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OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR The Presidential Building 415 12th Street, N.W., Room 210 Washington, D.C. 20004 Tel. 202-727-3600, Fax 202-724-8814 Deborah K. Nichols Mr. George Boyd Letter Report: Audit of the Financial Accounts and Operations of ANC 5B for Fiscal Years 1993 Through 1997 Dear Mr. Boyd: Pursuant to D. C. Code, Section 1-264(d), the Office of the District of Columbia Auditor conducted an audit of the financial activities of Advisory Neighborhood Commission (ANC) 5B. OBJECTIVE, SCOPE AND METHODOLOGYThe objective of this audit was to determine whether ANC 5B's financial accounts and operations were in compliance with ANC laws, legal opinions issued by the District of Columbia Corporation Counsel, and Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor. The audit covered fiscal years 1993 through 1997 (October 1, 1992 through September 30, 1997). For the audit period, the Auditor reviewed available canceled checks, bank statements, receipts, invoices, quarterly financial reports, minutes of meetings, and other related documents that supported ANC 5B's disbursements and related financial activities. The Auditor interviewed ANC 5B's current chairperson, former acting chairperson, two former commissioners, and two individuals who received payments for services rendered to ANC 5B. COMMISSION’S VICE-CHAIRPERSON ASSUMED THE ROLE OF ACTING CHAIRPERSON WITHOUT THE APPROVAL OF A MAJORITY OF ANC 5B COMMISSIONERSAfter the resignation of ANC 5B's chairperson in March 1994, the vacant chairperson's position was not filled in accordance with ANC 5B's by-laws. The Commission's then vice-chairperson improperly assumed the role of chairperson and was never officially appointed acting chairperson or elected as chairperson by ANC 5B's commissioners. Article IV, Section 10 of the ANC's by-laws state:
Further, Article IV, Sections 3 through 6 state, in relevant part, the following:
The Auditor's review revealed that after the chairperson resigned, more than nine months elapsed before ANC 5B elected a chairperson to fill the vacant position. The vice-chairperson assumed the role of acting chairperson without the Commission's approval for approximately nine months until the Commission elected officers for the next calendar year. At this election, the Commission did not elect the acting chairperson as its permanent chairperson. The Commission's minutes indicated that, on at least two occasions, an ANC 5B commissioner attempted to address the issue of the vice-chairperson's unauthorized assumption of the position of acting chairperson, however, the vice-chairperson refused to allow discussion of the issue during public meetings of the Commission. Inasmuch as the vice-chairperson was never approved as the acting chairperson by a majority of ANC 5B commissioners, questions must be raised concerning his authority to sign ANC 5B checks pursuant to the requirements of D.C. Code, Section 1 -264(f) which states, in relevant part, that: "Any expenditure made by check shall be signed by at least 2 officers of the Commission, one of whom shall be the treasurer or Chairman." RECOMMENDATIONVacant officer positions must be filled according to ANC 5B's by-laws. VARIOUS FESTIVAL EXPENDITURES VIOLATED THE ANC LAWFiscal Year 1995 Festival Expenditures Exceeded Amount Authorized by ANC 5B CommissionersDistrict of Columbia Code, Section 1-264(f) states:
On July 14, 1994, ANC 5B conducted a public meeting during which it authorized expenditures for a community festival. According to the ANC 5B minutes for the July 1 4th meeting, the purpose of this festival was " . . . to bring the entire 5B community together on a social and cultural basis. To disseminate social and economic resource information to the community residents." ANC 5B established a festival budget with a maximum total expenditure limit of $5,000. The commissioners budgeted funds specifically for equipment rentals, entertainment, posters, flyers, and mailings for the festival. The festival was held on October 15, 1994. Table I presents the approved festival budget, actual expenditures in each category, and the difference between actual and budgeted expenditures. Table I
In Table I, the "Other" category included various expenditures that did not clearly conform to categories identified in the approved festival budget. Expenditures in this category also exceeded the maximum $5,000 ceiling approved by the ANC for the festival. The expenditures classified as "Other" are listed in Table II. Table II
