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The deputy chairperson of the Department of Labor Fitness Association, Inc. (DOLFA) requested the Office of the Inspector General (OIG) to perform an audit of its financial records to insure that the Board of Directors is exercising prudent fiscal management and that expenditures are consistent with the Department of Labor (DOL) Fitness Center stated purposes. DOLFA is a nonprofit corporation created to promote the health and well-being of its members by providing a wellness and fitness program and related activities through the DOL Fitness Center, a federally funded, contractor-operated facility, located at The Curtis Center in Philadelphia, Pennsylvania. As of October 2001, DOLFA had 69 members.

The DOLFA treasurer maintains the financial accounting records on a cash basis. The financial statements consist of: Statement of Assets, Liabilities, and Fund Balance Arising from Cash Transactions - Modified Cash Basis; Statement of Revenues Collected, Expenses Paid, and Changes in Fund Balance - Modified Cash Basis; and Statement of Cash Flows - Modified Cash Basis.

We have expressed an unqualified opinion on the financial statements.

Overall, we determined that DOLFA had adequate controls for operating the DOL Fitness Center on behalf of the Department. However, we noted several opportunities for DOLFA to improve existing controls. Specifically, there are two areas in cash disbursements in which DOLFA needs to modify its practices to strengthen controls. We found that DOLFA does not have a credit or debit card for large purchases, and there are no formal procedures for maintaining petty cash. For large purchases, DOLFA board members use their personal credit cards and then are reimbursed from the DOLFA checking account. Although there were no problems with petty cash disbursements, we found that DOLFA has not established formal procedures for maintaining its petty cash account. As a result, the petty cash funds were commingled with cash from the membership fees, and purchase receipts were commingled with general disbursement receipts. We also found that there was no replenishment cycle. We recommend that DOLFA obtain a credit or debit card from its financial institution and discontinue the practice of having board members use their personal credit cards for DOLFA-related purchases. We also recommend that DOLFA develop and implement procedures to improve management of the petty cash fund.

DOLFA has not implemented controls to ensure that ownership of all of the DOL Fitness Center furniture and equipment is transferred to DOL. As a result, a member injured using furniture or equipment not under the ownership of DOL may not be entitled to medical expense reimbursement and/or compensation under the Federal Employees' Compensation Act (FECA). Additionally, we found that DOLFA needs to keep its inventory listing current, to take periodic physical inventories, and to transfer ownership of purchased furniture and equipment to DOL in a timely manner. Accordingly, we recommend that DOLFA conduct annual physical inventories of all furniture and equipment and ensure that all items are transferred to the DOL inventory of assets.

Finally, DOLFA needs to improve documentation of the fitness center's usage. We found that the requirement that members sign in when using the fitness center is not enforced, and fitness center sign-in logs are not retained. As a result, complete and accurate usage data is not available, and the eligibility of FECA claims for members who are injured at the DOL Fitness Center could be questioned. We recommend that DOLFA retain fitness center sign-in sheets for at least 3 years and enforce the requirement that each member sign the attendance sheet when entering and using the fitness center.

In their response to the draft report, DOLFA officials agreed with all the recommendations except for the recommendation requiring DOLFA to obtain a credit or debit card for purchasing DOL Fitness Center items.

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