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HomeMy WebLinkAboutM-88-0453C e j CITY 00 MIAMI, PL00116A INTER -OFFICE MEMORANDUM 77 TO: Cesar odio DATE: April 26, 1988 RILE: City Manager SUBJECT: Discussion Item for Agenda " May 12, 1988 FROM: y REFERENCES: is e Victor H. DYurre Commissioner ENCLOSURESf Please schedule for discussion at the May 12, 1988 Commission Meeting Mr. Carlos b'Mant with reference to certain irregularities and the performance of the Social Action Agency. Also to include a followup on the audit performed by the city's Internal Audit Department. VDY/re cc: Honorable Mayor and City Commission Aurelio Perez-Lugones Legislative Administrator r a' �1 i tdt9--45 ta ?' 1.1 e ) U:f- MIAMI. r-L!Vi itj^ bEPARTMENt OF INttANAi_ Aurms n Rr.virws AUNT REPORT :.i t '' Resat H. bdio ,rF May 10, 1988 I„I 88-587 City Manager ' Social Action of Little Havana, Inc. Intet•im Audit t 4O! r Dr,. Hattie M. Daniels ,,. September 15, 1987 Through March Acting Director 140 1988 Department of Internal Audits and Reviews DESCRIPTION A. In accordance with the March 18, 1988 request of the Community Development Department (CO) Director and the agreement between the City of Miami and Social Action of Little Havana, Inc. (SAL) dated April 22, 1988, the auditorhas examined the financial records of SAL for the period September 15, 1987 through March 14, 1988. The auditor per•for•med this interim examination to establish if SAL complied with the applicable provisions of the agreement. B. Applicable covenants of the agreement included the following: 1. The City of Miami agreed: a. to provide funding in an amount not to exceed $35,000. b. to provide an advance not to exceed $10,000 and to reimburse the Grantee for• expenditures incurred only during the term of the agreement. All expenditures must be in compliance with the previously approved line item budget and be verifiable by original invoices and prepared checks. The Grantee had 60 days after submittal of original invoices to provide cancelled checks for the expenditures. c. the CD would act on behalf of the City in the fiscal control, pr•ogr•ammatic monitoring and modification of the agreement. { d. to recapture funds if SAL failed to comply with the terms of the agreement. t, r;l V % � a -t'la3i t`+ Y S Cesar H. Sdio Social Action City Manager. 88-587 x: Page 2 of g 1 2. The Grantee agreed to; a. provide a dollar- for dollar. thatch for- the funds received through the Emer-gency Shelter- Grant, b. pr-ovide a low cost food distribution project for• needy persons and agencies providing services to the homeless. C. provide insurance coverages which reflected sound business practices as determined by the General Services Administration Department, Insurance Management Division. d. provide a Certified Public Accountant's (CPA) letter• attesting to the adequacy of its internal controls. e. disclose all sources and amounts of additional funds received durr ing the contact period. f. provide a final expenditure r•epor•t by April 14, 1988. 3. The agreement covered the period September- 15, 1987 through March 14, 1988. C. The City Commission approved funding by Resolution "►" t Number- 87-832 dated September- 8, 1987. The Resolution approved a grant consisting of $5,000 Special Programs and. Accounts, Contingent Funds and $30,000 from FY' 87 Emergency Shelter- Grant Funds. 0. The scope of this audit included an examination of the: 1. three bank accounts, bank statements and cancelled checks. 20 general 1 edgers. 3. cash receipts and related expenditures. E. The fieldwork for- this examination was completed Apr -it 22, 1988. r. II. PRIOR PERIOD'S AUDIT FINDINGS AND RECOMMENDATIONS NOT RESOLVED Not applicable, this is the first audit examination. t ' F ¢ i ¢ x t 4- PA Cesar- H. Odio^ Social Action City Manager, 88-987 Page 8 of g III. CURRENT PER_IOD'SAUDIT FI_NDIN_GS AND RECOMMENDATIONS A. FINDING #1 - Disallowed Expenditures The auditor- has disallowed salary expenditures totaling $2,317.46 ($2,060.96 + $256.50) for- two employees. A clerical employee earned $2,060.96 for, unsupervised and questionable work per-for-med in her. home for- 2 1/2 months, her- total employment period. The Executive Director- co• -endorsed the clerk's payroll checks. In addition, the Executive Director- received a salary of $256.50 from both the City and the State of Florida, Department of Health and Rehabilitative Services (HRS) for- January and Febr•uar•y 1988. See Exhibit 11. RECOMMENDATION - The CD should invoice SAL for• $'6'.