[Audit Report on the Protection and Advocacy of the Marianas, Territory of Guam ]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-179

Title: Audit Report on the Protection and Advocacy of the Marianas,
       Territory of Guam 

Date: December 23, 1997

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N-IN-GUA-009-96

United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
    Washington, D.C. 20240

Mr. Oleh Vitkovitsky
President, Board of Directors
Protection and Advocacy of the Marianas
P.O. Box 8830
Tamuning, Guam 9693 1

Subject: Audit Report on the Protection and Advocacy of the Marianas, Territory of Guam 
(No. 98-I-179)

Dear Mr. Vitkovitsky:

This report presents the results of our review of the Protection and Advocacy of the
Marianas, a nonprofit organization doing business as the Advocacy Office. The objective
of the review was to determine whether the Advocacy Office administered and expended
Federal grant funds in accordance with applicable requirements. The scope of the audit
included all grant-related Advocacy Office operations that occurred during fiscal years
1994, 1995, and 1996 (to March 1, 1996). However, our audit scope was limited because
the Advocacy Office's accounting records were not adequate to identify the application of
funds among the Federal grants and the local programs. During the audit period, the
Advocacy Office received $863,733 in Federal grants and expended $740,2 13 for
operations.

We concluded that the Advocacy Office needed to make improvements in the areas of
financial management, program administration, procurement and property management,
and expenditure control. Specifically, we found that:

  - The Advocacy Office did not have an approved indirect cost rate, used Federal
grant funds for other than grant purposes, did not properly allocate personal services costs
among its Federal programs, and did not provide required financial reports to grantor
agencies and prepare annual budgets.

  - The Advocacy Office did not adequately document the eligibility of clients to
receive protection and advocacy services, authorized payment for legal services that were
not clearly authorized by the Federal grants, and did not ensure that caseworkers
documented actions taken to address clients' concerns.

  - The Advocacy Office did not obtain prior grantor approval for equipment
purchases, did not conduct procurements competitively, and did not adequately control
personal property.

 
  - The Advocacy Office incurred unallowable and unnecessary expenditures for
retroactive salary payments; local and off-island travel: and miscellaneous costs, including
rent and computer purchases.

These conditions occurred because the Advocacy Office had not developed a financial
management system that was adequate to prepare and submit an acceptable indirect cost
proposal and to ensure that Federal grant funds were used only for grant-related purposes
and were properly protected, allocated, and accounted for. In addition, the Advocacy
Office had not developed and implemented written procedures for case reviews,
procurement actions, and property management and had not performed formal case file
reviews to ensure that the files contained all appropriate documents.

As a result of our review, we questioned costs totaling $743,995, including procurement
actions totaling $91,630, and could not locate property items valued at $8,813. In
addition, the Advocacy Office was unable to support that Federal funds were used for
grant-related purposes. The Office's Executive Director said that the expenditures we
questioned were necessary for operation of the Advocacy Office and were appropriate
because the expenditures were based on policies adopted by the Board of Directors of the
Protection and Advocacy of the Marianas.

To correct the conditions noted, we made 11 recommendations to the Board of Directors
of the Advocacy Office, including the recommendations that the Advocacy Office should:
(1) advise the U.S. Department of Health and Human Services and the U.S. Department
of Education of the questioned costs charged to the Federal grants and either resolve the
questioned costs or arrange for repayment; (2) develop and implement a system of
personnel activity reports to support distribution of personal services costs and prepare and
submit, to our North Pacific Region, indirect cost proposals; and (3) develop and
implement procedures to ensure compliance with requirements related to financial
reporting and budgeting, client and service eligibility, case file documentation, competitive
procurement, property management, and the allowability of expenditures.

On August 4, 1997, we personally delivered a draft of this report to you requesting your
response by September 12, 1997.  On September 19, 1997, the Advocacy Office
personally delivered its response, which was dated September 12, 1997 (see Appendix 5).
The Advocacy Office indicated concurrence with all of the recommendations. Based on
the response, we considered 1 recommendation resolved and implemented and requested
additional information for the remaining 10 recommendations (see Appendix 6).

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 l), 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 January 23, 1998. The response should be addressed to our North Pacific
Region, 238 Archbishop F.C. Flores Street, Suite 807, Pacific News Building, Agana,
Guam 96910. The response should provide the information requested in Appendix 6.

We appreciate the assistance of Board members and Advocacy Office staff during the
conduct of our audit.

Inspector General

cc: Executive Director, Protection and Advocacy of the Marianas
Governor, Territory of Guam
President, University of Guam

 
CONTENTS

Page

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

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

FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. FINANCIAL Mi4NAGEMENT  ..........................  4
B. PROGRAM ADMINISTRATION  ........................  12
C. PROCUREMENT AND PROPERTY MANAGEMENT.  .........  18
D. EXPENDITURE CONTROL  ...........................  23

APPENDICES

1. CLASSIFICATION OF MONETARY AMOUNTS . . . . . . . . . . . . . 29
2. PROGRAM AND QUESTIONED COSTS FOR FISCAL YEARS
  1994, 1995, AND 1996 (TO MARCH 1, 1996) . . . . . . . . . . . . . . 30
3. RECONCILIATION OF QUESTIONED COSTS SHOWN IN
  APPENDICES 1 AND 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4. U.S. CODE REQUIREMENTS FOR ELIGIBILITY TO
  PARTICIPATE IN THE PROTECTION AND ADVOCACY
  PROGRAMS ADMINISTERED BY THE ADVOCACY OFFICE . . 32
5. ADVOCACY OFFICE RESPONSE . . . . . . . . . . . . . . . . . . . . . . . 34
6. STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . . . . . 49

 
INTRODUCTION

BACKGROUND

The Protection and Advocacy of the Marianas, a nonprofit organization doing business as
the Advocacy Office, was established to: (1) promote and protect the general welfare and
well-being of mentally and physically handicapped citizens; (2) assist mentally and
physically handicapped citizens and their families or friends in finding available services;
(3) promote and sponsor projects that help mentally and physically handicapped citizens
reach their potential; and (4) support the objectives of Federally mandated and funded
programs. The Advocacy Office is governed by a 1 l-member Board of Directors. As of
June 20, 1996, the Advocacy Office employed four persons: an Executive Director; two
case workers; and an outreach worker, who stated that she had been performing primarily
administrative duties since being hired in March 1996.

During fiscal years 1994, 1995, and 1996, the Advocacy Office received grants from: (1)
the Administration on Developmental Disabilities, Administration for Children and
Families, U.S. Department of Health and Human Services; (2) the Substance Abuse and
Mental Health Services Administration, Center for Mental Health Services, U.S.
Department of Health and Human Services; and (3) the Rehabilitation Services
Administration, U.S. Department of Education. In addition, in fiscal year 1995, the
Advocacy Office received a U.S. Department of Education grant in a subrecipient capacity
through a memorandum of understanding with the University Affiliated Program,
University of Guam. This grant was to be used to develop information concerning
assistive technology and related advocacy issues. The Advocacy Office also operated a
locally funded financial assistance program for disabled individuals. The Advocacy Office
commingled all Federal funds in one bank account and maintained all local funds in a
separate bank account.

In an April 8, 1994, letter to the President of the Board of Directors of the Advocacy
Office, the Administration on Developmental Disabilities, U.S. Department of Health and
Human Services, declared the Advocacy Office "a high-risk grantee," stating that "a high-
risk organization is one whose management practices raise serious questions about its
ability to assure proper programmatic use and financial stewardship of grant funds."
Further, in a February 28, 1996, letter to the Executive Director of the Advocacy Office,
the Substance Abuse and Mental Health Services Administration, U.S. Department of
Health and Human Services, also declared the Advocacy Office a "high-risk grantee, "
stating that this designation is applied "to grantee organizations who have demonstrated
poor business management practices. " Finally, in a September 29, 1995, letter to the

Executive Director of the Advocacy Office, the Rehabilitation Services Administration,
U.S. Department of Education, stated that for fiscal years 1994, 1995, and 1996, "Special
conditions and reporting requirements have been made a part of [the individual rights
grant] based in part on the past performance as a recipient of the Client Assistance
Program grant, . . . and the more recent determination by HHS [Health and Human

1

 
Services] that the Advocacy Office is a `High Risk' grantee." The special conditions
included the requirement for the Advocacy Office to obtain prior written approval for the
acquisition of all contractual services, equipment, and off-island travel.

OBJECTIVE AND SCOPE

The objective of our review was to determine whether the Advocacy Office administered
and expended grant funds in accordance with statutory and grant requirements. The scope
of the audit included all grant-related activities that occurred during fiscal years 1994,
1995, and 1996 (to March 1, 1996).

Our audit was conducted at the Advocacy Office from February through June 1996. To
conduct our audit, we obtained information from Government of Guam officials of the
Bureau of Budget and Management Research, officials of the U.S. Departments of Health
and Human Services and Education, and the Advocacy Office's independent public
accountant. To accomplish our objective, we reviewed documents maintained by the
Advocacy Office as follows: minutes of Board meetings; internal and external
correspondence; and personnel, procurement, contract, and accounting records. We also
reviewed applicable laws, regulations, and operating procedures related to administering
the funds and programs under the Advocacy Office's three Federal grants. However, our
audit scope was limited because the Advocacy Office's accounting records were not
adequate to identify the application of funds among the Federal grants and local programs.

The audit 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 the audit, we evaluated the system of internal controls in the areas of financial
management, program administration, procurement and property management, and
expenditure control to the extent that we considered necessary to accomplish the audit
objective. We identified significant internal control weaknesses in all of these areas, as
discussed in the Findings and Recommendations section of this report.  Our
recommendations, if implemented, should improve the internal controls in these areas.

PRIOR AUDIT COVERAGE

During the past 5 years, neither the U.S. General Accounting Office nor the Office of
Inspector General has issued any audit reports concerning the Advocacy Office. However,
an independent public accounting firm issued single audit reports on Advocacy Office
operations for fiscal years 1990 through 1993. These single audit reports stated that the
Advocacy Office had allocated indirect costs among its Federal programs on the percentage
basis of each program's funding level relative to the total funding provided. However, the
use of funding levels as a basis for distributing indirect costs was contrary to the
requirements of U.S. Office of Management and Budget Circular A-122, "Cost Principles

2

 
for Nonprofit Organizations. " Therefore, the auditor questioned indirect costs totaling
$575,716 that were charged to the grants. In addition, the single audit reports questioned:
(1) excess per diem claimed by Advocacy Office officers and employees ($6,559); (2)
unresolved differences between quarterly financial reports submitted to the grantor
agencies ($278 15); (3) grant expenditures that exceeded award amounts ($25,564); (4)
disbursement checks that were unsupported ($2 1,682); and (5) unreconciled differences
between financial reports and the accounting records. Based on our review, we determined
that as of June 20, 1996, the Advocacy Office had not resolved these issues.

In an October 19, 1992, letter to the President of the Board of Directors of the Marianas
Association for Retarded Citizens (the Advocacy Office's predecessor), the Administration
on Developmental Disabilities, U.S. Department of Health and Human Services, reported
its results of an administrative review performed in June 1992 on the operation of the
Association's protection and advocacy program for persons who have developmental
disabilities. The Administration's Commissioner stated that three "serious issues" were
identified during the review, including "insufficient documentation of case records to
support the provision of services," and that the "provision of services to clients who do not
meet the developmental disabilities definition pursuant to Section 102(5) of the Act is a
compliance issue that could seriously affect the administration of the . . . program. " The
other two "serious issues" were the "lack of a formal agreement or contract for providing
individual legal services, " which is discussed in Finding C, "Procurement and Property

Management, " of this report, and the "unsubstantiated payment of salaries to salaried and
contracted employees, " which had been corrected before our audit was conducted. The
report questioned the provision of legal services to clients in cases involving divorce, wills,
collections, and eviction because they were not related to protection and advocacy
activities. Our review disclosed that the Advocacy Office had not effectively resolved
these issues and that client and case eligibility and case administration continued to'be
areas of significant weaknesses in Advocacy Office operations.

