The D.C. government must tighten its internal controls on vendor payments, tax refunds and payroll in the face of “significant fiscal challenges that we believe will continue into the foreseeable future,” the D.C. inspector general recently warned.
The IG’s office issued a report earlier this month that advised D.C. leaders of many weaknesses in the District’s payment processes that were uncovered in recent audits. Those failures include insufficient management oversight, ineffective supervision, lack of policies and procedures, poor file maintenance, disregard for regulations and unfamiliarity with standards of conduct.
“The tightening of revenue streams due to falling real estate values, combined with increasingly higher demands on social and support services will place additional stress on the city’s limited resources and heightens the importance of mitigating the risks of financial losses,” the IG wrote in the report.
“Accordingly,” it continued, “agency heads should review existing controls to see that they are in fact in place or implement new controls that will ensure the integrity of the payment process, thereby maximizing revenues and eliminating unnecessary or wasteful expenditures.”
Many of the internal control weaknesses emerged from reviews of the Office of Tax and Revenue, home to the costliest scam in D.C. government history. Harriette Walters, a midlevel OTR employee, stole nearly $50 million over 20 years by manipulating the property tax refund process, revealing the absence of any anti-fraud program within the office.
Chief Financial Officer Natwar Gandhi, under whose watch the money was stolen, has said repeatedly that his office is re-evaluating and strengthening anti-fraud programs and installing numerous controls on the tax refund process.
The problems go well beyond the tax office, the IG reported.
Another 2008 audit found that the District paid $16 million over the previous five years for construction management services, despite having invoices that were neither approved by an authorized government official nor sufficiently verified by a financial officer. Still another review found that the city’s managed care organizations were earning excessive profits — roughly $97 million over five years — because the District did not properly adjust its per-person rates.
The city made duplicate payments for disability services, paid overtime without required approvals and paid vendors late, drawing interest penalties, the IG said.
The IG called on all government managers to “consciously design operational strategies that maximize every dollar realized or spent.”
