The Indiana State Board of Accounts has released two examination reports on the Switzerland County Convention, Recreation, and Tourism Commission, and those reports show problems with how the commission handled its reporting of finances as well as how board members may have inadvertently profited from the commission.
Both reports were released by the state on November 15th, with one covering the time period of January 1st, 2007 until December 31st, 2009; and the second covers from January 1st, 2010 until December 31st, 2010.
In both reports, the state is critical of how the commission operated, both under former directors David Attaway and T.J. Justice; as well as how board members benefited from the commission without filing the proper “conflict of interest” statements required by the state.
It should be noted that the auditors found no money missing, it is a matter of record keeping and filing the proper paperwork.
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In the examination covering 2007 through 2009, the auditors found problems with the condition of the records that were being kept by the tourism commission.
Auditors found that the tourism commission did not file annual financial reports with the Indiana State Board of Accounts in any of the three years that the examination covered. The auditors found that the computerized records that the tourism commission had during 2007 and the first six months of 2008 did provide monthly cash balances for each fund that the tourism commission has; but financial transactions, such as receipts and disbursements, were not recorded for each individual fund.
A new accounting software program was implemented in July of 2008, but the auditors were unable to see any financial records that summarized receipt and disbursement transactions for the last six months of 2008 when this program was being used.
In the examination report, the State Board of Accounts notes that Donna Graham, former treasurer of the tourism commission, said that the financial transactions for that six month period had been recorded, but computer problems caused all of the information to be lost. She told the auditors that she again loaded all of the information into the new system, but again more computer problems caused the data to be erased.
The auditors noted that the tourism commission had no computerized backup for its financial records.
The auditors also found adjustments had been made to accounting records on December 31st, 2009. The examination report states that Donna Graham said that expenditures recorded in the commission’s General Fund, RECAP Fund, and Special Projects Fund were made to correct cash balances as of July 1st, 2008, which were recorded when the commission started the new software system.
It was noted by the auditors that reconcilements of record balances of cash and investments to deposited balances were not presented for examination at the time the auditors were here for the period of July, 2008 to November, 2009.
The audit also found problems with how the tourism commission handled the funds of other entities that it was helping.
In the examination report, it was noted that the commission had created a separate “Sales Account Fund” to handle the money that the tourism commission was collecting for local programs, such as selling tickets for performances at the Hoosier Theater and collecting camping fees for the town of Vevay for those camping in the Paul Ogle Riverfront Park.
Although the fund existed and money was taken in and disbursed, the auditors show no record of those funds being recorded in the commission’s accounting records.
There were also two issues filed in the report involving a “conflict of interest” for board members.
The audit noted that the tourism commission began paying Donna Graham $600 per month beginning on July 1st, 2008 to perform bookkeeping duties using the computerized accounting software that the commission had purchased. The examination shows that the commission continued to pay her a monthly fee for the remainder of 2008 and also in 2009.
As a member of the tourism commission’s board of directors, Indiana law says that members must file a written statement acknowledging that they have a conflict of interest when one arises. This is true of not just the members of the tourism commission, but for any public servant.
The examination report shows that there was no conflict of interest statement filed and there was no written contract presented to the auditors.
The other issue involving conflict of interest in the first audit examination report involves Fisher Real Estate receiving a RECAP Large Project Facade Grant from the commission’s RECAP Grant that it had received from the Indiana Housing and Community Development Authority.
The grant, which was approved by a grant committee in 2009, was used to improve the entrance way and driveway of the Schenck Mansion Bed and Breakfast. At the time the grant was awarded, Lisa Fisher was a member of the tourism board, but did not file a “conflict of interest” letter at that time.
After being interviewed by the auditors, Lisa Fisher did make an official response to the examination, and that response is included in the examination report.
Her statement, in part, reads: “My husband and I applied for a facade grant after Vevay was awarded the RECAP grant from the State of Indiana. We were awarded the maximum grant for a large facade which totaled $30,000. I wanted to mention that this grant was run through the office of tourism, but the tourism board or its members had noting to do with who was awarded the grant. A community grant committee was established to review the applicants and award accordingly. We were in the planning stages of changing our exterior grounds to accommodate large weddings. When our then Executive Director head that we were making some changes, he approached us and even brought us an application for the grant. He did this to several business owners in town. His goal was the use the state grant money exactly how the state wanted it to be used. Our project met the criteria and we were awarded the grant. Where the gray area comes in is that I was not instructed to put this on a conflict of interest former after being awarded the grant. The money for this grant did not come from tourism dollars, and the grant committee was not made up of tourism board members. I would have been happy to put it on the conflict of interest form we fill out every January if I had known that I needed to.”
