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United Way tightens controls

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Todd Cohen

GASTONIA, N.C. — In the wake of a financial scandal a year ago at one of its partner agencies, United Way of Gaston County has tightened accountability standards for the 28 health-and-human-service agencies it funds.

Triggering United Way’s review of its accountability standards was the disclosure that roughly $300,000 was missing at the Boys & Girls Clubs of Greater Gaston.

The agency’s former executive director, Scott Jimison, was indicted in August and subsequently pleaded guilty to embezzlement. He had been accused of taking money from the nonprofit and falsifying data submitted to United Way.

“As a result, our board members wanted to make certain that United Way had the necessary controls and accountability standards in place,” says Mary Vaughn, United Way president.

United Way, she says, wanted to assure donors their charitable contributions would be accounted for rigorously.

Initially, the United Way board wanted to require all agencies receiving its funds to submit certified audits each year.

But smaller agencies balked, fearing the cost of audits could be prohibitive, Vaughn says.

Based on checks with certified public accounting firms, she says, the cost of an audit could range from $2,500 to $10,000, depending on the size of the agency and the number of its financial transactions, with the cost of audits for smaller agencies likely to range from $2,500 to $3,500.

In fact, she says, all six crisis agencies funded by United Way said they would not seek funding if they were required to submit full audits each year.

So Janet Sarn, Gastonia market president for Wachovia and board chair for United Way, decided to take another look at the proposed changes to make sure the new accountability standards, without putting an “undue hardship on agencies,” would “assure donors that programs would continue to benefit clients,” Vaughn says.

Under the changes it now has adopted, United Way starting in 2009 will require all its partner agencies to submit more information in applying for funds.

Agencies with annual budgets of $100,000 or more will be required to submit certified audits, and those agencies’ auditors will be required to submit directly to United
Way a copy of the audit along with any management letter detailing any concerns.

If the auditor fails to send United Way a copy of the audit within 120 days after the end of the agency’s fiscal year, the United Way board has directed its staff to terminate funding until it receives the audit.

Those larger agencies also must submit minutes from their board meetings indicating that their auditors of record have presented their audit reports to the agencies’ boards of directors.

Agencies with annual budgets below $100,000 will not be required to submit audits but will have to submit the Form 990 reports they file with the IRS, and submit a form indicating their board has reviewed the Form 990.

They also will have to and keep separate accounts for United Way fundsthey receive, and provide two signatures for any expenditures of over $500 from those separate accounts.

All but one of the six crisis agencies now say they will continue to seek United Way funding, Vaughn says.

“Trust is not an internal control,” she says, quoting Steve Driscoll, the agency’s auditor. “While we want to believe that everyone is doing what is right, and for the well-being of the people being served, that is not always the case.”

The lesson for agencies, she says, is to “make certain they have the appropriate internal controls in place that will reassure the donor that their contributions are being spent wisely and have the greatest impact.”

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