U.S. Comission on Civil Rights: Deficiencies Found in Financial
Management and Internal Controls (07-MAR-05, GAO-05-68R).
The United States Commission on Civil Rights (Commission) was
first established in 1957 as the Commission on Civil Rights. The
Commission's life was extended in 1983 and reestablished again in
1994 with its current name. The Commission's purpose is to
collect and study information on discrimination or denials of
equal protection of the laws because of race, color, religion,
sex, age, disability, or national origin, or in the
administration of justice in such areas as voting rights,
enforcement of federal civil rights laws, and equal opportunity
in education, employment, and housing. The Commission has been
subject to long-standing congressional concerns over the adequacy
of its management practices and procedures, concerns that were
reinforced by several GAO reports. In July 1997, we issued a
report in which we found broad management problems at the
Commission, including limited awareness of how its resources were
used. In more recent studies, we found that the Commission lacked
good project management and transparency in its contracting
procedures and needed improved strategic planning. As a result of
these reports and other concerns, we conducted additional work at
the Commission. Specifically, Congress asked us to determine
whether (1) the Commission's financial transactions (receipts,
obligations, and expenditures) for the fiscal year ended
September 30, 2003, were properly authorized, approved, and
supported and (2) the Commission had effective internal controls
over financial transactions and reporting. Congress also asked us
to review the manner in which the Commission addressed its budget
priorities.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-68R
ACCNO: A18756
TITLE: U.S. Comission on Civil Rights: Deficiencies Found in
Financial Management and Internal Controls
DATE: 03/07/2005
SUBJECT: Accounting
Budget activities
Budget administration
Civil rights
Discrimination
Financial management
General management reviews
Internal controls
Performance measures
Reporting requirements
GSA Federal Supply Schedule
OMB Program Assessment Rating Tool
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GAO-05-68R
United States Government Accountability Office Washington, DC 20548
March 7, 2005
The Honorable F. James Sensenbrenner, Jr.
Chairman
Committee on the Judiciary
House of Representatives
The Honorable Orrin G. Hatch
Member
United States Senate
Subject: U.S. Commission on Civil Rights: Deficiencies Found in Financial
Management and Internal Controls
The United States Commission on Civil Rights (Commission) was first
established in 1957 as the Commission on Civil Rights.1 The Commission's
life was extended in 19832 and reestablished again in 19943 with its
current name. The Commission's purpose is to collect and study information
on discrimination or denials of equal protection of the laws because of
race, color, religion, sex, age, disability, or national origin, or in the
administration of justice in such areas as voting rights, enforcement of
federal civil rights laws, and equal opportunity in education, employment,
and housing. The Commission has been subject to long-standing
congressional concerns over the adequacy of its management practices and
procedures, concerns that were reinforced by several GAO reports. In July
1997, we issued a report in which we found broad management problems at
the Commission, including limited awareness of how its resources were
used.4 In more recent studies, we found that the Commission lacked
1Civil Rights Act of 1957, Pub. L. No. 85-315, 71 Stat. 634 (Sept. 9,
1957).
2Civil Rights Commission Act of 1983, Pub. L. No. 98-183, 97 Stat. 1301
(Nov. 30, 1983).
3Civil Rights Commission Amendments Act of 1994, Pub. L. No. 103-419, 108
Stat. 4338 (Oct. 25, 1994).
4GAO, U.S. Commission on Civil Rights: Agency Lacks Basic Management
Controls, GAO-/HEHS-97125 (Washington, D.C.: July 8, 1997).
GAO-05-68R Commission on Civil Rights
good project management and transparency in its contracting procedures5
and needed improved strategic planning.6
As a result of these reports and other concerns, you asked us to conduct
additional work at the Commission. Specifically, you asked us to determine
whether (1) the Commission's financial transactions (receipts,
obligations, and expenditures) for the fiscal year ended September 30,
2003, were properly authorized, approved, and supported and (2) the
Commission had effective internal controls over financial transactions and
reporting. You also asked us to review the manner in which the Commission
addressed its budget priorities.
To respond to this request, we obtained the Commission's fiscal year 2003
transaction files serviced by the Department of the Treasury's Bureau of
the Public Debt (BPD), and the Commission's payroll transactions serviced
by the U.S. Department of Agriculture's (USDA) National Finance Center
(NFC). We examined supporting documentation and approvals for both
statistically and nonstatistically selected transactions, as discussed
later in more detail in the scope and methodology of this report. We
evaluated the Commission's internal controls over financial transactions
and reporting by reviewing policies and procedures; interviewing
Commission staff, including the former staff director;7 and reviewing the
results of our tests of the Commission's fiscal year 2003 financial
transactions. We also determined the levels of total funding requested and
received by the Commission for fiscal years 1995 through 2005, reviewed
the Commission's fiscal years 2003 through 2005 budget justifications and
its performance plans, and interviewed Commission officials and others to
determine how the Commission's budget priorities were being addressed.
Results in Brief
Our tests of the Commission's fiscal year 2003 financial transactions
identified substantial deficiencies in the underlying support for a
significant level of its expenditures. Specifically, while our tests of
$5.3 million of payroll transactions found them to be substantially
correct, our tests of $4.9 million of nonpayroll-related transactions,
including travel and procurement, found serious deficiencies in the
supporting documentation underlying these transactions. These deficiencies
precluded us from being able to determine whether as much as 18 percent of
the statistically tested nonpayroll-related transactions of the Commission
for fiscal year 2003 were valid.
Our review of the Commission's internal controls over nonpayroll financial
transactions and financial reporting identified fundamental weaknesses in
internal
5GAO, U.S. Commission on Civil Rights: More Operational and Financial
Oversight Needed, GAO04-18 (Washington, D.C.: Oct. 31, 2003).
6 GAO, U.S. Commission on Civil Rights: Management Could Benefit from
Improved Strategic Planning and Increased Oversight, GAO-05-77
(Washington, D.C.: Oct. 8, 2004).
7 The former staff director's employment at the Commission was terminated
on December 6, 2004.
controls. We found that the Commission lacked a formal comprehensive set
of policies and procedures governing its financial management practices.
We also identified serious deficiencies in the Commission's maintenance of
financial records, enforcement of travel regulations, adherence to the
Federal Acquisition Regulation (FAR)8 regarding the ordering process for
contracted services from commercial
9
vendors, adherence to provisions of the Prompt Payment Act, monitoring of
budgetary resources, and cost accumulation and reporting. These
deficiencies stemmed from a weak overall control environment, which led to
BPD's decision to discontinue providing accounting services for the
Commission after fiscal year 2003, citing inadequate management oversight
and control. This weak control environment increases the risk of abuse of
the Commission's financial resources.
Our review of the manner in which the Commission addressed its budget
priorities found that the Commission was unable to provide evidence of how
its fiscal year 2003 budgetary resources were used to fulfill its
statutory duties and to achieve the six goals listed in its fiscal year
2003 annual performance plan. Further, we could not determine how the
Commission planned, communicated, and prioritized its budgetary resources,
which makes it difficult for the Office of Management and Budget (OMB) and
the Congress to understand whether the Commission is using its financial
resources to achieve its mission and goals. Given the long-standing
congressional concerns over the Commission's management priorities, we
believe the Commission could enhance the transparency of its budgetary,
financial, and operational activities.
We are making 39 recommendations to the Commission to strengthen its
overall financial management and internal controls.
Background
The Commission was established by the Civil Rights Act of 1957 to be an
independent, bipartisan, fact-finding federal entity required to report on
civil rights issues. The Commission is authorized to study the impact of
federal civil rights laws and policies and is required to submit at least
one report annually to the President and the Congress that monitors
federal civil rights enforcement in the United States and other reports as
considered appropriate by the Commission, the President, or the Congress.
In addition, the Commission investigates allegations of individual
citizens being deprived of voting rights, conducts appraisals of federal
laws and policies with respect to discrimination or denial of equal
protection of the laws under the Constitution of the United States, serves
as a national clearinghouse for information, and educates the public to
discourage discrimination.
8The FAR, established to codify uniform policies and procedures for
acquisition by executive agencies, applies to acquisitions of supplies and
services made by federal executive agencies with appropriated funds.
