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

Report No. R-GR-FWS-0008-2004

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

  

Date:  September 30, 2005

**********DISCLAIMER****************************************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:  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 Idaho, Department of Fish and Game, from July 1, 2001, through June 30, 2003 (No. R-GR-FWS-0008-2004)

This report presents the results of our audit of costs claimed by the State of Idaho, Department of Fish and Game (Department), under Federal Assistance grants from the U.S. Fish and Wildlife Service (FWS).  The audit included claims that totaled approximately $18.6 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 Departmentï¿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 identified questioned costs totaling $510,965 consisting of matching costs that were unsupported or unallowable, costs incurred outside the grant period, advances reported as costs without evidence that the work had been completed, awards to volunteers who provided services that were used as part of the Stateï¿½s match, and reimbursements that exceeded the Federal share percentage identified in the grant agreement. We also identified program income of $8,504 that was not reported by the Department, drawdowns that were made before the Department ensured it had obtained the necessary in-kind match, and paid leave costs that were not equitably allocated to Federal Assistance grants.

FWS Region 1 provided a response to a draft of this report on June 3, 2005, which included a copy of the Departmentï¿½s June 3, 2005 response to FWS. We summarized the FWS and Department responses after the recommendations and added our comments regarding the responses.  The status of the recommendations is summarized in Appendix 4.

In accordance with the Departmental Manual (361 DM 1), please provide us with your written response to the recommendations included in this report by January 3, 2006.  Your response should include the information requested in Appendix 4.  If you have any questions regarding this report, please contact Mr. K. Timothy Gallagher, Audit Team Leader, at (916) 978-5657 or me at (703) 487-5345.

cc:  Regional Director, Region 1, 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 department.

Scope, Objective, and Methodology

We performed our audit at the Idaho Department of Fish and Game (Department) headquarters in Boise, Idaho.  The audit work at the Department included claims that totaled approximately $18.6 million on FWS grants that were open during the Stateï¿½s fiscal years (SFY) ended 
June 30, 2002 and 2003 (see Appendix 1).  We also visited four wildlife management areas, one fish hatchery, and one nature center (see Appendix 3).  The objective of our audit was to evaluate:

> the adequacy of the Departmentï¿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 Departmentï¿½s hunting and fishing license fees collection, certification, and disbursement processes;
> the adequacy of the Departmentï¿½s procedures for identifying and reporting program income; 
> the adequacy of the Departmentï¿½s asset management system and related internal controls with regard to purchasing, 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 Department to the grants, interviews with employees to ensure that personnel costs charged to the grants were supportable, and a review of the Departmentï¿½s use of fishing and hunting license revenues to determine whether the revenues had been used solely for fish and wildlife program purposes.  We did not evaluate the economy, efficiency, or effectiveness of the Departmentï¿½s operations.

Prior Audit Coverage

On September 22, 1999, we issued audit report No. 99-E-923, ï¿½U.S. Fish and Wildlife Service Federal Aid Grants to the State of Idaho for Fiscal Years 1996 and 1997.ï¿½  In addition, the State Legislative Services Office issued Single Audit reports on the State of Idaho for SFYs 2002 and 2003 and a Management Report on Financial Procedures in the Department for FYs 2001, 2002, and 2003.

We reviewed these reports and followed up on all significant findings to determine whether they had been resolved prior to our review.  We determined that two findings in our September 1999 report have not been implemented. The findings relate to the documentation of in-kind services and the allocation of leave, which are discussed in the Results of Audit section of this report.

Results of Audit

We found that the Department was generally in compliance with applicable regulations and grant accounting requirements with respect to the following:
      
> The Departmentï¿½s accounting system and related internal controls were adequate to account for grant and license fee receipts and disbursements. 
> Except for the issues reported below, direct and indirect costs claimed under the Federal Assistance grant agreements with FWS were adequately recorded and supported. 
> The asset management system accurately identified and tracked personal and real property with regard to acquisition, control, and disposal.
> The State of Idaho had adequate assent legislation in place that prohibited the use of license fees for any purpose other than the administration of the Department.

However, we also identified the following issues:

A. We questioned costs totaling $510,965 consisting of the following:
      
1. State matching costs of $278,944 that were unsupported or unallowable under OMB guidelines.

2. Costs of $84,336 that were incurred outside the grant period.

3. Advances totaling $65,850 for which there was no documentation showing that the work had been completed.

4. Awards totaling $63,134 to volunteers who provided in-kind services that were used as part of the Stateï¿½s match.

5. Excess FWS reimbursements of $18,701 that resulted from using a Federal share percentage that was higher than the percentage in the grant agreement.

B. The Department did not report program income of $8,504 from grazing leases or program income related to barter arrangements under farming operations on lands maintained with Federal Assistance funds. 

