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New CFO headed office cited for weak controls
(Published May 8, 2001)
By OSCAR ABEYTA
Lack of internal financial controls in major parts of the D.C. government places the city in danger of violating several federal and local laws, according to the firm that recently completed an audit of the city’s fiscal 1999 books.
Among the areas cited for weak financial reporting controls is the business and individual tax processing operation that new Interim Chief Financial Officer Natwar Ghandi has been heading. Ghandi will replace current CFO Valerie Holt, who announced her resignation May 5.
Holt’s resignation came just one week after she delivered the long-overdue audit of the city’s finances for the last fiscal year. Holt, who was appointed by Mayor Anthony A. Williams last June, had been the target of stinging criticism from the press and some members of the city council since her office missed a Feb. 1 deadline for completing an independent audit of the city’s finances.
She incurred the wrath of the city council by not informing them of the problems her office was having with the audit until just a few days before it was due. In February, a majority of council members signed a letter calling for her resignation.
Because the CFO’s office is independent, neither the mayor nor the council can fire the chief financial officer. Only the control board has that authority.
The audit was late primarily because the District had switched to a new financial reporting system and workers were having a hard time getting the computers to generate the necessary reports for the auditors. Systems such as these generally take two to three years to implement, but to avoid a Y2K disaster, the city was forced to implement it in less than a year.
"I think Valerie has done a good job under very difficult circumstances," D.C. financial control board Chairman Alice M. Rivlin said.
Holt will be leaving her city job May 19 to become a strategic planner for a federal agency. Reportedly, Rivlin helped secure a position for Holt at the Office of Management and Budget as a way of easing Holt out of office painlessly.
Mayor Williams, in appointing Deputy CFO Ghandi as interim CFO, stated his intention to submit his former deputy’s name to the D.C. council and the control board for approval to fill the job permanently.
Ghandi, who has been with the city government since former CFO Williams brought him on in 1997, is currently the head of the city’s Office of Tax and Revenue, where he is credited with turning around one of the more dysfunctional city agencies in his short tenure.
Councilman Jack Evans, D-Ward 2, said he is pleased with Williams’ selection of Ghandi as Holt’s successor. When Holt was appointed last year, Evans had lobbied for Ghandi instead.
"We will hold him to the same high standards we held Valerie Holt to," said Evans, who heads the council’s finance committee.
"Valerie Holt did the right thing in resigning," Evans said. "She lost the confidence of the council and apparently she lost the confidence of the mayor and the control board too."
Despite giving the city’s fiscal 1999 books a clean audit, the firm that conducted the review – Mitchell and Titus – wrote in its report that the District is in danger of breaking several federal and local laws and regulations because of its lack of internal controls over its financial reporting practices. The report said the city could potentially be violating the Procurement Practices Act of 1985, the Anti-deficiency and Home Rule Acts, the Quick Payment Provision, lawsuits, court orders, federal grant requirements and the control board act.
The auditor’s report also pointed out areas in the government where financial reporting controls are weak. They include electronic data processing, business and individual tax information processing, bank reconciliation, the city’s dealings with the control board, Department of Housing and Community Development loan activity and overall financial management at several agencies.
"District officials need to place special emphasis and priority focus on restructuring certain aspects of the Office of the Chief Financial Officer," the report said. The report noted that there currently are not enough properly trained people working in the various city agencies. "In addition, assessments should be made of key positions in the Office of the Chief Financial Officer, at all levels, on their ability to perform the required work in a qualitative and timely manner."
Rivlin said the control board, the city auditor, the Inspector General and other city agencies will be looking into the reasons for the tardiness of the outside audit.
"The lateness (of the audit) revealed some of the weakness that need to be improved," Rivlin said.
Copyright 2000, The Common Denominator