The vagueness of this instruction has led to a few questionable charges. The expenses submitted by Directors have varied considerably. Some obviously do not submit many of the expenses incurred; some charges lack receipts. Usually travel is by first class and probably should be. RECOMMENDATIONS OF THE INSPECTOR GENERAL· The Inspector General recommends that the members of the Board of Directors be informed that, for reasons of economy and propriety, they should follow the guidelines spelled out in the Corporation's travel regulations as far as possible. Directors should be advised to submit expenses incurred. A more specific policy would be desirable. CORPORATION'S RESPONSES The Chairman issued a memorandum on 11 May 1982, authorizing each Board member to approve and authorize his own expenses, subject to existing policy. Travel expenses of Board members are reimbursed as actual costs are incurred, which is the principle underlying the Corporation's travel policy for all employees. Individual reimbursement claims of the parttime Board members can vary in terms of costs due to their unique requirements and constraints placed on trip scheduling, tight itinerary, and short-term availability of accommodations while on Corporation business. More advanced information concerning meetings is now being provided Board members to enable them to plan further ahead and reduce expenses. Sensitivity of expenditures related to travel expenses has now been discussed with each Board member by the Vice President-Administration. INSPECTOR GENERAL COMMENTS ON CORPORATION'S RESPONSES The memorandum of 11 May 1982 is unclear as to whether Directors can authorize any exceptions to the policy in approving their own expenses without further approval. The Corporation's policy with respect to Director's expenses is still disjointed and lacks specific guidelines. The Inspector General recommends that either provisions for Directors be formally incorporated into the Corporation's existing policy document covering travel authorization and cost reimbursement practices for officers, employees, and consultants; or a separate policy document, containing specific guidelines, be prepared for Directors. In addition, the Inspector General strongly recommends that the resulting policy document, either new or amended, be approved by formal resolution of the Board of Directors. 6. NINE OF TEN EXCEPTIONS REPORTED HAVE NOW BEEN SATISFACTORILY RESOLVED a) b) c) d) e) A board member who travels by private aircraft will further document Accounting has agreed to require a listing of hotels contacted with A Vice President's advance for $500 in August was disposed of by House payments applicable to principal will be excluded from any An employee reimbursed the Corporation $170 for a ticket rerouting f & g) h) i) Two different employees with inadequately documented travel An employee was instructed to follow travel reimbursement claim Filing and Journal Entry improvement suggestions have been accomplished. 7. A TENTH EXCEPTION INVOLVING RELOCATION REIMBURSEMENTS TO AN OFFICER/DIRECTOR HAS NOT BEEN RESOLVED . A. An Officer/Director has been reimbursed $19,500 for the real estate commission on the house he purchased in Alexandria, Virginia on 20 August 1981. The closing statement indicates the commission was being paid by the purchaser. However, such commissions are normally paid by the seller; and, neither the old draft policy nor the new adopted policy provide for real estate commission reimbursement on the purchase of a house. The $19,500 appears to be additional consideration toward the purchase cost of the house. The Officer/Director did not sell, or pay any selling commission on, his former residence. Therefore, no commission seems to be reimbursable under the relocation policy. Nothwithstanding a memorandum from the Chairman of the Board to the Personnel Office stating "Reimbursement for relocation B. C. expenses of [the Officer/Director] should be made in accordance A mortgage interest rate differential claim of $1,590 per year for three years is open to question because the same Officer/Director did not sell his former residence or forego the benefits of the lower mortgage rate thereon. There is no evidence in the files that mortgage rate differential payments apply to any situation other than the sale and purchase of a home connected with a relocation. Both of the above questions (A & B) remain unresolved and adequate justification supporting the propriety of the reimbursements is still lacking. Expenses incurred of more than $3,000 prior to the Officer/Director's hire date need more elaboration as to the specific services he was performing for the Corporation. Of these expenses, receipts were lacking for 28 April and 16 May 1981 airfares of $264 and $528, respectively. The Corporation should assemble the pertinent facts and document CORPORATION'S RESPONSES The Corporation's response was submitted in the form of opinions prepared by the Assistant General Counsel in a memorandum for the Chairman. (See Attachment B.) INSPECTOR GENERAL COMMENTS ON CORPORATION'S RESPONSES The Inspector General must consider the reply finally received by the Audit committee on 13 April 1983 as the final response for inclusion in this report. The Corporation had been notified by the Chairman of the Audit Committee on 25 February 1983 to submit its final response to him by 18 March 1983. The Corporation cannot be allowed to delay the auditing process. Board of Director's action is needed as the following deficiencies still exist: A. and B. Adequate justification supporting the authority for these two reimbursements under corporate policy is still lacking. C. Additional information regarding the specific services performed has been gathered by the Corporation and one of the airfare receipts found, but further efforts by the Corporation are necessary to complete the documentation. 24-125 0-83--17 At your request I am conducting a review of three matters relating to reimbursement of an officer and director of the Corporation that were raised as exceptions in the fiscal year 1982 internal audit of travel and relocation expenses and employee advance accounts conducted by the Office of the Inspector General and presented in a February 1983 Addendum. I set forth below the status of the review and the tentative conclusions reached with regard to each matter. (5.a.) A director and officer has been reimbursed reimbursement on the purchase of a house. Memorandum for the Chairman [The matter remains] unresolved and adequate I have reviewed the Corporation's file on the payment, interviewed the director/officer and spoken telephonically to the seller, Maurice N. DeGroff, the settlement agent, attorney George E. Bitner, and to Pat Buck, sales associate for Holley, Hargett & Spain, the real estate brokerage firm that received one half of the commission and on whose form the sales contract was written. I have also had a brief telephone conversation with the second broker, Gary Golubin of the firm of Golubin and Warwick. Responses in the telephone interviews have not always been precise, suggesting that more detailed interviews may be required. Subject to further verification of the facts, examination of real estate commission practice and discussions with accountants and compensation specialists regarding relocation compensation policies and practices, we set forth our understanding of the facts and tentative conclusions. The buyer, after several months of unsuccessful personal efforts conducted evenings and weekends to locate a residence, contacted a number of brokers specializing in residential homes in areas in and surrounding Washington, including Pat Buck of Holley, Hargett & Spain. No written contract was entered into between the buyer and Holley, Hargett & Spain. The buyer told the sales associate that he expected her to work for him, not a seller. There was no discussion of a commission or commission rate at the time of the engagement, although the buyer intended to pay an appropriate commission. The sales agent has said that she believes that she was "working for the buyers to find a house, and she often does not reach an explicit agreement regarding a commission until a contract is signed for a home. The house for which reimbursement of the commission was paid by the Corporation was subject to a July 29, 1981, listing agreement entered into by the seller with the real estate agency of Golubin & Warwick. The agreement provided for a three-month exclusive listing, a listed selling price of $349,000 or such other price agreed upon, and a commission of six percent of the selling price if the property were sold during the listing period. The agreement authorized Golubin & Warwick to utilize a multiple listing service, and it was through that service that the Holley, Hargett & Spain agent learned of the availability of the property. |