C. The Department drew down funds before ensuring that it had obtained the necessary in-kind match.

D. The Department did not allocate leave costs to Federal Assistance grants in an equitable manner.

A. Questioned Costs

We questioned costs totaling $510,965, as follows:

  1. Matching Costs.  The Department did not maintain adequate supporting documentation for at least $278,944 of the $306,218 claimed as the Stateï¿½s matching share on the aquatic education grants F-87-AE-4 ($137,582) and F-87-AE-5 ($141,362).  The Departmentï¿½s match included both in-kind services and expenditures.
 
OMB Circular A-87, Attachment A, Section C, states that costs must be necessary and reasonable, allocable and authorized, and adequately documented to be allowable under Federal awards.  In addition, the Code of Federal Regulations (regulations) [43 CFR ï¿½ 12.64 (b) (6)] provides that ï¿½costs and third party in-kind contributions ï¿½ must be verifiable from the records of granteesï¿½. These records must show how the value placed on third party in-kind contributions was derived.ï¿½  

The documentation provided by the Department as support for the $306,218 claimed as the Stateï¿½s matching share actually totaled $314,277, or $8,059 more than the amount claimed.  We could not identify the specific documentation supporting the $306,218 claimed and as such, based our review on the entire $314,277. 
      
Based on our review of the Departmentï¿½s documentation for a sample of costs totaling $214,616, we questioned $278,994 of the total amount claimed, as summarized in the following table.
[NOTE:  Table structure may not resemble those in the printed version.  A printed copy of this report may be obtained by referring to the PDF file.]



Documentation
Provided

Reviewed

Questioned
Volunteers
     $135,115
$57,618
$135,115
Donations
         73,062
55,547
46,861
Contributions
         10,000           
10,000
10,000
Expenditures
         96,100
91,451
86,968
Totals
$314,277
$214,616
$278,944

       
Volunteers - The regulations (43 CFR ï¿½ 12.64 (b) (6)) state, ï¿½to the extent feasible, volunteer services will be supported by the same methods that the organization uses to support the allocation of regular personnel costs.ï¿½  We selected a sample of $57,618 of the $135,115 claimed as volunteer in-kind services to determine if the costs were adequately supported.  While the Department requires its own employees to submit signed time sheets, none of the costs we tested were supported by time sheets signed by volunteers.  Accordingly, since the entire amount is our sample was unsupported, we questioned the entire $135,115 claimed for volunteer services.    

The prior audit found that the Department did not have adequate documentation in some cases to support the amounts claimed for in-kind contributions and in other cases, the in-kind services did not qualify as such.  Although the corrective action plan indicated that the Department had 
established written procedures and policies for documenting in-kind services in compliance with the regulations, the Department did not have such procedures in place at the time of our audit.

   Donations - We selected a sample of $55,547 of the $73,062 claimed as donations received by the Department and determined that $46,861 was not adequately supported.   For example, the Department provided an unsigned letter as support for an in-kind donation of an ï¿½image videoï¿½ valued at $3,000, but did not provide documentation showing how the value was determined.  

   Contribution - The Department claimed $10,000 for a contribution to the ï¿½Idaho Salmon and Steelhead Daysï¿½ event.  According to OMB Circular A-87 Attachment B, Section 13.a, contributions and donations, including cash, property, and services, by governmental units to others, regardless of the recipient, are unallowable. Accordingly, we questioned the $10,000 contributions used as in-kind match.

   Expenditures - The Department claimed expenditures of $96,100 as matching costs.  We selected a sample of transactions totaling $91,451 and determined that $86,968 was not supported.  For example, as support for part of this amount, the Department provided a program cost account (No. 51912) with expenditures totaling $64,861, including $52,234 identified as payroll costs.  However, only an estimated $1,944 of the $52,234 had cost codes that specifically related to aquatic education.  In addition, the Department stated that it was unable to provide supporting documentation showing that additional claimed labor costs of $18,295 for three individuals were related to aquatic education.

   Other Documentation Issues - We identified two other issues regarding the Departmentï¿½s supporting documentation for its matching share.

As part of its response to our documentation request, the Department increased its claimed match by a net amount of $85,912.  Based on our review of these costs, over $26,000 had codes that were already claimed as match, and the activity based cost codes did not specifically identify the costs as being related to aquatic education.  The revised claim also included an additional $10,000 for contributions, which are unallowable.  The Department did, however, provide sufficient support for $24,011 for donations received and direct expenditures.  FWS will need to determine whether it will allow the Department to use this amount as part of its matching share. 

The Departmentï¿½s in-kind match included volunteer services at the MK Nature Center and expenditures incurred by a non-profit organization operating at the Center.  However, we could not determine whether specific charges to the grants related to aquatic education.  The Center has some features and programs, such as ponds, creeks, fish viewing areas, and exhibitions which appear to be related to aquatic education; however, it also has other features which do not appear to have any relationship to aquatic education.  These features include an aviary and several outdoor exhibits and displays such as ï¿½Brush Piles ï¿½ Hiding and Roosting Cover for Birds;ï¿½ 

ï¿½Composting;ï¿½ ï¿½Formal Backyard ï¿½ Bringing in Wildlife;ï¿½ ï¿½Butterfly and Hummingbird Garden;ï¿½ ï¿½What Do Beavers Eat?;ï¿½ ï¿½Wetlands ï¿½ Wildlife Nurseries;ï¿½ and ï¿½Habitat ï¿½ A Home for Everyone.ï¿½   The Departmentï¿½s documentation did not identify which activities were supported by volunteer services and/or the nonprofit organization, and did not identify the costs as being related to the aquatic education program.

