jurisdiction: US

text: b' OFFICE OF THE INSPECTOR GENERAL\n CORPORATION FOR NATIONAL AND\n COMMUNITY SERVICE\n\n\n\n\n PRE-AUDIT SURVEY OF THE\n CALIFORNIA COMMISSION ON\n IMPROVING LIFE THROUGH SERVICE\n\n OIG Audit Report Number 0 1- 18\n October 13,2000\n\n\n\n\n Prepared by:\n\n KPMG LLP\n 200 1 M Street N. W.\n Washington, DC 20036\n\n Under CNS OIG MOU # 98-046-5003\n With the Department of Labor\n DOL Contract # 5-9-G-8-0022\n Task # B9GOV203\n\n\n\n\nThis report was issued to Corporation management on March 8, 2001. Under the laws and regulations\ngoverning audit follow up, the Corporation must make final management decisions on the report\'s findings\nand recommendations no later than September 4, 2001, and complete its corrective actions by March 8,\n2002. Consequently, the reported findings do not necessarily represent the final resolution of the issues\npresented.\n\x0c Office of Inspector General\n Corporation for National and Community Service CORPORATION\n\n FOR NATIONAL\n Pre-Audit Survey of the\n California Commission on Improving Life Through Service\n OIG Audit Report Number 01-18\n\n\n\nIntroduction\n\nThe Corporation for National and Community Service, pursuant to the authority of the National and\nCommunity Service Act, awards grants and cooperative agreements to state commissions, nonprofit\nentities, tribes and territories to assist in the creation of full and part time national and community\nservice programs. Currently, in accordance with the requirements of the Act, the Corporation awards\napproximately two-thirds of its AmeriCorps Staternational funds to state commissions. The state\ncommissions in turn fund, and are responsible for the oversight of, subgrantees who execute the\nprograms. Through these subgrantees, AmeriCorps Members perform service to meet educational,\nhuman, environmental, and public safety needs throughout the nation.\n\nThus, state commissions play an important role in the oversight of AmeriCorps programs and\nexpenditures. The Corporation has indicated that it intends to give them greater responsibility.\nHowever, the Corporation lacks a management information system that maintains comprehensive\ninformation on its grants including those to state commissions and subgrantees. Moreover, although the\nCorporation began state commission administrative reviews in 1999, the Corporation, historically, has\nnot carried out a comprehensive, risk-based program for grantee financial and programmatic oversight\nand monitoring. It is also unlikely that AmeriCorps programs are subject to compliance testing as part\nof state-wide audits under the Single Audit Act due to their size relative to other state programs.\n\nTherefore, CNS OIG has initiated a series of pre-audit surveys intended to provide basic information on\nthe state commissions\' operations and funding. The surveys are designed to provide a preliminary\nassessment of the commissions\' pre-award and grant selection procedures, fiscal administration, and\nmonitoring of subgrantees (including AmeriCorps Member activities and service hour reporting). They\nare a tool that allows OIG to plan future audit work related to the state commission\'s operations. For\neach survey, we also issue a report to the state commission and to the Corporation communicating the\nresults and making recommendations for improvement, as appropriate. Recommendations for future\naudit work consider the pre-audit survey results, known audit coverage, and the amount of funding.\n\nWe engaged KPMG LLP to perform the pre-audit survey of the California Commissionfor Improving\nLife Through Service. Based on the limited procedures performed, KPMG concluded that the\nCommission administers an open, competitive process to select national service subgrantees and has\ndeveloped various controlpolicies andproceduresforJisca1 administration andsub-recipient oversight.\nHowever, there report includes a number of recommendations to improve the Commission\'s fiscal\nadministration and oversight processes. In addition, KPMG recommends that the Office of Inspector\nGeneral perform a full scope audit as a follow-up on issues ident@ed by this pre-audit survey and that\nthe Corporationfollow-up to determine that appropriate corrective actions have been put into place.\n\nCNS OIG reviewed the report and work papers supporting its conclusions. We agree with the findings\nand recommendations presented therein.\n\n\n Inspector General\n 1201 New York Avenue, NW\n Washington, DC 20525\n\x0cThe California Commission\'s response (Appendix C) takes issue with the findings in the report as well\nas the overall conclusion that a full scope audit of all grant years be performed. KPMG provided\ncomments on the Commission\'s response (Appendix E) including additional detail and clarification.\nKPMG removed one finding from the final report based on the Commission\'s response related to the\nWeb Based Reporting System (WBRS). The Corporation\'s response (Appendix D) argues against the\nneed for a comprehensive manual of all financial responsibilities; improvements in record retention\npractices; and the need for documenting and implementing procedures to follow-up on untimely\nFinancial Status Reports but states that it will follow-up with the Commission on these recommendations\nto ensure that adequate policies are in place and being followed. The Corporation states that it will\nfollow-up with the Commission to assure that a system is in place to obtain subgrantee Circular A- 133\naudits. Lastly, the Corporation\'s response argues the need for instructions on its site visit form and\nMember file checklist charging that this attempts to direct "arbitrary, exacting standards for the\nCommission\'s monitoring of its programs".\n\x0c Pre-Audit Survey of the\n California Commission on Improving Life Through Service\n Table of Contents\n\n\n\nRESULTS IN BRIEF .......................................................................................................................\n 1\n\nBACKGROUND .............................................................................................................................\n 2\n\nOVERVIEW OF THE CALIFORNIA COMMISSION ..................................................................\n 3\n\nOBJECTIVES. SCOPE. AND METHODOLOGY .........................................................................\n 4\n\nFINDINGS AND RECOMMENDATIONS ....................................................................................\n 5\n\nAPPENDIX A. COMMISSION FUNDING: 1994-95 THROUGH 1999-2000 .........................A . 1\n\nAPPENDIX B. DETAILED ENGAGEMENT OBJECTIVES AND\n B .1\n METHODOLOGY ................................................................................................................\n\nAPPENDIX C. CALIFORNIA COMMISSION ON IMPROVING LIFE THROUGH\n SERVICE RESPONSE ..........................................................................................................\n C.1\n\n D.1\nAPPENDIX D. CORPORATION RESPONSE ...........................................................................\n\nAPPENDIX E. KPMG\'s COMMENTS ON COMMISSION RESPONSE .................................E.1\n\x0c 2001 M Street, N.W.\n Washington, D.C. 20036\n\n\n\n\nOctober 13, 2000\n\n\n\nInspector General\nCorporation for National and Community Service:\n\nAt your request, KPMG LLP (KPMG) performed a pre-audit survey of the California\nCommission on Improving Life Through Service (the Commission). The primary purpose of this\nsurvey was to provide a preliminary assessment of:\n\n the adequacy of the pre-award selection process;\n the fiscal procedures; and\n the effectiveness of monitoring of its AmeriCorps State subgrantees, including AmeriCorps\n Member activities and service hours and program accomplishments reporting.\n\nWe were also to report on the recommended scope of additional audit procedures to be\nperformed at the Commission.\n\nResults in Brief\n\nBased on the results of the limited procedures performed, we have made the following\npreliminary assessments regarding the Commission\'s systems for administering its AmeriCorps\ngrants:\n\n The Commission administers an open, competitive process to select national service\n subgrantees. However, prior to program year 1999-2000, the Commission could not provide\n documentation to support its evaluation of applicants\' financial management systems and\n past experience.\n\n The Commission has developed control policies and procedures to administer the\n Corporation\'s grant funds. However, prior to program year 1999-2000, differences were\n noted between amounts reported on the Commissions\' Financial Status Reports (FSRs)\n submitted to the Corporation and the Commission\'s financial records.\n\n The Commission has established controls to evaluate and monitor subgrantees. However,\n the Commission does not have adequate procedures for: (i) obtaining and reviewing\n subgrantees\' Office of Management and Budget (OMB) Circular A-1 33, Audits of State,\n Local Governments, and Non-profit Organizations audit reports, and (ii) following up to\n ensure the timely resolution of identified deficiencies. In addition, the Commission did not\n\n\n\n 1\n\n1111 KPMG LLP KPMG LLP a U S I m ~ t e dlhablllty partnership s\n a member of KPMG Internatma a SWISSassoclatlon\n\x0crn\n conduct adequate procedures during its site visits prior to program year 1999-2000 to verify\n the financial management activities of its subgrantees.\n\nThe section below entitled Findings and Recommendations describes the weaknesses noted\nabove in further detail and addresses additional issues noted during the survey.\n\nThe Commission is a part of an agency of the State of California, and as such, is annually subject\nto an OMB Circular A-133, Audits of State, Local Governments and Non-Profit Organizations,\naudit performed by the California State Auditors\' Office. The State Auditors identified the\nCommission\'s AmeriCorps grants as a major program and reported findings pertaining to the\nCommission\'s AmeriCorps program in fiscal years 1997, 1998 and 1999. In 1997 and 1998, a\nstate subgrantee of the Commission administering various AmeriCorps programs was cited for\nunsupported costs and inadequate monitoring of its subrecipients. Additionally, in 1998 the\nState Auditors reported the Commission\'s inaccurate reporting of AmeriCorps grant activities.