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WCCA'S INTERNAL CONTROLS OVER CREDIT CARD USAGE. MEMBERSHIP DUES. AND TRAVEL ARE DEFICIENT WCCA Officials Made Undocumented and Personal Charges to WCCA's Corporate American Express Card The Auditor found that certain WCCA officials failed to comply with policies and procedures requiring adequate documentation to support business related expenses charged to its corporate American Express account. Additionally, the Auditor found that the corporate American Express card was used for personal expenditures. The WCCA's "Travel Policies and Procedures Manual," Section 11.0 entitled, "Credit Cards," states in relevant part the following:
Of the $43,977.64 in charges to the WCCA's corporate American Express credit card and corresponding payments made during fiscal years 1995 and 1996, approximately $14,599.39, or 33%, of these charges were for food and beverages at local restaurants and hotels. Expenditures totaling $1,135 were for payments to florists for flowers and to department stores for gifts. In reviewing the expenditures for food, beverages, gifts and flowers, the Auditor could not find documentation showing a relationship between the expenditures and the expressed authorized usage of the credit card for promotional, marketing and business development of the WCCA. In the absence of documentation, the Auditor could not determine that the expenditures were either justified or had a discernible essential relationship to the WCCA's mission. Chairman's Use of Corporate Credit Card for Personal Expenditures During the Auditor's review of charges made to the American Express Corporate account for fiscal year 1997, the Auditor found that the WCCA Chairperson of the Board of Directors used the WCCA corporate American Express credit card to charge personal items totaling $2,247.14 in violation of Section 11.1 of WCCA's Travel Policies and Procedures Manual. The WCCA Board Chairperson forwarded a personal check for the $2,247.14 to American Express to cover these personal items. Undocumented Use of WCCA's Corporate American Express Credit Card American Express bills were submitted to the WCCA's accounting department by the general manager for payment. The accounting staff processed the payments without obtaining from the general manager and other users of the card, completed local and out-of-town travel vouchers, supporting charge slips, and narratives explaining the purpose of each expenditure as it related to the official business and mission of the WCCA as required in its Travel Policies and Procedures Manual. The Auditor found $54,783.77 in undocumented expenditures that were incurred by WCCA's general manager and other users of the card during fiscal years 1995, 1996 and 1997 through April 30. The undocumented and unallowable expenditures included lodging, travel, food, beverages, flowers, gifts, office products and supplies, fees and other expenditures. These expenditures are summarized below in Table IX. TABLE IX
Source: WCCA (The amounts shown in parenthesis indicates payments made to American Express by WCCA by WCCA for purchases for as personal.) As reflected in Table IX, during fiscal year 1996, the WCCA general manager approved the purchase of ten (l 0) $100 American Express Gift Cheques in the amount of $1,025. According to WCCA finance officials, the gift cheques were purchased as incentive awards for WCCA employees. WCCA's use of the corporate credit card to fund employee benefits is in violation of Section 1 1.1 of WCCA's Travel and Policies and Procedures Manual which states:
The Auditor found that the general manager's action was a clear violation of the WCCA's established rules and regulations pertaining to the corporate credit card. Expenditures by the general manager did not require Board approval before submission to the accounting department for payment. Moreover, the WCCA's travel policies and procedures did not require the general manager to substantiate and account for expenditures charged to the WCCA corporate credit card. Section 8 of the WCCA's Travel Policies and Procedures Manual entitled, Expense Reports and Reimbursement, states in relevant part the following:
Noticeably absent from the Policy and Procedures Manual is a policy and procedure that requires the general manager to submit a detailed report of his/her expenditures to WCCA's Board of Directors for review and approval to pay. The WCCA's Board of Directors did not establish sufficient internal controls to ensure accountability of the general manager's financial activities relative to expenditures charged to the WCCA's corporate credit card. As a result of this oversight, activities of the general manager were not adequately monitored and did not require the same level of scrutiny as other WCCA officials. The general manager did not adhere to WCCA's credit card policies and procedures. The lack of sufficient internal controls to monitor the activities of the general manager contributed to bypassing specific controls requiring: (1) a report of credit card charges on the local or out-of-town expense voucher, within a specified period of time, (2) a written explanation of the charges including the date, description