Recommendations

We recommend that FWS:

a.  Resolve the $278,944 of questioned costs related to unsupported or ineligible matching costs and in-kind services. 

b.  Require the Department to implement procedures for documenting and reporting matching costs and in-kind services.

   Department Response

Volunteers - The Department stated that volunteer signatures in major statewide events would not only be infeasible but would add a layer of complexity to an already difficult management situation.  The Department further stated that since the signature issue was not mentioned in the last audit and the Department reasonably complies with the ï¿½to the extent feasible clause [in 43 CFR ï¿½ 12.64 (b) (6)],ï¿½ the lack of signatures should not in and of itself make the amounts unallowable.  Nevertheless, the Department indicated that it had implemented a new form and policy which required the signature of each volunteer along with the hours worked and type of work completed.  The Department also agreed that the signature would make the documentation even more solid.

Donations - The Department stated that it was compiling the necessary documentation to substantiate the donations.
   
Contributions - The Department felt that the use of the word ï¿½contributionï¿½ in the supporting documentation was the cause of the issue.  According to the Department, the $10,000 payment was for its share of the costs to plan, organize, and administer the Salmon Steelhead Days event.  The Department further stated that it had the necessary documentation to support the payment.

Expenditures - The Department said that the finding was a direct result of its new Activity Based Costing system, which was initiated during the audit period.  The initial system had too many codes and included a financial code within an activity code, which may have caused some confusion on the coding of specific types of expenditures. The Department further stated it feels that the costs should not be disallowed because of coding errors that were made during the infancy of the new system, and that the questioned costs should be allowed based on the work that was actually done and the species that benefited.  
Other Documentation Issues - The Department stated that the first part of the finding related back to the Expenditures issue and that the match should be evaluated based on the work accomplished and not based on the activity code that was incorrectly used.  The Department requested an opportunity to work with FWS to review all the documentation in order to determine the allowability of the costs based on what was actually done.  The Department further stated that if FWS agrees that the allowable amounts should be based solely on what was actually done, the State has adequate documentation to support these amounts.

Regarding the MK Nature Center, the Department agreed that an analysis of the Center should be made to determine if there are any parts of the Center that do not relate to aquatic education.  The Department stated that in the future, it will ensure that those activities are not charged to the aquatic education program.

   FWS Response

FWS stated that it concurred with the recommendations and that the Departmentï¿½s proposals to implement the recommendations will be considered in the corrective action plan.  FWS also stated that it will allow the Department to use $24,011 in donations received for direct expenditures, as noted under Other Documentation Issues.

OIG Comments

While FWS concurred with the recommendations, it did not state whether it agreed with the Departmentï¿½s proposed corrective action.  Instead, it stated that the Departmentï¿½s proposals to implement the recommendations ï¿½will be consideredï¿½ in the corrective action plan.  Therefore, additional information is needed on the actions taken or planned to resolve the finding and implement the recommendations.  This information should be provided in the corrective action plan.

  2. Out-of-Period Costs.  The Department claimed costs of $84,336 which were not valid obligations of the grant period.  The regulations (43 CFR ï¿½12.63 (a)) state, ï¿½Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding periodï¿½.ï¿½ The regulations (43 CFR ï¿½12.43) define obligations as "the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee during the same or a future period." 

The Department did not have a process in place for identifying and eliminating expenditures which were obligations of a prior or subsequent grant or for allocating costs that were allocable to more than one grant period.  As a result, we questioned costs totaling $84,336 that were incurred outside the grant period, as follows: 

* The Department claimed costs totaling $71,576 on 23 grants that were obligations of a prior grant (see Appendix 2).

* The Department claimed $10,200 on Grant W-160-R-30 for the cost of University of Idaho interns for May 2002 through August 2002.  However, a portion of these costs were incurred prior to the grant period, which began on July 1, 2002.  As such, we questioned costs of $4,488 which were applicable to the period prior to start of the grant.

* The Department claimed $16,544 on Grant W-173-D-18 for an annual lease payment for the year beginning January 2002.  However, the lease included the 
6-month period July 1 through December 31, 2002 which was subsequent to the June 30, 2002 end of the grant period.  As such, we questioned $8,272 (6 months of the lease payment) which should have been allocated to the subsequent grant (Grant W-17-D-19). 

Recommendations	

We recommend that FWS:

a.  Resolve the $84,336 of questioned out-of-period costs. 

b.  Require the Department to implement procedures for identifying and eliminating grant charges that are outside the grant period. 

c.  Require the Department to implement policies and procedures to ensure that costs are allocated to the appropriate grants.