\nIn 1999, the State Auditors cited the above mentioned subgrantee for inadequate monitoring and\nreporting of subreceipient activities.\n\nBased on our preliminary assessments, the significant AmeriCorps funding that the Commission\nhas received, and the nature of the findings identified herein, we recommend the performance of\na full scope audit of the Commission for program years 1994-1995 through 1999-2000.\n\nAdditionally, we recommend that the Corporation follow up with the Commission to determine\nthat appropriate corrective actions are implemented to address the conditions reported herein,\nand that the Corporation consider these conditions in its oversight and monitoring of the\nCommission.\n\nBackground\n\nThe National and Community Service Trust Act of 1993, P.L. 103-82, which amended the\nNational and Community Service Act of 1990, established the Corporation for National and\nCommunity Service.\n\nThe Corporation, pursuant to the authority of the Act, awards grants and cooperative agreements\nto State Commissions, nonprofit entities and tribes and territories to assist in the creation of full\nand part time national and community service programs. Through these grantees, AmeriCorps\nMembers perform service to meet the educational, human, environmental, and public safety\nneeds throughout the nation, especially addressing those needs related to poverty. In return for\nthis service, eligible Members may receive a living allowance and post service educational\nbenefits.\n\nCurrently, the Corporation awards approximately two-thirds of its AmeriCorps State/National\nfunds to State Commissions. State Commissions are required to include 15 to 25 voting\nMembers. Each Commission has a responsibility to develop and communicate a vision and ethic\nof service throughout its State.\n\nThe Commissions provide AmeriCorps funding to approved applicants for service programs\nwithin their states and are responsible for monitoring these subgrantees\' compliance with grant\nrequirements. The Commissions are also responsible for providing training and technical\nassistance to AmeriCorps State and National Direct programs and to the broader network of\n\x0cservice programs in the state. The Commissions are prohibited from directly operating national\nservice programs.\n\nThe Corporation\'s regulations describe standards for financial management systems that must be\nmaintained by State Commissions. The standards require, in part, that the State Commissions\nmaintain internal controls that provide for accurate, current, and complete disclosure of the\nfinancial and programmatic results of financially assisted activities, and provide effective control\nand accountability for all grant and subgrant cash, real and personal property, and other assets.\n\nOverview of the California Commission\n\nThe California Commission on Improving Life Through Service, located in Sacramento,\nCalifornia, has received AmeriCorps grant funds from the Corporation for National and\nCommunity Service since program year 1994-95. The Commission operates as part of the State\nof California\'s Office of Planning and Research. The Commission has twenty employees\nincluding an Executive Director, a Deputy Director, a Director of Fiscal Affairs, Directors for\nLegal Affairs, Communications, Development, Programs and Administration, and Special\nProjects, and various assistant directors and support staff.\n\nAs part of the Office of Research and Planning of the State of California, the Commission is\nannually subject to an OMB Circular A-133 audit performed by the California State Auditors\'\nOffice. The AmeriCorps grants were identified as major programs in fiscal years 1997, 1998 and\n1999, and as noted above, findings related to these programs have been reported each year.\n\nThe Commission provided us with the following information for all program years:\n\n Number of\n Subgrantees\n Total Corporation Number of Subject to A- 133\n Program Year Funding Subgrantees Audits*\n\n\n\n\n* Determination is based solely on dollar value of federal awards passed through the\n Commission for each program year. Remaining subgrantees could be subject to an OMB\n Circular A-133 audit if they received additional federal grant funds from other sources.\n\nAppendix A contains more detailed information on funding received from the Corporation\nduring program years 1994-1995 through 1999-2000.\n\x0cObjectives, Scope, and Methodology\n\nWe were engaged by the Office of the Inspector General, Corporation for National and\nCommunity Service, to provide an assessment of the systems and procedures in place at the\nCommission for administering its AmeriCorps grants and for monitoring the fiscal activity of\nsubgrantees. The primary purpose of this pre-audit survey was to provide a preliminary\nassessment oE\n\n the adequacy of the pre-award selection process;\n the fiscal procedures at the Commission; and\n the effectiveness of monitoring of its AmeriCorps State subgrantees, including AmeriCorps\n Member activities and service hours and program accomplishment reporting.\n\nWe were also to report on the recommended scope of additional audit procedures to be\nperformed at the Commission.\n\nOur survey included the following procedures:\n\n reviewing applicable laws, regulations, grant provisions, the Corporation\'s State\n Administrative Standards Tool, and other information to gain an understanding of legal,\n statutory and programmatic requirements;\n\n reviewing OMB Circular A-133 reports and current program year grant agreements for the\n Commission;\n\n obtaining information from Commission management to complete flowcharts documenting\n the hierarchy of AmeriCorps grant funding for program years 1994-95 through 1999-2000;\n and\n\n performing procedures to achieve the objectives detailed in Appendix B to assess the\n Commission\'s internal controls, selection of subgrantees, administration of grant funds, and\n monitoring of subgrantees, including internal controls over service hours and performance\n accomplishment reporting.\n\nAs part of the procedures performed, we documented and tested internal controls in place at the\nCommission using inquiries, observations, and examination of a limited sample of source\ndocuments. Finally, we summarized the results of our work to develop the findings and\nrecommendations presented in this report. We discussed all findings with Commission\nmanagement during an exit conference on October 13,2000.\n\nOur procedures were performed in accordance with Government Auditing Standards issued by\nthe Comptroller General of the United States. We were not engaged to, and did not, perform an\naudit of any financial statements, and the procedures described above were not sufficient to\nexpress an opinion on the controls at the Commission, or on its compliance with applicable laws,\nregulations, contracts and grants. Accordingly, we do not express an opinion on any such\nfinancial statements, or on the Commission\'s controls or compliance. Had we performed\nadditional procedures, other matters might have come to our attention that would have been\nreported to you.\n\x0cWe provided a draft of this report to the Commission and the Corporation. The Commission\'s\nand Corporation\'s responses to our findings and recommendations are included as Appendix C\nand D respectively. Our comments on the Commission\'s response is presented in Appendix E.\n\nFindings and Recommendations\n\nSelecting Subgrantees\n\nAccording to 45 CFR Section 2550.80 (b)(l), "Each State must administer a competitive process\nto select national service programs to be included in any application to the Corporation for\nfunding."\n\nThe Commission administers an open, competitive process to select national service subgrantees.\nThe Commission advertises funding availability through mailing lists, newspapers and\nnewsletters. In addition, selection officials sign conflict of interest statements annually, receive\nan instruction package, and uses a standard form to evaluate each applicant. However, we\nidentified the following areas for improvement during the selection process.\n\n Assessment of an Applicant\'s Financial Management System\n\nDue to a lack of documentation, we were unable to confirm whether the procedures followed by\nthe Commission prior to program year 1999-2000 included a process to identify whether a\npotential subgrantee had a financial management system that provides adequate accounting for\nallowable and unallowable costs, documentation of expenditures, allocation of costs and cash\nmanagement. Office and Management Budget Circular A- 102, Grants and Cooperative\nAgreements with State and Local Governments, as revised, prescribes the need for assessing the\nadequacy of an applicant\'s financial management system, by relying on readily available sources\nof information, such as audit reports, to the maximum extent possible. It also prescribes that if\nadditional information is necessary to assure prudent management of funds, it shall be obtained\nfrom the applicant or from an on-site review. No recommendation is considered necessary at\nthis time because the Commission revised its procedures to include documentation of its grant\nevaluation of applicant\'s financial management systems beginning with program year 1999-\n2000.\n\n Assessment of an Applicant\'s Past Experience\n\nDue to a lack of documentation, we were unable to determine whether the procedures followed\nby the Commission prior to program year 1999-2000 included a process to assess the potential\nsubgrantee\'s past experience. 45 CFR Section 2522.410 (b)(2), Organizational Capacity,\nprescribes the basis upon which the Commission is required to consider the capacity of an\norganization to carry out the program, which includes consideration of the past experience of an\norganization or program in addition to other factors. No recommendation is considered\nnecessary at this time because the Commission revised its procedures to include documentation\nof its evaluation of grant applicant\'s past experience beginning with program year 1999-2000.