 
FINDINGS AND RECOMlVlENDATIONS

A. FINANCIAL MANAGEMENT

The Advocacy Office did not manage Federal grant funds effectively. Specifically, the
Advocacy Office: (1) did not have an approved indirect cost rate; (2) used Federal grant
funds for other than grant-related purposes; (3) did not properly allocate personal services
costs among its Federally funded programs; and (4) did not submit annual budgets and
required financial reports to grantor agencies. U.S. Office of Management and Budget
Circular A-122 requires that grant awards be used for grant purposes and sets forth
standards for identifying direct and indirect costs. In addition, Titles 34 and 45, Part 74,
of the Code of Federal Regulations, "Administration of Grants and Agreements
With . . . Nonprofit Organizations, " provide policies, standards, and guidelines for the
financial management systems of nonprofit organizations. Guidance for managing grants
funds is also contained in the terms and conditions of the Advocacy Office's Federal grant
agreements. However, the Advocacy Office had not developed an adequate financial
management system to: (1) prepare and submit an acceptable indirect cost rate proposal
to the Department of the Interior's Office of Inspector General and (2) ensure that Federal
grant funds were used only for grant-related purposes and were properly controlled,
allocated, and accounted for. As a result, we questioned costs of $528,938, which
consisted of cost exceptions of $358,994 and unsupported costs of $169,944.

Indirect Costs

Circular A-122, Attachment A, Paragraph E.2.b, states, "A nonprofit organization which
has not previously established an indirect cost rate with a Federal agency shall submit its
initial indirect cost proposal immediately after the organization is advised that an award
will be made and, in no event, later than three months after the effective date of the
award. " ' In addition, Paragraph 8 of the terms and conditions of the grant agreements
with the Administration on Developmental Disabilities, U.S. Department of Health and
Human Services, for fiscal years 1994, 1995, and 1996 requires "any claims for the
reimbursement of indirect costs [to] be supported by an approved indirect cost rate. A

Although the Advocacy Office had received Federal grants since at least 1987, it did not
submit an indirect cost proposal until May 1, 1995, for fiscal year 1995. Therefore, the
Advocacy Office did not have an approved indirect cost rate for fiscal year 1994, and its
indirect cost proposal for fiscal year 1995 was submitted 4 months late to the cognizant
audit agency (U.S. Department of the Interior, Office of Inspector General). These
conditions occurred because the Advocacy Office had not established an accounting system
capable of identifying and documenting expenditures chargeable to the appropriate Federal
and non-Federal programs. Thus, the Advocacy Office could not: (1) determine which

4

 
costs were specifically identified with a particular program (direct costs) and which were
incurred for a joint purpose benefiting more than one program (indirect costs) and
(2) prepare an accurate indirect cost proposal that could be approved by the cognizant audit
agency. Based on the lack of approved indirect cost rates for fiscal years 1994 and 1995
and the deficiencies noted in the accounting system, we questioned $418,8592 in charges
made to the indirect cost category for fiscal years 1994 ($232,849) and 1995 ($186,010).

Non-Federal Program

Circular A-122, Attachment A, Paragraph A.2, states that for costs to be allowable under
an award, they "must . . . [b]e reasonable for the performance of the award and be

allocable thereto under these principles. " Despite this requirement, during fiscal years
1994, 1995, and 1996, the Advocacy Office used funds from three Federal grants to pay
                    The local financial assistance
program was not a protection and advocacy program and therefore was not eligible for
funding under the Federal grant awards received by the Advocacy Office. The local
program provided clients one-time grants based on financial need. Although these one-
time grants were paid from local program funds, the cost of the personnel, equipment, and
office space used to administer the local program were fully paid by the three Federal
grants. These administrative costs associated with the local financial assistance program
were not an authorized use of Federal protection and advocacy grant funds (requirements
for eligibility in the Federal grant programs are presented in Appendix 4).

Based on our review of case files and interviews with employees, we determined that,
during fiscal years 1994, 1995, and 1996 (to March 1, 1996)) approximately 10 percent
of Advocacy Office staff and office space were used to administer the local financial
assistance program. Of 161 Advocacy Office cases open during the audit period, we
reviewed 76 cases and identified 9 cases (about 12 percent of the 76 cases) for which the
Advocacy Office provided financial assistance to the disabled (the local program). In
addition, two staff members and the Executive Director stated that they worked on the
local program during regular working hours. The Executive Director said that he did not
realize that these costs should not be charged to the Federal grant programs. As a result

amount consists of the total questioned costs of $418,859 reduced by costs of $115,067 that are
questioned, for
other reasons, elsewhere in the report as follows: $16,183 in the section "Non-Federal Program"
(Finding A);
$2,376 in the section "Eligibility of Clients and Services" (Finding B); $75,133 in the section
"Procurement"
(Finding C); $12,933 in the section "Salary Payments" (Finding D); $238 in the section "Travel"
(Finding D);
and $8,144 in the section "Miscellaneous Costs" (Finding D).

3The three Federal grants were Protection and Advocacy for the Developmentally Disabled,
Protection and
Advocacy for the Mentally Ill, and Protection and Advocacy for Individual Rights.

5

 
of our review, we questioned total
costs of salaries, fringe benefits,
that were applicable to the local

costs of $55,202,4 which represent our estimate of the
reimbursements for local mileage, and rental expenses
non-Federal program.

Personal Services Costs

Circular A-122, Attachment B, Paragraph 6.1.(l), states that charges to Federal grant
awards "whether treated as direct costs or indirect costs, will be based on documented
payrolls approved by a responsible official(s) of the organization. " The paragraph further
states, "The distribution of salaries and wages to awards must be supported by personnel
activity reports as described in subparagraph (2) below. " Paragraph 6.1. (2) states:

Reports maintained by nonprofit organizations to satisfy these requirements
must meet the following standards:

(a) The reports must reflect an after-the-fact determination of the actual
activity of each employee . . . .

(b) Each report must account for the total activity for which employees are
compensated and which is required in fulfillment of their obligations to the
organization.

(c) The reports must be signed by the individual employee, or by a
responsible supervisory official . . . .

(d) The reports must be prepared at least monthly and must coincide with
one or more pay periods.

Despite these requirements, during fiscal years 1994, 1995, and 1996, the Advocacy
Office did not have a method to identify time spent by employees on work related to a
specific program and did not accurately allocate employee salary costs among its Federal
programs. Time clock cards showing the times when employees arrived at and departed
from the office were the only time records routinely maintained. The Advocacy Office
allocated personal services costs among its Federally funded programs using a system
based on the case load of each program over a 5-year period instead of identifying and
collecting employee time spent on a specific program or on administrative duties. The
case load method was one of three cost allocation options proposed by the Advocacy
Office and accepted by the Administration on Developmental Disabilities, U.S.
Department of Health and Human Services.  However, the Advocacy Office did not
properly implement this case load cost allocation method because it did not have an

`%e estimated the costs of $SS,202 charged to the Federal grants as applicable to the local program
by allocating
actual personal services costs to the local program based on estimates, provided by each Advocacy
Office
employee, of the percentage of work each spent on the local program ($46,645) and by allocating
the other costs
using a combination of the employee time estimates and space utilization ($8,557).

6

 
accounting system and a personnel activity system that identified personal services costs
incurred by employees who performed work on: (1) the local (non-Federal) financial
assistance program; (2) cases normally handled by other staff under other Federal grant
programs; and (3) general administrative activities. Therefore, we questioned dire&
personal services costs totaling $394,249,6 which consisted of all costs charged directly
to Federal programs in fiscal years 1994 ($155,549) and 1995 ($170,011) and all personal
services costs in fiscal year 1996 to March 1, 1996 ($68,689).

Financial Reports and Budgets

Federal grant guidelines, grant agreement terms and conditions, and the Code of Federal
Regulations require grant recipients to maintain effective control over and accountability
for all funds, to submit periodic financial reports, and to prepare annual budgets.
However, the Advocacy Office did not submit required financial reports and annual
operating budgets to Federal grantor agencies for fiscal years 1994, 1995, and 1996. The
Executive Director of the Advocacy Office told us that fmancial reports were not submitted
because the grantor agencies would not accept the results of the Advocacy Office's
allocations of personal services costs.  Grantor agency personnel stated that they
questioned the accuracy of the cost allocation results provided by the Advocacy Office.
In addition, the Director stated that annual budgets were not submitted to the grantor
agencies because they had not requested the budgets. As a result, neither the Advocacy
Office Board of Directors nor the Federal agencies could adequately plan for or control
the use of Federal grant funds.

   Financial Reports.  Paragraph 3 of the terms and conditions of the U.S.
Department of Health and Human Services Administration on Developmental Disabilities
Federal grant agreement for fiscal years 1994, 1995, and 1996 required grantees to submit
a Financial Status Report (SF-269) to the Administration for Children and Families "on
a semi-annual basis. " Further, paragraph 4 stated that not submitting the reports on time
"may be basis for withholding financial payments, suspension or termination. "
Paragraph 1 of the terms and conditions of the Federal grant agreement for fiscal years
1994, 1995, and 1996 of the U.S. Department of Health and Human Services Substance
Abuse and Mental Health Services Administration required a report to be submitted to the
Center for Mental Health Services "on an annual basis" and required the report to "contain
a description of the . . . expenditures associated with protecting and advocating the rights
of the mentally ill individual supported by payments derived from the grant. " The grant
agreements with the U.S. Department of Education for fiscal years 1994, 1995, and 1996

5Personal services costs included in the indirect costs for fiscal
costs questioned in the section "Indirect Costs - (Finding A).

years 1994 and 1995 were Questioned aspartof

%ppendix 1 shows questioned costs of $169,944 related to the section "Personal Services Costs"
(Finding A).
That amount consists of the total questioned costs of $394,249 reduced by costs of $224,305 that are
questioned,
for other reasons, elsewhere in the report as follows: $164,597 in the section "Indirect Costs n
(Finding A):
$46,645 in the section "Non-Federal Program" (Finding A); and $13,063 in the section "Salary
Payments"
(Finding D).

 
included special award conditions which required that quarterly performance and financial
reports be provided to the U.S. Department of Education Regional Office (Region IX) 30
days after the end of each quarter.

We found, however, that from October 1, 1993, to February 29, 1996, the Advocacy
Office had not prepared and submitted 41 of the 51 required quarterly reports and any of
the 7 required final reports. During this period, the Federal grantor agencies had made
at least four requests for the reports, including a December 12, 1995, letter from the U.S.
Department of Education that stated, "Failure to submit these and other required reports
(i.e., financial, audits, program, or other required reports) on time may be the basis for
withholding financial payments, suspension, or termination of this grant." However, as
of June 20, 1996, we found no documentation indicating that the U.S. Department of
Education or the U.S. Department of Health and Human Services had taken action to
withhold payments or suspend or terminate the grants.

  Budgets. Title 34, Section 74.25(a), of the Code of Federal Regulations states that
the budget plan is "the financial expression of the . . . program as approved during the
award process. " In addition, Section 74.25(b) requires recipients "to report deviations
from budget and program plans, and request prior approvals for budget and program plan
revisions. " Further, in a July 24, 1996, letter to the Advocacy Office, the Substance
Abuse and Mental Health Services Administration stated that it "[does] expect P&As
[grantees] to prepare budgets annually. " The President of the Board of Directors and the
Executive Director said that the Advocacy Office had not prepared budgets for submission

to the grantor agencies since at least 1987 because the grantor agencies had not requested

adequate management and control of Federal funds.

              o ????