   Department Response

Regarding the questioned cost and recommendation 2.a, the Department agreed that costs were charged to the incorrect period.  However, the Department further stated that all of these costs would be allowable and legitimate if charged to the correct period, and requested that the costs be allowed for the correct grant period if there are sufficient funds remaining in those grants to cover these costs.  The response also stated that the Department would stress to its managers the importance of allocating costs to the appropriate grant period, but did not specifically address recommendations 2.b and 2.c on establishing procedures.
 
FWS Response

FWS stated that it concurred with the recommendations and that the Departmentï¿½s proposals to implement them will be considered in the corrective action plan.

   OIG Comments

While FWS concurred with recommendation 2.a, it stated that the Departmentï¿½s proposals ï¿½will be consideredï¿½ in the corrective action plan.  Also, the Department did not specifically respond to recommendations 2.b and 2.c and, therefore, those recommendations are unresolved.  Additional information is needed concerning the actions taken or planned to resolve the finding and implement the three recommendations.  This information should be included in the corrective action plan. 

   3. Unsupported Advances.  The Department claimed costs of $65,850 which were actually advances to third parties for future work or services.  Also, there was no documentation showing that the work or services had been completed or that the Department had received a full accounting of the advanced funds.  The regulations (43 CFR ï¿½12.63) state, ï¿½Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period.ï¿½    The questioned costs consisted of the following:

* A May 2003 advance of $20,850 to a local community group for a shooting range development on Grant W-159-HS-32.  At the time of our audit, the Department had not received documentation that the range had been completed.

*  Advances totaling $45,000 to local colleges for projects on Grant W-160-R-29 ($28,000) and Grant W-179-R-1 ($17,000).  At the time of our audit, the Department had not received a full accounting of these funds. 

Accordingly, we questioned costs of $65,850 because the Department claimed advances as costs before they were incurred by the recipient, and the Department did not have documentation showing that the work had been completed or that the funds had been spent.

Recommendations

We recommend that FWS:

a.  Resolve the questioned costs of $65,850 related to the advances.

b.  Require the Department to discontinue seeking reimbursement for advances to a third party for work or services to be provided. 

   Department Response

Regarding recommendation 3.a, the Department stated that it has received documentation for the shooting range on Grant W-159-HS-32 and was working on obtaining the necessary documentation on the other two grants.  The response did not specifically address recommendation 3.b.

     FWS Response

FWS concurred with the recommendations and stated that the Departmentï¿½s proposals to implement the recommendations will be considered in the corrective action plan.

   OIG Comments

While FWS concurred with recommendation 3.a., it did not state whether it agreed with the Departmentï¿½s proposals but stated that the proposals will be considered in the corrective action plan.  Also, the Department did not specifically respond to recommendations 3.b.  Therefore, we consider the finding unresolved and the recommendations not implemented.  Additional information is needed concerning the actions taken or planned to resolve the finding and implement the recommendations.  This information should be included in the corrective action plan. 

  4. Awards to Volunteers.  The Department claimed costs of $63,134 on Grants W-159-HS-31 ($36,192) and W-159-HS-32 ($26,942), for gift certificates and awards given to the volunteers in its Hunter Education program.  The Department had used the value of the volunteer services as part of its matching share on these grants.  According to the Department, the total annual awards had been averaging about $25,000, but were higher for Grant W-159-HS-31 due to the correction of an error made in a prior year. 

The regulations (43 CFR ï¿½ 12.64) state, ï¿½Unpaid services provided to a grantee or subgrantee by individuals will be valued at rates consistent with those ordinarily paid for similar work in the grantee's or subgrantee's organization.ï¿½   The Department provided gift certificates as incentives to Hunter Education program volunteers based on the level of volunteer hours provided.  As such, the volunteers, in effect, received partial compensation totaling $63,134 for their services. If the Department is allowed to claim the awards, then the value of the volunteer services would not be allowable as in-kind match.  Further, since the awards charged to Grant W-59-HS-31 included an adjustment to correct a prior year error and were about $11,000 more than the average annual awards, the additional $11,000 could be considered applicable to the prior grant period during which the error was made. 

Recommendation

  We recommend that FWS resolve the $63,134 of questioned costs for gift certificates and awards to volunteers. 

   Department Response

The Department stated that it feels the awards are allowable costs, in part because the awards program was mentioned in its grant proposal and according to the Federal Aid supplement for hunter education, ï¿½If a State indicates in its grant proposal that a volunteer recognition project is an important part of maintaining its cadre of instructors, 
then it is supportable (50 CFR 80.5).ï¿½   The Department further stated that the ï¿½token awardsï¿½ were not the same as compensation and should not be considered as such and considering the number of hours required to qualify for an award, the amount received was so little that the individuals would easily meet the FWS definition of a volunteer. 

