[Final Report, National Park Service Management of Selected Grants in Hawaii]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. P-IN-NPS-0105-2003

Title: Final Report, National Park Service Management of Selected
       Grants in  		Hawaii

Date:  July 30, 2004

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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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Memorandum

To:		Regional Director 
      Pacific West Region, National Park Service
      
      Branch Chief 
State, Tribal, and Local Programs - Heritage Preservation Services Division National Park Service

From:		Michael P. Colombo                   
		Regional Audit Manager

Subject:	Final Report, National Park Service Management of Selected Grants in 
		Hawaii (No. P-IN-NPS-0105-2003)

Results in Brief
	This memorandum presents the results of our review of the National Park Serviceï¿½s (NPS) management of three high-dollar grant programs in the State of Hawaii:  the Native Hawaiian Culture and Arts Program (NHCAP), the Historic Preservation Fund (HPF), and the Land and Water Conservation Fund (LWCF).  The objective of our review was to determine whether NPS effectively managed its grant programs in Hawaii.  Our audit scope and methodology are detailed in Attachment 1 to this memorandum.  

	We found that NPS needed to strengthen its oversight of the NHCAP and HPF grants.  NPS, for example, did not ensure that the NHCAP grant recipientï¿½the Bishop Museumï¿½submitted adequate and timely performance and financial reports.  NPS also did not follow up to ensure that the HPF grant recipientï¿½the State Historic Preservation Divisionï¿½implemented recommendations made by the Hawaii State Auditor to correct serious program and financial mismanagement of HPF grants.  We did not conduct an in-depth audit of the LWCF grant because a preliminary review revealed that the grant recipientï¿½the State of Hawaiiï¿½was effectively managing the grant.  We made five recommendations, which focused on the need for NPS to proactively oversee the NHCAP and HPF grants and enforce grant reporting requirements.  

	In your June 21 and July 6 and 21, 2004 responses (Attachment 2), you generally concurred with our recommendations.  Based on the responses, we consider Recommendations 1, 3, 4, and 5 to be resolved and implemented and Recommendation 2 to be resolved but not implemented.  The status of our recommendations is shown in Attachmentï¿½3.

Background
	To help promote, protect, and enhance our countryï¿½s rich historical, natural, and cultural resources, NPS awards grants to state and local governments and non-profit organizations.  In Hawaii, NPS provided grants totaling about $7.1 million from fiscal years 2001 to 2003.  As shown in Table 1, this funding was provided by five programs.

Table 1
NPS Grants* to Hawaii Entities
Fiscal Years 2001 to 2003
Program
Grant Recipient
Amount
Native Hawaiian Culture and Arts Program (NHCAP)
Bishop Museum
$3,707,000
Historic Preservation Fund (HPF)
Various
1,602,172
Land and Water Conservation Fund (LWCF)
State of Hawaii
1,301,000
Save Americaï¿½s Treasures 
Various
360,000
Native American Graves Protection Repatriation Act
Various
       88,171
     Total

$7,058,343
Source:  NPS Grant Awards
* We used the term ï¿½grantï¿½ synonymously with ï¿½cooperative agreement,ï¿½ which is distinguished from a grant by the degree of involvement by the awarding agency.  NHCAP includes the 1999 cooperative agreement, as the agreement was extended through fiscal year 2001.   
	Within the past 5 years, two audit reports have included findings and recommendations related to NPS grant activities in Hawaii.  In the Single Audit of the Bishop Museum for the year ended June 30, 2002, the auditors reported that the Museum did not file performance reports timely.  The Hawaii State Auditorï¿½s report, ï¿½Audit of the State Historic Preservation Division of the Department of Land and Natural Resources,ï¿½ issued in December 2002, concluded that the State Historic Preservation Division was grossly mismanaged and failed to serve the publicï¿½s interest.   

Oversight of NHCAP and HPF Grants
	Our audit revealed that NPS needed to strengthen oversight of NHCAP and HPF grants to ensure that funds are used effectively.  Specifically, NPS should (1) proactively work with the Bishop Museum to improve the quality and timeliness of performance reports, (2) strengthen financial oversight of NHCAP, and (3) ensure that all NHCAP program income is disposed of properly.  NPS also needs to follow up on HPF grants to ensure that the Stateï¿½s Historic Preservation Division implements corrective actions in a timely manner in response to the Hawaii State Auditorï¿½s audit recommendations.

