98 i 179

58 Pages·0.81 MB·

by  LENNOX YOUNG

.S.U tnemtrapeD of eht roiretnI
eciffO of rotcepsnI lareneG
TROPER
AUDIT
NOITCETORP DNA YCACOVDA
FO EHT ,SANAIRAM
YROTIRRET FO MAUG
TROPER .ON971-I-89
REBMECED 7991

N-IN-GUA-009-96
detinU setatS tnemtrapeD fo eht roiretnI
ECIFFO FO ROTCEPSNILARENEG
,notgnihsaW .C.D04202
ED 2 3 w7
.yrkMs thievloOktiV
President, Board of Directors
Protection and Advocacy of the Marianas
P.O. Box 8830
,gninumaT mauG 3969 1
:tcejbuS tiduA tropeR no eht noitcetorP dna ycacovdA fo eht ,sanairaM yrotirreTfo
Guam
98-I-179)
(NO.
raeD .rM:ykstivoktiV
sihT troper stneserp eht stluser fo ruo weiver fo eht noitcetorP dna ycacovdA foeht
Marianas, a nonprofit organization doing business as the Advocacy Office. The objective
of the review was to determine whether the Advocacy Office administered and expended
laredeF tnarg sdnuf ni ecnadrocca htiw elba c.isltpnpeameriuqer ehT epocs fo ehttidua
dedulcni l ldaetale ry-ctancaorvgdA ecif fsOnoitarepo taht derrucco gnirud lacsifsraey
1994, 1995, and 1996 (to March 1, 1996). However, our audit scope was limited because
the Advocacy Office’s accounting records were not adequate to identify the application of
sdnuf gnoma eht laredeF stnarg dna eht lacol .smargorp gniruD eht tidua ,doirepeht
ycacovdA eciffO deviecer 337,368$ ni laredeF stnarg dna dednepxe $740,2 13 for
operations.
eW dedulcnoc taht eht ycacovdA eciffO dedeen ot ekam stnemevorpmi ni eht saerafo
financial management, program administration, procurement and property management,
and expenditure control. Specifically, we found that:
- The Advocacy Office did not have an approved indirect cost rate, used Federal
grant funds for other than grant purposes, did not properly allocate personal services costs
gnoma sti laredeF ,smargorp dna did ton edivorp deriuqer laicnanif stroper otrotnarg
agencies and prepare annual budgets.
- ehT ycacov deAciffO did to nylet atunqeemduacod e hyttilibigil efo stneilcot
receive protection and advocacy services, authorized payment for legal services that were
ton ylraelc dezirohtua yb eht laredeF ,stnarg dna did ton erusne tahtsrekrowesac
documented actions taken to address clients’ concerns.
- ehT ycacovdA eciffO did ton niatbo roirp rotnarg lavorppa roftnempiuqe
,sesahcrup did ton tcudnoc stnemer u,cyolrepvititepmoc dna did ton yletauqedalortnoc
personal property.
- ehT ycacovdA eciffO derrucni elbawollanu dna yrassecennu serutidnepxerof
retroactive salary payments; local and off-island travel: and miscellaneous costs, including
rent and computer purchases.
esehT snoitidnoc derrucco esuaceb eht ycacovdA eciffO dah ton depoleved alaicnanif
management system that was adequate to prepare and submit an acceptable indirect cost
proposal and to ensure that Federal grant funds were used only for grant-related purposes
dna erew ylreporp ,detcetorp ,detacolla dna detnuocca .rof nI ,noitidda ehtycacovdA
eciffO dah ton depoleved dna detnemelpmi nettirw serudecorp rof esac,sweiver
tnemerucorp ,snoitca dna ytreporp tnemeganam dna dah ton demrofrep lamrof esacelif
reviews to ensure that the files contained all appropriate documents.
As a result of our review, we questioned costs totaling $743,995, including procurement
snoitca gnilatot ,036,19$ dna dluoc ton etacol ytreporp smeti deulav ta .318,8$nI
,noitidda eht ycacovdA eciffO saw elbanu ot troppus taht laredeF sdnuf erew desurof
detaler-tnarg.sesoprup ehT s’ecif feOvituce xrEotceriD dias taht eht serutidnepxeew
denoitseuq erew yrassecen rof noitarepo fo eht ycacovdA eciffO dna erewetairporppa
because the expenditures were based on policies adopted by the Board of Directors of the
Protection and Advocacy of the Marianas.
