determined that the meetings identified as business meetings appeared to have been opened to the public. This determination was based on discussions with ANC 1A’s former chairperson, a review of the agenda from these meetings, if available, that indicated “community forum” as an agenda item, and minutes of meetings that included discussions by individuals other than ANC 1A commissioners. RECOMMENDATION
V. Savings Account Opened Without Commission Approval D.C. Code, Section 1-264(b) states:
In violation of D.C. Code, Section 1-264 (b), the Commission’s chairperson, Richard Maultsby, and treasurer, Mack James, opened a savings account at NationsBank. This account was opened in February 1997 and was closed in March 1997. Disbursements totaling $2,405 were improperly made from the savings account by the chairperson and treasurer. Any savings account opened by the Commission should have been designated in a resolution that was approved by a majority of ANC 1A commissioners. This savings account was opened by these two officers without the approval of ANC 1A commissioners. The savings account at NationsBank was opened in February 1997 with funds withdrawn from the ANC’s checking account at Industrial Bank. Five withdrawals, using cashiers’ checks, were made from the account before it was closed. The audit team examined copies of the cashiers’ checks. Three disbursements totaling $904.94 were made payable to ANC 1A’s office worker. Another disbursement totaling $1,500.00 was made payable to Change, Inc. for “community network.”3 The final withdrawal was made to close out the account and transfer the balance to the Commission’s checking account. The audit team did not find any minutes of Commission meetings that reflected the Commission’s authorization to open the account. Also, the audit team did not find minutes that authorized withdrawals from the account. Further, because of the number and nature of withdrawals made in the one month period, it appeared that the savings account was used as a checking account and that funds deposited into the savings account were immediately needed by ANC 1A for the operation of the Commission. According to D.C. Code, Section 1-264(b), a Commission shall establish no more than one checking or negotiable order of withdrawal account. Therefore, the opening of the savings account and use of it as a checking account violated D. C. Code, Section 1264(b). RECOMMENDATION
SEVERAL RECOMMENDATIONS MADE IN THE PREVIOUS AUDIT REPORT WERE NOT IMPLEMENTEDThe Auditor made several findings and recommendations in the previous audit report of ANC 1A, dated August 11, 1994, that were not implemented by the Commission. Some of the recommendations are discussed in previous sections of this report. The following are additional recommendations that the Commission failed to implement: Previous Recommendation:
Implementation Status of Previous Recommendation: Minutes for all ANC 1A meetings were not available for review by the Auditor. Commission minutes represent one of the ways in which the Auditor verifies the Commission’s approval of ANC funds for disbursement. Therefore, the Commission must maintain minutes for all of its meetings. Previous Recommendation:
Implementation Status of Previous Recommendation: The Commission did not timely file its employee withholding taxes. Notification from the IRS, dated November 1996, reported that the Commission had not paid its 1994 withholding taxes. The IRS assessed penalties of approximately $454 and interest of approximately $253 on outstanding withholding taxes due from ANC 1A. Previous recommendations:
Implementation Status of Previous Recommendations: Petty cash expenditures were not documented and a system to adequately monitor the petty cash account was not established by the commissioners of ANC 1A. RECOMMENDATIONS ANC 1A must maintain minutes for all of its meetings. These minutes must accurately reflect discussions, approvals and authorizations of the Commission.ANC 1A must timely file federal and state tax forms to avoid unnecessary penalties and interest.ANC 1A must establish a system to monitor petty cash activities. Documentation must be maintained for all petty cash disbursements. CONCLUSIONThe Auditor found numerous deficiencies in ANC 1A’s internal accounting controls, a lack of accountability for ANC 1A funds, and a pattern of mismanagement of the Commission’s financial resources that resulted in the unauthorized disbursement of over $20,000 for improper and questionable expenditures. The deficiencies identified in this report gave rise to the expenditure of funds without proper documentation and, in most cases, the approval of ANC 1A commissioners. There was no assurance that funds disbursed by ANC 1A’s officers benefited the ANC 1A community or were used for purposes permitted by the ANC law. The ANC 1A officers who authorized these expenditures failed to effectively carry out their fiduciary responsibilities and failed to comply with the ANC law, the Auditor's Financial Guidelines and Procedures, and relevant legal opinions issued by the Corporation Counsel of the District of Columbia. The financial transactions examined by the Auditor warrant further investigation by appropriate law enforcement authorities. The Office of the Auditor recommends the continued suspension of further allocations of District funds to ANC 1A until the Commission accounts for all District funds it has received and spent during the audited period. Respectfully submitted, Appendix IUndocumented and/or Unauthorized Personal Services Disbursements for the Period October 1, 1993, through September 30, 19974
*The asterisk indicates disbursements which were approved by ANC 1A commissioners. 1. This check appears to have been written out of numerical sequence. 2. This check was written from the Commission’s saving account at NationsBank. 3. No documentation was available in the files of the Commission to fully describe or support this disbursement. The audit team contacted a representative of Change, Inc. who submitted receipts supporting the purchase of a computer and related supplies. 4. These disbursements do not include personal service payments made to the Commission’s office worker. Deficiencies involving payments to the office worker are discussed later in this report. 5. The explanations were taken directly from the quarterly financial reports or from attachments to the quarterly financial reports. |
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