and purpose as it related to WCCA official business, and (3) the names of the attendees, in detail, for entertainment charges. The general manager circumvented this process by directing accounting staff to pay the credit card charges without providing supporting documentation largely because there was no system of checks and balances in place. By circumventing the established procedures, the general manager prevented detection of non-compliance with the WCCA's prohibition against using its corporate credit card for entertainment, food, and other costs which were not related to the official business of the WCCA. Payment of Annual Membership Dues for Individual Staff Members The WCCA can save approximately $2,360 in annual membership dues expenditures if memberships are purchased in the agency 's name instead of individuals and if it discontinues paying membership dues to organizations that do not provide a service or benefit related to the mission of the WCCA. The WCCA membership dues expenditures increased from $3,134 in fiscal year 1995 to $6,408 in fiscal year 1996, or 104%, according to the WCCA's Summary of Expenditures Report for fiscal year 1996. This increase was the result of an increase in the number of individual membership dues paid for individual staff members. Chapter 4 of the Principles of Federal Appropriations Law, Vol. I state the following concerning membership dues:
The "Principles of Federal Appropriation Law" further states:
As a quasi-public entity, WCCA is not bound to observe federal guidelines. However, the guidelines are instructive and should be considered by the WCCA. The Auditor's review of membership dues payments found instances where dues were paid for more than one membership to an organization and membership dues payments were made for organizations that did not provide a service or benefit related to the mission of the WCCA. Table X below reflects the Auditor's analysis of potential savings to the WCCA based on fiscal year 1996 expenditures. TABLE X
Source: WCCA Member/Subscriptions FY1996 Based on the Auditor's analysis reflected in Table X, the WCCA can realize an annual savings of $2,360 by discontinuing membership dues expenditures for individuals and in organizations that do not provide direct benefits to the Washington Convention Center.
Local and Out-of-Town Travel Expenditures The WCCA's local and out-of-town travel expenditures increased from $81,188 in fiscal year 1995 to $121,724 in fiscal 1996, or 50%. Local travel expenditures, which included transportation, registration, staff development, employee activity, winter retreat, spring retreat, summer retreat, business entertainment and miscellaneous increased from $29,484 in fiscal year 1995 to $39,726 in fiscal year 1996, an increase of 34%. Out-of-town travel expenditures increased from $51,705 in fiscal year 1995 to $81,999 in fiscal year 1996, an increase of 59%. See Appendix V for a summary of local and out-of- town travel expenditures. The Auditor reviewed the WCCA's local and out-of-town travel budget for fiscal years 1995 and 1996 and compared the budget to actual expenditures. During fiscal year 1996, the Building Fund did not have a travel budget but expenditures were made from both the WCCA's Operating Fund and Building Fund. Out-of-town travel expenditures, which included transportation, lodging, business entertainment, registration and other, exceeded the budgeted amount by $48,609. In reviewing local and out-of-town travel expenditures, the Auditor noted that the highest amount of overspending occurred in the categories of lodging and registration. The Auditor's analysis of expenditures in these two categories determined that expenditures could be reduced if WCCA discontinued the practice of sending two or more people to the same conference and attending more than one conference per year. For example in fiscal year 1996, three (3) employees attended the International Association of Auditorium Managers Conference in Ft. Lauderdale, Florida, for a total of $4,266; three (3) employees attended the National Forum of Black Public Administrators Conference in Seattle, Washington, for a total of $6,063; two (2) employees attended the International Association of Expo Management Conference in Las Vegas, Nevada, for a total of $3,722; and two (2) persons attended two (2) National Coalition of Black Meeting Planners Conferences in Nassau, Bahamas, and Seattle, Washington, for a total of $7,112. Expenditures for these conferences totaled $21,163. A review of fiscal year 1997 out-of-town travel expenditures indicated a continuation of the same practice. Specifically, travel policies and procedures require the following:
Additionally, the Auditor found instances where WCCA officials traveled using first class accommodations. As previously stated, WCCA's travel policies and procedures require employees traveling to select the best alternative providing the least cost. WCCA officials first class travel did not represent the most efficient use of WCCA's resources. Officials traveling first class incurred expenditures that were considerably more than an employee attending the same conference using coach/regular air-fare accommodations.
