olk County Crime Stoppers, Inc. /b/a Heartland Crime Stoppers Pd July 21, 2011 Final Report and Recommendations to the Board of Directors Department of Legal Affairs - Office of the Attorney General Division of Victim Services - Bureau of Criminal Justice Programs - Grants Management Section CRIME STOPPERS PROGRAM Section 16.555, Florida Statutes, created the Crime Stoppers Program, established the Department of Legal Affairs as the dispersing department within the Office of the Attorney General, providing for the power to establish guidelines for, but not limited to, the dispersing of funds collected per section 938.06, Florida Statutes. AUTHORITY Pursuant to section 215.97(8), Florida Statutes, state agencies may conduct or arrange for audits of state financial assistance that are in addition to audits conducted in accordance with section 215.97, Florida Statutes. In such an event, the state awarding agency must arrange for funding the full cost of such additional audits. REVIEW TEAM The performance review team consisted of the following personnel: Emery Gainey, Director of Law Enforcement Relations, Victim Services and Criminal Justice Programs; Rick Nuss, Bureau Chief, Bureau of Criminal Justice Programs; Edna Smith, Program Administrator, Crime Stoppers Program; Adrian Dillon, Grants Specialist IV, Crime Stoppers Program; and Karen O’Bryan, Research and Training Specialist. This report and all other reports prepared regarding the Crime Stoppers Program are available upon request by contacting: Edna Smith Office of the Attorney General Crime Stoppers Programs PL-01, The Capitol, Tallahassee, Florida 32399-1050 Edna.Smith@myfloridalegal.com (850) 414-3360 OBJECTIVES, SCOPE AND METHODOLOGY Overview The Crime Stoppers staff of the Bureau of Criminal Justice Programs, within the Division of Victim Services and Criminal Justice Programs, routinely conducts spot desk audits of the Crime Stoppers Grant Trust Fund grantees for compliance with contractual requirements. This review encompasses fiscal year’s 2005 to March 2011. Details Attorney General Pam Bondi directed staff to review of the past fiscal year’s operational practices of this Program, which was conducted on April 22, 2011. The review uncovered sufficient inconsistencies to prompt a more thorough review of the Program’s past procedural and spending practices. The Office of the Attorney General Inspector General’s Office and division staff were utilized to plan and perform concurrent and separate reviews. This division’s initial review focused on the processes associated with the request for disbursement and accountability of state funds. The division’s detailed review focused on all aspects of the Crime Stoppers operations, to include but not limited to: management, fiscal, purchasing, bids, time and record keeping, board of directors, etc. While conducting these reviews, OAG staff: 1. Obtained records from Polk County Crime Stoppers, Executive Director Wayne Cross. 2. Reviewed records from the Polk County Sheriff’s Office. 3. Reviewed all transactions from October 1, 2009, through June 30, 2010, and July 1, 2010, through March 31, 2011. (Initial Review) 4. Reviewed purchase transactions, accounting records, bank statements, credit card statements, etc., from October, 2006 to September, 2009. (Extensive Review) 5. Checked paid rewards against a transaction ledger provided by the NCT Group. (A financial services provider for the Polk County Crime Stoppers.) 6. Established Polk County Crime Stoppers entitlement to reimbursement of expenses by review of invoices, bank statements, cancelled checks and budgets. 7. Compared issues discovered in this inspection with previous desk audits and on- site performance reviews in order to establish trends of compliance or non- compliance with previous guidelines. 8. Review receipts to establish the grant had not been billed twice for the same transaction. 9. Spoke with current and former Board members about the operation of the Program. 10. Spoke with former Executive Director (Wayne Cross – prior to his resignation) about the operation of the Program. 11. Spoke with NCT Group representatives. EXECUTIVE SUMMARY OF FINDINGS AND RECOMMENDATIONS The Polk County Crime Stoppers, Inc., d/b/a Heartland Crime Stoppers is a 501(c)(3) not-for profit organization, managed by a Board of Directors comprised of community members. The entity operates under letters of authorization from the Polk County Board of County Commissioners, Highland County Board of County Commissioners, and Hardee County Board of County Commissioners. The letters of authorizations provides for Polk County Crime Stoppers to receive and expend funds deposited for these counties under section 938.06, Florida Statutes, in accordance with section 16.555, Florida Statutes, for the purpose of the establishment of an anonymous tip line to provide concerned citizens a means of reporting crime. Section 16.555, Florida Statutes, designates the Department of Legal Affairs (Office of the Attorney General) as the administrative agency for the purpose of carrying out the purposes and provisions of this act. The Department is charged with establishing a trust fund for the purpose of grant administration; making applications for all federal and state or private grants which meet the purposes of advancing Crime Stoppers in the state; the disbursing authority for distribution of funds to units of local government and the adoption and enforcement of rules to implement the provisions of this act. Therefore day-to-day responsibility for the management and operations of the Polk County Crime Stoppers is the direct and sole responsibility of the Board of Directors as the authorized Crime Stoppers organization for Hardee, Highlands and Polk Counties. The extensive negative findings in this report are areas of responsibility of the Board of Directors and should have been addressed by the Board in their overview capacity and in conjunction with their By- Laws. Review and Findings A review of the Program’s accounting records, operation practices, purchases, payments and other documentation for the past five years has revealed that several critical financial controls, oversight and review processes of their Executive Director and staff by the Board of Directors has been poor or non- existent. A review of the available records revealed that accounting practices and documentation utilized by the Executive Director were poor and inadequate, thus making it difficult to clearly follow the procedures used for the submission of bills for reimbursement. The documentation submitted for the payment of tips is handwritten, inconsistent and lacks clear accountability. This is particularly disturbing since the Heartland Crime Stoppers Program is paying for a software package designed for the specific purpose of tracking tips, tipsters and