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District of Columbia Sports and Entertainment Commission’s Contracting, Procurement, and Spending Practices Characterized by Mismanagement, Noncompliance, and Inadequate Internal Controls
October 17, 2003

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OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR
717 14TH STREET N.W., Suite 900
WASHINGTON, D.C. 20005
TEL. 202-727-3600 • FAX: 202-724-8814

Deborah K. Nichols
District of Columbia Auditor 
002:04:SDG:LD:HA:gk

District of Columbia Sports and Entertainment Commission's Contracting, Procurement, and Spending Practices Characterized by Mismanagement, Noncompliance, and Inadequate Internal Controls

October 17, 2003

TABLE OF CONTENTS

EXECUTIVE SUMMARY
PURPOSE 
OBJECTIVE, SCOPE, AND METHODOLOGY
BACKGROUND
DCSEC’s Spending Outpaced Revenues During Each of the Four Fiscal Years Under Review
Inadequate Internal Controls Facilitated Non-compliance with Procurement Laws, Policies and Procedures 
DCSEC’s Current Chief Financial Officer (CFO) Also Serves as Its In-house Legal Counsel and Contracting Officer
DCSEC’s Management Executed a Contract Valued at More Than $1 Million Without Obtaining Prior Approval From the Council of the District of Columbia 
DCSEC’s Procurement Process Did Not Promote Fair and Open Competition 
DCSEC Management Awarded $1.3 Million in Contracts Over $50,000 Without Board Approval 
DCSEC Procurement Regulations Failed to Set Forth A Procedure for the Award of Consulting Services Contracts 
DCSEC Management Violated Procurement Regulations in the Award of Sole Source Contracts 
DCSEC’s Record Keeping Practices Were Insufficient 
DCSEC’s Management Engaged in Excessive And/or Unnecessary Spending During Fiscal Years 2000 Through 2003, as of January 31, 2003 
DCSEC Outside Legal Expenditures
Employee Travel Expenditures 

Entertainment and Hospitality Expenditures
DCSEC Sponsorships and Contributions
DCSEC Spent $14,533 to Send the Mayor and DCSEC Staff to the Major League Baseball Game in Atlanta During Fiscal Year 2000
DCSEC Management Failed to Adopt Policies and Procedures Governing the Use of Credit Cards
DCSEC Corporate Credit Cards Were Used to Make Purchases That Appeared to Be Personal
Undocumented Corporate Credit Card Charges 
CONCLUSION 
APPENDICES
AGENCY COMMENTS

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EXECUTIVE SUMMARY

PURPOSE

Pursuant to a request from Council Chairman Linda W. Cropp and Public Law 93-198 Section 455, the District of Columbia Auditor examined the accounts and operations of the District of Columbia Sports and Entertainment Commission (DCSEC) for fiscal years 1999 through 2003, as of January 31, 2003. This report focused on DCSEC’s contracting, procurement, and spending practices.

CONCLUSION

The District of Columbia Sports and Entertainment Commission (DCSEC) Board and management failed to ensure prudent financial decision making, compliance with laws and regulations, and the implementation of adequate and effective internal controls over its contracting, procurement, and spending practices.

The Auditor’s review of DCSEC’s accounts and operations revealed that spending outpaced revenues during fiscal years 1999 through 2002. Between fiscal years 1999 and 2002, DCSEC’s revenues grew an average of 49% while expenditures increased by approximately 80%. As a result, DCSEC ended the past four fiscal years with combined total operating losses of $9.8 million. The losses were fueled by significant increases in spending on outside services, professional services, insurance, advertising and promotions, and development. According to DCSEC management officials, the increased spending reflected DCSEC’s commitment to attract major league baseball to the District, its bid for the 2012 Olympics, and various other events. Numerous professional services contracts were negotiated to further these commitments as well as to support other events. Additionally, DCSEC’s management incurred significant travel and entertainment expenses, and funded several unplanned capital projects during this period including repaving of Parking Lots 6 and 7 in connection with the Grand Prix auto race.

An examination of DCSEC’s procurement of goods and services during fiscal years 1999 through 2003, as of January 31st, revealed that a lack of effective Board and management oversight, inadequate or nonexistent internal controls, in addition to a flawed procurement and contracting process facilitated circumvention of applicable laws, regulations and rules; costly noncompetitive procurement practices; and a lack of management accountability. The Auditor found that management awarded contracts without Board knowledge, scrutiny, or prior approval. The Auditor also found the following deficiencies with regard to DCSEC’s procurement activities: (1) the DCSEC Chief Financial Officer also acted as the Commission’s in-house legal counsel and contracting officer for certain transactions; (2) DCSEC’s management executed a contract above $1 million without obtaining prior approval from the Council of the District of Columbia; (3) the competitive bidding process used by DCSEC management did not appear to promote fair and open competition; (4) $1.3 million in contracts in excess of $50,000 were awarded without prior Board approval; (5) $931,151 in contracts for consulting services were awarded on a sole source noncompetitive basis or without prior Board scrutiny and approval; and (6) sole source contracts were awarded without adequate, documented justification or support.

DCSEC’s recordkeeping system and practices were grossly insufficient. In reviewing DCSEC’s contract files, credit card records, disbursement records and various other documentation supporting procurement, travel, hospitality and other operational expenses the Auditor found that: (1) files were incomplete and not organized in any discernible order; (2) key contract information was not consolidated in a single file or in some logical order; and (3) documentation for procurement and credit card transactions including travel, entertainment and hospitality expenses was missing or inadequate.

The Auditor found that during fiscal years 2000 through 2003, as of January 31, 2003, DCSEC management engaged in spending that appeared to be excessive and/or unnecessary, given DCSEC’s unsound financial position. The Auditor identified expenditures totaling $1.1 million during the audit period that appeared excessive and/or unnecessary including: (1) $682,759 in expenditures for outside legal services; (2) $62,689 in expenditures for employee travel; (3) $ 43,217 in expenditures for entertainment and hospitality; and (4) $355,500 in disbursements for sponsorships and contributions. The Auditor found that DCSEC’s Board failed to ensure appropriate oversight of management’s financial management and spending practices. Further, the Executive Director of DCSEC made financial commitments on behalf of DCSEC without adequately assessing the potential overall financial risk and impact on the Commission. In his stewardship of DCSEC, the Executive Director did not: (1) regularly monitor budget, revenue, and expenditure patterns; (2) investigate variances between budget, revenues, and expenditures; and (3) take appropriate timely corrective actions. As the disparity between budget, revenues, and expenditures grew more pronounced, management’s response was not to trim spending and raise revenues. Instead, management made the injudicious decision to raid DCSEC’s investment funds and maintain a pattern of undisciplined spending.

DCSEC’s executive leadership authorized the expenditure of $14,533 to send the Mayor of the District of Columbia, the Mayor’s wife, two DCSEC Board members, and five DCSEC staff members to the Major League Baseball All Star Game in Atlanta, Georgia during July 2000. According to DCSEC management, the purpose of this trip was to help promote bringing major league baseball back to the District of Columbia. The Auditor is concerned that there is no reasonable basis upon which it can be determined whether this expenditure materially benefited the District’s efforts to obtain a major league baseball team, or that the expenditure was beneficial to DCSEC’s mission. Further, there is reason to question the necessity and reasonableness of underwriting the cost of five DCSEC employees’ expenses for this activity, as well as the legitimacy of paying the expenses of the Mayor’s wife, which are not the financial obligation of the District government or DCSEC.

Finally, the Auditor found that DCSEC’s Executive Director failed to adopt, implement, and enforce policies and procedures governing accountability for the use of corporate credit cards issued to DCSEC’s Executive Director, CFO, Armory Manager, and Facilities Manager for operating expenditures. During fiscal years 2001 through 2003, as of January 31st, the Auditor found credit card payments totaling approximately $81,339.42. The Auditor found that of the $81,339.42 in credit card expenditures, $1,648.35 were related to charges that appeared to be personal purchases made by DCSEC’s Executive Director and Armory Manager during fiscal years 2001 through 2003, as of January 31, 2003. At least $11,372.07 in credit card payments were made without supporting documentation explaining the purpose of each expenditure and its relationship to DCSEC.

DCSEC must implement strong internal controls over its contracting, procurement, and spending, and exercise effective management control over expenditures to ensure the financial viability of the Commission in the future.

MAJOR FINDINGS

  1. Inadequate internal controls facilitated non-compliance with procurement laws, policies and procedures.
  2. DCSEC’s recordkeeping practices were insufficient.
  3. DCSEC’s management engaged in excessive and/or unnecessary spending during fiscal years 2000 through 2003, as of January 31, 2003.
  4. DCSEC spent $14,533 to send the Mayor and DCSEC staff to the major league baseball game in Atlanta during fiscal year 2000.
  5. DCSEC management failed to adopt policies and procedures governing the use of credit cards.

MAJOR RECOMMENDATIONS

  1. With regard to the employee serving in the capacity of chief financial officer, inhouse legal counsel, and contracting officer, the Board of Directors should immediately ensure that these three functions are not administered under any circumstances by the same employee. The Board of Directors, through its Personnel Committee, should use a competitive recruitment and selection process to identify qualified, competent candidates who possess an adequate mix of governmental and private sector expertise appropriate to the requirements of DCSEC’s legal, financial, and procurement operations.
  2. The DCSEC Board of Directors and management comply with District laws requiring the submission of Sports and Entertainment Commission contracts in excess of $1,000,000 to the Council of the District of Columbia for review and approval. Contracts that DCSEC classifies as event services are not exempt from this requirement.
  3. DCSEC’s Board of Directors, through the Contracting and Procurement Committee, revise current procurement regulations to address deficiencies related to small purchases, competitive bidding, and sole source procurements, including specific provisions to govern contracts for consulting and expert services and the use of retainer agreements and retainer fees.
  4. DCSEC’s Board of Directors, through the Contracting and Procurement Committee, hold the Executive Director accountable for the development of more comprehensive procurement procedures governing small purchases, including implementing a requirement for a minimum of three quotes for all small purchases above a specific dollar threshold to ensure fair and competitive procurement practices.
  5. DCSEC’s Board of Directors, through the Committee on Contracting and Procurement, identify specific requirements for and documentation to be maintained by management in the solicitation and evaluation of proposals submitted through the competitive bidding process.
  6. DCSEC’s Board of Directors must exercise more extensive and effective oversight of DCSEC’s procurement and contracting activities; establish policies and procedures that ensure the Board’s scrutiny and approval of contracts exceeding $50,000 before management awards such contracts; and require management’s strict adherence to requirements under DCSEC’s procurement regulations with regard to the award of sole source contracts.
  7. DCSEC’s Board of Directors hold the Executive Director accountable for the development and implementation of an adequate effective record keeping system for the maintenance of contract files, credit card records, disbursement records, and various other documents that support all operational expenses.
  8. DCSEC management immediately terminate all agreements with private law firms in that these agreements were based on a noncompetitive procurement process that lacked integrity and created the appearance of preferential treatment.
  9. DCSEC’s Board of Directors and Executive Director conduct a study to determine whether it is cost effective to employ an optimally sized full-time legal staff, use the legal resources of other District agencies such as the Office of the Corporation Counsel on a short-term or temporary basis, contract out only specified types of legal work, or contract out all legal work to a private law firm based upon the use of a competitive procurement process. In the meantime, when DCSEC lacks the requisite legal resources or expertise in-house, it should seek to utilize the legal expertise of the District’s Office of the Corporation Counsel, under a cost reimbursement arrangement, on a temporary or short-term basis before it procures outside legal counsel.
  10. In procuring legal services, DCSEC must use a competitive procurement process that is fair, open, and well-documented. Further, the competitive process used must ensure that quality legal services are obtained at a reasonable price.
  11. DCSEC’s Board of Directors and Executive Director prepare written guidelines, approved by a majority of the Board of Directors, which set forth:
    1. the criteria for deciding whether to seek outside legal counsel; and
    2. criteria and procedures regarding the type of legal work to be obtained from outside legal counsel, the specific agency official authorized to request legal services from a legal services contractor, cost control measures, and monitoring the quality of services rendered.
  12. DCSEC’s Executive Director exercise effective management control over the authorization of travel at DCSEC’s expense to ensure that it is necessary, economically priced, fully documented, and directly related to DCSEC’s core mission.
  13. DCSEC’s Board of Directors establish a policy regarding the expenditure of DCSEC funds by the Executive Director and any other DCSEC employee for entertainment and hospitality expenses. The policy should, at a minimum, include a requirement for a written justification to be submitted to and approved by a majority of the Board of Directors prior to the obligation of DCSEC funds to pay the expense. The failure to comply with this policy and procedure should result in the accountable employee being held personally liable for reimbursing the expenditure to DCSEC.
  14. DSCEC’s Board of Directors and Executive Director should discontinue the practice of sponsoring events and making contributions for various projects until the organization’s financial position improves. Further, the Board of Directors should consider establishing a policy and procedures which govern the use of DCSEC funds to make contributions to or sponsor events presented by other organizations, when such activities fall outside of DCSEC’s grant award process.
  15. DCSEC’s Executive Director and former Facilities Manager immediately reimburse DCSEC for personal expenditures charged to the corporate credit card totaling $818.68. If these reimbursements are not made within 15 days of the date of this final report, the amounts should be deducted from each manager’s salary payments until fully repaid.
  16. DCSEC’s Executive Director immediately cancel all corporate credit cards issued in DCSEC’s name, or the names of its employees if DCSEC is ultimately responsible for paying the bills, and provide the Auditor with evidence of the cancellation within 15 days of the date of this report.
  17. Each manager responsible for expenditures that are not supported by adequate or any documentation must repay these expenditures to DCSEC within 60 days of the date of this report, unless adequate original supporting documentation can be provided. If these officials fail to provide adequate original documentation to support each expenditure and fail or refuse to repay these charges to DCSEC, the Auditor will refer this matter to appropriate law enforcement authority for further investigation and the Office of Corporation Counsel to initiate the appropriate civil action to recover these funds. At a minimum, the Executive Director must substantiate or repay $8,938.89; the Armory Manager must substantiate or repay $291.37; and the Chief Financial Officer must substantiate or repay $2,141.81.
  18. DCSEC’s Board of Directors establish a specific policy and process regarding the criteria that must be used to determine the necessity for corporate credit cards to be issued in DCSEC’s name, in addition to the criteria that will be used to determine which DCSEC employees will be assigned credit cards; expenditure limits for each card; the types of purchases that cards may be used to make; regular specific reports that must be filed with the Board concerning expenditures made with all credit cards issued to DCSEC employees including the Executive Director; a requirement that the Executive Director develop complete policies and procedures regarding credit card usage that must be adhered by DCSEC employees under his management control; and specific accountability measures that will be applied by the Board for any failure of the Executive Director to comply with the Board’s policy and procedures.
  19. The DCSEC official who authorized the disbursement of $2,315 for the purchase of first class air fare for the Mayor and his spouse must reimburse DCSEC for this improper expenditure of public funds.
  20. The DCSEC official who authorized the disbursement of $1,116 to the campaign to Re-elect Bill Campbell reimburse DCSEC for this improper expenditure of public funds.

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PURPOSE

Pursuant to a request from Council Chairman Linda W. Cropp and Public Law 93-198 Section 455, the District of Columbia Auditor examined the accounts and operations of the District of Columbia Sports and Entertainment Commission (DCSEC) for fiscal years 1999 through 2003, as of January 31, 2003. This report focused on DCSEC’s contracting, procurement, and spending practices.

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OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of the audit was to determine whether DCSEC’s contracting, procurement, and spending were carried out in accordance with applicable laws, rules and regulations.

The review focused on fiscal years 1999 through 2002. In some cases the audit period was extended to include fiscal year 2003 as of January 31, 2003.

To accomplish the objectives, the Auditor reviewed D.C. Law 10-152 entitled, “Omnibus Sports Consolidation Act of 1994"; D.C. Law 10-115 entitled, “Omnibus Sports Consolidation Amendment Act of 1998"; D.C. Code, Sections 3-1401 through 3-1419; Title 19, Chapters 27 through 34 of the District of Columbia Municipal Regulations; audited financial statements for the period under audit; event schedules; management reports; DCSEC personnel rules; Board minutes; cash receipts and disbursement journals; contracts; contract files; expenditures and supporting documentation; and bank and investment account statements.

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BACKGROUND

District of Columbia Law 10-152, the “Omnibus Sports Consolidation Act of 1994,” established the District of Columbia Sports and Entertainment Commission, effective August 23, 1994, to consolidate the non-military functions of the D.C. Armory Board (Armory), the Robert F. Kennedy Memorial Stadium (the Stadium), the District of Columbia Commission on Baseball, and the non-regulatory functions of the District of Columbia Boxing and Wrestling Commission. The DCSEC was established as a corporate body and instrumentality of the District of Columbia government.

