The University Record, November 26, 1996
Committee recommends changes in Washtenaw United Way
By Julie A. Peterson
News and Information Services
An independent oversight committee has released a report finding that lax procedures in the handling of Washtenaw United Way's funds resulted in inappropriate expense reimbursements to some of the agency's employees. The report, presented to United Way's board of directors and to members of the media Nov. 18, included a number of specific recommendations to ensure that funds are handled properly in the future.
The eight-member committee, which included Executive Vice President and Chief Financial Officer Farris Womack and Vice President Emeritus Henry Johnson, was formed by the board of Washtenaw United Way Sept. 4 to conduct an independent investigation into allegations of irregularities in the handling of funds by agency employees.
Although the board has not yet had a chance to consider the report, Chair-elect Frank E. Fike said, "each and every recommendation will be reviewed in detail and acted upon by the board." The board's next meeting is scheduled Dec. 11.
The committee's investigation, which included a detailed review of financial records for 1993-96 by the accounting firm Plante & Moran, found that, contrary to United Way policy, personal expenses for six employees were charged to United Way credit cards. Even where employees repaid the agency for the charges, they were improperly not charged sales tax because of United Way's tax-exempt status.
Further, examination of expense reports found that receipts often were missing and the business purpose not detailed for travel, club memberships, athletic tickets and other expenses which were improperly reimbursed. The report also noted that political contributions were made by staff and reimbursed by United Way in violation of IRS regulations for tax-exempt organizations.
The committee also looked at the disbursement of funds designated by donors for specific United Way-supported organizations. Although some reporting errors were made, these "did not represent any misuse of funds," noted committee co-chair Robert Delonis. He said about $6,500 in designated donations over a two-year period were paid late because of accounting errors, but that the errors had been discovered and corrected. Although creating complex accounting challenges for Washtenaw United Way, the distribution of designated funds was handled properly, the committee found.
The committee recommended a number of changes, some very detailed and some more broad and far-reaching. It said Washtenaw United Way should:
Require every expense report to include acceptable receipts and a statement of business purpose.
Eliminate all United Way credit cards and reimbursement for club expenses, athletic tickets, charitable and political contributions. Those political contributions that were illegally reimbursed should be repaid by staff members to United Way.
Take steps to remedy "a significant deterioration in the quality of relationships and communications between Washtenaw United Way and its participating agencies."
Reduce the size of the board of directors from its current 28 members. Such a board "is too large to effectively act as a governing board," noted the report. Further, the board's finance committee should be "clearly responsible" for the oversight of all financial operations, and the agency should hire a chief financial officer with the expertise to manage its complex financial operations.
Examine the propriety of providing direct services, which compete with member agencies and increase the size, complexity and cost of the United Way organization.
Consider eliminating the ability of contributors to designate contributions to specific organizations, which "introduces significant accounting and administrative complexity, ... increases internal costs and the opportunity for errors."
Although committee co-chair Patricia Garcia called the report's findings "both disappointing and troubling," she also noted that "the aggregate dollar amount involved in these matters is relatively modest in comparison to the size of Washtenaw United Way's overall operations."
"While there can be no excuse for any breach of the trust which the public places in Washtenaw United Way ... the fact remains that Washtenaw United Way is deserving of our mutual efforts to correct these problems and assure its continuance as a substantial force for good in our community," Garcia said.