payments. Several Florida Crime Stoppers organizations use the same software package, which produces a clear record of tips, tipsters, accounting practices and payment recommendations. This type of detailed information is highly recommended for audit purposes for both the Board of Directors and state reviewers. Additional findings include the failure of the Executive Director to follow specific bid requirements for purchases in excess of $1000.00. In many instances, there was no attempt or an inadequate attempt to submit for bid purchases above the contractually mandated requirements. In several instances, bids were awarded to individuals that had been identified as having a close personal relationship with the Executive Director. Based upon communications from various Board members, it is apparent that the majority of the Board failed to address these issues. However, at least two Board members indicated that they brought several of these issues before the Board during past meetings, but no actions were taken by the Board as a collective body to rectify the conflicts of interest. Staff members of the Attorney General’s Office, Grants Administration Section failed to follow the agency’s requirements that bids be submitted prior to reimbursement for items in excess of $1,000. While the majority of the individual purchases for the Heartland Crime Stoppers Program were less than $1,000, and would not have caused the bidding requirement to be triggered, due diligence by our staff regarding those purchases in excess of $1,000 would have pointed out a significant contract violation, and provided early warnings that the management of this program required further detailed and comprehensive reviews beyond the routine basic reviews. The review process also revealed that the Executive Director was improperly using a Crime Stoppers issued cellular telephone for personal use; charging personal expenses on Crime Stoppers credit cards and failing to submit credit card charges to the Program’s accounting firm in a timely manner to ensure payment was made by the due date. This failure caused many unnecessary finance charges and fees to be billed to Crime Stoppers. It should also be noted that in many instances, credit cards were used for the payment of routine monthly expenses such as cellular phones and other internet service providers, as opposed to the bills being submitted to the Program’s accounting firm for payment by check. This process created credit card bills in excess of $8,000 on a number of occasions. Our review also revealed that on several occasions, the Executive Director utilized the same invoices that had been previously reimbursed by the OAG as justification for reconciling expenses associated with funding received from the Polk County Sheriff’s Office. Due to inadequate record keeping, we have been unable to clearly determine how the duplicate income was spent and have, therefore, recommended reimbursement to the Polk County Sheriff’s Office in those instances. While reviewing the records of the Polk County Crime Stoppers, information was produced that indicates that a $785.56 purchase was made from a retail establishment whose primary sales are alcoholic beverages. A review of the bills submitted to the OAG does not include a request for reimbursement of this expense, nor does our reimbursement report indicate that we paid such an expense. It should be noted that our contracts forbid food and beverage expenses, which include the purchase of alcohol. Records also indicate that a number of gift cards to various restaurants were purchased by the Polk County Crime Stoppers; however, those expenses were not submitted to the OAG for reimbursement as they, too, are unallowable expenses. We are unsure of the source of funding utilized by the Polk County Crime Stoppers to pay for these expenses; however, it should be noted that while reviewing their bank records, we discovered a number of deposits from other sources listed as “Fund Raiser Proceeds”, or deposits without explanation. The Executive Director and other Crime Stoppers organizations have often referred to donations not received from the OAG as “Discretionary Funds” and taken the position that they are not subject to the state’s purchasing rules. We offer no further comment about funds not received from governmental sources; however, it is our position that separate and thorough accounting procedures be put into place that separates OAG Trust Funds and other governmental provided income from all other sources of income. In those instances where funds have been co-mingled, it is our intention to review all purchases and expenses associated with that account, and we consider each of those records open for public inspection. Bank account fund balances can be found on each Polk County Crime Stoppers bank statement for the past five years starting October 1, 2006. A review of the October, 2006, statement indicates that the Polk County Crime Stoppers bank account and “NCT Group Transaction Listings” show a beginning balance of $46,889.53, a deposit from the OAG (even though listed as being received from the State of Florida) in the amount of $3,392.60 and withdrawals in the amount of $34,567.76; therefore, leaving an ending balance on October 31, 2006, of $15,714.37. Presumably, this amount represented additional funding that had been previously deposited into the Program’s account and co-mingled with OAG funding prior to October 2006. (Exhibit 1) Polk County Crime Stoppers bank account and NCT Group Transition Listings Beginning Balance October 2006 46,889.53 Deposit from OAG 3,392.60 Withdrawals 34,567.76 Ending Balance 15,714.37 Further review of the NCT accounting records also noted that a significant number of deposits are listed as having been received from the Florida Department of Law Enforcement. A cross reference to our records indicates that these deposits are all mis- labeled and are actually Trust Fund reimbursements from the OAG. Upon request, the Florida Department of Law Enforcement confirmed that no such payments were made by their agency to Polk County Crime Stoppers, d/b/a Heartland Crime Stoppers. (Exhibit 2) It is also noted that even after this inquiry began, and the Executive Director and Board were made aware of the inquiry, the Executive Director continued to submit duplicate bills for reimbursement to the OAG grants’ staff for reimbursement. At the request of the OAG, a member of the Polk County Sheriff’s Office conducted a brief inspection of the warehouse utilized by the Polk County Crime Stoppers Program to store supplies. This brief inspection found an excessive amount of Crime Stoppers promotional materials at this storage facility. The Board of Directors was notified of this finding and asked to have an immediate inventory conducted to determine the exact extent of stored materials