The Auditor found that the Commission's then acting chairperson, Jeffrey Desmukes, and its then financial secretary, Mary Slade, violated D. C. Code, Section 1-264(f) by disbursing more funds for the festival than was authorized by the Commission without obtaining the specific authorization of a majority of ANC 5B commissioners. As noted earlier in this section, ANC 5B's minutes for the meeting conducted on July 14, 1994 indicated that the commissioners authorized expenditures not to exceed $5,000 for the community festival. However, actual disbursements for the community festival totaled $12,145 which exceeded the $5,000 authorization by $7,145. The $7,145 in overspending was not authorized by the commissioners before or after the disbursements were made. Some ANC 5B Checks Were Signed Only by the Acting ChairpersonDistrict of Columbia Code, Section 1-264(f) states in relevant part the following:
Approximately $1,247, or 10 percent, of total festival expenditures were disbursed on ANC 5B checks signed only by the then acting chairperson. By issuing checks with only one signature, the acting chairperson violated D.C. Code, Section 1-264(f). A second signature on checks allows at least one other commissioner 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. Over $8,360, or 69 percent, of total festival expenditures were disbursed on checks signed by the Commission's then financial secretary and then acting chairperson. One check totaling $508, representing approximately 4 percent of total festival expenditures, was signed by the then acting chairperson and the Commission's then treasurer, Clifford Powell. The Auditor found that $2,030, or 17 percent of festival expenditures, were disbursed on checks that were not available in the Commission's files. Therefore, the audit team could not determine which Commission officer(s) signed the checks. Personal Service Disbursements for Festival Were Not Specifically Approved by the CommissionDistrict of Columbia Code, Section 1-264(g) states:
Approximately $2,550 of the $7,145 in unauthorized festival disbursements were made payable to five personal service consultants. The minutes of ANC 5B's meetings for the five-month period preceding the festival failed to reflect the Commission's approval to spend any ANC 5B funds to hire consultants in connection with the festival. The budget for the community festival, which was voted on by the Commission, authorized funds only for equipment rentals, entertainment, posters, fliers and mailings. Disbursement of funds for personal service expenditures without the approval of a majority of ANC 5B commissioners in a public meeting violated D.C. Code, Section 1-264(g). The disbursements to the consultants were made without the required authorization of the Commission. As a consequence, according to the D.C. Code, Section 1-264(g), such unauthorized expenditures shall be deemed a persona! expense of the officer(s) who signed checks making the payments, unless the Commission subsequently approves the expenditures. Advisory Neighborhood Commission 5B did not subsequently approve the personal service expenditures for the five consultants that were improperly authorized by its then acting chairperson. In the minutes of ANC 5B's March 2, 1995 meeting to vote on the quarterly financial report containing these expenditures, the Commission was explicit in its disapproval of the unauthorized festival expenditures which included $2,550 in improper payments to five "consultants." The minutes stated that the Commission approved the quarterly financial report "except for the unauthorized expenditures of approximately $7,000" for festival held in 1994. In an effort to verify that the disbursements of ANC funds for the festival were made to bona fide vendors who provided an actual service to the Commission, the Auditor attempted to contact the consultants listed on the quarterly financial report as having received compensation for rendering services related to the festival. The audit team was able to contact only one of the five consultants. This consultant indicated that she coordinated the overall festival activities and was unaware of the services provided by the other consultants. Based on a May 26,1994 Corporation Counsel opinion, ANCs are prohibited from spending District appropriated funds for entertainment and food. By letter dated August 16,1994, the District of Columbia Auditor informed ANC 5B that all disbursements for food and entertainment purchases (including block parties, food distribution programs, and festivals) were prohibited. RECOMMENDATIONS
CONSULTANTS' HIRING DID NOT COMPLY WITH THE DISTRICT OF COLUMBIA CODEAs noted in the Advisory Neighborhood Commissioners Manual, all decisions pertaining to the hiring, firing, and payment of compensation to staff must be made in a public ANC meeting and recorded in the Commission's minutes in order to constitute the official action of the Commission. Further, D.C. Code, Sections 1-264(f) and 1-264(g) state, in relevant part, the following: D.C. Code §1-264(f) — "...No expenditure of any amount shall be made without the specific authorization of the Commission.... D.C. Code §1-264(g) — "Disbursements of Commission funds exceeding $50 for personal services expenditures shall be specifically approved by the Commission at a public meeting prior to the disbursement.