To correct the conditions noted, we made 11 recommendations to the Board of Directors
of the Advocacy Office, including the recommendations that the Advocacy Office should:
(1) advise the U.S. Department of Health and Human Services and the U.S. Department
of Education of the questioned costs charged to the Federal grants and either resolve the
denoitseuq stsoc ro egnarra rof ;tnemyaper )2( poleved dna tnemelpmi a metsysfo
personnel activity reports to support distribution of personal services costs and prepare and
,timbus ot ruo htroN cificaP ,noigeR tceridni tsoc ;slasoporp dna )3( poleveddna
tnemelpmi serudecorp ot erusne ecnailpmoc htiw stnemeriuqer detaler otlaicnanif
reportinga ndb udgeting,c lienta nds ervicee ligibility,c asef iled ocumentation,c ompetitive
procurement, property management, and the allowability of expenditures.
On August 4, 1997, we personally delivered a draft of this report to you requesting your
esnopser yb rebmetpeS ,21.7991 nO rebmetpeS ,91 ,7991 eht ycacovdAeciffO
personally delivered its response, which was dated September 12, 1997 (see Appendix 5).
The Advocacy Office indicated concurrence with all of the recommendations. Based on
the response, we considered 1 recommendation resolved and implemented and requested
additional information for the remaining 10 recommendations (see Appendix 6).
ehT rotcepsnI lareneG ,tcA cilbuP waL ,254-59 Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary impact
fx oi sdtgninedipudpanAi(f ,)l snoitca nekat ot tnemelpmi tidua ,snoitadnemmocerdna
identification of each significant recommendation on which corrective action has not been
taken.
In view of the above, please provide a response, as required by Public Law 97-357, to this
report by January 23, 1998. The response should be addressed to our North Pacific
,noigeR 832 pohsibhcrA .C.F serolF ,teertS etiuS ,708 cificaP sweN ,gnidliuB,anagA
mauG .01969 ehT esnops edrluoh sedivorp e hntoi tdaemtrsoefunqier ni xidneppA.6
eW etaicerppa eht ecnatsissa fo draoB srebmem dna ycacovdA eciffO ffats gnirudeht
conduct of our audit.
Inspector General
cc: Executive Director, Protection and Advocacy of the Marianas
,yrroontriervro eGfTomauG
,tnediserP ytisrevinU fomauG
STNETNOC
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DNUORGKCAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1
EVITCEJBO DNA.EPOCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
ROIRP TIDUAEGAREVOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 4
.LAAICNANIF TNEMEGAN4iM . . . . . . . . . . . . . . . . . . . . . . . . .. 4
.BN OMIATRAGROTRSPINIMDA . . . . . . . . . . . . . . . . . . . . . . .. 12
.C TNEMERUCORP DNA YTREPORP.TNEMEGANAM . . . . . . . .. 18
.D ERUTIDNEPXELORTNOC . . . . . . . . . . . . . . . . . . . . . . . . . .. 23
APPENDICES
.1 NOITACIFISSALC FO YRATENOM STNUOMA . . . . . . . . . . . . .92
D SEM TNA. SO R2LROIDGSAOCTNORCFSARASEPEIUYFQ
1994, 1995, AND 1996 (TO MARCH 1, 1996) . . . . . . . . . . . . . . 30
NOI TDAE I NFL.SOOI3TIC STNNOSOWCECOUEHQRSNI
APPENDICES 1 AND 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
.4 .S. UST NEEDM OEYC RTRIIOULFQIEBRIGOITLE
ETAPICITRAP NI EHT NOITCETORP DNAYCACOVDA
SM ADREGROERTPSINIMDA YB EHT YCACOVDA ECIFFO . .23
5. ADVOCACY OFFICE RESPONSE . . . . . . . . . . . . . . . . . . . . . . . 34
.6 SUTATS FO TIDUA TROPER SNOITADNEMMOCER . . . . . . . . .94
NOITCUDORTNI
BACKGROUND
The Protection and Advocacy of the Marianas, a nonprofit organization doing business as
the Advocacy Office, was established to: (1) promote and protect the general welfare and
gnieb-llew fo yllatnem dna yllacisyhp deppacidnah ;snezitic )2( tsissa yllatnemdna
physically handicapped citizens and their families or friends in finding available services;
(3) promote and sponsor projects that help mentally and physically handicapped citizens
hcaer rieht ;laitnetop dna )4( troppus eht sevitcejbo fo yllaredeF detadnam dnadednuf
.smargorp ehT ycacovdA eciffO si denrevog yb a 1 rebmem-l draoB fo .srotceriD sAfo
June 20, 1996, the Advocacy Office employed four persons: an Executive Director; two
case workers; and an outreach worker, who stated that she had been performing primarily
administrative duties since being hired in March 1996.