9Codified at 31 U.S.C. S:S: 3901-3904 and implemented at 5 C.F.R. 1315.
The Commission is currently directed by eight compensated, part-time
commissioners who serve 6-year terms on a staggered basis. Four
commissioners are appointed by the President, two by the President Pro
Tempore of the Senate, and two by the Speaker of the House of
Representatives. No more than four commissioners at any one time can be of
the same political party. With the concurrence of a majority of the
Commission's members, the President may also designate a chairperson and
vicechairperson from among the Commission's members. On December 6, 2004,
the President appointed two new commissioners to replace two with expiring
terms. On that same day, the President designated a new Commission
chairperson and vicechairperson, both of whom were concurred by a majority
of the Commission's members.
A staff director, who is appointed by the President with the concurrence
of a majority of the commissioners, oversees the daily operations of the
Commission and manages the staff in six regional offices and the
Washington, D.C., headquarters. The President also appointed a new staff
director on December 6, 2004.10 The Commission operates four headquarters
units, whose chiefs and managers report directly to the staff director:
the Office of Civil Rights Evaluation, Office of General Counsel, Office
of Management, and Regional Programs Coordination Unit.
The Commission also has 51 State Advisory Committees (SAC), as required by
statute-1 for each state and the District of Columbia. SACs are composed
of citizens familiar with local and state civil rights issues. Their
members serve without compensation and assist the Commission with its
fact-finding, investigative, and information dissemination functions.
The Commission receives a quarterly apportionment from OMB to spend its
fiscal year appropriations. Since fiscal year 1995 the Commission has
operated on an annual appropriation of about $9 million with salaries and
benefits constituting about 73 percent. Because of level funding since
fiscal year 1995, the Commission's purchasing power in fiscal year 2003
had decreased by 24 percent as it had to absorb cost-of-living and other
pay and expense increases. The number of full time equivalent (FTE)
employees has steadily decreased from 95 in fiscal year 1995 to 64 in
fiscal year 2004, a 33 percent decrease.
Enclosure I provides a breakdown of the Commission's available resources
and the use of those resources in fiscal year 2003 (table 1), as well as
the Commission's fiscal year 2003 expenditures population by budget object
class (table 2).
The Accountability of Tax Dollars Act of 200211 was signed by the
President on November 7, 2002. The act requires the Commission to annually
prepare and submit
10 The majority of the Commission's members concurred with the President's
appointment.
11Pub. L. No. 107-289, 116 Stat. 2049 requires the Commission and other
covered executive agencies that were not previously required to obtain an
annual audit under another statute to begin submitting annual audited
financial statements to the Congress and OMB.
audited financial statements to OMB and the Congress. Fiscal year 2004 is
the first year the Commission was required to meet this new statutory
requirement.12 Further, OMB required agencies to submit their audited
financial statements for fiscal year 2004 no later than 6 weeks after the
close of the fiscal year.13 As of February 28, 2005, the Commission's
independent public accountant had not yet issued its audit report on the
Commission's fiscal year 2004 financial statements.
Scope and Methodology
To review the financial transactions recorded by the Commission during
fiscal year 2003, we examined receipts, obligations, and expenditures for
proper supporting documentation and management approval. Because our work
was limited to a review of transactions recorded by the Commission for
fiscal year 2003, there is a risk that there could be unrecorded
transactions for goods or services that the Commission purchased before
September 30, 2003, that were recorded or paid after this date. Using
statistical sampling, we selected for review 52 salary-related
transactions from a universe of 4,035 transactions totaling $5.3 million
that we obtained from the Commission's payroll processor, USDA's NFC. We
also statistically selected for review 68 nonsalary-related transactions,
such as procurement and rent transactions, which were selected from a
universe of 8,251 transactions totaling $4.9 million that we obtained from
the Commission's accounting services provider, Treasury's BPD. We
augmented our statistical samples by reviewing in detail another 72
transactions selected judgmentally. These transactions consisted of all
travel transactions over $1,000, all contractual transactions over
$10,000, some credit adjustments, and other expenditures exhibiting
unusual characteristics. These 72 nonstatistically selected transactions
totaled $0.4 million. Enclosure II provides a detailed breakdown of our
testing approach with respect to the Commission's fiscal year 2003
financial transactions.
As part of our review of the Commission's financial transactions for
selected procurement transactions, we also interviewed General Services
Administration (GSA) officials about the contracting procedures a federal
agency should use for certain procurement activities and discussed with
current and former Commission officials the contracting procedures
actually used. In addition, we sought to obtain responses from the
Commission's former chairperson on matters related to the agency's media
relations contract, but we did not receive a response.
To determine if internal controls over financial transactions and
reporting were effective, we obtained an understanding of the accounting
procedures and related
12The act permitted the OMB Director to exempt a covered agency from the
requirement in any given fiscal year if its budget in that fiscal year
does not exceed $25 million and if the Director determines that an audited
financial statement is not warranted due to an absence of risks associated
with the agency's operations, demonstrated performance, or other relevant
factors. While OMB exempted the Commission from the reporting requirement
in fiscal years 2002 and 2003, it denied the Commission's request for an
exemption from the audit requirement for fiscal year 2004.
13In 2001, OMB announced the executive branch's intention to significantly
accelerate agencies' financial reporting time line, requiring that for
fiscal year 2004 and thereafter they issue their financial statements by
November 15, which is about 6 weeks after the end of the fiscal year.
internal controls of the Commission, including financial accounting
services provided by Treasury's BPD and payroll processing services
provided by USDA's NFC. We reviewed the policies and procedures used by
the Commission, interviewed current and former Commission staff, and
interviewed BPD staff. We also reviewed the internal control effect of the
results of our testing of the Commission's fiscal year 2003 financial
transactions.
To determine the manner in which the Commission addressed its budget
priorities, we reviewed the total levels of funding requested and received
by the Commission for fiscal years 1995 through 2005. We also reviewed the
Commission's budget justifications and its annual performance plans for
fiscal years 2003 through 2005. In addition, we interviewed current and
former Commission officials and others about the Commission's budget
apportionment and allotment processes, and its budget goals, activities,
and projects.
Our audit findings are based on our review of documentation provided to us
by the Commission. In many cases, the documentation initially provided to
us as support for the Commission's financial transactions was insufficient
in demonstrating proper authorization, approval, or overall validity of
the transaction. In those cases where documentation was lacking, we
requested further support from the Commission, if such support existed. In
addition, BPD provided some documentation on behalf of the Commission and
the Commission itself provided some further support. However, as of an
agreed cut-off date of November 24, 2004, there was a substantial amount
of documentation missing that the Commission's former staff director told
us they could not find.
We performed our field work in Washington, D.C., from May 20, 2004,
through December 10, 2004, in accordance with U.S. generally accepted
government auditing standards for performance audits.
Financial Transactions Lacked Adequate Support
In our review of the Commission's fiscal year 2003 financial transactions,
we found substantial expenditures that lacked adequate supporting
documentation. Salary expenses, which comprised about half of the
Commission's annual expenditures, appeared to be adequately supported.
However, as much as 18 percent of the statistically selected
nonpayroll-related transactions we examined, such as procurement and other
miscellaneous expenses, lacked sufficient support for concluding whether
they were valid. Similar deficiencies were found in the nonstatistical
nonpayroll transactions we tested.
GAO's Standards for Internal Control in the Federal Government 14
identifies the minimum level of quality acceptable for internal control in
the federal government
14GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
and provides the basis against which internal control is to be evaluated.
Control activities, one of the five standards for internal control,
include a wide range of diverse activities such as authorizations,
approvals, verifications, and the creation and maintenance of related
records that provide evidence of execution of these activities as well as
appropriate documentation. This standard requires, among other things, the
following:
o All transactions and other significant events need to be clearly
documented, and the documentation should be readily available for
examination. All documents and records should be properly managed and
maintained.
o Only valid transactions are to be initiated or entered into.
o Transactions should be promptly recorded to maintain their relevance
and value to management in controlling operations and making decisions.
o Transactions are to be completely and accurately recorded.