The DCSEC is authorized to perform the following responsibilities, among others:

  • Promote the District as a location for holding sporting events to enhance the District’s economic development;
  • Provide community outreach and grassroots recreation for all District residents, especially children;
  • Coordinate and develop construction and implementation of new facilities and related infrastructure as well as the improvement of existing facilities in the District;
  • Manage and maintain facilities in the District which already exist and any new construction by the D.C. Sports and Entertainment Commission; and
  • Promote, market, and participate in sports events in the District.

The DCSEC’s Board of Directors consists of 11 members. Eight (8) members are appointed by the Mayor with the advice and consent of the Council of the District of Columbia, and three (3) ex-officio members. The three members who serve ex-officio include an official designated by the Mayor, the Chief Financial Officer of the District of Columbia, and the Director of the District’s Department of Parks and Recreation. Board members serve a 4-year term, except ex-officio members, and may be compensated at a rate equivalent to the highest step of a grade 15 in the District service. During fiscal years 1999 through 2003 as of January 31, 2003, none of the Board members received compensation.

D.C. Code, Section 3-1405, states, in relevant part, the following:

(a) The Board shall appoint an Executive Director who shall serve as the chief executive officer of the Sports and Entertainment Commission. The Executive Director shall be an employee of the Sports and Entertainment Commission...and shall receive such compensation as shall be fixed by the Board.

(b)   In addition to any other duties set forth in this chapter, the Executive Director shall:

(1) Direct and supervise the administration and management of the Sports and Entertainment Commission, and direct the affairs and activities of the Sports and Entertainment Commission, in accordance with policies, rules, and regulations of the Sports and Entertainment Commission;

(4) Approve all accounts for salaries, per diem payments, and allowable expenses of the Sports and Entertainment Commission and its employees and consultants, and approve all expenses incidental to the operation of the Sports and Entertainment Commission;

Throughout this report, the Auditor will refer to the chief executive officer of the Sports and Entertainment Commission as the Executive Director rather than president and Executive Director in that there is no provision in the Sports Commission Law, by-laws, or personnel regulations regarding the position or title of president.

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DCSEC’s Spending Outpaced Revenues During Each of the Four Fiscal Years Under Review

The Auditor’s review of DCSEC’s accounts and operations revealed that spending outpaced revenues during fiscal years 1999 through 2002. Between fiscal years 1999 and 2002, DCSEC’s revenues grew an average of 49% while expenditures increased by approximately 80%. As a result, DCSEC ended the past four fiscal years with combined total operating losses of $9.8 million.

Losses were fueled by significant increases in spending on outside services, professional services, insurance, advertising and promotions, and development. According to DCSEC management officials, the increased spending reflected DCSEC’s commitment to attract major league baseball to the District, its bid for the 2012 Olympics, and various other events. Numerous professional services contracts were awarded to further these commitments as well as to support other events. Additionally, DCSEC’s management incurred significant travel and entertainment expenses, and funded several unplanned capital projects including repaving Parking Lots 6 and 7 in connection with the Grand Prix auto race. Table I presents a comparison of DCSEC’s operating revenues and expenses for fiscal years 2001 through 2002.

TABLE I

Comparison of DCSEC’s Operating Revenues and Expenditures:
Fiscal Years 2001-2002
(dollars presented in thousands)

Category FY 2001 FY 2002 Variance

Operating Revenues

Rental $2,118 $2,346 11%
Event Services 1,476 1,830 24%
Ticket Sales 35 41 17%
Commissions 1,764 1,358 -23%
Advertising and Sponsorship 474 265 -44%
Parking 1,282 1,136 11%
Ancillary Sales 6 0 -100%
Other Income 202 525 160%
Co-Promoted Events 0 0 0%
Miscellaneous 0 0 0%
TOTAL REVENUE $7,357 $7,501 2%

Operating Expenditures

Personnel $4,908 $4,397 7%
Outside Services 1,343 1,949 45%
Equipment and Supplies 364 409 12%
Repairs and Maintenance 430 451 5%
Utilities 710 583 -18%
Advertising and Promotions 144 176 22%
Development 6 365 5,983%
Professional Services 348 695 100%
Administration 306 319 4%
Technology 232 297 28%
Insurance 183 363 98%
Grants 178 177 -1%
Depreciation 1,171 1,414 21%
Other 54 51 -6%
TOTAL EXPENDITURES $9,567 $11,646 22%
NET OPERATING PROFIT (LOSS) ($2,210) ($4,145) 88%
Source: DCSEC Audited Financial Statements

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FINDINGS

INADEQUATE INTERNAL CONTROLS FACILITATED NON-COMPLIANCE WITH PROCUREMENT LAWS, POLICIES AND PROCEDURES

The Auditor’s examination of DCSEC’s procurement of goods and services during fiscal years 1999 through 2003, as of January 31st, revealed that a lack of effective Board oversight, inadequate or nonexistent internal controls, and a flawed procurement and contracting process facilitated: (1) circumvention of applicable laws, regulations, and rules; (2) costly noncompetitive procurement practices; and (3) a lack of management accountability. The Auditor also found that management awarded contracts without Board knowledge, scrutiny, or prior approval.

D.C. Code, Section 3-1407(a)(12), states:

(a)   The Sports and Entertainment Commission shall have the power to:

(12) Adopt policies, rules and procedures governing its procurement of goods and services, notwithstanding Unit A of Chapter 3 of Title 2.

Pursuant to this provision, DCSEC was granted independent procurement authority. On September 24, 1998, DCSEC adopted procurement rules and regulations. The regulations adopted by DCSEC cover the following types of procurements: purchase orders (not to exceed $25,000); small purchases (not to exceed $100,000); formal solicitations (competitive bidding required for procurements exceeding $100,000); sole source procurements (awarded where there is a reasonable basis); and emergency procurements (unanticipated occurrence demanding immediate action).1

In addition to the requirements noted above, all procurements reasonably expected to exceed $50,000 must be approved by DCSEC’s Board.2 Further, 19 DCMR, Chapter 28, Section 2801 designates the Executive Director as the Chief Contracting Officer (CCO) and grants the Executive Director the authority and responsibility to administer DCSEC’s procurement process.

Although granted independent procurement authority, DCSEC's enabling legislation did not provide any guidance on the development of its procurement system or compliance with minimum procurement standards. To ensure accountability and integrity, DCSEC management, at a minimum, should conduct its procurement operations in a manner that: promotes the public's confidence in the integrity of the procurement process; results in the maintenance of appropriate documentation of the complete history of each procurement transaction; and ensures compliance with applicable laws, regulations, and rules. The Auditor found the following deficiencies with regard to DCSEC's procurement activities:

  1. the DCSEC Chief Financial Officer also acted as the Commission's in-house legal counsel and contracting officer for certain transactions;
  2. DCSEC executed a contract in excess of $1 million without approval from the Council of the District of Columbia;
  3. the competitive bidding process used by DCSEC management did not promote fair and open competition;
  4. contracts in excess of $50,000 were awarded without prior Board approval;
  5. contracts for consulting services were awarded on a sole source noncompetitive basis or without prior Board scrutiny and approval; and
  6. sole source contracts were awarded without adequate, documented justification or support.

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DCSEC's Current Chief Financial Officer (CFO) Also Serves as Its In-House Legal Counsel and Contracting Officer

DCSEC's current CFO also serves as its in-house legal counsel and chief contracting officer. The Auditor found cause for concern with this arrangement in that it undermines the system of checks and balances that should exist through the segregation of these duties. Administering the financial and procurement affairs of DCSEC under this arrangement facilitates the undetected circumvention of rules and regulations, invites fraud, waste, and abuse, and raises questions regarding the integrity and fairness of DCSEC’s financial and procurement operations.

According to data reviewed by the Auditor, this employee is assigned the following duties and responsibilities:

  1. analyzing DCSEC’s financial performance;
  2. managing DCSEC’s accounting function, including establishing, reviewing and implementing accounting and procurement practices, guidelines and procedures;
  3. negotiating, drafting, reviewing, and analyzing, from a legal, financial and business perspective, documents and information relating to the Commission’s events, advertising, procurement, and other activities; and
  4. serving as in-house legal counsel, including identifying and analyzing the legal implications of DCSEC’s activities; and communicating and working with DCSEC’s outside counsel on legal issues affecting DCSEC.

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DCSEC’s Management Executed a Contract Valued at More Than $1 Million Without Obtaining Prior Approval From the Council of the District of Columbia

The Auditor found that DCSEC’s executive leadership awarded a $1.2 million contract to Sudden Impact Entertainment for Fright House design and set production without obtaining approval from the Council of the District of Columbia.

In accordance with Public Law 104-8, the District of Columbia Financial Responsibility and Management Assistance Authority Act of 1995, Section 304(b)1:

No contract involving expenditures in excess of $1,000,000 during a 12-month period may be made unless the Mayor submits the contract to the Council for its approval and the Council approves the contract (in accordance with criteria established by act of the Council)

Further, on May 10, 1996, the District of Columbia’s Office of Corporation Counsel issued an opinion at the request of the General Counsel of the Council of the District of Columbia regarding whether Council review was required for proposed contracts of independent agencies in excess of $1 million during a 12-month period. The Corporation Counsel’s opinion stated, in relevant part, the following:

After weighing the various arguments and considering the language of the Self-Government and FRMA Acts, their purpose, structure, and legislative history, I conclude that Congress intended that the Council review the proposed contracts of all District government entities, including executive independent agencies like the Washington Convention Center Authority, that exceed one million dollars during a 12-month period (hereafter “covered contracts”).

Finally, D.C. Code, Section 2-301.05a states that pursuant to Section 1-204.51, prior to the award of a multiyear contract or a contract in excess of $1,000,000, during a 12-month period, the Mayor (or executive independent agency) shall submit the proposed contract to the Council for review and approval in accordance with criteria established in this section.

DCSEC’s executive leadership awarded the above identified contract without obtaining approval from the Council of the District of Columbia as required by law. As a result, the Auditor found that DCSEC management violated D.C. Code, Section 2-301.05a by entering into a contract in excess of $1 million without first obtaining Council approval.

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DCSEC’s Procurement Process Did Not Promote Fair and Open Competition

Under 19 DCMR, Chapter 28, Section 2804.1, competitive bidding is required whenever a contract for goods and services is reasonably expected to exceed $100,000. Further, Section 2804.2 states the following:

As used herein, the term “competitive bidding” shall mean the employment of such procedures, requirements and techniques as will result in fair and reasonable competition among suppliers, equality of opportunity, optimal pricing and quality, and maximization of the best interest of the Commission.

The Auditor found that DC SEC management failed to maintain sufficient documentation to demonstrate that contract awards exceeding $100,000 were based on a fair and open competitive process. Of the 13 contracts DCSEC awarded under the competitive bidding process during fiscal years 2002 through 2003, as of January 31" , the Auditor was provided bid review documentation for only one contract. Although DCSEC management was able to provide actual proposals received from vendors in response to two additional request for proposals (RFPs), they could not provide documentation of the proposal/bid evaluation criteria or selection process used. In the absence of sufficient supporting documentation, there was no assurance that DCSEC management used a credible competitive process in awarding contracts.

For example, during a Board meeting held on September 25, 2001, the Board Chairperson informed Board members that a search had been conducted to identify a law firm to provide legal services to DCSEC. Further, the Chairperson recommended that DCSEC enter into an agreement with a particular law firm to provide legal services because it was the only firm willing to provide free or discounted time. During the same Board meeting, two Board members raised concerns that the Chairperson failed to follow procurement guidelines in the decision to select this particular law firm and recommended the issuance of a formal solicitation prior to awarding a contract for legal services. During October 2001, DCSEC management issued a RFP for legal services. On February 6, 2002, DCSEC awarded the contract for legal services to the law firm initially recommended by the Board Chairperson on September 25, 2001. (See Minutes of September 25, 2001 Meeting in Appendix IV) With regard to this contract award, DCSEC management failed to provide the Auditor with documentation to support the use of a credible competitive procurement process. It appears that DCSEC management used a process designed to culminate in the award of this contract to the law firm first recommended by the Board Chairperson. Further, disbursement information revealed that the law firm had been providing services without a contract and actively billing DCSEC since December 31, 2000, long before the Board Chairperson recommended the law firm to the Board as a legal services contractor on September 25, 2001. Between fiscal years 2000 and 2003, DCSEC paid the law firm a total of $518,199.

The manner in which the contract was awarded suggests that the law firm selected to provide legal services received preferential treatment. This finding is further corroborated in a report on DCSEC procurement issued by the District of Columbia Office of the Chief Financial Officer. The report included a finding that DCSEC's contracting practices with respect to competitive bidding did not promote equal opportunity, citing DCSEC management's practice of contacting vendors from previous engagements to request them to submit proposals instead of advertising bids or using other methods to promote an open, fair, competitive procurement process.3 DCSEC officials further acknowledged allowing certain law firms to gain insight and expertise in specific areas of DCSEC’s operations and permitting these firms to compete with other firms that were not afforded the same advantage.

DCSEC’s current regulations do not set forth specific minimum requirements that must be met in soliciting and evaluating bids and proposals. In fact, DCSEC has not developed and implemented sufficient internal procedures governing any of its procurement activities, although 19 DCMR, Chapter 28, Section 2801 assigns the responsibility for the development of such procedures to the Chief Contracting Officer.

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DCSEC Management Awarded $1.3 Million in Contracts Over $50,000 Without Board Approval

As noted previously, DCSEC’s by-laws state that all contracts and procurements expected to exceed $50,000 must be approved by the Board prior to the contract award or the acquisition of goods and services. The Auditor found that DCSEC management failed to obtain the Board’s prior approval for 11 contracts totaling $1.3 million. Most of the contracts presented in Table II were reported by the Executive Director to the Board during a meeting held on July 26, 2001, well after the contracts were awarded and funds were expended. The minutes from the Board meeting held on July 26, 2001 also indicate that several Board members raised concerns about management’s failure to obtain the Board’s approval before awarding the contracts, implementing the capital improvements presented in Table II, and using investment funds to pay for the projects. Additionally, several Board members expressed the view that the Board’s authority with respect to major spending decisions needed to be clarified.

TABLE II

Contracts Over $50,000 Awarded Without Prior Board Approval

Vendor Services Provided FY 01 FY 02 Total
Metro Paving Island Removal $287,047.63 $23,728.22 $310,775.85
Mount Vernon Paving Patching 134,155   134,155
EE Lyons Construction Slurry Seal 102,896   102,896
SME Power Branding Logos/Branding 61,600   61,600
Communication Arts RFK/Armory Signage and Wayfinding Designs 56,317 9,895 66,212
John R. Kirlin, Inc. Install Supplemental Cooling System for RFK SFX 121,140 18,381 139,521.00
Hickcok Warner Fox Architects for SFX Sponsor and Lounge Renovations 66,184 995 67,179
E-Technologies Electrical Contractor for SFX Sponsor and Lounge Renovations 110,920   110,920
CCC Inc. Carpeting 93,078   93,078
Adsystec Inc. Office Furniture & Repair 103,654 18,438 122,092
H&R Services Janitorial Services   60,731 60,731
TOTAL       $1,269,159.85
Source: DCSEC Financial Systems

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DCSEC Procurement Regulations Failed to Set Forth A Procedure for the Award of Consulting Services Contracts

The Auditor found that DCSEC management awarded consulting services contracts totaling $931,151 in some instances on a sole source, noncompetitive basis while in other instances without obtaining the Board’s prior approval. Management was able to award the consulting services contracts on a sole source, noncompetitive basis or without obtaining prior Board approval as a result of deficiencies in the system of checks and balances, deficiencies in DCSEC’s procurement regulations, and a culture of management secrecy as reflected, in part, by management’s deliberate circumvention of DCSEC’s by-law requiring prior Board approval of contracts exceeding $50,000. In many instances, management claimed that these contracts did not have to comply with DCSEC’s procurement rules and regulations, or were awarded as small purchases based on management’s assertion that the costs would not exceed the $50,000 threshold requiring Board approval. These contracts included a $160,000 contract awarded to Bavasi Sports Partners, LLP under which a $10,000 per month retainer fee was paid without the submission of minimal documentation of work performed each month, and a $377,361 contract awarded to Brotman Winter Fried Communications under which a $5,000 per month retainer fee plus expenses were paid. Table III presents consulting services contracts awarded by DCSEC management on a sole source, noncompetitive basis or without prior Board approval during fiscal years 2001 through 2003, as of January 31st.

