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Government and People
GOVERNMENT OF THE DISTRICT OF
|OIG NO. 9810-19||SEPTEMBER 30, 1998|
At the request of the Corporation for National and Community Service (Corporation) and the Mayor's Office of Policy and Evaluation (OPE). the Office of the Inspector General (OIG) has completed an audit of the costs incurred by the District of Columbia Commission for National and Community Service (Commission).
On March 16, 1998, the Corporation's Director, Office of Grants and Contracts, requested the OIG to review and analyze all Commission expenses paid by the Washington Council of Agencies (WCA) during the period January 1, 1996 through June 30, 1997, to determine whether funds expended were reasonable and properly supported. The audit also included a review of the WCA's fiscal procedures, a review of the Commission's matching contributions, and a review of the grant reports prepared by the WCA.
We noted during our review that payment procedures provided by the WCA were inadequate. Additionally, payments were made without determining if the expenses were pre-approved or reviewing the underlying support for the expenses before making payments. As a result, overpayments occurred in the amount of approximately $3,356.
We recommended that the Corporation, prior to reestablishing the Commission. obtain the services of a Fiscal Agent that is experienced with the management of Federal funds. We also recommended that the Corporation bill the former Executive Director for overpayments of salary.
The National and Community Service Act of 1990 (amended 1993) requires each state (and the District of Columbia) to establish a commission responsible for the legal administration of the National and Community Service program and for the funding of community-based service efforts that address identified educational, public safety, environmental, and health needs. The District of Columbia Commission was established on January 26, 1994, by Mayor's Order 94-11.
In September 1995, the D.C. Financial Control Board mandated the downsizing of the District of Columbia. During this downsizing, the Commission's two personnel positions were eliminated. The Commission remained without staff until April 1996, when a temporary interim Executive Director was hired, and the WCA assumed limited fiscal responsibilities for the Commission.
The Commission was housed within the District of Columbia, Office of Policy and Evaluation. It received support in the way of rent, utilities, and reproduction services and was eligible to receive matching contribution funds from the Corporation up to 20 percent of the Commission's total administrative expenses.
On March 4, 1997, the Corporation completed its review of the Commission's FY 1997 State Administrative Fund Application. On March 5, 1997, the Corporation received a consultant's report (Walker & Company, LLP) which concluded that the Commission's cash management practices and financial management system did not comply with the requirements for the management of Federal funds. The report indicated that the Commission was lacking accounting records and did not produce financial reports. Based on the Corporation's review and the consultant's report, the Corporation suspended funds for the Commission. The Commission was dissolved on June 17, 1997 (Mayoral Order 97- 109).
On January 22, 1998, the Director, Office of Policy and Evaluation, requested the OIG to conduct an audit of the Commission as a preliminary step to reestablishing the Commission.
The audit included a complete review and analysis of all Commission invoices paid by the WCA for the period January 1, 1996 through June 30, 1997. Additionally, we reviewed the WCA's payment procedures and analyzed the supporting documentation for all disbursements made by the WCA. Each invoice for payment was reviewed to determine if the invoices were (i) supported with reasonable documentation, (ii) verified for mathematical accuracy and (iii) reviewed prior to payment. We also reviewed the Commission's matching contributions to determine if they were correctly computed and appeared reasonable. The Federal Cash Transactions Report was also reviewed to determine if grant disbursements were accurately reported.
The March 5, 1997 consultant's report concluded that the financial management practices of the Commission were inappropriate for the management of Federal funds. Our review did not duplicate the areas discussed in the consultant's report.
Our audit was performed in accordance with generally accepted government auditing standards (GAGAS) and included such tests as considered necessary under the circumstances.
