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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
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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
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bEPARTMENt OF INttANAi_ Aurms n Rr.virws
AUNT REPORT
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'' Resat H. bdio ,rF May 10, 1988 I„I 88-587
City Manager
' Social Action of Little Havana,
Inc. Intet•im Audit
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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.
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d. to recapture funds if SAL failed to comply with
the terms of the agreement.
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Cesar
H. Sdio Social Action
City
Manager. 88-587
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Page 2 of g
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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
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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.
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II.
PRIOR PERIOD'S AUDIT FINDINGS AND RECOMMENDATIONS NOT
RESOLVED
Not applicable, this is the first audit examination.
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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
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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
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received written assurances that SAL would be
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accountable for funds disbursed. The CD disbursed
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$20,890.60 without any assurances that SAL would
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account for the funds.
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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
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City Manager 88-587
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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
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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
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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
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payments in money, materials, or- services for- or- in
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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.
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Cesaw H. Odio Social Action
City Manager 00-507
page 5 of 0
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. 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.:
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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.
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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
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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
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Cesar H. Odio Social Action
City Manager 88-587
Page 'a of 9
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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
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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
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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
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NAME
DATE
NUMBER
AMOUNT
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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
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Rafael Lopez
02 /11 /88
1052
81.61
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Rafael Lopez
03/01/88
301A
157.60
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FICA Tax (on above salaries)
161.75
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Total
$2,317.46 (1)
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Legend:
(1) See Finding
#1.
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