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SEC Recreation and Welfare Association Financial Management

July 31, 2003

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Audit No. 368


We found that the financial management of the Commission's Employee Recreation and Welfare Association (RWA) has been improved since our prior audit on RWA Oversight (No. 346). We are recommending several additional improvements, including: establishing an annual budget; implementing a plan to bring revenues in balance with expenditures; enhancing controls over the donation of memorabilia items, and discontinuing the sale of identification card holders.


Our objectives were to evaluate RWA's financial management, and to follow-up on financial related recommendations in our prior audit. During the review, we interviewed RWA and Office of Administrative and Personnel Management (OAPM) staff, and reviewed RWA financial documentation, including its 2002 bank statements and inventory records. We also observed the inventory of RWA property (e.g., memorabilia items) conducted on December 30, 2002.

We performed our review in accordance with generally accepted government auditing standards between December 2002 and April 2003.


The Recreation and Welfare Association promotes employee welfare through several activities, including employee parking, sale of Commission memorabilia, and social events (e.g., ice cream socials). These activities have been generally limited to headquarters and Operations Center staff.

RWA officers consist of a President (who manages the RWA's parking program), a Treasurer (who handles RWA financial transactions and memorabilia sales), and a Vice President (who signs checks, reviews the bank reconciliation, and observes the inventory). The President and Treasurer have served for several years, without annual elections.

RWA funds primarily derive from rental of 80 parking spaces at headquarters. The RWA pays the Commission's landlord $80 monthly for each space, and local tax of $12.00 (12%). It leases the spaces to employees for $100 monthly (well below the market rate), and thus makes an $8.00 profit per space, or about $8000 per year. In addition, RWA sells Commission memorabilia at a mark-up of 5% over its cost.

Under the provisions of 5 USC section 5702, the Commission is prohibited from using appropriated funds to purchase refreshments for employee social activities (e.g., holiday parties, staff picnics, and ice cream socials). The RWA provides funding for these events (approximately $17,000 in 2002).


We found that RWA has improved its financial management since our prior audit by implementing several of our recommendations.

It has enhanced the separation of duties by having the Vice President (rather than the President or Treasurer) sign checks, review the bank reconciliation, and observe the inventory. RWA has also enhanced documentation of the inventory (reconciliation and analysis of beginning and ending inventory balances).

RWA has obtained a business credit card (rather than using the Treasurer's personal card). It now requires participants to pay their monthly parking fees by electronic funds transfer, which is more secure than a personal check. Our audit also acts as a control over financial management (formerly, RWA's books were not audited).

We are making several additional recommendations to enhance RWA financial management.


RWA does not prepare an annual budget. A budget acts as an important financial management control. It is useful for financial planning, identifying financial trends, controlling expenses, showing planned versus actual results, and to provide information to management and members.

Recommendation A

In consultation with OAPM, the RWA should prepare an annual budget. It should post the budget on the Commission's Insider or send it by e-mail to Commission staff.


We found that RWA's cash balance has declined over the last two years, because its expenditures have exceeded its revenues. This trend, if not addressed, would force RWA to curtail its funding for employee activities.

In 2001, RWA's revenues were $98,450, while its expenditures were $109,461 (a deficit of $11,011). Its cash balance as of December 31, 2001 was $13,064.

In 2002, its revenues were $101,858, while its expenditures were $107,343 (a deficit of $5,485). Its cash balance as of December 31, 2002 had declined to $2,839.00.

RWA needs a financial plan to bring its expenditures into balance with its revenues, by increasing revenues and/or by decreasing expenditures. The most obvious way to generate additional revenue would be to increase the rate it charges for parking (since most RWA revenue comes from parking, and RWA's $100 monthly charge is less than half the commercial rate in the area).

Recommendation B

RWA, in consultation with OAPM, should develop a financial plan to bring its revenues and expenditures into balance. The plan should be incorporated into its budget (discussed above).


RWA periodically donates Commission memorabilia as gifts and prizes (e.g., for employee recognition ceremonies). The items are taken from RWA's inventory and therefore represent a cost to it. However, RWA does not maintain documentation of these donations. Also, it does not identify the related cost as a separate line item in its financial reports.

Recommendation C

RWA should maintain documentation of donated items, and report the cost of donations as a line item in its financial reports.


RWA provides funding for office events (e.g., holiday parties, staff picnics) at the rate of $3.20 for each employee in an office. Funding is provided only when an office submits a written request, and is limited to employees in headquarters (because funding for office events is generated by the parking program at headquarters).

Some offices may not be aware of the requirement to submit a written request.

Recommendation D

RWA should notify offices of the procedures for requesting funding for office events.


The RWA sells identification card holders to employees. The holders have the Commission Seal glued on the inside cover and resemble a badge.

The RWA indicated that employees are only allowed to purchase one holder for their personal use. However, because of their similarity to a badge, the holders are subject to possible misuse (such as to help gain unauthorized entry to a government building). Purchasers could give or sell a holder to someone else without being detected.

Recommendation E

RWA, in consultation with OAPM, should discontinue the sale of identification card holders.

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