� The invoice should be sent to: _ Mr. Rafael Lopez, Executive Director Social Action of Little Havana 1336 N. W. 22nd Street Miami, FL 33142 j B. FINDING #2 - CD Disbur-sed Funds Without Requiring Accounta i ty or Funas Section 3.2B of the agreement authorizes the disbursement of funds prior- to the execution of the agreement. This procedur-e weakens established administrative internal controls when CD has not '$' received written assurances that SAL would be x accountable for funds disbursed. The CD disbursed ^' $20,890.60 without any assurances that SAL would -;: account for the funds. yJ RECOMMENDATIONS 9 1. CD, should evaluate the potential risk of the agreement provision for- disbursing funds prior- to the execution of the agreement. 2. Prior to disbursement of funds, CD should receive written assurances from agency concerning accountability for- funds. 98 14.5 Cow. N. Cdio Social Action { City Manager 88-587 3 page 4 of ry; C. FINDING #8 Non b-i_t_closuf-e- of _Additiona_l i u,nds Section 2.10 of the agreement required SAL to disclose all sources and amounts of additional funds received during the contract term. However, SAL's Officials did not disclose the receipt of $172.80 from the Lutheran Ministries to cover a Clerk's salary which the City also reimbursed to the SAL. Ther•efore, the SAL was overpaid by $172.80. Based on this information, the auditor• requested the CD to reduce the salary expenditure line item by $172.80. In addition, SAL did not disclose the execution of a grant agreement with the HRS for- a maximum of $15,000 covering the period January 1 through September- 30, 1988. The SAL received $1,441.04 for• the period January 1 through Februar-y 29, 1988. Therefore, SAL has not complied with the disclosure terms of the agreement. RECOMMENDATION 1. The SAL should have complied with the agreement and disclosed the additional sources of funds. 2. The City should terminate this contract and not w disburse the remaining $9,109.40 in accordance with ;• Section 4.17 Default Provisions of the agreement. D. FINDING #4 - Delivery Fee Collections Violated Federal egu I ati on SAL's collection of approximately $6,000 from del iver•y 'z fees violated Federal Regulations regarding USDA donated foods. On March 3, 1988, the HRS notified SAL that Federal Regulation, 1CRF 250.6 stated, "Under no circumstances shall recipients be required to make any x payments in money, materials, or- services for- or- in `� connection with the receipt of donated foods, nor shall voluntary contributions be solicited in connection with the receipt of donated foods for• any purpose." However-, SAL has continued to collect these fees. c RECOMMENDATION - The SAL should immediately comply with }` ed er•a 1 Regulations regarding USDA donated foods and discontinue the collection of all delivery fees. 98-45)3 AK 7 v r•. ;F 4 Cesaw H. Odio Social Action City Manager 00-507 page 5 of 0 _x . FINDING #5 - SAL did not Meet Del ivery Goals i. Pot September 15 through December. 31, 19876 the SAL's r•ecor•ds disclosed monthly deliveries averaging approximately 200. This averaged 10 del iver•ies per- day. Based on this information, SAL has not reached the work pr•ogr•am goal of 1,750 deliveries per- month. In addition, SAL has not efficiently used its r•esour•ces by making 10 deliveries per- day since it appeared at least 32 deliveries could be made in an eight -hour, day (four• del ivevies per- hour). 2. SAL did not adequately document del iver•y fees collected, approximately $6,000, because the del iver•y slips were not pr•e-numbered nor dated. Ther•efor•e, the auditor• had no assurance all fees collected were pr•oper•ly reported as income. RECOMMENDATIONS 1. The SAL should: a. Account for• the discrepancy in actual and projected deliveries and provide CO with an explanation.: t b. Increase its daily food del iver•y rate. c. Have initiated a system to adequately account for del iver•y fees collected. 2. The City should terminate this contract for- non- compliance and not distribute the remaining $9,109.40 in accordance with Section 4.17 Default Provisions of the agreement. F. FINDING #6 - Internal Control Weaknesses The SAL did not: 1. apply generally accepted accounting pr•ocedur•es (GAAP) in the pr•epar•ation of its bank account reconciliations. 