[Final Audit Report on Federal Grants Administration, Guam Community  College]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 95-I-1202

Title: Final Audit Report on Federal Grants Administration, Guam
       Community 		College

Date:     August 22, 1995


     *********************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 or by calling the Office of Inspector General, Logistical Services Branch at (202) 219-3840.
     *********************************************************
 
United States Department of the Interior
     OFFICE OF INSPECTOR GENERAL
           Washington, D.C. 20240

                            					  August 23, 1995


MEMORANDUM

TO:                 		The Secretary

FROM:               		Wilma A. Lewis
                   		nspector General

SUBJECT SUMMARY:    Final Audit Report for Your Information - "Federal
                    		 Grants Administration, Guam Community College" (No.
                    		  95-I-1202)

Attached for your information is a copy of the subject final audit report.

The Community College did not allocate salaries based on actual work load
distribution for full-time employees, and it incorrectly charged overtime wages to
Federal grants. The College also paid and charged Federal grants for part-time
wages that were unallowable under Federal grant regulations, were in excess of
employment contract rates, or were not. supported. This resulted in questioned
personal services charges of $157,204.

Based on the College's response, we considered two recommendations resolved. The
recommendations pertained to: (1) ensuring that charges to Federal grant programs
are made in accordance with Office of Management and Budget Circular A-21, "Cost
Principles for Educational Institutions"; and (2) ensuring that policies related to dual
employment are implemented. However, the College was requested to reconsider
the recommendation regarding questioned costs and either provide the supporting
documentation for the costs incurred or advise the grantor agencies as to how it
intends to resolve the questioned costs."

If you have any questions concerning this matter, please contact me at
(202) 208-5745.


Attachment





 
N-IN-GUA-011-93

United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
      Headquarters Audits
   1550 Wilson Boulevard
            Suite 401
  Arlington, VA 22209

                           					   August 22, 1995

Dr. Richard G. Tennessen
Chairman, Board of Trustees
Guam Community College
P.O. BOX 23069
GMF, Guam 96921

Dear Dr. Tennessen:

Subject:  Final Audit Report on Federal Grants Administration, Guam Community
        		College (No. 95-I-1202)

This report presents the results of our review of Federal grants administration by
Guam Community College. The objective of the review was to determine whether
Guam Community College administered Federal grants (other than Federal student
financial assistance programs) in accordance with grant agreements and applicable
laws and regulations. Our review covered expenditures charged to Federal grants
in fiscal years 1992 and 1993.

Our audit disclosed that the Community College did not allocate salaries for full-
time employees on the basis of actual work load distribution and that it incorrectly
charged overtime wages to Federal grants. Further, the Community College paid
and charged to Federal grants part-time wages that were unallowable under Federal
grant regulations, in excess of employment contract rates, or not supported. These
conditions occurred because the Community College did not have procedures that
would ensure compliance with Federal and local requirements pertaining to personal
services charges. As a result, we questioned personal services charges of $157,204.

To correct the conditions noted, we recommended that your office request the
Community College President to ensure that charges to Federal grant programs for
personal services are in accordance With-Office of Management and Budget Circular
A-21 and Title 4, Guam Code Annotated.

Based on the response (Appendix 3) to the draft report from the Chairman, Board
of Trustees, Guam Community College, we consider one recommendation resolved
and implemented, one recommendation resolved but not implemented, and one
recommendation unresolved (see Appendix 4). Also based on the response, we
revised two recommendations and did not include the discussion of equipment that
was contained in our draft report.

 
The Inspector General Act, Public Law 95-452, Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary
impact of audit findings (Appendix 1), actions taken to implement audit
recommendations, and identification of each significant recommendation on which
corrective action has not been taken.

In view of the above, please provide a response, as required by Public Law 97-357,
to this report by October 20, 1995. The response should provide the information
requested in Appendix 4. A copy of your response should also be provided to our
North Pacific Region, 238 Archbishop F.C. Flores Street, Suite 807; Pacific News
Building; Agana, Guam 96910.

                        					 Sincerely,

                   					    /s/ Judy Harrison (for)

                       					  Marvin Pierce
                      					   Acting Assistant Inspector General
                     					        for Audits

cc: President Guam Community College
      Director, Bureau of Budget and Management Research

 
				CONTENTS

                                          				                         Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . ...1


   BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1
   OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...2
   PRIOR AUDIT COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . ...2


FINDING AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . ...4


   PERSONAL SERVICES COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . ..4


APPENDICES

1.CLASSIFICATION OF MONETARY AMOUNTS . . . . . . . . . . . . 9
2.SCHEDULE OF CHARGES TO FEDERAL GRANT
PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 10
3.GUAM COMMUNITY COLLEGE RESPONSE . . . . . . . . . . . . . . 11
4.STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . . . 20