In April 1994, without the approval of a majority of ANC 5B commissioners at a public meeting, the ANC 5B acting chairperson hired an independent contractor to "coordinate day-to-day Commission activities and to provide other services to the ANC." In an April 25, 1994 letter to ANC 5B commissioners, the acting chairperson stated that he had hired the contractor at the rate of $ 10 per hour. The contract signed by the acting chairperson and the independent contractor failed to specify the maximum number of hours authorized by the contract. This transaction, which was executed solely by the then acting chairperson without the Commission's authorization, violated District of Columbia Code, Section 1 -264(f) and (g). In February 1995, ANC 5B's minutes indicate that the Commission approved the extension of the independent contractor's contract. However, ANC 5B's minutes did not indicate that the original contract was ever approved by the Commission. Without the Commission's approval, the contractor was paid $15,200 between April 1994 and February 1995. The checks to the independent contractor were signed by the then acting chairperson and the then treasurer of ANC 5B. Also on April 25, 1994, without the approval of a majority of ANC 5B commissioners, the then acting chairperson, Jeffrey Desmukes, entered into a $ 1,250 contract with Peacock Systems, Inc. to provide computer support services to ANC 5B for a six-month period. A check for $500, signed by the then acting chairperson, Jeffrey Desmukes, and the then treasurer, Clifford Powell, was disbursed to Mr. Walter Peacock on April 25, 1994 — the same day the contract was signed. ANC 5B's files did not contain invoices, receipts or other documentation to support the services that the contractor may have provided to the Commission. ANC 5B's files did not reflect that any further payments beyond the $500 were disbursed to Mr. Peacock. A review of the minutes for ANC 5B revealed that the Commission did not authorize the disbursement of any ANC 5B funds to this contractor. Because ANC 5B failed to specifically approve the hiring of the consultants discussed above, or to establish rates of compensation and hours of service, there was no assurance that the disbursements to these individuals reflected the amount that ANC 5B desired to spend for the services or even if the Commission wished to obtain the services at all. RECOMMENDATIONS
Consultant's Compensation Exceeded Contract AmountLorie Rones, a consultant hired by the Commission to review its second quarter fiscal year 1994 financial report was paid more than the maximum amount authorized and approved by the Commission. The Commission authorized a $75 per hour rate of pay not to exceed 10 hours. Thus, the maximum compensation the consultant should have received was $750. The consultant, however, was paid $1,000, or $250 more than the amount approved by the Commission. The check disbursing this payment to the consultant was signed by the then acting chairperson and the then treasurer of ANC 5B. RECOMMENDATIONS
ARTICLE V SECTION 2 OF ANC 5B's BY-LAWS WERE INCONSISTENT WITH THE D.C. CODE AND A CORPORATION COUNSEL OPINIONAccording to the Corporation Counsel of the District of Columbia, a quorum is achieved at an ANC meeting when a majority of the commissioners representing each single member district are present. During calendar years 1993 through 1997, ANC 5B consisted of 12 commissioners, therefore, seven commissioners were required to constitute a quorum. Further, D.C. Code, Section 1-262(d) states, in relevant part, the following:
Article V, Section 2 of Advisory Neighborhood Commission 5B's by-laws states:
This provision of ANC 5B's by-laws is inconsistent with D.C. Code, Section 1 -262(d) and November 18, 1994 opinion issued by the Corporation Counsel which states:
The opinion states further that a Commission has no authority to adopt by-laws that conflict with applicable rules of common law. RECOMMENDATIONANC 5B must amend its by-laws to be consistent with D.C. Code, Section 1-262(d) and current Corporation Counsel opinions regarding establishing a quorum for Commission meetings. ANC 5B COULD NOT ESTABLISH A QUORUM FOR APPROXIMATELY 48 PERCENT OF PUBLIC MEETINGS HELD DURING CALENDAR YEARS 1993 THROUGH 1997ANC 5B was unable to establish a quorum for many of its public meetings held during the audit period. When a quorum was not present at public meetings, the Commission was prohibited from conducting official business on behalf of the Commission. As noted earlier, in violation of common law quorum rules, ANC 5B conducted "official" business in the absence of a quorum of commissioners present. The inability to establish a quorum was the result, many times, of commissioners not attending meetings of the Commission. Table III presents the number of public meetings held during calendar years 1993 through 1997, the number of public meetings at which a quorum was not present, and the percentage of meetings held without a quorum. Table III
