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New NC Funding Policy Needs Some Fine-Tuning |
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Advice
By Harvey Goldberg
(The Department of Neighborhood Empowerment released a proposed new NC funding policy recently and ask for neighborhood council and public input. Here’s one expert’s analysis.)
Dear Mr. Kim:
I am glad to see that you have taken steps to improve DONE’s funding program and related financial controls in your June 16, 2008 draft, Proposed Changes in the Funding Program , that detailed six recommendations to be reevaluated after the 90 day comment period.
I believed that some of the recommendations are either existing policy or common sense and should be implemented immediately since delaying them would only aggravate existing problems.
1. When the original credit card from Bank of America was issued Neighborhood Councils (NC’s) were limited to petty cash withdrawals of $500 every 30 days. If that was changed with the new US Bank credit card, DONE should immediately reinstitute that control. I don’t think any NC Treasurers expects to withdraw more than $500 every 30 days.
2. If NC’s are not timely submitting their quarterly reports of expenditures to DONE, then DONE should stop funding them. I have reviewed the status of some NC’s reports online and found some 3-4 reports delinquent.
3.
Rather than waiting for comments on this draft DONE should notify the offending NC’s that they have the balance of the 90 days to get their reports up to date. The appropriate Neighborhood Empowerment Analyst (NEA) should contact the offending NC and arrange to work with them to bring their reports current. This process should be able to be completed in a matter of weeks with the help of the NEA’s.
4. AUDIT, AUDIT, AUDIT—The failure to promptly audit/review quarterly reports submitted by NC’s is a failure on the part of DONE. In fact DONE should be immediately auditing those NC’s that submit reports late, incomplete or when there is a change in Treasurer. Those NC’s that have Treasurer continuity and have submitted acceptable reports in the past will generally continue to do so, and thus they pose less of a risk. This is risk based auditing.
5.
I am not suggesting that NC’s with limited risk not be audited; they should be audited at least annually. At the same time those NC’s identified as the greatest risk should be audited immediately upon presentation of their submissions.
6. When the Treasurers were initially trained they were told that the NC’s could not open a checking account for Petty Cash. Did anyone really believe that it was safe and prudent that Treasurers keep several hundred to several thousand dollars in cash in a shoe box and carry that box to meetings, and, at the same time not comingle that money with their own?
Four years ago when I became Treasurer of the Tarzana NC my locked box was a personal checking account, in my name, subtitled “TNC-PC”. Each petty cash payment is made by check and there is a 100% trail for all monies.
DONE should immediately suggest a similar approach for each NC. If, at a later date, DONE finds a way to open a NC Petty Cash accounts, then the monies can be transferred from the personal checking account to it.
The four items above should be implemented immediately by DONE. They require little or limited effort by DONE and the NC’s. As a result DONE and the NC’s will be more secure and DONE would be on their way to instituting some of the controls they need rather than waiting for the 90 day period to begin.
The balances of the Draft recommendations are much harder to solve and comment upon. These include budgeting, purchasing, approval, processing and payment of bills, preparation of financial reports (actual expenses versus budget), which method of payment is used (petty cash, credit card or warrant), how much petty cash can be on hand and how and when financial reports are made available to individual Boards, DONE and the public. In addition, there is the issue of training and monitoring Treasurers (who are generally not financially oriented persons).
Mr. Kim you have made general recommendations and asked for comments with regard to the items detailed immediately above. Since DONE has not fully explained the process and controls in the draft, I personally think it is impossible for anyone to comments on specific recommendations.
For example, it is being suggested that petty cash accounts should be sized to that of nonprofit organizations with a $50,000 budget. What is missing is the intent of the Controllers Office with regard to the issuance of warrants (limit or expand the number of warrants to be issued). Also, how do we handle local people and merchants who provide services and don’t take credit cards and will not grant credit, how many times a month will we be allowed to refill petty cash from the credit card, etc.
I feel the best approach for the handling of the balance of the Draft’s recommendations would be to create a working committee to develop the procedures, reporting and controls that satisfy the needs of the City agencies while not placing unnecessary burdens on the NC Treasurers. This committee should include representatives from DONE, City Controller and Treasurers Offices and NC Treasurers (who to date have been left out of the process). This joint effort would allow the Treasurers to understand the City’s requirements and give the City the input of the NC Treasurers. Treasurers are not financial professional but ordinary citizens who are volunteering for public service.
Since Treasurers, in many cases, are not financially oriented a suggestion would be for DONE to develop or purchase simple internet based software that could be used by Treasurers to post their NC’s budget and financial transactions (petty cash, credit card and warrant) by line item. This could be integrated with the current warrant and credit card reports for each NC now posted by DONE. Such software would allow the NC Treasurers to prepare a financial report for their Board, DONE would have access and it would be available to the public. This software would be nonfinancial based and should have the simplicity of Quicken for ease of use. This would be useful since most Treasurers do not know how or have the ability to prepare a report for their Board detailing how much money was spent as compared to how much was budgeted for each budget line item. In addition, DONE is currently not equipped to do this based on the information supplied to them. Thus, when a request is made to issue warrant, DONE cannot determine if a NC is over or under budget.
What is important is not to institute a “bunch of changes” without developing the “big picture” so that it can be reviewed as one complete process. Comments from the NC’s to individual recommendations are meaningless unless we can understand the whole process.
Therefore, I request that you put together a working group that will include NC Treasurers to help develop the needed financial controls for the next step in the development of NC’s. (Harvey Goldberg is a retired CPA and Chief Financial Officer and the Treasurer of the Tarzana Neighborhood Council.) ◘
CityWatch
Vol 6 Issue 54
Pub: July 4, 2008
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