EXECUTIVE SUMMARY 1
OBJECTIVES, SCOPE AND METHODOLOGY 4
1. T&TA funds tend to be a last resort for financially troubled localRECOMMENDATIONS 13
SER offices. 5
2. The Central Los Angeles (LA) SER Office was staffed by two SER
National employees using T&TA grant funds 6
3. Employees did not complete daily time sheets to allocate costs
to the proper program, activity, or function 8
4. SER needs to submit its indirect cost proposal to the DOL Office of
Cost Determination for approval 8
5. SER National employees did not follow Federal Travel Regulations 9
6. T&TA grant was charged for travel costs when no travel
expenses were incurred 10
7. Travel costs not directly related to the T&TA grant were
charged to the grant 11
SCHEDULE OF QUESTIONED COSTS 14
APPENDIX I: AUDITEE'S RESPONSE TO DRAFT REPORT 15
DOL U.S. Department of Labor
ETA Employment and Training Administration
LA Los Angeles
OCD Office of Cost Determination
PIC Private Industry Council
SER SER-Jobs for Progress, Inc.
Training and Technical Assistance
We conducted a limited scope financial audit of noncompetitive Training and Technical Assistance (T&TA) Grant No. F-4690-4-00-80-60 between the U. S. Department of Labor (DOL) and SER-Jobs for Progress National, Inc. (SER). In addition, we attempted to determine what T&TA services SER National provided to local SER offices under the grant.
We found that the T&TA grant funds were used as a last resort for local SER offices which were in such poor financial condition that their continued existence was unlikely. Visits to seven local SER offices accounted for 73 percent of the T&TA grant's travel expenditures. Yet, five of the seven offices closed during the audit period. Maintaining and closing local offices would appear to be a corporate, not a T&TA grant, responsibility. (See finding 1.)
We questioned $54,924 of grant costs as follows:
In our draft report we recommended the Assistant Secretary for Employment
and Training disallow the $54,924 questioned costs and instruct SER National
Auditee's response to draft report and OIG's conclusion:
SER National indicated it assigned staff to temporarily assist in the reorganization of Central SER LA programs already in operation. The amount of time required to complete the project was in excess of what SER National anticipated due to the outstanding programmatic and financial reporting issues with the City of Los Angeles JTPA Office. The limited resources of Central SER LA required SER National to continue providing assistance until the completion of all outstanding contract compliance requirements were met.
In our opinion, staffing a separate legal entity for 9 months is outside the scope and intent of the training and technical assistance grant as it was written. Technical assistance does not include funding the actual day-to-day cost of administering contracts with the City of Los Angeles JTPA program. If assistance was needed until the completion of all outstanding contract compliance requirements were met, such administrative costs should be charged to the contracts they were administering. Our position is unchanged. These costs are questioned.
Regarding the other questioned cost issues, SER indicated adjusting accounting entries had been made to correct the problems. Based on their unclear response to these issues, we continue to question these costs and recommend cash recovery of the costs.
SER indicated the other administrative findings are being addressed.
We recommend that ETA review these issues on any future monitoring visits.
SER is a national, private, nonprofit, community-based corporation. The organization's major objective is to formulate and advocate initiatives that result in the increased development and utilization of America's human resources, with special emphases on the needs of Hispanics in the areas of education, training, employment, business and economic opportunity.
SER is funded by the U.S. Department of Labor, the U.S. Department of Education, and private funds. Our audit was limited to the Training and Technical Assistance Grant No. F-4690-4-00-80-60 funded by the U.S. Department of Labor.
This grant provided funds to the SER national headquarters to provide training and technical assistance services to the local SER affiliates throughout the United States and Puerto Rico in the areas of program administration, financial management, procurement, management information, oversight and monitoring, and other areas as needed.
Details of this grant are as follows:
Term Number Amount 12/31/96
7/1/94 - 6/30/95 $ 787,950
7/1/95 - 6/30/96 1 602,550
7/1/96 - 6/30/97 2 463,500
We conducted a limited scope financial audit of noncompetitive T&TA Grant No.