\n\x0cAdministering Grant Funds\n\nAs part of the grant administration process, "Grantees are responsible for managing the day-to-\nday operations of grant and subgrant supported activities. Grantees must monitor grant and\nsubgrant supported activities to assure compliance with applicable Federal requirements and that\nperformance goals are being achieved. Grantee monitoring must cover each program, function\nor activity" (45 CFR Section 2541.400 (a)).\n\nThe Commission has developed and implemented procedures that are intended to provide\nreasonable assurance that grant funds received from the Corporation are properly administered.\nProcedures are in place to withhold funding payments if subgrantees do not submit Financial\nStatus Reports (FSRs) timely; to manage cash draw downs and disbursements to subgrantees\nmade by the Office of Planning and Research since 1994, as the Commission\'s fiscal agent; and\nto ascertain whether subgrantees have met their matching requirements. The Commission\'s\npersonnel have adequate skills and experience to manage and administer Corporation grant\nfunds. However, we identified the following areas for improvement within the administering\nprocess.\n\n Discrepancies between Financial Status Reports and Financial Records\n\nCertain Financial Status Reports (FSRs) that were submitted to the Corporation during program\nyears 1995-1996 through 1997-1998, did not agree to the financial records that were maintained\nby the Commission. Examples of FSRs that were submitted to the Corporation that did not\nagree to the financial records of the Commission include the FSR for the Program Development\nand Assistance Training (PDAT) grant for September 30, 1997 and June 30, 1998, and the\nAmeriCorps Grant for June 30, 1995. 45 CFR Section 2543.2 1(a) prescribes standards for\nfinancial management systems of grant recipients. Federal grant recipients financial\nmanagement systems are required to provide accurate, current, and complete disclosure of the\nfinancial results of each federally sponsored project or program. Financial management systems\nare also required to provide for records that identify the source and application of funds for\nfederally sponsored activities. No recommendation is considered necessary at this time because\nthe Commission implemented reconciliation and documentation procedures to correct these\nproblems during fiscal year 1998.\n\n Documentation of Financial Management Processes at the Commission Level\n\nA comprehensive policies and procedures document has not been developed to address the\nfinancial management processes at the Commission level. For example, written polices and\nprocedures do not exist for tasks conducted by personnel who are responsible for the\nadministration and accounting of grant funds, to ensure consistent and appropriate administrative\nand financial oversight of the Commission\'s direct expenditures and those of its subgrantees.\nOMB Circular A-133 Compliance Supplement, Part 6 - Internal Control, suggests that clearly\nwritten operating policies and procedures should form part of the Commission\'s control activity\nto help ensure management\'s directives are carried out.\n\x0c Document Retention\n\nCertain documentation required to be maintained by the Commission could not be located. For\nexample, the Commission could not locate:\n\n 1998-99 site visit reports for Building Individual Community (1 of 1 such report\n requested)\n 1996-97 progress reports for Watershed-CCC (3 of 3 such reports requested)\n 1996-97 year end FSR for El Dorado Co. Tahoe-Sierra AmeriCorps\n\n45 CFR Section 2543.53 (b) provides requirements for record retention. Financial records,\nsupporting documents, statistical records and all other records pertinent to an award are to be\nretained for a period of three years from the date of the submission of the final expenditure\nreport, or for awards that are renewed quarterly or annually, from the submission of the quarterly\nor annual financial report, as authorized by the awarding agency.\n\n Timeliness of Subgrantee FSRs\n\nAmeriCorps Provisions 16 (a) prescribe that Grantees such as the Commission should set\nsubgrantee reporting requirements consistent with their need for timely and accurate reports.\nThe Commission requires FSRs to be submitted on a quarterly basis during a program year. The\nFSRs are due 30 days after the quarter ends, with the exception of the final FSR being due four\nmonths following the last quarter. We have been informed that the Commission had procedures\nin place to monitor the timely submission of subgrantees FSRs during program years 1994- 1995\nthrough 1997-1998. Procedures included follow-up through e-mail. Our procedures identified 8\nsubgrantee FSRs which were submitted late out of a total of 40 selected for review. Follow-up\non these late submissions could not be verified due to missing e-mail documentation.\n\n Recommendations\n\nWe recommend the Commission focus on measures for improving the effectiveness of its grant\nadministration process as follows:\n\n rn Prepare a comprehensive manual that is reflective of its financial responsibilities. This\n manual should include:\n\n Subject matter\n Source (identification of key documents)\n Identification of responsible official(s)\n Process\n Related internal controls in place\n Timelines (for review and reporting)\n Sample documents\n Requirements for the retention of documents\n Filing requirements\n\n This comprehensive manual should seek to incorporate documented procedures already\n developed for certain areas.\n\x0c Improve its record retention practices by the use of a file checklist that identifies the\n nature and type of documents that should be retained. This checklist should also identify\n the requirements for record retention. A periodic review should be conducted by\n someone other than the individual who is responsible for filing to ensure that appropriate\n procedures are being followed. Additionally, information should be stored in a manner\n that will facilitate retrieval.\n\n Document and implement procedures regarding follow-up on untimely FSR submissions\n by subgrantees. These procedures must emphasize the need for consistent follow up\n action on all subgrantees who are late at any time. The Commission should continue to\n implement its policy of refusing to reimburse subgrantee invoices without timely and\n accurate FSRs.\n\nEvaluating and Monitoring Subgrantees\n\nAs noted above, the Commission is responsible for monitoring subgrant supported activities to\nassure compliance with applicable Federal requirements and that performance goals are being\nachieved. The Commission has established controls to evaluate and monitor subgrantees, which\ninclude reviewing program and financial reports and scheduling site visits for each subgrantee\nduring the grant period. Commission personnel use a standard site visit report form to document\nresults of each visit, and the Commission notifies the subgrantees of the results of these site\nvisits, including strengths, weaknesses, concerns, recommendations, and any necessary follow-\nup requirements.\n\nIn addition, the Commission evaluates program accomplishments reported by the subgrantees.\nThe Commission uses a standard form to compile program objectives which were originally\nstated in the grant application. By establishing the objectives in this format and sharing it with\nthe subgrantees at the beginning of the program year, it is clear how the program will be\nevaluated and what types of documentation must be maintained. Three times per year, the\nCommission requires that the programs address their accomplishments towards meeting the\nstated objectives, citing both numerical and other informational data. (In program year 1994-95\nthese reports were required quarterly.) The Commission personnel then verify this information\nas part of their site visits.\n\nHowever, we identified the following areas for improvement related to the evaluation and\nmonitoring of subgrantees.\n\n Review of OMB Circular A-133 Audit Reports\n\nThe Single Audit Act, as amended in 1996, requires nonfederal entities expending $300,000 or\nmore in Federal awards in a year to have audits performed in accordance with OMB Circular A-\n133. OMB Circular A-133 requires a grantee, such as the Commission, to be responsible for\nensuring that audits of subgrantees are performed where required, and that the subgrantees take\nprompt corrective action on any findings. OMB Circular A-133 Compliance Supplement, Part 6\n-Internal Control, suggests that review of and follow-up on subgrantees\' audit reports is a key\ncomponent of a program to monitor subgrantees\' compliance with federal grant requirements.\n\nHowever, the Commission has not implemented an adequate process for obtaining and reviewing\nOMB Circular A-133 audit reports for its subgrantees and following up on corrective actions\n\x0ctaken by subgrantees on reported findings. For example, the Commission\'s report tracking\nspreadsheet identifies that an A-133 audit report was received for the LA Conservation Corps (a\nsubgrantee of the Commission) for the fiscal year ending 1996. However, the report that was\nreceived contained only one of three required components that should have been received.\n\nFollow-up procedures on corrective actions are not being conducted at all in certain instances,\nand in other instances, not in a consistent, timely manner. For example, documentation to\nsupport follow up procedures performed by the Commission on the corrective actions taken in\nresponse to the State Auditors\' findings reported in fiscal years 1997, 1998 and 1999 on the\nCalifornia Conservation Corps (CCC), a subgrantee of the Commission, was not available. For\naudit findings identified related to non-state agency subgrantees, the Commission followed up by\nrequesting corrective plans, but did not consistently verify that corrections had been made.