Recommendations

We recommend that the Board of Directors of the Protection and Advocacy of the
Marianas ensure that the Executive Director:

  1. Advises the U.S. Department of Health and Human Services (Administration
on Developmental Disabilities and the Substance Abuse and Mental Health Services
Administration) and the U.S. Department of Education (Region IX) of the questioned costs
and either resolves the questioned costs or arranges for repayment.

  2. Annually prepares and submits indirect cost proposals to the cognizant audit
agency for approval in accordance with requirements of U.S. Office of Management and
Budget Circular A-122.

  3. Develops and implements an accounting system which separately tracks
revenues and expenditures by each Federal and non-Federal program and a personnel

 
activity system which accounts for and reports the distribution of personal services costs
(direct and indirect) among each Federal and non-Federal program.

    4. Develops and implements procedures to ensure that all financial reports required
by the grant agreements are submitted to the grantor agencies in a timely manner and that
annual budgets are prepared and approved by the Board of Directors and submitted to the

grantor agencies.

Advocacy Office Response and Office of Inspector General Reply

In the September 12, 1997, response (Appendix 5) to the draft report from the President
of the Advocacy Office, the Advocacy Office concurred with the four recommendations
and indicated that corrective actions would be taken, but it disagreed with certain aspects
of the finding as they related to Recommendations 2, 3, and 4. Based on the response,
additional information is needed for the recommendations (see Appendix 6).

Recommendation 2, Concurrence.

   Advocacy Office Response. The Advocacy Office said that it did not have an
approved indirect cost rate but that it was the Office's "understanding" that our office
would provide technical assistance for it to `come up with an acceptable indirect cost
rate. " The Advocacy Office also stated that it did not concur with the statement in our
report that it " `had not established an accounting system capable of identifying and
documenting expenditures chargeable to the appropriate Federal and non-Federal
programs. ' " The Advocacy Office said that it had used "for years" several methods to
calculate indirect costs, including formulas "based on a running 5-year average case load";
the "quarterly case load per program"; and, more recently, "a weighted, monthly case load
per program. "

   Office of Inspector General Reply. Although the Advocacy Office's accounting
system adequately identified and summarized total financial transactions, as stated in the
finding, we concluded that the Advocacy Office was unable to accurately calculate indirect
costs because it had not established an accounting system capable of identifying and
documenting those personnel and other expenditures specifically chargeable to each
Federal and non-Federal program and those expenditures of a joint nature that needed to
be allocated to the various programs. As a result, for its reports to the grantor agencies,
the Advocacy Office had to estimate the expenditures applicable to each Federal program.
Therefore, as stated in the finding, the Advocacy Office did not properly allocate
expenditures among the Federal programs and did not reflect the impact of the local
program on the Advocacy Office's operations. The formulas based on case load that were
used by the Advocacy Office were not, in our opinion, adequate to allocate indirect costs
among the programs. For example, just counting the number of cases applicable to each
program would not take into consideration the relative amount of time that had to be
devoted to different types of cases. We believe that a more accurate basis for allocating
indirect costs (one which would have met the requirements of U.S. Office of Management

9

 
and Budget Circular A-122) would have been actual time reporting records of the
Advocacy Office's employees which showed how many hours were spent on each program
for direct charging to those programs and on administrative duties for allocation through
an approved indirect cost rate.

Regarding our providing technical assistance on preparing an acceptable indirect cost
proposal, in March 1995, personnel from our North Pacific Regional Office in Guam
provided both the Advocacy Office's Executive Director and the accountant with technical
information and guidance for the preparation of indirect cost proposals. Further assistance
can be provided if requested.

Recommendation 3. Concurrence.

   Advocacy Office Response. The Advocacy Office did not agree that it "used
funds from three Federal grants to pay for the costs of a local assistance program," stating
that "[o]nly local funds were ever used for the local financial assistance program. " The
Advocacy Office was also critical of our report for questioning costs associated with
programs that were of a "humanitarian and altruistic" nature. In addition, the Advocacy
Office stated that the amount of time the Executive Director spent in attending "to the
[local program] cases . . . during office hours, . . . can be shifted to the considerable extra
time [the Director, as well as other officers and members of the Board of Directors of the
Advocacy Office] spends at the office after hours which are uncompensated. "  The
Advocacy Office also stated that caseworkers' hours were allocated as direct costs based
on actual case loads for each employee and program and that this method was "apparently
acceptable to the grantor agencies, which continued to release operating funds" to the
Advocacy Office.

   Office of Inspector General Reply.  The finding does not question the need for
or the humanitarian benefit of the types of services provided by the Advocacy Office.
However, the report does question the adequacy of accounting for Federal and non-Federal
funds used to provide those services.

During the audit, we determined, based on interviews with Advocacy Office personnel and
reviews of the Advocacy Office's files, that Advocacy Office staff assisted needy
individuals during regular working hours through the local financial assistance program.
Although there was no indication that Federal funds were distributed to clients through the
local program, we concluded that the use of personnel, equipment, and office space which
were fully paid for by Federal funds for non-Federal programs was not an allowable use
of Federal funds. The use of an approved indirect cost rate would have permitted an
equitable allocation of a portion of the costs of such personnel, equipment, and office
space to the local financial assistance program. Further, without detailed records and prior
Board approval, work performed outside preestablished working hours should not be a
substitute for work performed during official working hours, at least partially because an
unregulated system would be susceptible to abuse. We have revised the wording of the

10

 
finding to more clearly identify the nature of the costs associated with the local financial
assistance program that were charged to Federal funds.

Regarding the identification of personnel services costs with specific Federal programs,
we found that the personnel time reporting and accounting systems of the Advocacy Office
were not designed to capture personnel time and financial transactions on a program/grant
basis. As indicated in reply to Recommendation 2, we said that the Advocacy Office's
practice of allocating personnel costs on the basis of case load was not the most accurate
way of allocating such costs. In addition, as stated in the finding, Circular A-122 contains
specific requirements for any personnel time reporting system.  In our opinion,
computerized personnel time reporting systems are readily available and can be easily
adopted for an organization with a small staff, such as the Advocacy Office. Since
personnel costs represent the majority of program costs, we still believe that the Advocacy
Office should obtain and adopt such a computerized personnel time reporting system and
use the data generated by the system to charge associated personnel costs to each of the
Federal and local programs and to accumulate administrative personnel costs for allocation
through an approved indirect cost rate.

Finally, the fact that grantor agencies released operating funds is not an indicator that any
specific management practice is allowable. One of the purposes of an audit is to identify
deficiencies in and to make recommendations for the improvement of management
practices. We believe that the fact that two of the three grantor agencies had placed the
Advocacy Office in a high risk status (the third grantor included additional controls in
its grant agreements with the Advocacy Office) indicates that the grantor agencies were
concerned about certain aspects of the Advocacy Office's operations.

Recommendation 4. Concurrence.

  Advocacy Office Response. The Advocacy Office stated that its financial reports
were submitted to the grantor agencies after our audit was concluded and that quarterly
performance reports were routinely submitted to Region IX of the U.S. Department of
Education. The Advocacy Office also stated that budgets were prepared for internal use
and that some were submitted to the Substance Abuse and Mental Health Services
Administration, U.S. Department of Health and Human Services.

  Offke of Inspector General Reply. Although the Advocacy Office was not able
to provide most financial reports and officially approved budgets when they were requested
during the audit, the fact that the financial reports have now been submitted and that the
fiscal year 1998 budget will be submitted is commendable. We have revised the finding
to clarify that budgets were not prepared for submission to the grantor agencies.

11

 
B. PROGRAlV ADMINISTRATION

The Advocacy Office did not administer its Federal grants program effectively.
Specifically, the Advocacy Office: (1) did not adequately document the eligibility of
clients to receive protection and advocacy services: (2) authorized payment for legal
services not clearly related to protection and advocacy needs; and (3) did not ensure that
caseworkers documented actions taken to address clients' concerns. Titles 42 and 29 of
the U.S. Code Annotated and Title 45, Part 1386.24, of the Code of Federal Regulations
contain the guidelines for client and service eligibility. However, the deficiencies occurred
because the Advocacy Office had not developed written procedures for documenting
eligibility for protection and advocacy programs and had not performed formal case file
reviews to ensure that the files contained all appropriate documents. As a result, we
questioned costs of $89,264, which consisted of cost exceptions of $4,991 and unsupported
costs of $84,273.

Eligibility of Clients and Services

Titles 42 and 29 of the U.S. Code Annotated (see Appendix 4) contain the requirements
for an individual's eligibility to participate in protection and advocacy programs. In
addition, Title 45, Part 1386.24, of the Code of Federal Regulations states, "Federal
financial participation is not allowable for: (a) Costs incurred for activities on behalf of
persons with developmental disabilities to solve problems not directly related to their
disabilities and which are faced by the general populace . . . ." Despite these
requirements, the Advocacy Office did not ensure that client eligibility for protection and
advocacy services was documented and that legal services provided were allowable. The
conditions related to the eligibility of clients and services occurred because the Advocacy
Office had not developed and implemented written procedures to require caseworkers to
document the basis of their determinations as to client and service eligibility. As a result,
we questioned total costs of $250,959,' which consisted of $245,968 in unsupported costs
and $4,99 1 in unallowable costs.

During the period of October 1, 1993, to February 29, 1996, Advocacy Office records
identified 161 cases that were administered by Advocacy Office personnel. We reviewed
the files for 76 of the 161 cases for documents supporting each client's eligibility for
           By using questionnaires either provided by or prepared
based on guidance from grant officials for the Developmental Disabilities, Mental Illness,

(Finding B). That amount consists of costs of $250,959 reduced by costs of $161,695 that are
questioned, for
other reasons, elsewhere in the report as follows: $138,755 in the section "Indirect Costs (( (Finding
A) and
$22,940 in the section "Personal Services" (Finding A).

*We considered case file records adequate to support a client's eligibility for services if the file
included
documents such as medical, legal, and educational records that defined the disability so that a
determination
could be made if the disability met program criteria.

12

 
and Individual Rights programs, we determined that 52 of the 76 case files reviewed did
not contain documentation to support the client's eligibility as follows:

Client

  ses

Developmental    Mental
Disabilities     Illness

Individual     Total
.Riehts# Cases

Total Cases          96         33         32        161
Cases Reviewed        45          17         14         76

Eligibility
Supported

Yes               19           2         3         24
No             26         I3        J-l        52
Cases Reviewed       45          17
                         -                    14
                                          C                   76
                                                         X             -

For example, notes in one case file opened in fiscal year 1996 indicated that the client had
an orthopedic disability. However, the notes also stated that the disability was not severe
and that the client had a full-time job and substantial money in savings and checking
accounts. The fact that the client had a full-time job indicated that the client may not have
been eligible for the developmental disability program, but there was no documentation
in the file which explained how the client did qualify for the program.

Since the Advocacy Office was unable to identify staff time and/or other costs by case
except for legal fee invoices, we could not determine the cost of providing advocacy
services by individual case. Therefore, to estimate the value of services provided to clients
who may not have been eligible for protection and advocacy services, we divided the
number of case files that did not have adequate support for the clients' eligibility by the
total number of client cases and multiplied this percentage by the total charges to the
Federal grants for each fiscal year. Based on these calculations, we estimated that the
Advocacy Office charged $245,968 to Federal grants for work performed for clients who
may not have been eligible.

