Panel approves audit of CA Columbia Council ready to review recommendations

December 12, 1997|By Dana Hedgpeth | Dana Hedgpeth,SUN STAFF

Taking its first significant step to tighten control of the Columbia Association, the Columbia Council last night approved a three-month-long, $50,000 audit of the huge homeowners organization.

The council -- made up of elected residents from Columbia's 10 villages -- ordered the audit of the last three years of purchasing records after articles in The Sun this spring found questionable practices. The articles showed that CA staff members apparently falsified telephone bids, accepted late bids, altered bids after they were received and allowed contractors to increase their fees without written authorization.

Council members said they found the auditors' report complete and wanted to begin reviewing the recommendations.

"The audit will be beneficial to CA's operation and will probably save us money in the long run," Kenneth S. Puckett of Dorsey's Search said before the meeting. "It confirms there were some irregularities in documentation, and that's being cleaned up."

The Sun's findings prompted concern among the elected board, which has vowed to play a more significant role in the management of the 30-year-old association. Since the audit began, some council members have criticized past councils and CA staff members as becoming too accepting of CA purchasing procedures.

In the next few months, the board will conduct a nationwide search to replace CA's 25-year president, Padraic M. Kennedy, who plans to retire in the summer. The new president probably will help institute changes recommended in the association's purchasing process.

Key recommendations and findings from the audit by Raffa & Associates, P.C. are contained in a Tuesday letter the firm addressed to Joseph P. Merke, chairman of the Columbia Council:

We were engaged to apply certain investigative procedures and perform an evaluation of the Columbia Association (CA) purchasing and contracting policies and procedures from May 1, 1994 through April 30, 1997. Additionally, at the request of the purchasing task force, we examined a small number of purchases and contracts for the period May 1, 1997 to October 31, 1997 to provide insight as to whether CA's recent changes in purchasing policies and procedures are being followed. This engagement is a result of a front page and supporting article in the April 27, 1997 edition of the Baltimore Sun, which alleged six specific [types of] irregularities in the way CA staff performed its purchasing and contracting responsibilities.

Our investigative procedures as described in our Phase I and II reports, revealed that CA staff did not consistently follow CA policies and procedures for the procurement of purchases during the period tested. However, CA policies are not always clear with respect to obtaining oral bids versus price quotes, reconciling incomparable bids and adhering to bid deadlines. Also, due to the lack of supporting documentation, certain explanations from CA managers and division directors regarding specific exceptions could not be supported. We noted that purchases and contracts tested in our supplemental investigation for the period May 1, 1997 to October 31, 1997 contained adequate and recently implemented documentation.

Although the Baltimore Sun articles were generally accurate, they did not contain all of the relevant information. Without the explanations from vendors and CA staff, the articles lead the reader to conclude that CA may be corrupt in its procurement practices. We did not find any evidence of corruption in our testing. However, short of obtaining individuals' and vendors' bank accounts for review of unusual activity, our agreed-upon procedures were not designed to detect illegal activities such as kickbacks and collusion. Through our discussions with vendors, Columbia businesses and CA employees, no such illegal activities were mentioned.

The Baltimore Sun articles did, however, raise 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. Accordingly, in addition to the phone bid form and other changes instituted just prior to the Baltimore Sun articles (examined in the supplement to our Phase II report), we recommended further revisions to CA's purchasing and contracting policies and procedures for management to consider. Our recommendations considered issues such as proper controls, cost-effectiveness, efficiency, the ability to pass public scrutiny, as well as procedures in place for similar sized corporations, governmental organizations and homeowners' associations.

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