Audit Finds Elk Grove Police Activities League Ripe With 'Opportunity For Fraud'

November 20, 2015 |

Ed. note: Aside from receiving grants from them, The Elk Grove Police Activities League is not affiliated with The Elk Grove Police Department or the City of Elk Grove.

A recent audit of the Elk Grove Police Activities League (EGPAL) found numerous deficiencies in accounting of public funds received and expended.

The audit, which was performed earlier this year, was ordered by Elk Grove Police Chief Robert Lehner. The results of the audit, which were obtained through a public records request, does not disclose the reason it was ordered.

The audit found deficiencies in three general categories, and within each category there were numerous findings. The three categories included internal accounting controls, interaction with government agencies, and books and records.

Some of the major findings taken directly from the audit report are listed below:  

Internal Accounting Controls:

• There was inadequate segregation of duties over the collection and deposit of cash receipts, and the disbursement of cash and checks.
• There was ineffective monitoring by the board of directors. Our reading of the minutes showed that there were long gaps between some meetings and little mention of financial difficulties even though the bank accounts were consistently overdrawn.
• With respect to the maintenance of the general ledger: During the four year audit period, three different general ledger files were used to record the accounting transactions. The general ledger for 2010-2011 was maintained by former accountants and was not available to us. The electronic general ledger detail for the 2012-13 fiscal year was lost and unavailable for our review.

Effects:

• The opportunity for fraud (asset misappropriation) was prevalent and widespread during the audit period. The organization is now having great difficulty in meeting its current financial obligations.

Interaction with Government Agencies

• Non-profit organizations should have infrequent and routine encounters with government agencies (generally accepted). During our audit we discovered that the organization has had frequent, non-routine encounters with numerous government agencies, including: Internal Revenue Service, Franchise Tax Board, California Secretary of State, California Attorney General, Sacramento County Grand Jury and the Labor Board.
• Compliance with government laws and regulations was clearly not a priority for the organization.

Effect:

• The organization has lost most sources of funding and is on the brink of closing down.

Books and Records:

• Books and records presented for the audit engagement were either unauditable (fiscal year 2010-11) or barely auditable (fiscal years 2011-12, 2012-13 and 2013-14).
• Sufficient care, skill and resources have not been provided for the care of the books and records of the organization for the periods under audit.

Effect:

• The organization has lost most sources of funding and is on the brink of closing down.

For the Elk Grove Police Activities League, 2015 has been a tumultuous year. The group, who for the last several years has had Cosumnes Community Services District Director Michelle Orrock as its board chairperson, lost major funding earlier this year when the City of Elk Grove decided against continued funding of the organization and is currently dissolving. (See video below)

Over the last several years, the EGPAL has been one of the largest beneficiaries of the City of Elk Grove's Community Block Grant money. Since 2009, they received $207,010 in community service grant money from the city. Additionally, they have received $63,368 from the Elk Grove Police Department’s Community Grant Budget since 2007.    

In 2012, the EGPAL also received a special one-time $10,000 grant to fund The Fittest of Elk Grove contest that was organized by Brian Detrick, son of Elk Grove City Council Member Steve Detrick. Since 2007, more than $280,378 in public funds was funneled through the organization.

The audit also noted that Kendra Lewis, a former employee of the organization, “has filed a claim under the Fair Labor Standards Act for unpaid earnings.”  

In addition to its funding problems, EGPAL and a former board director have been the subject of civil litigation by a former EGPAL volunteer football coach. Filed by Charles Washington, the lawsuit seeks damages after Washington learned that former EGPAL Director Manuel Saenz had conducted an illegal background check on him.

An Elk Grove Police internal affairs investigation confirmed that Washington was investigated by someone using the department’s access to Federal databases. The report did not say who conducted the inquiry.

Subsequent to that, Saenz’ employment as a police officer with the city ended. It is not known if he resigned or was terminated.

The audit, which was conducted by the accounting firm of Fritzsche and Associates of Sacramento, also noted “Poor accounting controls were exercised over the collection and deposit of cash receipts and the payment of cash disbursements prior to the initial entry of such contributions in the accounting records. We were unable to obtain sufficient appropriate audit evidence about the amounts recognized as support and revenue, or program expense by the Elk Grove Police Activities League, Inc. for the years ended June 30, 2014, 2013 and 2012. Consequently, we were unable to determine whether any adjustments to those amounts were necessary.”  

For a complete copy of the report, email editor @ ElkGroveNews. net with “Audit” in the subject line.