which presumably were purchased and reimbursed with Crime Stoppers Trust Fund dollars. We were informed that the storage facility is full to capacity, thus prompting questions and concerns as to why these materials were not distributed to schools and other organizations for which they were purchased. The Board of Directors is required to report to this agency the status of all stored materials, each type of pamphlet, promotional item, etc. Furthermore, the board should determine if these items can be distributed within the targeted counties in order to accomplish their intended mission or if they have become out-of-date, damaged or otherwise not useful. NOTE: A response/inventory was received from the Board on June 27, 2011. (Exhibit 3) As we complete this review, we acknowledge that the Executive Director, Wayne Cross, referenced during the past five years, resigned, along with his daughter, Chris Shea, the Chairman of the Board, Brock Self, and a majority of other Board members that were in office during the time period of this review. Recommendations Going forward, the Board of Directors must establish clear written goals and objectives for the Board, their Executive Director and staff; hire an Executive Director who possesses the knowledge, skills and abilities to perform the duties of the Crime Stoppers Program; keep trust fund dollars separate from funds received from non-government sources; and maintain complete records of all billing statements, credit card invoices, bid requests, etc., for the mandatory time period specified in each contract. While it is the practice of the OAG to only honor/pay reimbursement requests from original invoices, this review has revealed a flaw in the current process. The Polk County Crime Stoppers practice of paying certain invoices and other routine monthly charges by credit card has pointed out the clear need for all pages of credit card statements to be maintained in order to cross reference original invoices to payments made by credit card, and to ensure that the credit card bills were indeed paid in full by Program checks. On multiple occasions, purchases and payments that were made by credit card were not immediately paid, or not paid in full during the appropriate billing cycle even though the Executive Director had submitted the original invoice to the OAG and received Trust Fund reimbursement. NOTE: The OAG does not recommend the use of credit cards to make routine monthly payments such as phone bills, etc. These routine bills should be paid by check, thus providing a clear accounting record to match and track invoices to payments. The use of credit cards in these instances adds an extra layer of accounting, tracking and review. In this case, the practice has lead to questionable and improper accounting practices. The Board of Directors MUST take a more active role in the operations of the Polk County Crime Stoppers program. We recommend an active finance committee made up of selected Board members, whose background and work experience includes senior level accounting, banking, investment or similar hands-on financial knowledge, skills and abilities. Furthermore, the Board should give consideration to members with diverse backgrounds, to include members who have served in senior law enforcement positions (consistent with Board By-Laws, Section 4.02(d)), members of the Florida Bar, business owners (including large corporate business executives and private business owners), the education community, and other interested citizens representing community diversity. Having such a strong and diverse board with multiple professional backgrounds would serve to enhance the oversight of the Crime Stoppers Program and ensure financial integrity and public confidence in this Program. Because this Program serves three counties, we further recommend the Board seek members from each county in order to ensure a broad representation of the entire service area. The Board of Directors must seek and ensure that they have firsthand knowledge of the Executive Director’s management of the Program. This review has clearly demonstrated that the practice of the prior Board clearly extended and entrusted too much of the operational decision-making and financial responsibility of this Program to the Executive Director. This has proven to be unwise, unproductive and led to financial irregularities in the form of purchases, record keeping, accountability, and business dealings with individuals who are closely associated with the Executive Director, including the employment of his daughter, whose timesheets he personally signed off on without any oversight from the Board. Even if no irregularities are found in the daughter’s time keeping, the simple appearance of impropriety in this case could lead to a lack of public confidence in the Program. We recommend the Board meet monthly to conduct the business of Polk County Crime Stoppers. However, should the Board choose a longer interval, it should not exceed every other month in order to receive a complete accounting of the Program’s finances, purchases, tips, tip payments, travel, training, mission, successes, weaknesses, etc. This recommendation does not in any way suggest the Board cannot or should not meet more frequently at their discretion. Given the history and findings in this review, the current system of quarterly meetings has proven, in part, inadequate. We further recommend a complete and thorough independent annual audit of the Program’s finances and purchases by a firm or individual qualified to conduct financial audits who is not closely associated with any Board member or Board staff. (Trust Funds cannot be used to pay for this recommendation) The grants management staff at the OAG has put into place additional guidelines for the monitoring of Crime Stoppers programs. These additional guidelines were presented to the Executive Directors at the annual Crime Stoppers meeting on June 21-22, 2011, in Lake Mary, Florida. Grants management staff will review and update their written guidelines and provide the updates to each program within the next 60 days. Additionally, OAG grants management staff will integrate the findings of this report and the agency’s Inspector General’s report into their review processes when conducting future desk audits of Crime Stoppers programs. Board’s By-Laws Board By-Laws, Section 4.01(a) (Powers) state: “Subject to the limitations of the Articles of Incorporation and these By-Laws, the activities and affairs of the corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the Board. The Board may delegate the management of the activities of the corporation to any person(s), a management company or committees however composed, provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board.” We also note that the Polk County Crime Stoppers By-Laws address