2. maintain a separate bank account which contained only the City of Miami's funds as required by CD's Policies and Pr•ocedur•es Manual for- Community Ba-sea ur anizations. ine SAL co -mingled the Gity's fundedtransactions with donations. 531. T. IN: rill 777 � Nt�k7 r x � h34 t� Cesar H. Odio City Manager page 6 of § Sbelal Action 88.587 R_L_COMMENDATI.O,N - The SAL should: �. r•econstr•uct all bank account reconciliations relating to expenditures funded by the City of Miami into a generally accepted format. 26 have maintained a separate bank account from which City funded transactions were expended. G. FINDING #7 - SAL's Board of Dir-ectors did not Receive Financial Reports The SAL's Board of Directors' minutes did not indicate that the board members received financial r•epor•ts,. Sound business practices require that the Board receive a written financial report at each meeting. RECOMMENDATION -A copy of the financial report should ave een presented at the Board Meetings. The SAL's Board of Directors should have reviewed and approved the financial status of operations. H. FINDING #8 - Inadequacies of Personnel Policies The SAL did not provide the auditor- with personnel policies which included the use of daily "sign -in" timesheets and accident reports. Therefore, these documents were not available for- audit. RECOMMENDATION The SAL should develop the above mentioned ocuments and submit them to CD for- approval. IV. EXIT CONFERENCE The Department of Internal Audits and Reviews (DIAR) held an exit conference on May 2, 1988, and the following people attended: Name Organization Hattie M. Daniels DIAR El 1 iott Pr•enner• DIAR Delores McKinley DIAR Francena Brooks Community Development Dept. Dan Fernandez Community Development Dept. Gene Sanchez Social Action Rafael Lopez Social Action r; t, 1 q ) a "'s" a Social Action 88-987 Cesar H. Odio^ City manager Page I of 9 The audit findings were discussed with the exception of Finding #5 SAL did not Heet Delivery Goals, Everyone agreed with e MaIngs except or Finding #1 Disallowed Expenditures Mr. Sanchez did not agree with this finding and could not document actual hours worked and work performed. V. EXHIBITS Exhibit I - Statement of Budgeted and Actual Revenues and Expenditures for the Period September 15, 1987 through March 14, 1988 Exhibit 11 - Disallowed Expenditures for• the Period September 15, 1987 through March 14, 1988 VI. FOLLOW-UP RESPONSIBILITIES FOR RECOMMENDATIONS* Department Finding # Community Development 1, 2, 5 & 8 *Per APM #1-82, the Department Director shall submit a written response to the Director of Internal Audits and Reviews within 30 days after receipt of the audit report. DM/em cc: Angela Bellamy Herbert Bailey Frank Castaneda Carlos Garcia Agency Elliott Pr•enner Delores McKinley {` File Reader V �38-45 r L'4ii {, Cesar H. Odio Social Action City Manager 88-587 Page 'a of 9 �4 EXHIBIT I SOCIAL ACTION OE LITTLE HAVANA STATEMENT OF BUDGETED AND ACTUAL REVENUES AND EXPENDITURES FOR THE PERIOD SEPTEMBER 15, 1987 THROUGH MARCH 140 1988 BUDGET ACTUAL Revenues City of Miami's Contributions: Special Programs & Accounts $ 5,000.00 5,000.00 Emergency ShelterGrant (1987) 30,000.00 20,890.60 ,t Total $35,000.00 25,890.60 Expenditures Salaries FICA Tax Unemloyment Tax Forklift Rental Plastic Bags Telephone Liability Insurance Group Insurance Truck Rental Utilities Total Expenditures (OVER) UNDER BUDGET 0.00 9,109.40 9,109.40 $24,350.31 22,400.04 (1) 1,950.27 1,782.69 1,634.37 (1) 148.32 324.83 0.00 324.83 2,000.00 423.48 1,576.52 1,200.00 570.00 630.00 457.00 295.88 161.12 1,000.00 566.83 433.17 882.17 0.00 882.17 2,670.00 0.00 2,670.00 333.00 0.00 333.00 $35,000.00 25,890.60 9,109.40 t� � �� i • � +fit �, { Pj F� r 3" Cesar H. OdicSocial City mana et. Action 8858 Page 9 of EXHIBIT It SOCIAL ACTION OF LITTLE HAVANA ' DISALLOWED EXPENDITURES FOR THE PERIOD SEPTEMBER 15, 1987 THROUGH MARCH 141 1988 CHECK '`. NAME DATE NUMBER AMOUNT j Maria Valdez 10/06/87 6 $ 243.86 Maria Valdez 10/21/87 1002 416.66 Maria Valdez 11/05/87 1006 416.66 Maria Valdez 11/20/87 1013 416.66 Maria Valdez 02/11/88 1017 416.66 !� r Rafael Lopez 02 /11 /88 1052 81.61 t _ Rafael Lopez 03/01/88 301A 157.60 ` FICA Tax (on above salaries) 161.75 r, Total $2,317.46 (1) � r ` Legend: (1) See Finding #1. i y t38 4:iai f� Y �. k 4 Jj .gip 3 kp 4