F-4690-4-00-80-60 between the U.S. Department of Labor and SER-Jobs for Progress National, Inc., for the period July 1, 1994 to December 31, 1996. In addition, we attempted to determine what T&TA services were provided to local SER offices under the grant.
We performed a limited review of the internal controls of the grant recipient related to the financial and performance reporting requirements. Our specific audit procedures were limited to reviews of payroll and travel costs.
We reviewed payroll records that had charges to the T&TA grant including the time and attendance system used by the SER National staff. We verified the pay rate, gross and net pay amount, personal deductions, check signature, and check clearance.
We also reviewed those travel vouchers which were charged to the T&TA grant. The travel costs to each location were summarized. The total travel costs to each location were listed in descending order. We compared the seven locations with the highest travel costs to the list of open and closed offices to determine if the travel expenditures assisted in keeping a local SER office viable and competitive.
We conducted interviews with some of the SER National staff, board members and executive directors, and staff at local SER offices. We interviewed representatives from 10 local SER offices to determine whether or not T&TA was requested, provided, and relevant. While the sample was judgmental, it included two nonaffiliates, six affiliates, and two closed offices.
The audit was performed in accordance with generally accepted auditing
standards and the Government Auditing Standards promulgated by the Comptroller
General (1994 Revision). Fieldwork was conducted from April 29, 1997 through
July 1, 1997.
1. T&TA funds tend to be a last resort for financially troubled local SER offices.
In order to determine what level of T&TA services were provided to local SER offices, we reviewed travel vouchers charged to the T&TA grant. Listed in order of cost, travel to Los Angeles, Puerto Rico, District of Columbia, Orlando, Corpus Christi, El Paso, and Las Vegas represented 73 percent of all T&TA travel expenditures. Yet, offices in five of these seven locations closed during the audit period. Therefore, we concluded that a disproportionate share of the T&TA travel budget was used to staff (see finding 2) and then close local SER offices.
We interviewed the chairman of the SER National Board and representatives from 10 local SER offices. The 10 local SER offices included 2 nonaffiliates, 6 affiliates, and 2 closed offices. Those representing the eight open offices indicated that they requested little or no T&TA, although one uses the accounting system provided by the SER National. By contrast, representatives of the two closed local offices stated they requested extensive T&TA and funding assistance from the National Office.
The reasons given by successful SER affiliates for not requesting assistance are (1) they either do not need assistance, or (2) feel that the T&TA provided is not relevant, and the brochures and other literature provided are basic and do not address their needs. Local SER offices suggested the National SER could:
- Open lines of communication by personalizing literature around the local activities, including monthly/quarterly newsletter featuring relevant and meaningful articles regarding available services, upcoming training, legislation, and current events. Include in Recruit America magazine local office success stories.
- Assume a proactive role in obtaining local grants, including writing proposals.
- Assist in fund raising activities. Also, attempt concurrence with local SER offices on a fair distribution of combined national and local donations.
- Use the buying power of the National Office to obtain equipment for local offices.
- Improve and update the information on the Internet.
- Identify problems and reach solutions jointly throughout the SER community.
In early 1995, the Central LA SER Office had management problems and failed to maintain accounting records. In October 1995, SER National officers met with their board and concluded that the Central LA SER was worth saving but it could not survive with their current management. The decision was made for SER National to take over the Central LA SER Office. SER National conducted an assessment of the Central LA SER Office during the week of December 9, 1995, and took control of the facility on December 28, 1995. The part-time Central LA SER director resigned.
In February 1996, the LA Private Industry Council (PIC) withheld the Central LA SER's JTPA subcontract payments because PIC-required audits had not been performed. SER National met with the PIC, an interim director was named, and the staff was reduced from nine to four employees. An independent auditor was retained but was having difficulty due to poor accounting records. In March 1996, the SER National Director of Accounting provided some T&TA, and the SER National Chairman of the Board persuaded the LA PIC to release $15,000 per month to meet Central LA SER's current obligations.