Although our audit showed that the Commission met its matching contribution and that the Federal Cost transactions were accurately reported, the fiscal services provided by the WCA for the Commission were not adequate. Payment procedures were restrictive in that the Commission was only allowed to write a maximum number of three checks per month. This caused Commission personnel to lump their expenses into large payments, which were often unsupported. Commission personnel went as long as three months without a salary check. In addition, internal controls were lacking in payment procedures. The WCA did not verify the amounts, review supporting documentation, review hours worked, or determine if prior approval was obtained prior to issuing payroll checks. As a result, overpayments were made in the amount of $3,356.
Restrictive payment procedures imposed by the WCA were not responsive to the needs of the Commission. The unrealistic restriction of allowing the Commission to write only three checks per month and the absence of reviews for documentation prior to payment by the WCA resulted in overpayments in the amount of $1,174.50. Total expenditures for the period we audited were $ 102,038.
During our review, we noted several weaknesses in the WCA's payment procedures. We observed that the WCA placed an unrealistic restriction on the number of checks that could be written for reimbursement of Commission expenses. The Commission staff was limited to a total of only three reimbursement checks per month. This restriction forced the Commission staff on occasion either to pay expenses with their own funds, or to charge expenses to their personal credit accounts. Moreover, the staff would accumulate and batch their invoices, and request a single consolidated check covering expenses and salary payments, to stay within the three-checks-per month limitation. The restrictive payment procedures of three reimbursement checks per month resulted in a situation in which the Commission personnel went as long as three months without a pay check and created an opportunity for the Executive Director to submit at least three unsupported payment requests, as described below.
The Executive Director submitted two unsupported requests for salary payments. On two separate occasions, the executive submitted requests, and was paid, twice for the same period. The first unsupported payment request occurred on November 14, 1996, when the Executive Director submitted an invoice totaling $7,016 to cover her salary of $4,846.50 for the period October 19, 1996 through November 13, 1996, plus $2,169.50 for additional incurred expenses. The Executive Director in her November 14, 1996 salary request indicated, "The total number of hours at $27 per hour for 179.5 hours. The total for billable hours is $4,846.50." The requested salary payment of $4,846.50 was paid on November 20, 1996.
Our review of that pay period indicated that there were only 144 available working hours, not 179.5 during the period, including the holiday on November 11, 1996. The Executive Director's unsupported salary request resulted in an overpayment of 39.5 hours, or $958.50, as shown in the following schedule:
|Total Available Hours||144|
|Times Rate per Hour||$27|
The second unsupported payment request was initiated on November 26, 1996, when the Executive Director submitted a salary invoice for the period November 14, 1996 through November 26, 1996. The invoice read, "for services rendered as the Interim Executive Director, 72 hours at $27 per, TLR $1,944.00." Payment was made on December 12, 1996 for the period November 14, 1996 through November 26, 1996 in the amount of $ 1,944.
On December 19, 1996, the Executive Director submitted another salary invoice for the period November 14, 1996 through December 19, 1996, which read, "please accept this invoice for the time period November 14, 1996 through December 19, 1996. The total number of hours at $27 per is 220. The total billable hours is $5,940." The payment was made on December 30, 1996 in the amount of $5,940.
The Executive Director's December 19, 1996 invoice included the same period of November 14, 1996 though November 26, 1996 paid previously on December 12, 1996. It became apparent that the Executive Director double billed 72 hours at $27 per hour for the period November 14 through November 26, 1996, and was overpaid 72 hours at $27 per hour or $1,944. Because the payments were batched in total in this manner, which included four weeks of payments in three checks, it was difficult for the Commission to determine that she had previously billed for her salary for the period November 14 through November 26. In our opinion, if the three-check restriction was not in effect and separate checks were issued to pay her salary every two weeks, this overpayment would have been immediately detected. Instead, the overpayment was detected by the WCA and corrected five months later as a result of a special review conducted by the WCA.
The third unsupported payment request was initiated on December 6, 1996, when the Executive Director alleged that she had written a $4,240 check to Xerox Corporation as a deposit for an upcoming training session at Xerox's training facility in Leesburg, Virginia. She informed the WCA that a copy of the check did not exist at the time reimbursement was requested because the check had not yet cleared the bank. This was the only occasion we noted during our review that the WCA issued a check without a supporting invoice. However, an understanding existed that the Executive Director would supply documentation for the deposit at a later date.
