A District auditor has warned that more fraud could lie ahead if the D.C. Council does not immediately take steps to enforce better oversight by the city organization that former Councilman Harry Thomas Jr. used to embezzle more than $300,000.

In a letter to Council Chairman Kwame Brown, City Auditor Yolanda Branche said a lack of sufficient internal controls "enabled the embezzlement" of District funds.

"We strongly urge the Council to immediately take steps toward restoring the public trust and protecting the resources of the District of Columbia from further fraud mismanagement and abuse by implementing the recommendations in this memorandum," Branche said.

The memo was written in response to Brown's request for an explanation of prior recommendations made by the auditor's office regarding the city's financial controls over grantees that get city money. Thomas had used the D.C. Children & Youth Investment Trust, which doled out more than $18 million in grant money in 2009, to divert money meant for youth sports camps back to himself via nonprofits that received money from the trust.

The trust is now under the council's microscope as Ward 4 Councilwoman Muriel Bowser has is calling for an audit of the organization. Ward 1 Councilman Jim Graham, whose council committee oversees the trust, has said he is considering launching an investigation into the organization.

Branche's memo, which was sent to Brown last week, identified two previous audits that outlined the city's poor history of keeping track of its grants once that money is in the hands of a nonprofit. A 2010 audit on the city's now-defunct earmarking process found that some money was steered to organizations that weren't nonprofits or not registered entities in D.C. Either is a violation of the District's rules for grant recipients.

Branche recommends that entities granting money must first validate that nonprofit's tax-exempt status with the Internal Revenue Service and verify that it is a properly registered entity in the city. The memo also recommends grantors monitor their grantees by conducting site visits, reviewing their financial reports and requiring prior approval for some requests.

In the case of Thomas, falsified expense reports were submitted on behalf of a nonprofit funneling money back to Thomas, according to prosecutors. The filing of the reports automatically triggered the next grant payment from the trust to the nonprofit.