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Audits, Evaluations and Reviews
Audits, Evaluations and Reviews
Penquis Community Action Program (Penquis) of Bangor, Maine, received grants totaling approximately $2.4 million from the Corporation for National and Community Service (Corporation) for its Retired and Senior Volunteer Program (RSVP) and Foster Grandparent Program (FGP) between May 2010 and May 2013.
The Corporation's Office of Inspector General (OIG) audited the costs incurred by Penquis during this period, and, as a result, questions $394,401, or approximately 21 percent, of the nearly $1.9 million in Federal costs charged against these grants. The questioned costs stem from non-compliance with applicable laws, regulations, and grant provisions. The audit gave rise to key findings that the grantee:
- Did not perform required background checks for volunteers and verify/document their eligibility before enrolling them.
- Did not conduct and document required background checks for Penquis' staff.
- Did not maintain adequate documentation of service agreements between the grantee and volunteer stations.
- Made longevity awards to long-serving FGP volunteers without adequate transparency, in excessive amounts and by misreporting service hours.
To address these findings, OIG recommend that the Corporation disallow and recover the questioned costs. To improve compliance, OIG also recommend that Penquis:
develop and implement procedures to ensure that required background checks are done for volunteers and staff;
- improve monitoring of its volunteer stations to ensure that required documentation is properly prepared and retained;
- update its policies and procedures to include volunteer longevity awards; and
- familiarize staff with the grant agreement terms and applicable laws and regulations.
The Office of Inspector General (OIG), Corporation for National and Community Service (Corporation), performed an evaluation of the Corporation's Personnel Education and Qualification Review. The evaluation focused on validating the Corporation's personnel academic credentials and professional certification and was conducted in accordance with the Quality Standards for Inspection and Evaluation promulgated by the Council of the Inspectors General on Integrity and Efficiency.
We found no instances of fraudulent or "diploma mill" academic degrees. None of the schools we reviewed were on the List of Unaccredited Schools obtained from the Consumer Fraud Reporting Organization. All the schools we reviewed were listed on the Department of Education's Database of Accredited Post-Secondary Institutions and Programs, with the exception of two schools which were no longer in existence.
The Corporation's financial statements present fairly, in all material respects, the financial position of the Corporation as of September 30, 2013 and 2012, and its net cost of operations, changes in net position, cash flows, and budgetary resources for the years then ended, in accordance with accounting principles generally accepted in the United States of America.
Audit of the Corporation's National Service Trust financial statements. The Trust financial statements present fairly, in all material respects, the financial position of the Trust as of September 30, 2013 and 2012, and its net cost of operations, changes in net position, cash flows, and budgetary resources for the years then ended, in accordance with accounting principles generally accepted in the United States of America.
The auditors determined that the Corporation has limited assurance that its Information Security Program is compliant with the Federal Information Security Management Act legislation, applicable Office of Management and Budget (OMB) guidance, and National Institute of Standards and Technology (NIST) Special Publications (SP). Their evaluation identified 30 instances of noncompliance with OMB guidance and NIST SPs. These areas of noncompliance are grouped into six findings, resulting in nine recommendations to strengthen the Corporation's Information Security Program.
More than $1.7 million in Federal costs and nearly $560,000 in match costs claimed by Family Services of Central Massachusetts (FSCM) under four Senior Corps grants during 2009-2013 were unsubstantiated and/or incurred improperly, in violation of applicable laws, regulations and grant provisions. These overcharges represent more than 71 percent of the Federal costs charged against these four grants, reflecting fundamental weaknesses in the organization's internal controls. The audit revealed deficient financial management and ineffective volunteer station monitoring by FSCM, including:
- Inconsistencies between FSCM's internal records (general ledger) and its periodic financial reports to the Federal government
- Lack of supporting documentation and/or proper approval of claimed costs
- Charges for volunteer travel and meals that were not substantiated
- Failure to ensure income-eligibility for means-tested benefits, as well as other missing eligibility documentation, including background checks and volunteer's written assignment plans
- Lack of formal processes for monitoring its volunteer stations
We note that FSCM's financial and accounting staff appear to be unfamiliar with basic grant accounting requirements and continue to operate under certain noncompliant legacy policies that they do not understand and cannot explain. The grantee's management has not fulfilled its supervisory obligation to ensure that its personnel are adequately trained and their work reviewed for adequacy.
To address the severity of these findings, we recommend that the Corporation withhold additional drawdowns and require supporting documentation prior to any further grant disbursements to FSCM. We also recommend that FSCM improve its grant accounting operations and the related internal controls, by implementing risk-based monitoring plans for volunteer stations, sending accounting personnel to fiscal training and strengthening background checks and volunteer's written assignment plans.
