Logosm.gif (1927 bytes)
navlinks.gif (4688 bytes)
Hruler04.gif (5511 bytes)

Return to DC Auditor home page

Audit of ANC 1B Covering the Period October 1, 1993, through December 30, 1996

Summary

Major Findings

Report

I. Commission Chairperson Improperly Diverted and Received Commission Funds

II. ANC 1B's Recordkeeping Measures Were Inadequate to Safeguard Its Funds Against Fraud and Abuse

III. Commission Failed to Adhere to Regulations and Guidelines

IV. Commission Did Not Comply with D.C. Code, Section 1-264(m) in Awarding Its Grants

V. Commission Did Not Submit Quarterly Reports Timely

VI. Funds Were Received without Council Approval

VII. There Were Irregularities in Disbursements for Purchase of Services

VIII. Equipment Purchase and Inventory Controls Were Ignored

IX. Meetings Were Held and Business Conducted When a Quorum Was Not Present

X. Disbursements Were Made When Treasurer Was Not Bonded

XI. Commission Improperly Maintained Two Accounts from Which Checks Could Be Written

Conclusion

SUMMARY OF ANC 1B FINANCIAL AUDIT

This is the District of Columbia Auditor's report of the financial activities of Advisory Neighborhood Commission (ANC) 1B for the period October 1, 1993 through December 31, 1996. The audit is part of an initiative by the Auditor to review the financial status of all thirty-seven Advisory Neighborhood Commissions.

The Auditor found numerous deficiencies in ANC 1B's internal financial controls that attributed to the diversion of ANC 1B funds to its Chairperson. Some of the activities identified by the Auditor warrant further review by appropriate investigative bodies.

Other deficiencies resulted in the expenditure of funds without proper documentation or approval. There is no assurance that all allocations from the District of Columbia government to ANC 1B benefited the ANC 1B community or were used for their intended purposes.

The Auditor will recommend the immediate suspension of allocations of District funds to ANC 1B. A follow-up review will be initiated within 60 days to determine if the ANC has implemented sufficient internal controls to justify, document and support its expenditures.

Back to top of page

MAJOR FINDINGS

I. The Commission Chairperson Improperly Diverted and Received Commission Funds

II. ANC lB's Recordkeeping Measures Were Inadequate To Safeguard Its Funds Against Fraud and Abuse

A. Supporting documentation for expenditures was not adequately maintained.
B. Voucher packages were improperly maintained.
C. Voided checks were not maintained by the Commission.
D. Some checks were not prenumbered by the bank.
E. Documentation was not available to determine if stop payments were requested.
F. Commission's checkbook was not adequately maintained.
G. Commission did not properly reconcile bank statements.
H. Reconciliations were not reviewed by the Chairman or Vice Chairman of the Commission.
I. Petty cash expenditures were poorly documented.
J. Recurring petty cash fund reimbursement checks in the same amount were questionable.
K. Petty cash reimbursement was made for more than the amount established for the fund and was incorrectly reported in the quarterly report.

III. The Commission Failed to Adhere to Regulations and Guidelines

A. Sixteen percent of checks reviewed were signed by only one Commission officer.
B. Some checks were not signed by the Chairperson or the Treasurer.
C. ANC IB did not have a spending plan in its files for fiscal years 1994 and 1995.

IV. The Commission Did Not Follow the D.C. Code in Awarding All of its Grants

A. Some Grants did not provide a public benefit.

V. The Commission Did Not Submit Quarterly Reports Timely

VI. Funds Were Received Without Council Approval

VII. There Were Irregularities in Disbursements For Purchase of Services

A. Disbursements were made without specific approval from the Commission.
B. Disbursements for purchase of service included payments to a bail bondsman.
C. Consultants did not have signed written contracts.
D. Office workers were improperly treated as independent contractors, not employees.
E. No IRS Form 1099 was prepared by the Commission for the purchase of services payments.
F.  Payments to the first office worker were not monitored.

1. Salary advances were not approved.
2. Same dates on two different timesheets.
3. Night hours reported on timesheet.

G. Disbursements to accountant were not approved and accounting services were inadequately performed.

VIII. Equipment Purchase and Inventory Controls Were Ignored

A. Commission did not maintain an inventory of equipment.
B. Documentation was not available to support disposition of the digital answering machine.
C. Purchases were not approved by the Commission.
D. Invoices and receipts were not available for $2,959 in equipment purchases.

IX. Meetings Were Held and Business Conducted When a Quorum Was Not Present

X. Disbursements Were Made When Treasurer Was Not Bonded

XI. The Commission Improperly Maintained Two Accounts From Which Checks Could Be Issued

Back to top of page


REPORT

OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR
THE PRESIDENTIAL BUILDING
415 12TH STREET, N.W., ROOM 210
WASHINGTON, D.C. 20004
TEL. 202-727-3600 _ FAX: 202-724-8814

ANTHONY S. COOPER
DISTRICT OF COLUMBIA AUDITOR

Mr. Nik Eames
Treasurer, ANC 1B
211 Elm Street, N.W.
Washington, D.C. 20001

Dear Mr. Eames:

The Office of the District of Columbia Auditor conducted an audit of the financial activities of Advisory Neighborhood Commission (ANC) 1B pursuant to D.C. Code, Section 1-264 (d).

The objective of this audit was to determine whether ANC lB's financial accounts and operations were in compliance with ANC laws, guidelines of the Office of the District of Columbia Auditor, and Corporation Counsel opinions.

This audit covers fiscal years 1994,1995,1996 and the first quarter (October 1,1996 through December 31,1996) of fiscal year 1997. The Auditor reviewed canceled checks and bank statements where available. The Auditor also reviewed ANC lB's quarterly reports, minutes of meetings, invoices and other related and available documents that supported ANC disbursements and financial activities.

An October 11, 1995 audit report issued by the Office of the District of Columbia Auditor covering the period October 1, 1990 through September 30, 1993, contained a number of recommendations for improvements in the financial operations of ANC 1 B. These recommendations are included in the appropriate sections of this report as "Previous Recommendations " along with a status of the implementation of these recommendations.