NHCAP.  Congress created the Native Hawaiian Culture and Arts Program in 1986 to increase public awareness of and promote Native Hawaiian culture, arts, and history.  The legislation provides for federal grants to support this program.  To that end, NPS provided about $3.7 million for NHCAP projects from fiscal years 2001 to 2003 through cooperative agreements with the Bishop Museum.  These projects included the transcription and translation of taped interviews with Native Hawaiians, bookbinding of historic Hawaiian language texts, and educational outreach programs.

	Our review revealed that the NPS Pacific Islands Support Office in Honolulu, Hawaii, did not adequately exercise its oversight responsibilities for NHCAP by ensuring that the Bishop Museum submitted adequate and timely performance and financial reports.  Improved oversight is needed to ensure that NHCAP funds are spent more effectively.

      Programmatic Oversight.  According to Title 43, Part 12.951, of the Code of Federal Regulations, performance reports should generally contain a comparison of actual accomplishments with the goals and objectives established for the reporting period, reasons why goals were not met, and other pertinent information.  Upon reviewing performance reports for the fiscal year 2001 Cooperative Agreement, we noted that goals were very general and were rarely compared to actual performance.  For example, fiscal year 2001 goals included ï¿½continue newspaper indexing,ï¿½ and ï¿½continue audio interview translations,ï¿½ which are so general that the Bishop Museum was held to a very low standard for progress with these projects.

	The cooperative agreements require the Museum to submit performance reports within 30 working days after the end of the quarter and final reports within 90 calendar days of the expiration of the cooperative agreement.  However, as illustrated in Table 2, between January 2000 and September 2003, 12 of 18 required performance reports were untimely, with 9 of the 12 reports more than 3 months overdue.  Six of the 18 reports were submitted, but neither NPS nor Museum records indicated an issuance date. 

               

      Financial Oversight.  NPS also did not ensure that the Museum submitted Financial Status Reports as required by the cooperative agreements.  The Department of the Interiorï¿½s Assistant Secretary for Policy, Management and Budget underscored the importance of financial reporting in a memorandum dated July 22, 2003, which requires Interior agencies to delineate sanctions in award notices for noncompliance with federal reporting requirements.  Such sanctions could include the withholding of cash payments and further awards until the required reports are received.

      As a result of insufficient oversight of financial reporting requirements, the Museum had potentially $1.1 million in NHCAP funding available as of December 2003, $199,791 of which was provided in the fiscal year 2002 cooperative agreement and $735,000 in the fiscal year 2003 cooperative agreement.1  Program income comprised the remaining $155,516.  Table 3 illustrates the extent of NHCAP funding that was not used timely.  NPS extended the fiscal year 2002 agreement until the Museum could expend the funds, but in the meantime, additional funding was awarded to NHCAP. 
      


	Program Income.  Program income refers to income received by a grant recipient that was directly generated by a grant-supported activity or earned only as a result of the grant agreement.  In the instance of NHCAP, NPS was unaware of $155,516 in unused program income because it did not collect and review required Financial Status Reports from the Museum.  The program income was generated primarily from NHCAP publication sales, but was mistakenly recorded under two different accounts:  NHCAP Publication Sales and NHCAP Interest Income.  

	Title 43, Part 12.65, of the Code of Federal Regulations outlines three alternatives for disposing of program income, two of which are applicable in this instance.2  First, program income should be deducted from grant outlays, unless the grant agreement or the federal agency regulations specify another alternative.  The second option allows program income to be added to the grant funds and used solely for grant purposes if authorized by the federal awarding agency.  NPS needs to resolve the issue of unused program income using one of these options.

HPF.  The National Historic Preservation Act of 1966 was enacted in response to the increasing frequency with which rapid development resulted in the destruction of historic properties.  The Act established a grant program, through NPS, to assist states in their historic preservation programs and to help pay for survey costs, historic preservation plans, historic structure reports, and restoration ï¿½bricks and mortarï¿½ work.  For fiscal years 2001 to 2003, NPS awarded HPF grants totaling about $1.5 million to the State of Hawaiiï¿½s Historic Preservation Division.  HPF grants fund about 40 percent of the Divisionï¿½s operations.