In addition, the Advocacy Office authorized payment for cases involving client legal
services.  By examining all Advocacy Office legal services invoices and supporting
documents for services paid by the Advocacy Office, we identified 36 clients for whom
the Advocacy Office had paid for legal services from October 1, 1993, to February 29,
1996. We selected and reviewed 9 of the 36 cases based on descriptions on the invoices.
We determined that legal services paid for by the Advocacy Office did not appear to
qualify as protection and advocacy issues in eight of the nine cases as follows: two cases
involving wills ($1,018), five cases involving divorce ($3,725), and one case involving
consumer finance ($248).  Therefore, we questioned costs of $4,991 (as of
February 29, 1996) that were charged to the Federal grants for these eight cases. We also
identified payments in the 36 case files reviewed that appeared to be for appropriate legal

13

 
services, such as helping clients obtain special education services and social security
benefits.

Records Maintenance

Guidelines for the operation of protection and advocacy offices are contained in the
"Standards for Advocacy Programs Serving People With Disabilities and People With
Mental Illness. " These standards are included in the publication "A Technical Guide For
Operating a Protection & Advocacy System," which was prepared by the Advocacy Office
Training/Technical Assistance Center. 9  The pertinent standards related to the areas
reviewed are as follows:

  - Section 500.30, Paragraph 2, states, "The program ensures that each client's file
includes documentation regarding the objectives and desired and attained outcomes of the
representation. "  Paragraph 3 states, `Individual cases are reviewed regularly by
supervisors to ensure representation of high quality."

  - Section 500.70, Paragraph 1, states, "Case notes indicate ongoing attention to
expressed goals. "

  - Section 1100.00 states, `Case records include information regarding the nature of
the client's disability, the client's complaint or problem, the advocacy strategies employed,
case responsibility, and final disposition, as well as other relevant data."

The Advocacy Office did not follow these guidelines and did not maintain its case files and
related records in an effective manner. Specifically, of the 80 cases (from the 161 total
cases) requested for review, 3 case files could not be located and 1 case listed as open in
fiscal year 1994 had been closed in fiscal year 1992. Of the 76 case files reviewed, 12 of
the 33 open case files did not contain the current status, none of the 43 closed case files
contained evidence that closure letters were sent to the client, and none of the 76 case files
included evidence of supervisory review of caseworker actions.  These conditions occurred
because the Advocacy Office did not have written procedures and case file checklists to
ensure that needed administrative actions were taken on each case. Although the Executive
Director stated that he discussed each case with the caseworker after the case was opened
and during its processing, such discussions were not documented. In our opinion, all
actions taken to resolve a case should be documented, particularly any advice and/or
recommendations from the Executive Director, to assist the caseworker and to provide a
case history if there is an extended delay in resolving the case or if the case is assigned to
another caseworker. As a result of these conditions, the Advocacy Office could not ensure
that clients received appropriate services in a timely manner.

`The Center is part of a Federal Interagency Project of the Administration for Developmental
Disabilities, the
Center for Mental Health Services, and the Rehabilitation Services Administration.

14

 
Recommendations

We recommend that the Board of Directors of the Protection and Advocacy of the
Marianas ensure that the Executive Director:

  1. Advises the U.S. Department of Health and Human Services (Administration on
Developmental Disabilities and the Substance Abuse and Mental Health Services
Administration) and the U.S. Department of Education (Region IX) of the questioned costs
and either resolves the questioned costs or arranges for repayment.

  2. Develops and implements procedures to ensure that Advocacy Office clients and
services meet the eligibility requirements contained in Federal law and grant agreements
and regulations and that Advocacy Office personnel prepare and maintain case files in
accordance with guidelines issued by the National Association of Protection and Advocacy
Systems.

Advocacy Office Response and Office of Inspector General Reply

In the September 12, 1997, response (Appendix 5) to the draft report from the President
of the Advocacy Office, the Advocacy Office concurred with the two recommendations
and indicated that corrective actions would be taken, but it disagreed with certain aspects
of the finding as they related to Recommendation 2. Based on the response, additional
information is needed for both recommendations (see Appendix 6).

Recommendation 2. Concurrence.

  Advocacy Office Response. The Advocacy Office agreed that some cases were
"without written medical diagnosis or certification of disability" and stated that such lapses
in documentation were "promptly remedied. " The Advocacy Office further stated that our
report "assumes that we [the Advocacy Office] are unable to determine obvious functional
disabilities among our clients" and that it used an "intake form' obtained from the Hawaii
Protection and Advocacy which has "specific written instructions and definitions for
caseworkers " to help identify qualified clients.  The Advocacy Office then provided
information on two specific cases related to the example cited in the fmding, stating that
"financial status was never a criteria for eligibility in our programs. " In addition, the
Advocacy Office stated that this audit was "suspended" to allow the Advocacy Office time
to obtain certifications but that the auditor did not return to review the records. The
Advocacy Office also stated that the auditors did not identify the clients used as examples
in the finding and that a better "`yardstick"' (than an audit) for evaluating the Advocacy
Office's operations would be a "peer review process" by counterpart advocacy
organizations. Finally, the Advocacy Office stated that the caseworker who told us that
"`he had not received adequate training to determine client eligibility and eligible
services"' had "in fact received more training both off and on-island as well as one-on-one,
hands-on training with his peers as well as with the Executive Director as compared to
others. "

15

 
  Office of Inspector General Reply. The finding does not state that clients served
by the Advocacy Office were not eligible for those senTices but that the Advocacy Office
"did not adequately document the eligibility of clients to receive protection and advocacy
services. "

Our review of Advocacy Office ease files was performed during a 3-week period and
included files prepared with the intake form (referred to in the response) that was adopted
from Hawaii. Based on that review, we determined that information in 52 of the files was
insufficient to adequately support that the client met the various grant program
requirements (see Appendix 4). In addition, since a determination that a client has a
specific level of developmental disability or mental illness is necessary to qualify for
Protection and Advocacy services and especially since, according to an Advocacy Office
caseworker, the Advocacy Office's caseworkers were not licensed in the United States to
provide medical or psychological services, we believe that the files should contain written
support for the eligibility determinations. Regarding the example cited in the finding, our
point was not that "financial status" was an eligibility requirement but that the client's
ability to hold a full-time job might have affected the individual's eligibility for services
under the Federal program. For example, the deftition of "developmental disability"
identifies seven indicators of "substantial functional limitations" (at least three of which
must be satisfied), including limitations on an individual's capacity for independent living
and economic self-sufficiency (see Appendix 4). Although the recipient may have been
qualified to receive the needed services, the case file did not contain documentation to
allow a clear determination as to the client's continued eligibility, especially in view of the
independent living and economic self-sufficiency indicators.

Further, we did not suspend the audit to allow time to obtain medical certifications. We
requested, in writing, the files that were reviewed as part of our audit. Those files were
provided to us by the Advocacy Office's staff, and those employees had the opportunity
to provide, and did provide in several cases, additional information during the audit.
Additionally, because those files were provided to us by the Advocacy Office's staff, the
identity of the clients should have been known to Advocacy Office officials. However,
a list of the cases presented as examples in the report can be provided if requested.

Regarding the issue of a peer review being a better means by which to evaluate the
Advocacy Office's operations than our audit, we agree from a technical delivery of
services perspective but disagree with respect to the financial and programatic aspects of
the program. That is, the objective of a peer review would be to evaluate the technical
aspects of the Advocacy Office's operations, including the specific type and level of
services provided to clients.  The objective of our audit, which was performed in
accordance with the "Government Auditing Standards, " was not to evaluate the technical
aspects of the operations but to determine whether the Advocacy Office administered and
expended Federal grant funds in accordance with statutory and grant requirements. Thus,
our audit included reviews of financial transactions and program operations to determine
whether they were carried out in accordance with Federal requirements.

16

 
Finally, during the audit, interviews with Advocacy Office personnel, reviews of case
files, and observations of the caseworker cited in the Advocacy Office's response indicated
that this employee was conscientious and concerned about his job and clients.  When this
caseworker was hired, the Advocacy Office had no open cases in the Protection and
Advocacy for Individuals With Mental Illness program. During his 2 years at the
Advocacy Office, the caseworker opened and managed 33 cases in this program, as well
as handled most of the cases under the Protection and Advocacy for Individual Rights
program. In addition, although we received several complaints from clients relating to
Advocacy Office operations during the audit, we received a compliment and no complaints
from clients relating to this caseworker. In any event, because the training provided was
a minor issue, we have removed the caseworker's comment pertaining to inadequate
training from the report.

17

 
C. PROCUREMENT AND PROPERTY MANAGEMENT

The Advocacy Office did not effectively conduct procurement actions for purchases made
under Federal grants. Specifically, the Advocacy Office: (1) did not obtain prior grantor
approval for equipment purchases in excess of $500; (2) did not conduct procurements
competitively and issue written contracts for legal services; and (3) did not adequately
manage and control personal property.  Titles 34 and 45 of the Code of Federal
Regulations and Circular A-122 contain the standards for procurement and property
management activities under the Federal grant programs. However, the deficiencies
occurred because the Advocacy Office had not developed and implemented procurement
and property management procedures which ensured that Federal funds were used properly
and that property was adequately accounted for and protected. As a result, we questioned
procurement costs totaling $91,630 and could not locate property items valued at $8,8 13.

Procurement

Title 34, Section 74.43, states, "All procurement transactions shall be conducted in a
manner to provide, to the maximum extent practical, open and free competition." In
addition, Section 74.45 states, "Some form of cost or price analysis must be made and

documented in the procurement files in connection with every procurement action. " Also,
Circular A-122, Attachment B, Paragraph 35.a, states, "Costs of professional and
consultant services . . . are allowable . . . when reasonable in relation to the services
rendered. " Paragraph 35.b further states that "in determining the allowability of costs in
a particular case, " relevant factors include the "adequacy of the contractual agreement for
the service (e.g., description of the service, estimate of time required, rate of
compensation, and termination provisions). " Finally, the U.S. Department of Health and
Human Services required the Advocacy Office, as a "high risk" grantee, to obtain prior
approval for all procurement of equipment valued in excess of $500 that would be charged
to the Developmental Disabilities grant. Despite these requirements, the Advocacy Office
did not conduct procurement actions in a manner that provided, to the maximum extent
practicable, open and free competition and did not execute written contracts before legal
services were acquired.

The June 1992 Program Administrative Review by the Administration on Developmental
Disabilities, U.S. Department of Health and Human Services, stated that the Advocacy
Office did not comply with the requirement to obtain prior approval for equipment
purchases in excess of $500. On September 17, 1993, the agency granted the Advocacy
Office a one-time exemption from the approval requirement for the items that were
improperly procured between fiscal years 1984 and 1991. However, the grantor agency
did not grant an exception for procurement actions made during fiscal years 1992 and
1993. According to the Executive Director, the Advocacy Office did not need to obtain
prior approval for equipment purchases made during fiscal years 1994 through 1996 (the
time period covered by our review) because Federal regulations governing equipment
purchases for the three Federal programs administered by the Advocacy Office were
revised before fiscal year 1994 and the revised regulations did not require prior approval

18

 
from agencies for purchases of less than $5,000. However, according to the grantor
agency, the revised purchase authorization limits for equipment did not apply to the
Advocacy Office because the Advocacy Office was designated a "high risk" grantee. In
addition, the 1992 Program Administrative Review noted that the Advocacy Office had not
entered into a written contract with the organization which provided legal services to
Advocacy Office clients. The Executive Director stated that the Advocacy Office did not
issue contracts for legal services in fiscal years 1995 and 1996 because the Advocacy
Office used oral agreements and did not have a policy requiring written contracts.