Back to top of page

FINDINGS

I. COMMISSION CHAIRPERSON IMPROPERLY DIVERTED AND RECEIVED COMMISSION FUNDS

Two ANC 1B checks totaling $10,900 were deposited into an account at Columbia First Bank. Checks totaling $10,400 were issued from the account to ANC 1B Chairperson Mary M. Treadwell. The account was established through a series of transactions involving the ANC, the Commissioners who signed the checks, a local law firm, and Commissioner Treadwell. The ANC Chairperson was the common link in an audit trail of ANC funds leading from the ANC's bank account . . . to the local law firm . . . to Columbia First Bank . . . and, eventually, to the ANC Chairperson.

The minutes of the December 14, 1994 ANC 1B meeting reflect that the Commission authorized $7,400 for a number of grants relating to the "Banneker Project." Minutes of the March 15, 1995 ANC l B meeting reflect that the Chairperson "asked for permission to contract with [a law firm]," and recommended a fee not to exceed four thousand. Specifically the minutes stated:

"The Chair stated that in the December grant to the LeDroit Park, Pleasant Plains Civic Associations and Banneker Recreation Center for the Banneker Project, the Commission had been a bit ambitious in that the Commission had not spelled out guidelines for the project. Further, the Chair stated that the Commission also needs a close-out package for grants. The close-out package would be filed once the grantee completes the planned activity. The Chair reminded the Commission that we have an up-to-date grant application package. The Chair asked for permission to contract with. . . . a law firm which does this kind of technical piece, requesting an operational guideline document for the project and a 'close-gut' document for general use by the Commission. The Chair recommended that the . . . fee not exceed four thousand dollars. The Chair placed on record that the Banneker project includes; 1. The funds approved by the Commission for Banneker Recreation Center; 2. The Pleasant Plains grant and; 3. The LeDroit Park Grant. The vote was unanimous giving the Chair Authority to proceed and authorizing a fee to be paid."

Subsequent to this meeting checks totaling $10,900 were written on ANC lB's checking account and made payable to the above referenced law firm. The first check in the amount of $3,500 was written from the ANC's checking account on March 16, 1995. This check was signed by the ANC's 1994 treasurer and vice-chairperson (ANC officers for 1995 were elected at the March 15, 1995 meeting.) The purpose of the check as listed on the quarterly report was "prof. services." The second check in the amount of $7,400 was written from the ANC's checking account on March 20, 1995. This check was signed by the ANC's 1995 treasurer and vice-chairperson. It was listed on the quarterly report as a grant (Banneker Recreation Cent. Project). Additionally in a September 21, 1995 memorandum to the files entitled "circumstances regarding special grant expenditures authorized in December 1994," Ms. Treadwell stated that an unsolicited grant was issued to the law firm. Specifically, she included the following on a list of unsolicited grants:

"$3,500 fee to [the law firm] for assistance in coordinating project, disbursing funds, and development of a close out package to be utilized by ANC 1B in its grant process"

In an interview with Commissioner Treadwell, she indicated that the $3,500 disbursed to the law firm was payment for an operational guideline document to be used by the ANC in its close-out of ANC grants and for grant guidelines that would assist the ANC. She further stated that $7,400 was to be used by the law firm to disburse the ANC grants to the Pleasant Plains Civic Association, LeDroit Park Civic Association, and Banneker Recreation Center for the Banneker project.

The Auditor also interviewed the law firm regarding its involvement with ANC 1 B funds. The firm acknowledged receipt of the $3,500 and $7,400 checks. However, its account of how the money was handled differed from accounts made by Ms. Treadwell. According to the firm, the checks were deposited into an escrow account on March 16 and March 20 at the behest of Ms. Treadwell. It was told that the account was to fund the Banneker Recreation Project and that Ms. Treadwell was the contractor. The firm was unaware that Ms. Treadwell was an ANC 1B officer. The firm's only responsibility was to administer the fund under the sole direction of Ms. Treadwell. The firm indicated that it received no fee for its work but was doing it as a favor for what appeared to be a community enterprise.

According to the firm, between March 21 and August 31, it wrote a total of five checks at Ms. Treadwell's direction. All but one was made out to "Mary Treadwell." These checks totaled $10, 400.

The law firm fully cooperated with the audit team and allowed the Auditor to examine and make copies of relevant documents relating to ANC 1B funds. Our review of deposit slips and canceled checks indicated that on March 21, 1995, $10,900 was deposited in Columbia First Bank. Four checks totaling $10,400 were issued from the account at Columbia First Bank to Mary Treadwell. Each of the four checks were endorsed in the name of Mary Treadwell. One check for $500 was issued to the Pleasant Plains Civic Association. Commissioner Treadwell did not provide an accounting of these checks to the audit team. Table I below reflects the checks written from the account at Columbia First Bank.

TABLE I
CHECKS ISSUED FROM COLUMBIA FIRST BANK

Date Payee Amount
3/21/95 Mary M. Treadwell $4,900.00
4/21/95 Mary Treadwell 1,500.00
4/21/95 Pleasant Plains Civic Association 500.00
8/21/95 Mary M. Treadwell 2,000.00
8/31/95 Mary Treadwell 2,000.00
  Total $10,900.00

This matter will be referred to appropriate investigative bodies for further review.

The Commission was negligent in monitoring checks written from its bank account. ANC Commissioners have a fiduciary duty with respect to all funds allocated to the ANC. They have a responsibility to ensure that ANC funds are used for intended public purposes.

Recommendations

  1. The Commission must disburse grants to grantees directly from its own checking account. It is a violation of the D.C. Code, Section 1-264(b) to use more than one checking account to disburse ANC funds.
  2. The Commission must take action to retrieve Commission funds that were diverted from their intended use.

Back to top of page

II. ANC 1B's RECORDKEEPING MEASURES WERE INADEQUATE TO SAFEGUARD ITS FUNDS AGAINST FRAUD AND ABUSE

A. Supporting Documentation for Expenditures Was Not Adequately Maintained

Previous Recommendation:

Take corrective measures to ensure that all receipts, bills and/or invoices are maintained in the records of the ANC. For example, the ANC should institute a filing system wherein vendor files are maintained. This filing system should include a separate file for bills already paid and a separate file for bills that must be paid. Failure to implement this recommendation immediately will result in disallowance of all disbursements not properly supported with appropriate documentation.