Commission grantees failed to conduct National Service Criminal History checks, the failure of which poses an unacceptable risk to AmeriCorps members and public . The Commission's lack of understanding of grant provision requirements contributed to the questioning of costs charged to the grants by subgrantees. Inaccurate and/or unsupported AmeriCorps member and staff timesheets were also issues discovered during our review. As a result of our review we questioned claimed Federal-share costs of $205,790, match costs of $550,551, education awards of $139,352, and accrued interest of $500.
In 2009, Edward M. Kennedy Serve America Act for the first time authorized the Corporation to award grants in fixed amounts, based on the hours worked by members to be enrolled in national service positions. 42 U.S.C.§ 12581(l). Unlike the Corporation's traditional grants, which reimburse a grantee for program costs, a fixed grant awards the grantee a specified amount (not to exceed $13,000 for AmeriCorps, $4,600 for Senior Corps) for each full-time national service member. The structure was intended to minimize the administrative burdens on grantees and thus encourage smaller organizations to participate in national service.
The fixed amount grant program has placed $240 million at financial risk, due to a lack of meaningful safeguards against waste, fraud or mismanagement. Over the past four years, the Corporation expanded this program without evaluating the risks inherent in its structure or mitigating those risks with measures to prevent or promptly detect excessive drawdowns of grant funds. A grantee is able to access the funds at will, and to expend its entire award even if it falls far short of the volunteer enrollment levels on which the award is based. The Corporation continues these grants from one year to the next, essentially advancing funds, without reassessing the grantee's creditworthiness or compliance with financial requirements. Taxpayers have been fortunate to escape losses, despite this vulnerability.
This luck ran out, however, in the case of Digital Opportunities Trust (DOT), one of AmeriCorps largest fixed amount grantees. DOT never maintained the contemplated level of enrollment, but the Corporation continued to fund the grant for three years, while the organization’s financial condition deteriorated. Each year, DOT spent all of the funds, far more than it was entitled to spend based on its enrollment.
At the end of the grant’s second year, DOT was $687,427 in debt to the Corporation. Instead of taking immediate collection steps, the Corporation deferred the problem and optimistically extended funding. It hoped to recover the difference by continuing the grant for a third year, while expecting DOT to: (1) reach a retention level of 280 members, which DOT had failed to achieve in years one and two; and (2) shoulder a greater share of the program costs, sufficient to offset the prior excessive drawdowns. Both of these expectations proved unrealistic.
Before the end of the third year, DOT expended the entire grant amount, owed the Corporation more than $1 million, shut down the program and declared bankruptcy. This left the community underserved and the taxpayers holding the bag. To avoid further losses from other fixed amount grants, the Corporation should adopt effective, risk-based monitoring, internal controls and other measures. The Office of Inspector General recommends that the Corporation:
1. Reduce vulnerabilities in the Corporation’s fixed amount grant program by identifying the risk drivers (to include member enrollment/retention, drawdowns and non-CNCS resources contributed by grantees) and developing indicators by which to assess the associated risks. With the resulting information, the Corporation should:
- Establish criteria for the use of fixed amount grants in the AmeriCorps and Senior Corps programs, considering, among other factors, the amount of
- the grant, financial resources, stability and capabilities of the grantee, grantee’s fundraising history, Corporation’s past experience with the grantee, level of uncertainty regarding grantee’s ability to meet programmatic and financial objectives and Congressional intent to enable small grantees to participate in national service programs;
- Determine what information should be sought and considered in the application and selection process to support prudent award decisions, including thorough vetting of an applicant’s ability to retain members, independent verification of a grantee’s ability to devote additional resources to the program and submission of a program budget.
- Develop terms and conditions to address these risks;
- Target monitoring on key risk drivers/indicators (such as benchmarking an expected rate of member attrition for a successful grant, so that oversight
- can focus on programs with excessive attrition);
- Modify or impose special conditions on underperforming or at-risk grants;
- Ensure that continuation decisions include rigorous analysis of financial, as well as programmatic, performance and prospects.
2. Control and monitor drawdowns through policies, procedures and processes that incorporate.
- Caps on the portion of a grant that can be withdrawn quarterly from the Health and Human Services Payment Management System
- Periodic, risk-based drawdown analyses, testing more frequently those grantees with excessive attrition and/or who are rated as moderate- or
- high-risk. Fresh results should be available for consideration when deciding whether to continue an existing grant or award a new grant to an
- existing grantee, as well as in developing monitoring priorities and annual and final grant closeouts;
- An array of corrective actions and interim safeguards for excessive drawdowns (including, for example, third-party confirmation of program funding commitments) that are based on risk, with resolution deadlines;
- Timely recoupment of excessive drawdowns, with interest; Elevation of seriously troubled grants for management attention to ensure that corrective action plans are reasonable, realistic and sufficient, with followup reports.
