Workforce Investment Board Fiscal Practices - 3

On to the FY 2000 findings by Crowe, Chizek, et.al.

Notes on Finding 00-1 include "The Organization has not established procedures that allow for a matching of requests for grant funds with the specific grant expenditures. In addition, the Organization's focus has been on reporting revenue and expenditures based on the grant year-end. As a result, additional receivables or liabilities for grant funds in relationship to grant expenditures may exist on both a monthly and fiscal year basis." (Added emphasis is mine).

The auditors go on to outline accepted and common practice(s). "Accounting practices for cost reimbursement grants and contracts should include documentation for the request of grant funds with information attached for the specific expenses (i.e. vendor invoices) to be reimbursed by the funds. Accounting principles also require the matching of revenue and expenses and establishing procedures that ensure cut-off is proper on a monthly basis."

Why does this stuff matter? According to the auditors, the downside is "Potential for improper use of grant funds and related monitoring".

On to Finding 00-2:

"The organization is experiencing difficulties in preparing monthly financial statements for management use. In addition, timely reconciliations of account reconciliations were not prepared during the fiscal year ended June 30, 2000." (My emphasis)

The downside, according to the auditors (and this may seem familiar) "Potential for improper use of grant funds and related monitoring".

Finding 00-3

"The Organization has not followed the Cost Allocation Plan as approved by Indiana Department of Workforce Development (DWD) in the allocation of various cost pools. The impact of these changes affect the allocation of various cost pools. The impacts of these changes affect the allocation of indirect costs to various grants, including those specifically affected (ACP, AEGF, WIA/JTPA Youth)." (My apologies, I don't know these acronyms).

DWD, of course is the agency the WIB reports to. The description above - at the least - amounts to ignoring company policy. I think most of us will recognize that there is a downside to that sort of practice.

The auditors' concern (no surprise) "All grants affected by the allocation of Cost Pools #15, #97 are impacted by change." (Sorry, I don't know what the cost pool numbers refer to.)

Finding 00-4

"The Organization has reported expenditures by grant under the reconstruction process that do not match those reported on the Accrued Expenditure Reports (AERs) utilized for grant monitoring and settlement."

In retrospect, this will turn out to be a key finding. The auditors continue, "Reported costs do not match detailed records prepared through the reconstruction process."

The auditors must have been scratching their heads about this one. I've heard reports that the actual cost to reconstruct this organization's books was around $500,000 and still the auditors state reported costs don't match the records!

Now that we have a flavor for the tradition of the NIWIB, let's fast forward to the audit for FY 2003 - the most recent in my packet of 169 pages.

The FY 2003 audit was prepared by a different company for some reason: Comer, Nowling and Associates. There is definite improvement illustrated in this report. Significantly, no material weaknesses are identified - though there are reportable conditions. These conditions (again) have to do with federal grants.

And, sad to say, this auditor agrees with Crowe, Chizek... that the WIB is not "qualified as (a) low risk auditee".

Let's now return to our assignment to compare and contrast.

The Northern Indiana Workforce Investment Board displayed very sloppy and haphazard record keeping. The auditors complained that the biggest problem they faced was the reality that they couldn't possibly be sure they could identify all the problems. The WIB was out of compliance (consistently) with federal grant programs as well as with the agency they report to. These systemic failures had a real cost - which will be the topic of the next chapter.

The City of South Bend with a far larger and more complex budget by contrast had very specific reportable conditions. Any of us who run or have run businesses know that auditors insist on regular, timely deposits - no matter how much (or little) money is involved. It's a good practice that indicate controls are in place. But lets remember - no money was lost, misappropriated or turned up missing.

The other area of focus had to due with specific account "shortfalls". These were in the categories of central services and parking garage funds. Per the mayor, these were anticipated and routinely covered by general revenue funds. (There's nice explanation about how these funds work in the South Bend Tribune article of August 28, 2007 by Jeff Parrot). One wonders if there is a way to eliminate future confusion by reallocating figures into different categories, but once again - no money was lost, misappropriated or turned up missing.

So as promised, next time we look at what the Northern Indiana Workforce Investment Board cost you and the people they were to serve. 'Til then.

Democracy is not a spectator sport.

Don Wheeler