[Final Audit Report on Costs Incurred by the State of Nebraska Game and Parks Commission, under Federal Assistance Grants from the U.S. Fish and Wildlife Service from July 1, 2000, through June 30, 2002]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. R-GR-FWS-0024-2003

Title: Final Audit Report on Costs Incurred by the State of Nebraska
       Game and Parks Commission, under Federal Assistance Grants
       from the U.S. Fish and Wildlife Service from July 1, 2000,
       through June 30, 2002 

  

Dated:  January 9, 2004

**********DISCLAIMER********** 
This file contains an ASCII representation of an OIG report. No attempt has been made to display graphic images or illustrations. Some tables may be included, but may not resemble those in the printed version. A printed copy of this report may be obtained by referring to the PDF file or by calling the Office of Inspector General, Division of Acquisition and Management Operations at (202) 219-3841. 
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AUDIT REPORT

Memorandum

To:  Director, U.S. Fish and Wildlife Service

From:  Joe Ansnick, Director of External Audits

Subject:  Final Audit Report on Costs Incurred by the State of Nebraska Game and Parks Commission, under Federal Assistance Grants from the U.S. Fish and Wildlife Service from July 1, 2000, through June 30, 2002  (No. R-GR-FWS-0024-2003)

Introduction

      This report presents the results of our audit of costs incurred by the State of Nebraska Game and Parks Commission (Commission) under Federal Assistance grants from the U.S. Fish and Wildlife Service (FWS) for the period July 1, 2000, through June 30, 2002. 

Background and Scope

      The Pittman-Robertson Wildlife Restoration Act, as amended (16 U.S.C. 669), and the Dingell-Johnson Sport Fish Restoration Act, as amended (16 U.S.C. 777) (Acts), authorize FWS to provide Federal Assistance grants to states to enhance their sport fish and wildlife programs.  The Acts provide for FWS to reimburse the states up to 75 percent of the eligible costs incurred under the grants.  The Acts specify that state hunting and fishing license revenues cannot be used for any purpose other than the administration of the stateï¿½s fish and game agencies.
        
      We performed an audit of Federal Assistance grants to the State of Nebraska at the request of FWS.  The objective of our audit was to evaluate: (1) the adequacy of the Commissionï¿½s accounting system and related internal controls; (2) the accuracy and eligibility of the direct and indirect costs claimed under the Federal Assistance grant agreements with FWS; (3) the adequacy and reliability of the Commissionï¿½s hunting and fishing license fee collection and disbursement process; (4) the adequacy of the Commissionï¿½s asset management system and related internal controls with regard to purchasing, maintenance, control, and disposal; and (5)ï¿½the adequacy of the Commissionï¿½s compliance with the Actsï¿½ assent legislation requirements.  The audit was also to include a review of other issues considered sensitive and/or significant by the FWS.  The audit included claims totaling approximately $16.2 million on FWS grants that were open during the Stateï¿½s fiscal years ended June 30, 2001, and 2002 (see Appendix 1).

      Our audit was performed in accordance with the government auditing standards issued by the Comptroller General of the United States.  Accordingly, we included such tests of records and other auditing procedures that we considered necessary under the circumstances.  Our tests included an examination of evidence supporting selected expenditures charged by the Commission to the grants and interviews with employees to ensure that all personnel costs charged to the grants were allowable.  We reviewed the audit work performed by other auditors, including the working papers and summaries for the Commission's (1) certification of hunting and fishing license holders for fiscal years 2001 and 2002, and (2) use of fishing and hunting license revenues for fiscal years 2001 and 2002 to determine whether the revenues had been used for program purposes.  No exceptions were reported.  We did not evaluate the economy, efficiency, and effectiveness of the Commissionï¿½s operations.
        
      Our audit was performed at the Nebraska Game and Parks Commission headquarters in Lincoln, Nebraska.  We also visited a hatchery and several wildlife management areas (see Appendix 2). 

Prior Audit Coverage

      On August 4, 1999, we issued audit report No. 99-E-726, ï¿½Audit of U.S. Fish and Wildlife Service Federal Aid Grants to the State of Nebraska Game and Parks Commission for the Fiscal Years Ended June 30, 1996, and 1997.ï¿½  We reviewed this report and followed up on all findings to determine whether they had been resolved prior to our review.  We included one area in this report that had been addressed previously, program income from crops.  No other reports on the Commissionï¿½s Federal Aid program or license fee collections and disbursements were issued during the last five years. 

Results of Audit

      Our review disclosed that, except for the conditions reported below, the Commissionï¿½s accounting system and related internal controls adequately and accurately accounted for grant and license fee receipts and disbursements; direct and indirect costs were adequately recorded and supported; the asset management system accurately identified and tracked personal and real property with regard to acquisition, maintenance, control, and disposal; and the State had adequate assent legislation in place 

* Costs of $11,138 were questioned because supporting documentation was not provided for hours worked for volunteer in-kind contributions ($9,526), and for an expenditure of $1,612.