3. Establish monitoring priorities, plans and procedures based on grantee risk assessments developed in accordance with the specific requirements of fixedamount grants, distinguishing between financial risk and programmatic risk.
4. Expand grant continuation decision-making with:
- Information concerning available non-CNCS funding and changes to grantee’s financial stability or capabilities, as well as enrollment/retention, drawdowns and programmatic performance;
- Stronger scrutiny for continuation awards that involve repayments of excessive drawdowns for prior periods, including: requiring approval by senior management where the debt is substantial in amount; written agreement with the grantee on a schedule for repayment; and more intense financial and programmatic monitoring to protect against further overpayments, ensure return of funds and promote achievement of program objectives.
5. Ensure effective communication between Program Officers and Grant Officers concerning enrollment and retention shortfalls, to permit grant adjustments, modifications or special conditions to mitigate developing risks and promote successful outcomes.
6. Formalize policies and procedures for the administration of fixed amount grants, communicate them to the affected parties, reassess them periodically and
enforce them. With these safeguards, fixed amount grants may be a useful funding vehicle for the Corporation and its grantees.
The Office of Inspector General (OIG), Corporation for National and Community Service (Corporation), contracted with CliftonLarsonAllen LLP, an independent certified public accounting firm, to perform agreed-upon procedures (AUP) on grant costs incurred by the Edna McConnell Clark Foundation (EMCF) and three of its subgrantees. EMCF is an intermediary grantee under the Corporation’s Social Innovation Fund (SIF). This review also tested EMCF's compliance with Corporation policies and applicable regulations for Corporation-funded Federal assistance. In addition to reviewing EMCF's SIF grant administration, we selected the following EMCF subgrantees for detailed testing:
- The SEED Foundation (SEED)
- Building Educated Leaders for Life (BELL)
- Center for Employment Opportunities (CEO)
These subgrantees were judgmentally selected based on an assessment of overall risk to EMCF and the Corporation. The assessment included consideration of several factors, namely the amount of costs claimed by each subgrantee, the results of subgrantee monitoring reports, and findings, if any, contained in Circular A-133 single audit reports for each entity. Our procedures resulted in total questioned grant costs of $647,535, consisting of $348,413 in Federal share, EMCF match costs of $83,270, and subgrantee match costs of $215,852. We also identified six instances of noncompliance with the United States Code of Federal Regulations, the Corporation's grant requirements, and the subgrantee's own policies and procedures.
One significant internal control weakness involves CEO's failure to remove two of its employees, who were known by CEO management to have criminal histories that made them ineligible, from working on the SIF grant. Federal statutes prohibit such individuals from serving in this capacity. CEO attributed this situation to a lack of communication between members of its staff. We found that the three subgrantees are generally free of major financial weaknesses. The questioned costs shown above, although material, are related primarily to deficiencies in the procedures used to conduct criminal history and sex offender background checks, a pervasive compliance finding affecting each of the subgrantees. Of the $647,535 amount, SEED's questioned Federal costs of $290,251 and match costs of $70,489 (SEED) and $34,455 (EMCF) represent nearly 61 percent of the total. Further details on each subgrantee's claimed and questioned costs are at Schedules B, C, and D. Compliance findings and recommendations are discussed in the Detailed Findings section of this report beginning at page 12.
EMCF and subgrantee match represents a significant amount of the questioned costs. As of September 30, 2012, EMCF was $2,132,373 short of meeting its match requirements; however Grant 10SIHNY003 is still an active grant and the grantee has until the end of the grant term (July 31, 2015) to fulfill its match obligation.
More than $1.4 million in costs claimed by Atlantic Human Resources, Inc. (AHR) under Senior Corps grants during 2008-2011 were duplicative, unsubstantiated and/or incurred improperly, in violation of applicable laws, regulations and grant provisions. These overcharges, which reflect fundamental weaknesses in internal controls, represent 71 percent of the costs charged under the grant. The audit revealed deficient financial management by AHR, including:
- Double-charging of travel expenses
- Inconsistencies between AHR's internal records and its periodic financial reports to the Federal government
- Charges for meals that were not provided
- Direct charges for items that were already included in AHR's negotiated indirect cost rate
- Misapplication of the indirect cost rates
- Failure to ensure income-eligibility for means-tested benefits, as well as other missing eligibility documentation
- Complete lack of basic documentation for the RSVP grant, including the names of volunteers and records of their activities.
Overall, AHR's financial management practices were inadequate to manage Federal funds. The grantee could not provide records to support the majority of the costs that it claimed for volunteer meals, travel, and salaries and fringe benefit transactions. In many cases, its charges against the grant were based on estimates and projections, without any evidence of expenses actually incurred. Its indirect cost methodology was flawed and resulted in duplicative charges.