      We found that NPS oversight of HPF grants was not adequate, given the significant programmatic and financial risks.  In December 2002, the State Auditor issued a comprehensive report, which disclosed significant mismanagement within the Division to the extent that Hawaiiï¿½s unique cultural and historic properties were jeopardized.  Table 4 lists key findings and recommendations from the State Auditorï¿½s report.
      
Table 4
State Auditorï¿½s Findings and Recommendations
Finding:  Mismanagement Exposes Historic Properties and Artifacts to Potential Losses istoicHisH
Practice
Recommendation
The Division does not perform archaeological reviews in a timely or consistent manner.
Develop clear guidelines and adequate oversight for archaeological reviews to ensure consistency and fairness in reviews.
The Division does not maintain an inventory listing of historical artifacts in its custody.
Perform inventory of all historic artifacts in the Divisionï¿½s custody.


Finding:  Misused Historic Preservation Resources
Practice
Recommendation
Leave records do not account for all leave taken.

Patterns of sick leave abuse were not investigated.

Staff were paid for unauthorized overtime.
Establish adequate controls to protect historic preservation resources from misuse, abuse, and theft.  Specifically, (1) direct staff to use sign in/out sheets; (2)ï¿½establish procedures for investigating patterns of sick leave abuse and require staff suspected of leave abuse to provide medical documentation; and (3)ï¿½approve employeesï¿½ overtime timesheets only if overtime claimed is approved by the department chair.
Source:  Hawaii State Auditorï¿½s Report, ï¿½Audit of the State Historic Preservation Division of the
              Department of Land and Natural Resources,ï¿½ December 2002.   
      
      NPS did not proactively initiate follow-up action to ensure the Division implemented the Hawaii State Auditorï¿½s recommendations timely.  One year elapsed before the Division developed a corrective action plan, issued in December 2003.  We believe the plan, if properly implemented, adequately addresses the State Auditorï¿½s recommendations.  Currently, the State of Hawaiiï¿½s Department of Land and Natural Resources is following up with the Division to ensure that the State Auditorï¿½s recommendations are implemented timely.  NPS should monitor this follow-up to make certain that implementation of the State Auditorï¿½s recommendations protects the federal interests.  Under the terms and conditions of the HPF grant, the Division is not required to submit relevant audits to NPS.  Such reporting is necessary, however, for NPS to initiate appropriate follow-up action to resolve identified problems involving federal funds.  
      
Recommendations
	Although our review included only NHCAP and HPF grants, similar problems may exist on other NPS grants, and we would hope that the following recommendations would be applied to all grants.  

	With regard to NHCAP, we recommend that the Regional Director of the Pacific West Region take the following actions through the Pacific Islands Support Office:

	1.  Establish effective programmatic oversight of NHCAP by:
* Ensuring that performance reports include clear, quantifiable goals for each performance period and that these goals are compared to actual accomplishments in quarterly and final reports;

* Ensuring that Quarterly and Final Performance Reports are submitted on time; and 

* Initiating appropriate follow-up with the Bishop Museum if performance reports identify problems.

	2.  Establish effective financial oversight of NHCAP by:
* 	Including sanctions for noncompliance with financial reporting requirements in future NHCAP Cooperative Agreements, as required by the Assistant Secretary for Policy, Management and Budget in the July 22, 2003 memorandum;

* 	Enforcing these sanctions for noncompliance; and

* 	Balancing the amount of funding provided to NHCAP with the programï¿½s demonstrated need for funds.

	3.  Dispose of NHCAP program income using the available options outlined in Titleï¿½43, Part 12.65, of the Code of Federal Regulations.  

	With regard to the HPF grants to entities in Hawaii, we recommend that the Washington, D.C., Branch Chief for State, Tribal, and Local Programs:

	4.  Amend the terms and conditions of the HPF grant to require the Division to submit relevant audit reports to NPS and initiate follow-up should audit reports identify problems.  

	5.  Step up follow-up activities with the Division to ensure timely implementation of the State Auditorï¿½s recommendations.  