* The Commission did not report program income of $346,872.

* The Commission did not account for and report as program income the value of work provided by lessees in lieu of rental payments.
      
      The Commission and the FWS responded to a draft of this report on September 30, 2003.  Based on the Commission and the FWS responses, we deleted two findings.  Based on the Commissionï¿½s further responses, we modified the other findings and recommendations as necessary to clarify the issues and to incorporate any additional information provided.  We have included the Commissionï¿½s responses after our recommendations to resolve each finding.

A.  Questioned Costs

      1.  In-Kind Contributions.  The Commission claimed in-kind contributions under an Aquatic Education Program grant (F-82-E-13) for accumulating volunteer hours without documentation to support the hours claimed.  The amount of unsupported costs is $9,526.  The program coordinator stated that two volunteer instructors claimed to work about one hour each day throughout the year to develop and coordinate a one-day event that included fishing clinics for children and adults and other events for handicapped and veterans groups.  The only documentation to indicate the hours worked was the Aquatic Education Program Instructorï¿½s Activity Report for the day of the event showing 300 hours for the head instructor and 300 hours for the volunteer instructor.

      Matching or cost sharing requirements, as described in 43 CFR ï¿½ 12.64 (a)(2), may be satisfied by the value of third party in-kind contributions applicable to the grant period.  43 CFR ï¿½ 12.64(b)(6) requires that third party in-kind contributions used as a cost sharing or matching requirement must be verifiable from the granteeï¿½s records.  In addition, to the extent feasible, volunteer services should be supported by the same methods used to support regular personnel costs.

      The unsupported amount of $9,526 consists of the grant agreement hourly rate of $15.877 applied to the 600 hours claimed.

Recommendation

      We recommend that the FWS:
      
      a. Resolve the $9,526 of unsupported costs associated with Grant F-82-E-13.
      
      b. Ensure that the Commission verifies the accuracy of volunteer instructor hours claimed for in-kind contributions, and maintains adequate supporting records for those contributions.

Commission Response

      The Commission responded that it would continue to verify and use volunteer hours only within the grant period as match.  In addition, the Commission stated that one instructor logged 300 hours under Grant F-82-E-13 and another 300 hours under Grant F-82-E-14 for preparation and travel hours for an event held at the end of June each year.  The Commission stated that while there was not adequate documentation for all of the hours under Grant F-82-E-13, there were instructor logs to account for the hours charged under Grant F-82-E-14.  The Commission added that there was unused match of $20,923 for both Grants and no excess Federal funds were reimbursed.

Office of Inspector General Comments

      The finding pertained to two instructors (the head instructor and a volunteer instructor) who claimed to work 300 hours each on the day of the event, June 24, 2000, as identified on the Instructorï¿½s Activity Report.  The 600 hours were charged to Grant F-82-E-13.  None of the hours in question here were charged to Grant F-82-E-14.  Only one time and attendance report for June 24, 2000, was used to support the 300 hours claimed for each instructor.  Accordingly, FWS should resolve the finding and implement the recommendations.

      2.  Expenditure Testing.  Our testing of 99 disbursement transactions and journal entries, totaling $2.9 million, identified four documents totaling $70,952 (Federal share $53,214) for which the State of Nebraska Department of Administrative Services (Department) was initially unable to provide supporting documentation.  Subsequently, the Department provided supporting documentation for three of the transactions totaling $69,340.  The remaining transaction for $1,612 (Federal share $1,209) is for a disbursement under Grant F-86-D-13 and continues to be classified as an unsupported cost.

Recommendation

      We recommend the FWS resolve the unsupported costs of $1,612 (Federal share $1,209) claimed under Grant F-86-D-13.

Commission Response

      The Commission stated that the $1,612 remains unsupported.
      
Office of Inspector General Comments

      The Commission concurs with the finding.  Accordingly, FWS should resolve the finding and implement the recommendation.

B.  Additional Findings 

      1.  Program Income.  During the audit period, the Commission did not report $346,872 of program income from crops raised on Wildlife Management Areas (WMAs) operated and maintained through Federal Assistance Grants FW-21-D-2, FW-21-D-3, and FW-21-D-4.  Overall, crop program income from these three WMAs during the audit period was $490,141 ($234,891 in State fiscal year 2001 and $255,250 in State fiscal year 2002), but the Commission reported crop program income of only $143,269 for the two-year period.
      