To test the level of compliance with procurement requirements, we reviewed 20
procurement actions, totaling $124,455, out of the 123 procurement actions, totaling
$153,002, that were initiated by the Advocacy Office during the period of
October 1, 1993, to February 29, 1996. Based on our review, we questioned costs
totaling $95,040 as follows: lo

  - For eight procurement actions, we classified $13,216 as cost exceptions because
the Advocacy Office did not obtain the required grantor agency approval prior to making
the purchases. One of the eight equipment purchases occurred on January 3 1, 1995, when
the Advocacy Office paid an employee $1,400 for a computer, a monitor, and a printer.
Documentation in the file indicated that the employee purchased this computer equipment
for $2,200 about 3 years earlier, on March 21, 1992. The file contained no record of
competition, cost or price analysis, or justification for the purchase.

  - For 10 procurement actions, we classified $81,824 as unsupported costs because
the files did not contain evidence of competition. For example, the Advocacy Office
obtained a lease for office space costing $36,508 and issued six service contracts,
consisting of three bookkeeping contracts for $12,985, two auditing. contracts for $7,250,
and one consulting contract for $4,450, without any record of competition. In addition,
the Advocacy Office did not document any competition efforts and could not provide
written contracts for two other procurement actions for legal services costing $13,759.

Although the Advocacy Office had not executed formal written contracts with private
attorneys during fiscal years 1995 and 1996, we identified three instances in which the
Advocacy Office orally authorized private attorneys to provide legal services to clients.
Since no payments had been made or invoices received as of February 29, 1996, we could
not identify any questioned costs related to these legal services.

Property Management

Titles 34 and 45 of the Code of Federal Regulations contain guidelines relating to the
safeguarding and control of equipment. Specifically, Title 34, Section 74.34(f), states that

l"Append.ix 1 shows qydoned costs of $91,630 related to the section "Procurement" (Finding C).
That amount
consisted of costs of $95,040 reduced by costs of $3,410 that are questioned, for other reasons, in
the section
"Eligibility of Clients and Services" (Finding B).

19

 
equipment records "shall be maintained accurately" and "shall include" information on the
equipment such as description, source, acquisition date and cost, location and condition,
and ultimate disposition data. This section also requires that a physical inventory be taken
and the results reconciled with the equipment records "at least once every two years" and
that a control system be implemented "to insure adequate safeguards to prevent loss,
damage, or theft of the equipment. "

Although the Advocacy Office did maintain property listings, the listings were not
comprehensive or current, and the most recent property inventory had been performed on
April 15, 1994. Based on our review of a sample of 43 personal property items, valued
at $69,180, we found that the following 8 property items, valued at $8,8 13, could not be
located:

_Ouantitv

Description           Purchase Cost

1         Computer Monitor              $620
1         Karaoke System                  500
1         Computer                 2,073
3           Window Air Conditioners          1,790
1        Copier                  3,060
1        Electric Typewriter             ---m

8            Total
-                         i!i&u

The Executive Director stated that he could not provide documentation to support the
status of the eight property items because the Advocacy Office's procurement and property
records were "in shambles." The Executive Director attributed this condition to a lack of
adequate supervision of office staff and to misplaced documents resulting from the
Advocacy Office's two moves in 1993 and 1994. In addition, the Executive Director
stated that the Advocacy Office had not adopted internal written procedures for
procurement or property management because it used Federal regulations instead of
developing its own procedures. However, based on our review, we determined that the
Advocacy Office did not appear to have followed the Federal regulations. Accordingly,
the Advocacy Office needs to establish procedures to ensure that: (1) records are
maintained for personal property from the time of receipt until the time of disposal; (2)
comprehensive biennial inventories are taken; (3) property is tagged for identification and
security; and (4) donated property and stolen property are adequately documented.

Recommendations

We recommend that the Board of Directors of the Protection and Advocacy of the
Marianas ensure that the Executive Director:

   1. Advises the U.S. Department of Health and Human Services (Administration
on Developmental Disabilities and the Substance Abuse and Mental Health Services

20

 
Administration) and the U.S. Department of Education (Region IX) of the questioned costs
and either resolves the questioned costs or arranges for repayment.

2. Develops and implements procedures which provide for:

     - Procurement actions to be conducted in accordance with Titles 34 and 45,
Section 74.40, of the Code of Federal Regulations.

    - All equipment purchases in excess of $500 to be approved by the grantor
agency before the procurement actions are executed while the Advocacy Office is
designated a high risk grantee.

     - Written contracts to be awarded and executed before the Advocacy Office
incurs costs for goods or services, including legal services.

     - Personal property acquired with Federal funds to be documented and
controlled in accordance with Titles 34 and 45, Section 74.34, of the Code of Federal
Regulations.

Advocacy Office Response and Office of Inspector General Reply

In the September 12, 1997, response (Appendix 5) to the draft report from the President
of the Advocacy Office, the Advocacy Office concurred with the two recommendations
and indicated that corrective actions would be taken, but it disagreed with certain aspects
of the finding as they related to Recommendation 2. Based on the response, additional
information is needed for both recommendations (see Appendix 6).

Recommendation 2. Concurrence.

   Advocacy Of'fice Response. The Advocacy Office stated,"[Wle were under the
impression that we were uniformly covered by the revised regulation exempting purchases
of less than $5,0 from prior authorization. " The Office further stated, "[Flor the most
part, we did allow for open and free competition. " However, according to the response,
the problem was in locating and retrieving written documents to prove the Advocacy
Office's position. The Advocacy Office provided a narrative justification for the purchase
of the employee's computer and stated that it would have been "helpful to have an itemized
list" of the other seven procurement actions classified as "cost exceptions. " The Advocacy
Office also provided narrative justifications for a lease for office space and six service
contracts and stated that it did have written contracts for legal services. Further, regarding
property management, the Advocacy Office provided details on the disposition of each of
the eight inventory property items that could not be located during the audit.

   Office of Inspector General Reply. The Advocacy Office has the obligation,
based on Federal grant requirements, to document its compliance with requirements related
to competitive procurement and the protection of property acquired with Federal funds.

21

 
At the time of our audit, such documentation was not contained in the Advocacy Office's
files for the purchases and property items discussed in the finding and, despite our oral
requests, was not provided to us by the Advocacy Office. Regarding the seven purchases
that were not specifically identified in the finding, we will provide the Advocacy Office
with a list of the transactions.

22

 
D. EXPENDITURE CONTROL

The Advocacy Office used grant funds for purposes that were either unallowable or
unnecessary. Attachment A of Circular A-122 provides general cost principles, and
Attachment B establishes the allowability of specific items of cost. The Executive Director
stated that, in his opinion, the expenditures were necessary for the operation of the
Advocacy Office and were based on policies that had been adopted by the Board of
Directors.  However, we questioned costs of $25,350 because they were for: (1)
retroactive salary payments; (2) local and off-island travel expenditures; and (3)
miscellaneous costs, including rent and computer purchases.

General Cost Allowability Guidelines

Circular A-122, Attachment A, Paragraph A.2, states, "[Tlo be allowable under an award,
costs must . . . be reasonable for the performance of the award. " Paragraph A.3 states:

A cost is reasonable if, in its nature or amount, it does not exceed that
which would be incurred by a prudent person under the circumstances
prevailing at the time the decision was made to incur the costs . . . . In
determining the reasonableness of a given cost, consideration shall be given
to .
 

a.  Whether the cost is of a type generally recognized as ordinary and
necessary for the operation of the organization or the performance of the
award.

b. The restraints or requirements imposed by such factors as generally
accepted sound business practices, arms length bargaining, Federal and
State laws and regulations, and terms and conditions of the award.

c. Whether the individuals concerned acted with prudence in the
circumstances, considering their responsibilities to the organization, its
members, employees, and clients, the public at large, and the Government.

Salary Payments

Circular A-122, Attachment B, Paragraph 6.a, states, "Compensation for personal services
includes all compensation paid currently or accrued by the organization for services of

                              .
employees rendered during the period of the award " (Emphasis added.) However, during
fiscal years 1994 and 1995, the Board of Directors of the Advocacy Office approved
retroactive salary increase payments to the Executive Director and three staff members for
periods dating back to 1990. We questioned retroactive salary payments made during

23

 
Executive Director, because we found no evidence in the files to indicate that the
Advocacy Office had included the use of Federal funds for proposed salary increases in
any grant request, budget, or other financial planning document until 1994.

According to the President of the Board of Directors, the retroactive payments were
appropriate because the Board had tied Advocacy Office wages to the Government of
Guam pay scale, but the Advocacy Office did not have the funds available to increase the
employee salaries in 1991, when the Government of Guam increased salaries for its
employees. However, in our opinion, since the Board of Directors did not approve the
salary increases until fiscal years 1994 and 1995, there was no basis to use current year
Federal funds for prior period expenditures. Therefore, only the salary payments made
for personal services subsequent to the date of the Board's approval of the raises would be
considered allowable costs.

Travel

Although Circular A-122 requires that costs be reasonable to be allowed under the grant
award, the Advocacy Office paid its staff local mileage rates that were in excess of the
rates paid by the Government of Guam for the use of personally owned vehicles for
official business. From May 1995 through February 1996, the Advocacy Office paid staff
members $1,192 for local mileage at $.60 per mile instead of the $. 30 per mile rate used
by the Government of Guam. The Executive Director said that since the Board of

Directors adopted the Government of Guam travel schedule,`2 it also used the local mileage
reimbursement rate of $.60 per mile and that he was not aware that the Government of
Guam had subsequently reduced its mileage rate to $.30 per mile.

We also found that, during fiscal year 1995, the Advocacy Office charged costs of $1, 116
to the U.S. Department of Education grant for off-island travel without obtaining prior
grantor agency approval. The fiscal year 1995 grant agreement with the U.S. Department
of Education states, "Pursuant to 34 CFR [Code of Federal Regulations] 74.7 the
following special reporting requirements are included as a condition of this award: 1. Prior
RSA (Rehabilitation Services Administration) Approvals - Written prior approval must be
obtained from this RSA Regional Office for . . . all off-island travel. " The Executive
Director stated that he was not aware that travel costs had been charged to the U.S.
Department of Education grant and that the costs should have been charged to the U.S.
Department of Health and Human Services grants, which did not have a similar restriction.

%e total of all retroactive salaq payments made for periods prior to the date of approval was $19,868,
which
included payments of $12,961 to the Executive Director.

`ZTitle 5, Chapter 23, of the Guam Code Annotated ("Government Travel Law") established
allowable per diem
rates and minimum control procedures.

24

 
In summary, we questioned costs totaling $2,308, which consisted of cost exceptions of
$1,192 based on the excess mileage rates and unsupported costs of $1,116 based on the
lack of approval of off-island travel.