gniruD lacsif sraey ,4991 ,5991 dna ,6991 eht ycacovdA eciffO deviecer stnarg :morf)1(
eht noitartsinimdA no latnempoleveD ,seitilibasiD noitartsinimdA rof nerdlihCdna
Families, U.S. Department of Health and Human Services; (2) the Substance Abuse and
latneM htlaeH secivreS ,noitartsinimdA retneC rof latneM htlaeH ,secivreS.S.U
tnemtrapeD fo htlaeH dna namuH;secivreS dna )3( eht noitatilibaheRsecivreS
,noitartsinimdA .S.U tnemtrapeD fo.noitacudE nI ,noitidda ni lacsif raey ,5991eht
Advocacy Office received a U.S. Department of Education grant in a subrecipient capacity
hguorht a mudnaromem fo gnidnatsrednu htiw eht ytisrevinU detailiffA,margorP
ytisrevinU fo.mauG sihT tnarg saw ot eb desu ot poleved noitamrofnigninrecnoc
assistive technology and related advocacy issues. ehT ycacovdA eciffO osla detarepoa
locally funded financial assistance program for disabled individuals. The Advocacy Office
delgnimmoc lla laredeF sdnuf ni eno knab tnuocca dna deniatniam lla lacol sdnuf nia
separate bank account.
nI na lirpA ,8 ,4991 rettel ot eht tnediserP fo eht draoB fo srotceriD fo ehtycacovdA
Office, the Administration on Developmental Disabilities, U.S. Department of Health and
namuH ,secivreS deralced eht ycacovdA eciffO a“ ksir-hgih ”,eetnarg gnitats taht a“ -hgih
ksir noitazinagro si eno esohw tnemeganam secitcarp esiar suoires snoitseuq tuobasti
ytiliba ot erussa reporp citammargorp esu dna laicnanif pihsdrawets fo tnarg”.sdnuf
,rehtruF ni a yraurbeF ,82 ,6991 rettel ot eht evitucexE rotceriD fo eht ycacovdA,eciffO
eht ecnatsbuS esubA dna latneM htlaeH secivreS ,noitartsinimdA .S.U tnemtrapeDfo
htlaeH dna namu H,secivreS osla deralced eht ycacovd AeciffO a ksir- h,geieht“narg ”
stating that this designation is applied “to grantee organizations who have demonstrated
poor business management practices. ” ,yllaniF ni a rebmetpeS ,92 ,5991 rettel oteht
Executive Director of the Advocacy Office, the Rehabilitation Services Administration,
U.S. Department of Education, stated that for fiscal years 1994, 1995, and 1996, “Special
snoitidnoc dna gnitroper stnemeriuqer evah neeb edam a trap fo eht[ laudividnisthgir
]tnarg desab ni trap no eht tsap ecnamrofrep sa a tneipicer fo eht tneilCecnatsissA
margorP ,tnarg . .. dna eht erom tnecer noitanimreted yb SHH htlaeH[ dnanamuH
1
]secivreS taht eht ycacovdA eciffO si a hgiH‘ ’ksiR ”.eetnarg ehT laicepssnoitidnoc
included the requirement for the Advocacy Office to obtain prior written approval for the
acquisition of all contractual services, equipment, and off-island travel.
SCOPE
OBJECTIVE AND
The objective of our review was to determine whether the Advocacy Office administered
eaxnpde ngdrefaaducni nctndo sr dawnsictteah t utgaornrradeyn q tu irements. The scope
fo eht tidua dedulcni lla detaler-tna rsgeitivitca taht derrucco gnirud lacsif sraey,4991
1995, and 1996 (to March ,1 1996).