In addition, section 150 of OMB Circular No. A-11, Preparation, Submission
and Execution of the Budget, implements statutory requirements, by
providing that agencies must have a system of administrative control of
funds for obligations and expenditures.
The lack of adherence to these requirements resulted in our finding a high
level of exceptions in our testing of the Commission's fiscal year 2003
financial transactions and raises concerns as to the validity of a number
of these transactions.
Payroll Transactions Were Substantially Correct
Payroll transactions consisting of direct salaries represented about half
of the Commission's fiscal year 2003 expenditures. We tested a statistical
sample of 52 payroll transactions for fiscal year 2003 consisting of
salary expenses to ensure that they were properly authorized, approved,
and supported. We found no substantive errors in this sample and that the
transactions were properly authorized, approved, and supported. In
addition, we tested two salary-related credit transactions and found them
to be properly authorized and supported. These credit transactions
represented corrections of errors in the transaction records. Although
errors may exist in the payroll transactions we did not test, we can
statistically conclude that the $5.3 million in payroll expenditures in
the Commission's records are valid and adequately authorized, approved,
and supported.15
15During our testing of payroll transactions, we classified errors as
substantive errors or internal control errors. Substantive errors would be
errors that call into question the dollar amount of some or all of a given
transaction. Internal control errors are instances in which specific
internal control criteria are not met. In some cases, an error could
represent both an internal control deficiency and a substantive error.
However, in our testing of the Commission's payroll transactions, we noted
that for two of the three payroll transactions we tested involving
commissioners, time sheets for two biweekly pay periods were submitted and
paid at the same time. The Commission's human resources director told us
that this is not unusual and that commissioners have submitted time sheets
for up to five biweekly pay periods at one time. This practice could lead
to the Commission not recognizing expenses in the proper period for
accounting purposes.
Nonsalary Transactions Lacked Adequate Support
We tested a statistical sample of 56 nonsalary transactions, including
expenses associated with procurement, payroll benefits, and rent for
fiscal year 2003 to determine if they were properly authorized, approved,
and supported by appropriate documentation. We also tested a statistical
sample of 12 credit transactions. Our testing revealed significant
deficiencies in the support and underlying records for numerous sampled
transactions. Specifically, we found the following:
o For three transactions, the Commission did not provide documentation
to support the validity of the transactions. The transactions consisted of
three entries to write off unusual negative accrued liabilities of
$83,719, accounts receivable of $25,587, and old equipment of $6,366. In
all three cases, the Commission could not provide support to justify the
entries to adjust account balances. In reviewing documentation provided by
BPD, the Commission's former accounting services provider for fiscal year
2003, we found that BPD had informed the Commission of its plans to make
the accounting entries by a certain date. However, the Commission did not
provide any documentation evidencing its response to BPD as to whether it
had support for the adjustment amounts. The Commission's lack of
supporting documentation increases the risk that improper transactions
could be processed and recorded, distorting the financial records of the
entity.
o For two transactions totaling $17,130, the Commission did not provide
evidence of proper approval of the transactions. The transactions
consisted of payments to vendors for computer and electrical services.
Payment vouchers are approved by the staff director or his designee, and
the absence of such approval could result in unauthorized transactions
being processed, leading to improper payments.
o For four transactions with commercial vendors totaling $10,176, we
found the Commission's contract files to be insufficient: the contract
files did not document (1) the agency's basis for decisions made during
the acquisition process, (2) support for the actions the agency took, and
(3) information for an outside review of the procurement process. The lack
of documentation in contract files necessary to satisfy internal control
standards and procurement regulations increases the risk that procurement
transactions could have been made that were not in accordance with the
requirements of the FAR. This and other procurementrelated matters are
discussed later in this report.
Based on the results of our work, we estimate that the combined upper
error limit of nonsalary-related debit and credit transactions that were
not properly authorized, approved, and supported by appropriate
documentation is $883,018.16 In essence, the results of our statistical
testing indicate that as much as 18 percent of the $4.9 million in
nonsalary-related expenditure transactions for fiscal year 2003 lacked
proper authorization, approval, or validity.17
In performing our transaction testing, we experienced great difficulty in
obtaining adequate documentation from the Commission in a timely manner.
It took the Commission over 5 months to provide some documentation for our
sampled transactions although former and current agency officials
initially said it would take no more than a week to accumulate the
majority of the documentation for those transactions. While BPD was able
to provide us with some documentation on the Commission's behalf, as of
November 24, 2004, when the Commission provided to us its final
compilation of available documentation, we had not received adequate
documentation for all of the transactions selected for testing.
Further Transaction Testing Revealed Significant Documentation
Deficiencies
As part of our review of the Commission's fiscal year 2003 financial
transactions, we augmented our tests of statistical samples of salary- and
nonsalary-related expense transactions by testing an additional
nonstatistical selection of 72 fiscal year 2003 transactions. These
transactions consisted of all 32 travel transactions of $1,000 or more,
all 22 contractual transactions of $10,000 or more, and 18 other nonsalary
transactions that we deemed to be of an unusual nature, such as credit
transactions or other uncommon characteristics. For 38 of these
transactions (53 percent), we
18
found significant deficiencies in the supporting documentation. These
deficiencies, by category of expense activity, are discussed below.
Travel Transactions
In testing all 32 selected travel transactions of $1,000 or more, we
identified the following deficiencies:
16Our estimate is based on a 63 percent confidence level, with a tolerable
error of $100,820. We chose a 63 percent confidence level because we
augmented our statistical test with a nonstatistical test of additional
nonsalary-related expenditure transactions, as discussed in the scope and
methodology.
17During our testing of nonsalary transactions, we classified errors as
substantive errors or internal control errors. Substantive errors would be
errors that call into question the dollar amount of some or all of a given
transaction-for example, a payment for services that had not been received
would constitute a payment made in error. Another example would be a
payment recorded in the accounting records for which there is no
documentary evidence to support the fact that a disbursement was made.
Internal control errors are instances in which specific internal control
criteria are not met--for example, a transaction was not properly
authorized for payment. In some cases, an error could represent both an
internal control deficiency and a substantive error.
18Some of the transactions contained multiple deficiencies.
o For 28 transactions, the Commission did not provide adequate evidence
to support airfare expenditures. Airfares should be properly supported by
a payment receipt or itinerary from the travel agency that shows the
amount paid for the ticket and boarding passes to indicate that the trip
was taken. The lack of such supporting documentation may allow improper
travel transactions to be processed and paid. In response to this matter,
the Commission, as part of its efforts to improve its travel processes,
issued memos in November 2004 to its employees and other travelers19
stating that itineraries or invoices listing ticket price and boarding
passes must be submitted with travel vouchers.
o For 17 transactions, the Commission did not provide complete evidence
that the trips were actually taken in accordance with the Federal Travel
Regulation.20 For 8 of these transactions, the Commission did not provide
any travel vouchers for $8,657 of the recorded airfare expenditures. The
lack of adequate supporting documentation may allow the recording of
airfare expenditures although travel may never have occurred or may allow
improper travel transactions to be processed and paid.
o For three transactions, the Commission could not provide evidence that
it ever received reimbursement for travel overcharges totaling $857. For
one of these transactions, the Commission's travel agency overcharged $538
on a $100 airline ticket and for two transactions, employees were overpaid
and owed $319 to the Commission. The lack of reimbursement will result in
higher travel costs being incurred and recorded by the Commission.
In total, of the $97,196 in expenditures related to the 32 travel
transactions we tested, $54,847, or 56 percent, was unsupported due to the
deficiencies noted above. The $54,847 unsupported amount includes $10,674
for which the Commission did not provide any travel vouchers. In testing
travel transactions, we also found 16 instances where the Commission
either did not provide to us evidence of travel authorizations, or
evidence of approval of travel vouchers. However, we were eventually able
to obtain such documentation from BPD.
Contractual Transactions
In an October 2003 report, we reported that the Commission lacked
sufficient management control over its contracting procedures.21 The
Commission routinely did not follow proper procedures for its fiscal year
2002 contracting activities and had inadequate controls over the
administration of its contracts. These weaknesses
19 The Commission issued a memo to its State Advisory Committee
representatives, of which there are 15 for each of the 50 states and the
District of Columbia, who are not employees, but when authorized, may
travel at the expense of the Commission.