several of the areas of weakness found during our review, and believe that had the Board of Directors strictly followed their own By- Laws, many of these problems would not have existed. (Exhibit 4) Acknowledgements We would like to extend our thanks to Lori Lehman and Mike Carter of the NCT Group. Beginning with the first request for records or clarification of records in their possession, both Lori and Mike responded without hesitation to provide the OAG with copies of all files in their possession, made their staff available to collect and copy records in a timely manner, and took many phone calls from OAG staff without delay. We note that there were opportunities for NCT Group staff to have questioned several of the financial transactions sent to them for payment that would have brought into question some of the improper financial transactions of the Executive Director. We also acknowledge that the Executive Director’s actions and lack of Board oversight put the NCT Group in a position of paying invoices which should not have been submitted, or were previously submitted. We thank both current and former members of the Board of Directors who responded to our numerous requests for information and did so very timely, with emphasis on the communications from Board Member Melony Bell, who has been in continuous communication and cooperation with our staff throughout this entire review period. ORGANIZATIONAL BACKGROUND The Polk County Crime Stoppers, Inc., d/b/a Heartland Crime Stoppers is a 501(c)(3) not-for profit organization, managed by a Board of Directors comprised of community members. A letter of authorization from the Polk County Board of County Commissioners, Highland County Board of County Commissioners, and Hardee County Board of County Commissioners, provides for Polk County Crime Stoppers to receive and expend funds deposited for these counties under section 938.06, Florida Statutes, in accordance with section 16.555, Florida Statutes, for the purpose of the establishment of an anonymous tip line to provide concerned citizens a means of reporting crime. This allows citizens a means of providing information to law enforcement that might not otherwise reach them. This program compensates those citizens through the payment of a cash reward. The Board of Directors is required to oversee the receipt and expenditure of these funds as outlined in the agreement between the Office of the Attorney General (hereafter referred to as the Agency) and the Board of Directors. The Board of Directors is required to review and approve payments for all expenses associated with grant awards. The activities performed by the Board of Directors may result in the payment of funds to “tipsters” who report the whereabouts of wanted fugitives and individuals being sought in connection with criminal activities. The Board of Directors also conducts public awareness campaigns, manages operational costs and staff salaries. According to Agency records, awards associated with the above Program totaled approximately $225,742 and $234,242 for the 2009-2010 and 2010-2011 grant years, respectively. (Exhibit 5) 2009-2010 Program Categories Amounts Percent of Total Rewards & Public Education $146,880 65% Operating Expenses $16,862 8% Salaries $62,000 27% Total $225,742 100% 2010-2011 Program Categories Amounts Percent of Total Rewards & Public Education $153,992 66% Operating Expenses $18,250 8% Salaries $62,000 26% Total $234,242 100% The program categories are used by Polk County Crime Stoppers (hereafter referred to as the Program), to report to the Agency, costs associated with the Program. The Program submits appropriate support documentation to the Agency for processing of payments, and costs associated with the three categories of the grant award. The accounting records are to be maintained by the Program in sufficient detail to provide for any pre-audits or post audits in accordance with Articles 8, 9, and 11 of the grant agreement. SUMMARY OF PRIOR PERFORMANCE REVIEWS FOR 2006-2011 This operational and reporting performance review of the Polk County Crime Stoppers, Inc., d/b/a/ Heartland Crime Stoppers focused on the management of the processes associated with the collection, recording, and reporting of required documentation for cost reimbursement; expenses associated with the grant awards for October, 2009, through June 2010, and July 2010, through March 2011; agreement requirements; and separation of duties associated with the submission of reimbursement requests and follow-up on prior review findings. Management and Reporting Requirements In the Performance Review Reports for grant years 2006-2007, 2007-2008, 2008-2009, and 2009-2010, agency findings were addressed as follows: Finding No. 1: 2006-2007: Expenses for previous grant year billed to the following grant year. Finding No. 2: 2007-2008: The Executive Director cost the Program $604.00 of allowable expenses. Finding No. 3: 2008-2009: Several expenses were charged twice to the Trust Fund for reimbursement. Finding No. 4: 2009-2010: Checks and salaries were listed in a manner inconsistent with proper reporting. In the instances of overbilling the Crime Stoppers Trust Fund, the Program was required to return the overpayments of funds to the Crime Stoppers Trust Fund and the Executive Director was counseled. In the other two instances dealing with procedures which did not result in an overpayment, the Executive Director was counseled. Prior Performance Review Follow-Ups Each instance listed above was isolated. However, in viewing them collectively as presented in this report, they indicate poor procedures and accountability. 2006-2007 PERFORMANCE REVIEW FINDINGS (Exhibit 6) The Performance Review Report for grant year 2006- 2007, conducted on August 1, 2007, revealed notations for failure to submit reports in a timely manner, for which the Executive Director was counseled and reminded of the reporting requirements as listed in Article 13 of the grant agreement. A review of the financial support documentation, checks, invoices, bank statements, etc., revealed the Program had paid expenses in October 2007, for the previous grant year of 2005- 2006, which ended on September 30, 2006. PRIOR RECOMMENDATIONS These findings resulted in the Executive Director being counseled, payments for these expenses were determined to be disallowable and funds totaling $23,378.46 were required not to be used, but remained in the Trust Fund, resulting in a net loss to the Program for the 2006-2007 fiscal year. The process of paying final end-of-the-grant year expenses was explained to the Executive Director in detail, as he had expressed his misunderstanding of the process. 