TABLE III

Consulting Contracts Awarded by DCSEC On a Sole Source, Noncompetitive Basis or Without Prior Board Approval: Fiscal Years 2001 through 2003, as of January 31, 2003

Vendor Services Provided FY 01 Expenditures FY 02 Expenditures FY 03 Expenditures (as  of January 31, 2003) Total
Five Star Parking Parking Consulting $10,000     $10,000
MarParc Parking Consulting $34,223     $34,223
Bavasi Sports Partners, LLP Baseball Consulting   $110,000 ($10,000 per month retainer) $50,000 $160,000
Brotman-Winter-Fried Communications Public Relations   $71,099 ($5,000 per month retainer, plus expenses) $306,262 $377,361
Allsport Productions, Inc. Event Consulting   $27,924 ($5,000 a month retainer plus expenses) $10,000 $37,924
Stephen C. Yaros Fright House Marketing   $30,908 ($10,000 a month plus expenses over a three month period) $11,523 $42,431
Robert Lee Jones, LLC Facility Development Consulting (Kenilworth Park)   $24,500 ($3,500 a month retainer) $13,000 $37,500
City Security Security Consulting   $93,300 $16,390 $109,690
B-Rob Enterprises Consulting services related to paving of Grand Prix race track   $34,740 ($140 per hour)   $34,370
Tony Burnett Facilities Management Consulting   $16,000 ($4,000 per month)   $16,000
Enlightened Inc. IT Consulting Services     $71,652 $71,652
TOTAL         $931,151
Source: DCSEC invoices and contract agreements

Management failed to disclose to the Board the cost of consulting service contracts exceeding $50,000 awarded to Bavasi Sports Partners, LLP; Brotman, Winter, Fried Communications; City Security; and Enlightened Inc. on a sole source, noncompetitive basis.

Although the acquisition of expert and consulting services are not addressed in DCSEC's procurement regulations, District procurement regulations set forth in 27 DCMR, Chapter 19, entitled "Contracts for Services," provide guidance on the procurement of expert and consulting services. Specifically, 27 DCMR Chapter 19, Section 1901.2, states that the contracting officer shall determine in writing that contracting for expert or consulting services rather than the use of District employees is in the best interest of the District for one or more of the following reasons: (a) the use of a contract for services is substantially more economical, feasible, or necessary due to unusual emergency circumstances; (b) the services are needed for short periods only or are needed in connection with a specific project that is to be completed within a specified period; or (c) the services are difficult to obtain due to scarcity of skilled personnel or because the services are of a highly specialized nature.

Given the nature of its business, DCSEC may, in some cases, require consulting services for specific short-term projects and events or because the services required are of a highly specialized nature. However, the deficiencies in DCSEC's procurement regulations allow DCSEC management to routinely award consulting services contracts on a sole source, noncompetitive basis without meeting any prescribed standards. For example, the Executive Director of DCSEC executed a letter contract with Bavasi Sports Partners, LLP to provide baseball consulting services as an exemption under 19 DCMR, Chapter 28, Section 2800.4. The Auditor could not find any basis for this exemption in the Sports Commission Law or DCSEC’s procurement regulations. This contractor was paid a $10,000 per month retainer to provide baseball consulting services. Although this contract was expected to exceed $100,000, the Auditor found that the contract was not approved by the Board until almost one year and $110,000 in payments later. The contract for Bavasi Sports Partners, LLP was signed by DCSEC’s Executive Director on October 25, 2001. According to minutes from the Board meeting held on November 14, 2002, the Board Chairperson stated that this contract had been previously approved in an executive session of the Board held on September 25, 2001, but the Board’s approval was inadvertently omitted from the minutes. The Auditor requested minutes from all Board executive sessions, however, we were informed that DCSEC does not prepare minutes of Board executive sessions. Thus, there is no record to support the Chairperson’s assertion that this contract was approved by the Board in executive session on September 25, 2001, or at any other time. Further, official actions of the Board must take place in a public meeting not in executive session.

In addition to the consulting contract with Bavasi Sports Partners, LLP, the Auditor found that DCSEC management entered into retainer agreements with other consultants. Although DCSEC and District procurement regulations fail to set forth a policy and procedures which govern the use and administration of professional and consulting service retainer agreements, the Federal Acquisition Regulations state the following with regard to retainer agreements and retainer fees under retainer agreements:

(b) Retainer fees, to be allowable, must be supported by evidence that–

(1) The services covered by the retainer agreement are necessary and customary;

(2) The level of past services justifies the amount of the retainer fees (if no services were rendered, fees are not automatically unallowable);

(3) The retainer fee is reasonable in comparison with maintaining an in-house capability to perform the covered services, when factors such as cost and level of expertise are considered; and

(4) The actual services performed are documented in accordance with paragraph (f) of this subsection. [Auditor’s Emphasis]

(f) Fees for services rendered shall be allowable only when supported by evidence of the nature and scope of service furnished...[Auditor’s Emphasis] However, retainer agreements generally are not based on specific statements of work. Evidence necessary to determine that work performed is proper and does not violate law or regulation shall include–

(1) Details of all agreements (e.g., work requirements, rate of compensation, and nature and amount of other expenses, if any) with the individuals or organizations providing the services and details of actual service performed;

(2) Invoices or billings submitted by consultants, including sufficient detail as to the time expended and nature of the actual services provided; and

(3) Consultants’ work products and related documents, such as trip reports indicating persons visited and subjects discussed, minutes of meetings, and collateral memoranda and reports.

The Auditor found that DCSEC’s Executive Director authorized payments to Bavasi Sports Partners on the basis of e-mails which did not include any evidence of actual work performed or any other evidence to support Bavasi’s requests for payment. There was no supporting documentation from which a determination could be made as to the propriety and legitimacy of the contractor’s claim for payment; whether the claims for payment were based on work performed; and, if so, whether the work performed was within the scope of the agreement. The sole source noncompetitive award of this agreement, the failure to obtain the Board’s prior approval of this contract, the oral nature of the services, and the lack of sufficient documentation to support payments made to the contractor raises questions regarding the reasonableness and legitimacy of the payments and whether the payments were provided for purposes related to the agreement.

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DCSEC Management Violated Procurement Regulations in the Award of Sole Source Contracts

During fiscal years 2001 through 2003, as of January 31st, DCSEC’s management awarded six sole source contracts which violated DCSEC’s procurement regulations regarding the appropriate use of this procurement method.4

In accordance with 19 DCMR Chapter 28, Section 2805.1:

The Commission may award sole source contracts where there is a reasonable basis to conclude that the Commission’s needs can only be satisfied by the goods, services, or construction proposed to be procured when the proposed sole source contact is the only source capable of providing required goods, services, or construction.

In accordance with 19 DCMR, Chapter 28, Section 2805.5, for each sole source procurement, the Board must receive a prior written determination of findings statement prepared by management stating that the minimum needs of the Commission can only be met on a sole source basis and that the proposed sole source is the only source capable of providing the required goods, services, or construction. Further, 19 DCMR, Chapter 28, Section 2805.6 states that the determination of findings statement must contain the following:

  • a description of the Commission’s requirement, including estimated cost;
  • an explanation of the unique nature of the procurement;
  • an explanation of the contractor’s unique qualifications;
  • a determination that the costs to the Commission will be fair and reasonable; and
  • a description of the market survey conducted, list of potential sources contacted, or explanation for why such a survey or list was not possible.

Further, 19 DCMR, Chapter 28, Section 2805.3 states that sole source procurements cannot be justified solely on the basis of any of the following:

  • lack of time, unless there is a legitimate emergency or when the delays have been determined by the Commission to be excusable;
  • the desire for a particular name brand when others of equal nature are available; or
  • convenience alone.

For five sole source contracts, DCSEC’s management failed to provide written determination of findings statements to the Board describing the cost of the procurement, its unique nature, the unique qualifications of the contractor, and a market survey for the goods and services desired as required by Title 19 DCMR, Chapter 28 Section 2805.6. For one contract, DCSEC relied on the representations of a contractor as justification for the sole source award rather than conducting its own independent analysis. The six sole source contracts are presented in Table IV.

TABLE IV

SEC Sole Source Procurements: Fiscal Years 2001 through 2003, as of January 31, 2003

Contract Services Provided Date Issued Amount Justification for Sole Source
Sudden Impact Entertainment Group The design, development, and production of Fright House 5/17/01 $1,170,000 no written justification included in contract support documentation
Duraturf Field Turf Various $120,000 no written justification included in contract support documentation.

no evidence of Board approval

Andco RFK Graphics 5/14/01 $315,555 no written justification provided to the Board and included in contract documentation.
Warren Graves Consulting Services 9/1/99 $104,998 no written justification included in documentation

no evidence of Board approval

National Events RFK Sound System Upgrade 3/30/01 $220,560 written justification did not contain an estimated cost of procurement, unique qualifications of contractor, or market rates;

justification based on recommendation from another contractor providing technology services to DCSEC;

no evidence of Board Approval.

Daktronics5 Scoreboard/Video Board Maintenance 4/7/00

$1,759,771

no written justification included in documentation
Source: DCSEC contract files

In the absence of documentation justifying the sole source award of these contracts, there is no assurance that these contractors were not given preferential treatment, that the goods or services were obtained from the only source available, that the goods or services were reasonably priced, and were necessary.

RECOMMENDATIONS

  1. With regard to the employee serving in the capacity of chief financial officer, in-house legal counsel, and contracting officer, the Board of Directors should immediately ensure that these three functions are not administered under any circumstances by the same employee. The Board of Directors, through its Personnel Committee, should use a competitive recruitment and selection process to identify qualified, competent candidates who possess an adequate mix of governmental and private sector expertise appropriate to the requirements of DCSEC’s legal, financial, and procurement operations.
  2. The DCSEC Board of Directors and management comply with District laws requiring the submission of Sports and Entertainment Commission contracts in excess of $1,000,000 to the Council of the District of Columbia for review and approval. Contracts that DCSEC classifies as event services are not exempt from this requirement.
  3. DCSEC’s Board of Directors, through the Contracting and Procurement Committee, revise current procurement regulations to address deficiencies related to small purchases, competitive bidding, and sole source procurements, including specific provisions to govern contracts for consulting and expert services and the use of retainer agreements and retainer fees.
  4. DCSEC’s Board of Directors, through the Contracting and Procurement Committee, hold the Executive Director accountable for the development of more comprehensive procurement procedures governing small purchases, including implementing a requirement for a minimum of three quotes for all small purchases above a specific dollar threshold to ensure fair and competitive procurement practices.
  5. DCSEC’s Board of Directors, through the Committee on Contracting and Procurement, identify specific requirements for and documentation to be maintained by management in the solicitation and evaluation of proposals submitted through the competitive bidding process.
  6. DCSEC’s Board of Directors must exercise more extensive and effective oversight of DCSEC’s procurement and contracting activities; establish policies and procedures that ensure the Board’s scrutiny and approval of contracts exceeding $50,000 before management awards such contracts; and require management’s strict adherence to requirements under DCSEC’s procurement regulations with regard to the award of sole source contracts.

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DCSEC’S RECORDKEEPING PRACTICES WERE INSUFFICIENT

DCSEC’s record keeping practices were grossly insufficient. In reviewing DCSEC’s contract files, credit card records, disbursement records and various other documentation supporting procurement, travel, hospitality and other operational expenses, the Auditor found that:

files were incomplete and not organized in any discernible order;

key contract information was not consolidated in a single file or in some logical order; and

documentation for procurement and credit card transactions including travel, entertainment and hospitality expenses was missing or inadequate.

The Auditor found that DCSEC failed to implement an adequate effective record keeping system.

RECOMMENDATION

DCSEC’s Board of Directors hold the Executive Director accountable for the development and implementation of an adequate effective record keeping system for the maintenance of contract files, credit card records, disbursement records, and various other documents that support all operational expenses.

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DCSEC’S MANAGEMENT ENGAGED IN EXCESSIVE AND/OR UNNECESSARY SPENDING DURING FISCAL YEARS 2000 THROUGH 2003, AS OF JANUARY 31, 2003

The Auditor found that during fiscal years 2000 through 2003, as of January 31, 2003, DCSEC management engaged in spending that appeared to be excessive and/or unnecessary, given DCSEC’s unsound financial position. The Auditor identified $1.1 million of expenditures made during the audit period that appeared excessive and/or unnecessary in the following categories:

  • $682,759 in expenditures for outside legal services;
  • $ 62,689 in expenditures for employee travel;
  • $ 43,217 in expenditures for entertainment and hospitality;
  • $355,500 in disbursements for sponsorships and contributions.

As noted in the Auditor's report on governance and oversight, DCSEC expenditures significantly outpaced revenues during fiscal years 1999 through 2002 and, as a result, the Commission experienced significant operating deficits in each of those fiscal years. The Auditor found that DCSEC's Board failed to ensure appropriate oversight of management's financial management and spending practices. Further, the Auditor found that DCSEC management developed and submitted to the District faulty budgets that reflected management's inadequate response to a trend of expenditures exceeding budget and actual revenue collections. The Executive Director of DCSEC made financial commitments on behalf of DCSEC without adequately assessing the potential overall financial risk and impact on the Commission. In his stewardship of DCSEC, the Executive Director did not: (1) regularly monitor budget, revenue, and expenditure patterns; (2) investigate variances between budget, revenues, and expenditures; and (3) take appropriate timely corrective actions. As the disparity between budget, revenues, and expenditures grew more pronounced, management's response was not to trim spending and raise revenues. Instead, management made the injudicious decision to raid DCSEC's investment funds, also referred to as reserve funds, and maintained a pattern of spending that could not be sustained by DCSEC's existing revenue generating capacity.

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DCSEC Outside Legal Expenditures

During fiscal years 1999 through 2003, as of January 31St, DCSEC incurred $682,759 in expenditures for legal services provided by law firms. As shown, total legal expenditures increased from $141,573 in fiscal year 2000 to $357,111, or by 152%, through fiscal year 2002. Outside legal services were used in a significant number of instances to address issues such as Freedom of Information Act (FOIA) requests and matters involving other District agencies or the D.C. Council. Further analysis indicates that the majority of time billed by the law firms related to the following:

  • providing services associated with lawsuits and discrimination complaints filed against DCSEC by former DCSEC employees;
  • responding to FOIA requests;
  • responding to DC Council inquiries and preparing memoranda to the Council;
  • reviewing event-related contracts and agreements with vendors and sports teams;
  • providing legal advice regarding DCSEC initiatives (e.g., baseball, National Grand Prix); and
  • researching legislation pertaining to DCSEC.

The Auditor found no evidence of an analysis performed by DCSEC management to determine whether it would be more cost effective to employ a full-time optimally sized legal staff and contract out some kinds of legal work, to use the legal expertise of other District agencies such as the Corporation Counsel on a temporary or short-term basis, or to contract out all legal work. Further, the Auditor found no guidelines, criteria, or procedures developed by management to control the type of legal work contracted out, to contain the cost of outside legal services acquired, and to ensure the quality of services rendered. There was no policy that work was to be contracted out only when necessary or only for certain kinds of legal work. Table V presents payments made to law firms during the period under review.

TABLE V

DCSEC Legal Expenditures: Fiscal Years 2000-2003, as of January 31, 2003

Vendor FY 2000 Payments FY 2001 Payments FY 2002 Payments FY 2003 Payments TOTAL
Covington & Burling $24,662 $63,113 $340,763 $89,661 $518,199
Hogan & Hartson $116,911 $11,324 _   $128,235
Patton & Boggs _   $14,269   $14,269
Crispen & Brenner, PLLC. - $19,977 $2,079 _ $22,056
TOTAL $141,573 $94,414 $357,111 $89,661 $682,759
Source: DCSEC invoices for legal services

The Auditor found that DCSEC management injudiciously used outside law firms at expensive hourly rates to handle matters that should have been handled more economically by DCSEC’s in-house resources. For example, the Auditor observed one instance in which a lead attorney billing at $475 per hour, charged DCSEC $1,187 for attending a Board meeting. Also during fiscal year 2002, the Auditor estimates that the law firm of Covington & Burling billed DCSEC approximately $63,369 to respond to FOIA requests received from the Washington Post. The Auditor found the use of outside attorneys to perform tasks such as compiling data in response to FOIA requests, researching District laws, researching DCSEC’s ability to exempt contracts under District procurement regulations, and preparing memoranda to staff regarding duties related to DCSEC events, an uneconomical use of scarce DCSEC financial resources.

In addition to the functions identified above, the DCSEC CFO estimates that Covington & Burling billed DCSEC $120,000 for issues related to bringing baseball to Washington, DC, and approximately $120,000 on issues related to the National Grand Prix.

The Auditor found that the vast majority of expenditures for legal services incurred by DCSEC related to FOIA requests, major league baseball, and the National Grand Prix. These disbursements represented 85% of total DCSEC legal expenditures for 2002. The failure of DCSEC’s executive leadership to develop and effectively utilize in-house legal staff and to judiciously select the type of work referred to outside counsel has resulted in a 152% increase in legal expenditures between fiscal years 2000 through 2002.

Employee Travel Expenditures

The Auditor’s review of expenditure data revealed that DCSEC managers incurred expenditures totaling $62,689 for employee travel. (See Appendix I ) According to DCSEC internal policy, all employee travel must be pre-approved in writing by the Executive Director, CFO, or the Armory Manager. Additionally, all employees requesting out-of-town travel must complete a Travel Request Form and include an explanation for travel along with the estimated cost, including transportation, lodging, transfers, registration, meals, and any other items.