\n\n Adequacy of the Site Visit Form\n\nThe Commission\'s monitoring process prior to program year 1999-2000, included the use of a\nstandard form (the site visit planning form) to provide guidance to the person performing the site\nvisit. However, this form did not instruct the evaluator to perform such tasks as: (i) verifying\nmatching amounts to supporting documents; (ii) agreeing grant expenditures to supporting\ndocuments to verify the existence and allowability of costs; (iii) verifying amounts reported by\nthe subgrantee to the general ledger; and (iv) reviewing and assessing the adequacy of the\nsubgrantee\'s financial policies and procedures. According to OMB Circular A-133, the\nCommission is required to monitor the activities of subgrantees as necessary to ensure that\nFederal awards are used for authorized purposes in compliance with laws and regulations, and\nthe provisions of grant agreements. The Commission\'s 1999-2000 revised standard site visit\nform (the site assessment survey) provides guidance with respect to these procedures. However,\nwe noted that it did not include procedures to document the specific work done or to retain\ncopies of the supporting documents.\n\n Review of Member Timesheets\n\nAs part of the Commission\'s site monitoring process, the Commission documents certain aspects\nof its review of Member timesheets. However, prior to program year 1999-2000, the\nCommission did not consistently document which Member timesheets were reviewed during site\nvisits and what was specifically reviewed during a site visit. In addition, the Commission did not\ndocument the sample size selected and the rationale behind the selection. We were also\ninformed that other requirements, such as evidence of a Member\'s awareness of prohibited\nactivities, is reviewed at the same time as the timesheets. However, no specific evidence of this\nreview was provided.\n\nAccording to OMB Circular A-133, the Commission is required to monitor the activities of\nsubrecipients as necessary to ensure that Federal awards are used for authorized purposes in\ncompliance with laws and regulations and the provisions of grant agreements.\n\nThe Commission\'s Member file checklist implemented in program year 1999-2000 includes\nrequirements for performing these procedures. However, we noted that it did not include\nprocedures to document the basis used to select Member files.\n\x0cWe recommend the Commission focus on measures for improving the effectiveness of its\nevaluation and monitoring of subgrantees as follows:\n\n Improve its evaluation and monitoring procedures by developing and implementing a\n process for obtaining OMB Circular A-133 audit reports from its subgrantees and\n following up to ensure that timely corrective actions were taken on audit findings that\n have been identified. This process should include documenting, for each of its\n subgrantees: (i) whether an OMB Circular A- 133 audit was required to be conducted, (ii)\n whether or not the audit was actually conducted, (iii) collection and review of the report,\n and (iv) follow up procedures performed for missing reports and to resolve reported\n findings.\n\n Include instructions in the standard site visit form to more specifically instruct evaluators\n as to required documentation and record retention practices.\n\n Include instructions on the Member file checklist to document the basis used to select\n Member files for review, and identification of those actually reviewed during the site\n visit.\n\n\n\nThis report is intended solely for the information and use of the Office of the Inspector General,\nthe management of the Corporation for National and Community Service, the management of the\nCalifornia Commission on Improving Life Through Service, and the United States Congress and\nis not intended to be and should not be used by anyone other than these specified parties.\n\x0c Commission Funding Appendix A\n\n The table below and the flowcharts on the following pages depict the Commission\'s funding\n over the past six program years.\n\n\nFunding Source\nand Type 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000\n\nCNS Formula\n Grant Funds\n\nCNS Competitive\n Grant Funds\n\nAmerica Reads 2,795,294 4,867,28 1\n\n\nCNS Educational\n Only Awards\n\nGovernment\'s Innovative\n Award Funds\n\nGovernment\'s Initiative\n Award Funds\n\n\nFEMA Funds 30,400\n\nPromise Fellow Funds 195,833 24 1,600\n\nPDAT Funds 100,000 140,000 168,000 384,000 320,000\n\nAdministrative Funds 760,000 750,500 750,000 756,000 750,000 750,000\n\nState Disability Funds 351,316 338,476 485,000\n\nState Matching Funds 465,353 194,580 194,580 696,324 1,521,878 436,115\n\x0c Appendix A\n Commission Funding\n\n Corporation for National and Community Service\n\nFunding to the California Commission on Improving Life Through Service\n (1994-1995)\n\n\n L\n AmeriCorps AmeriCorps 4dministration\n Formula Competitive Funds\n Funds Funds $760,000\n $5,877,739 $6,374,803\n\n Match Match Match\n $0 $0 $465,353\n\n\n\n\n I\n Total CNS Funds Retained by the Commission $760,000\n\n Total Commission Matching Funds $465,353\n\n Total CNS Funds Awarded to Subgrantees $12,252,542\n\n\n\n\n 1\n AmeriCorps\n 1\n AmeriCorps\n Formula Funds Competitive\n $5,877,739 Funds\n $6,374,803\n\n\n Match Match\n $4,053,137 $3,726,753\n\n # o f Subs: 16 # of Subs: 6\n # of Sites: 160 # of Sites: 87\n\x0c Commission Funding\n\n\n Corporation for National and Community Service\n\n Funding to the California Commission on Improving Life Through Service\n (1995- 1996)\n\n\n * + + + +\nAmeriCorps AmeriCorps Governors PDAT Administration\n Formula Competitive Innovative Funds Funds\n Funds Funds Award $100,000 $750,500\n$8,601,749 $7,288,642 $250,000\n Match\n $194,580\n Match Match Match Match\n $0 $0 $0 $0 Other CNS\n Funds\n $351,316\n\n\n\n\n Total CNS Funds Retained by the Commission $1,100,500\n\n Total Commission Matching Funds $194,580\n\n Total CNS Funds Awarded to Subgrantees $l6,24 1,707\n\n\n\n\n v\n AmeriCorps\n +\n AmeriCorps\n v\n Government\n Formula Funds Competitive Innovative\n $8,601,749 Funds Award\n $7,288,642 $250,000\n\n\n Match Match Match\n $5,263,090 $2,987,264 $0\n\n # o f s u b s : 21 # of Subs: 6\n # of Sites: 174 # of Sites: 64\n\x0c Commission Funding\n\n\n Corporation for National and Community Service\n\n Funding to the California Commission on Improving Life Through Service\n (1996-1997)\n\n\n A L L\n 4meriCorps AmeriCorp: PDAT 4dministration\n Formula Competitive Funds Funds\n Funds Funds $l4O,OOO $750,000\n $8,709,383 $9,367,02 1\n Match\n $194,580\n Match Match Match\n $0 $0 $0 Other CNS\n Funds\n $338,476\n\n\n\n\n I I\n Total CNS Funds Retained by the Commission $890,000\n\n Total Commission Matching Funds $194,580\n\n Total CNS Funds Awarded to Subgrantees $18,414,880\n\n\n\n\n AmeriCorps AmeriCorps Disability\n Formula Funds Competitive Funds\n $8,709,383 Funds $338,476\n $9,367,02 1\n\n\n Match Match Match\n $6,956,252 $6,522,993 $0\n\n # of Subs: 22 # of Subs: 10\n # of Sites: 69 # of Sites: 184\n\n\n\nNote: The Governors Innovative Award of $250,000 was carried forward from last year and used\nas a hybrid fund and divided between formula and competitive funds.\n\x0c Commission Funding\n\n\n Corporation for National and Community Service\n\n Funding to the California Commission on Improving Life Through Service\n (1997- 1998)\n\n\n f .c\nAmeriCorps AmeriCorps FEMA Education PDAT Ydministration\n Formula Competitive Funds Award Only Funds Funds\n Funds Funds $30,400 $10,000 $168,000 $756,000\n$8,3 14,433 $1 1,358,635\n\n\n Match Match Match Match Match\n Match\n $0 $0 $0 $0 $696,324\n $0\n\n\n\n\n Total CNS Funds Retained by the Commission $924,000\n\n Total Commission Matching Funds $696,324\n\n Total CNS Funds Awarded to Subgrantees $l9,7 13,468\n\n\n\n\n AmeriCorps AmeriCorps FEMA Education\n Formula Funds Competitive Funds Award Only\n $8,314,433 Funds $30,400 $10,000\n $1 1,358,635\n\n\n Match Match Match Match\n $12,856,840 $5,395,220 $0 $0\n\n # of Subs: 24 # of Subs: 12 # of Subs: 1\n # of Sites: 167 # of Sites: 18 1\n\x0c Commission Funding\n\n\n Corporation for National and Community Service\n\n Funding to the California Commission on Improving Life Through Service\n (1998- 1999)\n\n\n2\n4meriCorps\n *\n AmeriCorps\n 2\n America\n *\n Promise Education PDAT\n * z\n Administration\n Formula Competitive Reads Fellows Award Funds Funds\n Funds Funds Funds Funds Only $384,000 $750,000\n$8,647,447 $13,460,337 $2,795,294 $195,833 $309,430\n Match\n $1,521,878\n Match Match Match Match Match Match\n $0 $0 $0 $0 $0 $0 Other CNS\n Funds\n $485,000\n\n\n\n\n Total CNS Funds Retained by the Commission $1,134,000\n\n Total Commission Matching Funds $1,521,878\n\n Total CNS Funds Awarded to Subgrantees $25,893,341\n\n\n\n\n AmeriCorps AmeriCorps America Reads \'romise Fellows Education Disability\n Formula Competitive Funds Funds Award Only Funds\n Funds Funds $2,795,294 $195,833 $309,430 $485,000\n $8,647,447 $13,460,337\n\n\n Match Match Match Match Match Match\n $5,104,908 $1 5,556,743 $2,342,493 $0 $0 $0\n\n # of Subs: 2 1 # of Subs: 14 # of Subs:8 # of Subs:9\n# of Sites: 246 # of Sites: 2 18 # of Sites: 65 # of Sites: 11 # of Sites: 69\n\x0c Commission Funding\n\n Corporation for National and Community Service\n\n Funding to the California Commission on Improving Life Through Service\n (1999-2000)\n\n\n .t t L .ti\n4meriCorps AmeriCorps America Promise Education Governors PDAT Administration\n Formula Competitive Reads Fellows Award Only Initiative Funds Funds\n Funds Funds $4,867,281 Funds $305,900 Award $320,000 $750,000\n$8,414,948 $15,274,295 $24 1,600 $2,863,500\n\n\n Match Match Match Match Match Match Match Match\n $0 $0 $0 $0 $0 $0 $0 $436,115\n\n\n\n\n Total CNS Funds Retained by the Commission $1,070,000\n\n Total Commission Matching Funds $436,115\n\n Total CNS Funds Awarded to Subgrantees $3 1,967,524\n\n\n\n\n I\n AmeriCorps\n Formula\n AmeriCorps\n Competitive\n America\n Reads\n \'romise Fellows\n Funds\n Education\n Award Only\n Governors\n Initiative\n Funds Funds $4,867,28 1 $241,600 $305,900 Award\n $8,414,948 $15,274,295 $2,863,500\n\n\n Match Match Match Match Match Match\n $4,439,139 $9,907,086 $2,167,047 $0 $0 $0\n\n # of Subs:20 # of Subs: 15 # of Subs: 18 # of Subs: 9 # of Subs:6 # of Subs: 1\n# of Sitex263 # of Sites: 161 # of Sites:58 # of Sites: 9 # of Sites:42 # of Sites: 1\n\x0c Detailed Engagement Objectives\n and Methodology Appendix B\n\nInternal Controls\n\n\nOur objective was to make a preliminary assessment of the adequacy of the Commission\'s\nfinancial systems and documentation maintained by the Commission to provide reasonable\nassurance that transactions are properly recorded and accounted for to: (1) permit the preparation\nof reliable financial statements and Federal reports; (2) maintain accountability over assets; and\n(3) demonstrate compliance with laws, regulations, and other compliance requirements.