[Final Audit Report on Selected Financial Activities of the Pinon Community School Board]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 95-I-416

Title: Final Audit Report on Selected Financial Activities of the
       Pinon Community School Board

Date: January 27, 1995

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       United States Department of the Interior
                OFFICE OF INSPECTOR GENERAL
                         Washington, D.C. 20240

MEMORANDUM

TO:          The Secretary

FROM:        Acting Inspector General

SUBJECT SUMMARY:  Final Audit Report for Your Information - "Selected
          Financial Activities of the Pinon Community School
          Board" (No. 95-I-416)

DISCUSSION: We concluded that the Pinon Community School Board complied
with Federal regulations regarding the student count process for determining annual
funding levels for dormitory operations. However, the funding process established
by these regulations permitted the School Board to receive funding for its dormitory
students that was based on a student count that exceeded student attendance during
the subsequent school year and that exceeded the stated capacity. This funding
process permitted school administrators to encourage children to stay in the Pinon
Community School dormitory while attending special activities at Pinon during count
week. As a result, during school years 1992-1993 and 1993-1994, the School Board
received $568,551 in funding for students who did not reside in the dormitory during
the school year, which included $253,339 for housing students who were in excess
of the dormitory's capacity. We also found that because of inadequate control over
its budgets and expenditures, the School Board incurred, from July 1992 through
February 1994, a funding shortfall of at least $62,647 on the contract for design of
the new dormitory and, from July 1992 through December 1993, incorrectly applied
$64,546 of school operations funds for School Board administration.

We recommended that the Office of Indian Education continue to consult with
interested parties to refine the process used to determine the amount of funds
distributed to schools and that the Bureau of Indian Affairs ensure that the School
Board complies with contract and grant standards for administrative and financial
management systems and resolves the monetary issues relating to funding.

Based on the Bureau's response to the draft report, we considered three of the
report's six recommendations resolved. We have requested the Bureau to respond

to the three unresolved recommendations, two of which have been revised based on
the Bureau's response.

Attachment     .

Prepared by: Marvin Pierce
Extension: 208-4252

C-IN-BIA-005-94

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

Arlington, VA 22209

Memorandum

To:   Assistant Secretary for Indian Affairs

From:  Acting Assistant Inspector General for Audits

Subject:  Final Audit Report on Selected Financial Activities of the Pinon
    Community School Board (No. 95-I-416)

This report presents the results of our review of selected financial activities of the
Pinon Community School Board, Inc. The School Board operates a kindergarten
and dormitory for the Navajo Nation in Pinon, Arizona. This audit was requested
by the Bureau of Indian Affairs Navajo Area Office because of possible
mismanagement of Federal contract funds by the School Board. Accordingly, our
audit objective was to determine whether contract and grant funds were used
efficiently and economically and in accordance with applicable requirements. We
expanded the scope of our audit to include an evaluation of the student count of
dormitory students (used as a basis for funding) because of questionable practices
used by the School Board in developing the counts.

Our review disclosed that the Bureau approved a funding level based on an
inaccurate dormitory student count.  Consequently, during July 1992 through
January 1994, the Pinon Community School Board received $568,551 in funding for
students who did not actually reside in the dormitory during the school years. In
addition, the School Board experienced a financial funding shortfall of at least
$62,647 for a dormitory construction project and misapplied education formula funds
totaling $64,546 for School Board activities.

To correct the identified problems, we recommended that (1) the Office of Indian
Education continue to consult with interested parties to refine the process used to
determine the amount of funds distributed to schools, (2) the Bureau ensure that
the School Board complies with contract and grant standards for administrative and
financial management systems, and (3) the Navajo Area Contracting Officer resolve
the monetary issues relating to Indian School Equalization Program funding and
administrative cost grant funding.

In its September 8, 1994, response (Appendix 3) to our draft report, the Bureau
disagreed with the recommendations concerning student count, School Board costs,
and lobbying costs (Nos. A.l, B.3, and B.4, respectively). Based on the response,
we have revised Recommendations A. 1 and B.3 and have requested the Bureau to
provide a response to the revised recommendations and to reconsider its response
to Recommendation B.4, which is unresolved. The Bureau generally agreed with the

remaining recommendations. In addition, the School Board provided its comments
to the Bureau on August 22, 1994 (Attachment to Appendix 3). Comments from
both the Bureau and the School Board were considered and incorporated into the
report as appropriate.

In accordance with the Departmental Manual (360 DM 5.3), we are requesting a
response to this report by March 24, 1995. The response should provide the
information requested in Appendix 7.

The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the 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.