The Auditor’s analysis of DCSEC travel-related expenditures revealed that management failed to exercise sound judgment in the approval of employee travel, especially during fiscal year 2000 when approximately one-half of travel expenditures were incurred. During this period, the Board’s Chairperson also functioned as DCSEC’s Executive Director. The Auditor identified travel expenditures that appeared to be questionable and/or excessive. For example, DCSEC paid travel costs totaling $3,653 for several DCSEC employees to attend the National Basketball Association Allstar game in San Francisco, California. In this instance, there was no discernible relationship between DCSEC’s mission and the expenses incurred for these employees to attend the Allstar Basketball Game, particularly when the District of Columbia already had a professional basketball franchise playing in a venue not owned or operated by DCSEC.

DCSEC also paid for the stadium manager and his wife to travel to Honolulu, Hawaii to attend a stadium managers’ conference. DCSEC’s CFO failed to provide any documentation from which it could be determined whether the stadium manager reimbursed DCSEC for his wife’s travel expenses totaling $861.20. In the absence of adequate documentation that reimbursement was made, the Auditor concludes that the stadium manager never made reimbursement and therefore is responsible for repaying this expenditure to DCSEC.

Entertainment and Hospitality Expenditures

DCSEC paid $43,217 in entertainment and hospitality expenditures. In many cases, the Auditor was unable to determine whether entertainment and hospitality expenditures were directly related to official DCSEC business. In a significant number of instances, there was no supporting documentation available to support expenditures, thus the Auditor could not determine the relationship of the expenditures to the performance of official DCSEC business or whether public funds were used to pay for legally permissible expenses. For example, DCSEC was billed for and paid $1,648 to B&B Washington Caterer for food provided to DCSEC, however, the invoice was not available for review. Without this documentation, the Auditor could not determine whether the expenditure was related to a DCSEC business function. Thus, given the absence of documentation to support these and at least $5,402.14 in expenditures presented in Appendix I, the presumption is that these were not legitimate expenditures in support of DCSEC’s mission.

Disbursements were also made to vendors for parties and receptions that were not adequately justified in writing as related to DCSEC’s mission. In some cases, charges appeared to be related to official DCSEC business, however, in most cases no nexus could be made. Appendix I presents a detailed listing of all entertainment, travel, and hospitality expenditures that were paid by DCSEC during fiscal years 1999 through 2003, as of January 31st.

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DCSEC Sponsorships and Contributions

During fiscal years 2000 through 2003, as of January 31st, DCSEC management sponsored or made contributions to approximately 11 events totaling $355,500. (See Appendix II) The Auditor found that disbursements for sponsorships and contributions were made during a period in which overspending and significant operating deficits were incurred.

Although it appears that in most cases the events sponsored or organizations receiving contributions from DCSEC appeared consistent with its mission, DCSEC’s Executive Director and Chief Financial Officer failed to make prudent, sound financial decisions by expending funds for such purposes during a time of fiscal instability.

During fiscal year 2002, DCSEC contributed $10,000 to an event sponsored by the United States Olympic Committee and $10,000 to the United States Soccer Foundation, $40,000 for sponsorship of the BB&T Classic basketball game, and $25,000 to the Chesapeake Region 2012 Coalition to assist the region’s efforts to host the 2012 Summer Olympic Games. These sponsorships and contributions were made during a period in which the organization incurred an operating deficit of $4 million.

RECOMMENDATIONS

  1. DCSEC management immediately terminate all agreements with private law firms in that these agreements were based on a noncompetitive procurement process that lacked integrity and created the appearance of preferential treatment.
  2. DCSEC’s Board of Directors and Executive Director conduct a study to determine whether it is cost effective to employ an optimally sized full-time legal staff, use the legal resources of other District agencies such as the Office of the Corporation Counsel on a short-term or temporary basis, contract out only specified types of legal work, or contract out all legal work to a private law firm based upon the use of a competitive procurement process. In the meantime, when DCSEC lacks the requisite legal resources or expertise in-house, it should seek to utilize the legal expertise of the District’s Office of the Corporation Counsel, under a cost reimbursement arrangement, on a temporary or short-term basis before it procures outside legal counsel.
  3. In procuring legal services, DCSEC must use a competitive procurement process that is fair, open, and well-documented. Further, the competitive process used must ensure that quality legal services are obtained at a reasonable price.
  4. DCSEC’s Board of Directors and Executive Director prepare written guidelines, approved by a majority of the Board of Directors, which set forth:
    1. the criteria for deciding whether to seek outside legal counsel; and
    2. criteria and procedures regarding the type of legal work to be obtained from outside legal counsel, the specific agency official authorized to request legal services from a legal services contractor, cost control measures, and monitoring the quality of services rendered.
  5. DCSEC’s Executive Director exercise effective management control over the authorization of travel at DCSEC’s expense to ensure that it is necessary, economically priced, fully documented, and directly related to DCSEC’s core mission.
  6. DCSEC’s Board of Directors establish a policy regarding the expenditure of DCSEC funds by the Executive Director and any other DCSEC employee for entertainment and hospitality expenses. The policy should, at a minimum, include a requirement for a written justification to be submitted to and approved by a majority of the Board of Directors prior to the obligation of DCSEC funds to pay the expense. The failure to comply with this policy and procedure should result in the accountable employee being held personally liable for reimbursing the expenditure to DCSEC.
  7. DSCEC’s Board of Directors and Executive Director should discontinue the practice of sponsoring events and making contributions for various projects until the organization’s financial position improves. Further, the Board of Directors should consider establishing a policy and procedures which govern the use of DCSEC funds to make contributions to or sponsor events presented by other organizations, when such activities fall outside of DCSEC’s grant award process.

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DCSEC SPENT $14,533 TO SEND THE MAYOR AND DCSEC STAFF TO THE MAJOR LEAGUE BASEBALL GAME IN ATLANTA DURING FISCAL YEAR 2000

DCSEC’s Board Chairperson authorized the expenditure of $14,533 to send the Mayor of the District of Columbia, the Mayor’s wife, two Board members, and five DCSEC staff members to the Major League Baseball All Star Game in Atlanta, Georgia during July 2000. According to DCSEC management, the purpose of this trip was to help promote bringing major league baseball back to the District of Columbia. The Auditor is concerned that there is no reasonable basis upon which it can be determined whether this expenditure materially benefited the District’s efforts to obtain a major league baseball team, or that the expenditure was beneficial to DCSEC’s mission. Further, there is reason to question the necessity and reasonableness of underwriting the cost of five DCSEC employees’ expenses for this activity, as well as the legitimacy of paying the expenses of the Mayor’s wife, which are not the financial obligation of the District government or DCSEC. The travel expenses of the Mayor’s wife are the personal obligation of the Mayor or the Mayor’s wife. Further, DCSEC’s use of public funds to pay for first class travel for the Mayor and his wife is a violation of public policy in that taxpayer funds may only be used to pay coach fare for legitimate government travel. Table VIII identifies expenditures incurred by DCSEC for the trip.

TABLE VIII

DCSEC Expenses Associated with the Major League Baseball All Star Game

Item Amount Comments
Airfare $5,538 All tickets purchased were for coach seats, with the exception of Mayor and First Lady who flew first class.
Lodging $2,811 9 room nights at a rate of $274 per night plus 14% rate of taxes
Game Tickets $1,116 Payment for tickets made out to the Campaign to reelect Bill Campbell
Game Tickets $600 Payment for tickets made out to Major League Baseball
Advertising Expense $3,468  
Employee Advance $1,000 Advance paid to DCSEC employees for expenses associated with the trip to Atlanta
TOTAL $14,533  
Source: DCSEC

The most significant expenditure for the trip was airfare of $5,538. Of that total, $2,632 was used to purchase two first class tickets for the Mayor and his wife to fly to Atlanta. The price of each first class ticket was $819 greater than the price of coach seats purchased for DCSEC Board members and staff to travel to the same destination.

The Auditor also found that DCSEC made a payment of $1,116 to the Campaign to Re-Elect Bill Campbell and indicated on the check request that the payment was a reimbursement for tickets to the Major League Baseball All Star Game. However, the Auditor’s review of DCSEC disbursements revealed that during fiscal year 2000, DCSEC also purchased tickets for the Major League All Star Game for $600. Thus, DCSEC’s assertion that the payment to the campaign was a reimbursement for tickets appears to be a misstatement of fact.

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DCSEC MANAGEMENT FAILED TO ADOPT POLICIES AND PROCEDURES GOVERNING THE USE OF CREDIT CARDS

The Auditor found that DCSEC’s Executive Director failed to adopt, implement, and enforce policies and procedures governing accountability for the use of corporate credit cards issued to DCSEC’s Executive Director, CFO, Armory Manager, and Facilities Manager for operating expenditures. In discussions with DCSEC’s CFO, the CFO noted that although credit cards had been issued, DCSEC had not implemented official policies and procedures governing their use. This is but another example of poor management practices that exposed DCSEC finances to misuse and mismanagement.

During fiscal years 2001 through 2003, as of January 31st, the Auditor found bank card payments totaling approximately $81,339.42. Table IX presents expenditures that were charged to the credit cards assigned to DCSEC officials during fiscal years 2001 to 2003, as of January 31, 2003.

TABLE IX

D.C. Sports and Entertainment Commission Credit Card Expenditures:
Fiscal Years 2001 through 2003, as of January 31, 2003

Credit Card Charges FY 2001 FY 2002 FY 2003 Total
Hotel $5,064.49 $4,944.91 $8,038.73 $14,736.33
Airfare 4,428.25 10,436.20   9,388.21
Conference Fees 900.00 850.00   900
Food & Beverage 453.46 2,746.67 393.06 2,198.93
Entertainment 660.00 75.90   560
Car Rental 248.22 5,110.59 640.39 3,085.22
Fuel: Gas 21.00 27.02 132.08 153.08
Telephone 3,535.85 7,210.21   10,746.06
Clothing     197.28 197.28
Rail Fare: Amtrak 188.00 1,103.00   1,097
Membership Fees 290.00     290
Software     271.28 271.28
Limo Services 103.50   755.00 858
Direct TV Subscription 1,493.66     1,493.66
Equipment Rental     2,527.24 2,527.24
Miscellaneous 53.52 13,342.29 5,097.62 13,477.30
Total $17,439.95 $45,846.79 $18,052.68 $81,339.42
Source: DCSEC Disbursement Files

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DCSEC Corporate Credit Cards Were Used to Make Purchases That Appeared to Be Personal

The Auditor found that $1,648.35 of the $81,339.42 in credit card expenditures were related to charges that appeared to be personal purchases made by DCSEC’s Executive Director and Armory Manager during fiscal years 2001 through 2003, as of January 31, 2003.

According to information reviewed by the Auditor, reimbursements totaling $829.67 were made to cover some of the personal expenses of the Armory Manager. However, the Auditor notes that given the personal nature of these expenses, they should not have been charged to DCSEC’s credit cards or paid by DCSEC. The expenses were not necessary in the execution of official duties related to DCSEC and therefore should not have been charged to a DCSEC issued credit card. The DCSEC Executive Director’s failure to establish effective internal controls and to issue written guidelines governing the appropriate use of the credit cards by employees under his supervision created an environment in which the use of DCSEC funds to pay for personal expenses appeared to be an acceptable practice. Table X presents a sample of purchases that appeared to be of a personal nature that were made by DCSEC officials using DCSEC credit cards.

Table X

Personal Purchases Charged to DCSEC Corporate Credit Cards:
Fiscal Years 1999 through 2002

Cardholder Name Vendor Transaction Description Transaction Date Amount
Ollie D. Harper Syms at Williamsville NY Big & Tall Dress Shirts 11/3/02 $91.48
Ollie D. Harper Athletic X Press at Phoenix AZ Clothing 9/24/02 $54.02
Ollie D. Harper Burlington Coat Factory at Amherst NY Cloth: Prior Balance Payment 11/3/02 $51.78
Robert D. Goldwater Flights of Fancy Toys 12/21/01 $718.68
Anthony Burnett SMA Registration Fee for Spouse 1/8/02 $100
Ollie D. Harper Safeway Food 4/8/02 $15.53
Ollie D. Harper Pizza Bolis Food & Beverage 4/9/02 $75.90
Ollie D. Harper Amoco Gas 4/11/02 $27.02
Ollie D. Harper Lowe’s unknown 4/13/02 ($8.75)
Ollie D. Harper Hevener Tire unknown 4/12/02 $10.00
Ollie D. Harper Lowe’s unknown 4/12/02 $33.53
Ollie D. Harper Winn Dixie Food 4/11/02 $53.44
Ollie D. Harper Applebee’s Food 4/12/02 $56.87
Ollie D. Harper Flower ‘N’ Fern unknown 4/16/02 $62.85
Ollie D. Harper US Airways Airfare 4/23/02 $234
Ollie D. Harper US Mint unknown 7/20/02 $72
Total Personal Expenses       $1,648.35
Source: DCSEC Bank Card Records

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Undocumented Corporate Credit Card Charges

Credit card bills were submitted to DCSEC’s Chief Financial Officer and approved for payment by DCSEC’s controller. At least $11,372.07 in credit card payments were made without supporting documentation explaining the purpose of each expenditure and its relationship to DCSEC. The Auditor found that of the $11,372.07, DCSEC’s Chief Financial Officer’s credit card was used to cover $2,141.81 in expenditures that lacked supporting documentation. Additionally, the Auditor found that DCSEC’s Executive Director made approximately $8,938.38 in expenditures with his DCSEC credit card that lacked supporting documentation. DCSEC’s Armory Manager made approximately $291.37 in expenditures with his DCSEC credit card that were paid by DCSEC finance officials without supporting documentation.

DCSEC’s Board of Directors failed to establish sufficient management and accounting controls to ensure the accountability of the Executive Director’s financial activities relative to expenditures charged to the credit card assigned to him. As a result, expenditures charged to the Executive Director’s card were not adequately monitored, failed to receive any meaningful scrutiny as to appropriateness of the charge, and a significant number of transactions were not supported by adequate, if any, documentation. For example, the Auditor identified two charges of $330 each at a nightclub. During the time of our fieldwork, there were no receipts or other documentation in DCSEC’s files indicating the business purpose of the charges and no documentation to suggest the Executive Director reimbursed DCSEC for the charges. The Auditor’s analysis indicated that the transactions were two cash advances charged to the Executive Director’s corporate credit card. Following the release of the draft report, the Executive Director provided documentation supporting the charges and his subsequent reimbursement to DCSEC 16 months after the charges were made.

There is no evidence that the Executive Director informed DCSEC’s Board of Directors of the acquisition of credit cards in DCSEC’s name. Had the Board been informed of this action, it would have been the obligation of the Board to establish a policy and procedures to govern and monitor the Executive Director’s use of the card assigned to him.

In the absence of Board level scrutiny of the Executive Director’s use of the credit card and the poor accountability practices allowed by top management, there was no effective system of checks and balances in place to ferret out inappropriate charges and ensure their reimbursement to DCSEC.

Appendix III presents all undocumented and personal charges or charges that were made by unauthorized card users identified by the Auditor during the period under review.

RECOMMENDATIONS

  1. DCSEC’s Executive Director and former Facilities Manager immediately reimburse DCSEC for personal expenditures charged to the corporate credit card totaling $818.68. If these reimbursements are not made within 15 days of the date of this final report, the amounts should be deducted from each manager’s salary payments until fully repaid.
  2. DCSEC’s Executive Director immediately cancel all corporate credit cards issued in DCSEC’s name, or the names of its employees if DCSEC is ultimately responsible for paying the bills, and provide the Auditor with evidence of the cancellation within 15 days of the date of this report.
  3. Each manager responsible for expenditures that are not supported by adequate or any documentation must repay these expenditures to DCSEC within 60 days of the date of this report, unless adequate original supporting documentation can be provided. If these officials fail to provide adequate original documentation to support each expenditure and fail or refuse to repay these charges to DCSEC, the Auditor will refer this matter to appropriate law enforcement authority for further investigation and the Office of Corporation Counsel to initiate the appropriate civil action to recover these funds. At a minimum, the Executive Director must substantiate or repay $8,938.89; the Armory Manager must substantiate or repay $291.37; and the Chief Financial Officer must substantiate or repay $2,141.81.
  4. DCSEC’s Board of Directors establish a specific policy and process regarding the criteria that must be used to determine the necessity for corporate credit cards to be issued in DCSEC’s name, in addition to the criteria that will be used to determine which DCSEC employees will be assigned credit cards; expenditure limits for each card; the types of purchases that cards may be used to make; regular specific reports that must be filed with the Board concerning expenditures made with all credit cards issued to DCSEC employees including the Executive Director; a requirement that the Executive Director develop complete policies and procedures regarding credit card usage that must be adhered by DCSEC employees under his management control; and specific accountability measures that will be applied by the Board for any failure of the Executive Director to comply with the Board’s policy and procedures.
  5. The DCSEC official who authorized the disbursement of $2,315 for the purchase of first class air fare for the Mayor and his spouse must reimburse DCSEC for this improper expenditure of public funds.
  6. The DCSEC official who authorized the disbursement of $1,116 to the campaign to Reelect Bill Campbell reimburse DCSEC for this improper expenditure of public funds.

