More than three years ago, District taxpayers learned Harriette Walters, a midlevel manager in the Office of Tax and Revenue, had embezzled $50 million using the simplest scheme. Chief Financial Officer Natwar Gandhi and his team pledged to institute regular audits and install important controls to prevent a reoccurrence. Yet, in letter dated Jan. 27, 2011, auditors with KMPG, LLP found conditions at OTR remain ripe for theft. There were no appropriate policies “to prevent a single employee from being able to prepare, review and approve [computerized] cash receipt vouchers.” Further, management hadn’t restricted access “appropriately to prevent compliance division personnel from having inappropriate access.” “These deficiencies increase the risk that inappropriate refunds may be issued,” auditors added in the letter — commonly called the yellow book — that accompanied the city’s Comprehensive Annual Financial Report.
CFO spokesman David Umansky seemed to pooh-pooh the auditors’ statement. He said “OTR’s systems are replete with redundant controls, aimed at preventing fraud before it occurs and detecting it after it occurs. ” But, he added, scrutiny of OTR sometimes “pinpoints areas for additional improvement such as those included in this year’s yellow book.”
Ward 2 D.C. Councilman Jack Evans, who oversees the finance cluster, called the yellow book “good news bad news.” He said the number of weaknesses has been reduced. “[But] we shouldn’t have any.”
Gandhi is expected to appear Tuesday before the full council to discuss the CAFR and yellow book.
No doubt residents will learn KMPG also found employees who were eligible for retroactive pay received more than $70,000 in overpayment. Some DCPS payments were made to vendors although no invoices could be located and about $1.5 million was posted incorrectly in the general ledger. Millions of dollars were paid out for sole source contracts or emergency contracts that lacked required approvals.
Council Chairwoman Pro Tempore Mary Cheh, who has oversight of government operations, called the procurement weaknesses “distressing.” But, she said the Procurement Practices Reform Act passed last year should address the “fundamental challenge of fragmented recordkeeping and imbalanced training.” She said she anticipates “digging” into the newly created Office of Procurement Integrity and Compliance.
What’s more, Cheh wants to “create a task force to reform the recordkeeping system ” at [Office of Contracting and Procurement, the chief technology office] the CFO and other relevant agencies.”
What might help more is having an attentive and aggressive CFO. Consider the fact that auditors reported tax officials haven’t performed a site visit since March 2008 or conducted an audit of a company processing some $1.9 billion in transactions.
The CFO and his team may want to celebrate the fact the city balanced its budget for the 14th year. But no one should be dancing in the halls of the John A. Wilson Building.
The 17-page yellow book reveals all isn’t right. At a time when the District faces a potential $600 million budget gap for fiscal 2012, taxpayers’ money should be better protected and managed.
Jonetta Rose Barras can be reached at [email protected]
Jonetta Rose Barras’s column appears on Monday and Wednesday. She can be reached at [email protected].