2007-2008 PERFORMANCE REVIEW FINDINGS (Exhibit 7) The Performance Review Report for grant year 2007- 2008, conducted on March 31, 2009, revealed reports had been submitted in a timely manner. The requirement to leave $23,378.46 in the Trust Fund had been complied with and the financial review included the month of October, 2007, and was found to be in proper order. The month of January 2008, was reviewed for financial compliance and found not to be in proper order. The review indicated the Executive Director had shorted his Program on two items, one was a reward for $600 and the other was the listing of a Bright House bill for $4.00, less than the amount shown on the statement. PRIOR RECOMMENDATIONS In light of the fact that these findings did not result in a loss to the Agency, no recommendations were made. 2008-2009 PERFORMANCE REVIEW FINDINGS (Exhibit 8) The Performance Review Report for grant year 2008- 2009, conducted on June 23, 2009, revealed the Executive Director had submitted travel expenses for the Chairman, (Brock Self) and himself, (Wayne Cross) in October 2008, and again in November 2008, totaling $546.36. This resulted in double billing and unauthorized overpayment. Other findings included the listing of incorrect check numbers. Support documentation for the month of January 2009, revealed that check #2686, dated January 26, 2009, payable to Crime Scene Information in the amount of $1,180.50 was also listed as having paid for payroll taxes to the IRS in the amount of $1,180.50. A review of the bank statement indicated the payment to the IRS was made via credit card in the amount of $1,009.77. This resulted in an overbilling of $170.73. The grant manager also chose to review the March, 2009 reimbursement and found that: Check #2691, dated March 2, 2009, payable to Anderson Tipsoft, in the amount of $299.40; Check #2697, dated March 2, 2009, payable to Telecompute, in the amount of $38.25; Check #2693, dated March 5, 2009, payable to Wayne Cross (mileage February 2009), in the amount of $93.45; Check #2694, dated March 5, 2009, payable to Wayne Cross (per diem Fort Worth), in the amount of $106.00; and Check #2696, dated March 4, 2009, payable to South Eastern Crime Stoppers (dues), in the amount of $50.00, were all previously submitted for reimbursement in the prior month (February 2009). Check #2696, dated March 4, 2009, payable to South Eastern Crime Stoppers (dues), in the amount of $50.00, was discovered prior to the Performance Review. Mr. Cross was notified and provided a refund to the Crime Stoppers Trust Fund via check #2767 on May 27, 2009. March 2009 Reimbursements Check # Date Payable To Amount 2691 March 2 Anderson TS 299.40 2697 March 2 TeleComute 38.25 2693 March 5 W. Cross 93.45 2694 March 5 W. Cross 106.00 2696 March 4 South Easter CS 50.00 TOTAL 587.10 In view of the issue of numerous checks submitted twice and submitted with the same check number, the grant manager reviewed the entire year of submitted reimbursements. PRIOR RECOMMENDATIONS A spread sheet indicating the findings of incorrect check numbers was submitted to Mr. Cross for correction and he was required to provide the correct information. The amount of $170.73 was disallowed. The Program was required to reimburse the Trust Fund in the amount of $1,254.19 to settle all of the overpayments noted above, including the $170.73 that was paid to the program. Mr. Cross admitted to having changed the way he obtained information for completing the reimbursements and was advised to return to previous procedures. 2009-2010 PERFORMANCE REVIEW FINDINGS (Exhibit 9) The Performance Review Report for grant year 2009- 2010, conducted on September 29, 2010, revealed two reports were not submitted in a timely manner. The financial review for January 2010, February 2010, and March 2010, indicated the Executive Director listed the salary expenses in a manner that did not provide for separation of taxes and salary expenses, and check numbers were not consistent with documentation. The expenses submitted for reimbursement were allowable. (Exhibit 10) PRIOR RECOMMENDATIONS The Executive Director was counseled regarding the proper method for requesting reimbursement for salaried employees. 2006-2011 EXTENSIVE REVIEW Finding No. 1: Crime Stopper Phones Based upon our April 2011, detailed review of several phone bills, we discovered that Wayne Cross, Executive Director, is using phone number (863) 602-8241 as a personal phone. This phone is an add- on to the Heartland Crime Stoppers business account and being charged at a lower rate. This is further proven based upon Executive Director Cross’ written notes subtracting the charges for this phone number each billing cycle, as consistently noted on several AT&T monthly phone bills. The following bills are attached as samples of these findings: June 5, 2010, July 5, 2010, September 5, 2010, and January 5, 2011. (Exhibit 11) Our review further indicated that the Program is paying for a land line/office phone through Bright House in addition to the three lines/phone numbers listed on the AT&T bill. In November 2009, it was noted on the agency’s Invoice Tracking Form that there are charges from AOL, AT&T and Verizon, thus indicating three different phone/wireless service providers during this period. Several cash deposits to the bank account correspond to reimbursement for personal use of a company cell phone. RECOMMENDATIONS Comply with the Department of Financial Services, Reference Guide for State Expenditures under the heading of “Perquisites.” (Exhibit 12) We further recommend a review by the Board of Directors to determine the necessity for the number of phone lines and their justification. Phone number (863) 602-8241 should be immediately disconnected. The Executive Director and other staff should only utilize Polk County Crime Stoppers phones for business purposes. Finding No. 2: Overbilling Review of the Telecompute statements discovered the following: Invoice #19234, dated January 5, 2010, was paid by check #2830 on February 1, 2010, in the amount of $30.98. Invoice #36725, dated February 1, 2010, was paid by check #2842 on March 5, 2010, in the amount of $57.12. This invoice included a past due amount of $30.98, for a total payment of $57.12. This past due amount is the same charge previously paid as stated above and therefore, resulted in a duplicate payment of the same bill. Invoice #19234 (Telecompute) was paid again in March 2010, with check #2848, resulting in a triple payment. These were all then submitted to the OAG for reimbursement. (Exhibit 13) A review of the March 2011, Telecompute Statement indicates a similar situation occurred on the March Reimbursement Request to the Office of the Attorney General. 1. A charge of $11.61 was paid by check #2954, on March 7, 2011. 