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CONCLUSION

The District of Columbia Sports and Entertainment Commission (DCSEC) Board and management failed to ensure prudent financial decision making, compliance with laws and regulations, and the implementation of adequate and effective internal controls over its contracting, procurement, and spending practices.

The Auditor’s review of DCSEC’s accounts and operations revealed that spending outpaced revenues during fiscal years 1999 through 2002. Between fiscal years 1999 and 2002, DCSEC’s revenues grew an average of 49% while expenditures increased by approximately 80%. As a result, DCSEC ended the past four fiscal years with combined total operating losses of $9.8 million. The losses were fueled by significant increases in spending on outside services, professional services, insurance, advertising and promotions, and development. According to DCSEC management officials, the increased spending reflected DCSEC’s commitment to attract major league baseball to the District, its bid for the 2012 Olympics, and various other events. Numerous professional services contracts were negotiated to further these commitments as well as to support other events. Additionally, DCSEC’s management incurred significant travel and entertainment expenses, and funded several unplanned capital projects during this period including repaving of Parking Lots 6 and 7 in connection with the Grand Prix auto race.

An examination of DCSEC’s procurement of goods and services during fiscal years 1999 through 2003, as of January 31st, revealed that a lack of effective Board and management oversight, inadequate or nonexistent internal controls, in addition to a flawed procurement and contracting process facilitated circumvention of applicable laws, regulations and rules; costly noncompetitive procurement practices; and a lack of management accountability. The Auditor found that management awarded contracts without Board knowledge, scrutiny, or prior approval. The Auditor also found the following deficiencies with regard to DCSEC’s procurement activities: (1) the DCSEC Chief Financial Officer also acted as the Commission’s in-house legal counsel and contracting officer for certain transactions; (2) DCSEC’s management executed a contract above $1 million without obtaining prior approval from the Council of the District of Columbia; (3) the competitive bidding process used by DCSEC management did not appear to promote fair and open competition; (4) $1.3 million in contracts in excess of $50,000 were awarded without prior Board approval; (5) $931,151 in contracts for consulting services were awarded on a sole source noncompetitive basis or without prior Board scrutiny and approval; and (6) sole source contracts were awarded without adequate, documented justification or support.

DCSEC’s recordkeeping system and practices were grossly insufficient. In reviewing DCSEC’s contract files, credit card records, disbursement records and various other documentation supporting procurement, travel, hospitality and other operational expenses the Auditor found that: (1) files were incomplete and not organized in any discernible order; (2) key contract information was not consolidated in a single file or in some logical order; and (3) documentation for procurement and credit card transactions including travel, entertainment and hospitality expenses was missing or inadequate.

The Auditor found that during fiscal years 2000 through 2003, as of January 31, 2003, DCSEC management engaged in spending that appeared to be excessive and/or unnecessary, given DCSEC’s unsound financial position. The Auditor identified expenditures totaling $1.1 million during the audit period that appeared excessive and/or unnecessary including: (1) $682,759 in expenditures for outside legal services; (2) $62,689 in expenditures for employee travel; (3) $ 43,217 in expenditures for entertainment and hospitality; and (4) $355,500 in disbursements for sponsorships and contributions. The Auditor found that DCSEC’s Board failed to ensure appropriate oversight of management’s financial management and spending practices. Further, the Executive Director of DCSEC made financial commitments on behalf of DCSEC without adequately assessing the potential overall financial risk and impact on the Commission. In his stewardship of DCSEC, the Executive Director did not: (1) regularly monitor budget, revenue, and expenditure patterns; (2) investigate variances between budget, revenues, and expenditures; and (3) take appropriate timely corrective actions. As the disparity between budget, revenues, and expenditures grew more pronounced, management's response was not to trim spending and raise revenues. Instead, management made the injudicious decision to raid DCSEC's investment funds and maintain a pattern of undisciplined spending.

DCSEC's executive leadership authorized the expenditure of $14,533 to send the Mayor of the District of Columbia, the Mayor's wife, two DCSEC Board members, and five DCSEC staff members to the Major League Baseball All Star Game in Atlanta, Georgia during July 2000. According to DCSEC management, the purpose of this trip was to help promote bringing major league baseball back to the District of Columbia. The Auditor is concerned that there is no reasonable basis upon which it can be determined whether this expenditure materially benefited the District's efforts to obtain a major league baseball team, or that the expenditure was beneficial to DCSEC's mission. Further, there is reason to question the necessity and reasonableness of underwriting the cost of five DCSEC employees' expenses for this activity, as well as the legitimacy of paying the expenses of the Mayor's wife, which are not the financial obligation of the District government or DCSEC.

Finally, the Auditor found that DCSEC's Executive Director failed to adopt, implement, and enforce policies and procedures governing accountability for the use of corporate credit cards issued to DCSEC's Executive Director, CFO, Armory Manager, and Facilities Manager for operating expenditures. During fiscal years 2001 through 2003, as of January 31 s`, the Auditor found credit card payments totaling approximately $81,339.42. The Auditor found that of the $81,339.42 in credit card expenditures, $1,648.35 were related to charges that appeared to be personal purchases made by DCSEC's Executive Director and Armory Manager during fiscal years 2001 through 2003, as of January 31, 2003. At least $11,372.07 in credit card payments were made without supporting documentation explaining the purpose of each expenditure and its relationship to DCSEC.

DCSEC must implement strong internal controls over its contracting, procurement, and spending, and exercise effective management control over expenditures to ensure the financial viability of the Commission in the future.

Respectfully submitted,
Deborah K. NichoIs
District of Columbia Auditor

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APPENDICES

APPENDIX I

DCSEC Travel Expenditures

Individual Traveling Travel Mode Travel Dates Amount Purpose
Troy Scott   12/30/1999 $1,500 Airfare for INTIX Conference in Albuquerque, NM
Kenneth Brown   12/16/1999 $200 Airfare to attend the Heritage Bowl Game in Atlanta
Kenneth Brown   11/1/1999 $1,994.22 $1395 of total payment for Kenneth Brown to attend the Strategic Research Conference in NYC
Neville Waters   10/18/1999 $1,300 Travel advance for Sports and Media Technology Conference 99
Neville Waters   10/18/1999 $1,200 Travel advance for trip to Colorado Springs to US Olympic Congress
Mayor Anthony Williams, Diane Williams, John Richardson, William Hall, Warren Graves, Scott Burrell, and Kenneth Brown   7/5/2000 $4,683 Payment for airfare to Atlanta for MLB All-Star Game
Mayor Anthony Williams, Diane Williams, John Richardson, William Hall, Warren Graves, Scott Burrell, and Kenneth Brown   7/7/2000 $2,811 Payment for hotel rooms @274/night for delegation to the MLB all star game in
Atlanta
Neville Waters   5/18/2000 $920.42 Travel to Los Angeles to attend MOBE XVI Spring 2000 Marketing and Tech Symposium from 4/1/-4/4
Neville Waters   2/15/2000 $267.53 Travel to NYC for MLB: heage Entertainment WWF
    9/12/2000 $409 Travel for employee to supervise installation of forum floor at a stadium in Columbus, OH
Neville Waters   9/12/2000 $248 Roundtrip airfare to attend MBOE fall 2000 symposium in Chicago
Kenneth Brown   8/9/2000 $355 Airfare to Orlando on 8/10/00 for meeting/conference
Neville Waters   2/7/2000 $2,000 Travel advance for trip to San Francisco for NBA all star game
Kenneth Brown   2/10/2000 $550 Airfare for trip to San Francisco for the NBA all star game
Tony Burnett and Kenneth Brown   2/1/2000 $2,476 Travel for T. Burnett and wife to Houston and then the Honolulu, and travel for K. Brown to Atlanta and hotel expenses. Note indicates that T. Burnett would refund DCSEC for wife's expenses. No travel vouchers for any of the expenses
Kenneth Brown   2/8/2000 $1,103 Airfare for K. Brown to the NBA all star game in San Francisco
Neville Waters   3/24/2000 $2,000 Travel to Los Angeles to the MOBE XBI Spring 2000 Mktg & Tech Symposium and trip from LA to San Jose to meet with Cirque De Soleil Representatives
Kenneth Brown   3/24/2000 $1,000 Travel advance for trip to Los Angeles to the Marketing Opportunities in Black Entertainment Symposium in Los Angeles
Neville Waters   3/24/2000 $238 travel to Los Angeles to the MOBE XBI Spring 2000 Mktg & Tech Symp and trip from LA to San Jose to meet with Cirque De Soleil Representatives
Neville Waters and Kenneth Brown   3/14/2000 $752 Travel to Los Angeles
Warren Graves   7/10/2000 $500 Travel advance for trip to Atlanta for MLB all star game
Kenneth Brown (?)   7/13/2000 $425 Airfare to NYC to meet with executive for epic records to discuss holding an NBA all star party at the Armory and to go to a reception for the mickey mantle foundation
Neville Waters and Eric Drury   7/7/2000 $855 travel to Atlanta for MLB All Star Game
Scott Burrell   6/13/2000 $893 Travel to Detroit to meet with Grand Prix promoters and to see Grand Prix of Detroit
Kenneth Brown   5/22/2000 $1,000 Travel advance for BCA annual convention in Atlanta
Kenneth Brown   5/11/2000 $1,157 Payment for airfare for K. Brown to NYC, Atlanta, and Minn for various meetings and conferences and airfare for Nevill waters for trip to Minn for Rainbow Push national sports conference
Total     $30,837  
Neville Waters   10/23/2000 $1,500 Travel advance for Teams 2000 conference/music festival in new Orleans and Texas, 10/25/00-10/28/00. Additionally travel on 10/2/00-10/4/00 to Chicago for MBOE fall 2000 symposium.
Neville Waters   10/3/2000 $425 Airfare for travel to Sony Records and NBA entertainment meeting/conference on 10/5/00
Troy Scott   4/2/2001 $598.52 Travel to Orlando to observe ALMS 12 hours of Sebring and to meet with race promoters and series executives
Tony Burnett   2/13/2001 $1,455 Expenditures related to trip to Orlando for Annual Stadium Managers Conference
Scott Burrell   3/26/2001 $878.85 Travel for S. Burrell to Orlando to observe ALMS 12 hours of Sebring and to meet with race promoters and series executives
Kenneth Brown   5/22/2001 $460.58 Airfare and rental car for conference in Dallas, no specific information on what conference and no travel request documentation.
Kenneth Brown   5/22/2001 $1,000 request for check for travel advance for hotel and meals, however, no specific mention of what conference or for what purpose.
Troy Scott and Anthony Burnett   5/1/2001 $982 Airline ticket to New Orleans for pre site visit related to NSYNC concert
Scott Burrell     $1,355.32 Travel to LA to attend Grand Prix of Long Beach and meet with officials from Dover Downs Entertainment, Grand Prix Association , and DC emergency management and special event staff regarding motor sport event in the District.
Robert D. Goldwater Continental Airlines 06/25/01 $168.75 Roundtrip airfare from Miami to Orlando, FL for
Robert D. Goldwater United Airlines 06/25/01 1,069.25 No invoice
Robert D. Goldwater Continental Airlines 06/26/01 295.75 Round trip airfare from Orlando, FL to Newark, NJ
Robert D. Goldwater Alaska Air 06/28/01 416.75 Roundtrip airfare from Las Vegas to Seattle/Takoma
Kenneth Brown Delta Air 06/27/01 256.00 Roundtrip airfare from Wash Dulles to San Orlando, FL. Travel charged to Scott Burrell’s card.
Jeffrey Hunter America West Air 06/13/01 1,077.00 Roundtrip airfare from BWI to San Francisco. Travel charged to Anthony Burnett’s card.
Anthony Burnett US Airways 06/21/01 329.50 Roundtrip airfare from BWI to Los Angeles. IAAM Conference August 3-7, 2001.
Troy Scott US Airways 06/21/01 329.50 Roundtrip airfare from BWI to Los Angeles. IAAM Conference August 3-7, 2001.
Robert Goldwater American Airlines 07/14/01 272.75 No invoice
Kenneth Brown Delta Airlines 08/21/01 173.00 Round trip airfare from DC to Orlando, FL. Travel charged to Scott Burrell’s card.
Robert D. Goldwater Amtrak 08/13/01 188.00 Round trip Amtrak fare from DC to Philadelphia. X Games sport event
Robert D. Goldwater Hertz rent-a-car 08/07/01 248.22 Rental car 8/2/01 to 8/7/01
Subtotal FY 01     $13,480.00  
Robert D. Goldwater Delta Air 10/02/01 889.00 No invoice
Robert D. Goldwater Delta Air 10/03/01 43.50 No invoice
Robert D. Goldwater Delta Air 10/03/01 93.00 No invoice
Troy Scott Delta Air 11/09/01 434.00 Round trip airfare from B.W.I. to San Diego. Travel charged to Anthony Burnett’s card.
Robert D. Goldwater Delta Air 12/27/01 242.76 Round trip airfare from Atlanta, GA to B.W.I.
Anthony Burnett Delta Air 01/03/02 211.50 Round trip airfare from B.W.I. to Tucson, AZ. Stadium Managers Seminar.
Velita Burnett Delta Air 01/03/02 211.50 Round trip airfare from B.W.I. to Tucson, AZ.
Cheryl Land Delta Air 01/11/02 271.50 Round trip airfare from B.W.I. to Atlanta, GA.
Robert D. Goldwater United Air 12/02/01 397.20 Round trip airfare from B.W.I. to Los Angeles.
Ollie Harper US Airways 01/05/02 48.00 No invoice.
Ollie Harper US Airways 01/04/02 100.00 No invoice
Lawrence Wittenberg United Air 09/05/01 1,563.50 Round trip airfare from Los Angeles
Robert D. Goldwater US Airways 09/07/01 394.50 Round trip airfare
Robert D. Goldwater Delta Air 02/11/02 205.50 No invoice. Laguardia, NY to DC
Ollie Harper Delta Air 07/11/02 236.00 Round trip airfare
Robert D. Goldwater United Air 02/11/02 1,213.00 No invoice. One way fare from DC to Salt Lake City. IAAM conference.
Robert D. Goldwater JetBlue 02/11/02 209.00 One way fare from Salt Lake City to NY
Kenneth Brown Midwest Air 06/14/02 582.50 Round trip air fare DC to Marquette. Travel charged to Scott Burrell’s card.
Kenneth Brown United Air 07/16/02 258.00 Round trip airfare from DC to Chicago. Travel charged to Scott Burrell’s card.
Robert D. Goldwater United Air 03/01/02 1,065.00 Round trip airfare from B.W.I. to Los Angeles, CA.
Robert D. Goldwater US Airways 01/31/02 193.75 No invoice
Kenny Brown US Airways 04/10/02 288.50 Round trip airfare from DC to Indianapolis. Travel charged to Scott Burrell’s card.
Jeffrey Hunter US Airways 06/07/02 496.50 Round trip from B.W.I. to NY. Travel charged to Scott Burrell’s card
Kenneth Brown Midwest Air 05/24/02 312.50 Airfare from DC to Marquette
Ollie Harper US Airways 04/23/02 234.00 No invoice. Reimbursed by Ollie Harper.
Robert D. Goldwater Amtrak 10/02/01 123.00 No invoice
Robert D. Goldwater Amtrak 10/31/01 344.00 Round trip rail fare from DC to NY
Scott A. Burrell & James McPartlin Amtrak 11/02/01 250.00 Outbound rail fare from DC to NY SIEC meeting regarding fright house event.
Scott A. Burrell Amtrak 11/03/01 123.00 Rail fare from NY to DC meeting regarding fright house event.
Ollie Harper Amtrak 01/19/02 69.00 No invoice
Robert D. Goldwater Amtrak 02/01/02 145.00 Rail fare from NY to DC. National Music Center meeting.
Ollie Harper Amtrak 06/21/02 49.00 No invoice. Reimbursed by Ollie Harper.
Robert D. Goldwater Hertz rent-a-car 01/04/02 174.87 Rental car
Robert D. Goldwater Hertz rent-a-car 01/13/02 80.00 Rental car
Robert D. Goldwater Hertz rent-a-car 01/26/02 202.40 Rental car
Anthony Burnett Enterprise 01/30/02 75.38 Rental car
Robert D. Goldwater Hertz rent-a-car 11/30/01 201.30 Rental car
Robert D. Goldwater Hertz rent-a-car 12/15/01 253.00 Rental car
Robert D. Goldwater Hertz rent-a-car 12/22/01 56.79 Rental car
Robert D. Goldwater Hertz rent-a-car 12/28/01 230.21 Rental car
Robert D. Goldwater Hertz rent-a-car 10/13/01 236.96 Rental car
Robert D. Goldwater Hertz rent-a-car 10/27/01 503.25 Rental car for grand prix event
Scott Burrell Hertz rent-a-car 10/10/01 182.45 Rental car
Robert D. Goldwater Hertz rent-a-car 02/01/02 151.80 Rent car 01/29/02 through 02/01/02
Robert D. Goldwater Hertz rent-a-car 02/16/02 233.16 Rent car 02/13/02 through 02/16/02
Robert D. Goldwater Hertz rent-a-car 02/22/02 151.99 Rent car 02/19/02 through 02/22/02
Robert D. Goldwater Hertz rent-a-car 05/22/02 48.12 Rent car 05/21/02 through 05/22/02
Kevin Mahoney Budget rac-ryder 03/28/02 93.15 Rent car charged to Anthony Burnett’s card.
Ollie Harper Enterprise 07/28/02 60.49 Rental car
Robert D. Goldwater Hertz rent-a-car 03/09/02 44.38 Rent car 03/08/02 to 03/09/02
Robert D. Goldwater Hertz rent-a-car 04/05/02 556.60 Rent car 03/25/02 to 04/05/02
Robert D. Goldwater Hertz rent-a-car 04/07/02 62.97 Rent car 04/05/02 to 04/07/02
Robert D. Goldwater Hertz rent-a-car 04/12/02 202.40 Rent car 04/09/02 to 04/12/02
Robert D. Goldwater Hertz rent-a-car 04/30/02 303.60 No invoice
Robert D. Goldwater Hertz rent-a-car 03/08/02 304.03 Rent car 03/02/02 to 03/08/02
Robert D. Goldwater Hertz rent-a-car 03/23/02 701.29 Rent car 03/09/02 to 03/23/02
Cheryl L. Land   1/16/2002 $800 INTIX conference in Atlanta travel advance
James E. McPartlin   7/18/2002 $524 Reimbursement for J. Hunter travel and Fed ex cost--no indication of purpose of travel
Subtotal FY 2002     $17,731.80  
Ollie Harper Enterprise 11/19/02 324.45 Rent car for WS trip
Ollie Harper Avis 09/25/02 315.94 Rent car 09/21/02 to 09/25/02 Phoenix AZ.
Subtotal FY 2003     640.39  
Total Travel Expenses Charged to DCSEC Credit Cards     $62,689  