20The Federal Travel Regulation was promulgated by GSA and is codified at
41 C.F.R. chapters 300304. It implements statutory requirements and
executive branch policies for travel by federal civilian employees and
others authorized to travel at government expense.
21 GAO-04-18.
continued in fiscal year 2003. In testing 31 nonstatistically selected
contract-related transactions, including all those of $10,000 or more, we
identified deficiencies in the Commission's transactions with commercial
vendors and its procurement of goods and services as follows:
o For eight transactions totaling $59,499 involving six commercial
vendors, we found that the Commission did not adhere to the federal
procurement regulations and procedures that were established by GSA under
the FAR and, where applicable, other related guidance. For example, in
procuring services from different commercial vendors on the GSA Federal
Supply Schedule (FSS), we found the following deficiencies in the
Commission's procurement actions:
-- The Commission did not satisfy competition requirements22 in using
GSA's on-line shopping service or in reviewing catalogs or pricelists of
at least three contractors on the FSS that provide such services.
-- The Commission's contract files did not document the agency's basis for
selecting the service providers as prescribed by the FAR and the special
ordering procedures of GSA.
In discussions with GSA officials (and consistent with our findings in our
prior work23), we ascertained that when a contract exceeds the $2,500
micro-purchase threshold, a federal agency cannot simply select a
contractor because it is on the FSS-the federal agency has to consider
other information before making the selection. Other information is
available through GSA's on-line services or by reviewing the catalogs or
pricelists of at least three contractors on the FSS. The Commission's
circumvention of federal procurement regulations-including not documenting
in the contract files the basis for selecting contractors-could result in
the government incurring potentially greater costs than necessary to
procure goods and services.
o For the Commission's $81,636 fiscal year 2003 media relations
contract24 with a vendor it procured off the FSS, the contract file we
reviewed did not include a Commission-required signed statement by the
contractor that it had no organizational conflict of interest. We found
the Commission's statement of work with the contractor to basically define
organizational conflict of interest to mean that because of other
activities or relationships with persons or agencies, the contractor might
be unable or potentially unable to render impartial assistance or advice
to the Commission, or the contractor's objectivity in performing needed
work is or might be otherwise impaired, or the contractor has an unfair
competitive edge. On November 24, 2004, the Commission provided us with a
22 FAR 8.405-2.
23 GAO-04-18.
24 The fiscal year 2003 contract was initially established under a
purchase order with an amount to not exceed $156,000. In September 2003,
the Commission made two downward modifications totaling $74,364, leaving
an obligated amount of $81,636.
signed statement from the vendor noting that it had no organizational
conflict of interest with the Commission during the contract periods of
service (October 1, 2000, through September 30, 2003). However, this
signed statement was dated November 10, 2004, well after the period of
service under the contracts. By not having contractors' signed statements
on-hand prior to selecting the vendor to provide services, the Commission
made itself susceptible to entering into contracts with businesses that
may have an organizational conflict of interest that could impair
objectivity.
o We also reviewed seven of the Commission's contract files for services
provided by commercial vendors that the agency selected using other than
the FSS. None of these cases had documentation in the contract files
supporting the agency's basis for selecting the vendors. In addition, one
contract's statement of work lacked a provision on organizational conflict
of interest. This situation makes the Commission prone to potentially
entering into contracts with contractors that may have an organizational
conflict of interest and could impair objectivity.
o In discussing procurement matters with the former staff director and
the chief of administrative services who handled procurements of less than
$10,000, we found that both had minimal training on procurement issues.
The former staff director approved all procurement decisions at or above
the $10,000 threshold but admitted that his procurement knowledge was
based on primarily on-the-job training and contract law as an attorney.
The lack of training by those responsible for procurement matters made the
Commission susceptible to misinterpreting federal procurement regulations
as it did when obtaining services off the FSS.
o For one transaction consisting of payment for a Commission meeting
held at a Charlotte, North Carolina, hotel in February 5 and 6, 2003, we
found evidence that the authorizing purchase order for the transaction was
prepared after the actual charge was incurred. A procurement request for
estimated hotel charges of $16,227 was prepared on January 30, 2003.
However, an authorizing purchase order was dated January 31, 2003, in the
exact amount of the bill for $10,739, which would not have been known
until the bill had been issued by the hotel on February 19, 2003. This
indicated that the purchase order was not prepared on January 31, but
rather on February 19 or later, after the amount of the actual charge was
known. The Commission provided us with no documentation that reflected
authorization to procure services in advance of an authorized order for
25
supplies or services. Procurement authorizations prepared after
expenditures are incurred represent a breakdown in internal controls and
could result in an Antideficiency Act violation.26
25According to FAR 1.602-1(b), no contract shall be entered into unless
the contracting officer ensures that all requirements of law, executive
orders, regulations, and all other applicable procedures, including
clearances and approvals, have been met.
26 An Antideficiency Act violation occurs when a government employee makes
or authorizes an expenditure or obligation in excess of an amount
available in an appropriation for the expenditure or obligation (31 U.S.C.
S: 1341(a)) or an amount available in an apportionment or an amount
permitted by regulation involving the subdivision of appropriated funds
(31 U.S.C. S: 1517(a)).
Also related to the February 2003 meeting in Charlotte, North Carolina, we
found that the Commission incurred excessive charges of $660 as follows:
-- The former chairperson's hotel suite cost $169 per night plus $23 tax
for the nights of February 5 and 6. This exceeded the maximum lodging rate
of $81 per night plus $11 tax paid for all other Commission hotel rooms.
The Federal Travel Regulation allows up to 300 percent of the maximum
lodging per diem allowance under certain conditions,27 but we could find
no written authorization
28
for this actual expense in the records provided to us by the Commission.
Regarding this matter, a former Commission official referred to a
long-standing agency policy that governs the accommodation practices for
commissioners but could not provide any documentation evidencing the
policy.
-- Two no-show charges for room and tax of $92 per night were incurred
(although the hotel did adjust for three other no-show charges). No-show
charges are not an effective use of government funds and can typically be
avoided if reservations are cancelled at least a day in advance.
-- A room charge of $92 for the deputy general counsel was incurred for
the night of February 7, after the meeting was over. The deputy general
counsel provided documentation to us that she paid for this room on her
personal credit card; therefore, it appears that the hotel double-billed
the Commission for this room. We could find no evidence that the
Commission identified this overbilling and received a reimbursement or
credit.
Other Expense Transactions
Other transactions we included in the nonstatistical selection consisted
of contract and service-related transactions of less than $10,000, other
miscellaneous expenses, and credit adjustments. In testing these 18
transactions, we identified the following deficiencies:29
o For five contract-related transactions with commercial vendors
totaling $19,826, the contract files did not contain evidence of the
Commission's basis for selecting the vendors.
o For one transaction for professional services totaling $3,000, the
Commission did not comply with the Prompt Payment Act's requirement that
it pay interest if vendors are not paid pursuant to their contractual
payment date or within 30 days of receipt and acceptance of the goods or
services. In this case, the Commission
27 41 C.F.R. 301-11.30.
28 Approval of actual expenses is usually in advance of travel and at the
discretion of the agency. See 41 C.F.R. 301-11.302.
29 Some of the transactions contained multiple deficiencies.
submitted the vendor's reminder invoice, not the original invoice that it
had received several weeks earlier, to its accounting services provider
who processed the payment.
o For one transaction for professional services totaling $3,357, there
was no evidence of the satisfactory receipt of the services.
o For one credit adjustment for an intragovernmental transaction
totaling $9,758, there was no evidence that the Commission appropriately
authorized approval of the transaction.
In addition to these deficiencies, we also found that a transaction
classified as subsistence and support in the Commission's records should
actually have been split among four separate budget object codes. This
transaction consisted of the charges the Commission incurred for the
meeting it held in Charlotte, North Carolina, on February 5 and 6, 2003.