The Xerox training coordinator subsequently advised the WCA treasurer that the deposit was for only $4,010, a difference of $230. The WCA treasurer in turn requested the Executive Director to provide her with documentation for the deposit. The Executive Director in reporting to the WCA treasurer, sometime in February 1997, submitted a previously unclaimed request for reimbursement, dated December 6, 1996, for supplies in the amount of $235. An annotation on the invoice read "Paid in full- cash" along with the signature of the company representative. Because of the circumstances surrounding the invoice, and the WCA treasurer's knowledge that the Executive Director had a personal relationship with the company representative, the WCA did not pay the bill.
The WCA treasurer advised the Xerox training facilitator to add an additional comment on the Xerox training facility bill that fewer people than planned attended the conference and the Commission was entitled to a refund of $ I ,313. As it turned out, the Xerox training facilitator had had prior dealings with the WCA, called the WCA to issue the refund check payable to the WCA, and subsequently deposited the check to the Commission's grant account.
We recommended that the Director, Office of Policy and Evaluation:
Initiate collection procedures to recover salary overpayments in the amount of $1,174.50 from the former Executive Director.
The Agency agreed with the finding and recommendation as stated. (See Exhibit C.)
The Agency is requesting that the OIG provide information to assist with the expeditious recovery of salary overpayments to the former Executive Director of the Commission.
The WCA did not verify the amounts, review supporting documentation, review hours worked, and determine if prior approval was obtained prior to issuing payroll checks. As a result, errors were noted for both over and under payments for total amounts contained in the transmittal letters and the number of hours worked.
Because of the internal control weaknesses, we reviewed and analyzed the supporting documentation for all disbursements and adjustments made by the WCA. We reviewed each invoice to determine if the invoices were (i) supported with reasonable documentation, (ii) verified for mathematical accuracy, and (iii) evidenced with prior approval.
Salaries were the largest single element of expense incurred by the Commission. In reviewing the underlying support for salaries, we noted that the Executive Director, the Program Officer, and the Deputy Director were all contract employees, who would not normally be entitled to be paid vacations, holidays, sick leave, and annual leave. However, during our audit, we noted that the Program Officer was receiving vacation pay, holiday pay, sick leave pay, and comp-time pay. Our review also noted that the Program Officer was apparently being paid for lunch periods. She routinely received 8 hours pay for working the hours from 9:00 a.m. to 5:00 p.m. The absence of time and attendance records prevented us from determining if the Executive Director and the Deputy Director were also receiving similar compensation. (The lack of time and attendance records was included in the consultant's March 1997 report referenced in the background to this report.)
We were also unable to locate employment contracts needed to document properly the terms and conditions under which the Commission staff members were employed. The absence of time and attendance records and employment contracts defining essential pay information such as pay periods, frequency of pay, and working hours prevented the WCA and the auditors from determining if salary payments were properly supported. In our opinion, the absence of employment contracts specifying prescribed pay periods also contributed to the Executive Director's overpayments.
Our review of the underlying support for the remaining expenses determined that there were receipts supporting documentation for the expenses, but there was no indication of approvals or authorizations that had been obtained in advance for travel, conference and training expenses.
Our review of the adjustments made by the WCA noted two exceptions. First, the WCA's review did not identify the November 20, 1996 overpayment of $958.50 to the Executive Director detailed above. Second, the WCA, in making the May 15, 1997 final salary adjustments, determined that the Executive Director had worked 376 hours during the period December 20, 1996 to March 3, 1997. However, those hours were incorrectly carried over to another worksheet resulting in the Executive Director being paid for 384 hours. As a result, the Executive Director's final salary payment was overstated by 8 hours at $27 per hour, or $216.