Miscellaneous Costs

Circular A-122, Attachment B, Paragraph 16.b, states. "The costs of idle facilities [defined
as "unused facilities that are excess to the organization's current needs"] are unallowable
except to the extent that: (1) They are necessary to meet fluctuations in workloads; or (2)
Although not necessary to meet fluctuations in workload, they were necessary when
acquired and are now idle because of . . . causes which could not have been reasonably
foreseen. "  Further, Paragraph 37.b states that "public information service costs are
allowable as direct costs with the prior approval of the awarding agency" and that "such
costs are unallowable as indirect costs. "  Also, Paragraph 19.a( 1) states, "Costs incurred
for interest on borrowed capital or temporary use of endowment funds, however
represented, are unallowable. "

The Advocacy Office incurred costs that, in our opinion, were unnecessary or unallowable
based on the criteria contained in Circular A-122. Specifically, we found that, during the
audit period, the Advocacy Office incurred costs of $400 for the first month of a l-year
lease agreement for office space, which we believe was excessive considering the
Advocacy Office's current staffing level. The office space consisted of an interior room,
separated by a hall from the Advocacy Office offices, that, based on our observations and
Advocacy Office personnel statements, had been used only for incidental storage. In
addition, the main office space provided separate offices for all professional personnel, a
separate work area for the secretary/outreach worker, a break area, a conference area, and
file cabinet area. Also, since October 1, 1993 (fiscal year 1994), the Advocacy Office paid
$4,201 for s pace to store unneeded property, which, in our opinion, should have been
                                                .
disposed of in 1993. Further, the Advocacy Office paid $5,387 for two new computer
systems, one purchased in September 1994 and the other purchased in November 1995,
despite having five additional computer systems (one of the five computer systems was
loaned to the Developmental Disabilities Council) for four employees. The purchase of
these computers was not approved in advance by the grantor agency (see Finding C). In
addition, the Advocacy Office purchased public information advertising at a total cost of
$3,378 to announce the relocation of the Advocacy Offrce, a general membership meeting,
and a disability-related conference. Finally, the Office improperly paid interest of $2,ooO
on an equipment lease issued on December 11, 1992.

According to the Executive Director, the extra space was needed for storage of excess
property and for a conference room. The Executive Director also stated that the computer
equipment was intended to improve the Advocacy Office's operations and office
administration, that he was not aware that prior approval was needed for public
information service costs, and that the interest was a part of the lease payments applied

25

 
toward the purchase of the equipment. Despite these explanations, we continue to believe

Recommendations

We recommend that the Board of Directors of the Protection and Advocacy of the
Marianas ensure that the Executive Director:

  1. Advises the U.S. Department of Health and Human Services (Administration
on Developmental Disabilities and the Substance Abuse and Mental Health Services
Administration) and the U.S. Department of Education (Region IX) of the questioned costs
and either resolves the questioned costs or arranges for repayment.

  2. Revises the current local mileage reimbursement rate to conform to that used
by the Government of Guam.

  3. Develops and implements procedures which provide for all charges to Federal
grants to be in compliance with requirements of Office of Management and Budget
Circular A-122 and, where required by specific regulations or grant conditions, for Federal
approval of planned expenditures to be obtained before costs are incurred.

Advocacy Office Response and Office of Inspector General Reply

In the September 12, 1997, response (Appendix 5) to the draft report from the President
of the Advocacy Office, the Advocacy Office concurred with the three recommendations
and indicated that corrective actions had been or would be taken, but it disagreed with
certain aspects of the finding as they related to Recommendation 3. Based on the
response, we consider Recommendation 2 resolved and implemented and requested
additional information for Recommendations 1 and 3 (see Appendix 6).

Recommendation 3. Concurrence.

  Advocacy Office Response. The Advocacy Office stated that to "catch up" with
the Government of Guam's pay raises, prior Advocacy Office Boards of Directors had
"approved the pay increases in principle with full implementation upon availability of
funds. " The Advocacy Office also stated that the Executive Director's retroactive
payments "represented postponed increments due to delayed performance evaluations and
unavailability of funds. " Regarding travel expenses, the Advocacy Office "concur[red] "
with the finding but stated that "sixty cents per mile [as opposed to the thirty cents per
mile rate used by the Government of Guam] is not unreasonable to pay our staff for local

`3Appendix 1 shows questioned costs of $9,979 related to the section "Miscellaneous Costs"
(Finding D). That
amount consisted of cost exceptions of $15,366 reduced by costs of $5,387 that were questioned, for
other
reasons, in the section "Procurement" (Finding C).

26

 
mileage" because the road conditions, other environmental factors, and gasoline prices on
Guam resulted in higher operating costs than in the mainland United States. The
Advocacy Office also disagreed with the questioned costs related to the lease of office and
storage space, the purchase of computers and public information advertising, and the
payment of interest on the purchase of office equipment. Specifically, the response stated:

      - The room rented adjacent to the Advocacy Office's current office space was used
for storage of official files and various items that were needed for "periodic events" and
for purposes such as a meeting room for the Advocacy Office's Board of Directors and
other nonprofit organizations, a computer learning and work area, and a reading and
audiovisual room.

      - The commercial storage space was used to store some of the " `excess baggage"'
the Advocacy Office had accumulated over the years but which it wanted to maintain,
although these items were "no longer needed in [the Advocacy Office's] daily operation. "

      - The new computers were purchased to upgrade from three "286," one "386,"
and one "486" computers and to give the Advocacy Office the benefit of the latest
computer software and Internet access.

      - The public information advertising was purchased to "tell our community where
persons with disabilities, . . . can find us, or to tell members of our organization and the
general public when and where we are going to have a general membership meeting and
election of officers, or to invite people to attend a conference on assistive technology
where they can gain new, valuable and essential information which would impact their
lives. "

      - The interest costs were related to the lease of a photocopier that the Advocacy
Office could not "afford to buy outright. "

  Office of Inspector General Reply. During our review of minutes of Board of
Directors meetings that occurred during fiscal year 1993, we did not identify any Board
approval, actual or in principle, of the questioned salary increases. However, even if the
prior Boards had approved the increases in principle, the payments were not allowable
unless those salary increases were included in the grant request, budget, or other Federally
approved document obligating the Federal grant funds during the relevant period. As
stated in the finding, Attachment B, Paragraph 6.a, of Circular A-122 states that
"compensation for personal services includes all compensation paid currently or accrued
by the organization for services of employees rendered during the period of the award. "
(Emphasis added.) Therefore, if grant funds were not available for the salary increases
during the grant period to which those increases were applicable, the Advocacy Office
could not use funds !?om subsequent grant periods to pay for prior period costs.

Regarding the mileage rate used by the Advocacy Office to reimburse employees for the
use of private vehicles, we believe it is inconsistent that, although the Advocacy Office

27

 
chose to adopt the salary scales used by the Government of Guam, it considered the
mileage rate used by the Government of Guam to be "a disincentive to staff" to use their
private vehicles.

Finally, regarding the other questioned costs, we believe that our decision to question those
costs was appropriate for the following reasons:

      - The additional office space was used for purposes that do not appear to have
been related exclusively to the Federal programs.

      - The commercial storage space and related rental costs could have been reduced
if the Advocacy Office had taken prompt action to dispose of items that were no longer
needed in its daily operations.

   - Although the Advocacy Office said that it purchased the new computers to
upgrade its computer capabilities, in 1995 the Advocacy Office purchased a 3-year old
computer from an employee.  (During the audit, we were not able to determine the
computer's microprocessor type. However, because it was a 1992 model, we believe that
it was most likely a 386. or a 486-type computer.) Additionally, the purchase of this
equipment was not approved in advance, as required by the grantor agency (see
Finding C).

      - Attachment B, Paragraph 37b, of Circular A-122 states that "public information
service costs are allowable as direct costs with the prior approval of the awarding agency"
and that "such costs are unallowable as indirect costs. " (Emphasis added.) However, we
did not find any documentation during our audit to indicate that the questioned public
information advertising costs had been approved by the grantor agencies, and no such
documentation was subsequently provided to us.

      - Attachment B, Paragraph 19a(l), of Circular A-122 states that "costs incurred
for interest on borrowed capital or temporary use of endowment funds, however
represented, are unallowable. " l4 Therefore, we believe that the interest costs for leasing
the photocopier were unallowable.

The essential issue regarding these questioned costs was not whether they may have served
a useful purpose for the Advocacy Office but whether they should have been charged to
local funds rather than Federal funds. These costs were questioned because they: (1) were
not allowable costs under the Federally funded programs; (2) required grantor agency
approval; and (3) need documented justifications as to their eligibility for grant purposes.

14A September 29, 1995, revision to Circular A-122 now states that "interest on debt incurred . . .
to acquire
capital assets (including renovations, alterations, equipment, land and capital assets acquired through
capital
leases)" is allowable. However, the photocopier in question was leased by the Advocacy Off& in
December 1992,
or almost 3 years before this revision.

28

 
APPENDIX 1

CLASSIFICATION OF MONETARY AMOUNTS

.   .
mu Area

Questioned
  B*

A. Financial Management
  Indirect Costs
  Non-Federal Program
  Personal Services

$303,792 **
55,202
169,944 **

B. Program Administration

Eligibility of Clients and Services                 89,264 **

C. Procurement and Property Management
  Procurement
  Property Management

91,630 **
8,813

D. Expenditure Control
  Salary Payments
  Travel
  Miscellaneous Costs

13,063
2,308
9,979 **

Total                          $743.995
                          ***

*Amounts represent Federal

**Amount adjusted to avoid duplicate counting of questioned costs (see the reconciliation in
Appendix 3).

***The total questioned costs in this appendix exceed the total expenditures reported for the audit
period and
the total questioned costs shown in Appendix 2 because the $8,813 questioned in "Property
Management" (see
Finding C) related to property squired before October 1, 1993, the start of the audit period (see the
reconciliation in Appendix 3).

29

 
   1994
Developmental Disabilities
Mental Illness
Individual Rights
Indirect Costs**
Subtotal

. iscal Ym
Developmental Disabilities
Mental Illness
Individual Rights
Assistive Technology
Indirect Costs**
Subtotal

Developmental Disabilities
Mental Illness
Individual Rights
Assistive Technology
Indirect Costs**
Subtotal

TOTAL

Total
Audited

$33 1,803

$315,219

$22 1,636

$740.213***

$20,161     $2,335
9,335     6,717
899      320
  0       0
$90,719     $18,400

`Drawdown amounts for the Developmental Disabilities and Mental Illness grants are combined
because Advocacy Offke and U.S. Department of Health and Human Service drawdowu
records did not distinguish between the two grants.

*The term "indirect costs" was used in the Advocacy Offke's accounting records to identify costs
not charged to a particular program rather than to indicate allowable costs pursuant to
an approved indirect cost rate.

***Reported expenditures exceed total drawdowns because the Federal grant funds were available
for a 2-year period. In add ition, the Advocacy Offke received $18,898
as reimbursement for expenditures incurred prior to fiscal year 1994 for another Federal grant
program that was transferred to another agency during fiscal year 1993.

in Federal funds

 
APPENDIX 3

RECONCILIATION OF QUESTIONED COSTS
  SHOW-N IN APPENDICES 1 AND 2

Fkxiin~ Area

A. Financial Management
Indirect Costs
Non-Federal Program
Personal Services

B. Program Administration
Eligibility of Clients and Services

C. Procurement and Property Management
Procurement

Property Management

D . Expenditure Control
Salary Payments
Travel
Miscellaneous Costs

Totals Per Appendix 1
Less: Costs Prior to FY 1993
Totals Per Appendix 2

Gross  Elimination   Net
Questioned of Duplicate Questioned Unsupported  cost
CostsCosts Costs,-. ,Eizs&Qu

31

 
APPENDIX 4
Page 1 of 2

U.S. CODE REQUIREMENTS FOR ELIGIBILITY
      TO PARTICIPATE IN THE
PROTECTION AND ADVOCACY PROGRAMS
ADMINISTERED BY THE ADVOCACY OFFICE

Each of the three programs administered by the Advocacy Office had different
requirements for client eligibility as follows:

   Developmental Disabilities. The protection and advocacy program for individuals
who have developmental disabilities is established by Title 42, Section 6000(b)(2), of the
United States Code Annotated to ensure that individuals with developmental disabilities
and their families have the support to protect their legal and human rights. Regarding the
protection and- advocacy program, Sections 6042(a)( 1) and (2) state:

[S]uch system . . . must have the authority to . . . pursue legal,
administrative, and other appropriate remedies or approaches to ensure the
protection of, and advocacy for, the rights of such individuals . . . who are
or who may be eligible for treatment, services, or habilitation, . . . and
to investigate incidents of abuse and neglect.