Although the purchase request, receipt, and acceptance approval all
appropriately listed four separate budget object codes and amounts to be
charged, the entire bill was charged to one budget object code on the
purchase order and the processed invoice as contractual services. Budget
object codes should be properly charged in accordance with section 8.3 of
OMB Circular No. A-11. Charging incorrect budget object codes distorts
financial and budgetary information pertaining to the use of the
Commission's financial resources.
Recommendations
To address the issue we identified with respect to payroll transactions,
we recommend that the Commission, through its staff director or his
designee, do the following.
1. Instruct commissioners to submit time sheets biweekly or at least
monthly so that the Commission recognizes expenses in the proper period
for accounting purposes.
To address the issues we identified with respect to nonsalary
transactions, we recommend that the Commission, through its staff
director, instruct the Commission chief of budget and finance to do the
following.
2. Review account balances on a periodic and regular basis to identify
unusual account balances.
3. Create and retain appropriate documentation in transaction files to
support accounting entries made to adjust or write off assets and
liabilities.
4. Respond, and document the response, to the accounting service provider
before any accounting entries are made on behalf of the Commission.
5. Retain sufficient evidence in transaction files to show that all
transactions have been properly approved for payment.
6. Include evidence of transaction authorization, such as a purchase
order, in each voucher package prior to approval for payment by the staff
director or his designee.
7. Prepare purchase authorizations in advance of the expenditure or
provide documentation for any exceptions to be properly approved.
8. Monitor the prompt processing of vendor invoices upon receipt so that
vendors can be timely and accurately paid.
9. Have evidence of the receipt of goods and services prior to approving
transactions for payment and retain such evidence in the transaction
files.
10. Charge the appropriate budget object code as evidenced by supporting
documentation.
11. Ensure that travelers provide appropriate documentation to support
airfare transactions, including a payment receipt or itinerary from the
travel agency that shows the airfare paid and boarding passes to indicate
that the trip was taken.
12. Provide travel vouchers by travelers as evidence that the trips were
taken and to support amounts claimed for reimbursement.
13. Document and retain for review travel transactions including travel
authorizations prepared and signed by the Commission, as well as
Commissionapproved travel vouchers.
14. Maintain written justification for any cases where the Commission
approved travel costs for reimbursement although the traveler could not
provide appropriate documentation.
15. Ensure that travel-related overcharges and traveler reimbursements
are timely collected or offset against amounts due.
16. Document in writing policies on travel accommodation practices for
commissioners.
17. Provide written travel policies to assist travelers in understanding
the requirements and procedures to follow.
18. Implement a travel policy requiring travelers to call to cancel a
hotel reservation to avoid a no-show charge.
19. Inform travelers via written communication that reimbursement will be
made only for costs directly related to business purposes for government
travel and not for personal charges.
To address the issues we identified with respect to procurement of goods
and services, we recommend that the Commission, through its staff
director, instruct the Commission chief of administrative services to do
the following.
20. Prepare and maintain contract files, including contract award and
contract administration, to document the basis for Commission decisions in
acquiring goods and services from commercial vendors, to document each
step in the acquisition process, and to document information for an
outside review of the procurement process.
21. Document review of catalogs or price lists for at least three
contractors or a review of information on GSA's on-line shopping service
about the supply or service offered under the schedule before making a
selection when procuring goods or services off the Federal Supply
Schedule.
22. Ensure that all statements of work contain a provision on
organizational conflict of interest and that contract files contain signed
assurances that contractors have no organizational conflict of interest.
23. Provide for employees responsible for procurement activities to
receive periodic training and updates on federal procurement rules,
regulations, procedures, and issues.
Substantial Deficiencies Exist in the Commission's Internal Controls
We found serious deficiencies in the design and operating effectiveness of
the Commission's internal controls over financial transactions, reporting,
and budgeting. These deficiencies increase the risk that transactions will
be improperly prepared, processed, and reported. They also increase the
risk of inappropriate use of the Commission's financial resources and
raise serious questions about the Commission's ability to have a
successful audit of its fiscal year 2004 financial statements.30
Commission Had No Formal Financial Policies and Procedures
The Commission lacked a formal, comprehensive set of policies and
procedures to govern its day-to-day financial management practices.
Instead, Commission staff refer to a wide range of federal policies as
needed. GAO's Standards for Internal Control in the Federal Government
refers to control activities as the policies, procedures, techniques, and
mechanisms that enforce entity management's directives. The lack of formal
policies and procedures at the Commission increases the risk that control
mechanisms are not established to ensure proper accountability over
government resources and activities specific to the needs of the
Commission. This was evident in the results of our testing of travel and
contractual transactions previously discussed where the Commission did not
routinely follow proper procedures for its travel and contracting
activities.
30 As of February 28, 2005, the Commission's independent public accountant
had not yet issued its audit report on the Commission's fiscal year 2004
financial statements.
Financial Transactions Were Not Adequately Supported
The Commission experienced great difficulty in providing support for its
fiscal year 2003 financial transactions. It took the Commission over 5
months to provide us documentation to support the 192 transactions we
selected for testing. Even after this extensive period of time, the
documentation for a substantial number of these transactions was either
missing or seriously deficient. GAO's Standards for Internal Control in
the Federal Government requires that all transactions be clearly
documented and that documentation be readily available for examination. As
discussed earlier in this report, the lack of adequate support resulted in
our being unable to determine whether a significant level of reported
activity was valid.
Budgeting and Administrative Funds Control Was Weak
As with its financial transactions and reporting, we found that the
Commission did not have a budget execution plan to show how it expected to
use its resources nor an adequate administrative system of fund controls
to ensure that spending controls were not exceeded. Agencies are expected
to prepare financial plans and to request an apportionment from OMB that
is based on a careful forecast of obligations to be incurred for programs
or operations planned during the year. The primary purpose of the
apportionment process is to centralize the Administration's approval of
agency spending plans to achieve the most effective and economical use of
these funds and to prevent agencies from obligating more funds than they
are authorized to spend. OMB is responsible for approving apportionments,
which control the rate of spending during the year by limiting the amount
of funds that can be obligated--typically by time period, program,
project, or some other reporting category.
In addition, the Antideficiency Act requires that an agency head
prescribe, by regulation, a system of administrative control of funds.
This system allots authority to obligate funds to heads of offices and
program managers making them responsible not only for carrying out the
Commission's programs and operations, but for managing funds within
spending controls. In addition, spending plans and their execution are the
starting point for developing budget requests in subsequent years.
Travel Regulations Were Not Enforced
As discussed earlier, our testing of travel-related transactions for
fiscal year 2003 identified numerous instances in which the Commission did
not enforce the travel requirements contained in the Federal Travel
Regulation, including the requirement to provide complete evidence for
trips actually taken. In addition, based on our review of 32
nonstatistically selected travel-related transactions,31 we noted that in
15 out of 185 instances where an individual was reimbursed by the
Commission for travel costs, the traveler took more than 15 days, and as
many as 226 days, to submit a voucher for reimbursement of hotel, per
diem, and other charges. This excessive
31Most of the 32 selected travel transactions represent payment to
Citibank USA for travel costs charged by individuals traveling on behalf
of the Commission for a specific period. For example, a selected travel
transaction may include charges for 10 travelers.
period is in violation of the Federal Travel Regulation's requirement that
travel vouchers be submitted within 5 working days of the trip or every 30
days if on continuous travel status. When Commission processing and
payment, which normally ran 30 days, is added, some 60 to 90 days would
likely have lapsed since the traveler first made the charges on a
government travel credit card. Rather than pay amounts from personal
funds, this may explain why, according to the Commission's chief of budget
and finance, several Commission cardholders were delinquent in making
their payments on their government travel cards, in violation of the
credit card agreement.
Federal Acquisition Regulations for Procuring Supplies and Services from
Commercial Vendors Were Not Consistently Followed
Based on our testing of the Commission's fiscal year 2003 financial
transactions involving contract payments to commercial vendors, including
inquiries of former and current Commission staff, the Commission did not
follow the FAR in 10 of the 13 contract-related transactions tested. In
reviewing those 10 contract files, we found no evidence of the
Commission's basis for selecting the contractor. In addition, for 9 of the
13 contract-related transactions, there was no evidence in the contract
files that the Commission reviewed available information before selecting
the contractor as required under the FAR.32 This information would consist
of price lists of at least three vendors on GSA's approved vendor list or,
in other cases, solicited offers from at least three vendors.