From April 1996 to December 1996, a SER National employee served as Acting Executive Director of the Central LA SER. Her salary and travel costs for 9 months were 100 percent T&TA funds. Another SER National employee assisted her with Central LA SER's accounting records. His salary was charged 100 percent as indirect costs. Since we did not audit the indirect cost pool or indirect charges to DOL grants, we do not know what amount of his salary was charged to the T&TA grant for this period. However, all his travel costs were charged directly to the T&TA grant. The use of T&TA funds to operate, and eventually close down a local SER office, in our opinion, is outside the intent of the grant.
Page 3 of the Statement of Work included in the 1994-95 Training &
Technical Assistance award provides the purpose for the grant which was
We question the travel costs associated with staffing the local Central LA SER Office with two National SER employees from April 1996 through December 1996. We also question the salary of the acting Executive Director who was paid with T&TA funds.
Identifiable travel costs for the two employees were $21,392; the acting Executive Director's salary for the 9 months was $24,940. Total questioned costs from this finding are $46,332.
Auditee's response to our draft report
SER National was requested to perform training and technical assistance from the board of directors of Central SER LA in the areas of fiscal and program management. In response to their request, SER National assigned staff to temporarily assist in the re-organization of programs already in operation. The amount of time required to complete the project was in excess of what SER National anticipated due to the outstanding programmatic and financial reporting issues with the City of Los Angeles JTPA office. The limited resources of Central SER LA required SER National to continue providing assistance until the completion of all outstanding contract compliance requirements were met.
Staffing a separate legal entity for 9 months is outside the scope and
intent of the training and technical assistance grant as it was written.
Technical assistance does not include funding the actual day-to-day cost
of administering contracts with the City of Los Angeles JTPA program. If
assistance was needed until the completion of all outstanding contract
compliance requirements were met, such administrative costs should
have been charged to the contracts they were administering. Our position
remains unchanged, and the costs remain questioned.
Time and attendance sheets to identify programs, activities, or functions worked on were not filled out daily by the SER National employees during the audit period. Employees were required to punch a computerized time clock upon entering and leaving the office. The payroll accountant then generated time sheets from the time clock information. The time sheets were distributed to the directors who reviewed them and then passed them onto each employee in order to make any necessary time adjustments. Time adjustments were made for punches that the time clock may not have read or that the employee had forgotten to punch in.
Subsequent to the audit period in January 1997, SER National began implementing a new time and attendance system. The new time and attendance sheets were being filled out daily by each employee to document the actual time spent on each program, activity, and function in half-hour increments. In addition, supervisors are reviewing and approving employees' time sheets. SER National should continue to document time and attendance for each program, activity, and function.
Auditee's response to our draft report
SER National personnel have continued completing daily time sheets to allocate costs to the proper program activity or function. The attendance and method of documenting actual time into the programs have been reviewed and approved by the Office of Cost Determination represented by the Regional Cost Negotiator.
We urge SER National to continue compliance with the time distribution
system currently being used. We also recommend that ETA periodically monitor
this grantee to ensure the time distribution system is being used.
4. SER needs to submit its indirect cost proposal to the DOL Office of Cost Determination for approval.
The DOL Regional Cost Negotiator took exception to three of SER's National
job positions -- President, Vice President-Corporate and Community Affairs,
and Administrative Assistant to the President -- being allocated 100 percent
as indirect costs. Because their salaries were charged 100 percent indirect,
very low percentages of their salaries had been allocated to corporate
programs, activities, or functions.
It is our understanding that the Regional Cost Negotiator still has not approved this indirect cost plan; it is a provisional plan.
Auditee's response to our draft report
On October 3, 1997 the Regional Cost Negotiator from the Office of Cost Determination and the Director of Accounting from SER National reviewed and agreed to the final supporting documentation required for the submission of a revised indirect cost proposal for FY 94-95 and FY 95-96, a final indirect cost rate will be issued by the end of October, 1997 accordingly.