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DCSEC Entertainment and Hospitality Expenditures

Vendor Fiscal Year Amount Purpose
B&B Washington’s Caterer 2000 $1,358 Undetermined
Fed Ex 2000 44.00 Undetermined
B&B Washington’s Caterer 2000 993.99 Undetermined ice and hot dogs
B&B Washington’s Caterer 2000 230.00 Undetermined ice and hot dogs
B&B Washington’s Caterer 2000 644.00 Undetermined ice and hot dogs - 3 orders
B&B Washington’s Caterer 2000 993.00 Undetermined ice and hot dogs - 4 orders
Campaign to Re-elect Bill Campbell 2000 1,116.00 Reimbursement for MLB 2000 All-Star Game Tickets
B&B Washington’s Caterer 2000 594.00 Soccer-ice and hot dogs; 3 orders made
Major League Baseball 2000 900.00 Tickets for MLB All-Star Game
Washington Sports and Entertainment 2000 6,160.00 Purchase of Wizards tickets; four seats for 20 games
Total FY 2000 $13,033.00
Capital City Brewing 2001 32.75 Food, taxes & tip, Bobby Goldwater
Gordon Biersch Restaurant 2001 27.05 Food, taxes & tip, Bobby Goldwater
The Palm Restaurant 2001 56.90 Food, taxes & tip, Bobby Goldwater
The Palm Restaurant 2001 95.13 Food, taxes & tip, Bobby Goldwater
America @ Washington DC Restaurant 2001 34.92 Food & Beverage, Bobby Goldwater
Capital City Brewing 2001 37.85 Food & Beverage, Bobby Goldwater
Manhattan Wonton @Beverly Hills 2001 62.95 Food & Beverage, Bobby Goldwater
Peninsula Beverly Hills 2001 51.70 Food & Beverage, Bobby Goldwater
Westin Hotels @LA 2001 31.45 Food & Beverage, Bobby Goldwater
Wyndham Checkers Hotel 2001 22.75 Food & Beverage, Bobby Goldwater
Magnolia Coach 2001 103.50 Limo Services, Robert Goldwater
Chevron 2001 21.00 Fuel, Robert Goldwater
Shareeza Peterson 2001 1,263.12 Car and truck damage
R&R Catering 2001 269.00 Catering for Community Meeting
R&R Catering 2001 274.25 CPR Training
R&R Catering 2001 2,092.50 DC Freedom pre-game reception
R&R Catering 2001 3,190.00 DC United pre-game reception
R&R Catering 2001 2,353.00 Festive Holiday Party
R&R Catering 2001 500.00 Lunch for media reception (World Cup)
MCI (Levy Restaurant) 2001 10,199.74 Olympic reception
R&R Catering 2001 239.00 Catering for 20
Henry’s Soul Cafe 2001 137.50 Lunch for 25
DCSEC Box Office 2001 241.89 Reimbursement for event staff training
Champion 2001 242.60 Retirement plaques for Mary F. Wilhoite
DCSEC 2001 1,576.00 Tickets for DC United Opener
Bob Aylward 2001 470.00 Tickets to 2001 MLB All Star Game
Lamb Awards & Engraving Company 2001 3,425.00 Trophies for city title game
Total FY 2001   $27,051.55  
B Smith’s @ Union Station 2002 $65.65 Food & Beverage, Bobby Goldwater
Bull Feathers 2002 65.32 Food & Beverage, Bobby Goldwater
Bull Feathers 2002 27.49 Food & Beverage, Bobby Goldwater
Chop House 2002 83.21 Food & Beverage, Bobby Goldwater
Ciao Bella 2002 63.00 Food, beverage, tips, Scott Burrell
DC Coast Restaurant   185.54 Food & Beverage, Bobby Goldwater
Four Season Hotels 2002 45.60 Food & Beverage, Bobby Goldwater
Georgia Browns 2002 54.53 No invoice, Bobby Goldwater
Georgia Browns 2002 91.48 Food & Beverage, Bobby Goldwater
Grand Hyatt Hotels 2002 33.20 Food & Beverage, Bobby Goldwater
Hawk & Dove Restaurant 2002 22.86 Food & Beverage, Bobby Goldwater
Hawk & Dove Restaurant 2002 29.63 Food & Beverage, Bobby Goldwater
Hawk & Dove Restaurant 2002 38.06 Food & Beverage, Bobby Goldwater
Hawk & Dove Restaurant 2002 25.34 Food & Beverage, Bobby Goldwater
Hilton Twiggs Restaurant 2002 31.92 Food & Beverage, Bobby Goldwater
Houston’s Restaurant 2002 81.22 Food & Beverage, Bobby Goldwater
Hyatt Hotels 2002 29.70 Food & Beverage, Ollie Harper
Hyatt Hotels 2002 28.30 Food & Beverage, Bobby Goldwater
Luigino 2002 63.60 Food & Beverage, Bobby Goldwater
Marriott 2002 31.75 Food & Beverage, Bobby Goldwater
McCormick & Schmick 2002 50.29 Food & Beverage, Bobby Goldwater
Renaissance Mayflower 2002 129.44 Food & Beverage, Bobby Goldwater
Sheraton Hotels 2002 34.80 Food & Beverage, Scott Burrell
Ten Penh Restaurant 2002 40.48 Food & Beverage, Bobby Goldwater
B. Smith @ Union Station 2002 93.40 Food & Beverage, Bobby Goldwater
Capital City Brewing 2002 25.30 Food & Beverage, Bobby Goldwater
Chop House 2002 29.52 Food & Beverage, Bobby Goldwater
Daily’s 2002 31.17 Food & Beverage, Ollie Harper
DC Coast Restaurant 2002 293.47 No invoice, Bobby Goldwater
Georgia Brown 2002 58.33 Food & Beverage, Bobby Goldwater
Georgia Brown 2002 75.17 Food & Beverage, Bobby Goldwater
Hawk & Dove 2002 26.49 Food & Beverage, Bobby Goldwater
Total FY 2002   $1,985.26  
Pizza Italian 2003 99.00 Pizza, Ollie Harper
Marriott (Metro Center) 2003 68.15 No invoice or receipt, Ollie Harper
JW Marriott @Washington, DC 2003 63.00 No invoice or receipt, Ollie Harper
Applebees 2003 24.86 Ollie Harper
Applebees 2003 36.21 Ollie Harper
Denny’s 2003 9.70 Ollie Harper
Denny’s 2003 11.71 Ollie Harper
Outback 2003 24.00 Ollie Harper
Shoney’s 2003 24.88 Ollie Harper
T.G.I. Friday’s 2003 24.37 Ollie Harper
Safeway 2003 7.18 Breakfast for staff, Ollie Harper
SLS Executive Sedan Service 2003 755.00 Limousine Services, Ollie Harper
Total FY 2003   $1,148.06  
Total FY 00-03   $43,217.86  
Source: DCSEC disbursements, credit card statements for BB&T

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APPENDIX II

SEC Event Sponsored Activities: Fiscal Year 2001 through 2003

Event Amount Fiscal Year Description
The DC Office of Planning $200,000 2000 Anacostia waterfront revitalization program contribution
The Gazelle Group $2,500 2000 Sponsor of Black Coaches Association game between Georgia Tech an Virginia Tech in Blacksburg, VA.
United Negro College Fund $5,000 2000 Sponsor of Sportball event
Black Coaches Association $5,000 2000 Sponsor of Luncheon at annual convention
Amateur Athletic Union $10,000 2000 Sponsorship of Awards Luncheon in connection with 2006 AAU Junior Olympic Games
Children’s Charity Foundation $40,000 2002 Sponsor of BB&T Classic Basketball Game
American University $8,000 2002 Sponsor of soccer and volleyball tournament
U.S. Soccer Foundation $10,000 2002 Sponsor of a table for the Celebration of a Decade of U.S. soccer.
Chesapeake Region 2012 Coalition $25,000 2002 Part of a $100,000 commitment to the Olympic bid effort
United States Olympic Committee $10,000 2002 Pledge for event held at the Marriott Wardman Park Hotel.
Children's Charity Foundation $40,000 2003 Sponsor of BB&T Classic Basketball Game
TOTAL $355,500  
Source: DCSEC Disbursement Records

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APPENDIX III

Undocumented Charges to Corporate Credit Card Not Supported With an Invoice or Valid Receipt

FY 2001

Cardholder Vendor Fiscal Year 2001 Comments/ Purpose
Scott A. Burrell Delta Air 256.00 Round trip airfare from Washington Dulles to Orlando, FL for Kenneth Brown. No invoice
Robert D. Goldwater United Air 1,069.25 No invoice
Scott A. Burrell Agent Fee 20.00 Round trip airfare from Washington Dulles to Orlando, FL. No invoice
Robert D. Goldwater FEDEX 16.02 No invoice
Robert D. Goldwater FEDEX 15.50 No invoice
Robert D. Goldwater FEDEX 22.00 No invoice
Robert D. Goldwater Wyndham Checkers Hotel 22.76 No invoice, food & beverage.
Robert D. Goldwater IAAM 290.00 No invoice, membership dues.
Total FY 2001 $1,711.53

FY 2002

Cardholder Vendor Fiscal Year 2002 Comments/ Purpose
Robert D. Goldwater Delta Air 43.50 Airfare for Goldwater
Robert D. Goldwater Delta Air 93.00 Airfare for Goldwater
Robert D. Goldwater Delta Air 242.76 Round trip from Atlanta, GA to BWI for Goldwater.
Robert D. Goldwater United Air 1,563.00 Round trip airfare from Los Angeles to DC for Lawrence Wittenberg
Robert D. Goldwater Delta Air 205.50 Laguardia, NY to DC for Goldwater
Robert D. Goldwater United Air 1,213.00 One way fare from DC to Salt Lake City for Goldwater
Robert D. Goldwater US Airways 193.75 Airfare
Scott A. Burrell US Airways 6.99 No invoice
Robert D. Goldwater Georgia Browns 54.53 Food & beverage, no invoice.
Robert D. Goldwater AMTRAK 123.00 Rail fare, no invoice.
Robert D. Goldwater Hertz Rent A Car 236.96 Rental car, no invoice.
Robert D. Goldwater Hertz Rent A Car 303.60 Rental car, no invoice.
Robert D. Goldwater Hampton Inns @ GA 115.26 Lodge: room charge, no invoice or receipt.
Robert D. Goldwater Pollstar Promoters 150.00 Subscription, no invoice.
Robert D. Goldwater Sports Business 199.00 Subscription, no invoice.
Robert D. Goldwater Washington Business 87.77 Subscription, no invoice.
Robert D. Goldwater D/M RFK Stadium 332.50 No invoice
Robert D. Goldwater MCI Center 70.00 No invoice
Robert D. Goldwater MCI Center 280.00 No invoice
Robert D. Goldwater Flights of Fancy 141.63 Toys, no invoice.
Anthony Burnett Dereggi Com Peters 10.00 No invoice
Robert D. Goldwater National Association of Sport Comm. 700.00 No invoice
Robert D. Goldwater National Sports Marketing 500.00 No invoice
Robert D. Goldwater Safeway 123.46 No invoice
Robert D. Goldwater The Board of Trade 125.00 No invoice
Robert D. Goldwater UJA Fed of NY 300.00 No invoice
Scott A. Burrell Compaq Consumer 20.58 No invoice
Robert D. Goldwater GTE 25.28 No invoice
Robert D. Goldwater GTEAIR 8.98 No invoice
Robert D. Goldwater GTEAIR 31.45 No invoice
Robert D. Goldwater GTEAIR 40.43 No invoice
Total FY 2002   $7,540.93  

FY 2003, as of December 31, 2002

Cardholder Vendor Amount Comments/Purpose
Scott A. Burrell Ramada Limited at DC 91.52 No invoice or receipt
Scott A. Burrell JW Marriott 400.52 Unauthorized card user, room and telephone charge for Harris Lynton
Scott A. Burrell Howard Johnson 445.40 Hotel stay for an unauthorized individual, 9 days. Invoice missing.
Scott A. Burrell Howard Johnson 445.40 Hotel stay for an unauthorized individual, 9 days. Invoice missing.
Scott A. Burrell Howard Johnson 445.40 Hotel stay for any unauthorized individual, 9 days. Invoice missing.
Ollie Harper Marriott @ Crystal City 291.37 Room charge, no invoice or receipt
Total FY 2003 through December 2002 $2,119.61
Total 11,372.07
Source: DCSEC Credit Card Statements

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APPENDIX IV

Meeting of the Board of Directors
D.C. Sports & Entertainment Commission
RFK Stadium - Media Room
September 25, 2001

Board of Directors

John L. Richardson, Chair
Bill Lucy
Bill Hall
John Ross and Kimberly Ryan for District CFO Natwar Gandhi 
Neal Albert

Commission Staff

Bobby Goldwater, President and Executive Director
Tony Burnett, Director of Operations and Stadium Manager
Scott Burrell, Chief Financial Officer
Warren Graves, Director of Governmental Affairs 
Tiffany Simms, Executive Assistant

Minutes

The approval of the minutes from the July 26, 2001 meeting are subject to Bill Hall's review at a later time as well as the addition of Linda Greenan's insert.

Chairman's Comments

Mr. Richardson apologized for the rescheduling of the original board meeting date .but felt. it was necessary due to the tragic events of September 11, 2001. The agenda for that meeting will be addressed in another meeting planned for early October. He commented that be is in possession of the proxies of those not in attendance, as well as making note that the Board will enter into executive session to handle the issues relevant to the end of the fiscal year. Reference was made to the success of BikeDC, an event held on the RFK campus on September 23, 2001.

Response to September 11 Tragedies

Mr. Goldwater announced the loss of two D.C. United games as a result of the attacks on September 11s` along with the postponement of the Fright House Halloween event at the Armory. He added to that by commenting that in response to the attacks there will be a benefit soccer doubleheader on November 3rd to aid in raising money for charity. Furthermore, there are also plans to organize a benefit concert for October 21 at RFK Stadium to assist in the relief effort. He adds that the Commission is in a position to raise money and the spirits of Washingtonians. Hoop-It-Up was also cancelled but Mr. Goldwater assured everyone that the event would return next year, in addition, the Armory schedule has been adjusted.

Mr. Goldwater indicated that security would do a better job of checking bags, limiting parking under the Stadium, and possibly using search dogs for the benefit events. The Fright House will be postponed until next year due to the September 11th tragedies because there was no proper way to promote the event for this year. The Commission will attempt to rent out the sets to recoup some of its investment.

Financial Update

Mr. Burrell commented that the new accounting system went live on September 1st, and when fully operational will track costs much better. He also noted that reports would be generated beginning in October or November.

John Richardson posed the question of when would the first report be dispersed. Mr. Burrell indicated those reports for the current year would be available by the end of the new accounting system and commends Jim McPartlin of DCSEC and Scott Burrell on the progress of the new system.

Mr. Richardson asked if there had been an expenditure of more than $50,000 since the last meeting. Mr. Burrell responded by saying there. had been no such expense outside of what has been previously approved by the Board in earlier meetings.

Outside General Counsel

Mr. Richardson introduced the issue of retaining outside counsel by commenting that although Mr. Burrell has assisted in various legal matters, there needs to be a better system when confronted with major issues. He added by saying there had been a search for a law firm that was willing to provide free or discounted time and services and the only firm willing to provide that was Covington & Burling. Mr. Richardson proposed that the Commission. enter into an agreement with the firm.

