Audit: More than $48K in 'questionable' spending
Officials question spending and cities look at greater oversight of TV station, which is jointly owned by OC and West Linn
By Kara Hansen Murphey
Pamplin Media Group
An audit of the finances at Willamette Falls Media Center found $48,293 in 'questionable' spending over a roughly one-year period at the cable access station, owned jointly by Oregon City and West Linn.
The results of the review, released late last week, follow the temporary shutdown of the media center in April because of 'concerns raised over the financial management and general operations of the media center, as well as the resignation of two Clackamas Cable Access Board members who cited concerns over internal controls,' according to the cities.
The center reopened soon after, but the cities still decided to hire a consultant to review the operation, located in Oregon City with about six employees.
The review for April 1, 2010, through April 30, 2011, did not find evidence of fraud but did note numerous weaknesses in financial control that could allow fraud to go undetected.
'While we did not find any direct evidence of misappropriation of financial resources, we found numerous instances of unsupported transactions where the ultimate purpose was left undeterminable and examples of purchases that are commonly made for home use for which there was no support for the business purpose or intended use,' stated the report, prepared by Nancy Young of Moss Adams LLP.
'The pure lack of supporting documentation is a 'red flag' to possible fraud.'
Dan Holladay is chairman of the advisory Clackamas Cable Access Board, which oversees the studio's policies and budget. He stressed that WFMC employees are not accused of theft or fraud.
'They've been working hard for a lot of years to provide public access television,' he said. 'They may not have had the experience to do the finances that were going through the studio, but there wasn't any wrongdoing. It was really more about inexperience and sloppy accounting than about fraud or abuse or theft.'
As of early this week, he added, the audit results were already outdated.
'Now that studio management has had a chance to give them additional documentation, I think it's going to come down to a few hundred dollars of missing receipts,' Holladay said.
Audit flags purchases, procedures
The $48,000 identified in the audit report as questionable transactions amounts to about 18 percent of the media center's expenditures for the current year, according to West Linn. Most were considered dubious because they lacked documentation showing their purpose, such as itemized receipts. Auditors checked purchases made with credit cards, checks and petty cash.
Credit card purchases without receipts included a $433.44 tab at the MGM Grand Hotel in Las Vegas along with payments for airport parking in Portland and cab fare in Las Vegas plus about $19 at the Las Vegas Flamingo Tropical Breeze. In all, that group of purchases totaled $553.15 from April 11 to 16 of this year.
Others included $7,347.46 in goods bought from Home Depot and electronics stores between June 2010 and February 2011.
Another $6,113.68 in credit card transactions were considered 'convertible,' meaning they could easily have been put to personal use and there was nothing to show they weren't.
In a review of petty cash, auditors found all but one item - $14.18 from Jo-Ann Fabrics and Crafts - were backed up with itemized receipts. But they noted petty cash issues from outside of the period under review, when employees took 'draws' on their pay from petty cash.
Though the draws were all paid back over time, in one case that took more than a year.
'The four transactions appear to be interest-free loans and may be an ethics violation,' the audit report states. 'The WFMC is not authorized to grant loans to its employees under any circumstances.'
Officials want quick turnaround
The center must improve financial management and controls, according to the report, which also recommended that 'management track and monitor purchases for items that are easily convertible to ensure the continued custody and proper use of the item.'
The report also suggested that managers keep receipts for all purchases and document the business purpose for each expenditure and recommended creating a new policy that strictly prohibits taking payroll draws or borrowing from petty cash.
Among other notes:
'Some purchases were made for food and did not have a documented business purpose. As WFMC is funded with public funds, it should ensure that any food purchases are necessary and meet with state statute.'
'One employee has not paid the correct amount for their share of the insurance premium,' and their share must be withheld from their paychecks.
'Finally, due to the significant weaknesses identified in the control environment, the WFMC management should communicate the intended changes in its controls and formally report to the city of West Linn and (the) city of Oregon City management of the actions it will take to resolve the issues,' the report states.
Cities seek tighter controls
West Linn officials have wrestled for tighter financial management at WFMC for several years, although the battle heated up in 2009, when the city proposed paying fees for services used rather than a set proportion of funds.
Today, Oregon City and West Linn each funnel a percentage of franchise fees from Comcast to the cable station, typically about $100,000 each. That makes up about two-thirds of the studio's income, with the remainder coming from contracts with other government agencies and from equipment rentals and production fees.
Officials have called for improved financial controls and business practices over the past year.
Kirsten Wyatt, assistant city manager in West Linn, said city leaders are now considering the creation of a new Willamette Falls Media Center and Clackamas Cable Access Board oversight committee, made up of Oregon City and West Linn's city managers or their designees.
'Creating an oversight committee creates a structure in which the cities can take some steps to deal with these issues,' Wyatt said. 'Our intent is not to take over complete power but to make sure there are defined rules and responsibilities between financial oversight and management.'
She wasn't sure whether anyone would be asked to pay back studio money spent without a documented business purpose or backed up by receipts.
And though Wyatt said she felt many problems noted by the audit 'are explainable or understandable,' the report is 'very concerning, especially considering that guidance has been given on how that could have been avoided.'
'In light of that, it's worrisome the professionalism of our two cities was apparently ignored,' she said. 'If that sort of thing were to happen at that scale in our organizations, there would be some very direct lines of accountability.'
But Holladay, of the cable access board, wasn't sure the oversight committee is the solution.
The West Linn City Council has approved the new committee, and Oregon City leaders will vote on the proposal.
'Certainly the board feels there needs to be some changes in the way the finances are handled, and the policies and procedures Moss Adams recommended are certainly appropriate and need to be initiated,' he said. 'I'm not certain that city managers taking over studio management is the best way to go about that.'
Holladay questioned whether studio managers would then be considered public employees, and in that case they could be eligible for expensive public employee benefit programs.
More importantly, he said, a board separate from Oregon City and West Linn has long operated Willamette Falls media and done so successfully.
'I believe it should continue to operate that way,' he said.