  FWS Response

FWS stated, ï¿½ï¿½consideration should be given to the Hunter Education Guideï¿½s section on Recognition which encourages volunteers to be recognized by the use of certificates, incentive awards, and more.ï¿½ 

  OIG Comments

OMB Circular A-87, Attachment A, Section C.1.a. states that for a cost to be allowable under a federal award, it must be necessary for proper and efficient performance and administration of the award.  In addition, as noted in the Departmentï¿½s response, the Federal Aid supplement for hunter education states that if the grant proposal indicates that a volunteer recognition project is an important part of maintaining its cadre of instructors, then it is supportable (50 CFR 80.5).ï¿½   While the Departmentï¿½s response stated that the awards program is ï¿½mentioned in the proposal,ï¿½ it did not indicate that the awards program was necessary to maintain an adequate level of volunteer instructors.  In addition, the regulation (50 CFR ï¿½ 80.5) cited in the Departmentï¿½s response does not relate to awards to volunteers.  Also, although the individual award amounts may not be significant, the total amount of the awards ($63,134) is significant.  Since neither FWS nor the Department concurred with the finding, we consider it unresolved and the recommendation not implemented.  The finding and recommendation should be addressed in the corrective action plan.  

  5. Federal Share.  The Department used an incorrect percentage to determine the Federal share of net outlays on Grants F-71-R-26 and F-86-D-3.  The regulations (50 CFR ï¿½ 80.16) require that payments be made for the Federal share of allowable costs incurred by the State in accomplishing approved projects.  The Federal share was identified in the grant agreements in terms of both dollars and percentages.  However, the Department computed the federal share using a percentage that was higher than the one identified in the agreement, which resulted in overstating the Federal share of grant costs by $18,701, as follows:

Grant F-71-R-26  The Department computed the Federal share of  total net outlays of $2,281,043 using the maximum 75 percent rate allowed in the Sport Fish Restoration Act instead of the 74.7 percent rate identified in the grant agreement. As a result, the amount claimed as the Federal share was overstated by $6,609. 

Grant F-86-D-3  The Department computed the Federal share of the total net outlays of $525,768 using the 75 percent rate rather then the 72.7 percent rate identified in the grant agreement.  As a result, the amount claimed as the Federal share was overstated by $12,092.

Recommendations

   We recommend that FWS:

a.  Resolve the questioned costs of $18,701 related to computing the Federal share using a percentage which exceeded the percentages specified in the grant agreements.

b.  Require the Department to establish and implement procedures to ensure that the appropriate Federal percentage identified in the grant agreement is used in computing the Federal share of net grant outlays.  Any deviations from the approved rate should be based on a signed amendment to the grant agreement.

   Department Response

The Department did not agree that it calculated the Federal share incorrectly.  The Department cited 50 CFR ï¿½ 80.12 which states, ï¿½Federal participation is limited to 75 percent of eligible costs incurred in the completion of approved work or the Federal share specified in the project agreement, whichever is less.ï¿½  The Department stated that it ï¿½did not exceed the limit for Federal participation of 75 percent in either grant since Federal Assistance funds represented the total Federal share.  The response further stated, ï¿½The amount of Federal funds obligated under each grant was not exceeded in claims.ï¿½  Finally, the response states, ï¿½In both grants the 75 percent Federal share was less, so the Department feels it has applied the regulations correctly.ï¿½   The Departmentï¿½s response did not specifically address recommendation 5.b. 

   FWS Response

FWS stated that consideration should be given to the regulations (50 CFR ï¿½ 80.12) which states, ï¿½Federal participation is limited to 75 percent of eligible costs incurred ï¿½ or the Federal share specified in the agreement, whichever is less.ï¿½   FWS further stated ï¿½The Federal share equals the actual funds obligated which are not to [exceed] 75 percent of cost incurred.ï¿½  

   OIG Comments

Both the Department and FWS cited 50 CFR ï¿½ 80.12 to support the position that the use of the 75 federal participation rate was appropriate. However, the cited regulation states that federal participation is limited to the lower of 75 percent of the actual costs incurred or the Federal share specified in the grant agreement.  In both cases, the rate established in the agreement was less than 75 percent and therefore the lower rate was the appropriate one to use.   In addition, the regulations also establish a minimum federal participation rate of 10 percent, recognizing that there are circumstances where a lower participation rate would be appropriate.  However, it was not clear as to why the percentage stated in these two grants was less than 75 percent. 

Applying the FWS and Department position, establishing a federal participation rate of less than 75 percent would have little meaning, especially in situations where grant outlays are significantly less than the grant amount.  For example, on a $60,000 grant having a federal participation rate of 20 percent ($12,000) and a state participation rate of 
80 percent ($48,000), the state would earn the full federal share once the total outlays reached $16,000 (75 percent of total outlays of $16,000 equals $12,000). This means that the state would have to spend only $4,000 ($16,000 minus $12,000) of the $48,000 state share identified in the grant agreement to earn the full federal share.  As such, we consider the finding unresolved and the recommendation not implemented.  In addition, the Departmentï¿½s response did not address recommendation 5.b.	