We urge SER National to continue to follow up with the Regional Cost
Negotiator until the indirect cost proposals for FY 94-95 and FY 95-96
are approved by the Office of Cost Determination. We recommend ETA follow
up with the grantee to ensure the plan is approved.
5. SER National employees did not follow Federal Travel Regulations.
A special attachment to the T&TA grant and OMB Circular A-122 allows grantees to use their agency travel procedures for staff travel provided they are reasonable. The attachment states:
A general test of the reasonableness of a travel expense is the degree to which it conforms to the current Federal travel requirements with respect to cost limitations and documentation.
SER National's policy was to use Federal Travel Regulations and charge
the corporation for any excess. Standard per diem rates, Government contract
airfares, and lodging limitations were applied. However, there were claims
for reimbursement of meals in excess of per diem because the traveler purchased
meals for local staff. Travel policies do not provide for the traveler
to provide meals for the local staff.
Since the adopted travel policies were violated, SER National is not entitled to reimbursement for some costs claimed. Because of the immateriality of the amount in question, we have not questioned costs. However, we recommend that SER National follow the adopted Federal Travel Regulations.
Auditee's response to our draft report
Management has initiated a review of the travel procedures. The focus of our review is to improve effectiveness and efficiency in the application of travel procedures, to streamline our system, and to ensure that staff are provided adequate opportunity to carry out their specific control functions.
We urge SER National to improve travel accountability. ETA should include
this area for review in any monitoring visits.
6. T&TA grant was charged for travel costs when no travel expenses were incurred.
Two SER National employees traveled to the International School of Minnesota on
September 21 through 22, 1995. All expenses, including airfare, were paid by the school. The $1,230 airfare was credited to program income and debited as a reimbursable program expense. Three SER employees also traveled to St. Louis to review a software product. The trip was paid for by the vendor. The $2,124 airfare and $500 hotel cost were credited to program income and debited as a reimbursable program expense.
OMB Circular A-122 states:
Donated goods; i.e., expendable personal property/supplies, and donated use of space may be furnished to an organization. The value of the goods and space is not reimbursable either as a direct or indirect cost.
Since no costs were incurred, there was no expense to the T&TA grant.
Consequently, the $3,854 is questioned.
All future program income generated from the program's operation is to be recorded in the program benefitting from the income-producing venture, and subsequently used for the continuing development of the program. An adjusting entry correcting the original entry has been recorded in the specific journals of accounting, the $3,854 will be reflected as revenue received instead of an expenditure of the program.
The grantee neither received any revenue nor incurred any costs for
these trips. Consequently, they should not be reflected on the grantee's
accounting records. Simply making an adjusted accounting entry will not
ensure that the inappropriately charged costs have been recovered from
the grantee from non-Federal funds. The grantee would also have to revise
expenditure reports and incur an additional $3,854 in DOL program costs
without drawing down a corresponding amount of cash. For ease of accountability
and to ensure this overcharge to the DOL grant is properly repaid, we recommend
recovery of cash from non-Federal sources.
7. T ravel costs not directly related to the T&TA grant were charged to the grant.
The source documentation for five trips indicate that travel expenses
totaling $4,748.67 were improperly charged to the T&TA grant due to
a coding error. These costs are questioned. The following are the details
of the five trips:
To be allowable under the award, costs must . . . be reasonable for the performance of the award and be allocable thereto under these principles.
Auditee's response to our draft report
An adjusting entry correcting the original entry has been recorded in the specific journals of accounting, the $4,748.67 will be reflected as revenue received instead of an expenditure of the program.
We do not understand this response. Is SER indicating that improper
costs to DOL programs will be shown as revenue under the grant? This response
is inappropriate for the same reason given in our conclusion to the previous
finding. The most appropriate way to resolve this finding is to recover
the cash from non-Federal sources.
We recommend that the Assistant Secretary for Employment and Training
disallow $54,924 questioned costs as follows:
The auditee's response to our draft report and the OIG's conclusion
can be found at the end of each finding.
of a local office
the grant when there was no travel expense
error where corporate travel was charged to the grant