Included in these nine transactions was the Commission's largest contract
of $81,636 for media relation services. While this contractor was a GSA
FSS contractor, there was no evidence in the contract file that the
Commission reviewed the catalogs or price lists of comparable contractors
on the GSA FSS in accordance with the FAR and GSA's special ordering
procedures (SOPs).33 Such actions circumvent the competitive selection
process, resulting in the government incurring potentially greater costs
than necessary to procure services.
Contract Data Was Not Entered Into the Federal Procurement Data Center
In reviewing the Commission's reporting on its procurement activities we
found that the Commission did not enter fiscal year 2003 contract data
into the Federal Procurement Data Center (FPDC). According to federal
regulations,34 agencies are required to collect and report procurement
data to FPDC quarterly. The government
32The FAR requires, with limited exceptions, that the agency's contracting
officer-an agency official who has the authority to enter into,
administer, or terminate contracts and make related determinations and
findings-promote and provide for full and open competition in soliciting
offers and awarding government contracts. The competitive procedures
available for use in fulfilling the requirement for full and open
competition are as follows: (a) sealed bids, (b) competitive proposals,
(c) a combination of competitive procedures, and (d) other competitive
procedures.
33 GSA may establish SOPs for a particular schedule. Unless otherwise
noted, SOPs take precedence over the procedures in FAR 8.405. See FAR
8.403.
34 48 C.F.R. 4.602.
uses FPDC as its central repository of statistical information on federal
contracting that contains detailed information on contract actions of
$25,000 or more and summary data on procurements of less than $25,000. The
Commission's failure to report required procurement data evidences that
management did not ensure that the federal directive was carried out.
Prompt Payment Act Requirements Were Not Consistently Followed
As our detailed tests of its fiscal year 2003 financial transactions
showed, the Commission did not always pay vendors by the contractual due
date or, if no date was established, within 30 days after receipt of a
proper invoice for goods and services, as specified by the Prompt Payment
Act. Failure to pay within the statutory time frames resulted in at least
$653 of interest being paid to vendors. In addition, we identified two
transactions for which the Commission did not pay interest to vendors on
late payments. The Commission's poor prompt payment performance caused the
government to incur unnecessary costs for goods and services and is thus a
waste of government resources. Additionally, the failure to pay interest
that is rightfully owed to vendors when payments for services provided are
late denies vendors amounts to which they are entitled and subjects the
Commission to the risk of claims for additional penalties.
Commission's Monitoring of Budgetary Resources Could Be Improved
The Commission did not use the U.S. Government Standard General Ledger
(SGL) 4000 accounts, which include accounts to track budget authority,
obligations, and outlays necessary to prepare financial statements
(statements of budgetary resources and financing), and required Treasury
financial reports. Instead, the Commission stated that it tracked its
budget on informal cuff records (EXCEL worksheets). This approach is prone
to error if transactions are not properly monitored and recorded and
created differences with budgetary amounts recorded by BPD on behalf of
the Commission that were not periodically reconciled.35 This became a
significant problem in August 2003, when BPD expressed its concern in
written correspondence that the Commission was in danger of overobligating
funds, which could have resulted in a violation of the Antideficiency Act.
Full Costs Were Not Tracked by Project
The Commission identified hours charged to specific projects on time
sheets, and Commission officials stated that the Commission accumulates
costs by project. However, despite our repeated requests, the Commission
was unable to provide us evidence of how costs were accumulated by project
for fiscal year 2003 and whether administrative time and other overhead
costs such as rent, supplies, travel, and other costs were included.
Federal Accounting Standards have required federal entities to
35 While the Commission did not use the SGL 4000 accounts, BPD, as the
Commission's accounting service provider, did utilize them.
report the full costs of outputs in general purpose financial reports
since fiscal year 1998.36
We were able to obtain a Commission cost report for the second quarter of
fiscal year 2004 that showed $397,432 of what appeared to be primarily
direct salary charges for eight projects and $1,192,017 of primarily total
salary charges. These amounts would indicate that administrative staff
salaries not allocated to specific projects were double the level of
direct salary charges. Considering that one-quarter of the Commission's
total fiscal year 2004 appropriation of $9,096,000 would be $2,274,000,
the cost report included about half the costs and thus did not appear to
include nonsalary overhead such as rent, supplies, travel, and other
costs.
Commission's Internal Control Environment Was Weak
The internal control deficiencies discussed above are symptoms of a
long-standing, fundamental problem plaguing the Commission: an overall
weak internal control environment. In an earlier report, we found broad
management problems at the Commission, which appeared to be an agency in
disarray, with limited awareness of how its resources were being used.37 A
lack of these basic, well-established management controls makes the
Commission vulnerable to resource losses due to waste or abuse.
The control environment reflects management's commitment to and attitude
toward the implementation and maintenance of an effective internal control
structure. The control environment that management promulgates through the
organization will strongly influence the design and operation of control
policies and procedures. It will also determine how effective controls are
at mitigating risks and achieving results. Further, the environment is
affected by the manner in which the Commission delegates authority and
responsibility throughout the organization. Duties should be segregated to
assure that one individual cannot control all key aspects of a
transaction. However, we found that the Commission's former staff director
exercised significant control over Commission transactions and activities,
such that it overrode internal controls by responsible staff. For example,
the former staff director routinely approved travel vouchers for payment
although many of the transactions lacked adequate supporting
documentation.
In addition to the internal control issues discussed above, the extent to
which the Commission's internal control environment is weak is further
evidenced by BPD's decision in September 2003 to discontinue providing
accounting services for the Commission. On September 9, 2003, BPD informed
the Commission that it would not
36 FASAB Statement of Federal Financial Accounting Standard (SFFAS) No. 4,
Managerial Cost Accounting Standards (Washington, DC.: July 31, 1995), as
modified by SFFAS No. 9, Deferral of the Effective Date of Managerial Cost
Accounting Standards (Washington, DC.: October 1997). In addition, section
221.3 of OMB Circular No. A-11 encourages agencies to include full costs
to achieve program outputs. If full costs cannot be precisely calculated,
agencies should prepare their best estimate or approximation of the full
cost.
37 GAO/HEHS-97-125.
renew the interagency agreement to provide accounting services to the
Commission for fiscal year 2004. BPD believed that management control and
oversight of Commission resources were inadequate, which they indicated
could lead to overobligation of funds, resulting in a violation of the
Antideficiency Act.
In a December 9, 2003, letter to the Commission's former staff director,
BPD outlined its various concerns about the financial management of the
Commission during fiscal year 2003 that had almost led to the Commission
violating the Antideficiency Act. While the Commission, through the former
staff director, maintained that the discontinuance of BPD accounting and
procurement services stemmed purely from cost considerations, our review
of the financial transactions of the Commission, and the internal control
issues we identified during our review, are consistent with BPD's
expressed concerns about the state of the Commission's financial
management practices.
Prior to November 2002, the Commission was not required under federal law
to prepare annual financial statements or have them subjected to
independent audit. However, with the enactment of the Accountability of
Tax Dollars Act of 2002, the Commission became subject to an annual
financial statement audit requirement. Fiscal year 2004 was the first year
for which the Commission was required to submit annual audited financial
statements to the Congress and OMB. We found no evidence that the
Commission had ever had its financial statements audited or was required
to. Given the serious internal control issues we identified as a result of
our testing of financial transactions and our review of the Commission's
internal controls, it is highly unlikely that the Commission will be able
to obtain a successful first-year audit of its fiscal year 2004 financial
statements. Additionally, it is also clear that the Commission did not
comply with the accelerated financial reporting deadline of November 15,
2004, for federal entities, required by OMB to take effect beginning with
financial statements for fiscal year 2004. As of February 28, 2005, the
Commission's independent public accountant had not yet issued its audit
report on the Commission's fiscal year 2004 financial statements.
Recommendations
To strengthen the Commission's internal controls, we recommend that the
Commission, through its staff director or his designee, take the following
actions.
24. Work with the Commission's current accounting service provider to
develop specific policies and procedures for the Commission with respect
to control activities and the processing, recording, and reporting of
financial transactions.