2. A bill dated March 1, 2011, indicates a past due balance of $11.61, and new charges of $66.25, for a total of $77.86. Check #2962 in the amount of $77.86 was issued to pay the March 1, 2011, bill, thus resulting in the duplicate payment for the $11.61, paid by check #2954. Check Number Past Due Current Charges Amount Paid 2954 11.61 11.61 2962 11.61 66.25 77.86 A review of the Invoice Tracking Form for November 2010, indicated the submission of invoice #08090023, dated November 24, 2010, in the amount of $500.00, and paid on November 16, 2010, with check #2917. The Invoice Tracking Form for December 2010, indicates that the same invoice, #08090023, dated November 24, 2010, in the amount of $500.00, was paid again on December 20, 2010, with check #2927. (NOTE: The above are a few samples of consistent poor accounting practices found during our review). RECOMMENDATIONS We recommend the establishment of internal controls within the Program relating to the accuracy and completeness of records. Stamp, date and note each paid invoice (including check number) at time of payment for cross referencing in order to avoid duplicate payments. Finding No. 3: Utilization of Required Bidding Procedures No bids or improper bids in excess of $1000, as required in Article 5 of the 2009-2010 grant agreement, and Article 11 of the 2010-2011 grant agreement, were received prior to purchases from the following companies. Furthermore, no sole source declarations were requested or approved: 1. Central Florida Media Group 2. Effective Playing Cards 3. The Lakeland Ledger 4. Mainely Graphics & Design 5. B & B Storage The grant agreement provides for the following: “If the Provider is a non-profit or for-profit organization, the Provider agrees to obtain a minimum of three (3) written quotes for all grant- related purchases equal to or in excess of one thousand dollars ($1,000) unless it can be documented that the vendor is a sole source supplier. The Provider must submit copies of the three written quotes and a copy of the (Request for Bids) with the Reimbursement Request. The Agency, upon request, may approve in writing an alternative purchasing procedure.” Additional questionable findings included: According to Invoice #17795, the Winter Haven Police Department (WHPD) purchased a vehicle wrap from Digitech Graphics Group on 2/7/2011 for $2,274.31. However, the Invoice Tracking Form submitted to the OAG by the Executive Director indicates that the Polk County Crime Stoppers paid this invoice by credit card and not the WHPD. An invoice dated October 1, 2009, for Mainely Graphics & Design, in the amount of $7,937.50. No bids or specifications were provided to OAG. RECOMMENDATIONS Establish internal Board of Director’s controls relating to the bidding process required by the agreement and section 287.017, Florida Statutes. Follow OAG contract requirements for all purchases over $1000. Require Board written approval/disapproval for all such requests and record such in the minutes of the Board meetings. All bids received must be stamped with the date of receipt. The selected bid shall also include the date accepted and approved by the Board. A copy of the Request for Bids and Specifications along with all three bids must be submitted to the OAG when seeking reimbursement for items or services in excess of $1000. Submit to the OAG all bids for the expenses associated with Central Florida Media Group, Effective Playing Cards, The Lakeland Ledger, Mainely Graphics & Design, and B & B Storage. If bids were not obtained, then provide a written statement indicating such for our records. Provide a copy of the magazine printed by Central Florida Media Group, including the number of distribution locations, broken down by county. (We do not require specific addresses.) Provide an explanation for the change from The Lakeland Ledger to Central Florida Media Group, as the change appears to have resulted in an average increase of approximately $1000 per occurrence. Was this change approved by the Board of Directors? What advantages did the program realize from the change? The Board and staff should also review section 287.017, Florida Statutes, and the Florida Department of Financial Services, Reference Guide for State Expenditures. Links are as follows: http://www.leg.state.fl.us/statutes/index.cfm?App_ mode=Display_Statute&URL=0200- 0299/0287/0287.html http://www.myfloridacfo.com/aadir/reference_guide/Reference_Guide_For_State_Expenditures.pdf Finding No. 4: Related Party and Board Association Transactions The Executive Director, Wayne Cross, and Staff Assistant, Chris Shea, are father and daughter. Mr. Cross has been approving Ms. Shea’s payroll time sheets and her travel. Ms. Shea also served as a member of the Board of Directors. Mr. Dan Turner, owner/operator of Effective Playing cards, is also the former brother-in-law of Wayne Cross. The Chairman of the Board, Mr. Self, and Executive Director Cross are partners in a private business. Reports indicate the owner of Mainely Graphics & Design has associated ties with Effective Playing Cards. Mr. Rodriquez, who serves on the Polk County Crime Stoppers Board of Directors, is affiliated with LaRaza Radio Station that provides paid air time to Polk County Crime Stoppers. RECOMMENDATIONS It is highly recommended the Board of Directors avoid the appearance of impropriety by not conducting business with organizations or individuals that employ Board members, staff of Board members, their immediate family or business partners. The Board of Directors must develop written guidelines addressing the employment of relatives and require that full disclosure statements be completed annually by Board members and staff. Should the Board choose to do business with related parties, (not recommended) the Board President should appoint or designate a committee of Board members (excluding any related Board member) to approve all invoices, payments, time sheets, travel and other employment documents. Any Board member (or person related to the member, or business partner) wishing to transact business with the program MUST refrain from voting during that specific process. (See your current By-Laws, Article 6.) Provide a list of services, a copy of tape or description of how air time is used, and the benefits derived by the program through the LaRaza radio account. Finding No. 5: Legal Name and Address of Organization A review of the Program’s paperwork during the past five years revealed that service providers have utilized several versions of the Program’s legal name and various mailing addresses. RECOMMENDATIONS Use the Program’s legal name when conducting business with vendors. Establish one physical address and one post office address, as necessary. Finding No. 6: Internet and Wireless Services Records indicate the Program is paying for a home internet service and a wireless internet service for Executive Director Cross and home internet service for Administrative Assistant Shea. RECOMMENDATIONS Provide support documentation that these internet connections are used strictly for