 
                  			       INTRODUCTION

BACKGROUND

Guam Community College, an autonomous entity of the Government of Guam, was
established by Guam Public Law 14-77 on November 11, 1977. The Community
College consists of three instructional divisions. The Secondary Division operates
Guam's vocational-technical high school. The Post Secondary and Continuing
Education Division provides degree and nondegree vocational-technical and career
programs.  The Apprenticeship Training Division was established to develop
apprenticeship training programs in view of the local needs for employees skilled in
various crafts and trades. In the fall 1993 semester, enrollment in the Community
College was as follows: the vocational high school, 1,441 students; the adult high
school, 329 students; the post secondary school, 2,217 students; the Criminal Justice
Academy, 138 students; and the apprenticeship program, 352 students. The
Community College is administered by a seven-member Board of Trustees appointed
by the Governor subject to confirmation by the Legislature. Day-to-day operations
are managed by the President of the Community College, who is appointed by the
Board of Trustees.

The Community College maintains its records and accounts separate and apart from
other Government of Guam accounting activities. For fiscal years 1992 and 1993,
the Community College had revenues of $20 million and $15.4 million, respectively
(including Government of Guam subsidies of $16.4 million and $13.6 million,
respectively), and expenditures of $19.8 million and $17.8 million, respectively. The
Community College charged expenditures of $1.8 million to 16 Federally funded
programs in fiscal year 1992 and $1.02 million to 11 Federally funded programs in
fiscal year 1993 (see Appendix 2).

The criteria for administering Federal grants are contained in Office of Management
and Budget Circular A-110, "Uniform Administrative Requirements for Grants and
Agreements With Institutions of Higher Education, Hospitals and Other Nonprofit
Organizations," and Office of Management and Budget Circular A-21, "Cost
Principles for Educational Institutions." In addition, Title 4 of the Guam Code
Annotated contains the criteria applicable to employees of the Government of
Guam, and Title 5 of the Guam Code Annotated contains the criteria for the
procurement of goods and services.

1

 
OBJECTIVE AND SCOPE

The objective of our audit was to determine whether Guam Community College
administered Federal grants (other than Federal student financial assistance
programs) in accordance with the grant agreements and applicable laws and
regulations. Our grant audit covered Federal grant expenditures that occurred
during the period October 1, 1991, through September 30, 1993. Audit work was
performed at the Community College and the Guam Department of Education.

Our review was made, as applicable, 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.

As part of our audit, we evaluated the system of internal controls related to the
administration of Federal grant programs at the Community College. We did not
review the internal controls relating to travel charges because these controls were
included in the Office of Inspector General's audit report on the Government of
Guam's travel practices (see Prior Audit Coverage). We found internal control
weaknesses in the charging of costs for personal services. This weakness is discussed
in the Finding and Recommendations section of this report. Our recommendations,
if implemented, should improve the internal controls in this area. Also, based on the
Community College's response to the draft report, we did not include in this report
the discussion of equipment that was contained in our draft report.

PRIOR AUDIT COVERAGE

During the past 5 years, neither the U.S. General Accounting Office nor the Office
of Inspector General has issued any reports that addressed the administration of
Federal grants at the Community College. However, the Office of Inspector General
issued a report in November 1993 entitled "Travel Practices, Government of Guam"
(No. 94-1-106), which included the Community College. The report concluded in
part that the need for travel was not adequately justified and per diem was not
limited to amounts authorized by law for travel expenditures of $1,456. In addition,
the Community College did not require travelers to file travel documents after they
completed travel.

A certified public accounting firm issued a single audit report on the Community
College for fiscal years 1987 and 1988. The report stated that no material instances
of noncompliance were identified and that the Community College had complied, in
all material respects, with requirements applicable to major Federal financial
assistance programs. However, the report stated that the financial status reports
used to claim grant expenditure reimbursements did not agree with the financial

2

 
statements, resulting in unreimbursed Federal grant expenditures of $526,000. In
addition, the report questioned expenditures of $5,012 that were incorrectly charged
to Federal grants.

         


 
     			              FINDING AND RECOMMENDATIONS

PERSONAL SERVICES COSTS

In charging personal services costs to Federal grant programs, Guam Community
College: (1) did not allocate employees' salaries on the basis of actual work load
distribution and incorrectly charged overtime wages; (2) included additional part-time
wages (paid to full-time employees), which was not allowable under Federal grant
regulations and was contrary to local law;1 and (3) included part-time wages that
either were in excess of employee contract rates or were not supported for the
Federal programs for which they were charged. These conditions occurred because
the Community College did not have procedures to ensure: (1) that charges to
Federal grants for personal services were based on a system of work load monitoring
or personnel activity reports; and (2) that the College's employment practices
complied with the restrictions imposed by Federal grant regulations and local law.
As a result, for fiscal years 1992 and 1993, we questioned personal services costs of
$157,204: payroll wages, $94,958; additional wages, $39,355; excess wages, $1,799;
and unsupported wages, $21,092.

