[Final Audit Report on the U.S. Fish and Wildlife Service Federal Assistance Grants Administered by the State of Rhode Island, Department of Environmental Management, Division of Fish and Wildlife from July 1, 2001, through June 30, 2003]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. R-GR-FWS-0023-2004

Title: Final Audit Report on the U.S. Fish and Wildlife Service
       Federal Assistance Grants Administered by the State of
       Rhode Island, Department of Environmental Management, Division
       of Fish and Wildlife from July 1, 2001, through June 30,
       2003

  

Date:  May19, 2005

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AUDIT REPORT

Memorandum

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

From:  Andrew Fedak, Director of External Audits

Subject:  Final Audit Report on the U.S. Fish and Wildlife Service Federal Assistance Grants Administered by the State of Rhode Island, Department of Environmental Management, Division of Fish and Wildlife from July 1, 2001, through June 30, 2003 (No. R-GR-FWS-0023-2004)

This report presents the results of our audit of costs claimed by the State of Rhode Island, Department of Environmental Management (DEM), Division of Fish and Wildlife (DFW), under Federal Assistance grants from the U.S. Fish and Wildlife Service (FWS). The audit included claims that totaled approximately $15.3 million on FWS grants that were open during the Stateï¿½s fiscal years ended June 30, 2002 and 2003 (see Appendix 1). The audit also included a review of the DEMï¿½s compliance with certain regulatory and other requirements, including those related to the collection and use of State hunting and fishing license revenues and the reporting of program income.

We found that DFW needs to improve controls over its equipment and reconcile its land records to the official land records maintained by the DEM and to the land records maintained by FWS. We also found that the DEM needs to develop written procedures on the controls and accounting process utilized for Federal Assistance grants.

FWS Region 5 advised us on May 3, 2005, that it agreed with the findings and recommendations in the draft report but that neither FWS nor DEM would be providing a formal response to the draft.

In accordance with the Departmental (361 DM 1.5), please provide us with your written response to the recommendations in this report by August 18, 2005.  Your response should include the information requested in Appendix 3.  If you have any questions regarding this report, please contact me at (703) 487-5345 or Mr. Steven Moberly, Audit Team Leader, at (916) 978-5650.

cc:  Regional Director, Region 5, U.S. Fish and Wildlife Service

Introduction

Background

The Pittman-Robertson Wildlife Restoration Act and the Dingell-Johnson Sport Fish Restoration Act  (Acts) 1 authorize the U.S. Fish and Wildlife Service (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.  They also 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.

Scope, Objective, and Methodology

We performed our audit at the Rhode Island Department of Environmental Management (DEM), Division of Fish and Wildlife (DFW) in Providence, Rhode Island.  The audit work included claims that totaled approximately $15.3 million on FWS grants that were open during the Stateï¿½s fiscal years (SFYs) ended June 30, 2002 and 2003 (see Appendix 1).  We also visited four field headquarters, four wildlife management areas, two fish hatcheries, and three boat access facilities (see Appendix 2).  The objective of our audit was to evaluate:

> the adequacy of the DEMï¿½s accounting system and related internal controls; 
> the accuracy and eligibility of the direct and indirect costs claimed under the Federal Assistance grant agreements with FWS;
> the adequacy and reliability of the DEMï¿½s hunting and fishing license fees collection, certification, and disbursement processes; 
> the adequacy of the DEMï¿½s asset management system and related internal controls with regard to purchasing, maintenance, control, and disposal; and
> the adequacy of the Stateï¿½s compliance with the Actsï¿½ assent legislation requirements.  

We performed our audit 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 DEM to the grants; interviews with employees to ensure that personnel costs charged to the grants were supportable; and a review of the DEMï¿½s use of fishing and hunting license revenues to determine whether the revenues had been used for program purposes.  We did not evaluate the economy, efficiency, or effectiveness of the DEMï¿½s operations.

Prior Audit Coverage

On September 30, 1998, we issued audit report No. 98-E-705, ï¿½U.S. Fish and Wildlife Service Federal Aid Grants to the State of Rhode Island, Department of Environmental Management, Division of Fish and Wildlife, for Fiscal Years Ended June 30, 1995 and 1996.ï¿½  In addition, the State Auditor issued Single Audit reports on the State of Rhode Island for SFYs 2002 and 2003, but DEM was not audited as a major program.  However, the Single Audit report stated that 
(1) the Stateï¿½s accounting controls over equipment acquired with Federal Aid funds was not adequate to ensure that acquisition and disposal information was recorded accurately and 
(2) physical inventories were insufficient to ensure that the inventory data was complete.

