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Audit finds faults in CDI

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An audit of a Columbus-controlled downtown development company revealed loose control of money, improper assessment of donated property and lack of a paper trail for the company’s decisions.

Columbus Downtown Inc., or CDI, handled money from city tax funds through the Columbus Redevelopment Commission, grants, donations and leases. Lease payments from city-owned restaurant spaces at The Commons and the parking garage at Fourth and Jackson streets went to CDI, as well as money raised from leasing of parking spaces at both city-owned parking garages. At one time, CDI owned more than 10 acres of property downtown worth more than $850,000.

Mayor Kristen Brown and CDI Board President Susan Fye said there is no indication any of the money that was funneled to Columbus Downtown Inc. was used for any purposes other than downtown development.

“As an accountant and a previous auditor, I have looked at this extensively, and I see nothing illegal that was done here,” Fye said. “I wish the controls had been more tightly done. I wish things had been done in a more business-like manner, especially when public funds were involved.”

The audit of Columbus Downtown Inc. was completed last week. The Columbus Redevelopment Commission will be presented with the results at its Monday meeting in a presentation from the auditing company, Crowe Horwath LLP, of Indianapolis.

The audit covered March 14, 2008, when the company was formed, to Dec. 31, 2011, when the Brown administration took over. In an overview letter sent to the CDI board, Crowe Horwath identified several “significant deficiencies and material weaknesses” in CDI’s accounting.

“To the best extent possible, I think we have been able to account for the money,” Brown said.

“At least we have some sort of documentation on most transactions,” the mayor said. “And where we haven’t, we do have bank statements on everything, so we should know who got paid and how much, and at least for the vast majority of it, what it was spent on. We don’t detect or suspect any fraud or anything like that. There is no indication whatsoever of that.”

Brown said there is no indication that CDI ever paid for an accountant to organize its finances. Fye said the company operated five separate bank accounts, but the company never had previously produced a balance sheet. Crowe Horwarth essentially had to start from scratch.

Audit issues

Here are some of the problems identified by the audit.

n Ledger and journal entries: The company did not properly measure and record the value of properties and the use of rental properties. Instead of conducting independent appraisals, it relied on the last assessment from the county assessor’s office for the donated properties.

n Cash disbursement controls: Bank accounts were not reconciled or maintained in one central location. Invoices were not maintained in a central location and, in some cases, could not be located. Some checks included only one signature when two were required.

n Board decisions: CDI did not regularly include board decisions in its minutes. For example, there was no recorded board agreement to accept a $2.6 million gift from the Cummins Foundation. Some leases did not have signatures from both parties, or were approved after the fact.

n Grant reporting: CDI did not provide written reports on its use of grant funds.

n Annual report: CDI did not complete annual reporting required by the state.

Fye said the Cummins grant was used to build the parking garage at Second and Jackson streets.

The audit said the potential problems that could be caused by the accounting shortfalls were that they “may increase the risk of fraudulent activity occurring without timely discovery.”

Auditors recommended that CDI establish an accounting system and procedures to record all of its financial transactions, as well as establish a system of documenting significant business transactions.

Since the new administration took over in January 2011, city officials have followed standard accounting procedures, Fye and Brown said.

“Since the current board got involved, we have not received any grants,” Fye said. “We are in a shutdown phase. The only income since January of 2012 was income from garages and restaurants.”

Explaining actions

Terry Coriden, the former city and CDI attorney under former Mayor Fred Armstrong, said every dime was accounted for during his involvement with CDI. He said the board made broad decisions, such as to authorize the payment of electric bills, but did not specifically set the amounts to be paid to Duke Energy.

“There were no financial transactions that took place that were not approved by the board,” Coriden said.

The bookkeeping was handled by Sharon Renfro, the former manager of the CDI and Commons properties, Coriden said.

Coriden maintained that the board minutes were properly kept, but were general notes on the decisions made, not specific word-by-word accounts of the board’s meetings.

For his part, Coriden said he never handled any of the money or deposited any of the money that passed through CDI.

Ann DeVore, a former City Council member and former CDI board member, said the previous administration modeled CDI on an Indianapolis development company and under the guidance of Indianapolis attorneys. She believed the company had received annual accounting audits, but could not recall the accounting company involved.

DeVore said that all of the money that went through CDI during her tenure was used for downtown development efforts.

Coming Monday: CDI winding down

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