Condition at Time of Audit:

Documentation to support the Commission's disbursements was not adequately maintained in the records of the ANC (See Appendix A for fiscal years 1994 through 1997 disbursements by category). Documents were not readily available or easily attainable. Some documents were maintained at locations other than the ANC office, by the Chairperson, and the Commission's accountant. Other documents were stored in unlabeled boxes in the Commission's office. While our audit was in progress, the ANC's office worker attempted to file some of these documents in the ANC's office files. However, at the conclusion of our field work, supporting documentation such as receipts, bills, invoices and other related documents were not available for several disbursements made during the period of our review.

Examples of documentation not available for our review included canceled checks for the period October 1, 1993 through January 31, 1995 (See Appendix B), equipment purchases and purchase of service payments.

Recommendation

The ANC must begin immediately to ensure that its receipts, bills, invoices, minutes, bank statements, canceled checks and other supporting documentation are maintained in the office files of the ANC -- or in a single secure location. Such files must be readily available for review by the Auditor or members of the ANC.

B. Voucher Packages Were Improperly Maintained

The Auditor found that a voucher package to support each disbursement was not maintained by the Commission's treasurer. The date paid and check number was only occasionally entered on the original invoice. None of the invoices reviewed included a statement certifying that the payments were bona fide expenses of the ANC. This was a violation of ANC Financial Guidelines and Procedures issued by this Office which state:

"Prior to disbursing funds, the Treasurer must ensure that a voucher package is prepared which contains the following:

a. An original invoice or receipt from the supplier of goods or services.
b. A signed statement must be attached to the invoice or written on the invoice by the ANC representative who receives the goods or services which states:

"I certify that the goods or services described on the attached invoice have been received and represent bona fide expenses of the ANC."

c. The date paid and check number must be entered on the original invoice.
d. All vouchers must be filed in check number sequence."

All voucher packages should be retained for a period of at least seven years.

The existence of voucher packages for disbursements would have provided an audit trail and would have enabled the Commission to better monitor its disbursements.

Recommendation

The Commission must immediately begin to ensure that a voucher package is prepared for each disbursement. The date paid and check number must be entered on each original invoice.

C. Voided Checks Were Not Maintained by the Commission

Previous Recommendation:

The ANC must use all checks in sequential order, and void and mutilate checks that it does not intend to use to prevent unauthorized and/or fraudulent use. All checks, including canceled, voided, and mutilated checks must be retained by the ANC for audit and accounting purposes.

Condition at Time of Audit:

During the period of the Auditor's review, six of the eleven checks reflected as void in the ANC's checkbook and quarterly reports were not available for review.

The ANC financial guidelines and procedures issued by this office require that voided and spoiled checks must be retained by the Treasurer for the purpose of accounting for consecutively numbered checks belonging to the ANC.

Recommendation

All voided checks must be retained by the Commission for a minimum of seven years.

D. Some Checks Were Not Prenumbered by the Bank

The ANC violated D.C. Code, Section 1-264(f) by issuing two checks that were not prenurnbered and that were not issued in consecutive order. In March 1995, two counter checks totaling approximately $182 were written on the Commission's checking account. One check in the amount of $88.95 was written to Agile Printing Co. The purpose as reported on the quarterly report was for printing. The other check was written to the then office worker for $92.75. Its purpose, as stated on the quarterly report was for "out-of-pocket expenses." The Auditor did not see approval by a majority of the Commissioners in the minutes of a public meeting for either of these disbursements and we found no supporting documentation for these disbursements. These checks were not taken from the Commission's checkbook but appeared to have been obtained from the bank. The checks were not prenumbered by the bank and the name of the ANC was hand-written on the face of the check. The account number was typed on the top of the check. Both checks were signed by ANC lB's then treasurer and vice-chairperson.

D.C. Code, Section 1-264(f) states in relevant part that:

". . . Any check shall be prenumbered, shall bear the name of the Commission on its face, and shall be issued in consecutive order."

From our review of the Commission's checkbook, we did not find that these checks were recorded in the Commission's checkbook or deducted from the Commission's checkbook balance.

Writing checks on the Commission's checking account without using prenumbered checks placed the ANC at risk of not being able to account for all disbursements from its checking account and not being able to obtain an accurate checkbook balance.

Recommendations

  1. The Commission must comply with D.C. Code, Section 1-264(f) as it relates to the required use of prenumbered checks.
  2. The Commission must use (in sequential order) only those checks from its checkbook.

E. Documentation Not Available to Determine If Stop Payments Requested

Previous Recommendation:

The Commission stop payment on all checks which are not presented for payment within two months of the date written.

Condition at Time of Audit:

At least two checks written during the period of our review were not presented for payment within two months of the date written. The amount of these checks was included on the quarterly report as having been added back to the Commission's checkbook balance. However, the Auditor did not find any documentation in the records of the Commission that the Commission stopped payment on these checks.

F. Commission's Checkbook Was Not Adequately Maintained

Previous Recommendations:

Maintain an accurate and up-to-date running checkbook balance after each financial transaction in its bank account, and adjust the balance accordingly after each disbursement. In other words, the treasurer should deduct the amount of each check from the existing checkbook balance and record the new balance.

Adhere to D. C. Code, Section 1-264(f) and the Office of the District of Columbia Auditor's Financial Procedures for ANCs concerning the requirement for maintaining documentation to support all ANC disbursements.

Condition at Time of Audit:

An accurate and up-to-date checkbook balance was not maintained after each financial transaction in the Commission's checking account. The Auditor found periods of almost one year during which the checkbook balances were not recorded. Checks were written from the checking account and the amount of the check, payee, and date were recorded in the checkbook but the balance remaining in the account was not calculated and recorded after the check was written. For example, for almost five months from the period February 2, 1994 through June 28, 1994, over sixty checks were written, but no running balance was recorded in the checkbook after each disbursement. Again, from July 28, 1994 through June 9, 1995, for over ten months, 156 disbursements were made by check but the checkbook was not adjusted after each disbursement.

A running checkbook balance would have enabled the Commission's treasurer and other Commissioners to readily determine the Commission's account balance prior to issuing a check. The Auditor found that when the checkbook balances were calculated and recorded after the ten month period as discussed above, the total amount of checks written exceeded the Commission's checkbook balance. This resulted in at least one check written from the Commission's checking account being returned by the bank because the Commission's account contained insufficient funds to cover the check.

Recommendation

The Commission must adjust its checkbook balance after each financial transaction affecting its checking account.