Since FWS and the Department did not agree with the finding and recommendation 5.a and the Department did not respond to recommendation 5.b, we consider the finding unresolved and the recommendations not implemented.  The finding and recommendations should be addressed in the corrective action plan, which should identify the actions taken or planned to resolve the finding and implement the recommendations, or the basis for any disagreement with the finding and/or recommendations. 

B.  Program Income

The Department did not report all program income generated in wildlife management areas (WMA) that were managed and maintained with Federal Assistance funds under Grants W-173-D-18 and W-173-D-19.  The regulations (43 CFR ï¿½ï¿½12.65(b)) state, ï¿½Program income means gross income received by the grantee or subgrantee directly generated by a grant supported activity, or earned only as a result of the grant agreement during the grant period.ï¿½  The term ï¿½during the grant period" is defined as the time between the effective date of the award and the ending date of the award reflected in the final financial report.ï¿½  In addition, the regulations (43 CFR ï¿½ï¿½12.65(g)) on the use of program income state, ï¿½Program income shall be deducted from outlays which may be both Federal and non-Federal ï¿½, unless the Federal agency regulations or the grant agreement specify another alternative (or a combination of the alternatives).ï¿½ 

The Department did not report program income of $8,504 from a grazing lease on lands owned by the Idaho Department of Lands (IDL) within the Andrus WMA.  The WMA, including the IDL lands, was managed and maintained with Federal Assistance funds under Grant W-173-D-19.  The Department did not report the lease rental receipts as program income because the receipts were transferred to IDL.

We also found that the Department did not report program income related to farming operations on WMAs.  Department contracts allow farmers to leave a portion of their crop in the field for the benefit of wildlife in lieu of paying for the use of the land.  However, the Department did not report the value of the crops as program income.  According to Department officials, these barter  arrangements provided benefits to the fish and wildlife areas in their wildlife management efforts.

We agree that these types of arrangements may provide benefits to WMAs.  However, since the crops were received in lieu of lease payments (which are required to be reported as program income), the value of those crops should likewise be reported as program income.  Further, the 

value of the lease payments foregone by the Department should be included in the reported outlays on the SF 269. These types of barter arrangements should be identified in the grant application, and the appropriate accounting and reporting under the arrangement should be identified in the grant agreement. 

Recommendations

We recommend that FWS:

1.  Resolve the unreported program income of $8,504 received from grazing activities. 

2.  Coordinate with the Department to establish procedures for (a) identifying the farming arrangements, including anticipated program income, in the grant application; and (b) reporting the value of the crops received as program income on the Financial Status Report (SF 269).

3.  Resolve the issue of unreported program income from farming activities for the audit period.

   Department Response

The Department did not agree that the regulations applied to this lease or that the lease revenues should be reported as program income. The response noted that the lease was in effect with IDL before the Department owned any lands around it.  The Department also stated that after acquiring lands around the IDL land, it allowed the existing lease to continue and allowed grazing on both IDL and Department land to try to minimize the impact for wildlife.  The overall level of grazing did not change, and the only other change was that the lease payment was given to the Department and then passed on to IDL.  The Department concluded that the regulations did not apply to this lease, stating ï¿½Since this lease was in effect before we ever became involved, and since it has not changed since our management efforts on the property, and since none of the property was purchased with PR [Pittman-Robinson] funds, it appears to us that the income is neither ï¿½generated by a grant supported activityï¿½ nor is it earned as a ï¿½result of the grant during the grant period.ï¿½  Therefore, the Department disagrees that this amount should be reported as program income.ï¿½

Regarding the farming agreements, the Department stated that agreements to leave crops in the field are a substantial benefit to the wildlife and their habitat.  The Department further stated that in the future, for farming activities on land purchased with Wildlife Restoration funds, it will estimate the value of the lease payments foregone as a result of the farming agreements and show it as program income on the SF 269.

The Departmentï¿½s response did not specifically address recommendation B.3.

   FWS Response

Regarding recommendation B.1, FWS stated that consideration should be given to 
43 CFR ï¿½ 12.65 and that the Departmentï¿½s pre-existing lease generated the revenue prior 
to Wildlife Restoration funding being used to support the lands.   FWS agreed with recommendations B.2 and B.3 and stated that the Departmentï¿½s proposals to implement the recommendation will be considered in the corrective action plan. 

   OIG Comments

Regarding recommendation B.1, the criteria for program income does not differentiate between agreements that went into effect before or after the grant agreement.  Further, the Department indicated that it allowed the grazing to extend to its lands to minimize the impact for wildlife which, in our opinion, demonstrates a relationship with the wildlife grant.  Since both the Department and IDL lands were maintained with Federal Assistance funds, these revenues should be reported as program income.   As such, we consider the finding unresolved and the recommendation not implemented.
      
Regarding recommendation B.2, the Department indicated that program income will be reported for farming activities only on lands purchased with Wildlife Restoration funds. This limitation is not in accordance with the March 11, 2004  Directorï¿½s Order No. 168,  which provides that income generated on lands managed with Federal Assistance funds is also program income.  Based on the Departmentï¿½s response, we consider the finding unresolved and the recommendation not implemented.