Payroll Wages

The Community College charged full-time and overtime wages to Federal grant
programs that were not allocable to those programs. This occurred because the
Community College did not base charges for personal services on either a system of
monitored work load or a system of personnel activity reports. As a result, the
Community College charged, to Federal grant programs, personal services costs of
at least $94,958 ($51,178 for fiscal year 1992 and $43,780 for fiscal year 1993) that
were not allocable to those programs.

Circular A-21 provides that a cost is allocable to a Federal program if it is incurred
solely to advance the work under the program. The Circular also provides that these
costs may not be shifted to other grant programs in order to meet deficiencies caused
by overruns or other fund considerations, to avoid restrictions imposed by law or by
terms of the grant or for other reasons of convenience. In addition, the Circular
requires that Federal grant charges for compensation for personal services be based
on either a system of monitored work load or a system of personnel activity reports.

In fiscal years 1992 and 1993, the Community College charged wages to Federal
grant programs as follows: full-time wages, $873,319 ($512,634 in fiscal year 1992

10ffice of Management and Budget Circular A-21 contains the cost principles applicable to Federal grants, and Title 4 of the Guam Code Annotated contains provisions applicable to all employees of the Government of Guam.

4

 
and $360,685 in fiscal year 1993); part-time wages, $384,681 ($220,753 in fiscal year
1992 and $163,928 in fiscal year 1993); and overtime wages, $20,439 ($447 in fiscal
year 1992 and $19,992 in fiscal year 1993).

We reviewed documentation supporting full-time wages of $850,626 charged to
Federal grants for 30 employees, and we interviewed 23 of these employees to
determine whether their wages were charged to the proper grants. We determined
that $76,433 of the $850,626 was not charged to the proper grant programs. For
example, our review of one employee's full-time salary for fiscal year 1992 indicated
that 99 percent of his $53,872 annual salary was charged to the Vocational Education
Program and 1 percent was charged to the Adult Education Program, both Federally
funded programs. There was no documentation to support the Community College's
basis for allocating the employee's wages between the two programs. In addition, the
employee stated that he performed services for the Vocational Education grant only
50 percent of the time but that the majority of his salary was charged to the
Vocational Educational Program because more funds were available in that program.
This resulted in the Vocational Education grant being overcharged by $26,397 and
the Adult Education Program being undercharged by the same amount.

Of the $850,626 in full-time wages we reviewed, we were not able to determine
whether full-time wages of $188,266 were charged to the proper Federal grant
programs because the Community College did not maintain the required activity or
confirmation records and the employees were not available for interview.

The Community College did not have documentation to support that $18,525 charged
to Federal grants for overtime work directly benefited Federal grant programs. Also,
the Community College did not document why the cost of overtime work was
charged to Federal grant programs while the cost of work performed during the
employees' base salary period was charged entirely to local programs. As a result,
we questioned overtime charges of $18,525.

During the last 3 months of fiscal year 1993, the Community College charged
Federal grant programs overtime costs of $3,575 that were paid to a procurement
section administrative assistant to the Federally funded Drivers Education Program,
although the employee's regular salary, as well as $6,153 in overtime paid during the
preceding 8 months, was charged to local. funds. The Community College could not
provide documentation to support the allocation of the overtime to a Federal grant
program. Further, the employee stated that his regular duties included responsibility
for coordinating the maintenance of the Community College's fleet of cars, including
Drivers Education Program cars, and that he was regularly paid overtime.
Therefore, based on the duties performed by the employee, the amounts paid
represent an indirect cost and are not allowable as a direct cost of the grant.
Accordingly, we questioned overtime costs of $3,575 charged to the grant.

5

 
Additional Wages

The Community College charged at least $39,355 ($18,739 for fiscal year 1992 and
$20,616 for fiscal year 1993) to Federal grant programs for part-time wages paid to
employees in addition to their full-time salaries. Both Circular A-21 and Title 4 of
the Guam Code Annotated contain restrictions on compensation in excess of base
salary for personal services not related to teaching activities. This occurred because
the Community College did not have procedures to ensure that its employment
practices complied with the restrictions imposed by Federal grant regulations and
local law.