G. Commission Did Not Properly Bank Statements

Previous Recommendation:

The ANC must reconcile its bank statements to its checkbook within fifteen (15) days of receipt of the bank statement on a monthly basis. This will in effect make the ANC aware of checks outstanding, as well as provide the ANC with an accurate account of those monies readily available for its use.

Condition at Time of Audit:

The Commission did not accurately reconcile its bank statements to its checkbook. The Commission prepared "bank reconciliations" for 33 of the 39 months reviewed by the audit team. However, only 9 of these 33 reconciliations accurately reconciled the Commission's bank balance to the balance in the Commission's checkbook for that period. For nine of the months, the book balances on the reconciliations did not agree with the checkbook balance. For 15 of the 24 months, running balances were not recorded in the checkbook, therefore the balance on the reconciliation could not be compared with the checkbook balance at the time the reconciliations were completed.

A check written on the Commission's checking account was not honored because there were insufficient funds in the Commission's account. Accurate reconciliations could have made the appropriate Commission officials aware of the actual balance in the Commission's checking account. Without an accurate and timely reconciliation of its account, the ANC may be unaware of errors in its account caused by the bank or by the ANC.

Recommendation

The ANC must reconcile its bank account on a monthly basis. Any reconciling items must be analyzed and if necessary brought to the attention of the appropriate Commissioners.

H. Reconciliations Were Not Reviewed by Chairman or Vice Chairman of the Commission

None of the bank reconciliations reviewed by the Auditor were initialed by the Commission's Chairman or its vice-chairman to indicate a review by a Commission officer. The bank reconciliations also did not contain the signature of the preparer.

According to the ANC Financial Guidelines and Procedures issued by the Office of the District of Columbia Auditor:

"The bank statement and bank reconciliation must be reviewed by the Chairman or vice-chairman of the ANC, who must indicate their review by initialing the bank reconciliation."

Because there were no signatures on the bank reconciliations, there was no assurance that these documents were reviewed by the appropriate Commission officers. This lack of review may have contributed to the ANC being unaware that there were insufficient funds in the account as discussed earlier.

Recommendation

The Commission chairman or vice chairman must review each bank reconciliation. They must indicate that this review was conducted by signing or initialing the bank reconciliations.

I. Petty Cash Expenditures Were Poorly Documented

Previous Recommendations:

1. Establish a petty cash journal to document each transaction made from the petty cash account and prepare a petty cash voucher for each disbursement made from the petty cash fund. This voucher should note the amount to be disbursed, and indicate the purpose for the disbursement. Additionally, this voucher must be submitted along with a receipt to the designated Commission officer for signature, and then signed by the individual receiving the reimbursement.
2. The person authorizing a petty cash reimbursement must not be the same individual receiving the reimbursement.

Only $215 of the approximately $3,115 in petty cash reimbursements made during October 1, 1993 through December 31, 1997 could be traced to receipts. The $215 was for reimbursements made to the petty cash account in fiscal year 1996 and the first quarter of fiscal year 1997. A petty cash account is a special money fund maintained in cash for the purpose of making convenient payments for small miscellaneous non-routine purchases. While the Auditor observed numerous receipts from taxicabs, metro card purchases, and other entities, these receipts were in no discernable order, were not attached to a petty cash voucher and were not traceable to specific petty cash reimbursements.

The ANC did not maintain a petty cash journal as recommended by this office. For the $215 that we were able to trace to receipts, none of the petty cash summary sheets were signed by the individual receiving the reimbursement nor were they signed by a Commission officer to indicate that a review and approval of purchases from the petty cash account had been conducted. Additionally, the reimbursement request did not indicate how the expenditure related to the business of the ANC. The petty cash fund for ANC 1B was maintained by the office worker who was the primary user of the fund.

J. Recurring Petty Cash Fund Reimbursement Checks in the Same Amount Were Questionable

In fiscal year 1994, the petty cash account did not appear to have been properly reimbursed. There were 22 petty cash reimbursement checks totaling $1,100, written on the ANC checking account. All of the checks were in the amount of $50. The petty cash fund was an impress fund established at $50. The amount to be reimbursed to the fund should have been based on the actual expenditures from the fund at the time of the reimbursement. Therefore, the amount of the reimbursement check should have varied based on the amount of expenditures from the fund. As such, these reimbursements are highly questionable and should have been more carefully scrutinized by the Treasurer.

Guidelines for the operation of an ANC Petty Cash Fund which were issued by this office state that:

"All payments out of the fund should be supported by signed petty cash vouchers and receipts from the vendors. The vouchers should list the voucher number, date, payee, description of the purchase, amount, the signature of the payee and the signature of the ANC authorized representative"

These guidelines were not adequately followed.

Recommendation

The ANC must reimburse petty cash only after receipt of appropriate supporting documentation. Petty cash vouchers must be prepared and signed by the appropriate individuals. The Treasurer must carefully scrutinize and reconcile petty cash vouchers and reimbursements.

K. Petty Reimbursement Was Made for More than the Amount Established for the Fund and Was Incorrectly Reported in the Quarterly Report

In December 1994, a check was issued to the then office worker in the amount of $548.00 There were no receipts or other documentation to support this disbursement. This check was incorrectly listed on the quarterly report as $48.00. It was also incorrectly recorded on the check book stub as $48.00 although a handwritten notation on the stub stated that the check was actually $548.00. The bank statement for that period stated that the amount of the check was $548.00. The Commission did not have the canceled check in its file and we could not determine if the check was altered after it was written or whether the check was originally written in this amount.

Recommendation

The ANC must investigate this disbursement to determine the circumstances surrounding this check. If it is determined that this check was improperly disbursed, the ANC should seek reimbursement from the appropriate individual.

Back to top of page

III. THE COMMISSION FAILED TO ADHERE TO REGULATIONS AND GUIDELINES

A. Sixteen Percent of the Checks Reviewed Were Signed by Only One Commission Officer

Of the approximately 160 checks examined by the audit team, approximately 26, or 16 percent, were signed by only one ANC officer.. Twenty-two of the twenty-six checks were signed by the vice- chairperson, who is now deceased, during fiscal year 1995 and the first 5 months of fiscal year 1996. Two were signed by the treasurer in fiscal years 1995 and 1996, and two were signed by the secretary in fiscal years 1995 and 1996.

Nineteen, or 73 percent, of the 26 checks issued with only one signature were payable to the individual who was the ANC 's office worker from October 1993 through March 1996.

