The State Attorney's Office reviewed a complaint of potential fraud and theft at the National Guard Association of Florida and found apparent "financial irregularities" but due to a "severe lack" of financial controls prosecutors decided not to launch a criminal investigation, according to documents.
Lax practices at the National Guard Association of Florida, a nonprofit based in St. Augustine that lobbies for people who served in the guard, found problems that could lead to misappropriation and fraud, according to an audit.
The office of 7th Circuit State Attorney R.J. Larizza conducted the preliminary review after receiving allegations involving the organization's former executive director, Mary Paul of St. Augustine, according to Investigator T.C. McIntosh who prepared a four-page "fraud examination report."
The allegations were made in a 12-page letter by Rachael Rosenburg, who is listed as one of the two presidents of the association on state Division of Corporation's website. A copy of Rosenburg's letter was provided by the State Attorney's Office.
The documents from the State Attorney's Office provided insight into the operation of the nonprofit, which spent 43 percent of its expenses of just over $300,000 on salaries and wages in 2018, according to an expense statement included in the State Attorney's Office review. The allegations in the documents describe an organization with little safeguards against internal fraud.
In a Feb. 13 memo, Assistant State Attorney Benjamin J. Rich wrote that fraud examiner McIntosh found "what appeared to be financial irregularities; however, a severe lack of proper internal policies and controls contributed to the CEO's arguable legal claim to the funds received, in light of the history of self-reimbursement and lack of procedural guidance."
Rich wrote that for those reasons "a formal evidentiary criminal investigation would be unlikely to yield fruitful evidence for the purposes of a criminal prosecution."
The State Attorney's Office began the inquiry after receiving the letter from Rosenburg, making a number of allegations against Paul, including that she took unearned vacation time, paid what appeared to be an excessive amount for items without documentation, engaged in "questionable time and attendance activity" and personally received "monetary incentives" from Bank of America for the use of the guard association's credit card for guard business, documents state.
Rosenburg wrote that Paul personally earned "points" on the association's credit card even though she was using it for association purchases.
Paul could not be reached for comment. Carolyn Smith, an executive assistant at the Guard Association, said Paul left the organization last summer.
A post on the "Enlisted National Guard Association of Florida" on Feb. 5 said that Paul was retiring after 30 years of working for the group. The same post welcomed her replacement, Ron Corey, a retired colonel from the Florida Air National Guard.
Terry Hashey, president for the officers side of the association, said when reached by The News-Journal that he was unaware of the investigation and said he would request it from the State Attorney's Office.
"We don't typically talk about our internal affairs, specially with the media," Hashey said.
Hashey took issue with the memo written by Rich when a copy was emailed to him by The News-Journal.
"There are glaring errors in this document. I will follow up with the SA office," Hashey wrote in an email.
But Hashey had not responded as of Thursday morning to an email from the News-Journal asking him what were the "glaring errors."
He did say in another email that the association was working on the issue.
"Our association had put in place internal controls and we continue to improve our processes based on professional consultants and best practices of other associations," Hashey wrote.
He declined to respond to questions about Paul.
The organization is working to correct problems, said John Pelleriti, who is the president-elect. He said the group hired the new executive director, Corey, about a month ago. Pelleriti said the group hired two firms to audit the group's books.
"We take everything extremely seriously," Pelleriti said. "And the current leadership is working diligently to make sure the right policies are in place."
The non-profit guard association describes itself on its web page as working to protect the benefits soldiers and airmen have earned through their service.
The organization has two presidents, one for officers, Hashey, and the other, Rosenburg, for enlisted personnel.
McIntosh's findings were the result of a preliminary review by the State Attorney's Office.
The National Guard association "provided little or no oversight over" Paul's duties according to a review of a financial audit on March 5, 2019, the investigator found.
The National Guard Association of Florida hired Chris Russell to perform the independent audit according to a document dated March 5, 2019.
The duties of accounting for funds, issuing payments, signing checks, reconciliation of accounts and reporting expenditures were not separated, the audit found.
Based on the audit, the Guard Association "ran with little regard for the potential for the misappropriation of the organization's funds and assets," the investigator found. The investigator also said that someone could argue that Paul had a "fiduciary duty" to the group to establish the lacking internal controls.
McIntosh found he could not show that anything was violated "without specific internal controls, specific regulations, or governance documents regarding payments or reimbursement procedures."
The audit found that significant transactions were not being scrutinized by those running the organization.
Among the findings: the National Guard Association of Florida did not record accrued and personal sick leave for employees, resulting in significant "audit adjustments" to the financial statement, according to the audit.
A significant number of transactions in the general ledger involving "vendors and payees did not match or were absent or did not agree to the actual supporting documentation," the audit found.
The audit found a "general absence or inadequate segregation" of duties related to handling cash.
"This deficiency can lead to misappropriation of assets, material misstatements, and or instances of fraud," according to the audit by Chris Russell and Co.
The audit also found that the executive director had too much responsibility: approving disbursements, receives and reviews bank statements and canceled checks and reconciles bank statements.
"This condition could provide an opportunity for misappropriation of funds and concealment of such activity," the audit found.
The documents provided by the State Attorney's office included an expense statement for the National Guard Association of Florida for the year ending Dec. 31, 2018. The statement listed total expenses for the group of $304,932. Of that, $125,939 went toward salaries and wages, payroll taxes accounted for $9,742 and fringe benefits came to $6,500.
According to the letter sent to the State Attorney's office, Paul had a salary of $83,864 in 2018 or 27 percent of the expenses of the not-for-profit group.
The salaries and wages together came to $132,439 which means that in 2018 salaries and wages made up 43 percent of the expenses of the not-for-profit group.
It spent $26,832 on banquet expenses and another $28,082 on "meals and entertainment."
The statement indicates that the group spent $4,750 in scholarships that year.
This article is written by Frank Fernandez from Daytona Beach News - Journal, The and was legally licensed via the Tribune Content Agency through the NewsCred publisher network. Please direct all licensing questions to email@example.com.