For example, a financial aid office employee whose regular full-time wages were
charged to local program funds was paid additional wages of $4,509 in fiscal year
1992 and $9,378 in fiscal year 1993 that were charged to a Federally funded program.
According to the Community College Assistant State Director, the Community
College knew that paying part-time wages to this employee in fiscal year 1992 was
prohibited "dual compensation." The Community College subsequently discontinued
the part-time pay. However, in fiscal year 1993, the Community College paid the
same employee overtime wages in lieu of part-time wages, apparently to avoid a
violation of Guam law. Accordingly, we questioned both the part-time wages paid
in fiscal year 1992 and the overtime wages paid in fiscal year 1993.
Excess and Unsupported Compensation

The Community College charged Federal grant programs for part-time wages that
either were in excess of employment contract wage rates or were unsupported.
Specifically, of the part-time wages reviewed, we determined that the Community
College charged $1,799 ($996 in fiscal year 1992 and $803 in fiscal year 1993) more
to Federal grants than the amount specified in the employees' teaching contracts.
In addition, the Community College could not support whether part-time wages of
$21,092 ($14,890 in fiscal year 1992 and $6,202 in fiscal year 1993) paid to full-time
employees benefited the Federal grant programs for which they were charged.

Recommendations

We recommend that the Chairman, Board of Trustees, Guam Community College,
request the President of the Community College to:

       1. Ensure compliance with the requirement in Office of Management and
Budget Circular A-21 that the allocation of personal services charges to Federal
grant programs should be based on either a system of monitored work load or a
system of personnel activity reports.

6

        2.  Ensure implementation of the Community College's policies and
procedures related to "dual employment."

       3. Advise the grantor agencies of the questioned costs and either resolve
questioned costs with the grantor or arrange for repayment.


Guam Community College Response

The November 9, 1994, response (Appendix 3) to the draft report from the
Chairman, Board of Trustees, Guam Community College, cited written procedures
that are in place to address Recommendations 1 and 2 and did not concur with
Recommendation 3.

     Recommendation 1. The Community College stated that it had used a
monitored work load system before the end of 1992. The College further stated that
the system had been "revised and modified and made even more specific," including
the incorporation of nonregulatory guidance provided by the U.S. Department of
Education on time distribution for entities governed by Office of Management and
Budget Circular A-87.

     Recommendation 2. The Community College stated that it already has
regulations and procedures "that would stop any questionable practices with regard
to `dual employment,'" and it included information in its response that it said
supported this statement. The College further stated that the Personnel Services
Administrator will be requested to ensure that issues regarding dual employment are
made a part of the College's Personnel Policies and Procedures.

     Recommendation 3. The Community College stated that "there should be no
questioned costs" for the three examples cited in our report as follows: First the
work load related to grant assignments was being documented by the College "within
the parameters of the Federal requirements for the period audited." Second, since
management is authorized by the Guam Code to assign duties that may require
overtime, the report's conclusion that overtime costs for the Drivers Education
Program employee should have been indirect costs and therefore not charged to
Federal grants was "incorrect." Third, since the "fundamental tasks" in the agreement
for the Women's Program relate to "counseling and instruction," it therefore
"appears" that this activity is covered by that part of the law that "clearly allows" for
dual employment when the second employment relates to instructional activities,
which is indicated as a duty in the position description of the Financial Aid Officer.
The Community College also stated that it could not respond to the section "Excess
and Unsupported Compensation" because "specifics were not mentioned."

7

 
Office of Inspector General Comments

Based on the response from the Community College, we consider Recommendation
1 resolved and implemented, Recommendation 2 resolved but not implemented, and
Recommendation 3 unresolved (see Appendix 4).

In its response to Recommendations 1 and 2 in our draft report, the Community
College said that it did have written procedures in place to address these
recommendations. Therefore, we revised these recommendations for our final report
so that compliance with these written procedures would be ensured.

Regarding Recommendation 3, even though we accept the Community College's
statement that it has the necessary systems, regulations, and procedures to provide
adequate supporting documentation for the costs incurred (Recommendations 1 and
2), adequate documentation was not provided during the audit or in the Community
College's response for the questioned costs discussed in this finding. Therefore, we
request that the Community College reconsider its response to the recommendation
and either provide the supporting documentation or advise the grantor agencies as
to how it intends to resolve the questioned costs. Also, Community College officials
can review, upon their request, specific information on the questioned costs that is
contained in our working papers.

 
                                        APPENDIX 1


          CLASSIFICATION OF MONETARY AMOUNTS


  Finding                        		 Questioned Costs*
                         		Fiscal Year 1992     Fiscal Year 1993          Total

Personal Services        $85,803        	$71,401 	 $157,204























*Amounts represent Federal funds.

 
                                                          			 APPENDIX 2

SCHEDULE OF CHARGES TO FEDERAL GRANT PROGRAMS

Program

Vocational Education
Adult Education
Cooperative Education
National Literacy Workplace
Engineer Achievement
Federal Endowment
Project 3-D
Drivers Education
Technology Education
Special Education
Drug Free Program
Career Outreach
Title III
Facility Grant
Headstart
Suicide Intervention
Manhita Todo
Child Care and Development
Pacific Vocational Educational
Improvement

Total

FY 92
Amount

$395,936
231,415
32,440
123,045
4,100
500,000
8,528
20,550
114,171
251,182
26,002
3,528
91,050
7,588
1,129
1,035
N/C
N/C
 
FY 93
Amount
$513,376
100,392
14,903
N/C
N/C
N/C
N/C
29,153
36,670
204,449
22,116
N/C
N/C
N/C
1,803
N/C
48,363
4,029

47,914

N/C - No charge to the program.