RECOMMENDATIONThe Council of the District of Columbia consider amending D.C. Code, Section 1264 to include corrective actions that may be taken if commissioners are consistently absent from Commission meetings during a 12-month period. GRANTS WERE AWARDED THAT DID NOT ADHERE TO THE ANC LAWDistrict of Columbia Code, Section 1-264(m) requires that:
According to quarterly financial reports submitted by ANC 5B for fiscal years 1993 through 1997, it awarded grants totaling $ 10,425 of which $ 10,175 in disbursements were identified as grants on quarterly financial reports and another $250 in disbursements were misclassified and reported in the "Other" category on quarterly financial reports. The Auditor's review of available supporting documentation for grants awarded revealed that grants were awarded without: (1) the proposed grantee requesting the grant at a public meeting of the ANC; (2) the approval by a majority of ANC 5B commissioners at a public meeting; and (3) the establishment of appropriate guidelines under which ANC 5B could award grants. These awards violated D.C. Code, Section 1-264(m). Grants Approved Without Proposed Grantee Making Request at a Public MeetingIn violation of D.C. Code, Section 1-264(m), ANC 5B awarded grants totaling at least $5,925, or 57 percent of the total $ 10,425 in grant awards, without the proposed grantee presenting the grant request to the Commission at a public meeting as required by D.C. Code, Section 1 -264(m). While written grant proposals were available in ANC 5B's files for approximately 83 percent of the grants awarded, grants were often presented to the Commission by an ANC 5B commissioner rather than by the proposed grantee as required by D.C. Code, Section 1-264(m). For at least one grant award, the written request was for $500, however, the Commission approved an additional $500 based on an oral request from a commissioner which raised the total grant award to $1,000. During the review of ANC 5B's quarterly financial reports for fiscal year 1994, the Auditor disallowed eight grants awarded by ANC 5B totaling $4,000 because the grants were not awarded in accordance with the D. C. Code, Section 1-264(m). RECOMMENDATIONS
TAX FORMS WERE NOT FILED FOR ALL ANC 5B EMPLOYEES/CONTRACTORSANC 5B did not submit the appropriate tax forms to appropriate state and federal tax authorities and did not provide copies of such information to all of its employees and independent contractors for calendar year 1994. According to ANC 5B's quarterly financial reports filed with the Office of the Auditor, approximately $24,791 were disbursed in salary payments during calendar year 1994. Approximately $12,500 were disbursed for personal service expenses during the same period. The Commission's files did not indicate that ANC 5B provided the necessary tax forms, such as W-2s and 1099s, to each of its employees and contractors to file with the appropriate tax authorities. The files also did not contain certain data showing that copies of these forms were submitted to the appropriate state and federal tax authorities. RECOMMENDATIONANC 5B must submit the appropriate tax forms to all of its employees and independent contractors. Further, the Commission must file completed tax forms with the appropriate state and federal tax authorities. ADDITIONAL FINDINGS REGARDING RECORDKEEPINGIn addition to the findings discussed in this report, the Auditor made the followings findings concerning recordkeeping and the quality of disbursements. These findings are presented for the Commission's further review.
CONCLUSIONThe Auditor found that in some areas of its financial operation, Advisory Neighborhood Commission 5B was substantially in compliance with ANC laws, legal opinions issued by the Office of the Corporation Counsel, and Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor. These areas included the retention of minutes of ANC 5B meetings in its files as well as the retention of a majority of canceled checks and bank statements. In other areas, however, the Commission must improve its compliance with applicable laws, opinions and guidelines. The commissioners of ANC 5B must establish guidelines for awarding grants and all grants awarded must comply with the ANC law. Also, ANC 5B commissioners must ensure that all Commission disbursements are made pursuant to the approval of a majority of ANC 5B commissioners. The commissioners must specifically approve personal service disbursements, including the name of the person who is to receive the payment, the rate of pay, and the hours of service. Further, former commissioners who disbursed ANC 5B funds without obtaining the approval of the Commission must immediately repay the Commission for those unauthorized disbursements. In the absence of prompt repayment by the former commissioners, the funds must be recovered by the Office of the Corporation Counsel or referred to the United States Attorney for the District of Columbia for appropriate prosecutorial action. Respectfully submitted, Deborah K. Nichols |
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