	Based on your June 21 and July 6 and 21, 2004 responses (Attachment 2), we consider Recommendations 1, 3, 4, and 5 resolved and implemented and Recommendationï¿½2 resolved but not implemented (please see Attachment 3).  

      The legislation, as amended, creating the Office of Inspector General requires semiannual reporting to Congress on all audit reports issued, actions taken to implement audit recommendations, and recommendations that have not been implemented.  Accordingly, this report will be included in our next semiannual report.

	We thank NPS for the cooperation and courtesies extended to our staff during the review.  If you have any questions regarding this report, please call me at (916) 978-5653.

Attachment (3)

cc:  Director, National Park Service, Washington, DC (MS 3316)
      Audit Liaison Officer, National Park Service, Attn:  Vera Washington (MS 3117)
	

Attachment 1
Scope and Methodology

	This attachment details the methods we used to accomplish our objective.  Our scope covered active grants from fiscal years 2001 to 2003.  We were unable to draw any general conclusions about NPS grants management in Hawaii, because grants management was highly decentralized and the number of grants was limited.  We therefore revised our scope to focus on high-value grants in three locations:  the Pacific Islands Support Office and Haleakala National Park, Hawaii (NHCAP cooperative agreements); the Pacific West Region in Oakland, California (LWCF grants); and NPS Headquarters in Washington, D.C, (HPF, SAT, and NAGPRA grants).  We did not conduct an in-depth review of LWCF grants because a preliminary review disclosed that the grant recipientï¿½the State of Hawaiiï¿½competitively awarded the project to the lowest qualified bidder, who completed upgrades to the Lahaina Recreation Center.   

	For NHCAP, we evaluated whether NPS ensured the Museum spent NHCAP funds effectively.  Specifically, we determined whether NPS received and used performance and financial reports to oversee NHCAP.  We selected the fiscal year 2001 cooperative agreement and determined whether the billings, which totaled $740,000 (direct costs of $317,810, indirect costs of $216,676, and other direct costs of $205,514), were supported by the Museumï¿½s job cost records and general ledger.  We also reviewed the indirect cost rate agreement and determined that it was not current.  The Museumï¿½s latest indirect cost rate agreement was for fiscal year 1997.  We referred this matter to the NPS grants officer for appropriate follow-up.  In April 2004, the NPS grants officer followed up with the Museum staff.  During our review of the costs, nothing came to our attention that would lead us to believe that costs were not appropriately incurred and charged to the grants.   

	For the HPF, we determined whether NPS took appropriate action to ensure that the State Historic Preservation Division implemented corrective actions in response to the Hawaii State Auditorï¿½s report ï¿½Audit of the State Historic Preservation Division of the Department of Land and Natural Resourcesï¿½ (December 2002).  Because of the comprehensive audit performed by the State Auditor, further audit work was not considered necessary in this area.  

	We conducted our audit from August 2003 to January 2004 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 were considered necessary under the circumstances.  We also reviewed the Department of the Interiorï¿½s reports on accountability for fiscal year 2003, which included information required by the Federal Managerï¿½s Financial Integrity Act, and NPSï¿½s annual assurance statements on management controls for fiscal year 2003.  We determined that no material weaknesses were reported that directly related to the objective and scope of our audit.  We also evaluated NPSï¿½s system of internal controls related to our audit objective and found that NPS had not established sufficient procedures to ensure that grant recipients submitted timely and adequate performance and financial reports.  These internal control weaknesses are discussed in this report.  If implemented, our recommendations should improve the internal controls in these areas. 



Attachment 3
Status of Audit Recommendations

Recommendations
Status
Action Required
1, 3, 4, and 5
Resolved and Implemented
No further response to the Office of Inspector General is required.
2
Resolved
Not Implemented 
We will refer the recommendation to the Assistant Secretary for Policy, Management and Budget for tracking of implementation.  

1 The amounts mentioned here represent funds awarded by NPS to the Museum, for which the Museum has not requested reimbursement.  The Museum receives NHCAP funding based on incurred costs.
2 The third option, which is not applicable in this case because NHCAP is 100 percent federally funded, allows the use of program income to meet the cost-sharing or matching requirement of the grant agreement.
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