Remove ImagesCity Unsure Of Its Own Audit Policy
September 06, 2012
The City of Greensboro doesn't appear to know what the city's policy is for auditing the nonprofit organizations it gives money to, and that becomes particularly apparent when one looks into the management of privately owned Center City Park.
The private organizations that own and operate the park – Action Greensboro and Downtown Greensboro, Inc. (DGI) – have not been audited by the city's Internal Audit Division or subject to annual compliance reviews, despite the fact that they each receive city funding, some of it in a strangely convoluted way.
It is also difficult to tell just what the city expects from such organizations in terms of financial scrutiny, and the answer from city staff keeps changing.
The $350,000 the city gives annually for "maintenance" of Center City Park does not go directly to DGI, which manages the park. Instead the money is allocated to Center City Park LLC, of which Action Greensboro is the manager and sole member, according to the North Carolina secretary of state's website.
The city also gives money to DGI separately. DGI annually receives $103,500 for operating expenses and $100,000 for "downtown improvement projects."
In addition to city money, Action Greensboro is supported by six sponsoring foundations: the Joseph M. Bryan Foundation, the Cemala Foundation, the Community Foundation of Greater Greensboro, the Cone Health Foundation, the Tannebaum-Sternberger Foundation and the Weaver Foundation. As of 2011 Action Greensboro had almost $9 million in assets, about $2 million of which were in cash or cash equivalents.
In an audit by independent auditing firm Bernard Robinson & Company LLP, Action Greensboro and Center City Park LLC were grouped together and treated as the same entity. The audit also noted that Action Greensboro was a member of the Greensboro Partnership, which is what Greensboro calls its chamber of commerce organization.
Although the audit was made available to the city, there has not been a compliance review of Action Greensboro or Center City Park by the Greensboro's Internal Audit Division. A compliance review focuses specifically on how an organization spends funds from the city, to make sure they are spent on public service.
When reached for comment about the Greensboro auditing policy on Friday, August 24, City Attorney Mujeeb Shah-Khan said that he and staff weren't sure what the policy was, or if there was a policy at all.
City staff has been reviewing Greensboro's auditing procedures since July when it was revealed that Grassroots Productions, which had not been audited since 2008, lost its nonprofit status in 2011 for failure to file tax returns. Grassroots receives city funds annually to put on Fun Fourth and the Festival of Lights.
Also on August 24 the city issued a statement on the auditing of nonprofits that focused on a "Zero Tolerance Policy" passed by the City Council in 2004, which requires all agencies that receive city funding to submit to audits by independent firms and make financial records available to the city for review.
The statement, which was part of the weekly "Items for Your Information" from the city manager's office to city councilmembers, admitted that not all agencies had been audited or reviewed as the policy requires.
The Zero-Tolerance Policy was adopted in response to a scandal surrounding Project Homestead, a low income housing provider that failed to provide satisfactory financial information to the city and eventually fell apart amid accusations of gross misappropriation of funds.
According to City Communications Manager Donnie Turlington, the frequency with which a company is subject to an audit or compliance review by the Internal Audit Division depends on its individual contract with the city.
In an email Turlington initially stated, "The contract that the City has with the Greensboro Partnership (Action Greensboro) and Center City Park LLC (maintenance agreement) do [sic] not require the City to conduct a formal audit if the Greensboro Partnership and Center City Park LLC provides [sic] a financial statement and third party audit. However the city is responsible for conducting an annual compliance review of the financial documents."
But Turlington later offered a "clarification" of that statement in another email: "My earlier comment that the compliance review was required annually – that only applies to certain contracts."
This is despite the fact that the city's statement released on August 24 characterized the Zero-Tolerance Policy as requiring that "all public service agencies be reviewed to ensure that city funds are expended for a public purpose."
There are 11 city-funded organizations that Turlington in his clarification identified as having contracts that call for annual compliance reviews along with independent audits and providing financial information. That list includes East Market Street Development Corporation, Preservation Greensboro, the Greensboro Sports Commission, Piedmont Triad Regional Council, Triad Stage, Greensboro Children's Museum, Piedmont Triad Partnership, Greensboro Jaycees, Community Theatre of Greensboro and Grassroots Productions.
As noted Grassroots, according to the city is on the list for annual reviews but had not been reviewed since 2008. City staff say that they are in the process of making the auditing procedure more consistent.
Action Greensboro, Center City Park LLC and DGI are not on that list, and according to staff's latest interpretation of the city's auditing policy, a compliance review may not be required on a regular basis.
Housing related agencies on the other hand have been subject to frequent reviews by the Internal Audit Division over the last 10 years. Greensboro Urban Ministries, Greenbriar Housing and the Greensboro Housing Coalition have undergone several compliance reviews by the Internal Audit Division.
Director of the Internal Audit Division Len Lucas, who now works under Mary Vigue, an assistant to the city manager, has said that his office has been reviewing the financial information of nonprofits administered by the Planning and Development Department. However, the division has only been reviewing nonprofits administered by other departments "as time and staffing allows."