10

 
                                        						APPENDIX 3
                                        						Page 1 of 9


GCC
Guam Community College
Kulehon Kumunidat Guahan
Accredited by the
Western Association of
Schools and Colleges

                                  				 November 9, 1994

Sam W. Gillentine
Regional Audit Manager
Office of Inspector General
North Pacific Region
238 Archbishop F. C. Flores Street
PDN Building, Suite 807
Agana, Guam 96910

Re: Letter of September 27, 1994; assignment N-IN-GUA-011.93.

Dear Mr. Gillentine:

Guam Community College (GCC) is in receipt of your draft audit and letter dated
9/27/94. This letter represents GCC's response to various recommendations
made in the audit plus comment about the findings.

A. PERSONAL SERVICES FINDINGS AND RECOMMENDATIONS

Recommendation 1

  Develop and implement written procedures with regard to the charging of personnel   activity  to   Federal grant programs.

  Prior to the end of 1992, GCC utilized a monitored work load system
  whereby a limited number of personnel were assigned to grants and if
  necessary personnel costs were transferred to/from the grants to reflect the
  assignment and activity of the employees. On November 25, 1992, Winifred
  Warnet, Director of Vocational-Technical Education for the Federal
  Government issued "Non-Regulatory Guidance Regarding Time Distribution
  Records." (Emphasis added; see Appendix A-A). This document provided
  information on additional suggested ways of recording record keeping on
  employees who worked on grants. GCC immediately reviewed the memo
  (see Appendix A-B) and also distributed Dr. Warnat's memo. During the
  rest of FY 93, during the time that the memo was being studied and
  implemented, documentation on grant effort was handled as noted in the
  memo to the file from the Administrative Semites Officer (ASO) (See
  Appendix A-C). In that memo the ASO notes that during that period

     P.O. Box 23069, Barrigada, Guam 96921 * Phone: (671) 734-4311 *  Fax: 734-1003

11
 
                   					                     APPENDIX 3
                               					         Page 2 of 9

Page 2
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

time keepers and employees were contacted to verify the  proper allocation of time
and effort. Starting with FY 94, GCC put into place a time and effort reporting
system (See Appendix A-D). This system has been revised and modified and made
even more specific. It has been discussed with federal personnel who have visited
GCC and it has been additionally revised in accord with certain of their suggestions
(See Appendix A-E).

Per this review it can be clearly said that GCC has in place a system for tracking the
allocation of personal services charges to Federal grant programs. Based on this
review it can also be said that GCC has been responsive to even the "non-regulatory
guidance" of the federal government with regard to tracking personal activity on
formula and other grants. It has been and continues to be the policy of the Board
of Trustees and the management of GCC to follow the federal rules and regulations
that apply to grants and contracts at GCC. While the DOI Auditor may not like the
level of documentation that was available in FY 92 and FY 93, GCC believes that at
that time it was being responsive to the requirements of the federal government for
formula and other grants. This is especially so because the memo from the Federal
government suggesting additional documentation requirements (Appendix A-A)
clearly indicates that it is "non regulatory" and it did not cite other federal regulations
for its suggestions. It should also be noted that formula grants do not allow for
indirect costs to be charged to them in any way.

Recommendation 2

  Develop and implement written procedures to ensure that GCC does not hire personnel contrary    to the "dual employment" rule in Guam law.

  The memo from GCC's Personnel Services Administrator indicates that GCC put in
  place regulations and procedures that would stop any questionable practices with
  regard to "dual employment." See Appendix A-F.  In addition the Personnel Services
  Administrator will be asked to make sure that issues with regard to dual employment
  are made part of GCC's Personnel Policies and Procedures.

Recommendation 3

  Advise grantor agencies of questioned costs and resolve any related issues.

  Response. Questioned costs fundamentally relate to three items. Item one is

12 


                                  					  	APPENDIX 3
                                        						Page 3 of 9

Page 3
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

documenting work load related to grant assignments. Based on the discussion in
recommendation one noted above, GCC believes that they were documenting
workload within the parameters of the Federal requirements for the period audited.
Therefore there should be no questioned costs with regard to that item.