The issuance of checks signed by only one officer violated D.C. Code, Section 1-264(f) which states that "any expenditure made by check shall be signed by at least two officers of the Commission."

The Auditor also found that, in June 1994, the ANC's then treasurer and vice-chairperson requested the Commission's bank to acknowledge one of their two signatures as an authorized signature by the full Commission. The stated reason for this request was that "on numerous occasions signers were unavailable to provide a second signature."

The Auditor was unable to determine if any checks were issued in 1994 with only one signature because canceled checks written on the checking account during 1994 were not in the Commission's files.

We also found one check that did not contain any signatures. This check was in the amount of $49.00, dated February 23, 1995, payable to the then office worker for petty cash.

Recommendations

  1. Commission officers must ensure that all checks written on the Commission's account contain two signatures.
  2. Canceled checks must be maintained in the Commission's office files.

B. Some Checks Were Not Signed by the Chairperson Nor the Treasurer

Over 62 of the checks reviewed by the audit team were not signed by the Commission's treasurer nor its Chairman. They were signed by the Commission's secretary and vice-chairperson. This was in violation of D.C. Code, Section, 1-264(f) which states in relevant part that:

". . . Any expenditure made by check shall be signed by at least 2 officers of the Commission, one of whom shall be the treasurer or Chairman."

RECOMMENDATION

The Commission must ensure that all checks written contain the signature of its treasurer or its chairperson.

C. ANC 1B Did Not Have a Spending Plan in its Files for Fiscal Years 1994 and 1995

Previous Recommendation:

Develop an annual fiscal year spending plan for each fiscal year and submit the budget to the Mayor and Council of the District of Columbia as required by D. C. Code, Section 1-261(n).

Condition at Time of Audit:

Commission minutes did not reflect that the Commission developed and submitted an annual fiscal year spending plan to the Mayor and Council for fiscal years 1994 and 1995. According to Commission minutes, the fiscal year 1996 spending plan was approved by the Commission in June 1996, eight months into the fiscal year. There was no documentation to reflect that the spending plan was submitted to the Mayor and Council of the District of Columbia as required by D. C. Code, Section 1- 261(n) which states:

"Each Commission shall develop an annual fiscal year spending plan budget for the upcoming fiscal year and submit the budget to the Mayor and Council within 60 days of notification of the amount of the Commission's annual allotment."

Back to top of page

IV. COMMISSION DID NOT COMPLY WITH D.C. CODE SECTION 1-264(m) IN AWARDING ITS GRANTS

The Commission violated D.C. Code, Section 1-264(m) because none of the seventeen grants totaling $28,513 awarded between October 1, 1993 and September 30, 1996 complied with this section of the code. According to D.C. Code, Section 1 -264(m):

". . .A Commission shall adopt guidelines for the consideration and award of grants that shall include a provision that requires the proposed grantee to present the request for a grant at a public meeting of the Commission. A grant may not be awarded unless the grant is awarded pursuant to a vote of the Commission at a public meeting."

None of the grants awarded were properly presented by the grantee at a public meeting of the Commission with a quorum of Commissioners present. Four of the grants were presented by the grantee at a Commission meeting, however, these meetings did not have a quorum of Commissioners present.

Table II identifies the grantees and the grant amount disbursed for each fiscal year.

TABLE II
GRANTS AWARDED

FOR FISCAL YEARS 1994 THROUGH 1996

Grantee FY1994 FY1995 FY1996
Mother Dear's Community Center (3 grants $513.00 $2,800  
Funds for the Community, Inc. (2 grants) 200.00    
Harrison School 250.00    
IPACHI 300.00    
Dorothy Kidane/Portner Pl. 400.00    
Anthony Bowen YMCA 4,000.00    
Edward C. Mazique Child Center, Inc.   $5,000  
Capital Manor Residents Assoc.   $3,500  
Williams Associates   $7,400  
Cardoza Sr. High School   500.00  
St. Augustine's Church   350.00  
SST Orange Hat Patrol   500.00  
Westminster Neighborhood Assoc.     300.00
Residential Action Coalition     $2,500
TOTAL $5,663 $20,050 $2,800

Some grantees submitted written requests in the form of a letter or on a grant request form.Other grants were awarded without a solicitation from the grantee but were awarded instead pursuant to a Commissioner's request.

Five, or 30 percent, of the seventeen grants were voted on and approved by the Commission at meetings when a quorum of Commissioners were not present. The approval for four additional grants were reflected in minutes that were not signed by the Commission's Secretary.

Recommendation

The Commission must adopt and adhere to guidelines for the consideration and awarding of grants. These guidelines must comply with D.C. Code, Section, 1264(m).

A. Some Grants did not Provide a Public Benefit

Grants totaling approximately $1,563 did not appear to provide a public benefit as required by D.C. Code, Section 1-264 (m) and Corporation Counsel opinions.

Grants totaling $750 were awarded to D.C. Public Schools. The Office of the Corporation Counsel determined that ANC's may not make direct grants to a public school.

The grant to Westminster Neighborhood Association was awarded to provide funds to purchase meals and other food items. According to the documentation from Mother Dear's Community Center, the $513 was awarded to assist the Center in its Family Day Activities. According to the General Accounting Office's Principles of Federal Appropriation Law, "Appropriated funds are not available for entertainment, including free food, except under specific statutory authority."

Recommendation

The Commission should comply with the public purpose requirement when awarding grants.

Back to top of page

V. THE COMMISSION DID NOT SUBMIT QUARTERLY REPORTS TIMELY

ANC 1B violated D C. Code, Section 1-264 (j) by not filing its first quarter, fiscal year 1997 (October 1, 1996 through December 31, 1996) financial report with the Office of the D. C. Auditor. This report was due on February 13, 1997 and was over thirty days late at the conclusion of our field work.

D.C. Code, Section 1-264(j) requires the Commission treasurer to prepare a quarterly report and file it with the District of Columbia Auditor within 7 days of Commission approval.

Further, at least eleven of the twelve quarterly financial reports ANC 1B was required to file with the Office of the D.C. Auditor for the period October 1, 1993 through December 31, 1997 were filed after the due date. Reports for the first and second quarters of fiscal year 1996 were both submitted over twelve months late. Reports for each quarter of fiscal year 1996 were all filed on March 6, 1997.