WCCA Managers Did Not Follow Travel Policies and Procedures For Out-Of-Town Travel Expenditures WCCA managers did not follow the Authority's travel policies and procedures by requiring the submission of an out-of-town travel voucher and supporting documentation for out-of-town travel expenditures. Travel policies were revised in fiscal year 1996 and again in fiscal year 1997, each revision containing different requirements for supporting documentation. Travel policies and procedures require authorization in advance by the Division Director and/or the general manager. This authorization is requested by completing and submitting a Travel Requisition Form to the appropriate personnel for approval. The WCCA's travel policies and procedures specifically state:
The Auditor reviewed WCCA travel expenditures for fiscal years 1995, 1996, and 1997 through April 30 to determine compliance with travel policies and procedures. This review included an examination of travel requisitions, payment vouchers, out-of-town travel vouchers and supporting documentation, if submitted, and actual payments. During fiscal year 1995, WCCA travel policies and procedures required supporting documentation for all expenditures incurred during travel. The Auditor's review of out-of-town travel expenditures for fiscal year l 995 showed that the WCCA complied with its travel policies and procedures. The WCCA revised its travel policies and procedures on March 21, 1996 from requiring supporting documentation for all expenditures incurred during travel to "per diem" which allowed the traveler a specific amount for meals, telephone, parking, taxi cabs, gas and tolls, tips, and laundry. No receipts were required. If the traveler underspent the per diem then he/she retained the difference. The traveler was only required to reconcile these "per diem" expenditures if actual expenses exceeded the specified amounts. The hotel receipt, however, was required under the revised "per diem" travel policies and procedures. The revised travel policies and procedures specifically stated:
During fiscal year 1996, the Auditor reviewed 35 transactions related to travel expenditures and tested for (i) the submission of a travel requisition, (ii) accounting/budgetary approval, (iii) a completed out- of-town travel expense voucher, and (iv) supporting documentation. Of the 35 transactions tested for each category, the Auditor found that 12 (34%) did not have the required travel requisition, proper accounting approval was secured for all transactions, 25 (71%) did not have a completed out-of-town travel expense voucher, and 23 (63%) did not have copies of hotel receipts as required by WCCA's travel policies and procedures. The Auditor also reviewed all travel expenditures for fiscal year 1997 through April 30. The WCCA's travel policies and procedures were revised again on February 13, 1997 requiring the following:
Of 16 transactions, a travel requisition was submitted in all except one instance; proper accounting approval was secured for all transactions; an out-of-town travel expense voucher was not submitted in 11 (69%) of the transactions; and supporting documentation was not submitted in 12 (75%) of the transactions.In the absence of proper supporting documentation of the travel expenses incurred during out-of- town travel, it could not be determined whether each trip or expense was clearly required for the benefit of the WCCA.
During a review of the WCCA's financial activities, the Auditor noted two payments made for travel to the Democratic National Convention (DNC) in Chicago, Illinois during the period August 24- 28,1996. One payment of $2,808.40 was made to the Chairperson of the WCCA's Board of Directors along with an additional payment of $269.00 for an airline ticket. This combined total expenditure of $3,077.40 was not supported by proper documentation. The travel requisition did not specify the purpose of the travel and there was no evidence of Board approval for this trip. Without this documentation, it could not be determined whether these expenditures related to a defined and discernible marketing strategy of the convention center. Table XI presents the total expenditures in connection with the Board Chairperson's travel to the DNC. TABLE XI
Source: WCCA Travel Advance Worksheet, Administrative Services Department Revised 3/6/96 The authorization for the second payment of $730.92 was made to the WCCA Board of Directors' Management Liaison after the employee attended the Democratic National Convention, which violated WCCA's travel policies and procedures. The WCCA's travel policies and procedures state the following:
The travel requisition form was not submitted prior to travel, therefore the travel was not appropriately authorized in advance. The travel dates covered by the $730.92 payment were from August 25-August 28, 1996. An out-of-town travel voucher was submitted to the general manager for reimbursement of the $730.92 on September 26, 1996. The Auditor could not determine, by examining travel documentation and files, whether either of the expenditures, totaling $3,808.32, for travel to the Democratic National Convention were consistent with the mission of the WCCA or related to official WCCA business.