\n\nIn order to achieve the above objective, we identified the compliance requirements with a direct\nand material effect on the Commission\'s AmeriCorps grant program, as follows: activities\nallowed or unallowed and allowable costs; eligibility; matching; period of availability of\nCorporation funds; suspension and debarment; subrecipient monitoring; and reporting by the\nCommission to the Corporation. We then interviewed key Commission personnel to assess the\nCommission\'s controls surrounding these requirements.\n\nSelecting Subgrantees\n\nOur objectives were to make a preliminary assessment:\n\n of the adequacy of the systems and controls utilized by the Commission to select national\n service subgrantees to be included in an application to the Corporation;\n\n as to whether the Commission evaluated the adequacy of potential subgrantee financial\n systems and controls in place to administer a Federal grant program prior to making the\n award to the subgrantees; and\n\n as to whether Commission involvement in the application process involved any actual or\n apparent conflict of interest.\n\nIn order to achieve the above objectives, we interviewed key Commission management\npersonnel and documented procedures performed by the Commission during the pre-award\nfinancial and programmatic risk assessment of potential subgrantees. We also reviewed\ndocumentation to determine if conflict of interest forms for each subgrantee applicant tested\nwere signed by selection officials annually and maintained by the Commission.\n\nAdministering Grant Funds\n\nOur objectives were to:\n\n make a preliminary assessment of the adequacy of the systems and controls utilized by the\n Commission to oversee and monitor the performance and progress of funded subgrantees;\n\n make a preliminary assessment as to whether the Commission\'s organizational structure and\n staffing level and skill mix are conducive to effective grant administration;\n\x0c Detailed Engagement Objectives\n and Methodology Appendix B\n\n make a preliminary assessment as to whether the Commission provided adequate guidance to\n subgrantees related to maintenance of financial systems, records, supporting documentation,\n and reporting of subgrantee activity;\n\n make a preliminary assessment of the adequacy of financial systems and documentation\n maintained by the Commission to support oversight of subgrantees and required reporting to\n the Corporation (including Financial Status Reports, progress reports, enrollment and exit\n forms, and change of status forms); and\n\n determine whether the Commission has procedures in place to verify the accuracy and\n timeliness of reports submitted by the subgrantees.\n\nIn order to achieve the above objectives, we reviewed Financial Status Reports and progress\nreports submitted by subgrantees, as well as Financial Status Reports submitted by the\nCommission to the Corporation, to preliminarily assess the accuracy of submitted Financial\nStatus Reports and progress reports. We also preliminarily assessed whether the Commission\'s\nimplementation of the Web Based Reporting System (WBRS) had enhanced the grant\nadministration process.\n\nEvaluating and Monitoring Subgrantees\n\nOur objectives were to:\n\n make a preliminary assessment of the adequacy of the systems and controls utilized by the\n Commission, in conjunction with the Corporation, to implement a comprehensive, non-\n duplicative evaluation and monitoring process for their subgrantees;\n\n determine whether the Commission has an established subgrantee site visit program in place\n and make a preliminary assessment of the effectiveness of its design in achieving monitoring\n objectives;\n\n make a preliminary assessment of the adequacy of the Commission\'s procedures used to\n assess subgrantee compliance with Corporation regulations (e.g., those governing eligibility\n of Members, service hour reporting, prohibited activities, payment of living allowances to\n Members and allowability of costs incurred and claimed under the grants by subgrantees,\n including reported match);\n\n make a preliminary assessment of the adequacy of the Commission\'s procedures for\n obtaining, reviewing and following up on findings included in the subgrantee OMB Circular\n A- 133 audit reports, where applicable;\n\n determine whether program goals are established and results are reported and compared to\n these goals; and\n\n make a preliminary assessment of the adequacy of the procedures in place to evaluate\n whether subgrantees are achieving their intended purpose.\n\x0c Detailed Engagement Objectives\n and Methodology Appendix B\n\n\nIn order to achieve the above objectives, we documented the procedures performed by the\nCommission to evaluate and monitor individual subgrantees. In addition, we judgmentally\nselected subgrantees and obtained the Commission\'s documentation for site visits. We reviewed\nthe documentation to preliminarily assess the adequacy of the procedures performed by the\nCommission to assess financial and programmatic compliance and related controls at the sites.\nWe also determined whether the Commission received and reviewed OMB Circular A-133 audit\nreports from subgrantees.\n\x0c Appendix C\'\n\n\n\n\nJanuary 25,2001\n\n\nLuise S. Jordan\nInspector General\nOffice of Inspector General\nCorporation for National Service\n1201 New York Avenue, NW\nWaslungton, D.C. 20525\n\nDear Ms. Jordan:\n\nThank you for the opportunity to respond to the draft audit report dated\nDecember 28,2000. Whle we appreciate the recommendations you made to\nimprove our operations, we must disagree with your report conclusion that\nthe extent of problems you found could be considered sufficient to justify a\ncomprehensive a u d t of the commission covering a five-year period. For\nexample, the a u d t &sclosed no condtions that would result in the return of\nfunds to the federal government because they had been misspent.\n\nIn support of your conclusion, you asserted ten adverse condtions, but made\nonly seven recommendations because you noted the adequacy of our\ncorrective action for three items. Since it would not be reasonable to justify a\nfive-year audit based on condtions where you were satisfied with our\ncorrective action, we will only respond to your seven recommendations in\nour response. Whle each of the recommendations has some minimal degree\nof merit, the adverse conditions you a t e as a basis for the recommendation\nare isolated, the bad effects of the condition are non-existent, and / or the\nspecific criteria you apply is generic and does not address the specifics of the\ncondition.\n\nI. Selecting Sub Grantees\nNo Recommendations by the hspedor General\n\n11. Administering Grant Funds\n\nAdministering Grant Funds: Recommendation One\nDocumentation of Financial Management Process at the Commission Level\n ,. \' /\n\n\n\nPiepare h cbmpr&ensive manual that is reflective of its financial responsibilities.\n@is manual should include:\n\x0cSubject matter\nSource (identification of kpy documentation)\nldent$cation\'of respons~bleoj?cial is)\nProcess\nRelated internal controls in place\nTimeliness (for review and reporting)\nSample docttmen ts\nRequirements fir retention of documents\nFiling requirements\n\nThis comprehensive manual should seek to incorporate documented procedures\nalready dmeloped for certain areas.\nT h s recommendation is based on the selecbve extracbon of a sentence from\nPart 6 of Circular A-133\'s Compliance Supplement (attached). T h s selecbve\nextra&on, without the accompanying context, misrepresents the passage.\nT h s passage reads:\n\n T h s Part 6 is intended to assist non-Federal entities and their auhtors in\n complying with these requirements by describing for each type of\n compliance requirement the objecbves of internal control, and certain\n characteristics of internal control that when present and operating\n effectively may ensure compliance with program requirements. However,\n the characterizations reflected in h s Part 6 may not necessarily reflect\n how an entity considers and implements internal control. Also, h s part\n is not a checkkt of required internal control characteristics. Non-federal\n entities could have adequate internal control even though some or all of\n the characteristics included in Part 6 are not present. Further, non-Federal\n entities could have other appropriate internal controls operating\n effectively that have not been included in Part 6. Non-federal entities and\n their audtors will need to exercise judgment in determining the most\n appropriate and cost effective internal control in a gven environment or\n circumstance to provide reasonable assurance for compliance with federal\n program requirements.\nThus, we believe Part 6 clearly provides for management to determine the\nextent of a comprehensive manual that is required in our circumstance. Also,\nthat the tack of any items not in our manual could not be construed to be\nnoncompliance with federal regulations. Further, that the content of our\ncomprehensive manual could not reasonably be used as a basis to warrant a\nfive year audit of our operations unless the lack of adequate poliaes and\nprocedures was established as the cause of sigmficant misuse of federal\nfunds, whch the auditors did not establish.\nAdministering Grant Funds: Recommendation Two\nDocument Retention\nImprove its record retention by the use of a file checklist that identrfies the nature and\ntype of document that should be retained. This Checklist should also identzfij the\n\x0crequrrerneirts for record retention. \'4 periodic ra)ieuji~oddbe colldrlctrd bv ionleo)lr\nother tluzn the individtral who is responsible for fiiing to ensure that approprzatz\nprocedures are beingollou~ed..4dditiomllil; - i?iforrnation\n . drodd ire i t o r d i r l ~7\nmanner that will facilitate revim.