Program business purposes. Since the service is located at the homes of the Executive Director and the Administrative Assistant, please explain what steps the Board has taken to ensure that each staff member has a separate internet service provider for their personal use. It is highly recommended that a suitable office location be provided for the Program’s business operations. This review has proven that a home office location is inadequate and does not lend itself to random unannounced inspections of the Program’s records and equipment. Finding No. 7: Travel A review of several travel vouchers indicated travelers going to the same destination, utilizing individual transportation modes, resulting in a higher cost to the Program. A travel voucher dated October 2009, provides for a room charge of $629.37; however, only $447.00 was charged to the grant. The mileage log dated November 2010, indicates a trip to Sebring with no other explanation. (Exhibits 14A & 14B) RECOMMENDATIONS Develop travel guidelines for the Board and staff. The Agency will only reimburse travel costs up to the approved State of Florida per diem rate. Therefore consideration should be given to state guidelines during your policy development. The Board should review and pre-approve the Executive Director’s travel and review all travel documents approved for staff by the Executive Director at the first Board meeting following the travel. When travel is outside the three county service area and in excess of 100 miles, the use of rental cars may be less expensive than mileage reimbursement. Traveler should do a cost comparison before choosing a travel method. Provide an explanation for the October 2009 travel voucher room charge of $629.37 and the requested reimbursement of $447.00. Was this a personal charge to the Program’s credit card? Establish a review and documentation process for travel within the service area (as noted on mileage logs), explaining the relationship to job and benefits derived by the Program prior to submitting to the OAG for reimbursement. Finding No. 8: Bank Statements Bank statements indicate two types of withdrawals, Counter Debit and Bank Adjustment. Several deposits were noted during the review of the bank statements indicating the receipt/deposit of funds other than those received from the OAG and the Program. The bank statement dated April 2010, indicated the payment of a reward on April 13, 2010, for $2000.00, of which $1000 was billed to the OAG; however, there is no notation regarding the source of the other $1000 payment. A monthly bank fee of $29.95 was noted on several bank statements. A review of the Program’s submitted checks for payment indicates they are not counter signed by a second party. RECOMMENDATIONS The single signature noted on checks returned from the bank is not considered to be best business practices for the program. The Board is required to develop a Finance Committee who is responsible for reviewing all financial transactions on a monthly basis. (Even if the Board meets less frequently) Require the Finance Committee to provide the Board with a complete and comprehensive written review of all financial transactions (expenses, purchases, deposits, tips paid, travel and other transactions), which occurred between Board meetings. Copies should be included in Board minutes. Provide an explanation of the two consistently used bank notations of Counter Debit and Bank Adjustment on your statements. If they are meant to convey the same type of transaction, please direct your banking institution to use only one term. Banking records indicate a number of deposits other than those from the OAG and the Program. Establish separate program accounts in order to separate OAG Trust Funds and government funds from non-government funding. Explain the source of the second $1000 payment on April 13, 2010, that was not billed to the OAG and explain why such a large award was paid in this instance. The Board of Directors should attempt to negotiate with Bank of America to eliminate or reduce the account service fees or seek services at other banking institutions in an effort to eliminate or reduce the monthly service fees. Finding No. 9: Past Due Accounts During the review of accounts it was noted that several accounts have been consistently past due. RECOMMENDATIONS Establish guidelines for the payment of all accounts on or before the due date to avoid finance charges. Finding No. 10: Organizational Credit Cards It was noted during the course of the review that the Program has at least three business credit cards. The credit card bills indicate there is an extensive use of the Program’s credit cards to pay routine monthly expenses as opposed to having checks issued. In some instances, the credit card charges were not paid within the allotted payment period resulting in unnecessary service/late charges to the Program. An example is noted on the invoice/billing statement for September 22, 2009, through October 22, 2009 for Citibank account ending 8113, in the amount of $68.82. (Exhibit 15) It should be noted that the OAG does not reimburse late charges and, therefore is not a party to these unnecessary expenses. The American Express credit card account number ending 1003, indicates a cash-back amount on October 18, 2009, of $150.86. This is one of a series of cash back amounts on credit card statements. A Citibank credit card payment was noted to the B & B Storage company for two rental units. Payments of $803 and $1150, on October 7, 2009. (Exhibit 16) Several credit card statements indicate that personal expenses were charged to the Program’s credit cards. RECOMMENDATIONS Develop purchasing procedures for the use and oversight of all Program credit cards to ensure they are utilized strictly for the benefit of the Program and that no unauthorized expenditures or personal expenses are being charged to the Program’s cards. Require all pages of the Program’s credit cards be kept on file and/or submitted to the OAG for review during random and scheduled audits. Pay routine monthly expenses via checks in order to clearly establish a clean audit trail for all accounts. Review the credit card payment and invoice for B & B Storage. The invoice indicates two rental units at a cost of $2,111; however, the credit card payment indicates a payment of $1,953. Why is there a difference? Does the Program need two units or could the price of one larger unit be negotiated for a savings? Explain how the “cash back” amounts listed on the American Express bills were used. A review of several A&E statements suggest that the cash back credits are not being credited back to the OAG or the Program. Are they used for business purposes or otherwise? Finding No. 11: Tip Software and Tip Payment Determination It was noted that your Program is paying for “TipSoft” software. During the