While the FWS concurred with recommendation B.3, the Department did not provide a response to the recommendation.  Therefore, we consider the finding unresolved and the recommendation not implemented. In addition, the Departmentï¿½s statement that the value of the lease payment foregone will be reported as program income may have been based on an erroneous statement in our draft report, which has been corrected. The value of the crops received should be reported as program income, while the value of the lease payments foregone should be included in the reported outlays.

The finding and recommendations should be addressed in the corrective action plan. The plan should identify the actions take or planned to resolve the finding and implement the recommendation.

C.  Drawdown Procedures

On grants where the Department anticipated using in-kind contributions to provide all or part of its matching share, the Department drew down its total expenditures to date without determining whether it had obtained the necessary in-kind match.  The regulations (50 CFR ï¿½ 80.16) state that payments shall be made for the federal share of allowable costs incurred by the State in accomplishing approved projects.

Department officials said that drawdowns are made under the assumption that at grant completion, the matching or in-kind requirements would be satisfied or an appropriate adjustment would be made.  As a result, the Department may have drawn down more than its allowable share while the grant was in process.

Recommendation

We recommend that FWS require the Department to establish and implement procedures that ensure that sufficient in-kind match is available before funds are drawn down.

   Department Response

The Department stated that it adjusted its drawdown process to ensure that the amounts drawn down were supported by in-kind match already obtained.

   FWS Response

The FWS concurred with the recommendation and stated that the Departmentï¿½s proposal to implement the recommendation will be considered in the corrective action plan.

  OIG Comments

While FWS concurred with the recommendation, it stated that the Departmentï¿½s proposal ï¿½will be consideredï¿½ in the corrective action plan.  Therefore, additional information is needed concerning the actions taken to resolve the finding and implement the recommendations.  This information should be included in the corrective action plan.

D.  Allocation of Leave

The Department has not corrected a prior report finding on the inequitable allocation of leave and associated fringe benefits.  OMB Circular A-87, Attachment B, Section 11d (2) (b), states that fringe benefits are allowable if they are equitably allocated to all related activities including Federal awards.
      
Our September 1999 audit report stated that the Departmentï¿½s accounting practices for allocating paid leave and associated fringe benefits to FWS grants was noncompliant with Circular A-87.  The audit found that employees charged leave to the projects they would have charged had they been at work.  For employees who charge more than one project during the year, this method would result in some projects absorbing more than their appropriate share of paid leave.

The FWS corrective action plan for resolving and implementing the audit recommendations had identified a July 1, 2002 target date for implementation. In addition, the plan stated, ï¿½Effective September 25, 2000, IDFG [Idaho Department of Fish and Game] will no longer charge paid leave or fringe benefits to Federal Aid grants until they develop accounting procedures for the equitable allocation of these costsï¿½ï¿½.

The Department attributed the delay in implementing the corrective action plan to the complexity of developing a system that would comply with the plan requirements.  According to the Department, a system was placed in operation on July 1, 2003, in response to the audit recommendations. However, the Department was attempting to develop an alternative method for allocating leave and associated fringe benefits, and FWS has not closed the recommendation.

We noted that contrary to the corrective action plan, the Department charged paid leave and associated fringe benefits to the Federal Assistance grants during the audit period.  We confirmed that the Department procedures in place during our audit period continued to result in an inequitable allocation of leave and associated fringe benefits to the FWS grants.  For example, our test of the biweekly pay period charges by 46 individuals found that during the 2-week period, all 13 employees who charged part of their work hours to other projects, including non-Federal Assistance projects, charged all their leave to Federal Assistance grants.

Recommendation

We recommend that FWS require the Department to determine the total leave and associated fringe benefits charged to Federal Assistance grants for the audit period, determine an equitable allocation method for these costs, and resolve any overcharges to Federal Assistance grants.

   Department Response

The Department implemented a system on July 1, 2003 to equitably allocate all leave taken along with the associated fringe benefits. The Department also stated that it will be working with FWS to provide a sample of the new methodology.

   FWS Response

FWS concurred with the recommendation and stated that the Departmentï¿½s proposals to implement the recommendation will be considered in the corrective action plan.

   OIG Comments

Neither the Departmentï¿½s nor FWS response addressed the recommendation with respect to identifying and resolving any overcharges to Federal Assistance grants.  Therefore, we consider the finding unresolved and the recommendation not implemented.  The finding and recommendation should be addressed in the corrective action plan which should identify the action taken or planned to resolve the finding and implement the recommendation, or the Divisionï¿½s basis for disagreement with the finding and/or recommendation. 

Appendix 1

IDAHO DEPARTMENT OF FISH AND GAME
FINANCIAL SUMMARY OF REVIEW COVERAGE
JULY 1, 2001 THROUGH JUNE 30, 2003

[NOTE:  Table structure may not resemble those in the printed version.  A printed copy of this report may be obtained by referring to the PDF file.]