Neal Albert asked if the fee schedule was still being arranged, Mr. Richardson answered that the major issues would be full charge, but other routine services would, be discounted.

Mr. Ross stated that he is supportive of the retention of Covington & Burling as. the Commission's legal representation but is concerned with whether the Commission bas followed the procurement guidelines. Mr.. Hall voiced his feelings that an RFP should be drafted. Mr. Richardson responded- that as long as the Board approved the motion then it was appropriate. Bill Lucy inquired if we [the Commission] could market one proposal to others, Mr. Richardson answered by saying that he anticipated little or no interest from other firms. Mr. Ross stated that he was concerned that the Commission would be leaving themselves open down the road by not doing an RFP. Mr. Richardson later stated that an RFP would be prepared for counsel retention.

Meeting adjourned to Executive Session

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AGENCY COMMENTS

On September 11, 2003, the Office of the District of Columbia Auditor submitted this report in draft for review and comment to the D.C. Sports and Entertainment Commission’s Board of Directors (DCSEC), Executive Director, and the District of Columbia’s Chief Financial Officer (CFO).

An exit conference was held on September 25, 2003, with the Interim Chairman of DCSEC’s Board of Directors, the Executive Director, and the Chief Financial Officer. On October 3, 2003, the Auditor held another conference with DCSEC’s Executive Director and CFO to further discuss several matters including the submission of additional documentation not available during the fieldwork phase of the audit. Written comments to the draft report were initially received on October 3, 2003. As a result of DCSEC’s submission of additional information, the draft report was revised where appropriate and reissued on October 10, 2003. Comments were received from DCSEC on October 14, 2003 and October 16, 2003. The District’s CFO also submitted comments to the draft report on October 15, 2003. All comments are appended in their entirety to this final report.

DC SPORTS & ENTERTAINMENT COMMISS1ON
2400 EAST CAPITOL STREET, SE • WASHINGTON, DC 20003
TEL: (202) 547-9077 • FAX: (202) 547-7460 • WWW.DCSEC.COM

October 3, 2003

Ms. Deborah K. Nichols 
District of Columbia Auditor 
717 14th Street, NW 
Suite 900
Washington, D.C. 20005

Dear Ms. Nichols:

he attached has been prepared for your review by the Commission's Office of the CFO and is submitted in reply to your draft report of September 11, 2003: "District of Columbia Sports and Entertainment Commission's Contracting, Procurement and Spending Practices Characterized by Mismanagement, Noncompliance and Inadequate Controls."

We look forward to scheduling a meeting at your earliest convenience to go over the discussion document, any material that was provided to your staff earlier this week and the draft of the Commission's responses to the draft report's recommendations.

Sincerely,

John J. Mahoney
Interim Chairman

cc: B. Goldwater 
S. Burrell

DC Auditor's Draft Report
Sports Entertainment Commission. Contracting and Procurement & Spending Practices

Recommendation Area/Function Commission Response
DRAFT
Full Recommendation
1. Council approval for contracts over $1 million

 

Contracting - limits and oversight DCSEC will follow Council law. Implementation Committee will put procedures in place. See accompanying letter. The DCSEC Board of Directors and management comply with District laws requiring the submission of Sports and Entertainment Commission contracts in excess of $1,000,000 to the Council of the District of Columbia for review and approval.
2. DCSEC CFO, Counsel and contracting officer should not be same person General - Staff expertise Personnel Committee will make recommendations to the Board. With regard to the employee serving in the capacity of chief financial officer, in-house legal counsel, and contracting officer, the Board of Directors should immediately ensure that these three functions are not administered under any circumstances by the same employee. The Board of Directors, through its Personnel Committee, should use a competitive recruitment and selection process to identify qualified, competent candidates who possess an adequate mix of governmental and private sector expertise appropriate to the requirements of DCSEC's legal, financial, and procurement operations.
3. Revise procurement regulations Procurement - rules and regulations Contracts & Procurement Committee will work from current By-Laws to refine regulations and develop a policy document to bring  into conformance with standard contracting and procurement procedures. DCSEC's Board of Directors, though the Contracting and Procurement Committee, revise current procurement regulations to address deficiencies related to small purchases, competitive bidding, and sole source procurements, including specific provisions to govern contracts for consulting and expert services and the use of retainer agreements and retainer fees.
4. Hold executive director accountable for development of procurement guidelines Procurement - rules and regulations and executive director accountability Contracts & Procurement Committee will develop rules and regulations to ensure fair and competitive procurement practices as they relate to small purchases. DCSEC's Board of Directors, through the Contracting and Procurement Committee, hold the executive director accountable for the development of more comprehensive procurement procedures governing small purchases, including implementing a requirement for a minimum of three quotes for all small purchases above a specific dollar threshold to ensure fair and competitive procurement practices.
5. Board identify procurement documentation Procurement - rules and regulations Contracts & Procurement Committee will draft procurement policies and procedures ensuring adequate Board oversight and documentation. DCSEC's Board of Directors, through the Committee on Contracting and Procurement, identify specific requirements for and documentation to be maintained by management in the solicitation and evaluation of proposals submitted through the competitive bidding process.
6. Board oversight of procurement and contracting Procurement - board oversight Contracts & Procurement Committee will develop and implement procedures for enforcing current requirement ensuring Board approval. DCSEC's Board of Directors must exercise more extensive and effective oversight of DCSEC's procurement and contracting activities; establish policies and procedures that ensure the Board's scrutiny and approval of contracts exceeding $50,000 before management awards such contracts; and require management's strict adherence to requirements under DCSEC's procurement regulations with regard to the award of sole source contracts.
7. Terminate non-competitive contracts with law firms Contracting- lawyers It is DCSEC's belief that the private law firm was selected in a competitive process. See accompanying letter. DCSEC management immediate terminate all agreements with private law firms in that these agreements were based on a noncompetitive procurement process that lacked integrity and created the appearance of preferential treatment. 
8. Board and executive director determine best mechanism for legal assistance Contracting - lawyers Will study and meet with Corporation Counsel.  DCSEC's Board of Directors and executive director conduct a study to determine whether it is cost effective to employ an optimally sized full-time legal staff, use the legal resource of other District agencies such as the Office of Corporation Counsel on a short-term or temporary basis, contract out only specified types of legal work, or contract out all legal work to a private law firm based upon the use of a competitive procurement process. In the meantime, when DCSEC lacks the requisite legal resources of expertise in-house, it should seek to utilize the legal expertise of the District's Office of the Corporation Counsel, under a cost reimbursement arrangement, on a temporary or short-term basis before it procures outside legal counsel.
9. DCSEC must use competitive procurement Contracting - lawyers and rules and regulations Same as #7. In procuring legal services, DCSEC must use a competitive procurement process that is fair, open, and well-documented. Further, the competitive process used must ensure that quality legal services are obtained at a reasonable price.
10. Board create guidelines for contracting with outside counsel Contracting - lawyers and rules and regulations Will incorporate into procurement policies and regulations ensuring adequate Board oversight.  DCSEC's Board of Directors and executive director prepare written guidelines, approved by a majority of the Board of Directors, which set forth: (a) the criteria for deciding whether to seek outside legal counsel; and (b) criteria and procedures regarding the type of legal work to be obtained from outside legal counsel, the specific agency official authorized to request legal services from a legal services contractor, cost control measures, and monitoring the quality of services rendered.
11. Executive director better manage travel Spending - travel Will be consistent with Board policy governing entertainment and hospitality expenses. See #12. DCSEC's executive director exercise effective management control over the authorization of travel at DCSEC's expense to ensure that it is necessary, economically priced, fully documented, and directly related to DCSEC's core mission. 
12. Board establish policy for entertainment and hospitality expenditures Spending - rules and regulations Implementation Committee will develop a policy ensuring adequate Board oversight.  DCSEC's Board of Directors establish a policy regarding the expenditure of DCSEC funds by the executive director and any other DCSEC employee for entertainment and hospitality expenses. The policy should, at a minimum, include a requirement for a written justification to be submitted to and approved by a majority of the Board of Directors prior to the obligation of DCSEC funds to pay the expense. The failure to comply with this policy and procedure should result in the accountable employee being held personally liable for reimbursing the expenditure to DCSEC.
13. Board and executive director temporarily stop sponsoring and contributing to events. Board establish policy for this type of spending.  Spending - reductions and rules and regulations Implementation Committee will establish a policy to govern. Sponsorship contributions will be discontinued until a policy is in place. Prior to the establishment of such policy, the Executive Director will not authorize sponsorship contributions without Board approval.  DCSEC's Board of Directors and executive director should discontinue the practice of sponsoring events and making contributions for various projects until the organization's financial position improves. Further, the Board of Directors should consider establishing a policy and procedures which govern the use of DCSEC funds to make contributions to or sponsor events presented by other organizations, when such activities fall outside of DCSEC's grant award process.
14. Executive director and armory manager reimburse DCSEC for personal expenses Spending - repayment DCSEC believes repayment has been made. See accompanying letter.  DCSEC's executive director and armory manager immediately reimburse DCSEC for personal expenditures charged to the corporate credit card totaling $2,308.35. If these reimbursements are not made within 15 days of the date of this final report, the amounts should be deducted from each manager's salary payments until fully repaid.
15. Executive Director cancel all corporate credit cards Spending - reductions Use of corporate credit cards will be suspended until implementation of same rules promulgated by the District executive. DCSEC's executive director immediately cancel all corporate credit cards issued in DCSEC's name, or the names of its employees if DCSEC is ultimately responsible for paying the bills, and provide the Auditor with evidence of the cancellation within 15 days of the date of this report.
16. Managers reimburse DCSEC for undocumented expenses Spending - repayment If an expenditure is not acceptably documented or is determined to be inappropriate, repayment will be required. Each manager responsible for expenditures that are not supported by adequate or any documentation must repay these expenditures to DCSEC within 60 days of the date of this report, unless adequate original supporting documentation can be provided. If these officials fail to provide adequate original documentation to support each expenditure and fail or refuse to repay these charges to DCSEC, the Auditor will refer this matter to appropriate law enforcement authority for further investigation and the Office of Corporation Counsel to initiate the appropriate civil action to recover these funds. At a minimum, the Executive Director must substantiate or repay $13,793; the Armory Manager must substantiate or repay $5,672.75, and the Chief Financial Officer must substantiate or repay $1,593.29
17. Board create policy governing corporate credit cards Spending - rules and regulations Same as #15 DCSEC's Board of Directors establish a specific policy and process regarding the criteria that must be used to determine the necessity for corporate credit cards to be issued in DCSEC's name, in addition to the criteria that will be used to determine which DCSEC employees will be assigned credit cards; expenditure limits for each card; the types of purchases that cards may be used to make; regular specific reports that must be filed with the Board concerning expenditures made with all credit cards issued to DCSEC employees including the executive director; a requirement that the executive director develop complete policies and procedures regarding credit card usage that must be adhered by DCSEC employees under his management control; and specific accountability measures that will be applied by the Board for any failure of the executive director to the executive director to comply with the Board's policy and procedures.
18. Mayor reimburse DCSEC for airfare Spending - repayment   The Mayor reimburse DCSEC $2,315 for the purchase of first class air fare for his spouse and first class airfare for himself.
19. Unnamed official reimburse DCSEC for campaign contribution Spending - repayment If this expenditure is determined to be inappropriate, repayment will be required. The DCSEC official who authorized the disbursement of $1,116 to the campaign to Re-elect Bill Campbell reimburse DCSEC for this improper expenditure of public funds.
20. Executive director and armory manager reimburse personal expenses Spending - repayment Same as #14 The Executive Director and Armory Manager repay DCSEC $2,308.35 for personal expenses charged to their DCSEC credit cards.
21. Change management team General - Staff expertise Referred to Personnel Committee In light of financial and procurement irregularities, questionable spending, deplorable financial condition of DCSEC, and poor management performance rendered to DCSEC by the current executive director, DCSEC's operations would substantially benefit from a new management team.

Note: Implementation of the Auditor's recommendations, where indicated, will be accomplished no later than December 31, 2003, in order to provide an opportunity for a new chairman to participate in the discussion and development of such policies.

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Sports and Entertainment Commission Achievements

In 1999, to permit us to retain the business we had and compete effectively for new business so that we could achieve our legislative goals, we adopted a strategy to use our accumulated retained earnings to improve our physical assets and upgrade the quality of our staff.

We recruited and hired highly qualified professionals with experience and expertise in the industry.

We improved the training, management and development of our existing staff.

We developed and implemented new management, financial and data transmission systems.

We upgraded all our physical assets (new paint, new signage, thorough cleaning, new scoreboards and videoboard, new sound system, new parking systems, new ticketing facilities, repaired parking lots) and improved our staff to assure a better fan experience and impress potential patrons and event partners.

We played a very prominent role in the leadership of the Washington bid for the 2012 Summer Olympics. We made the "final four" cities but were eliminated by one out of twenty votes cast for the final contenders. The USOC repeatedly noted that the capabilities of the Commission and the condition of its assets enhanced the Washington bid by establishing its credibility.

We continue to have a leadership role in the effort to bring Major League Baseball back to the District and the Washington market, which we believe has made the city the leading contender if Major League Baseball decides to relocate the Montreal Expos. Baseball representatives and others have repeatedly noted the professionalism of the Commission and improved condition of its assets as demonstrating the credibility necessary to be successful with MLB.

In 1999, Major League Soccer was so dissatisfied with the Commission and its assets that it had decided that D.C. United would leave Washington. Based on our changed strategy, new policies and new people, United decided to stay at RFK and we are currently exploring together the concept of building a new soccer stadium in Washington. Kevin Payne, the managing director of United's parent company, AEG, testified to this effect at a City Council hearing earlier this year.

In 1999, the WUSA, the new women's professional soccer league, was not inclined to plan to play its games in Washington. Because of the performance of the Commission, the Washington Freedom came to the city and RFK, has led its league in attendance twice in three years, won the 2003 WUSA championship and looks forward to remaining at RFK.

In 2001, the Commission attracted to RFK every touring concert act that played a stadium in our region. Tour promoters assure us that that achievement was due to the new strategy the Commission adopted and the newly enhanced professionalism of the Commission's staff. Among the acts that came to RFK were *NSYNC, Dave Matthews Band and the WHFStival.

The Commission has expanded its community outreach program and been able to support more and more District-based youth sports and entertainment programs and activities.

The Commission was a charter member of the Anacostia Waterfront Initiative and one of its first funding members. The Commission continues to have an active role in this program as well as other city-wide projects.

The Commission has led the effort to restore professional boxing to Washington.

Because of the improvements made at RFK, Washington has enhanced its stature as an internationally recognized soccer venue. Just this year alone, the Commission attracted to RFK the prestigious Barcelona-AC Milan match which drew over 45,000 fans in July and three doubleheader dates of the 2003 FIFA Women's World Cup including the USA national team's opening game in September.

The Commission has established a regular pattern of meeting with its neighbors to discuss upcoming events and other matters of mutual interest.

The Cadillac Grand Prix was, by most measures, a very successful sports and entertainment event. It generated approximately $12 million in direct spending in the District at a time when the City was suffering significantly. It provided a prominent positive spike in hotel and restaurant patronage and attracted some 70,000 fans over the three-day event. Metro ridership increase significantly. The Commission earned $450,000 in net revenue. The national and international television exposure over a summer weekend was extraordinary and distinguished Washington, the City, as an important site for important international events. While there were significant disappointments associated with the event, most notably the failure of the promoter to satisfy its contractual obligations with respect to noise control, the event demonstrated that the City and the Commission are fully capable of hosting major world-class events.

The Commission has established a close working relationship with the D.C. Public Schools and has been able to help the school system in many significant ways. The Commission has been the presenting sponsor of the annual City Title high school basketball games featuring the boys and girls champions of the D.C. Inter-Scholastic Athletic Association and the Washington Catholic Athletic Conference. The Commission has also made the Armory available, on a cost-free basis, for D.C. public school track meets. The Commission has also sponsored high school and youth soccer tournaments on RFK's auxiliary soccer fields.

The Commission has devoted a significant amount of time and attention promoting the Armory as a premier venue for sports and entertainment activities.

The Commission played an important role in securing the return to Washington of Sesame Street Live, the national touring children's show, and other family events.

The Commission produced The Fright House at the Armory, which was viewed as a very successful production, unfortunately offered at a very bad time - in the middle of the area-wide assault by the "Beltway Snipers." The originally planned debut for The Fright House in 2001 was postponed due to the tragic events of September 11.

Following the tragic events of September 11, the annual biking marathon, Bike DC, could not be conducted as originally planned. The Commission stepped in and played a prominent role in reestablishing that important event.

At or about the same time, the Commission was responsible for conceiving and being a partner in presenting the United We Stand benefit concert at RFK, which brought together many world-class performers, produced substantial sums of money for the relief organizations of the September 11 tragedy, and helped demonstrate to the world that the City was safe, secure and open for business.