performance review conducted on April 7, 2011, it was learned that your Program is not utilizing the entire software package. It was also noted that the Executive Director also serves as the Law Enforcement Coordinator. During the April 7, 2011, review, the Executive Director stated he did not use either the Board-established matrix or the “TipSoft” software to determine the amount of reward to pay out, but instead the tip reward is based on, “his years of experience.” The reviewer noted that the majority of the rewards for tips were $300. In addition, it was learned that he did not always receive confirmation from law enforcement that a tip received by Crime Stoppers led to an arrest. In some cases, he stated that he checks the arrest docket and uses his “best judgment,” and if the arrest occurred within a reasonable time related to a tip he received, he provided a reward to the tipster. A hand-written tip number ledger was obtained and reviewed. The documentation and unapproved process utilized by the Executive Director clearly demonstrates inadequate documentation and control of tip information. (Exhibit 17) Reviewers noted an unusually high number of tips attributed to middle and high schools, as well as Violation of Probation. We have a lot of concerns about these, but lack documentation to adequately verify them. RECOMMENDATIONS The Board of Directors is directed to mandate the utilization of all components of the “TipSoft” software which is designed to assist with the determination of rewards as opposed to relying on the Executive Director’s self-described experience as the basis for reward determination. The Board is directed to establish a policy to ensure that rewards are paid according to guidelines. The Board of Directors is directed to select an active local law enforcement officer who is not employed by Crime Stoppers to perform the duties or Law Enforcement Coordinator. (Preferably only one per county.) The designated Law Enforcement Coordinators will be responsible for verifying that the tip received leads to the arrest of the violator and reduce same to writing with their signature before the Executive Director is authorized to pay a reward. Immediately stop paying any further rewards approved by the (now former) Executive Director that cannot be independently verified by an officer with the agency that made the arrest. The Board should seek the establishment of a relationship with each law enforcement agency to review the reported number of tip payments to high and middle schools in an effort to ensure that the paid tips meet or met the requirements of a “Tipster.” NOTE: The utilization of the current method is improper, inaccurate, not accountable, unverifiable and subject to fraud and theft. Finding No. 12: Double Billing Based on information received from the Program and compared to the Reimbursement Requests sent to the OAG, the Polk County Sheriff’s office has been improperly billed. The OAG was billed for and reimbursed the following invoices: 1. From Designing for a Better World - Artwork and Graphics - February 17, 2009, for $125. 2. From Bagley Idea Pros - Folders and School Supplies - August 14, 2009, for $5,638.97. 3. From Bagley Idea Pros – Basketball Magnets w/logos - August 14, 2009, for $748.39. A review of documentation provided to the OAG from the Polk County Sheriff’s Office indicates that the exact invoices were submitted to PCSO on January 28, 2010, as reconciliation for a $15,000.00 advance donation. Indicated on the same invoice is a tip dated January 30, 2010, (according to NCT transaction listing) #196-14029-0124, for $2,000; of which $1,700 was billed to the Polk County Sheriff’s Office and $1,000 billed to the Office of the Attorney General on the January 2010, reimbursement request, thus creating an overbilling in the amount of $700. Also indicated on the same invoice is another tip ending in #12101 that was billed to the Polk County Sheriff’s Office in the amount of $300. OAG records indicate that the same tip was submitted to this agency on January 31, 2010, thus creating another doubling occurrence, resulting in $7512.36 in double billing. RECOMMENDATIONS Develop a Finance Committee to have oversight of income, purchases, invoices and billing. Ensure that the Program’s selected accountant utilizes as much due diligence as possible in an attempt to catch any duplicate bills. Ensure that bills that are submitted for payment are marked and dated as such and later marked and dated as paid with the corresponding check number in order to avoid double billing and to provide for easy cross reference. The Polk County Sheriff’s Office is due a refund in the amount of $7512.36. No Crime Stoppers Trust Funds may be used to reimburse the Sheriff’s Office. The OAG will not finalize the 2011-2012 grant contracts until repayment is made. Finding No. 13: Office of the Attorney General Inspector General’s Report We have reviewed the findings in the Office of the Attorney General Inspector General’s Report #10-39 titled: “Heartland Crime Stoppers Audit” Preliminary and Tentative Report. We concur with their findings and adopt report #10-39 as an addendum to this report. (Exhibit 18) RECOMMENDATIONS Comply with each finding and recommendation in the Inspector General’s Report. This report addresses a number of accounting errors, poor operational practices and lax procedures that are a direct responsibility of the Board of Directors and not of the Office of the Attorney General. This program’s Board of Directors failed to adequately monitor the actions and operating practices of its staff, which resulted in excessive and improper purchasing by the Executive Director. Furthermore, the Board failed to review and/or take actions to correct errors noted in previous reviews regarding the Program’s management. Given the extensive findings of this Program over the past five-year period, it is highly recommend that the Florida Association of Crime Stoppers (FACS) immediately review this report to determine if this Program continues to meet the requirement of an organization in “Good Standing” and shall continue to be eligible as a member of FACS. Since the Board of County Commissioners has to authorize an organization to serve as the “Official” Crime Stoppers organization for their respective county, it is highly recommended that the Board of County Commissioners for Polk, Highlands and Hardee counties each review this report to determine if they will continue to support and authorize this organization to serve as their official Crime Stoppers organization. The Office of the Attorney General will require updated written authorization from the FACS Board of Directors, and each County Commission currently served by the Polk County Crime Stoppers, d/b/a Heartland Crime Stoppers by September 15, 2011, in order to continue any existing contracts.