Item two relates to the charging of overtime work to federal grants. The only
example the audit cites is the instance of the Driver's Education Program. The
employee cited was interviewed. He indicated that the statement in the audit was
incorrect.  During the period mentioned his regular duties did not include
"responsibility for coordinating the maintenance of the Community College's fleet of
cars." This was also confirmed by the employee's vice president. Therefore the
conclusion in this section of the audit about "indirect  cost [s]" is incorrect. Appendix
A-G notes the authority of management in GovGuam to assign additional or collateral
duties (p 15). This includes the authority to assign duties that may require overtime.
Because management may legitimately make such assignments there should be no
questioned costs with regard to this item.

Item three relates to the payment of part-time employment for employees who are
also working full-time at the college. The example cited was of an financial aid office
employee who also had responsibility for running the Women's Program. The
Assistant State Director was quoted in this section of the audit. He has been
interviewed and he indicates that quote is incorrect in that it implies that he knew of
a problematic situation in FY 92. In any case the task requirements of the grant
have been reviewed. A summary is included as Appendix A-H. It indicates that the
fundamental tasks in the program agreement relate to counseling and instruction.
Given this fact, it appears that this activity comes under that part of the law that
clearly allows for dual employment when the second employment relates to
instructional activities. Also see Appendix A-1 which shows that counseling activities
are considered a subset of inspection activities (see section C.2). See also the
memo of the Financial Aid Officer indicating the instructional and counseling nature
of the position (Appendix A-J). In any case in FY 93 GCC switched to the use of
overtime based on the analysis done by the Personnel Services Administrator (see
Appendix A-K and Appendix A-G). It is clear that the use of overtime is correct and
falls within the parameters of GovGuam law. Therefore there should be no
questioned costs with regard to this item.

The final section covers Excess and Unsupported Compensation (p 9). Since
specifics were not mentioned, it is not possible to respond specifically except to

13

 
                                      						  APPENDIX 3
                                       						 Page 4 of 9

Page 4
Letter to Sam W. . Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

mention that this appears to be a continuation of the issues noted in
recommendation one above.  Those concerns were dealt with in that
recommendation. Therefore it there should be no questioned costs with regard to
this item.

B. EQUIPMENT RECOMMENDATIONS AND FINDINGS

Recommendation 1

  Develop and implement procedures to ensure that procurements funded by Federal grants   comply with grant terms and conditions and prior grantor approval.

  As noted in Recommendation one under PERSONNEL it has been and continues
  to be the policy of the Board of Trustees and the management of GCC to follow the
  federal rules and regulations that apply to grants and contracts at GCC as well as
  any related GovGuam rules and regulations. However it should be noted that there
  has been a fundamental error made in this audit. Please review the faxed letter from
  the Office of Vocational and Adult Education (Appendix B-A). It clearly indicates that
  any need for prior approval for equipment purchases has been waved by the Office
  of Vocational and Adult Education for their formula grants. Since the great bulk of
  the findings relate to an incorrect audit assumption, significant revision of the audit
  findings is necessary. In addition it should be noted that it was pointed out to the
  auditors while they were at GCC that formula grants such as VEA and ABE did not
  require prior approval.

  The audit indicates that 90 out of 91 purchases did not have prior approval from the
  federal granting agency (p 12). Based on the notification above, this is clearly an
  incorrect statement.               

  In the same section the audit questions the purchase of a greenhouse for lack of
  prior approval and for the fact that the greenhouse was not mentioned in the state
  plan. Since prior approval is not necessary, specific mention of items in the State
  plan is not necessary.  However it should be noted that the Annual Plan for
  Horticulture for FY 93-94 includes the purchase of a greenhouse (Appendix B-B).
  In addition the approved Guam State Plan (Appendix B-C) includes the objective of
  providing "direct program support in terms of staff and material." The postsecondary
  program agreement (Appendix B-D) under which the greenhouse was purchased

14

 
                                  					 APPENDIX 3
                                   					Page 5 of 9

Page 5
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

  includes as an objective the purchase of "necessary materials, books, and
  equipment for the start-up of new courses and programs." Horticulture  was a new
  program and GCC's standard process of review includes the review of departmental
  annual plans. Therefore it can be clearly said that the purchase of the greenhouse
  was within parameters of the requirements of the formula grants involved and the
  required planning processes including the state plan.

  In the section Grant Related Use (p 13) the audit criticizes GCC for purchasing
  furniture for the library because such purchase was not in the state plan and
  because the furniture "benefits all of the Community College Programs." First a
  review of the paragraphs above clearly show that specific mention in the state plan
  Is not required. The relevant section of the approved state plan notes the following:
  "GOAL: The goal of the vocational program renovation activities is to improve the
  College's instructional stations and laboratories (Appendix B-E)." The same plan
  also notes the objective to "renovate existing vocational and technical education
  facilities..." Therefore the purchase was within the parameters of the formula grants
  involved.  In addition it should be noted that formula grants provide for
  supplementing state funds in support  of programs that are related to grant outcomes
  (Appendix B-F). The Perkins II act itself says "Funds made available under title ii
  shall be used to supplement, and to the extent practicable increase the amount of
  State and local funds that would in the absence of such Federal funds be made
  available to the uses specified in the application, and in no case supplant such State
  or local funds." Since the funds involved supplemented GovGuam funds, it is clear
  that it is appropriate that in many cases the outcome benefit all the Community
  College's programs.