Table III presents the due dates for ANC lB's quarterly financial reports to be submitted and the actual date they were submitted to this office.

TABLE III
QUARTERLY REPORTS SUBMITTED AFTER THE DUE DATE
FOR THE PERIOD OCTOBER 31, 1993 THROUGH DECEMBER 31, 1996

Period Date Due Date Received Number of Months Late
10/01/93-12/31/93 02/94 04/01/94 2
01/01/94-03/31/94 05/13/94 09/94 4
04/10/94-06/30/94 08/12/94 12/94 4
10/01/94-12/31/94 02/11/95 03/20/96 13
01/01/95-03/31/95 05/15/95 03/20/96 10
04/01/95-06/30/95 08/14/95 03/20/96 7
07/01/95-09/30/95 11/02/95 11/13/961
03/06/97
12
16
10/01/95-12/31/95 02/12/96 03/06/97 13
01/01/96-03/31/96 05/13/96 03/06/97 10
04/01/96-06/30/96 08/14/96 03/06/97 7
07/01/96-09/30/96 11/11/96 03/06/97 4
10/01/96-12/31/96 02/13/97 (Not Yet Received)  

1The report was first received in the office on November 13, 1996. It was returned to the Commission because it did not contain appropriate documentation and resubmitted to this office by the Commission on March 6, 1997.

Quarterly reports should have been submitted to this office on a timely basis in order to ensure that the allocations provided to the ANC by the District government were monitored and are were properly accounted for by the ANC. The submission of these reports and subsequent review by this office forms the basis for the release of funds to the Commission.

Recommendation

The Commission must submit quarterly reports to this office by the due date.

Back to top of page

VI. FUNDS WERE RECEIVED WITHOUT COUNCIL APPROVAL

Advisory Neighborhood Commission 1B violated D.C. Code, Section 1-261(1) by accepting contributions in excess of the $400 limit without obtaining authorization from the Council of the District of Columbia.

According to D.C. Code, Section 1-261(1):

"No Commission may solicit or receive funds unless specifically authorized to do so by the Council, except that receipt of individual contributions of $400 or less need not be approved by the Council."

On October 2, 1995, $500 was deposited into the ANC's checking account. An additional $200 was deposited on October 10, 1995. No documentation was available that provided the source of these funds. Additionally, the Commission did not receive authorization from the Council of the District of Columbia to receive funds in excess of the $400 limit.

Based on our review of minutes, it appears that the ANC received donations for a "W street block party." These funds were then used to provide funding for expenditures related to this block party. These included sound system, music, trophies, plaques, and transportation. Based on a Corporation Counsel opinion, disbursements for block parties were prohibited. The minutes do not reflect the Commissioner's approval for these expenditures. Additionally, we did not find documentation in the form of receipts and invoices to support disbursements for this activity.

Funds received by the ANC from any source become ANC funds and are subject to the rules, regulations, and guidelines that govern the expenditure and accountability of public funds.

Recommendations

  1. The ANC must follow the D. C. Code in its receipt of contributions to the ANC.
  2. The ANC must follow all guidelines and regulations in the disbursement of contributed funds.

Back to top of page

VII. THERE WERE IRREGULARITIES IN DISBURSEMENTS FOR PURCHASE OF SERVICES

During the period October 1, 1993 through December 31, 1996, ANC1B wrote checks totaling approximately $65,000 in purchase of service payments. Approximately $52,000 was disbursed for office help while approximately $8,500 was disbursed for the services of a CPA. The disbursements for office help included payments to two different office workers for different periods of time at different rates of pay for substantially the same services. The first office worker provided services from the beginning of our review in October 1993 to March 1996 and was compensated a rate approximately two and one-half times that of the second office worker. The second office worker provided services from April 1996 through the period of our review. Table IV reflects purchase of service payments made for each fiscal year and the type of service provided.

TABLE IV
PURCHASE OF SERVICE PAYMENTS
OCTOBER 1, 1993 THROUGH DECEMBER 31, 1996

Name FY1994 FY1995 FY1996 FY1997 (1st qtr)
Office Worker #1
Office Worker #2
$14,111.22 $26,634.34 $6,214.24
$3,097.50

$1,874.50
Accountant 1,430.00 2,974.00 2,695.00 1,389.50
Other 1,710.00 650.00 250.00 -0-
Attorney -0- 3,500.00 -0- -0-
TOTAL $17,251.22 $33,758.34 $12,256.74 $3,264.00

A. Disbursements Were Made Without Specific Prior Approval From The Commission

The Commission violated D.C. Code, Section 1-264 (g) by not approving purchase of service payments. The ANC also did not approve the rate of compensation, and the maximum hours of service for any of the purchase of services arrangements.

D.C. Code, Section 1-264(g) states:

"Disbursements of Commission funds exceeding $50 for personal service expenditures shall be specifically approved by the Commission at a public meeting prior to the disbursement. The approval shall be recorded in the minutes of the Commission meeting. Any personal service payment shall name the person who is to receive the payments, the rate of compensation, and the maximum hours of service, if less than full-time compensation. If an expenditure required to be approved pursuant to this subsection is made without the required authorization of the Commission, the expenditure shall be deemed to be a personal expense of the officer who authorized the payment. unless the Commission subsequently approves the expenditure."

We did not find minutes that reflected approval for the initial hiring of the first office. According to a review of disbursements, the first check issued to this office worker during our period of review was in December 1993. In July 1994, the minutes reflected that the ANC approved a resolution to extend the "staff consultant on an as needed basis to be determined by the Commission not to exceed December 31, 1994." The rate of pay was not voted on by the Commission. Minutes also reflect that the Commission did not approve the number of hours the staff consultant was to work. An additional extension of ninety days was approved by the Commission in December 1994. A review of minutes subsequent to December 31,1994, did not show that the Commission voted to extend the services of the consultant beyond this ninety day period. However, the first office worker continued to be paid through March 1996.

The Commission also did not approve the rate of pay and maximum hours of service for the second office worker.

The disbursements shown in Table IV as "other" represent payments reported on the ANC's quarterly reports as purchase of service payments that are not supported by any documentation. These also represent unapproved and questionable disbursements.

B. Disbursements For Purchase of Service Included Payment to A Bail Bondsman

In fiscal year 1995 a $500 check was written on the Commission's account to Stancil and Stancil. Stancil and Stancil is identified as a bail bondsman. There was no documentation in the files of the Commission related to this disbursement. There was also no discussion or approval in the minutes of the Commission for this disbursement.

