Audit criticizes Columbia spending Three-month review shows association lacking controls

December 12, 1997|By Dana Hedgpeth and Dan Morse | Dana Hedgpeth and Dan Morse,SUN STAFF

An extensive audit of the Columbia Association shows the huge homeowners organization repeatedly used poor spending practices over the last three years and recommends major changes in the way it spends millions of dollars on behalf of the city's 85,000 residents.

The three-month audit confirms many of the findings of an investigation published by The Sun in April. A Washington accounting firm conducted the audit and wrote a 27-page report, which was obtained by the newspaper yesterday and then officially released last night by CA's governing board.

"It shows that it [CA's purchasing procedure] was out of control," said Wanda Hurt, one of CA's volunteer board members who commissioned the $50,000 audit. "We have to have somebody who is responsible and won't let it happen again and make sure the procedures are being followed. It's embarrassing."

The audit did not determine if CA's spending practices overall had wasted money. And auditors found no "evidence of corruption" among CA's 185 full-time staff members. But the auditors said CA's inadequate procedures could give the appearance of favoritism in selecting contractors.

The audit (which can be found on The Sun's Internet site: www.sunspot.net/news/columbiaaudit/) describes the newspaper articles as "generally accurate" and raising "legitimate issues regarding lack of supporting documentation.

"Further examination revealed not only insufficient supporting documentation, but also inadequate purchasing and contracting policies and procedures for a quasi-governmental organization the size of CA."

In the planned community of Columbia, CA runs everything from day-care programs to 3,000 acres of parkland. CA's current budget is $49 million, making it one of the largest homeowners associations in the nation. The typical homeowner pays about $740 a year to CA in what is essentially a local property tax.

CA's spending policies are similar to those of some governments and large businesses. But The Sun found CA has fallen short of accepted purchasing standards by accepting late bids, altering bids after they arrived and allowing contractors to increase their projects without written authorization.

CA staff members also said they received telephone bids from contractors who later told a reporter they had never made the bids. CA solicits and reviews bid quotations for purchases greater than $1,500.

In recent months, CA staff members had downplayed the newspaper articles and the significance of the audit. But they also have tightened their spending practices since April.

Last night, the top staff member -- longtime President Padraic M. Kennedy -- called the audit a "useful review of our purchasing."

"I don't think there were any surprises," he added. "There was no favoritism. No vendor or staff benefited. I don't think they found the same things as The Sun."

In the past, Kennedy said his staff members have always worked to get the best deal for CA.

CA officials plan to hold a news conference at 10: 30 a.m. today to discuss the audit.

Auditors at Raffa & Associates, P.C., did not return repeated calls yesterday.

But in the audit, the firm recommends new policies designed to save money and avoid the appearance of favoritism. Among those changes, CA should institute a more formal bidding process for projects greater than $10,000, consider creating a purchasing agent position and take other steps to ensure the association gets the most for its members' money.

The audit found problems on a number of fronts:

Roughly one of every six times that CA staff members made purchases greater than $1,500, they either failed to follow proper procedure or failed to record proper paperwork. The auditors studied 180 of these randomly selected transactions from 1994 to 1997.

CA staff members routinely failed to produce missing documents for auditors. The staff members said the documents might have been in other files, but never provided them.

CA staff members didn't always understand how to obtain bid quotations over the telephone for purchases in the $1,500 range. Certain staff members "did not realize that they needed to formally ask for an oral bid and document the name of such person giving the bid."

CA staff members did not use competitive bidding to evaluate proposals for professional services jobs -- an engineering design contract, for example.

When the auditors contacted 40 local contractors who had not received CA business, only three said CA shows favoritism in its selection of contractors. But CA staff members routinely created the appearance of favoritism by not documenting telephone bids, accepting late bids and changing bids after they arrived.

Quoting a government manual on purchasing, the auditors wrote: "To the public, appearance is reality."

In conclusion, Raffa & Associates wrote:

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