  The same section also criticizes GCC for purchasing a van to support the activities
  of the Nursing Assistant Program. As part of the criticism, the act quotes the
  minutes of the departmental meeting of Allied Health. The audit states that the Dean
  of the School of Technology and Allied Health made a statement about the use of
  the van during that meeting and based on that statement, GCC is being criticized.
  It should be noted that the minutes of the meeting show that the dean was not
  present at the meeting and therefore could not have made a statement about the
  van. Further there is nothing in the minutes (Appendix B-G, p 2) that supports the
  quotation noted. The quote is from the Department Head for Allied Health. At that
  point the Department Head is speaking to the other members of the same
  department. Therefore there can be no implication drawn about the van being
  purchased for some other reason than for the needs of Allied Health.

15

 
                                      					  APPENDIX 3
                                       					 Page 6 of 9

Page 6
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

  However it should be clearly noted that the audit also incorrectly assumes that
  equipment items may only be directly used for the purposes directly allowed by the
  grant. First of all as noted above, it is the intention of the Perkins Act that its funds
  supplement available GovGuam funds. As part of such a supplement it is clear that
  such funds may benefit purposes which are also benefited by GovGuam funds.
  Otherwise the supplement statement could have no meaning. In addition it should
  be noted that Edgar (80.32 c2) states: "The grantee or subgrantee shall also make
  equipment available for use on other projects or programs currently or previously
  supported by the Federal Government, providing such use will not interfere with the
  work on the projects or program for which it was originally acquired." (Appendix B-
  H). In addition the Perkins Act itself, under which the van was purchased, says:
  "Equipment purchases pursuant to sections 231 and 232, when not being used to
  carry out the provisions of this Act, may be used for other instructional purposes if 

       (A)  the acquisition of the equipment was reasonable and necessary for the
       purpose of conducting a properly designed project or activity under
       this title;
       (B) is used after regular hours or on weekends; and
         such other use is
            I    incidental to the use of that equipment under this title, and
            ii   does not interfere with the use of that equipment under this title;
                  and
            iii  does not add to the cost of using that equipment under this title
                  (Appendix B-1)

  This van was purchased because it was necessary for the purposes of conducting
  a properly designed project. It is available to be used by other departments only 
  when it is not needed by Allied Health; its use is incidental to its use for Allied Health
  and does not interfere with Allied Health's needs and does not add to the cost of
  using that equipment under this title. The recorded use of this van falls entirely
  within the parameters of the grant.

Recommendation 2

   Develop and implement procedures to ensure that procurements are conducted competitively    in accord with appropriate law.

  It has been and continues to be the policy of the Board of Trustees and the

16

 
                                      					  APPENDIX 3
                                      					  Page 7 of 9

Page 7
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

  management of GCC to follow the applicable GovGuam procurement rules and
  regulations as well as any Federal rules and regulations that may additionally apply
  to grants and contracts at GCC. The most recent evidence of this is from the
  revised BOT Policy Manual (Appendix B-J). GCC is in the process of revising these
  rules and regulations in accord with the changes that have already been approved
  for the GovGuam Department of Education as well as those changes that are
  currently under review for the GovGuam Department of Administration. These
  revisions include the upward revision of purchasing limits in accord with the
  limitations already approved by the Federal government for Guam. These include
  the new limit of $25,000 for sealed bid procurements.

  With regard to the purchase of eight computers for $22,970 it should be noted first
  of all that the audit is incorrect. The vendor from which the computers were
  purchased has a Guam business license. It is not correct to say that the company
  involved was an off-island business. Second the machines ordered came with the
  three year warranty, That warranty was significantly longer than that offered by any
  other vendor. Third this warranty is honored on-island, something that was not true
  of other companies and machines reviewed. Fourth, GCC had bad experience with
  other on-island vendors in terms of their performance and follow through after
  winning bids. In some cases specified items were not delivered or were delivered
  very late. At other times items were delivered without appropriate configurations or
  went bad very quickly.

