In response to concerns over the Cook County Council on Aging’s financial situation and accusations of lack of financial transparency, the county board drafted a letter to the council dated October 1, 2013 that suggested that the board might require an audit – but Board Chair Jan Hall refused to sign it. On October 8, the board discussed creating a policy requiring audits from organizations that receive funding from the county.
The unsigned letter
The letter stated in part: “As you know, the Cook County Board of Commissioners [is] in the process of reviewing the proposed 2014 budget. Integral to this process is a review of present policies and procedures that affect budget decisions. While the term ‘audit’ usually sparks apprehension, in actuality, it’s really just a part of a reliable checksand balances system to make sure everything is in order.
“Audits are an important legal accountability tool used by resource providers (grantors, donors and others) to assure that resources are spent by nonprofit organizations in accordance with the resource provider’s intentions – in this case, the county. Audits provide a good opportunity for nonprofit organizations to prevent unexpected liability by addressing and resolving problematic issues before they escalate.
“While an annual financial audit may not be required by the federal or state government, the board of commissioners is considering such a policy, in certain cases, as a condition of funding, tied to the amount of the grant request coming before the board.”
The purpose of the audit, according to the letter, would be to: . “Protect the public’s trust and assure that public funds are used effectively for the exempt purpose intended; . “Assure accuracy and protection, not to find indiscretions by staff or officers; . “Protect new members joining the board from liability for any fraudulent activities that may have occurred prior to their appointment; . “Review broadly the legal ‘health’ of the organization by looking at legal documents, filings, procedures and policies; . “Determine that the organization’s activities remain consistent with its established exempt purpose and that sufficient controls are in place to examine and assure continued compliance.”
The letter goes on to say, “It is hoped the board of directors for the Cook County Council on Aging recognizes the importance of conducting an annual external audit.”
Ensuring fairness
On October 8, Commissioner Hall pointed out that other organizations receiving county funding have not been required to get audits.
Of the 10 agencies slated to receive non-mandated funding from the county in 2014, six had audits prepared by independent auditors in 2012 – the Violence Prevention Center, WTIP Radio, Grand Marais Public Library, the Volunteer Attorney Program, Cook County Higher Education, and Legal Aid. Four did not – Birch Grove Foundation, Cook County Historical Society, North Shore Music Association, and the Cook County Council on Aging. The Council on Aging did report $134,821 in reserves at the end of last year and requested $81,000 from the county for 2014.
Commissioner Hall said she did not think the county should pick one entity over another to get an audit. She said that’s why they attend “five or six meetings a day” where they find out how these organizations are operating.
Any agency getting over $50,000 from the county in a year should be required to get an audit, Commissioner Bruce Martinson said.
County Attorney Tim Scannell recommended that the board develop a policy on audits if they wanted to require them and that they make sure to enforce it fairly. “You can’t cherry pick,” he said.
Audits are a part of good stewardship and provide healthy checks and balances, Commissioner Garry Gamble said, and they would protect both the organizations and the county. He said he would rather work in partnership with organizations than force them to get audits, however. This is an opportunity for organizations to raise their integrity levels, he said.
Commissioner Sue Hakes said she had heard from at least four people over the last year who had concerns over finances at the Cook County Council on Aging, which operates the Senior Center in Grand Marais.
“The only thing is, you don’t want to be doing it in response to the four people who called about this,” Attorney Scannell said. “We have grumbling about everything constantly around here.”
“I trust these people,” Commissioner Sue Hakes said of the people who reported their concerns to her.
“I’m not saying that you don’t,” Scannell said. “…It’s got to be for a good reason and it makes good business sense is basically what it amounts to. You want to be doing it in response to the concept that you already have articulated that an audit is a good idea, you’re handing out a lot of public funds, and you want that information in front of you to make a better decision.”
“We feel like we’ve been picked on because of a disgruntled employee and disgruntled board members who didn’t know how to read financial statements,” said Senior Center Director Bev Green. She said they are not opposed to an audit but would need to budget for it.
According to Nolo, a legal information website, “Nonprofits are required to submit their financial statements and other information — including the salaries of directors, officers, and key employees — to the IRS. The IRS and nonprofits themselves are required to disclose the information on Form 990 to anyone who asks. Nonprofits must allow public inspection of these records during regular business hours at their principal offices. In addition, people can request information from the IRS….”
Attorney Scannell and Auditor-Treasurer Braidy Powers agreed to work on an audit policy for the board to consider.
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