A list of all expenses, by check number, paid by the WCA appears in Exhibit A. Neither the Commission nor the WCA maintained books of original entry that summarized these expenses. Therefore, based on the best information available, the OIG summarized those expenses into the following generic expense categories:
We recommended that the Director, Office of Policy and Evaluation:
Prior to reestablishing the D.C. Commission for National and Community Service, ensure that a Fiscal Agent who is experienced with the requirements for the management of Federal funds is obtained.
The Agency agrees with the finding and recommendation as stated. (See Exhibit C.)
The Corporation requested that we review the Commission's matching contributions. The Commission is required to provide matching funds in support of the National Community Service Program. Matching funds can be obtained from a variety of sources, including private funds, appropriated District funds, or from "in-kind services." Matching funds are limited to 20 percent of the Commission's total expenses, including the matching funds. (Grant funds requested by the Commission from the Corporation may not exceed 80 percent of the total combined funding.)
The matching funds were reported on line 10a of the Commission's Financial Status Report (Standard Form 269A) prepared by the WCA. Four quarterly Financial Status Reports should have been submitted covering the Commission's 12-month period ending March 31, 1997. However, the WCA did not prepare the fourth report covering the period January 1, 1997, through March 31, 1997. (The WCA advised the OIG that the Corporation did not request the fourth quarterly report.) Therefore, contributions for only three of the four quarters were reported.
At the request of the Corporation, we reviewed the supporting documentation for the Commission's reported matching contributions. The W CA reported in-kind matching contributions for the Commission totaling $46,101, as shown in the following schedule:
|Office Supplies, Space -(Commission Chair)||1,550|
|Rent and Utilities:|
All of the above contributions were based on estimates. Contributions were estimated on an annual basis and then reported on a quarterly basis for each of the three quarters reported. For salaries--the largest contribution-- the OPE Director and the Commission Chair each estimated approximately 300 hours per year, but there was no documentation to support the number of hours contributed. OPE's rent for the workstation space was based on an estimated 600 square feet at $23 per square foot, or a total of $13,800. Telephone costs were based on a cost of 7 cents per minute for an estimated 10,000 minutes per month, or $8,400 per year.
However, since the Commission's total administrative expenses incurred during the period January 1, 1996 through March 31, 1997 were $90.223, the maximum contribution is limited to $22,556 ($90,223- ($90,223/80 percent)). Although the reported contributions of $46,101 appear to be excessive, based on the limitation of $22,556, we concluded that the Commission met its requirement for matching contributions.
The Corporation also requested that we review Federal Cash Transactions Reports prepared by the WCA to determine if grant disbursements were accurately reported. As part of that review, we traced all disbursements made by the WCA into the Federal Cash Transactions Report (PMS 272 Report). The total disbursements of $102,038 made by the WCA for the period January 1, 1996 though June 30, 1997 equaled the total disbursements reported by the WCA for the same period. The results of that review are presented in Exhibit B.
Exhibit A: Schedule of Checks and Expenses (Not available on-line)
Exhibit B: Reconciliation of Checks to Drawdowns and Grants (Not available on-line)
Exhibit C: Response from Office of Policy and Evaluation
TO: E. Barrett Prettyman, Jr.
FROM: Rodney L. Palmer
Director, Office of Evaluation
DATE: September 24, 1998
SUBJECT: Draft Report on "Audit of Costs Incurred by the District of Columbia Commission for National and Community Service" (OIG No. 9810-19)
I am in receipt of the subject Draft Audit Report and accept the findings and recommendations contained in the Report.
To facilitate our follow through on one of your recommendations I am requesting that you provide this office with information to assist with the expeditious recovery of salary overpayments to the former Executive Director of the Commission. Further, as I discussed in the exit conference I am requesting copies of all relevant information to complete this offices files m reference to this matter.
Let me assure you that we are making every effort to ensure the fiscal accountability of future operations of the Commission. Thank you for your cooperation and the efforts of your staff with respect to this Audit Report.
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