The severity, duration and pervasiveness of AHR's mismanagement call into question the sufficiency of the Corporation's fiscal grant monitoring. A site visit in 2008 noted that AHR calculated its meal allowances incorrectly and observed that "a better system is needed to account for in-kind meals", but the Corporation's monitoring results letter to AHR stated that "no follow-up was needed for the matters." The Corporation failed to ensure proper corrective action, and the improper charging of in-kind meals continued throughout the audit period.
AHR's financial management practices were inadequate to manage Federal funds. The grantee could not provide records to support the majority of the costs that it claimed for volunteer meals, travel, and salaries and fringe benefit transactions.
OIG Report 13-05a and 13-05b, taken together, reveal a pattern of misconduct by AHR in the management of Federal grant funds and in the grantee's dealings with the Corporation and the Corporation's ability to monitor this program.
In response to the President's July 2010 mandate on implementing the Improper Payments Elimination and Recovery Act (IPERA), the Office of Inspector General (OIG), Corporation for National and Community Service (Corporation) performed an evaluation of the Corporation's compliance with IPERA. The objective of our evaluation was to determine whether the Corporation performed its improper payments assessment in compliance with IPERA, applicable Executive Orders, and the Office of Management and Budget (OMB) guidance.
For the second year in a row, the OIG concludes that the Corporation continues to understate its improper payments and has not accurately assessed the susceptibility of at least some of its programs. Six OIG audits of AmeriCorps State and National grantees, representing a small fraction of the grant portfolio, in Fiscal Year (FY) 2012 uncovered questioned costs of approximately $ 3.6 million. Experience suggests that similar problems exist elsewhere in the portfolio, making improper payments more prevalent than the Corporation acknowledges. Despite this, the Corporation's FY 2012 Agency Financial Report (AFR) does not contain an estimate of improper payments, does not describe the actions taken or to be taken to prevent and recover improper payments, and does not address the adequacy of its internal controls.
We contracted with the independent certified public accounting firm of Kearney & Company (Kearney) to audit the consolidated financial statements of the Corporation for National and Community Service (Corporation) as of September 30, 2012 and 2011, and for the years then ended. The contract required that the audit be performed in accordance with generally accepted government auditing standards.
In its audit, Kearney found
- The financial statements were fairly presented, in all material respects, in conformity with generally accepted accounting principles;
- One material weakness in the Corporation's internal controls;
- No instances of noncompliance with relevant laws and regulations.
We contracted with the independent certified public accounting firm of Kearney & Company (Kearney) to audit the financial statements of the Corporation as of September 30, 2012 and 2011, and for the years then ended. The contract required that the audit be performed in accordance with generally accepted government auditing standards. Attached is the Independent Auditor's Report on the Fiscal Year 2012 National Service Trust Schedule of Financial Position, and the related schedules of Operations and Changes in Net Position, Budgetary Resources and Trust Obligations (Schedules).
In its audit, Kearney found that the Schedules present fairly, in all material respects, the financial position of the Corporation's National Service Trust Fund for the fiscal year ended September 30, 2012.
The Office of Inspector General (OIG), Corporation for National and Community Service (Corporation), contracted with Castro & Company, LLC, to perform agreed-upon procedures (AUP) for the costs incurred by the New Jersey Commission on National and Community Service (Commission) and three subgrantees from January 1, 2008, through September 30, 2011, under grants awarded by the Corporation. The results of the AUP include findings of questioned costs, weaknesses in internal controls, and non-compliance with applicable laws and regulations. We performed tests of accounting and other records at the Commission, located in Trenton, New Jersey, and at subgrantees Jefferson Park Ministries, International Institute of New Jersey, and New Jersey Community Development Corporation.
The Commission and two subgrantees had inadequate accounting operations to manage Federal funds, including supporting their salaries and fringe benefit costs. These payroll costs were charged to Corporation grants based on budgeted amounts rather than actual costs incurred, which is not permitted by the Office of Management and Budget cost principles. Subgrantees need additional training on their responsibilities related to managing the grant dollars and to ensure compliance with Federal grant requirements.
As a result of applying these procedures, we questioned as unsupported $1,895,026 of Federal costs and $229,178 of match costs. A questioned cost is: (1) an alleged violation of a provision of law, regulation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of funds; (2) a finding that at the time of testing, such costs were not supported by adequate documentation; or (3) a finding that the expenditure of funds for the intended purpose was unnecessary or unreasonable. The results of our AUP are summarized in the Consolidated Schedule of Award Costs.
The procedures included judgmentally selecting samples to test the costs claimed by the Commission for compliance with its award agreements with the Corporation and other Federal requirements. Based on this sampling, questioned costs detailed in this report may not represent total costs that may have been questioned had all expenditures been tested. In addition, we made no attempt to project such questioned costs to total costs claimed.