      Program income is defined in 43 CFR ï¿½ 12.65 (b) as gross income received by a grantee directly generated by a grant-supported activity during the grant period.  Program income includes income from the sale of commodities [43 CFR ï¿½ 12.65 (a)], and crops are considered commodities.  Income from the sale of crops, or the value of crops raised on WMAs, if provided to the Commission in kind instead of in cash, is considered program income.  Program income should be reported in grant proposals and on each grantï¿½s Financial Status Reports (SF-269s); and, unless otherwise specified, program income should be deducted from total outlays reported on the SF-269s. 

      A Wildlife Division employee provided us with a document titled ï¿½Federal income and expenses on WMAï¿½s.ï¿½  According to this document, expenses and income associated with crops that will be harvested and sold should be coded as ï¿½Stateï¿½ instead of ï¿½Federal.ï¿½  We concluded that the policy and practice of at least one employee was to exclude crop income from program income on the WMA operation and maintenance grants.  In addition, it appears that it was also a practice of at least one employee to exclude the costs associated with crop lease activities from Federal Assistance grant reimbursement claims.
      
      As a result, the Commission did not report $346,872 of program income derived from crop agreements on three grants (Grants FW-21-D-2, FW-21-D-3, and FW-21-D-4).  We did not identify the dollar amount associated with each grant.

Recommendations

      We recommend that the FWS: 
      
      a. Resolve the $346,872 of unreported program income.
      
      b. Instruct the Commission to develop policies and implement practices to identify and report all program income and expenses on grants for the operation and maintenance of wildlife management areas.

Commission Response

      The Commission adopted a policy excluding crop income and expenses from the operation and maintenance of Grants W-21-D-3 and W-21-D-4, and received approval of this policy from the FWS Region 6 office.  As a result, income from the sale of the commodities was not credited to Federal Assistance.

Office of Inspector General Comments

      The project description for the Grants states that some income-producing activities are expected to occur as a byproduct associated with achieving project objectives.  It also stated that the activities would include the sale of commodities such as small grains.  We believe that the Commission should disclose the types of activities expected to occur on WMAï¿½s and report the revenue generated from those activities as program income.  We recommend that FWS resolve the finding and implement the recommendations.
      2.  Conservation Lease Accounting.  The Commission awarded crop and pasture leases that contained both rental and work terms.  The rental terms represented what the lessee paid for the right ï¿½to crop, hay, or grazeï¿½ on Commission lands.  The work terms represented tasks (e.g.,ï¿½establish food plots, mowing, plant native grass, maintain an irrigation ditch) that the lessee performed for the benefit of Commission lands.  The lessee received credit for the value of the work applied against the rental owed.  We found that the Commission was not adequately disclosing anticipated rental income and work terms from leases in its grant applications and not reporting the value of the work completed on its SF-269s as program income.

      The Commission practice was to make accounting entries for the amount collected, generally rental income less work credits.  However, we identified $346,872 of unreported program income in finding B.1 above which may be understated because of netting the value of work completed against the amount of lease rental owed.

      Program income is defined in 43 CFR ï¿½ 12.65 (b) as gross income received by a grantee directly generated by a grant supported activity, or earned only as a result of the grant agreement during the grant period.  We are unable to determine the total cost to operate and maintain WMAs because accounting entries were not made for all expenses.  Total cost information is needed to adequately plan, budget and evaluate programs and projects.

Recommendation
      
      We recommend that FWS require the Commission to adopt procedures to report total gross income generated by program activity and any reductions to income on its grant proposals and its Financial Status Reports.
      
Commission Response
      
      The Commission stated that the current practice is to include the value of rental and work items agreed to in the lease and will determine a way to track lease and work item values in the grant records.  Leases will identify the value of the lease, work items performed, and supporting information used to establish the value of the work items.  As exchanges are completed, the Division of Federal Aid will be provided documentation identifying that the exchange agreed to in the lease has be satisfied (or partially satisfied) and the monetary value of the lease is reported

Office of Inspector General Comments

      The Commission agreed with the recommendation and we consider the action appropriate.  FWS should sustain the finding and implement the recommendation.

      In accordance with the Departmental Manual (360 DM 5.3), please provide us with your written response by April 12, 2004, to the recommendations included in this report.  Your response should include information on actions taken or planned, including target dates and titles of officials responsible for implementation.  If you have any questions regarding this report, please contact me or Mr. Lawrence Kopas, Audit Team Leader, at (703) 487-5345.

