california integrated waste management board 1 testimony of marlena wells-murphy, ciwmb auditor...

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California Integrated Waste Management Board

Testimony of Marlena Wells-Murphy,

CIWMB AuditorAudit of Used Oil Nonprofit Grant to Sports Car Club of

America

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INTRODUCTION

• Marlena Wells-Murphy, CIWMB Administration & Finance Division.

• CIWMB Auditor for Used Oil Nonprofit Grants UNP4 and UNP5 to Sports Car Club of America (SCCA).

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Recap of DOF Audit Findings• Costs were not reflected in accounting records. Reimbursements

were thus reflected as profit.

• SCCA was unable to provide required supporting documentation for certain reimbursements.

• SCCA distributed grant funds totaling more than $30,600 to David Vodden for commissions that were not disclosed to the grant manager or authorized in the grant budgets or work plans.

• DOF determined that $234,928 should be remitted to the CIWMB as ineligible costs.

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SCCA Disputed DOF’s Audit Findings

• Following the issuance of the final DOF audit report, SCCA disputed the findings.

• CIWMB staff then made extensive efforts to accommodate SCCA and resolve the dispute.

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CIWMB Made Extensive Efforts to Resolve the Audit Dispute

• Held meetings with SCCA’s Executive Officers;• Made a site visit to Thunderhill Park;• Interviewed SCCA’s Executive Staff; and• Independently reviewed the DOF audit findings;• Granted SCCA five (5) time extensions to submit

documentation to support its costs -- extending the audit resolution process by more than eight months.

• Ultimately reduced the final reimbursement total in favor of SCCA.

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CIWMB Staff Recommendation

• Final CIWMB adjustment determined that $74,927.59 should be reimbursed as ineligible costs.

• Staff recommends the Board uphold this final, adjusted reimbursement determination.

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Explanation of Reimbursement Adjustments

• Kiosk – No adjustment.

• Personnel – No adjustment.

• Sponsorship – After review, CIWMB staff determined that $160,000 in expenses questioned by DOF were eligible for reimbursement.

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Responsibility for Financial Reporting and Compliance

• Both the grant application instructions and the grant agreements put SCCA on full notice regarding proper financial reporting and compliance.

• The CIWMB had no responsibility to give SCCA financial advice on how to manage its funds.

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Kiosk• SCCA complied with the grant requirements for use of

the approved kiosk trailer.

• However, SCCA did not expend any funds to purchase it.

• Instead, the expense was reflected in the general ledger for Thunderhill Raceway Park, a for-profit entity.

• Therefore, since SCCA did not incur any expense, it was not eligible for reimbursement.

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Kiosk (cont.) • The CIWMB’s program manager

rightfully assumed that SCCA, as the non-profit grantee, would take title of the Kiosk.

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SCCA Boasted That it “Banked” the Grant Funds for the Kiosk

• Quoted from the VODDEN REPORT dated 8-27-03 (included in the administrative record).

“For those who saw the Race to Recycle Oil ‘kiosk’ at lnfineon over the weekend I hope you were pleased with its look. Thunderhill purchased this unit from the AA ball team Chico Heat for $12,833 as a vehicle for handling merchandise. This was done because merchandise was not included in the new building as a result of committee input. As a result of our key role in the CIWMB program, when the excess funding became available from the RtoROIL at the end of the grant, I was able to get $12,500 in additional funding for the Club. It should also be understood that, even though Thunderhill purchased and paid for the trailer (Kiosk), the SCCA received and banked the $12,500 for the sponsorship opportunity. This was in addition to any previous funding under the affected grant. Not bad!”

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Kiosk (cont.)• The CIWMB did obtain some benefit from the

kiosk through the appearance of the CIWMB’s name and the “Race to Recycle” logo.

• Thus, the CIWMB’s auditor categorized this particular information on the kiosk as “sponsorship” along with any other used oil information and public service announcements.

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PERSONNEL

• Based on the SCCA’s accounting records and the grant agreement for UNP4 and UNP5,the CIWMB cannot reimburse SCCA for costs they did not incur.