Section 6001(8) defines "developmental disability" as follows:

[A] severe, chronic disability of an individual 5 years of age or older
that - (A) is attributable to a mental or physical impairment or combination
of mental and physical impairments; (B) is manifested before the individual
attains age 22; (C) is likely to continue indefinitely; (D) results in
substantial functional limitations in three or more of the following areas of
major life activity - (I) self-care; (ii) receptive and expressive language;
(iii) learning; (iv) mobility; (v) self-direction; (vi) capacity for independent
living; and (vii) economic self-sufficiency; and (E) reflects the individual's
need for a combination and sequence of special, interdisciplinary, or
generic services, supports, or other assistance that is of lifelong or extended
duration and is individually planned and coordinated.

   Mental Illness. Title 42, Section 10801(b), of the United States Code Annotated
established the protection and advocacy program for individuals with mental illness, which
"ensure[s] that the rights of individuals with mental illness are protected. "  According to
this section, the purpose of the program is as follows:

mo assist States to establish and operate a protection and advocacy system
for individuals with mental illness which will . . . protect and advocate the
rights of such individuals through activities to ensure the enforcement of the
Constitution and Federal and State statutes; and . . . investigate incidents

32

 
APPENDIX 4
Page 2 of 2

of abuse and neglect of individuals with mental illness if the incidents are
reported to the system or if there is probable cause to believe that the
incidents occurred.

Section 10802(4) defines an individual with mental illness as follows:

[A]n individual - (A) who has a significant mental illness or emotional
impairment, as determined by a mental health professional qualified under
the laws and regulations of the State; and (B)(i) who is an inpatient . . . in
a facility rendering care or treatment, even if the whereabouts of such
inpatient are unknown; (ii) who is in the process of being admitted to a
facility . . .; or (iii) who is involuntarily confined in a municipal detention
facility for reasons other than serving a sentence resulting from conviction
for a criminal offense.

   Individual Rights. Title 29, Section 794e, of the United States Code Annotated
created the protection and advocacy program "to protect the legal and human rights of
individuals with disabilities who . . . need services that are beyond the scope of services
authorized to be provided" by other protection and advocacy programs for individuals
receiving vocational rehabilitation services, individuals with developmental disabilities,
and mentally ill individuals.

33

 
APPENDIX 5

Protection & Advocacy of the Marianas
  (Fotmerly MARC.) dba Advmcy OfTIce
Suite 204, RefkctJon Gnter, Cbrhn hl~ Papa, Agana, Guam
   Tel. (671) 472-8985 / 6 / 7 : Fax (671) 472-8989
      P.O. Bax 8830 TamanJnt GU 96931

Oleh Vitkwitsky
President
Al Harrell

Vice Prcsidatt
Jun Mercurio - ?a
s--T
Gorgonio Cabot
T-W

Board Metubas:
Franklin Castro
Cheryl Hipolito
Linda Leon Guerrero
Nemi Macario
Tom Punzalan
Louie Yanza, Esq.

Staffi
Dr. Eddie del Rosario

Fkec, Director
Bernice Franquez
PADD Advoatc
Angela Taclmey
PAlMI Mvoafc
Dave Retumalta
Joseph Destefano
Admin. support

Sept. 12, 1997

Mr. Peter J. Scharwark, Jr.
Office of Inspector General,
U.S. Dept. of Interior
North Pacific Region,
238 Archbishop F.C. Flores St.,
Suite 807, Pacific News Bldg.,
Agana, Guam 96910

Subject: Drafi Audit Report on the Protection and Advocacy of the
Marianas, Territory of Guam (Assignment No. N-IN-GUA-009-96)

Dear Mr. Scharwark:

The following is our response to the draft audit report in the order found
in your report:

A. FINANCIAL MANAGEMENT:

1. Indirect Costs: We concur with the findings that we do not
have an approved indirect cost rate for FY 1994 & 1995. We
submitted a proposal to OIG/DOI Guam but the same was
rejected. Subsequently, we asked for technical assistance. We
also learned that our counterpart agency in Saipan WASI)
successfully negotiated an indirect cost rate with Region IX
San Francisco. Technical assistance was also provided to them
by Region IX officials. It was our understanding that after this
audit, technical assistance would be provided our office by
OIGLDOI Guam to come up with an acceptable indirect cost
rate.

34

 
APPENDIX 5
Page 2 of 15

We do not concur with the fmdings that we "had not established an
accounting system capable of identifying and documenting
expenditures chargeable to the appropriate Federal and non-
Federal programs." We have engaged the professional expertise of
Mr. John Halloran, C.P.A. for years who had set up our chart of
accounts, maintained, recorded, and regularly reported our
expenditures for each program. For FY 1994 and 1995, we utilized
a formula to calculate indirect costs based on a running 5-year
average case load for each of the programs we administered per
agreement with Region IX. Prior to that we distributed program
costs based on the proportion of each grant to the total of three
grants we administered. Several of our counterparts in the U.S.
mainland practiced this method. Subsequently, we utilized a more
precise method to calculate indirect costs based on quarterly case
load per program and then we fme-tuned it to a weighted, monthly
case load per program.

2. Non-Federal Program: We concur with the statement that "direct
fmancial assistance is not an authorized use of Federal protection
and advocacy grant funds." We do not concur with the fmdings
that the Advocacy Office used tids from three Federal grants to
pay for the costs of a local fmancial assistance program. Only local
funds (proceeds f?om annual Celebrity Wheelchair Race as well as
local donations) were ever used for the local fmancial assistance
program. The wisdom of the Board of Directors of oti
organization, past and present, provided for such assistance to
deserving clients and non-clients alike who fall through the cracks
just to keep body and soul together and to allow them some
reprieve/relief so that they can go on to survive another day.
Nowhere does it say that agencies such as ours need to be
"authorized" by anybody to engage in such humanitarian and
altruistic activities especially if no federal funds were utilized. For
the sake of argument, even if federal fL.nds were utilized, we
believe this is a commendable and a very reasonable undertaking
which is expected of any "helping agency" especially by those of
our target population the majority of whom are mired in poverty
and hopelessness. We doubt that there's a member in the U.S.
Congress who wrote these mandates mean enough to dispute this.

2


35

 
APPENDIX 5
Page 3 of 15

We should clarify that some of those recipients are regular cases
handled by our caseworkers with the added dimension of needing
fmancial assistance as part of their overall problems. Seeking
fmancial entitlements for clients, irrespective of source (federal
govt., local govt. or from non-governmental entities such as private
nonprofits) are legitimate activities incorporated in our annual
federal report. Human beings attended to by human service
workers are ideally treated in their totality, not segmented;
wholistically, not compartmentalized. Our caseworkers are
generalists, not specialists. To infer that clients' desperate fmancial
needs are unique and apart Tom their "legitimate" needs as persons
with disabilities and should thus be dealt with in a separate locale
at a "convenient" time by a different person is somewhat ludicrous
and counter-productive. Sometimes it is so easy to nit-pick at the
process and miss the obvious benefits of the outcome. In the matter
of time spent by our Executive Director attending to these cases in
question during office hours, those can be shifted to the
considerable extra time he spends at the office after hours which
are uncompensated. Likewise, we should not discount the hundreds
of volunteer hours spent by the officers and members of our Board
of Directors as well as other volunteers who spend time in our
office. We shouldn't even be telling you this since you yourselves,
as federal officials and employees, are called upon to perform
volunteer work as well as contribute monetarily to worthwhile
causes. In fact, we received favorable verbal comments from your
auditors who observed the operation of this worthwhile local
grant/loan program fusthand.

3. Personal Services Costs: We do not concur with these findings.
All the activities of caseworkers are geared towards alleviating the
problems of their clients whether done face to face, at the office, at
the client's home, at other agencies, by phone, via a guardian, in
institutions, etc. Similarly, time spent by caseworkers in record-
keeping, research, in-service training, conferences, seminars, etc.,
all redound to the benefit of their clients. All of their hours are
treated as direct costs and applied to their respective programs.
Where a caseworker's time was shared by two different programs,
we distributed his or her time proportionately based on actual
caseload. For example, when we fmt implemented the PAIR
program, we did not have a specific caseworker to handle PAIR

3
36

 
APPENDIX 5
Page 4 of 15

cases. Cases were distributed among the PADD and PAIMI
caseworkers as well as the Exec. Director. Direct costs were
allocated proportionately according to the actual caseloads of each
employee. Thus: If PADD caseworker had a total caseload of 45
for the period comprising of 40 DD cases and 5 PAIR cases, the
cost-allocation was Total Salary & Fringes of PADD caseworker
multiplied by 40/45 charged to the PADD program (direct cost);
likewise, Total Salary & Fringes of PADD caseworker multiplied
by 5/45 charged to the PAIR program (direct cost). The same
formula was applied to the PAIMI program accordingly. Thus: If
PAIMI caseworker had a total caseload of 25 for the period
comprising of 20 MI cases and 5 PAIR cases, the cost-allocation
was Tot. Sal. & Fringes x 20125 charged to PAIMI program; Tot.
Sal. & Fringes x 5/25 charged to the PAIR program. The Exec.
Dir's salary & fringes were allocated to both direct and indirect
costs to all 3 programs. Thus: If Exec. Dir. Handled 5 PAIR cases,
the direct cost-allocation was Tot. Sal. & Fringes of Exec. Dir.
multiplied by 5/15 (15 being total PAIR cases handled by all
employees) charged to PAIR program; indirect cost-allocation was
Tot. Sal. & Fringes x 5/85 (85 being total cases for all 3 programs)
charged to PAIR; Tot. Sal. & Fringes x 45/85 charged to PADD;
Totl Sal. & Fringes x 25/85 charged to PAIMI.

We think that this method is more equitable and better reflects the
proportion of effort expended by employees towards each program
as compared to a single indirect cost rate figure. The fact that this
was apparently acceptable to our grantor agencies which continued
to release operating tids as requested should be noted.

3. Financial Reports and Budgets: We do not fully concur with these
fmdings. SF269s were submitted to our grantors after this audit.
Quarterly performance reports were routinely submitted to
USDOE Region IX. There were attempts to fully withhold our
payments by all 3 programs but were resolved by our submission
of monthly cost-distributed expenditure reports. PAIMI and PAIR
expenditures were Mly reimbursed while PADD expenditures
were partially reimbursed pending resolution of some questions.
We believe that this tells us something that we were not as bad as
painted by your audit.

4

37

 
APPENDIX 5
Page 5 of 15

In the matter of budgets. we did have budgets prepared for internal
use for FY 1995 and 1946 for all 3 programs (PADD, PAIMI,
PAR); For FY `97 we prepared a budget for internal used for
above 3 programs plus PAAT. Likewise, budgets were prepared
and submitted to SAMHSA for the PA&II program for FY `95,
`96, `97. We are in the process of preparing the FY `98 budget for
submission to SAhBISA for the PAMI program. We intend to
prepare and submit to our grantors our FY `98 budget for all 4
programs plus our non-federal program. We just want to say that
we never engaged in reckless and unreasonable expenditures of our
funds whether federal or local funds. Most of our expenditures
were fairly routine based on ten years spending pattern.