Auditors also found several problems in how the tourism commission reimbursed employees for some benefits and allowances.
Involving former executive director David Attaway, the tourism commission had a personal services contract for a monthly car allowance payment; and also a monthly payment to cover reimbursement for his health insurance costs.
Those payments, according to the auditors, should have been run through the tourism commission’s payroll system, but they weren’t. That meant that no payroll taxes were withheld, and the tourism commission also did not report or remit the employer’s share of social security taxes.
In terms of David Attaway’s monthly car allowance, the auditors found no documentation of actual miles traveled on the claim that was filed.
The examination states that 25-percent of claims that were reviewed from January 1st, 2007 until December 31st, 2009 were not listed on the accounts payable voucher register, which is used to document the tourism commission members’ approval of those disbursements. It also noted that the commission had been assessed penalties and interest totaling $598.19 during 2009 for not paying amounts owed by the required dates.
Finally, the report states that the tourism commission prepared an annual operating budge for the years 2007, 2008, and 2009, but: “No evidence was presented for examination to indicate that the annual budgets were submitted to the Switzerland County Council for their review and approval.”
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The second audit examination by the State Board of Accounts covered the time period of January 1st, 2010 to December 31st, 2010.
Again the auditors found fault with how the sales account records were kept with regard to the tourism commission taking in money for things like the sale of tickets for performances at the Historic Hoosier Theater and for those paying to camp in the Paul Ogle Riverfront Park.
Again, that money was not recorded in the tourism commission’s accounting records during 2010.
Also, the auditors reported that the 2010 Special District Annual Report, a report that is filed with the state and reports financial activity and cash and investment balances was not completed and filed with the Indiana State Board of Accounts until June 13th, 2011. State law says that the report must be filed within 60 days after the close of each fiscal year.
The audit examination also covered the optical images of checks. It said that starting in November of 2010 the bank used by the tourism commission did not return the actual canceled checks with the bank statement for the tourism commission’s General Fund bank account, but instead returned optical images of the front side of checks. Again, Indiana law states that the original checks must be retained so that the information on both the front and back can be seen.
In terms of board members having a conflict of interest, the auditors again noted that tourism commission treasurer Donna Graham was continuing to perform bookkeeping services during a portion of 2010, but that was not reflected in the filing of a conflict of interest form and it was paid through the vendor claim process and not through the tourism commission’s payroll.
The auditors also found the absence of a conflict of interest statement for board member Ron Otter. He had applied for and received a RECAP Grant in the amount of $15,926 to be used for repairs to the Sinclair Garage located on Main Street during 2010. He received the grant from the RECAP Large Project Facade Grant committee, but did not file a conflict of interest form at that time.
Continuing to be an issue in the 2010 audit were how the payments under “personal services” contracts both with outgoing executive director David Attaway and then new executive director T.J. Justice were handled.
Along with health insurance reimbursements and car allowances, it was noted that the tourism commission approved a “relocation allowance” for T.J,. Justice to move to Switzerland County after he accepted the executive director’s position in the amount of $7,000 to cover moving expenses. That was paid to T.J. Justice in July of 2010; but the payment was not processed through the payroll system so no payroll taxes were withheld and no employer’s share of social security taxes were paid.
It was noted that these payments were also not included on the employee’s Internal Revenue Service W-2 forms.
The auditors found that 40-percent of the accounts payable vouchers that they reviewed were not listed on the Accounts Payable Voucher Register for 2010; and signatures that affirmed that the goods and services that had been purchased had been received were absent from the payable vouchers that were reviewed.
The auditors also found that on October 29th, 2010, there was a transfer of funds made from the RECAP Grant Fund to the Special Projects Fund that totaled $86,789. The voucher for this transfer had no supporting documentation attached to it, and also did not have any description noting on the accounts payable voucher, according to the examination report.
The examination report said that the transfer of funds, “…Was not certified by the Treasurer; nor was it approved by the Commission Board.”
During the examination, it was reported by Office Manager Natasha Turner that the executive director had instructed the treasurer to make the transfer to reimburse the Special Projects Fund for expenses that had been incurred during the renovation of the Grisard Building, which was being funded partially from the RECAP grant proceeds.
The auditors also found that the certified report of names, addresses, duties, and compensation of public employees that was due on January 31st, 2011, was not filed with the state examiner’s office until June 24th, 2011.
Again, the annual budget for the tourism commission for 2010 was not presented to the Switzerland County Council for its review and approval.
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The two reports of the State Board of Accounts are a matter of public record, and may be found at http://www.IN.gov/sboa/WebReports/B39732.pdf and http://www.IN.gov/sboa/WebReports/B39731.pdf.