• The SCCA was unable to produce any documentation that demonstrated that SCCA actually expended money for personnel for the number of hours that were claimed for grant activities.

• Therefore, CIWMB staff agreed with the DOF auditor’s final audit determination that SCCA must reimburse the CIWMB $38,745 and $45,210 for UNP4 and UNP5 respectively, totaling $83,955.

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Personnel (cont.)• Since SCCA could not demonstrate that

it actually expended funds on personnel for grant activities, the reimbursement from the CIWMB was reflected as ineligible profit.

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SPONSORSHIP • According to the DOF final audit report, SCCA

was unable to provide documentation (e.g. vendor invoices and cleared checks) to support claimed sponsorship fees totaling $54,000 and $112,000 for the respective grants.

• SCCA also misclassified $68,000 of sponsorship fees. The CIWMB appropriately reclassified these expenses under sponsorship for UNP4 and UNP5 respectively.

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UNP4-00-3310 - SPONSORSHIP

The CIWMB auditor’s analysis disclosed:

• The CIWMB was satisfied with the SCCA’s naming rights program and the other publicity opportunities for used oil recycling built into the plan; and

• The CIWMB concurred with the SCCA that it incurred expenditures to provide the promised value of sponsorship rights.

• As a result, $54,000 in UNP4 sponsorship cost was determined to be eligible for grant participation.

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UNP5-02-0013 - SPONSORSHIPThe UNP 5 grant budget was increased to cover the sponsorship fee cost of holding events and gaining exposure for used oil recycling in the Southern California regions at three racetracks:

• Buttonwillow Raceway near Bakersfield• Willow Springs International Raceway

near L.A.• California Speedway near Riverside

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UNP5-02-0013 - SPONSORSHIPThe CIWMB auditor concluded there was sufficient support for 53 event days. However, there was no evidence to demonstrate that the following two events actually occurred:

• Laguna SecaVintage Races Oct 22-24, 2004 1-day $2,000.00

• ButtonwillowCal Club Reg. Oct 22-24, 2004 2-days $4,000.00 Total $6,000.00

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UNP5-02-0013 - SPONSORSHIP (cont.)

Based on the documents submitted to the CIWMB, staff determined that $106,000 in expenditures were eligible for reimbursement and $6,000 was ineligible for UNP5-02-0013 grant participation due to a lack of supporting evidence. Claimed Sponsorship – UNP4 $54,000.00Claimed Sponsorship – UNP5 $112,000.00 Subtotal $166,000.00Less: Ineligible Sponsorship – UNP5 <$6,000.00> Total Eligible Costs $160,000.00

The SCCA concurred with the CIWMB auditor's findings.

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Inadequate Separation of Duties• The DOF audit report disclosed that David Vodden performed a

number of duties that lacked separation between SCCA, as a non-profit corporation, and Thunderhill, as a profit-making subsidiary.

• DOF questioned whether there is an adequate “arms-length” relationship with respect to transactions related to the grants.

• The CIWMB’s auditor agree with this finding.

• Maintaining an arms-length relationship is a federal government requirement for 501 (c) tax status as a non-profit corporation.

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Commissions to David Vodden• The DOF audit report further noted that the SCCA’s

payment of a commission to David Vodden equaled 10 percent of each grant reimbursement check, less the amounts invoiced from vendors.

• These commission amounts were not claimed in the grant payment requests submitted to the CIWMB.

• However, it was noted in DOF’s final audit report that Mr. Vodden was paid this commission through his consulting firm D.B. Vodden Enterprises.

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Conclusions• $74,927.59 should be reimbursed as

ineligible costs.

• Total reflects CIWMB adjustment to DOF’s audit findings under “Sponsorship.”

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Conclusions (cont.)

DOF Recommendation$234,928.00

Less CIWMB Adjustments - 160,000.41

Total: $ 74,927.59

california integrated waste management board 1 testimony of marlena wells-murphy, ciwmb auditor...

Documents

favor of scca

scca distributed grant

dof audit findingsgranted

ciwmb program

scca financial advice

grant manager

grant agreements

grant requirements