\n\nT h s recommendation is based on our inabilitv to produce five site visit\nreports, progress reports or year-end FSRs for h x a l vears 1996-97 and 1998-99\nwhen requested in the fall of 2000. We believe that the documents we could\nnot locate should be put in context of these same documents that we had\nalready provided to the State Aucbtor. Based on the State Auditor\'s work\npapers that were provided to the auditor to review, we were able to provide\nthe State Auditor with 177 of 181 site visit reports, progress reports and FSR\n269s for fiscal year 1997-98 and 199899. Whle we agree that we should be\nable to find copies of all documents, h s concbtion does not appear to jusbfy\nthe cost of a five-year a u h t of the program at the Commission.\n\nAdministering Grant Funds: Recommendation Three\nTimeliness of Sub grantees FSRs\n\nDocument and implement procedures regarding follow-up on timely FSR\nsubmissions by sub grantees. 7\'hese procedures must emphasize the need for\nconsistent follow up action on all sub grantees u7ho are late at any time. 77w\nCommission should continue to implement its policy of refusing to reimburse sub\ngrantee invoices without timely and accurate FSRs.\n\nT h s recommendation is based on the identification of two FSRs that were\nidentified as being late (one based on our request that a sub grantee revise its\nFSR). T h s conchtion has no bad effect stated in the aucht report and we\nbelieve none exists. In adhtion, it is im rtant to note that the State AucGtors\nworkmg papers that were provided to IF e\'auchtor for review &sclose that for\nfiscal years 1997-98 and 1998-99, the State Auhtor asked to review 76 FSR\n269s and we were able to provide each of them upon request. Since there is\nno bad effect to an individual FSR being "late", &us condition does not\nappear to justify the expendture of taxpayer dollars for a five-year audit of\nthe Commission.\n\nAdministering Grant Funds: Recommendation Four\nUse of Web Based Reporting System\nContinue to work with the Corporation to identi\' and resolve the programmatic\nissues arisingfrorn the use of WBRS. Alternatively, the Commission should consider\nother means of reporting, such as a manually compiled version.\n\nT h s recommendation is based on the observation that wtule we have fully\nimplemented WBRS, the federal Corporation has programmatic problems\nwith the system. The only bad effect stated is that a report was not\nelectronically transmitted to the Corporation for National Service. It does not\ndemonstrate that a five-year aucbt at the state Commission would result in\nfindings justifying the cost of the audit.\n\x0cLt73RS is a nationwide reporhng system. The Comrmssion has been proachve\nIn addressing system start-up problems including volunteering to be one ot\nthe two states nationwide to pilot the system. It is u-tappropriate that start-up\nsystem problems be idenhfied as an adverse conchtion to the Commission.\n111. Evaluating and Monitoring Sub Grantees\n\nEvaluating and Monitoring Sub Grantees: Recommendation One\nReview of OMB Circular A-133 Audit Reports\n Improve its maluation and monitoring procedures by developing and implantmg a\nprocess for obtaining O M B Circular A-1 33 audit reports from its sub grantees and\nfollowing up to ensure that timely corrective actions were taken on auditfindings\n that have been identified. This process should include documenting, for each of zts\nsub grantees: (i) whether an OhIB Circular A-133 audit was required to be\nconducted, (ii)whether or not the audit was actually conducted, (iii) collection and\n revzew o f the report, and (iv)follow up proceduresfor missing reports and to resolve\nreported-f ndings.\n\nThe basis for h s recommendation was (1)the identification that a single\naudit report for fiscal year 1995-96 contained only one of the three required\ncomponents that should have been received and (2) that follow-up\nprocedures on corrective actions are not being conducted at all in certan\ninstances, and in other instances, not in a consistent, timely manner. The\nlatter observation is based on our knowledge of the State Auditors fmdings at\na state level sub recipient, the California Conservation Corps and our follow-\nup on a u d t findings. We believe the Inspector General\'s audit report lacks\nthe necessary context contained in the State Aud~tor\'sworkmg papers that\nwere provided to the audtor to review. The State Auditor\'s worlung papers\nshow that we had a system to track A-133 reports during both 1997-98 and\n199899, that we received 50 of 50 non-state sub grantee a u h t reports\napplicable to those two years and that none of the 50 non-state sub grantee\naudit reports contained any AmeriCorps findings. In addition, for those\nyears, the State Audtor\'s staff discussed any findings and corrective acbon\nrelated to our state sub grantee, the California Conservation Corps, with our\nstaff at the exit conference. Also, the status of the follow-up by the state\naudtor in subsequent years is included in a schedule in the State Audtor\'s\nreport. Our understanding is that copies of those schedules were provided\nby the State Auditor\'s representative to the audtor who conducted h s audit.\nEvaluating and Monitoring Sub Grantees: Recommendation Two\nAdequacy of the Site Visit Form\nInclude procedures in the standard site visitform to more specifically instruct\nevaluators as to required documentation and record retention policies.\n\nT h s recommendation is based on the observation that our 1999-2000\nstandard site visit form (the assessment survey) does not include procedures\n\x0cto document the speafic work done or to retam coples ot the supporbng\ndocuments.\n\nThe aiterion ated by the audtor is silent to anv requirement that we retam\ncopies of supporhng documents. The work we perform is site momtonng\nand is not purported to be an a u d t conducted in accordance with a u d t\nstandards. It is interesting to note that even the Arnencan tnstitute of\nCerbfied Public Accountants au&t standards does not require auditors to\nretain copies of supporfing documents (attached). Whde sigruficant sub\nrecipients do obtain au&ts conducted in accordance with Goverrunent Au&t\nStandards that have supplemental a u d t standards related to work papers,\neven these standards do not require that copies of supporbng documents be\nretained. As a result, h s recommendation does not seem to provlde that an\naudit of the commission covering a five-year period would be cost justified.\n\nEvaluating and Monitoring Sub Grantees: Recommendation Three\nReview of Member Timesheets\n\nInclude procedures on the Afember file checklist to document the baszs used to select\nLClernber files.\n\nT h s recommendation is based on the observation that the Member tile\nchecklist does not include procedures to document the basis used to select\nMember files. The a u d t is silent as to any criteria that would require h s\npractice for a monitoring instrument. Apparently, the auchtors are infemng\nthat one of the supplemental work paper standards applicable to Government\nA u l t Standards that exceed AICPA a u l t standards is applicable to program\nmonitoring. Tlus explanatory language states "documentation of the work\nperformed to support sigruficant conclusions and judgments, including\ndescriptions of transactions and records examined that would enable an\nexperienced auditor to examine the same transactions and record". Wtule\nh s standard is applicable to Circular A-133 audits, it is not applicable to\nprogram monitoring since program monitors are not required to follow these\nstandards and do not purport to follow these standards. Thus, h s condhon\nappears to provide no basis to support a conclusion that a five-year a u d t of\nthe Commission is warranted.\n\nConclusion\n\nIn closing, we fuily support the federal government\'s authority to carry out\nadditional audits as described in OMB Circular A-133. The circular states that\n" A n y additional audits shall be planned and performed in such a way as to\nbuild upon work performed by other auditors." As referenced numerous\ntimes in h s response, the Inspector General failed to build upon the work\nand extensive body of knowledge produced by previous State Audits. The\nnarrative supporbng the aucht report conclusion that a five-year au&t is\nwarranted does not put the finlngs in context of what was documented in\nthe previous Circular A-133 auchts of our organization. In conclusion, the\ncited adverse conchtions are isolated, the bad effects of the conditions are\n\x0cnon-exlstent and provide no basis to support a conclusion that a full tive vear\na u d t of the Commission is tvarranted.\n\n\nIf you have any questions or need any additional infornabon on h s\nresponse, please do not hesitate to contact Maria Vail or Clauda Anderson of\nmy staff at (916) 323-7646.\n\n\nSincerely,\n\n\n\nat&\nCHUCK T. UPPLE\nExecutive Director\n\n\nEnclosures\n\x0c PART 6 - INTERNAL CONTROL lnsirtute of Cerlified Public Aicounlanr; A:C!\'\\I and a\n ALCPA aud~tgu~de.Consrdcrorio~~ ,\n of Internal Conrroi , wd F,rw\n INTRODUCTIOS ctal Sraremcnr Audrr ~ncorporatethe cornponenls ~l lnt,m,i\n The A- 102 Common Rule and OMB C ~ ~ u l A. a : 110 q u i r e that presented ~nthe COSO Repon % \\ -\'\n non-Federal entrties recelvlng Federal awards (e g audttee manage- n l s pan 6 describes characrerisrics of 1n1er%lcontrol .\n mml) establish and maritan Internal controi designed to nasonably i\n each o i ,he f ~ v ecomponents oi ~nternaicontrol tnat m o b , ~ ! a l ~ n ~\n ably assure complrance with the requirement, o f Federal lawsnh\n ensure cornp!~ancewith Fcdenl laws. regulauons. ana program\n cornpl~anccrequ~rements OMB Crrcular A 133 requrres auditors 10 latlons. and program comphancc requtrements h descrlplo, pf 1\n components of internal control and examples of characterlstrcrcon 4\n obtain an understand~ngof the non-Federal entity\'s tnternal control\n over Fedcral program5 suff~cientto plan the aud~tto support a low mon to the I4 types of compliance requirements are listed ktov\n R S S C ~ XIe\\el\n ~ of control rrsk for major programs, plan the test~ngof Objef ! les of internal control and examples of\n Ip.