Our audit was conducted at the Advocacy Office from February through June 1996. To
tcudnoc ruo ,tidua ew dneoniitaatmbr oom fotnrnifemnrevo Gfo ma usGlaiciffo foeht
Bureau of Budget and Management Research, officials of the U.S. Departments of Health
dna namuH secivreS dna ,noitacudE dna eht ycacovdA s’eciffO tnednepednicilbup
.tnatnuocca oT hsilpmocca ruo ,evitcejbo ew deweiver stnemucod deniatniam ybeht
ycacovdA eciffO sa :swollof setunim fo draoB ;sgniteem lanretni dnalanretxe
correspondence; and personnel, procurement, contract, and accounting records. We also
reviewed applicable laws, regulations, and operating procedures related to administering
eht sdnuf dna smargorp rednu eht ycacovdA s’eciffO eerht laredeF.stnarg ,revewoHruo
tidua epocs saw detimil esuaceb eht ycacovdA s’eciffO gnitnuocca sdrocer erewton
adequatet oi dentifyt hea pplicationo ff undsa mongt heF ederalg rantsa ndl ocalp rograms.
ehT tidua saw ,edam sa ,elbacilppa ni ecnadrocca htiw eht tnemnrevoG“gnitiduA
”,sdradnatS deussi yb eht rellortpmoC lareneG fo eht detinU .setatS ,ylgnidroccAew
dedulcni hcus stset fo sdrocer dna rehto gnit isdeuraudecorp taht erew derediysrnaoscsecen
under the circumstances.
As part of the audit, we evaluated the system of internal controls in the areas of financial
t n,enmoe ir ,,tud tt acnynnmroateeatrrmmrspeeegipgdgonoanarirnanpmpaadmma
erutidnepxe lortnoc ot eht tnetxe taht ew deredisnoc yrassecen ot hsilpmocca ehttidua
objective. We identified significant internal control weaknesses in all of these areas, as
dessucsid ni eht sgnidniF dna snoitadnemmoceR noitces fo siht .troper ruO
recommendations, if implemented, should improve the internal controls in these areas.
ROIRP TIDUAEGAREVOC
gniruD eht tsap 5 ,sraey rehtien eht .S.U lareneG gnitnuoccA eciffO ron eht eciffOfo
rotcep slnaIreneG sah deussi yna tidua str ogpneirnrecnoc eht ycacovd.AeciffO ,revewoH
na tnednepedni cilbup gnitnuocca mrif deussi elgnis tidua stroper no ycacovdAeciffO
operations for fiscal years 1990 through 1993. These single audit reports stated that the
ycacovd AeciffO dah detac otlclearidni stsoc gnoma sti lared esFmargorp no ehtegatnecrep
sisab fo hca es’mar ggonripdnuf leve levitaler ot eht latot gnid.nduefdivorp ,revewoH eht
esu fo gnidnuf slevel sa a sisab rof gnitubirtsid tceridni stsoc saw yrartnoc oteht
requirements of U.S. Office of Management and Budget Circular A-122, “Cost Principles
2
rof .tsinfooirtpanzoiNnagrO ” Therefore, the auditor questioned indirect costs totaling
617,575$ taht erew degrahc ot eht.stnarg In addition, the single audit reports questioned:
)1( ssecxe rep meid demialc yb ycacovd Aeciff Osreciffo dna seey o;l)p9m5e5,6$()2(
devlosernu secnereffid neewteb ylretrauq laicnanif stroper dettimbus ot ehtrotnarg
agencies ($278 15); (3) grant expenditures that exceeded award amounts ($25,564); (4)
disbursement checks that were unsupported ($2 1,682); and (5) unreconciled differences
neewte blaicnani fstroper dna eht gnitnuoc.csadrocer Based on our review, we determined
that as of June 20, 1996, the Advocacy Office had not resolved these issues.