Recommendation

The Commission must investigate this disbursement. If it is determined that the amount was improperly disbursed, a reimbursement should be obtained from the appropriate individual(s).

C. Consultants Did Not Have Signed Written Agreements

Previous Recommendation:

ANC 1B take action to ensure that each purchase of service expenditure is supported by a signed written agreement. The agreement must delineate the hours, rate of pay and specific duties to be performed. Further, the agreement must fi rst presented to and voted on by the Commission, and signed by the appropriate Commission officer(s).

Condition at Time of Audit.

The Commission did not obtain signed written agreements to support any of its personal service disbursements. The accountant did sign an agreement in 1992, however, this agreement was not updated to include all of the duties performed by the accountant. There were no minutes in the Commission's files which indicated the rate of pay, specific duties and responsibilities, and length of contractual services or that the agreements were presented to and approved by the Commission for any of its purchase of service payments (including the accountant).

D. Office Workers were Improperly Treated as Independent Contractors not Employees

For each of the fiscal years under review, the office workers were treated as independent contractors and not employees for purposes of compensation. Compensation was paid without deduction for the appropriate payroll taxes such as federal and state income taxes and social security taxes. The Internal Revenue Service has ruled that contractors who provide services that are continuous and routine in nature must be classified as regular employees and not as independent contractors. The Commission is responsible for making the appropriate tax withholdings.

The Office of the District of Columbia Auditor has cautioned ANCs to carefully evaluate the status of its workers. This advice has been provided through training sessions, individual discussions with ANC officers, and in correspondence with ANCs.

If personal services are improperly classified, the ANC could be liable for overdue taxes and interest.

E. No IRS Form 1099 Was Prepared by the Commission for Purchase of Services Payments

The Commission did not prepare IRS Form 1 099s for any of its independent contractors receiving ANC payments during the period of our review. According to Internal Revenue Service (IRS) regulations, a Form 1099 should be issued for payments, in excess of $600, to independent contractors.

F. Payments to the First Office Worker Were Not Monitored

Disbursements made to the ANC's first office worker from October 1993 to March 1996 were not monitored or authorized by the Commission.

The Auditor reviewed typed memoranda to the ANC chairperson from the office worker. Each memoranda contained dates, times and hours worked, and total payment due. However, there were no signatures or initials on the memoranda by either the office ANC chairperson or any other ANC 1B Commissioner. There was no indication that anyone reviewed or verified the information contained on these unsigned memoranda. Yet in several instances, the amount of the checks issued to the office worker corresponded with the amounts reported on these unapproved and unverified memoranda. Payments were sometimes in excess of what was reported on the memoranda. The Auditor also found instances in which payments were made to the first office worker but there were no memoranda indicating hours worked.

The Auditor found all time and attendance sheets from the second office worker, except one. Approximately 75 percent of these time and attendance sheets were initialed or signed by the Commission Chairperson, however, the sheets were not signed by the office worker.

In the Auditor's review of this data from the first of vice worker, we found several areas of serious and troubling concerns. A discussion of these areas follow:

1. Salary Advances Were Not Approved

Unapproved salary advances totaling at least $1,300 were made to the first office worker. Signed statements acknowledging the advances and establishing repayment terms were not obtained by the ANC for each advance. It appeared that advances were to be repaid by a deduction from the office worker's future compensation. However, adequate records were not maintained to document and attest to the fact that the office worker repaid salary advances.

We did not find any evidence that advances of compensation were made to the second office worker.

2. Same Dates of Work on Two Different Memoranda

We found at least four instances in which the first office worker presented unsigned memoranda for one week that duplicated the dates submitted on other memoranda. We note that the requested amount from each sheet was paid to the worker.

3. Night Hours Reported on Memoranda

Request for payment statements showed that the first office worker reported hours of work performed beyond eight hours in a regular business day and sometimes as late as ten or eleven o'clock at night. Many of the days for which these long days and night hours were reported were in months when the Commission did not conduct meetings. No explanation is provided on the requests to indicate the functions performed during these hours.

Recommendations

  1. The Commission must adhere all laws rules and regulations regarding purchase of service payments.
  2. The Commission or a committee of the Commission must review all purchase of service payments to determine if they have been approved by a majority of the Commission in a public meeting. For those services that were performed without proper approval, the Commission must either retroactively approve these disbursements or seek reimbursement from the appropriate individuals.
  3. [There is no recommendation #3 at this point in the report.]
  4. The Commission should review the classification of its employees for tax purposes.
  5. The Commission should immediately prepare an IRS Form 1099 for each individual or entity that received in excess of the limit imposed by the IRS during fiscal years 1994, 1995, and 1996.
  6. The Commission must monitor all payments for personal services and account for all services performed by its office workers. It must seek reimbursements for any improperly issued advances or personal service payments.

G. Disbursements to Accountant Were Not Approved and Accounting Services Were Inadequately Performed

During the period of our review, the Commission wrote checks totaling approximately $8,500 for the services of an accountant. The Auditor could not find documentation in the files of the Commission for approximately 34 percent of these disbursements. The Accountant's invoices reviewed by the Auditor were not initialed or signed by Commission officers or members to indicate their review and approval of the invoices for payment. According to the accountant's November 1996 invoice, the following services were performed:

  1. Updating check book balance
  2. Preparation of general ledger
  3. Preparation of three (3) months bank reconciliations
  4. Preparation of ANC quarterly report for quarter
  5. Auditing petty cash reports and telephone conferences
  6. Review of savings and money market account

While this invoice is for November 6, 1996, many other invoices reviewed by the audit team were similar, and indicated that similar services were preformed each month. Although all of these services were included on the invoice, we question whether all of these services were preformed each month as indicated on the invoice. We found that:

  1. As discussed earlier in the report, for numerous transactions, checkbook balances were not adequately updated;
  2. The ANC did not have a general ledger; and
  3. As discussed earlier in this report, bank reconciliations often were not accurately reconciled to the checkbook balance;

The accountant has provided services to the Commission since at least June 1992 at the rate of $27.50 per hour. (We did not review disbursements prior to October 1, 1993, as they were not within the scope of this audit). The agreement signed by the accountant required only the preparation of quarterly reports. However, the accountant performed several additional functions resulting in added cost to the Commission. We did not find minutes that approved this expansion of services.