25. Require that all financial transactions be properly approved and
supported before being processed and that documentation for transactions
be readily available.
26. Develop financial or operating plans and have periodic budget
execution reviews of the status of obligations against these plans.
27. Establish an administrative fund control system to hold managers
accountable for executing the budget against financial or operating plans.
28. Require that the financial management system support the
administrative fund control system.
29. Require that travel transactions be timely submitted for
reimbursement in accordance with the Federal Travel Regulation and be
processed promptly.
30. Require that all aspects of the Commission's procurement of goods and
services be properly documented, including the method of solicitation,
competition, and selection, in accordance with the FAR.
31. Report required fiscal year 2003 procurement data to the Federal
Procurement Data Center.
32. Implement procedures for reporting future years' procurement data to
the Federal Procurement Data Center on an annual basis.
33. Require that payments to commercial vendors be properly processed and
timely made in accordance with the requirements of the Prompt Payment Act.
34. Establish controls to timely monitor and reconcile budgetary
transactions between Commission cuff records and its service provider
reports.
35. Accumulate and report complete and adequate cost information by
project.
36. Strengthen the Commission's internal control environment by
documenting management's commitment and attitude in implementing and
maintaining an effective internal control structure, including audits and
the adequate segregation of duties.
Commission's Budgetary Resources Are Not Linked to its Mission and Goals
In reviewing the manner in which budget priorities were addressed, we
found that the Commission was unable to provide evidence of how its fiscal
year 2003 budgetary resources were used to fulfill its statutory duties
and to achieve the six goals listed in its fiscal year 2003 annual
performance plan.38 For example, the Commission could not determine the
extent and amount of budgetary resources expended in fiscal year 2003 for
one of its goals: public services announcements (PSAs). Further, we could
not determine how the Commission planned, communicated, and prioritized
its budgetary resources, which makes it difficult for OMB and the Congress
to understand whether the Commission is using its financial resources to
achieve its mission and goals. While projects to be funded were generally
approved by the
38 The Government Performance and Results Act (GPRA) of 1993 requires
federal executive agencies- including independent commissions-to submit
strategic and annual performance plans as well as report annually on
progress made. Annual plans show how an agency intends to carry out its
objectives and measure its performance in reaching long-term strategic
goals.
commissioners, the Commission's former staff director determined how
budgetary resources were actually spent. Given the long-standing
congressional concerns over the Commission's management priorities, we
believe that the Commission should take the initiative to improve the
linkage of its resources to its statutory duties and goals through better
planning and budget execution, and to enhance the transparency of its
budgetary, financial, and operational activities.
Statutory Authority
The Congress provides broad direction to the Commission through its
authorizing legislation, which mandates that the Commission investigate
allegations that certain citizens are being deprived of their right to
vote by reason of their color, race, religion, sex, age, disability, or
national origin, or by reason of fraud. The Commission's statutory duties
are also to
1. study and collect information relating to discrimination or denials of
equal protection of the laws under the Constitution of the United States
because of color, race, religion, sex, age, disability, or national
origin, or in the administration of justice;
2. make appraisals of the laws of the federal government with respect to
discrimination or denials of equal protection of the laws under the
Constitution of the United States because of color, race, religion, sex,
age, disability, or national origin, or in the administration of justice;
3. serve as a national clearinghouse for information relating to
discrimination or denials of equal protection of the laws under the
Constitution of the United States because of color, race, religion, sex,
age, disability, or national origin, or in the administration of justice;
and
4. prepare PSAs and advertising campaigns to discourage discrimination or
denials of equal protection of the laws under the Constitution of the
United States because of color, race, religion, sex, age, disability, or
national origin, or in the administration of justice.
In addition, the Commission is required to submit to the President and the
Congress at least one report annually that monitors federal civil rights
enforcement efforts in the United States.
Planning
While the Commission's duties are explicitly laid out in its authorizing
statute, the annual appropriations process gives the Commission discretion
in how it will use its budgetary resources to meet its mission. For fiscal
years 2003 through 2005, the general language contained in the
Appropriations Committee reports states "The Commission investigates
charges of citizens being deprived of voting rights and other civil
rights, and collects, studies, and disseminates information on the impact
of
Federal laws and policies on civil rights."39 This language does not
contain specific direction regarding how appropriations are to be applied
to specific budget priorities or projects. Therefore, it is the
responsibility of Commission management to plan, communicate, and
prioritize the use of its budgetary resources to demonstrate fulfillment
of its statutory duties and achievement of its goals.
The Commission listed six civil rights goals in its fiscal years 2003
through 2005 performance plans, which appear consistent with its statutory
mission. However, we found that the Commission was unable to provide
evidence linking its goals, funding requests, and accounting information
needed to support the costs of current projects and activities. For
example:
o In its fiscal year 2003 budget request for appropriations, the
Commission maintained that it has been unable to effectively communicate
and disseminate information to the public as a result of its outmoded
technology and equipment. However, the Commission provided no cost
information on the resources needed to effectively upgrade its technology
and equipment, nor did it provide information on how such an investment
would further its ability to achieve its goals.
o In its fiscal year 2004 budget request for appropriations, the
Commission stated that it needed to hire at least another 10 employees to
meet emerging issues and address new projects. However, the Commission
again provided no detailed cost information for these two items, or the
program effect if these employees were not hired.
For the performance budgeting display, OMB Circular No. A-11 states that,
to the extent possible, agencies should attempt to align budget accounts
with programs and distinguish among the components that contribute to
different strategic goals and objectives. However, OMB Circular No. A-11
specifically notes that this requirement is only applicable to major
programs and activities. Additionally, the circular does not require that
agencies show the financial costs associated with their goals and
activities, nor does it require that agencies present information by
project or activity. Consequently, while providing cost information by
goals and proposed projects and activities and linking budget requests to
performance plans would be informative, there is no requirement for the
Commission to present information by project in the President's Budget or
in its congressional budget submission.
Another mechanism that can be used to link budgetary resources to actual
performance is a strategic plan. However, we had previously reported that
the Commission had not updated or revised its GPRA-required strategic plan
and goals since 1997.40 As a result, the Commission continued to rely on
strategic goals developed in 1997 to formulate its current annual goals.
Without revisiting its
39 H.R. CONF. REP. No. 108-10, at 772 (2003); H.R. REP. No. 108-221, at
145 (2003); and H.R. REP. No. 108-576, at 119 (2004).
40 GAO-05-77.
strategic goals, the Commission does not have a firm basis on which to
develop its annual goals. We have previously made recommendations to the
Commission to update its strategic plan and to ensure that performance
plans and reports include all elements required under GPRA.
In its last congressional oversight hearing, the Commission was criticized
for poor management practices, the lack of detailed project costs, and
disregard of OMB budget procedures and its own budgeting process by
failing to submit its fiscal year 2002 budget to commissioners for
approval.41 During that hearing, one of the commissioners stated that
while the Commission requested a substantial budget increase each year, in
the commissioner's view, the Commission is unable to effectively plan from
month to month, let alone for the year.42
Budget Execution
The Commission does have a mechanism to provide more meaningful
information on the use of its budgetary resources through the
apportionment process. An apportionment is a plan on how budgetary
resources will be spent, which is approved by OMB. For fiscal year 2003,
the quarterly apportionment the Commission received from OMB on how to
spend its $9 million appropriation was presented by budget object class,
which in essence presented the breakout in broad categories such as
salaries, benefits, and travel. However, OMB Circular No. A-11 states that
a key purpose of the apportionment process is to identify meaningful
program reporting categories that agencies will report their obligations
against in their SF-133, Reports on Budget Execution and Budgetary
Resources. Agencies can work with OMB to develop meaningful reporting
categories that will better inform congressional oversight committees on
how budgetary resources are being prioritized and directed. Through this
process, the Commission has an opportunity to explain how its funding will
be used to affect the achievement of its statutory duties.
The Commission has not taken advantage of this opportunity. Instead, the
Commission's former staff director determined how quarterly funding would
be spent by broad budget object class. In reviewing the Commission's
fiscal year 2003 budgetary and financial records, we found no established
mechanisms or defined benchmarks to link budget plans or reported
expenditures to goals, activities, or projects.