We followed up on all significant findings to determine whether they had been resolved.  We determined that all findings in the audit of Federal Aid grants had been resolved, but the accounting and inventory controls over equipment still need improvement (see Finding A).

Results of Audit

Our review found that:

> The DFW/DEMï¿½s accounting system and related internal controls adequately and accurately accounted for grant and license fee receipts and disbursements; 
> Direct and indirect costs claimed under the Federal Assistance grant agreements with FWS were adequately recorded and supported; and
> The State had adequate assent legislation in place that prohibited the use of license fees for any purpose other than the administration of the DFW.
 
However, we also found that: 

A. DFW needs to improve its equipment records management system.
B. DEM needs to develop written policies and procedures to document the controls and accounting process used for Federal Assistance grants.
C. DFW needs to reconcile its land records with the official land records maintained by DEM and the land records maintained by FWS. 

A.  Equipment Records Management  

The DFW did not maintain a comprehensive equipment records management system or develop written policies and procedures to ensure that property acquired with Federal Assistance funds or license revenues was controlled, inventoried, and used for its intended purpose.

The State of Rhode Island, Department of Administration, Fixed Assets Control and Tracking Systemï¿½s Policies and Procedures Manual requires the State to maintain adequate records to support disposition of grant funds and conduct physical inventories at least every 2 years.  In addition, federal regulation 43 CFR ï¿½ 12.72 (d) requires the grantee to maintain property records  that identify the funding source of the property and to develop a control system with adequate safeguards to prevent loss, damage, or theft of property.

The DFW inventory database consisted of multiple spreadsheets that did not contain beginning or ending balances, were not reconciled with the Stateï¿½s accounting system or DEMï¿½s personal property inventory, and did not identify the property by funding source. DFWï¿½s property management responsibilities are performed substantially by one employee within the Wildlife section as a collateral duty.  In addition, DEM officials told us that a physical inventory of DFWï¿½s property was not conducted between 1998 and 2002, but that a physical inventory was performed in 2003.  However, the officials could not provide documentation showing the inventory was performed or the results of the verification process.  As such, there is no assurance that the spreadsheet listings of property were accurate.  As a result, property acquired with Federal Assistance funds or license revenues could not be readily verified, and the existing practices to safeguard equipment and to identify equipment that is lost, damaged, stolen, or no longer needed to support Sport Fish and Wildlife Restoration program requirements were not adequate.  We did not perform any tests of personal property due to the above deficiencies and DFWï¿½s acknowledgement that the inventory listing was not accurate.

We also found that DFW has not established policies and procedures to ensure that equipment records are adequately maintained and the equipment is adequately safeguarded.

Recommendations

We recommend that FWS:

1. Require DFW to develop and maintain an equipment records management system, including written policies and procedures, that will record, identify, and track equipment purchased with Federal Assistance funding or license revenues that meets the minimum requirements of the State and the federal regulations (43 CFR ï¿½ 12.72).

2. Require DFW to conduct and document a comprehensive review of its facilities to establish a baseline equipment inventory listing.  As part of this process, DFW should take appropriate action to address, in accordance with state and federal requirements, any equipment found to be lost, missing, stolen, or no longer needed. 
  
B. Policies and Procedures on Accounting Process 

The DEMï¿½s Office of Management Services performs the accounting function associated with DFWï¿½s Federal Assistance grants. However, we found that Management Services did not have adequate written policies and procedures to describe, govern, and control the accounting process employed to ensure consistent and proper accounting for license and other revenues and expenditures of license revenues and Federal Assistance grant funds. Written policies and procedures are a critical internal control to ensure that accounting procedures are applied consistently and that costs are properly authorized, incurred, recorded, and traceable to a level of expenditures to ensure that funds have not been used in violation of applicable statutes,  in accordance with  the standards for financial management systems (43 CFR ï¿½ 12.60).  According to Management Services officials, their office has not developed written policies and procedures because it did not have the time or expertise. 

