- The Washington Times - Thursday, April 6, 2000

On March 18, The Washington Times reported that a single discrepancy, albeit a $40 million discrepancy, was holding up the completion of the District's annual audit. On April 2, The Washington Post reported the problem remained unresolved. While the dollar amount of the discrepancy is important, the inability to complete the audit is no less troubling.
City officials are worried, and rightly so. The audit, which is technically called the Comprehensive Annual Financial Report and due Feb. 1 of each year, is vital to the District's creditworthiness. The more accurate and timely the audit, the better the terms on which the District can borrow money. The reverse is true as well. The District can ill afford a snub, however slight, from Wall Street.
This is true for a number of reasons. The District is planning massive capital improvements over the next few years for everything from transportation to water and sewer projects to new schools and recreation centers. Borrowing would be more costly if the city even appears to be returning to its old, discredited practices. As most businesses and taxpayers know, the old District not only habitually overspent and mismanaged money, but carried out a brand of fiscal chicanery that left the city practically bankrupt. Its bond ratings plummeted to junk status in 1995.
Fortunately, the city overcame those enormous financial hurdles to earn the sterling reputation it currently holds on Wall Street. It accomplished that because of a tightfisted chief financial officer (CFO), a tough-minded control board and a top-notch city administrator. As things now stand, two of those three critical leadership links the CFO and the control board are effectively absent, and it shows.
To date, city officials have carefully overlooked these problems in trying to explain the missing audit. Indeed, at first they said there was no single problem with the annual audit. Then they blamed a new computer system and the ill-trained employees who couldn't use it. Now they say the audit is being held up because the city has misplaced $40 million and can't find it.
The work of the CFO, Valerie Holt, or lack of it, is the source of concern here. The D.C. Council has lost faith in the city's chief financial officer, and the auditors do not have faith in the books she maintains. But neither the council nor the mayor has the authority to remove the chief financial officer. Her tenure depends on the control board, where a minority on the five-member panel has also expressed doubts about her. Yet, here they all are, six months into the fiscal year, two months late on the annual audit and in the midst of next year's budget negotiations, still spewing the same old excuses. That sounds like a formula for the same old problems.

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