For example, although required to prepare PSAs and advertising campaigns,
we could find no evidence that the Commission compiled or reported any
information on how much of its fiscal year 2003 budgetary resources were
actually used for these activities. In reviewing the Commission's requests
for appropriations for fiscal years 2003 through 2005, we found that the
Commission reported disparate information on PSAs. In its fiscal year 2003
request for appropriations, the Commission's plans for
41 Hearing before the Subcommittee on the Constitution, Committee on the
Judiciary, House of Representatives, 107th Cong. 16 (Apr. 11, 2002).
42 Id. (Statement of Commissioner Thernstrom).
PSA activity were limited. It stated that it planned to air at least one
PSA and, to the extent possible with available funding, develop and
implement a single public service advertising campaign.
In testing the Commission's fiscal year 2003 transactions, we identified
at least $18,788 of payments to a media services contractor for media
outreach and story placement to newspapers, television, and radio
stations, which included public announcements concerning voting rights in
Florida. However, we could find no evidence of a formal PSA campaign that
linked back to the Commission's fiscal year 2003 request for
appropriations. This lack of information organized around mission and
goals makes it difficult for OMB and the Congress to understand, and the
Commission to explain, how existing budgetary resources are prioritized
and spent. In turn, it raises questions about whether the Commission's
budget requests for additional funding are supportable.
Further, in its fiscal year 2004 request for appropriations, the
Commission reported detailed information on its fiscal year 2002 PSA
national radio campaign, The American Way. While this information stated
that more than 460 radio stations had aired the PSA an average of 131
times and had reached an audience of over 161 million, this campaign was
barely mentioned in the Commission's fiscal year 2003 budget request. In
addition, the 2004 request stated that in fiscal year 2003, the Commission
began work on a Spanish language PSA and would continue this work into
fiscal year 2004, in addition to developing a fifth PSA campaign. Again,
we could find no linkage of budget resources to PSA goals, activities, or
projects.
Assessment
We found that the Commission has never assessed its programs nor had its
programs rated and evaluated by OMB in terms of outcomes, outputs, and
inputs.43 OMB officials indicated that its oversight of the Commission has
been limited because of its small size and budget. Consequently, OMB has
not performed a Program Assessment Rating Tool (PART) on the Commission
and none is currently planned.44
PART was developed to assess and improve program performance so that the
federal government can achieve better results. A PART review helps
identify a program's strengths and weaknesses to inform funding and
management decisions aimed at making the program more effective. PART
therefore looks at all factors that affect and reflect program
performance, including program purpose and design; performance measurement
(including outcomes, outputs, and inputs), evaluations, and strategic
planning; program management; and program results. Because PART includes a
consistent series of analytical questions, it allows programs to show
43Outcomes describe the intended result or consequence that will occur
from carrying out a program or activity. Outputs are the goods or services
produced by a program or organization and provided to the public or
others. Inputs are resources, often measured in dollars, used to produce
outputs and outcomes.
44 However, OMB plans to assess 20 percent of all federal programs
annually such that all programs would be eventually reviewed over a 5-year
period represented by the fiscal years 2004-2008 budgets.
improvements over time, and allows comparisons between similar programs.
Although not required, the Commission could use PART as a tool in its
planning process to achieve better results.
Recommendations
We recommend that the Commission, through its staff director, instruct the
Commission chief of budget and finance, or his designee, to take the
following actions.
37. Work with OMB within the apportionment process to identify meaningful
program reporting categories that the Commission can use to report its
obligations against in its SF-133, ReportsonBudgetExecution and Budgetary
Resources, and other external reports.
38. Consider the costs and benefits of doing program self-assessments and
evaluate programs in terms of outcomes, outputs, and inputs.
39. Use the Program Assessment Rating Tool to identify weaknesses in
Commission programs and to assist in the planning process.
Commission Comments and Our Evaluation
We received written comments from the Office of the Staff Director of the
U.S.
Commission on Civil Rights, which represented the official response of the
agency. In
its comments, the Commission agreed with our report's findings and further
stated
that our report will serve as a useful guide as the agency begins to
reform its financial
management and internal controls. The Commission's comments are reproduced
in
their entirety in enclosure III.
Unless you publicly announce its contents earlier, we plan no further
distribution
until 30 days after the date of this letter. At that time, we will send
copies of this
report to the Chairman of the U.S. Civil Rights Commission and other
interested
parties. In addition, this report will also be available at no charge on
the GAO Web
site at http://www.gao.gov.
If you or your staff have any questions, please contact me at (202)
512-3406 or by
e-mail at [email protected] or Roger R. Stoltz, Assistant Director, at
(202) 512-9408
or by e-mail at [email protected]. Key contributors to this report were
Charles E.
Norfleet, Ryan D. Holden, Esther Tepper, Viny Talwar, Sharon O. Byrd, F.
Abe
Dymond, Jacquelyn N. Hamilton, and Denise M. Fantone.
Steven J. Sebastian
Director
Financial Management and Assurance
Enclosure I
Resources and Expenditures Table 1: Commission on Civil Rights Schedule of
Fiscal Year 2003 Appropriations, Obligations, and Outlays
Account Amount
Appropriations $9,096,000
Less: .0065 rescission -59,124
Available appropriation 9,036,876
Less: Unobligated appropriations -22,005
Obligations 9,014,871
Less: Unexpended obligations* -258,432
Outlays $8,756,439
Source: President's Budget and Department of the Treasury, Bureau of the
Public Debt.
*This amount consists of $223,276 of payables and $35,156 of undelivered
orders, which represent the value of goods and services ordered that have
been obligated but have not been received.
Table 2: Commission on Civil Rights Schedule of Fiscal Year 2003
Expenditures Population by Budget Object Code (BOC)
BOC Description of BOC Amount
11 Personnel compensation $5,316,324
12 Personnel benefits 1,692,473
13 Benefits to former personnel 2,291
21 Travel and transportation of persons 202,076
22 Transportation of things 35,728
23 Rent, communications, utilities, and misc. charges 1,208,467
24 Printing and reproduction 86,764
25 Other services 969,254
26 Supplies and materials 209,929
31 Equipment 507,909
42 Insurance claims and indemnities 9,794
43 Interest and dividends 653
Total** $10,241,662
Source: Department of the Treasury, Bureau of the Public Debt.
**The difference of $1,485,223 between the expenditure population and
outlays in table 1 is caused by proprietary accounting adjustments such as
$501,182 of old equipment written off as fully depreciated, while outlays
contain both current and prior year payments.
Enclosure II Testing Approach
Table 1: Statistical Samples and Population Summary
Samples Population
Total number Total dollar Total Total dollar
of sampled value of number of value of
selections sampled transactions transactions
transactions in the in the
population population
Nonsalary debit 56 $2,350,461 7,012 $6,147,274
transactions
Nonsalary credit 12 (267,057) 1,239 (1,221,936)
transactions
Subtotal 68 2,083,404 8,251 4,925,338
Salary transactions 52 130,127 4,035 5,316,324
Total 120 $2,213,531 12,286 $10,241,662
Source: GAO analysis of Commission data.
Table 2: Nonstatistically Selected Transaction Summary
Selections
Total number Total dollar
of value of
nonstatistically nonstatistically
selected selected
transactions transactions
Salary credits 2 ($7,629)
Travel debit
transactions 32 97,196
greater than $1,000
Travel credit
transactions 1 (1,251)
greater than $1,000
Contractual service
debit 22 396,936
transactions greater
than
$10,000
Contractual service
credit 4 (103,357)
transactions greater
than
$10,000
Contractual service
credit 2 (11,165)
transactions less than
$10,000
Other nonsalary debit 9 39,042
transactions less than
$10,000
Total 72 $409,772
Source: GAO analysis of Commission data.
Table 3: Statistically Selected and Nonstatistically Selected Summary Samples
Total number Total dollar of value of transactions transactions tested
tested
Total 192 $2,623,303
Source: GAO analysis of Commission data.
Enclosure III
Comments from the United States Commission on Civil Rights
(196018)
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