  In order to meet these problems, GCC went on a search for a local vendor who
  could supply proven brand name product(s), could warrant those products and
  repair them on-island, and could demonstrate some level of deliverable and
  reliability. Because GCC had also experienced severe problems with a lack of
  comparability  between computer brands, it was also determined to be important that
  GCC standardize on a limited set of PC brands. A number of vendors were
  reviewed and price quotes were obtained from them. Initially GCC issued the
  attached memo (Appendix B-K) Subsequently Digital Equipment Corporation and
  Its reps were added to the list. The review indicated that at the time the only
  vendors who could come close to meeting the established standards were Digital
  Equipment Corporation (DEC) and Computerland.  Even Computerland had
  demonstrated a lack of follow through on some of the bids they had won. However
  their performance appeared to be adequate overall. Therefore since that time GCC
  has standardized on both DEC computers from Digital Equipment Corporation and
  NEC computers from Computerland. Periodically GCC checks with other suppliers

 
                                   					APPENDIX 3
                                  					 Page 8 of 9

Page 8
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

  to see if the situation has changed.

  As part of this analysis the files related to Computerland and DEC were reviewed.
  It was determined that during the period in question twelve quotes and evaluations
  were obtained from nine different companies. Given the number of quotes obtained,
  the extensive evaluation of purchasing alternatives, and the need for standardization,
  GCC believes that it was entirely within parameters in purchasing the machines
  noted. The same is true of the purchase totaling $1,970.00. AS part of the review
  of this process, the purchase for $22,970 was reviewed with a federal employee sent
  to help GCC review its grant management practices. That employee noted that it is
  entirely within parameters to accept higher bids if that represents legitimately
  established standards or meets other important needs. This is no different than the
  federal government itself settling on a limited set of PC brands.

  Periodically GCC management reviews purchasing procedures with GCC employees
  (Appendix B-L). A review of it and GovGuam purchasing law indicates that it is the
  purpose of purchasing regulations to ensure that the procurement regulations exist
  to "promote economy, efficiency and effectiveness in the procurement of supplies,
  services, and construction (Appendix B-M)." While part of that process is to ensure
  that GovGuam receive a fair price for what is purchased, price is only one part of the
  purchasing process.  The purchasing process allows discretion at key points
  including consideration of quality, ability to deliver, and repairability. This even
  extends to the use of sole source under a number of circumstances including "the
  compatibility of equipment, accessories, or replacement parts is the paramount
  consideration (Appendix B-N)".

  While the auditor may not agree with the decision made, it is requested that the
  auditor understand that appropriate efforts are being made at GCC to follow the
  rules and regulations that apply to all purchasing efforts including the ones noted.
                .

Recommendation 3

  Establish a property management system that ensures that property acquired with Federal funds   is accounted for and controlled appropriately.

  Guam Community College has been without the services of a property management
  officer for several years. Despite the severe budget cuts in the last two years, GCC
  hired a new property management officer in 11/93. As part of the initial efforts of

18

 
                                      					  APPENDIX 3
                                     					   Page 9 of 9

Page 9
Letter to Sam W. Gillentine
Re: Assignment N-IN-GUA-011.93
November 9, 1994

  this person an initial inventory has been taken. In addition, equipment has been
  purchased to allow for better tagging and tracking of equipment This latter process
  is just starting and should be completed as of 07/95. Included in this is the tracking
  and controlling of equipment by the source of funds that purchased the equipment.
  This includes tracking what federal funds purchased what items.

Recommendation 4

  Advise grantor agencies of the questioned costs and resolve any related issues.

  The analysis in items B-1 and B-2 indicates that the fundamental questions with
  regard to purchases of equipment with federal funds have been answered.
  Therefore there should be no questioned costs to be resolved.

   If there are any other questions, please let me know. Given the thoroughness of the
   response, GCC formally requests that this proposed audit be corrected and changed to a    management letter similar to what was done for the University of Guam.

  Thank you for your help and consideration as well as that of your staff.

                         					     Sincerely,

                          					    /s/ signed

                          					    RICHARD G. TENNESSEN, Ed.D.
                          					    Chairman

RGT:JJT/jjt
c John Cruz, President GCC

         

[APPENDICES TO RESPONSE  NOT INCLUDED BY OFFICE OF INSPECTOR
GENERAL.]

19

 
                                                    APPENDIX 4

          STATUS OF AUDIT REPORT RECOMMENDATIONS

			Finding/Recommendation
  Reference              		 Status                 Action Required 

    1                   		       Implemented.
    2                  		       Resolved; not
                     		       implemented.
    
     3              		      Unresolved.




No further action is required.
No further response to the Office of
Inspector General is required. The
recommendation will be referred to
the Assistant Secretary - Policy,
Management and Budget for tracking
of implementation.

Reconsider the recommendation. If
concurrence is indicated, provide an
action plan that includes a target date
and the title of the official responsible
for advising grantor agencies of
questioned costs and documentation on
how issues were resolved.

20

*U.S. GOVERNMENT PRINTING OFFICE:  1995 301-126/00065

 
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          THE OFFICE OF INSPECTOR GENERAL BY

Sending written documents to:                  		Calling:

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