WCCA INCURRED QUESTIONABLE EXPENDITURES THAT DID NOT APPEAR TO RELATE TO WCCA'S MISSION In addition to questionable American Express and travel expenditures, WCCA spent more than $5S,0008 for goods and services that did not appear to relate to WCCA's mission. According to the legislation establishing the convention center, the mission of WCCA is to acquire, construct, equip, maintain, and operate the new convention center and maintain and operate the existing convention center. The Auditor did not find sufficient documentation justifying the business purposes of the expenditures listed in Table XII. Further, the expenditures that did not appear to relate to the mission the WCCA. TABLE XII
Source: WCCA's fiscal years 1995, 1996, and 1997 through April 30 Expenditure Files. The expenditures in Table XII did not appear to relate to a defined and discernible marketing strategy linking them to the mission of the WCCA. Furthermore, of the $56,217. 13 in questionable expenditures, $16,21 1.25 was used to pay for events related to the Barry Campaign Committee and a contribution to the Barry Constituency Fund. It is inappropriate for the WCCA, as a quasi-public entity, to fund political activities on behalf of elected officials or candidates for public office
WCCA Gave Expensive Tickets to District Government Officials to Attend Various Social Functions District officials may have violated Section 1803 of the of the D.C. Personnel Regulations in accepting tickets purchased by the WCCA. Several of WCCA's Board members, as well as District employees, either participated in or directly benefited from the WCCA's purchase of tickets to various social activities including the Congressional Black Caucus Foundation dinner and Presidential Inaugural/D.C. Ball. As presented in Table XII, the WCCA purchased tickets to several social functions during fiscal years 1996 and 1997 at a cost of $16,300. Those affairs and the ticket distribution, according to WCCA, are presented in Table XIII. TABLE XIII
Source: WCCA's CFO In accordance with the D.C. Personnel Regulations, Chapter 18, entitled "Employee Conduct," Section 1803, District of Columbia government officials are required to abide by the following guidelines:
The District officials who accepted tickets received a tangible benefit. The cost of an individual ticket to the Congressional Black Caucus Foundation dinner was $500; the cost of a ticket to the Presidential Inaugural/D.C. Ball was $150; and the cost of a ticket to attend the Whitney M. Young Jr. Memorial dinner was $360. A benefit of $1,000 was realized by each of the five (5) District government officials who received two tickets to the Congressional Black Caucus Foundation Dinner. A benefit of $300 was realized by one (1) District official who attended the Presidential Inaugural Ball and a benefit of $720 was realized by the one (1) District official who attended the Whitney M. Young Jr. Memorial dinner at the expense of the WCCA. The Auditor found that the WCCA's purchase of tickets to the events were not governed by sufficient controls. There was no established procedure in place which governed the purchase of the tickets. There appeared to be no coordination pertaining to the overall process of when tickets would be purchased and to whom they would be distributed. In some instances, officials who received tickets indicated that they were offered tickets right before the event was scheduled to occur. This left little time for them to plan to attend the event. Further, the WCCA was unable to distribute all the tickets it purchased to one affair, the Whitney M. Young Jr. Memorial Dinner. As a result, it incurred a loss of $720. Additionally, the Auditor found that in many instances tickets were given to one individual and then transferred to others because of various reasons. Tickets to these events were purchased with funds from the WCCA's operating fund which was partially subsidized by the building fund. The WCCA is not in a financial position to continue this practice.