cc:  Regional Director, Region 6, U.S. Fish and Wildlife Service

APPENDIX 1

NEBRASKA GAME AND PARKS COMMISSION
FINANCIAL SUMMARY OF REVIEW COVERAGE

Grant Number
Grant
Amount
Costs
Claimed 
Questioned Costs
Federal Share
Notes



Exceptions
Unsupported


F-6-B-1
$50,000 
$25,429 




F-6-B-2
50,000 
18,673 




F-75-R-18
245,000 
179,610 




F-75-R-19
190,300 
190,282 




F-75-R-20
159,260 
64,067 




F-77-R-15
20,000 
20,000 




F-82-E-13
528,200 
168,785 

$9,526

1
F-82-E-14
664,428 
184,913 
 



F-82-E-15
585,916 
9,849 




F-84-D-12
490,650 
268,181 




F-84-D-13
501,750 
256,801 




F-84-D-14
483,460 
100,416 




F-86-D-13
835,208 
500,164 

$1,612 
$1,209 
2
F-86-D-14
821,892 
821,892 




F-86-D-15
1,143,876 
271,715 




F-87-R-12
458,000 
371,634 




F-87-R-13
462,000 
460,093 




F-87-R-14
476,000 
49,251 




F-112-R-6
184,208 
126,038 




F-112-R-7
120,200 
67,593 




F-114-B-2
61,100 
52,346 




F-115-B-2
250,000 
114,796 




F-118-R-3
114,572 
83,506 




F-118-R-4
108,643 
79,777 




F-118-R-5
52,671 
1,589 




F-123-B-3
74,526 
2,045 




F-126-R-4
100,740 
15,509 




F-126-R-5
74,740 
27,496 




F-129-DB-1
467,000 
61,548 




F-129-DB-2
1,377,500 
292,010 




F-130-D-1
1,751,792 
906,045 




F-131-D-1
830,000 
198,971 




F-132-B-1
62,000 
7,725 




F-133-R-2
142,635 
90,608 




F-133-R-3
139,925 
88,135 




F-137-B-1
207,855 
151,040 




F-138-B-1
246,850 
224,833 




F-139-DB-1
75,000 
480 




F-139-DB-2
800,000 
1,239 




F-140-B-1
213,660 
171,844 




F-141-R-1
194,400 
135,000 




F-141-R-2
194,400 
135,000 




F-142-B-1
94,300 
75,662 




F-143-B-1
255,830 
209,711 




F-144-B-1
120,000 
90,173 




F-148-B-1
213,000 
5,386 




F-149-O-1
72,288 
72,288 




F-155-R-1
65,347 
2,574 




FW-6-C-60
200,000 
168,762 




FW-6-C-61
185,000 
152,863 




FW-12-T-27
105,000 
87,711 




FW-12-T-28
110,000 
79,693 




FW-15-L-52
1,310,000 
871,820 




FW-16-D-23
177,000 
1,048 




FW-16-L-24
182,000 
182,000 




FW-16-L-25
189,500 
184,850 




FW-19-T-15
101,951 
41,565 




FW-19-T-16
114,274 
41,697 




FW-21-D-2
2,942,290 
919,209 




FW-21-D-3
2,575,071 
1,948,822 




FW-21-D-4
1,997,033 
928,735 




W-15-R-57
820,000 
747,487 




W-15-R-58
535,050 
535,050 




W-15-R-59
615,425 
169,092 




W-40-E-27
382,664 
189,531 




W-40-E-28
389,063 
350,898 




W-40-E-29
493,370 
106,671 




W-41-T-26
618,000 
223,665 




W-41-T-27
340,000 
340,000 




W-78-L-30
283,500 
283,336 




W-78-L-32
168,000 
162,567 




V-2-1
56,000 
15,973 





$31,721,313 
$16,185,767 
 
$11,138
$1,209 


Notes:
      
      1.  Questioned costs that pertain to the Aquatic Education Programï¿½s in-kind hours that were unsupported (see Questioned Costs, 1.  In-Kind Contributions)
      
      2.  We classified this amount as unsupported because documentation was not provided for the transaction (see Questioned Costs, 2.  Expenditure Testing).
      
APPENDIX 2
      
NEBRASKA GAME AND PARKS COMMISSION
SCHEDULE OF SITES VISITED

Headquarters, Lincoln, Nebraska
District I Office, Alliance, Nebraska
Ponderosa Wildlife Management Area
Peterson Wildlife Management Area
Fort Robinson State Park
Gilbert-Baker Wildlife Management Area
District IV Office, North Platte, Nebraska
Cedar Valley Wildlife Management Area
North River Wildlife Management Area
Medicine Creek Wildlife Management Area
Medicine Creek Reservoir State Recreation Area
Red Willow State Recreation Area
Red Willow Wildlife Management Area
District V Office, Lincoln, Nebraska
Wagon Train Wildlife Management Area
Wagon Train State Recreation Area 
Branched Oak Wildlife Management Area
Branched Oak State Recreation Area
Branched Oak Wildlife Shop
Calamus Hatchery, Burwell, Nebraska
AK-SAR-BEN Aquarium, Gretna, Nebraska