The Commission has played a prominent leadership role in a new and different venture: to identify underutilized properties owned or available to the City which can be improved and made more useful with some financial assistance. The first project involves developing a plan for the establishment of a significant number of new recreational and athletic facilities at Kenilworth Park. This major initiative, created with the cooperation of the D.C. Department of Parks and Recreation and with the active assistance of the Mayor, Councilmember Kevin Chavous, the National Park Service and the local community, entails the construction of a new multi-million dollar facility to benefit soccer, baseball, softball and other recreational interests in the neighborhood and around the entire City.

The Commission has continued and enhanced the flea market and farmers' markets regularly held on the RFK campus.

The Commission has been able to provide more and better services for Feld Entertainment's Ringling Bros. and Barnum & Bailey Circus.

The Commission has improved markedly the food and beverage and parking experiences at its facilities by establishing higher standards of quality and service and insisting that these standards be satisfied for every event.

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DC Sports & Entertainment Commission
2400 East Capitol Street, SE
Washington, DC 20003
Tel: (202) 547-9077, FAX: (202) 547-7460
WWW.DCSEC.COM

October 14, 2003

Ms. Deborah K. Nichols
District of Columbia Auditor
717 14th Street, NW
Suite 900
Washington, D.C. 20005

Dear Ms. Nichols: 

The attached has been prepared and is submitted in reply to your draft report of September 11, 2003: "District of Columbia Sports and Entertainment Commission's Contracting, Procurement, and Spending Practices Characterized by Mismanagement, Noncompliance and Inadequate Control."

As Interim Chairman of the Board, I submit the following as additional comments applying more generally to both the audit report noted above and the earlier audit report: "District of Columbia Sports and Entertainment Commission's Executive Leadership Failed to Implement an Effective Governance Structure to Ensure Sound Financial Management Decisions, Mangement Accountability and Compliance with Applicable Laws and Regulations." Although my service as Interim Chairman followed the period covered in the audit report, I did serve as a member of the Board during a portion of that period. Accordingly, I believe my comments warrant your consideration. I also believe they may be useful to the Mayor and the DC Council, as they evaluate the current position of the Commission and develop policies to sustain it as an important component of the District's economic development efforts. Also, in order to obtain full and accurate information regarding the period prior to my joining the Board, a copy of the draft reports was shared with former Chairman John L. Richardson, who has also submitted comments that are attached for your consideration. 

It is apparent from the draft reports that the management of the Commission, at least in certain instances, did not strictly observe all applicable contracting and procurement rules and regulations. Some of those instances were oversight; most involved efforts to expedite event-related matters of some urgency in a sports and entertainment marketplace not characterized by the same formality of government administrative procedure. In no instance was there an effort to circumvent applicable contracting and procurement rules as a means of directing Commission business to a particular contractor or vendor. As the attached shows, the audit findings and recommendations have been duly noted, and management procedures that relate to the documentation of contract and procurement actions have been, or are being, appropriately adjusted where necessary. 

The following comments are submitted to offer a more substantive appraisal of the Commission's operations than that provided in the audit reports.

The audit reports portray the decline in the Commission's investment balances as the result of "excessive spending" which, in turn, is attributed to a "failure of governance." It does this without considering at all the condition of the Commission's facilities in 2000 and the revenue constraints that have applied since the departure of the Redskins from RFK Stadium in 1997. The interpretation of events, then, is so simplistically drawn as to suggest no intent whatsoever to address the actual causes of the investment balance decline. Instead, the audit reports take the fact of the decline, justified or not, as a prima facie case for a "failure of governance."

I would submit that the Commission's investment balances declined not because its Board functioned as a whole without certain standing committees until 2002; not because a strategic plan document was not published (the goals of the Commission were clearly spelled out in the Executive Director's employment contract and have been articulated publicly on any number of occasions); not because there was no personnel manual (the Commission observed DC government personnel regulations); not because "a focus on baseball and the Olympics epitomized the failure of Board and management leadership" (both were mandates of the Williams' administration, not Commission obsessions); not because the Chairperson "operated autonomously" in hiring the Executive Director (a search committee of five Board members made the selection); and not because the management's record keeping procedures could be improved.

The point is simply this. Investment balances declined because the Commission could not generate sufficient revenues from available market opportunities to finance its current operations, necessary capital expenditures and its marketing and development responsibilities. To simply ascribe that decline to "deficit spending" is to stunningly miss the point. The lion's share of the reduction in investment balances (some $11 million) was the result of capital expenditures for RFK Stadium and the Armory to (1) retain men's professional soccer in the District; (2) introduce women's professional soccer and attract other sports and entertainment events to the District; (3) support the city's bid for Major League Baseball and the 2012 Olympics; and (4) execute Commission event initiatives. The cash balances built up over the Redskins' years provided the only practical source of funding for that investment spending - without which RFK would have ceased to function as a viable venue for sports and entertainment in the District.

It would have been helpful in evaluating the operations of the Commission if the audit had made an effort to better understand and address the competitive economics of the sports and entertainment marketplace. The audit might then have discovered that the well regarded Maryland Stadium Authority, which operates big-ticket, high-attendance stadiums for both Major League Baseball (Orioles) and the National Football League (Ravens) reported an FY2002 operating loss of $7.1 million. In Maryland, that loss is apparently not regarded as egregious deficit spending, but rather as an acceptable subsidy cost for capturing the economic benefits of big league sports recreational spending in Baltimore.

What all the above suggests is that an audit report of broader perspective and more balanced judgment would have arrived at what is the crucial question - ie, given the facilities it operates and maintains in competition with more contemporary venues in the greater Washington market, and given the limitations of its current and predictable revenue streams, does it make sense to regard the Commission as a self-funding entity?

Clearly, the present financial position of the Commission raises important policy issues. They transcend simplistic charges of so-called deficit spending and a failure to seek supplemental Congressional appropriations. Maintaining a competitive sports and entertainment promotion capability in the District will require an evenhanded, informed consideration of marketplace realities, the Commission's future structure and the city's economic development objectives.

I regret that the draft audit report offers little help to the District's policy makers in those considerations.

Sincerely,
John J. Mahoney
Interim Chairman
D.C. Sports and Entertainment Commission

cc: Board of Directors 
Robert D. Goldwater

Attachments

Recommendation Area/Function Commission Response
DRAFT
Full Recommendation
1. Council approval for contracts over $1 million Contracting - limits and oversight DCSEC will follow Council law. Implementation Committee will put procedures in place. See accompanying letter. The DCSEC Board of Directors and management comply with District laws requiring the submission of Sports and Entertainment Commission contracts in excess of $1,000,000 to the Council of the District of Columbia for review and approval.
2. DCSEC CFO, Counsel and contracting officer should not be same person General - Staff expertise Personnel Committee will make recommendations to the Board. With regard to the employee serving in the capacity of chief financial officer, in-house legal counsel, and contracting officer, the Board of Directors should immediately ensure that these three functions are not administered under any circumstances by the same employee. The Board of Directors, through its Personnel Committee, should use a competitive recruitment and selection process to identify qualified, competent candidates who possess an adequate mix of governmental and private sector expertise appropriate to the requirements of DCSEC's legal, financial, and procurement operations.
3. Revise procurement regulations Procurement - rules and regulations Contracts & Procurement Committee will work from current By-Laws to refine regulations and develop a policy document to bring  into conformance with standard contracting and procurement procedures. DCSEC's Board of Directors, though the Contracting and Procurement Committee, revise current procurement regulations to address deficiencies related to small purchases, competitive bidding, and sole source procurements, including specific provisions to govern contracts for consulting and expert services and the use of retainer agreements and retainer fees.
4. Hold executive director accountable for development of procurement guidelines Procurement - rules and regulations and executive director accountability Contracts & Procurement Committee will develop rules and regulations to ensure fair and competitive procurement practices as they relate to small purchases. DCSEC's Board of Directors, through the Contracting and Procurement Committee, hold the executive director accountable for the development of more comprehensive procurement procedures governing small purchases, including implementing a requirement for a minimum of three quotes for all small purchases above a specific dollar threshold to ensure fair and competitive procurement practices.
5. Board identify procurement documentation Procurement - rules and regulations Contracts & Procurement Committee will draft procurement policies and procedures ensuring adequate Board oversight and documentation. DCSEC's Board of Directors, through the Committee on Contracting and Procurement, identify specific requirements for and documentation to be maintained by management in the solicitation and evaluation of proposals submitted through the competitive bidding process.
6. Board oversight of procurement and contracting Procurement - board oversight Contracts & Procurement Committee will develop and implement procedures for enforcing current requirement ensuring Board approval. DCSEC's Board of Directors must exercise more extensive and effective oversight of DCSEC's procurement and contracting activities; establish policies and procedures that ensure the Board's scrutiny and approval of contracts exceeding $50,000 before management awards such contracts; and require management's strict adherence to requirements under DCSEC's procurement regulations with regard to the award of sole source contracts.
7. Terminate non-competitive contracts with law firms Contracting- lawyers It is DCSEC's belief that the private law firm was selected in a competitive process. See accompanying letter. DCSEC management immediate terminate all agreements with private law firms in that these agreements were based on a noncompetitive procurement process that lacked integrity and created the appearance of preferential treatment. 
8. Board and executive director determine best mechanism for legal assistance Contracting - lawyers Will study and meet with Corporation Counsel.  DCSEC's Board of Directors and executive director conduct a study to determine whether it is cost effective to employ an optimally sized full-time legal staff, use the legal resource of other District agencies such as the Office of Corporation Counsel on a short-term or temporary basis, contract out only specified types of legal work, or contract out all legal work to a private law firm based upon the use of a competitive procurement process. In the meantime, when DCSEC lacks the requisite legal resources of expertise in-house, it should seek to utilize the legal expertise of the District's Office of the Corporation Counsel, under a cost reimbursement arrangement, on a temporary or short-term basis before it procures outside legal counsel.
9. DCSEC must use competitive procurement Contracting - lawyers and rules and regulations Same as #7. In procuring legal services, DCSEC must use a competitive procurement process that is fair, open, and well-documented. Further, the competitive process used must ensure that quality legal services are obtained at a reasonable price.
10. Board create guidelines for contracting with outside counsel Contracting - lawyers and rules and regulations Will incorporate into procurement policies and regulations ensuring adequate Board oversight.  DCSEC's Board of Directors and executive director prepare written guidelines, approved by a majority of the Board of Directors, which set forth: (a) the criteria for deciding whether to seek outside legal counsel; and (b) criteria and procedures regarding the type of legal work to be obtained from outside legal counsel, the specific agency official authorized to request legal services from a legal services contractor, cost control measures, and monitoring the quality of services rendered.
11. Executive director better manage travel Spending - travel Will be consistent with Board policy governing entertainment and hospitality expenses. See #12. DCSEC's executive director exercise effective management control over the authorization of travel at DCSEC's expense to ensure that it is necessary, economically priced, fully documented, and directly related to DCSEC's core mission. 
12. Board establish policy for entertainment and hospitality expenditures Spending - rules and regulations Implementation Committee will develop a policy ensuring adequate Board oversight.  DCSEC's Board of Directors establish a policy regarding the expenditure of DCSEC funds by the executive director and any other DCSEC employee for entertainment and hospitality expenses. The policy should, at a minimum, include a requirement for a written justification to be submitted to and approved by a majority of the Board of Directors prior to the obligation of DCSEC funds to pay the expense. The failure to comply with this policy and procedure should result in the accountable employee being held personally liable for reimbursing the expenditure to DCSEC.
13. Board and executive director temporarily stop sponsoring and contributing to events. Board establish policy for this type of spending.  Spending - reductions and rules and regulations Implementation Committee will establish a policy to govern. Sponsorship contributions will be discontinued until a policy is in place. Prior to the establishment of such policy, the Executive Director will not authorize sponsorship contributions without Board approval.  DCSEC's Board of Directors and executive director should discontinue the practice of sponsoring events and making contributions for various projects until the organization's financial position improves. Further, the Board of Directors should consider establishing a policy and procedures which govern the use of DCSEC funds to make contributions to or sponsor events presented by other organizations, when such activities fall outside of DCSEC's grant award process.
14. Executive director and armory manager reimburse DCSEC for personal expenses Spending - repayment DCSEC believes repayment has been made. See accompanying letter.  DCSEC's executive director and armory manager immediately reimburse DCSEC for personal expenditures charged to the corporate credit card totaling $2,308.35. If these reimbursements are not made within 15 days of the date of this final report, the amounts should be deducted from each manager's salary payments until fully repaid.
15. Executive Director cancel all corporate credit cards Spending - reductions Use of corporate credit cards will be suspended until implementation of same rules promulgated by the District executive. DCSEC's executive director immediately cancel all corporate credit cards issued in DCSEC's name, or the names of its employees if DCSEC is ultimately responsible for paying the bills, and provide the Auditor with evidence of the cancellation within 15 days of the date of this report.
16. Managers reimburse DCSEC for undocumented expenses Spending - repayment If an expenditure is not acceptably documented or is determined to be inappropriate, repayment will be required. Each manager responsible for expenditures that are not supported by adequate or any documentation must repay these expenditures to DCSEC within 60 days of the date of this report, unless adequate original supporting documentation can be provided. If these officials fail to provide adequate original documentation to support each expenditure and fail or refuse to repay these charges to DCSEC, the Auditor will refer this matter to appropriate law enforcement authority for further investigation and the Office of Corporation Counsel to initiate the appropriate civil action to recover these funds. At a minimum, the Executive Director must substantiate or repay $8,938.89; the Armory Manager must substantiate or repay $291.37, and the Chief Financial Officer must substantiate or repay $2,141.81
17. Board create policy governing corporate credit cards Spending - rules and regulations Same as #15 DCSEC's Board of Directors establish a specific policy and process regarding the criteria that must be used to determine the necessity for corporate credit cards to be issued in DCSEC's name, in addition to the criteria that will be used to determine which DCSEC employees will be assigned credit cards; expenditure limits for each card; the types of purchases that cards may be used to make; regular specific reports that must be filed with the Board concerning expenditures made with all credit cards issued to DCSEC employees including the executive director; a requirement that the executive director develop complete policies and procedures regarding credit card usage that must be adhered by DCSEC employees under his management control; and specific accountability measures that will be applied by the Board for any failure of the executive director to the executive director to comply with the Board's policy and procedures.
18. Unnamed official reimburse DCSEC for airfare Spending - repayment The Board will review. The DCSEC official who authorized the disbursement of $2,315 for the purchase of first class air fare for the Mayor and his spouse must reimburse DCSEC for this improper expenditure of public funds.
19. Unnamed official reimburse DCSEC for campaign contribution Spending - repayment If this expenditure is determined to be inappropriate, repayment will be required. The DCSEC official who authorized the disbursement of $1,116 to the campaign to Re-elect Bill Campbell reimburse DCSEC for this improper expenditure of public funds.
20. Change management team General - Staff expertise Referred to Personnel Committee In light of financial and procurement irregularities, questionable spending, deplorable financial condition of DCSEC, and poor management performance rendered to DCSEC by the current executive director, DCSEC's operations would substantially benefit from a new management team.

Note: Implementation of the Auditor's recommendations, where indicated, will be accomplished no later than December 31, 2003, in order to provide an opportunity for a new chairman to participate in the discussion and development of such policies.

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
OFFICE OF THE CHIEF FINANCIAL OFFICER
1350 Pennsylvania Avenue, NW • Suite 209 • Washington, DC 20004 • (202) 727-2476
www.dccfo.com

Natwar M. Gandhi 
Chief Financial Officer

October 14, 2003

Deborah K. Nichols
District of Columbia Auditor
Office of the District of Columbia Auditor 
717 14th Street, NW, Suite 900 
Washington, DC 20005

Dear Ms. Nichols:

Thank you for the opportunity to comment on the draft report entitled, "District of Columbia Sports and Entertainment Commission's Contracting, Procurement, and Spending Practices Characterized by Mismanagement, Noncompliance, and Inadequate Internal Controls." We have no comments on this draft report.

If you have any questions please do not hesitate to contact Ben Lorigo at 442-6433.

Sincerely,
Natwar M. Gandhi 
Chief Financial Officer

cc: John Ross, Chief of Operations, ORA 
Ben Lorigo, Executive Director, OIO

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1. The rules adopted by DCSEC do not apply to the booking and scheduling of events at Commission facilities (see Title 19 DCMR, Chapter 28, section 2800.4).

2. Title 19 DCMR section 2706.4

3. See Office of the Chief Financial Officer, Office of Integrity and Oversight. Final Report on Review of Contracting Practices of the D.C. Sports and Entertainment Commission for FY 01 and First Quarter of FY 02. July 2002. Pg. 4

4. The sole source contract awarded to Contemporary Services Corporation did not violate DCSEC procurement regulations. 

5. DCSEC officials assert that the Daktronics contract was awarded competitively pursuant to an RFP process and that they received bids from more than one firm. However, DCSEC was unable to produce any supporting documentation either in the form of responses from other firms, or its internal scoring sheets for the Auditors review to support this assertion.

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