Recommendation

We recommend that FWS require DEM to develop and maintain written policies and procedures that describe the accounting processes used to control and account for Federal Assistance funding and license and other revenues.

C. Land Records Reconciliations  

The DFW maintains a spreadsheet of lands acquired with Federal Assistance funds and license revenues, while DEM maintains the official land records listing.  However, DFW has not reconciled its land records with the DEM or FWS land records  to ensure that its listing is complete and accurate.

Recommendations

We recommend that FWS require DFW to:

1.  Reconcile its schedule of lands purchased with Federal Assistance funds or license revenue with DEMï¿½s official land records and with the land records maintained by FWS.

2.  Develop policies and procedures that require these reconciliations to be performed periodically.

Appendix 1
Page 1 of 2

RHODE ISLAND DEPARTMENT OF 
ENVIRONMENTAL MANAGEMENT 
FINANCIAL SUMMARY OF REVIEW COVERAGE
JULY 1, 2001, THROUGH JUNE 30, 2003

Grant Number
Amount
Claimed Costs



F-10-D-50
$499,132
$410,884
F-10-D-51
534,112
505,622
F-20-R-42
171,200
139,339
F-20-R-43
220,160
216,112
F-20-R-44
150,160
169,407
F-26-R-36
193,032
144,772
F-26-R-37
188,950
188,228
F-26-R-38
155,750
156,156
F-42-E-15
212,417
161,736
F-42-E-16
225,417
155,442
F-42-E-17
241,417
247,507
F-48-R-14
142,575
134,420
F-48-R-15
149,300
86,869
F-48-R-16
150,979
119,306
F-59-D-10
1,050,000
991,777
F-59-D-11
950,000
854,360
F-59-D-12
870,000
874,408
F-60-R-9
116,436
96,224
F-60-R-10
116,590
103,100
F-60-R-11
122,102
74,726
F-61-R-9
473,740
435,742
F-61-R-10
499,235
492,227
F-61-R-11
 656,450
697,484


Appendix 1
Page 2 of 2

RHODE ISLAND DEPARTMENT OF 
ENVIRONMENTAL MANAGEMENT 
FINANCIAL SUMMARY OF REVIEW COVERAGE
JULY 1, 2001, THROUGH JUNE 30, 2003

Grant Number
Amount
Claimed Costs



F-64-R-2
213,978
198,415
F-64-R-3
213,978
149,353
F-64-R-4
251,981
152,034
FW-8-C-53
272,760 
256,003
FW-8-C-54
343,120
312,904
FW-8-C-55
344,000
296,654
FW-14-D-4
2,472,776
2,472,776
FW-14-D-9
912,000 
925,637
FW-14-D-10
107,579
105,667
FW-14-D-11
920,000
80,370
FW-14-D-12
220,000 
234,909
FW-14-D-13
806,555
92,499
FW-14-D-14
69,000
0
W-22-D-46
541,665
493,668
W-22-D-47
495,156 
386,814
W-23-R-45
307,416
279,169
W-23-R-46
343,720
310,188
W-23-R-47
410,450
373,865
W-31-S-28
403,100
333,463
W-31-S-29
398,724 
380,645
Total
$18,137,112 
$15,290,881 


Appendix 2

RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT SITES VISITED

Field Headquarters:  Fort Wetherill, Government Center, Great Swamp, and Round Top

Wildlife Management Areas:  Arcadia, Black Hut, Burlingame, and Great Swamp, 

Fish Hatcheries: Arcadia Warmwater Hatchery and Lafayette Trout Hatchery

Boat Access:  Fort Wetherill, Galilee, and Passeonkquis Cove


Appendix 3

RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT STATUS OF AUDIT FINDINGS AND RECOMMENDATIONS

Recommendation:  A.1, A.2, B, C.1, and C.2

Status:  Finding Unresolved and Recommendations Unimplemented

Action Required:  Provide a corrective action plan that identifies the actions taken or planned to resolve the finding and implement the recommendations, and provide the basis  for any disagreements. The plan should also include the target date and the official responsible for implementation of the recommendation, or an alternative solution.  Unresolved findings and unimplemented recommendations remaining at the end of 90 days (after August 18, 2005) will be referred to the Assistant Secretary for Policy, Management and Budget for resolution or tracking of implementation, respectively.