Recommendations

  1. The Commission must review the invoices or request for payments form its accountant to ensure that all services were actually performed.
  2. The Commission must evaluate the performance of its current accountant and, if I found inadequate, terminate the accountant's services

Back to top of page

VIII. EQUIPMENT PURCHASE AND INVENTORY CONTROLS WERE IGNORED

A. Commission Did Not Maintain an Inventory of Equipment

The Commission purchased approximately $8,600 of equipment but did not maintain a written inventory of the purchases.

According to a review of canceled cheeks, all of the equipment purchases were made in fiscal year 1994. Table V below reflects the purchases that were made.

TABLE V
EQUIPMENT PURCHASES

OCTOBER 1, 1996 THROUGH DECEMBER 31, 1996

Vendor Item Amount Date of Check
Amegabytes Computer Systems Computer, Printer, Fax Machine, Software $2,948 March 16, 1994
ADT Security System Installation $2,459 Jane 2, 1994 and July 6, 1994
Time Office Products Office Furnishings, Digital Answ. Mach. $2,716 April 5, 1994
ANC Chairperson Air Conditioner $500 May 27, 1994

An inventory of equipment may be needed in the event of theft. An inventory would also enable the Commission to maintain accountability and control over items purchased.

Recommendation

The Commission must maintain an inventory of all purchases of equipment and durable goods by the ANC. This inventory listing should contain the items purchased, purchase price, and serial numbers. When equipment is no longer in use by the Commission, the date and disposition should be indicated on the inventory record. Warranty information should also be maintained with the inventory to be used for maintenance of the equipment.

B. Documentation Not Available for Disposition of the Digital Answering Machine

We found that the digital answering machine purchased during fiscal year 1994 by the Commission was no longer in use by the Commission. The Commission currently uses an answering service provided by the telephone company. No documentation was available during our field work to indicate the location or disposition of the digital answering machine.

C. Purchases Were Not Approved by Commission

No documentation existed in the minutes of the ANC to document that the Commission approved the expenditure of the $8,600 in purchases of any of the equipment included in Table V.

This is in violation of D.C. Code, Section 1-264(f) which states that "no expenditure of any amount shall be made without specific authorization of the Commission."

D. Invoices and Receipts Were Not Available for $2.959 in Equipment Purchases

Documentation was not available to support the purchase of the ADT system or the payment of $500 made to the then Commission Chairperson for an air conditioner. The checkbook stub indicated that the payment to the Chairperson was for an air conditioner. No other documentation such as invoices, receipts, or bills were available to support this payment. We noted that the Commission does have a window air conditioner in its ANC office but we were unable to determine how, where, or when the unit was obtained.

The invoices for the purchase of the ADT system could not be located in the records of the ANC. The Commission did have a security system and we reviewed several invoices for the maintenance and repair of the system.

Back to top of page

IX. MEETINGS WERE HELD AND BUSINESS CONDUCTED WHEN A QUORUM WAS NOT PRESENT

Advisory Neighborhood Commission 1B held only two meetings in calendar 1996 and, according to the minutes of these meetings only one of the meetings had enough Commissioners for a quorum. Yet the Commission conducted business of the Commission.

X. DISBURSEMENTS WERE MADE WHEN TREASURER WAS NOT BONDED

In calendar year 1995, ANC1B disbursed over $67,700 and in calendar year 1996 over $18,800 was disbursed without its treasurer being bonded. This was in violation of D.C. Code, Section 1-264(c) which states:

"no expenditure shall be made by a Commission during a vacancy in the office of treasurer or at any time when a current and accurate statement and bond or its equivalent are not on file with the District of Columbia Auditor."

XI. COMMISSION IMPROPERLY MAINTAINED TWO ACCOUNTS FROM WHICH CHECKS COULD BE WRITTEN

ANC 1B violated D.C. Code, Section 1 -264 (b) because it maintained a checking account as well as a money market account from which checks could be written. D.C. Code, Section 1-264(b) states in relevant part that:

". . . Each Commission shall establish no more than 1 checking or negotiable order of withdrawal account..."

According to the December 14, 1994 minutes, the Commission approved a resolution to "secure 60% of current cash assets in interest bearing securities." The "executive body" was given responsibility for consummating the arrangement.

Two certificates of deposit (CD) were purchased on December 22, 1994, one for $23,000 to mature in twelve months and the other for $12,000 to mature in 24 months.

The $23,000 CD was redeemed after six months. The proceeds, less an early withdrawal penalty of $112 were deposited partially in the ANC's checking account while the balance was used to open a money market account on June 28, 1995.

The $12,000 CD was also redeemed early- after eighteen months. These proceeds, less an early withdrawal penalty, were deposited into the Commission's money market account in June 1996. Transfers from the Money market account have been made to the ANC's checking account.

According to officials Riggs Bank of Washington, where the money market account was maintained, up to three checks per month may be written from the account. This technically violates D.C. Code, Section 1-264(b). However, during our audit, we found no checks/withdrawals that were made on the money market account other than the transfers that were traced to the checking account.

CONCLUSION

ANC 1B must improve its monitoring of its financial operations and the maintenance of its financial records and accounts. Recommendations made by the Office of the District of Columbia Auditor in its October 11, 1995 report on ANC 1B have not been implemented.

Funds have been diverted from ANC 1B to its Chairperson. Other disbursements were not properly documented and approved.

There is no assurance that all allocations from the District of Columbia government issued to ANC 1B have benefited the ANC 1B community.

Finally, all ANC Commissioners have a fiduciary duty to safeguard ANC funds against fraud and abuse. ANC 1B Commissioners must begin a vigilant effort to establish controls and accountability in order for this Commission to continue to receive funding. The Auditor will recommend the immediate suspension of future allotments until a follow-up review of ANC lB's compliance with the Auditor's recommendations has been completed.

Respectfully,

Anthony S. Cooper
District of Columbia Auditor

There are two appendices: "ANC 1B Report of Financial Activity by Fiscal Year," FY1994-FY1997; and "Advisory Neighborhood Commission 1B: Cancelled and Voided Checks Not in Commission Files"

Back to top of page


Send mail with questions or comments to webmaster@dcwatch.com
Web site copyright ęDCWatch (ISSN 1546-4296)