In an October 19, 1992, letter to the President of the Board of Directors of the Marianas
Association for Retarded Citizens (the Advocacy Office’s predecessor), the Administration
on Developmental Disabilities, U.S. Department of Health and Human Services, reported
sti stluser fo na evitartsinimda weiver demrofrep ni enuJ 2991 no eht noitarepo foeht
s’noitaicossA noitcetorp dna ycacovda margorp rof snosrep ohw evahlatnempoleved
re nd oesit’ san. stostisieamtihm a tto ersiC eetul”hrsoisThiibetnrauiessemsisrd“dieAw
deifitnedi gnirud eht ,weiver gnidulcni tneiciffusni“ noitatnemucod fo esac sdrocerot
troppus eht noisivorp fo”,secivres and that the “provision of services to clients who do not
teem eht latnempol esveeidtilibasi dnoitinifed tnausrup ot noitceS 102(5) f oe httc Asia
compliance issue that could seriously affect the administration of the . . . program. ” The
other two “serious issues” were the “lack of a formal agreement or contract for providing
individual legal services, ” which is discussed in Finding C, “Procurement and Property
,tnemeganaM ” of this report, and the “unsubstantiated payment of salaries to salaried and
contracted employees, ” which had been corrected before our audit was conducted. The
repqourets tipotrnhoeevdl i essogeifaro clvnl i cticaoieies nnnsevt sos l vdiinvgo rwciel,l s,
,snoitcelloc dna noitcive esuaceb yeht erew ton detaler ot noitcetorp dnaycacovda
activities. dd e e ts e yvyaowcrcl lhl eiuaoeetcdifOcshvsavfoeti iheOvrttdrdcoAenffe
eseht seussi dna taht tneilc dna esac ytilibigile dna esac noitartsinimda deunitnoceb’ot
saera fo tnacifingis sessenkaew ni ycacovdA eciffO.snoitarepo
SGNIDNIF DNA SNOITADNElVlMOCER
.A LAICNANIFTNEMEGANAM
ehT ycacov deAciffO did ton egana mlaredeF tnarg s,.dyynllulefavciitfciecfeefhpetS
Advocacy Office: (1) did not have an approved indirect cost rate; (2) used Federal grant
funds for other than grant-related purposes; (3) did not properly allocate personal services
stsoc gnoma sti yllaredeF dednuf ;smargorp dna )4( did ton timbus launna stegdubdna
deriuqer laicnanif stroper ot rotnarg.seicnega .etScn.ie Uf mdtffeneOogagadnuaBM
ralucriC 221-A seriuqer taht tnarg sdrawa eb desu rof tnarg sesoprup dna steshtrof
standards for identifying direct and indirect costs. nI ,noitidda seltiT 43 dna ,54 traP,47
fo eht edoC fo laredeF,snoitalugeR noitartsinimdA “fo stnarG dnastnemeergA
With . . . Nonprofit Organizations, ” provide policies, standards, and guidelines for the
financial management systems of nonprofit organizations. Guidance for managing grants
funds is also contained in the terms and conditions of the Advocacy Office’s Federal grant
agreements. ,revewoH eht ycacovdA eciffO dah ton depoleved na etauqedalaicnanif
management system to: (1) prepare and submit an acceptable indirect cost rate proposal
to the Department of the Interior’s Office of Inspector General and (2) ensure that Federal
tnarg sdnuf erew desu ylno rof detaler-tnarg sesoprup dna erew ylreporp,dellortnoc
allocated, and accounted for. As a result, we questioned costs of $528,938, which
consisted of cost exceptions of $358,994 and unsupported costs of $169,944.
tceridnIstsoC
ralucriC ,221-A tnemhcattA ,A hpargaraP ,b.2.E states, “A nonprofit organization which
has not previously established an indirect cost rate with a Federal agency shall submit its
initial indirect cost proposal immediately after the organization is advised that an award
lliw eb edam ,dna ni on ,tneve retal naht eerht shtnom retfa eht evitceffe etad foeht
.drawa ” ’ nI ,noitidda hpargaraP 8 fo eht smret dna snoitidnoc fo eht tnargstnemeerga
with the Administration on Developmental Disabilities, U.S. Department of Health and
namuH ,secivreS rof lacsif sraey ,4991 ,5991 dna 6991 seriuqer yna“ smialc rofeht
reimbursement of indirect costs [to] be supported by an approved indirect cost rate. A
Although the Advocacy Office had received Federal grants since at least 1987, it did not
timbus na tcerid ntis olcasop olriptnu yaM ,1 ,5991 rof lacsif raey .,5e9r9o1fereehhTt
Advocacy Office did not have an approved indirect cost rate for fiscal year 1994, and its
indirect cost proposal for fiscal year 1995 was submitted 4 months late to the cognizant
tidua ycnega .S.U( tnemtrapeD fo eht ,roiretnI eciffO fo rotcepsnI .)lareneGesehT
snoitid ndoecrrucco esuaceb eht ycacovdA eciffO dah ton dehsilbatse na gnitnuoccametsys
capabloiefd entifyinagnd do cumentinegx penditurecsh argeabltteoha ep propriatFee deral
dna laredeF- n.osnmargorp ,suhT eht ycacovdA eciffO dluoc :ton )1( enimretedhcihw
4