WCCA VIOLATED ITS PROCUREMENT REGULATIONS BY ISSUING PURCHASE ORDERS OVER $25,000 The WCCA issued purchase orders, which exceeded $25,000, to procure services from vendors, in violation of its own procurement regulations. Chapter 3, Section 303.1 of the WCCA Procurement Regulations states the following:
Additionally, Chapter 3, Section 302.2 of the WCCA Procurement Regulations refers to the small purchase limit as following:
The WCCA procured services in violation of the $25,000 small purchase limitation by issuing a purchase order to the following: TABLE XIV
Source: WCCA's Expenditure Files The WCCA exceeded the small purchase limitation of $25,000 when the WCCA failed to follow its established guidelines in obtaining the services outlined in Table XIV. The Auditor contends that these services should have been obtained through a competitive procurement process that culminated in the award of a contract. Additionally, the manager of contracts violated procurement regulations by failing to solicit quotations from other sources as required in WCCA's procurement regulations, Chapter 3, Section 302.3, which state:
The WCCA procurement regulations requires the manager of contracts to perform oral or written solicitations and requires that records of the quotations are developed and maintained as a public record for at least three years. These records should include the written names of the businesses, the date and amount of each quotation. The Auditor requested, but was not provided, written solicited quotations from the manager of contracts, on the following businesses whose services were secured with a purchase order:
The Auditor noted that contract files did not always contain all of the information pertaining to the contract, including the contract itself. The manager of contracts did not provide missing information. It was indicated that a notebook is being developed containing all critical information relating to each contract. Because of incomplete contract files, the Auditor was not able to examine all samples selected for the audit.
The former general manager negotiated a general release and severance agreement with the convention center's former controller. The former controller was employed by the WCC for approximately 14 years. Under a severance agreement, the general manager obligated the Convention Center to pay the controller $88,662.00 minus usual legal deductions, in twenty one biweekly installments beginning on October 1, 1996, and further agreed to pay the controller's health and life insurance premiums through September 1997. In exchange, the agreement stated:
The general release and severance agreement further provided that:
The Agreement, which was signed by both parties on September 25, 1996, is contrary to public policy. The Agreement effectively prohibited the disclosure of pertinent information by a former government official who possesses intimate knowledge of operating practices, policies and governing procedures, many of which the former Controller may have helped to develop and institute. The Auditor strongly questions the former general manager's authority to negotiate such an agreement. Additionally, since the general manager negotiated such a generous agreement with the former controller and at the same time hired a Chief Financial Officer to assume responsibilities for the financial operations of the Authority, the general manager's actions, in essence, contributed to WCCA having to pay for the services of two financial officials when the Authority only benefited from the services of one. The negotiation of the general release and severance agreement cost the WCCA approximately $80,500.00, (the difference between the former Controller's monthly salary and the amount paid under the general release and severance agreement) and it precluded a former government official from discussing what is considered to be public information. During fiscal years 1995 and 1996, the WCCA collected in excess of $68 million in dedicated taxes. Part of this revenue along with event-related revenue, interest income from investments, and miscellaneous revenue were used to fund the operations of the existing convention center, the predevelopment costs associated with the construction of the new convention center and to repay a loan to the District's Rainy Day Fund. The balance has been invested for the construction of the new convention facility. The Office of the D.C. Auditor is unable to make a specific finding of the sufficiency of the projected revenues from the taxes to meet the projected expenditures and reserve requirements of the WCCA for the upcoming fiscal year. According to WCCA's financial advisors and underwriters, the current level of dedicated taxes will only support bond financing and related proceeds of approximately $560 million. As a result, WCCA's financial advisors estimate a financing shortfall of approximately $90 million, however, at present no other sources of financing have been identified. Based upon the status of the new convention center and estimates of costs which are constantly changing, the