Capital Area United Way mishandled CFC funds, auditors find
Among other past financial improprieties, the National Capital Area United Way never paid interest on $3 million it improperly borrowed from the Combined Federal Campaign in spring 1999, outside auditors found in a report released Tuesday.
The organization, which underwent a management overhaul in 2002, owed nearly $13,300 in short-term interest payments on $3 million taken out of the Capital Area CFC account in March 1999 and repaid the next month, auditors from PricewaterhouseCoopers LLP concluded in their report. Newly elected capital chapter board members requested the report in January 2003 asking auditors to "leave no stone unturned."
The Capital Area United Way credited the interest to the CFC in a "journal entry," but the PricewaterhouseCoopers team was "unable to locate a physical check or wire transfer" proving the money was actually transferred. Auditors also noted that the United Way chapter should not have borrowed the $3 million from CFC in the first place. The CFC, formed in 1961 to pool informal solicitations into a single large-scale charity drive, is the only authorized fundraiser in the federal workplace.
Oral Suer, former chief executive officer of the Capital Area United Way, was "predominately responsible" for the CFC funds inappropriately borrowed in 1999, the auditors found. Suer and colleagues who co-signed the transfer did not provide PricewaterhouseCoopers with a satisfactory excuse for the transfer, according to the report.
One co-signer told auditors that the $3 million helped mitigate a cash flow shortage at the capital chapter. But the report noted that the transaction nonetheless seemed "highly unusual and questionable," given that such transfers usually occur after "extensive discussion, approval and documentation."
The Capital Area United Way plans to immediately file a lawsuit against Suer, in hopes of recouping money lost through the transfer and a number of other financial transactions he initiated, William Couper, chair of the chapter's board, announced Tuesday. The suit will ask Suer, who retired in the winter of 2001, for roughly $1.6 million in restitution and damages.
"We are shocked and outraged by the findings of the audit released this morning," Couper said in a statement following the release of the audit. "The United Way and the community it serves were abused." He added that under new leadership, the organization has "truly turned the corner" by strengthening checks and balances of power.
Auditors also noted that the organization has "taken numerous positive steps to reform itself." The capital chapter has halted its former practice of giving select donors preferential treatment and has enhanced oversight of its payroll, the auditors said.
The Capital Area United Way managed the local CFC campaign for 25 years before withdrawing its bid to manage the 2003 Capital Area CFC in mid-February, to spend a year recovering from recent financial troubles. The chapter planned on handing the contract over to the Central Maryland United Way temporarily, but Global Impact, an Alexandria, Va.-based nonprofit ended up winning the contract in May.
The Office of Personnel Management, which oversees the Combined Federal Campaign, has said that the new management, along with audit guidelines released in late April, should instill confidence in the campaign that eroded during the Capital Area United Way's financial troubles. During the nationwide fall 2002 campaign, federal employees gave $236.9 million to charities, about 2 percent less than the $241.4 million pledged the year before. Giving in the capital area fell by 6 percent over the same period, but Washington still contributed the most of any 2002 local campaign.