Grant No.   
        Grant Amount
               Claimed Costs[1]
F-71-R-26
$2,339,714
$1,912,507
F-71-R-27
2,430,900
1,871,379
F-73-R-24
914,650
738,038
F-73-R-25
979,300
655,504
F-75-R-17
45,300
38,101
F-75-R-18
45,300
37,476
F-76-D-18
374,967
328,645
F-76-D-19
487,881
321,104
F-77-B-17
1,200,640
737,047
F-77-B-18
1,643,091
799,279
F-81-D-12
368,129
294,399
F-81-D-13
307,313
239,287
F-86-D-2
368,500
15,000
F-87-AE-4
616,407
394,796
F-87-AE-5
616,407
394,894
F-88-C-2
232,700
195,392
F-88-C-3
263,650
207,049
FW-7-T-8
741,424
633,960
FW-7-T-9
814,267
579,332
W-159-HS-31
449,552
322,810
W-159-HS-32
604,334
384,491
W-160-R-29
827,781
795,214
W-160-R-30
936,918
715,155
W-168-C-19
58,713
37,175
W-168-C-20
55,355
38,630
W-170-R-26
1,599,765
1,111,942
W-170-R-27
1,654,870
1,100,361
W-173-D-18
2,122,797
1,855,069
W-173-D-19
2,154,497
1,507,468
W-176-R-8
101,848
64,792
W-179-R-1
164,133
133,345
W-179-R-2
224,859
157,287

$25,745,962
$18,616,928




Appendix 2

IDAHO DEPARTMENT OF FISH AND GAME
QUESTIONED COSTS

[NOTE:  Table structure may not resemble those in the printed version.  A printed copy of this report may be obtained by referring to the PDF file.]

FINDINGS
Grant
Matching Costs
Advances
Out of Period
Awards
Federal Share
Totals
F-71-R-26


  $14,151

$6,609
$20,760
F-71-R-27


      2,460


    2,460
F-73-R-24


      2,667


     2,667
F-73-R-25


        922


       922
F-76-D-18


     3,239


    3,239
F-76-D-19


        766


       766
F-77-B-17


     3,323


    3,323
F-77-B-18


     1,026


    1,026
F-81-D-12


     1,559


    1,559
F-86-D-3




12,092
   12,092
F-87-AE-4
$137,582

      1,600


 139,182
F-87-AE-5
141,362

      2,839


 144,201
F-88-C-3


         130


           130
FW-7-T-8


         703


       703
FW-7-T-9


           12


         12
W-159-HS-31


      1,243
$36,192

   37,435
W-159-HS-32

$20,850
      1,816
26,942

    49,608
W-160-R-29

28,000
      2,335


   30,335
W-160-R-30


    17,334


  17,334
W-170-R-26


    10,187


   10,187
W-170-R-27


      1,043


     1,043
W-173-D-18


    11,270


    11,270
W-173-D-19


      3,549


     3,549
W-179-R-1

17,000
         162


    17,162

$278,944
$65,850
  $84,336
$63,134
$18,701
   $510,965



Appendix 3

IDAHO DEPARTMENT OF FISH AND GAME SITES VISITED

Wildlife Management Areas
  Andrus 
  Mud Lake 
  Market Lake 
  Sand Creek

Fish Hatchery
  Hagerman

Nature Center
  MK Nature Center

Appendix 4

IDAHO DEPARTMENT OF FISH AND GAME STATUS OF AUDIT FINDINGS AND RECOMMENDATIONS


Recommendation:  A.1.a, A.1.b, A.2.a, and C.1

Status:  Management Concurs; Additional Information Needed.  [Management Concurs; Additional Information Neededï¿½ - The Department and FWS agreed with the recommendations or the Department provided alternative solutions, but FWS did not identify the actions it plans to take or state whether it agreed with the actions taken or planned by the Department.]

Action Required:  Provide a corrective action plan that identifies the actions taken or planned to resolve the finding and implement the recommendations.  The plan should also include the target date and the official responsible for implementation of each recommendation. The unimplemented recommendations remaining at the end of 90 days (January 3, 2006) will be referred to the Assistant Secretary for Policy, Management and Budget for resolution and/or tracking of implementation.

Recommendations:  A.2.b, A.2.c, A.3.a, A.3.b, A.4, A.5.a, A.5.b., B.1, B.2, B.3, and D.1

Status:  Finding Unresolved and Recommendations Not Implemented.  [Finding Unresolved and Recommendations Not Implementedï¿½ - FWS did not state concurrence with the recommendations or the Department disagreed with or did not comment on the finding and/or recommendations.]


Action Required:  Provide a corrective action plan that identifies the actions taken or planned to resolve the finding and implement the recommendations, as well as the basis for disagreement with any recommendations. The plan should also include the target date and the official responsible for implementation of each recommendation. The unimplemented recommendations remaining at the end of 90 days (after January 3, 2006) will be referred to the Assistant Secretary for Policy, Management and Budget for resolution and/or tracking of implementation.
1 As amended, 16 U.S.C. ï¿½ 669 and 16 U.S.C. ï¿½ 777, respectively.