\n lnternal conuol over major programs to suppon a low assessed level ctfis ro :aeh of 13 of the 14 types of compliance requirements b,\n of control risk for the assertions relevant to the compltance requue- low ths ~ n t r c d ~ c t ~ (Because\n on Sptc~alTests and Rovlsrom\n ments for each rnyor program. and. unless lntemal control I S likelv unlque for eacn program. we could not provldt spec:itc control&,,\n \\o be ~neffect~ve, perform testlng of tnternal conuol as planned jectl\\es and chwactensrrcs for t h ~type\n i of cornpilance r e q u u e ~ ~ ,\n\n\n\ni\n This Pan 6 is lntenbd to ass~stnon-Federal entiues and thetr a;l?\n d~torsIn complying wlrh these rqummenls by descr~btngfor each Conjrol Environment sets the tone of an organtzarion influenclna\n type of compliance nqumment. the objectives of tntemal control. the conml consciousness of its people. !t I S the foundahon 111\n and cerlain chuacur~sticsof ~nternaicontrol that when present and other components of ~nternalcontrol, providing d~scipllneand\n operating effectively may cnsun compiianct w~thpr&rn rquire- / scrucure\n Sense of conducting operations ethically. as e~idcncedby a\n ments. However, the categorlzatlons rcflecied in this Pan 6 may\n not necessarily reflect how an entity considers and implements In- I\n \\ code of conduct or other verbal or written d ~ r e c t ~ ~ e I\n remal control. Also, t h ~ spart I S nor a checklist of required internal / If there is a governing board. the Board has cstabltshed\n control characteristics. Non-Federal entitles could have adesuatc , Audit Con~rn~trcc or equivalent that i s respons~blefor en. 1\n internal control even though some or all of the chvacterrst~cs~ n - i gagtng thc auditor. r ~ ~ ~ wail i nrepons\n g and comrnunlca.\n cluded in Pan 6 are nor present. Funher, non-Federal entities could \', rions from the auditor, and ensurmg that audit findings 2nd\n have other appropriate internal controls operating effectively t h a ~\n have not betn included in this Part 6. Non-Fderal entities and their\n i recommenda~onsare adequately addressed.\n Management\'s psitibe responsiveness lo prior quesiiond\n aud~torswill need to exercise judgment in deurm~ningthe most ap- costs and control ncommendation.\n pfipriote and cost effective internal control in a givm environment\n or circumstance to provide reasonable assurance for compliance I\n Managcmenr\'s nspecr for and adherence 10 program com-\n pliance requirements. !\n with Fcdcral rquircmcnls. 4 Key m a g e n \' responsibilities cleruly defined.\nh e objectives of internal conml pertaining to the compliance re- Key managers\' have adequate knowledge and experience to\n quirements for Federal prognms (lnkmrl control over Federal Pro- discharge their rtsponsibiliues.\n grams), as found in \xc2\xa7- 105 of OMB Circular A-133. are as Slaff knowledgeable about compliance nquircments and be \'\n follows. ing given nspons~bilityto communicate all Instances of\n ( 1 ) Transactions are properly recorded and accounted for to: noncompliance to management I\n (i) Permit the preparation of reliable financial statements and Management\'s commitment to competence ensures that\n staff reccivc d q u a t e mining to perform their duties. I\n Federal reports;\n (ii) Maintain accountability over Issets;and M m q e m ~ t \'suppon\n t of adequate infonnat~onand 1\n (iii) Demonatrue compliance with laws. nguluions. ad other\n compliance requirements;\n ing system.\n I\n (2) Transactions arc u c c u t d in compliance with: Risk Assesrnvnl IS the ent~ty\'cidentification and d y r i s of re\\-\n evant risks to achievement of i a objectives, forming a basis for de- I\n I\n (i) laws, regulations. and the provisions of conrnas w grant\n agreements that could have a direct and material effect on a Federal t e r m i ~ n ghow the risks should be managed. I\n program: and Progrim managen and staff understand and have identified I\n (ii) Any other laws and regulations that are identified in the com- key:ornpliancc objectives.\n pliance supplemcnls; and Organizational structure provide 1den:ification of risks of\n (3) Funds. propcny. and other assets arc safeguarded against loss noncompliance:\n from unauthorized use or disposition. Key managers have been glven responsib~li~y to identify\n The characteristics of internal control are presented in the context and comm"n~catechanges.\n of the companenu af internal control discussed in Intcnid Conrrol- s Employees who require close supervision (e.g. t n e x ~ r i -\n Integrated Frumewont (COSO Report). published by the Committee enced) arc identified\n of Sponsoring Organizations of the T m d w a y Commission. The Management has identified and assessed complex opera-\n COSO Rtport provides a framework for organhtions to design, tions, programs. or projects.\n implement, and evaluate control that will facilitate compliance w ~ t h 8 Management is awart of ccSults of monitoring, audits. 1\n the requrrcmmu of k d e r d laws, regulrtions. and program compli- and reviews and conorders reiated nsk of noncornpl~ansc. i\n ance rewiremenu. Statement on Auditing Standards No. 78 (SAS Rocess established to implement changes in pmqam objec- \'\n 78). ~ot&ldcrafronof lntcrnd Control rn h Financrd Stalemen1 tives and procedures.\n Audit, ~ssuedby the Audltlng Standards Board of the Amencan\n\n\n\n\n T h o n p m Publishtng Group. Inc. J u 1999\n ~\n\x0c ___ _ - __ _. _ -\n Chapter 4\n Flcld Work Strndnrdm for\n F i c L I Aoditr\n\n\n\n\n .\n . _ _ _ _ _ _ _ _ _ _ _ _ _-_ _ _- _ - -\n that would e n d l e an experienced a u d t o r to exrulld\n the same tmnsactions and records;8and\nA mcordofthe rudiCors\' work ahodd be\nretained In the form of working p8pem. c. evidence of s~rpervisoryreviews of the work\n performed.\n4.36 me additional working paper standard for\n6nanciaI statement audits k 4.38 One fador underlying QAGM audits i s t h a ~\n federal, state, and local governments and other\n\n\n\n\ni\nW o W n g papem mhould contain suflkient organizations cooperate in auditir~gprogrants of\nIafornutlon to e d l e m experienced auditor common interest so that auciitors nlay use others\'\nhrvimg no prevloue connecdon with the audlt to work and avoid duplicate audit efforts. Arrangm~e\ncucertrln lrom them the evidence that lrupports should be made s o that working papers wiU be 111\nthe auditors\' s l r p r l n w t conclmions and avadable, upon q u e s t , to other auditors. To f a c ~\njudgmemb. reviews of audit quality m d reliance by other a~ttli\n on the auditors\' work, contradual ~~~~~~~~~~9 I r.\n\n\n\n4.36 Audiis done in accodance with GAG- ere GAGAS audits should p r o d e for access to work~rir\nsubject to review by other auditors and by oversight papem.\noficials more frequently than audits done in\naccordance with AICPA standards. Thus,whereas MCPA _ _ _ -\n\nstandards cite two main purposes of working 4.39 Certain A ~ C P Astandards adclres specific tyj\npapem--provldlng the princrpal su~mrt for the audit finan\'\'\' "Me\' finmddre,\n - ~\n audu, G A C ; M incoNorab\nreport and aiding auditors in the canduct and Audits standards, as drrrcussed below:\'\nsupervision of the auditworking papers sene an\nadditional purpose in audits performed in accordance\nwith GAGAS. Working papers allow for the review of\naudit quality by pmprovidlng the reviewer written\ndocumentation of the evidence supporting the\nauditon\'siWcant condusions and judgments. b. rn no. 62, Special\n ..-\n Reports,\n . - --\n for a u d ~ t ~ qn rgn 4 n <\n elements, accounts, or items of a financial state~~\n4.37 Working papers should contain\n\nn the objectives, scope, and methodology, including\nany sampling criteria used;\nb. documentation of the work performed to support\nsigmfkant conclusions and judgments, including\ndescriptions of trarrsactions and records examined\n\x0c Appendix D\n\nMemorandum\n\nTO: Luise Jordan. Inspector AmeriCorps National Service C 0 R P 0R A T I\n\n FOR ShTIOu\nTHRL\': U\'illiam Anderson. Acting\n OSERV\nFROhl: Peter Heinaru. Director.\n\nDATE: January 29. 2001\n\nSt--BJECT: Comments on the OIG Draft 0 1 - 19: Pre-.dudit Survey of\'rhe C \' d i f o r ~ 7 1 ~ 1\n (\'ommission on Improving Life Through Service\n\nU\'e ha\\.e re\\-ie\\c-edthe draft preaudit survey of the California Commission on Impro\\.ing\nLife Through Service and are pleased to note that the California Commission:\n\n 4 conducts an open competitive process for its subgrant selections:\n\n 4 has adequate controls. policies and procedures to administer the Corporation\'s\n grant funds: and\n\n + has established controls to evaluate and monitor subgrantees.\n\nThe report contains ten findings and seven recommendations. This letter comments on\nseveral of the key issues identified.\n\nIn the area of administer in^ Grant Funds, five findings were noted and four\nrecommendations were made. Concerning the finding that the Commission has not de\\ eloped\na comprehensir~epolicies and procedures document that addresses its financial\nresponsibilities, the Commission states that it adequately maintains its financial management\nprocesses through the State of California financial policies and procedures manual ~vhich\ncover all federal grant programs. This manual includes information pertinent to Corporation\nfunded subgrantees. Thus, the Corporation disagrees with the recommendation to prepare a\ncomprehensive manual that is reflective of its financial responsibilities, because a\ncomprehensive manual currently exists. The Corporation will follow-up with California to\nascertain if any supplemental policies and procedures are needed.\n\nThe tinding. Document Retention, states that certain documentation required to be\nmaintained by the Commission could not be located. The California Canmission has ..- --\nprovided 177 site visit reports out of 18 1 site visits conducted for fiscal years\' 1997 and $698\nto the State Auditor. This information was included in the State ~ u d i t o r \' ~ ~ papers\n 3rk t W - 7\nwere presented to the audit team. The number of missing reports is immaterial.\n W a syew\n 1201 ~ DC\n h ~ nYork\n n .~venu*\n 2052\n Telephone 202-W\n\x0cThe Cc7r;loration disagrees ~ i ~ ther h svtent c~fthe recommended ~ c t ~ c ,n , YPI r t - ,-\n ~ n:he\ncall for the use of a tile checkl~stthat idsntitiss the nature ~ n t)d pe ;ios~rncF[lY:J -c,:\nthe requlrements for record rersnrlon. 