Office of the D.C. Auditor will make an appropriate finding once the financial status of the new convention center has been finalized. The WCCA was underpaid approximately $1,000,000 during fiscal years 1995 and 1996. This was a result of the D.C. Department of Finance and Revenue's failure to reconcile sales and use taxes to their most recent report and make the necessary transfer of additional dedicated taxes to the WCCA. WCCA was remiss in not requesting the necessary documents to adequately validate and verify dedicated tax transfer amounts which resulted in the underpayment to WCCA of nearly $ 1,000,000 for fiscal years 1995 and 1996. WCCA's expenses exceeded its operating fund revenues during fiscal years 1995 and 1996. Despite the fact that this is a normal practice in the convention center industry, the Auditor believes WCCA should strive towards decreasing operating cost and increasing operating revenues to the greatest extend possible. WCCA subsidized certain events during fiscal year 1996. The Auditor found the WCCA can incur large out-of-pocket expenses associated with various concessions in hosting events. Despite the fact that this is viewed as a normal business practice in the convention center industry, WCCA must focus on events that are economically beneficially to enable them to meet their mandate of constructing a new convention center. The previous general manager of the WCCA exercised poor judgement and violated WCCA's travel policies and procedures relating to the use of the Convention Center's corporate credit card. Payments for unvouchered charges to its corporate credit card were made, and continue to be made without the necessary supporting documentation as required in the Travel Policies and Procedures Manual. These undocumented payments totaling $43,977.64 for fiscal years 1995 and 1996 and an additional $10,806.13 for fiscal year 1997 must be substantiated and supported by appropriate documentation or reimbursed to the WCCA Fund. Additionally, a total of $3,808.32 was expended by WCCA for the current Chairperson of WCCA's Board of Directors and the Management Liaison to the Board of Directors to attend the Democratic National Convention during August 1996. The Auditor was unable to determine that these expenditures were related to the mission or official business of the WCCA. The Auditor was further unable to determine that the purpose and results of the travel was presented to the Board of Directors. As a result, the Chairperson and Management Liaison must reimburse WCCA for the cost of these trips. The WCCA must strengthen its internal controls over travel and require all employees to submit required supporting documentation. WCCA incurred questionable expenditures totaling $66,217.13 that did not appear to relate to WCCA's mission. The expenditures in question did not appear to relate to a defined and discernible marketing strategy linking them to the mission of the WCCA. For example, the Auditor found the WCCA incurred $16,211.25 in questionable expenditures relating to the Barry Campaign Committee and a contribution to the Barry Constituency Fund. The Auditor notes that it is inappropriate for the WCCA to fund political activities on behalf of elected officials or candidates for public office.. Further, based on our sample review, WCCA purchased tickets to several social functions during fiscal year 1996 and 1997. Tickets to some of these events were inappropriately given to District officials. The former general manager negotiated a general release and severance agreement with the convention center's former controller. The agreement was negotiated for $88,662.00. The Agreement effectively prohibited the disclosure of pertinent public information by a former government official who possesses intimate knowledge of operating practices, policies and governing procedures, many of which the former Controller may have helped to develop and institute. The Auditor believes the Agreement which was signed by both parties on September 25, 1996, was contrary to public policy. Respectfully, Anthony S. Cooper 8This amount represents a sample selected for review by the Auditor and is not representative of a complete review and analysis of the WCCA's expenditures. The report's appendices include the following tables: "WCCA Convention Center Revenue Bonds, Series 1997, Preliminary Financing Schedule as of June 12, 1997"; WCC Dedicated Tax Transfer Payments Based on DFR's Business Tax Info System Reports"; WCCA Statements of Revenues, Expenses and Changes in Retained Earnings, Years ended September 30, 1996 and 1995"; "WCCA Difference Between Forecast and Actual Revenue for Events, Fiscal Year 1996"; and "WCCA Local and Out-of-Town Travel." The agency comments on the report include: a June 11, 1997, letter from Natwar M. Gandhi, Deputy Chief Financial Officer; a June 20, 1997, letter from Edith Jett McCloud, General Manager, WCCA, that has numerous attachments; and the Washington Convention Center Authority Act, the enabling legislation that created the authority. |
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