Solano County Audit Finds Significant Accounting Problems at Dixon Veterans Hall

An audit conducted by the Solano County Auditor-Controller’s Office on the finances of the found grave problems with the way that the Dixon Veterans Building Association – the group that manages the hall in Dixon – does its accounting and pays for its bills.

Deputy Auditor-Controller Ian Goldberg presented the results of the audit the Solano County Board of Supervisors during its Tuesday meeting. Goldberg told the board that the audit revealed “significant deficiencies and material weaknesses in the controls policies and procedures that directly impact the timely and accurate recording and reporting of financial transactions. The accounting records were incomplete and not sufficient to support the assets, liabilities, revenues and expenses of the organization.”

The group manages the Vet’s Hall is Dixon Veterans Building Association (DVBA) – a group that’s comprised of the Veterans of Foreign Wars (VFW) Post 8151 and American Legion Post 208, according to Solano County. It’s been an uneasy partnership that has placed the Veterans Hall under the magnifying glass of the county. Because of a recent management agreement signed between the VFW and the American Legion Post the Auditor-Controller's Office has the right to inspect the books and conduct audits.

The recent audit thoroughly investigated four components of the Vet’s Hall including the finances and management practices of the DVBA, the American Legion Post’s operation of the hall’s coffee shop/bar, accounting discipline and internal controls/oversight.

Goldberg told the board: “Some of the more significant findings included, in the area of hall rental, income and expenses, inconsistencies in policies, no documentation of receipt of rental income, a lack of accountability and documentation for expenses, unpaid expense in the hall including PG&E, a lack of segregation of duties.”

“In the bar and coffee shop we identified insufficient documentation, lack of cash receipts,” Goldberg said. “We were unable to trace receipts to deposits to the account records to the bar. We had insufficient documentation to support bar and coffee shop expenses.”

In addition, Golberg said the audit found the coffee shop/bar to be non-compliant with wage and labor laws – the staff of the shop were classified by the American Legion as volunteers, making them exempt from federal and state income taxes, but the audit found that the volunteers were in fact being paid a wage of $8 an hour and also collected tips. The volunteers were also directed on what hours to work and where, further cementing their status as paid employees of the shop.

Golberg said the coffee shop/bar’s ATM transactions were not properly accounted for and the American Legion did not track sales to the general public made at the shop and submit required unrelated business income tax in accordance with the Internal Revenue Code.

“I have to say that that in the time I have served on this board, I have never read anything that is as scathing as this report is about the operation of that facility and it concerns me a supervisor since we have our building and we have an oversight function,” District 2 Supervisor Linda Seifert said.

“As I read through this report, I couldn’t agree with Linda more,” Supervisor Jim Spering said. “This is a very disturbing report and you can sugar-coat it all you want and speakers can come up and say ‘There’s nothing wrong,’ but these are very serious allegations and discrepancies and issues that have to be addressed.”

Members of both the American Legion and VFW were in attendance during Tuesday’s meeting and spoke to the board about the audit.

American Legion member Ted Hickman said the American Legion Post inherited some problems that come with the management of the hall. The American Legion Post welcomed the county’s audit and encouraged complete cooperation with it, he said. Hickman said the American Legion Post decided to react proactively towards the audit.

“We hired professionals – a CPA, a tax attorney, a bookkeeper – to go over the ramifications, suggestions by the county and have spent money and are working to correct … the situations that we think need to be corrected,” Hickman told the board. “Pretty much that’s the end of the story. The audit, for whatever reason, we were flattered to be the first chosen to be looked at with incredible scrutiny. Interesting.”

Hickman noted that the American Legion Hall has had some success in generating revenue from use of the Vet’s Hall. He said a remote-caller bingo partnership between Dixon’s post and six other American Legion posts throughout the state has generated over $160,000 in winnings to Dixon residents alone. He also said that $20,000 has so far made it to community groups and organizations such as the Dixon Sports Booster Club.

American Legion and VFW member Kevin Kilkenny’s testimony to the board told of deep divisions from within the DVBA. He pointed out that the DVBA is comprised of not only the two groups of which he is a member of, but also a third – Dixon American Legion Auxiliary, a group that’s comprised American Legion members’ wives and daughters and also female veterans.

“I can see why it was that we were chose as the first one to be audited,” he said. “It can only be because of the dissident faction within the DVBA,” Kilkenny said. “We at the American Legion have committed ourselves to keeping this building open. We have committed ourselves to bettering, to giving back to the community …  that and the American Legion and American Legion Auxiliary have always done. It is the separating faction between us and the other member of the board, the Dixon Veterans Building Association, who do nothing to support that building.”

Kilkenny said that the VFW needs to step up and start to contribute to maintaining the building.

VFW member Robert Fletcher told the board that the VFW has stepped up and raised about $4,000 that was supposed to go to the building association until the funds disappeared out of the account that they were being held in. This disappearance of the funds was reported to the county.

“This situation in Dixon isn’t a American Legion-VFW membership disagreement,” American Legion Cmdr. Greg Coppes told the board, adding that many of the American Legion's members also belong to the VFW.  

Coppes said: “There are deficiencies that need to be corrected and we plan to work diligently to take care of it. I agree with Linda Seifert, it is the responsibility of the American Legion and the VFW to pay all the bills of the Association, there is no ifs ands or buts, we agree whole heartedly.”

But Seifert said she was confused as to who is making all the decisions and who should be held accountable for paying all the bills.

“My understanding is that it’s the responsibility of the DVBA to pay those bills and to oversee and are responsible for making those payments,” she told Coppes, adding that it’s shouldn’t be up to one group or the other to pay the bills, but the DVBA as a whole.

“But it is our understanding and also the understanding of our legal counsel and the accountants that if the DVBA is unable to pay the bills it falls back to the member organizations, which would be the American Legion and the VFW,” Coppes countered. “That’s our understanding, that’s our council’s understanding, that’s the way 1260 is written.”

Coppes then told the board that the American Legion is prepared to pay for half of a massive PG&E bill - a bill of  over $20,000 that's being investigated - if the VFW pays the rest of the bill. Supervisor Spering took exception to Coppes statement and said that if the American Legion Post is generating thousands of dollars in revenue from their remote-caller bingo operation, they should be able to pay the bills on time.

The board gave direction to the Auditor-Controller’s office to have them return to the board with a plan of action within two weeks. Solano County Auditor-Controller Simona Padilla-Scholtens told the board that the DVBA can implement some basic accounting changes right away.

The original recommendation was to re-visit the issue within six months to allow the DVBA to make necessary changes, but the board directed Padilla-Scholtens' office to aggressively pursue the recommendations made in the audit and come back to the board within two weeks for a progress report, and action plan as well as the outlining of consequences should the DVBA fail to implement the changes.