2nd 2 penod~crst ~ s i~~ ?cn d u c ! ~ J ,omctorc \'"i"\n l ~ 1 t t - 1;be c J. - \'-\nthan the l n d l ~idual responsible tar : i i ~ n The Ccrporation ~r ~ i taIlc~\\.-up\n l\nCommiss~onto ensure that [he! ha\\ e ;ln x i e q u ~ e>! >tern for dacarnent retention n\nconformance m ~ t hstate requlrements\n\nRegarding the recommendatlon on Timellnes~o f C~rhqrunreeFCR \\ to document 3nii\nimplement procedures regarding follou-up on unt~msl>FSR subm~ss~ons b! subgrmrces\nThe Cal~fomlaCommission states that ~t has pollcles and procedures In place :c\\r : d l o ~ i - ~ p\non untimel! FSR subm~ss~ons b) subgrantees and ~mplementsthem The Corpar;it,{ln i i 1 ; 1\n\n\nwork ~ k ~ the\n t h Califomla C o m m ~ s s ~ oton ensure that these p o l ~ c ~and\n ss proced~re~\nto be utii~zed\n\nThe recommendatlon. from the tinding I re of jt\'eh Bused Reportlnp C1,trrn. states that the\nCallfom~aCommission contlnue to nork ~11ththe Corporation to resolte the p r n g r m ~ m ~ t , ~\nIssues arlsing from the use of U\'BRS Therefore. there IS no tbllo~c-upor correctiLe x t i g n\nrequired because the report I S recommendmg someth~ngthat I S alread? happening\n\nIn the section. Evaluatin~and Monitorin9 Suberantees. three areas o t impro~smenr\\\\?re\nidentified. The first finding states that the Commission has not implemented an adequate\nprocess for obtaining and reviewing. and when necessary. ensuring that prompt correcti~e\naction is taken on OMB Circular A-133 audit reports for its subgrantees. The California\nCommission asserts that it has a system in place to I ) ensure that A- 132 audits are conducred\non subgrantees that require it 2 ) that the audit was conducted 3 ) that the Commission ~ o i l t c t s\nand reviews these audits. and 4) has procedures to follow-up with missins reports and rtports\nthat contain corrective action. The Corporation will follow-up with the Californ~a\nCommission to assure that the system is in place.\n\nThe second and third findings and recommendations under Evaluation and Monitoring\naddresses the .4dequacy of (he Sire Visit Form and Review of the .Member Timesheers. The\nCorporation disagrees with these findings and recommendations. The Corporat~onis\nconcerned that the auditor\'s recommendation is attempting to direct the establishment of\narbitrap. exacting standards for the Commission\'s monitoring of its programs. The report\nrecommends that program managers use audit techniques including sampling and the\nperformance of specific programmatic and fiscal reviews for every award on an annual bass.\nconcepts not normally associated with or required by Federal management standards as\narticulated in OMB Circulars A- 102. A- 1 10 and A-1 33.\n\nHowever. the Corporation advocates a risk-based strategy for monitoring of programs that\nconsiders experience. organizational history and past performance. including both\nprogrammatic and financial elements. OMB A- 1 10. addressing Administrative Standards and\nadopted by the Corporation in regulation. also addresses high-risk grantees and consideration\nfor additional monitoring by the Commission.\n\x0cThus. iis 110 nc7t 3gss i i ~ t hthe recommsnded s r m d ~ r dd f s ~ t s !sir rei I e i i j mi:~ t : : l ~ ; ~ . - : : L - .\nI?t\'suppiernsnt;tl ~uciitt e c h n ~ q u t s2s rscommendtd ;n [he repon The Corporzt:,lr ,.i , , ,\n\n\nc o o r d ~ n a t e2nd ~ ~ o uri tkh the C ~ i 1 r j r n 1 C\n 3 .d r n r n ~ ~ j to\n i ~ Jssure\n n th3t [ht:r ~ Q P , I ~ ~ T : P.::A:;\', :_,. : - .\nfor jubgrantctrs 15 r i s k - b a x d 2nd ~dtfquiiteduring :he their A d r n ~ n ~ j t r z i tSt3nJarCLl~.~ :;". .c,.i\n\x0c KPiMG\'s Comments on Commission Response\n Appendix E\n\nThe following paragraphs present KPMG\'s comments on the information presented in the\nCommission\'s response to the findings and recommendations included in this report. We\ncontinue to believe our findings are valid, based on the results of the limited procedures\nperformed. Further, our recommendations, if implemented, should result in improvements to\ninternal controls over Commission operations.\n\n I. Administering Grant Funds\n\n Recommendation One: Documentation of Financial Management Processes at the\n Commission Level\n\n Part 6 of OMB Circular A -133\'s Compliance Supplement is intended to provide guidance as\n to "best practices". Documentation of policies and procedures continues to be one of the\n most important management tools, and is necessary to ensure continuity and consistency in\n the procedures that are followed by Commission personnel in performing their tasks. We\n agree that ultimately it is management\'s decision as to how comprehensive the\n documentation should be for the Commission. However, certain basic financial and grant\n management processes such as the procedures followed by the Commission for obtaining\n OMB Circular A -133 Audit Reports from subgrantees, and the Commission\'s follow up\n procedures for deficiencies identified should be considered for documentation in light of the\n volume of Corporation grants managed by the Commission. As noted in the report we have\n acknowledged that the Commission has various policies and procedures already in place,\n however, it is evident that these procedures do not encompass some of the Commission\'s\n basic financial and grant management tasks.\n\n Recommendation Two: Document Retention\n\n The pre audit survey involved a review of various areas which were tested through a sample.\n The results of these tests provided the basis for the preliminary findings that have been\n identified in the Report. The missing documents referred to in the report represent an\n example of missing documents. Additional examples of documents requested but not\n provided include the following:\n\n The Commission\'s completed evaluation and scoresheets pertaining to the\n following applicants:\n\n I . California CASA Programs (Application Year 1994)\n\n 2. Building Community (Application Year 1994)\n\n 3. Safe Zones for Learning ArneriCorps (Application Year\n\n 4. Safe Zones for Learning Amencorps (Application Year\n\x0c KPMG\'s Comments on Commission Response\n\n\n\n 5. Inglewood Student Academic Partnership Program (Application\n Year 1998)\n\n Interview questions to assess past experience for the following applicants\n (Application Year 1997):\n\n 1. BAYAC AmeriCorps\n\n 2. AmeriCorps Watershed Project\n\n 3. Linking San Francisco\n\n 4. YMCAJCSU Pryde AmeriCorps Consortium\n\n 5. Central Valley Communities for Children\n\n Site visit reports for the following subgrantees:\n\n 1. Project AEGIS (Program Year 1999-2000)\n\n 2. Family Support Collaborative Placer (Program Year 1999-2000)\n\nAs noted in the report, the Commission is responsible for adhering to document retention\nrequirements. Without documentation, the Commission may be unable to demonstrate its\ncompliance with financial and programmatic requirements.\n\nRecommendation Three: Timeliness of Subgrantee FSRs\n\nThe pre audit survey involved a review of various areas which were tested through a sample.\nThe results of these tests provided the basis for the preliminary findings that have been identified\nin the report. The information provided in the report represent examples of FSRs that were noted\nas late submissions, for which follow-up procedures could not be verified. Our sample included\n6 other subgrantee FSRs that were also submitted late.\n\nThe number of instances that were identified within our sample indicates the need for\nimprovement in the Commission\'s control procedures in this area. We have reworded our\nfinding and recommendation to clarify the nature and extent of exceptions found in our sample.\n\nRecommendation Four: Use of Web Based Reporting System\n\nThis finding has been deleted from the report based on the nature and basis of this finding as well\nas the Commission\'s response.\n\x0c KPMG\'s Comments on Commission Response\n\n\n\n11. Evaluating and Monitoring Subgrantees\n\nRecommendation One: Review of OMB Circular A-1 33 Audit Reports\n\nThe pre audit survey involved a review of various areas which were tested through a sample.\nThe results of these tests provided the basis for the preliminary findings that have been identified\nin the report. Accordingly, any exceptions in the sample selected, such as that referred to of a\nsingle audit report containing only one of the three reports that should have been received\nsupport the fact that the Commission has not implemented an adequate process for consistently\nobtaining and reviewing subgrantee\'s audit reports. Further, we do not believe the\nCommission\'s staff participation in a discussion with the State Auditors fulfills the\nCommission\'s responsibility for monitoring or follow up on corrective actions. Corrective\nactions presented by subgrantees in response to an audit finding does not imply that such\ncorrective actions have been implemented. Additionally, auditors generally review the status of\ncorrective actions taken during the following audit cycle, i.e., after a year has passed. The\nCommission\'s procedures for follow up actions should include a formal written request to the\nsubgrantee for a corrective action plan as soon as the Commission is aware of a problem area.\nThe corrective actions to be taken, including the time line for implementation, should be\nmonitored by the Commission and verified during subsequent site visits.\n\nRecommendation Two and Three: Adequacy of the Site Visit Form, Review of Member\nTimesheets\n\nOur recommendation was not intended to infer that program monitoring should be subject to\nAICPA auditing standards. However, including requirements for documentation and retention of\ndocuments in the Commission\'s site visit monitoring tool, although not specifically required by\nlaw or regulation, enhances it\'s ability to consistently evaluate key compliance and\nprogrammatic requirements, validate the results of its reviews, and ensure the completion of all\nmonitoring steps at each subgrantee visited. Additionally, without proper documentation, a\nreviewer (e.g. Supervisor) of the Commission\'s site visit monitoring tool is not able to: (1) assess\nif the sample selected was adequate; and (2) review the same documentation if a question arose\nabout the results of the test.\n\x0c'