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Columbia Public Interest Policy Institute

Management Audit

Report No. 2000-04

Susan Baugh, Principal Management Auditor
Bert Golla, C.P.A., Senior Financial Auditor

Introduction
Audit Objectives
General Conclusions
Major Findings:

Finding 2-1 - The Columbia Policy Institute Was in Compliance With King County’s General Contractual Requirements and Its Project-Specific Contractual Requirements.
Finding 2-2 - The Columbia Policy Institute’s Financial Management Practices Were Reasonable; However, Its Internal Controls Could Be Improved Through Separation of Duties and Two Signatures on Checks.
Finding 2-3 - The Columbia Policy Institute Executive Director’s Responsibilities Were Not Clearly Identified in Either the County Contract or Internal Organization Documentation, and His Compensation Was Not Tied to Deliverables.

INTRODUCTION

The management audit of the Columbia Public Interest Policy Institute (Columbia Policy Institute) was conducted at the request of the Metropolitan King County Council. The audit was prompted by the council’s interest in determining Columbia Policy Institute’s compliance with King County’s general and project-specific contractual requirements, including the scope of work and the services provided to county citizens under the terms of the Columbia Policy Institute’s contract. In addition, the council was interested in a review of the Institute’s financial management practices.

The Columbia Policy Institute began contracting with King County in July 1998 for the purpose of increasing citizen involvement in public policy issues. The specific contractual objective was to increase public access to technical, legal, and academic research by conducting public presentations and workshops, and by providing research on public policy issues of concern to King County and its citizens.

AUDIT OBJECTIVES

The audit objectives were to review Columbia Policy Institute’s compliance with King County’s general and project-specific contractual requirements, including the scope of work; and to identify the services and benefits provided to county citizens under the terms of the contract. In addition, Columbia Policy Institute’s financial management practices were evaluated.

GENERAL CONCLUSIONS

The general audit conclusion was that the Columbia Policy Institute was in compliance with King County’s general and project-specific contractual requirements and provided the required services and benefits to county citizens. In addition, Columbia Policy Institute’s financial management practices were determined to be reasonable, although the Institute’s internal controls could be improved.

MAJOR FINDINGS AND RECOMMENDATIONS

Finding 2-1. The Columbia Policy Institute Was in Compliance With King County’s General Contractual Requirements and Its Project-Specific Contractual Requirements.

As a county contractor, the Columbia Policy Institute is required to meet a series of general and project-specific contractual requirements, which are displayed in Appendix 1. We found that the Columbia Policy Institute was in compliance with the county’s general requirements and the specific requirements identified in the initial 1998-99 contract and in the 2000 contract amendment. In addition, the Institute met the primary contract objective of increasing public access to technical, legal, and academic research by conducting public presentations and workshops, and by providing research on policy issues of concern to King County and its citizens.

One difficulty encountered during the audit, however, was the broad contractual scope of work and vague contract language. Public interest research, which was the primary focus of the Columbia Policy Institute’s contract, was neither defined as a term nor appropriately delineated by a suggested list of topics or activities. In addition, certain activities such as conducting presentations outside King County did not appear to directly serve King County citizens. King County’s Community Services Division Coordinator confirmed that the broad language contained in this "unique" special program contract covered any variety of deliverables, and combinations of research and administrative activities.

The audit recommended that the Community Services Division ensure that key terms are more clearly defined and deliverables are appropriately delineated for unique special program contracts.

Finding 2-2. The Columbia Policy Institute’s Financial Management Practices Were Reasonable; However, Its Internal Controls Could Be Improved Through Separation of Duties and Two Signatures on Checks.

The Columbia Policy Institute‘s contract and contract amendment with King County provided $71,000 for public interest research between July 1998 and December 2000. As of June 30, 2000, the Columbia Policy Institute received county payments totaling $44,845. Based upon the review of sample invoices, the Columbia Policy Institute, in all material respects, appropriately spent its county funds on research and other activities that were consistent with the terms of its county contract.

However, some minor discrepancies and questions were raised about administrative expenses. For example, the Executive Director was inadvertently overpaid $189 for expenses incurred on behalf of the Columbia Policy Institute in 1998 due to an arithmetic error.

In addition, although no irregularities were noted, the Columbia Policy Institute’s internal controls could be improved to safeguard the organization’s financial assets. For example, the Executive Director served as the Institute’s acting treasurer, which was a concern because he not only disburses agency funds but also reconciles bank statements and prepares financial reports without the Board of Director’s oversight. In addition, audit staff determined that the Executive Director issued checks with only one signature despite the requirement for two signatures in the Institute’s by-laws.

The audit recommended that the Executive Director reimburse the Columbia Policy Institute for the $188.92 overpayment, and the Institute’s Board of Directors appoint a new treasurer whose duties would include reviewing bank statements and cancelled checks as well as preparing the monthly bank reconciliation statement. The Institute should also develop a policy requiring two signatures on each check that exceeds a Board-established monetary threshold.

Finding 2-3. The Columbia Policy Institute Executive Director’s Responsibilities Were Not Clearly Identified in Either the County Contract or Internal Organization Documentation, and His Compensation Was Not Tied to Deliverables.

On January 14, 1999, the Board of Directors appointed Mr. Jeffrey Cain as the President and Executive Director of the Columbia Policy Institute. The Executive Director served as an "independent contractor" rather than an employee of the Columbia Policy Institute.

However, the Board of Directors did not execute a written employment contract with the Executive Director. A contract employee would typically have a contract that would describe the contractor’s responsibilities as well as specify the required deliverables to promote accountability in achieving the Institute’s goals. The contract would also provide an objective basis for the Executive Director’s compensation by tying the payments to deliverables.

The audit recommended that the Columbia Policy Institute develop a written, performance-based employment contract, which describes the Executive Director’s responsibilities and the basis for future compensation based upon clearly specified deliverables. The Community Services Division Coordinator should review the employment contract to ensure that it is consistent with the terms of the King County contract.

Updated: 12/06/02

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