RECOMMENDATIONS:

1. The Board of Directors will ensure that the Executive
Director advise the USDHHS and USDOE of the questioned
costs and its resolution.

2. The Board of Directors will ensure that the Executive
Director prepares and submits indirect cost proposal
annually to the cognizant audit agency for approval in
accordance with requirements of USOMB Circular A-122.
He may ask for technical assistance from pertinent sources.

3. The Board of Directors will ensure that the Executive
Director develops and implements an accounting system and
a personnel activity system per your recommendation.

4. The Board of Directors will ensure that the Executive
Director develops and implements procedures to ensure that
all fmancial reports required by the grant agreements are
submitted to the grantor agencies in a timely manner and
that annual budgets are prepared and approved by the Board
of Directors and submitted to the grantor agencies.

5

38

 
APPENDIX 5
Page 6 of 15

B. PROGRAM ADMINISTRATION

1. Eligibility of Clients and Services: We definitely do not concur with
the fmdings especially with the eligibility of clients to receive P&A
services. Although there were some cases without written medical
diagnosis or certification of disability (which we promptly remedied),
the report assumes that we are unable to determine obvious functional
disabilities among our clients. In fact, the intake form we are now
using which we adopted from Hawaii P&A was part of our corrective
action plan as a result of a previous Program Audit Review. This
intake form has specific written instructions and definitions for
caseworkers as well as others who need to know.

In the example used by the auditor regarding a client with orthopedic
disability (here we are assuming that the client referred to is one of
these two: 1. E.D., who in fact has cerebral palsy, a wheelchair user as
long as we had known her, and had represented her many times before
for various problems or 2. H.C., who had polio when she was a child),
the assumption was made that because the client had a full time job
and a saving/checking account, that one no longer have other
functional limitations which would still make one eligible for our
services. The truth is E.D. and another sibling are the only
breadwinners of a large family and so when she came to us with her
problem (as a co-signer she was being forced to pay off a debt
incurred by a co-worker who died) she was staring at financial
devastation in the face. With H.C., she was facing discrimination at
her work place aside Corn physical and mental abuse by her spouse
and in-laws.In any case, fmancial status was never a criteria for
eligibility to our programs.

We wish to interject at this point that the program audit was
suspended to allow us time to obtain medical certifications for those
without, with the understanding that the auditor will come back to
resume. That didn't happen. Here we are at a distinct disadvantage,
left to guess which are the clients being used as examples in this
report without any confidential ID. How do we explain for instance
that a temporary restraining order or a divorce is a needed intervention
to a very vulnerable client with disabilities to address the underlying
abusive and neglectful situation? Since we don't have an in-house
lawyer, we of course needed to refer to legal service agencies. We

6

39

 
APPENDIX 5
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should state here without meaning to offend anybody that we can not
accept these findings because the "yardstick" used as well as the ones
doing the "measuring" are not considered our program peers. The
ideal situation is for us to be evaluated through a peer review process
by our peers or counterparts who run similar programs. This can be
arranged through our national organization, the National Association
of P&A Systems (NAPAS) based in Washington, DC. This is the fair
thing to do. Please remember that human services is not an exact
science that can be reduced and expressed in absolute numbers. A
perfect example is the medical field where doctor's fees, medical
interventions, surgical procedures, ancillary procedures, etc. are
expressed in relative value units which may vary according to locale,
according to specialties or even subspecialties, according to time of
day or even the day of the week. We believe that our caseworkers are
dedicated, knowledgeable and genuinely care for their clients. There
have been but very few complaints from their clients.

In the matter of one of our caseworkers who stated that "he had not
received adequate training to determine client eligibility and eligible
services", we have documentation to show that he in fact received
more training both off and on-island as well as one-on-one, hands-on
training with his peers as well as with the Executive Director as
compared to others. To blame our office as well as others for his
personal inadequacy is a pure cop-out. His previous employer had
much the same problem with this fellow. Until he takes care of the
chip in his shoulder and face up to reality, nobody can really help him.
In addition, most of the client complaints mentioned above were
attributed to this former caseworker. He has since moved on to
another agency which does not take care of clients.

2. Records Maintenance: We concur with most of these findings which
point out lapses in documentation. Measures have already been
instituted internally to address these inadequacies. Technical
assistance is being sought from NAPAS regarding written procedures
for documenting eligibility as well as case file checklists to ensure
needed administrative actions. The 3 case files which could not be
located were located later on. A glitch in the computer report accounts
for that 1 case listed as open but had in fact been closed previously.

7

40

 
APPENDIX 5
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RECOMMENDATIONS:

1. The Board of Directors will ensure that the Executive Director
advise USDHHS and USDOE of the questioned costs and its
resolution.

2. The Board of Directors will ensure that the Executive Director
develops and implements procedures to ensure that the Advocacy
Offke clients and services meet the eligibility requirements
contained in Federal law and grant agreements and regulations;
likewise, the Board of Directors will ensure that the Advocacy
Office personnel prepare and maintain case files in accordance
with guidelines issued by the NAPAS.

C. PROCUREMENT AND PROPERTY LMiANAGEMENT:

1. Procurement: We can only say that we were under the impression that
we were uniformly covered by the revised regulation exempting
purchases of less than $5,000.00 from prior authorization. It was not
made clear to us that as a "high risk grantee", we were not covered by
   .
1t .

In the matter of the questioned procurement actions, we believe that
for the most part, we did allow for open and tiee competition. Our
problem is locating and retrieving written documentations to prove
our position. Given enough time, we could very well produce them. In
some cases, particularly computer purchases, we wait for the
opportune time whenever there is a sale before we make the purchase.

We believe that there were written contracts particularly with the
Guam Legal Services Corp. as well as with some particular lawyers in
the community willing to accept our offer of $75. Per hour which is
half of the going rate in our community. Some of the legal services we
obtained for our clients were on a pro bono basis.

Regarding one of the 8 procurement actions classified as cost
exceptions, we purchased a computer, monitor and printer from one of
our employees who had been good enough to lend us her system after

8
41

 
APPENDIX 5
Page 9 of 15

one of ours burned out due to the notoriously poor electrical power
services on our island. We used our employee's system at no cost for
several months before we decided to buv it outright at a discounted
price equivalent to a 36.4% depreciatedcost which was very
reasonable. Of the other 7 procurement actions, we are at a
disadvantage to address these since they were not identified in the
draft report. It would have been helpful to have an itemized list.

Regarding the 10 procurement actions classified as unsupported costs
because our files did not contain evidence of competition:

  We did make the effort to look for other office spaces before we
fmally decided on our present office location consisting of actual
visits to four other places, namely, the Boonsri Plaza (too small); the
Thai Airways building (difficult accessibility for persons with
disabilities); Martinez building recently vacated by the Police Dept.
(difficult accessibility and limited parking) and the Sunroute Guam
Oceanview building (too big; limited parking). We even had a
committee assigned to do this consisting of 3 board members, the
Exec. Director and a caseworker who is a wheelchair user. We picked
the Reflection Center site because of its central location in downtown
Agana, its accessibility, elevator, covered parking for our employee
and clients with disabilities, standby generator, very reasonable price
which included utilities as well as initial partitioning according to our
needs at no cost to us ($lSO/square foot plus 15 cents common area
expenses versus $3.OO/sq. A. which the Guam Legal Services Corp.
was paying one floor down from us). The Reflection Center is a
prestigious as well as a highly-visible location. High visibility was a
prime factor recommended to us by Federal officials who did our
program audit review when our office was located behind Hafa Adai 1
& 2 theatres. We also believe that our clients deserve to be served in
the best location we can offer. In fact, price-wise, the Reflection
Center location was the lowest among the five different locations we
smeyed.

  All six service contracts cited in the draft report were with Mr.
John Halloran, CPA with whom we negotiated such contracts based
on his consistent and satisfactory services with us all these years. We
knew for a fact as well as other nonprofit entities on Guam that he has
consistently quoted us a very fair price which is so much lower than
his colleagues.

9

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APPENDIX 5
Page 10 of 15

  As mentioned earlier, we did have contracts with Guam Legal
Services Corp.

2. Property Management:

a .

b .

C .

We a& not aware of any computer monitor purchased for
$620. In any case, we have two computer monitors which
we sent to U-BIX Computer Co. for repairs. Unfortunately,
both were beyond repair. Our Exec. Dir. informed the
auditor about this and provided him with the serial numbers.
The public address system referred to as the "Karaoke
System" which we used for our outreach efforts and general
membership meetings was stolen several years ago when we
were still in our old location behind the Hafa Adai theatres
in Tamuning. Our neighbors were also burglarized at the
same time. The p.a. system was left in the Exec. Dir's car
which was broken into. Unfortunately, we could not fclnd the
police report. This was previously reported to our grantors.
This computer system which was zapped during a typhoon
in the early 90s was sent off-island for repairs by the local
vendor since it was still covered by warranty. Unfortunately,
we never heard from the California company again which
we learned closed down inspite of several attempts of
tracking down. We will try to obtain an affidavit from the
local vendor as soon as we can.

d .

e .


f .

There were three window air conditioners (two not working
and one in working condition) which we lefi with another
nonprofit agency (Guam Vocational Training Center) when
we frlrst moved from the old Guam Memorial Hospital to
another location behind the Hafa Adai theatres in 1988. That
agency has since moved next to Goodwill Industries. Our
Exec. Director recently spoke to the former Exec. Director
of the Guam Vocational Training Center who indicated that
she will write an affidavit regarding the air conditioners.
The old Canon copier referred to here was traded in when
we leased our present Xerox copier.
The electric typewriter referred to here was turned over to
the Client Assistance Program which was redesignated to
another nonprofit entity.

10

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APPENDIX 5
Page 11 of 15

RECOMMENDATIONS:

1. The Board of Directors will ensure that the Executive Director
advise the USDHHS and USDOE of the questioned costs and their
resolution.

2. The Board of Directors will ensure that the Executive Director
develops and implements procedures which provide for:

a .


b .

c.

d .

Procurement actions to be conducted in accordance with
Titles 34 and 45, Section 74.40 of the Code of Fed. Regs.
All equipment purchases in excess of $500 to be approved
by the grantor agency before the procurement actions are
executed while the Advocacy Office is designated a high-
risk grantee.
Written contracts to be awarded and executed before the
Advocacy Office incurs costs for goods or services,
including legal services.
Personal property acquired with Fed. Funds to be
documented and controlled in accordance with Titles 34 and
45, Section 74.34 of the Code of Fed. Regs.

D. EXPENDITURE CONTROL:

1. Salary Payments: We do not concur with this fading. Prior to the
BOD's approval of retroactive pay raises, previous Boards have
discussed the subject at length after the Exec. Director submitted such
request coupled with cost-analysis both in text and graphic forms. The
basis of the request, as mentioned in the draft report, was the series of
actions taken by the Govt. of Guam to realign the salaries of
government employees across the board, culminating in the uniform
pay scale following the Hay's Study. Previous Boards have approved
the pay increases in principle with full implementation upon
availability of funds. This resulted in the Advocacy Office trying to
catch up with GovGuam pay scale with the Advocacy Office trailing
behind by two to three years until it fmally caught up with GovGuam
in 1994. The Executive Director's retroactive pay represented
postponed increments due to delayed performance evaluations and

11

44

 
APPENDIX 5
Page 12 of 15

unavailability of funds. Incremental pay for other staff took
precedence over the Exec. Director's.

2. Travel: We concur with this finding (it was an honest mistake)
although we still believe that sixty cents per mile is not unreasonable
to pay our staff for local mileage given the fact that road conditions as
well as environmental conditions on Guam place greater strain and
accelerates wear and tear on vehicles. Gasoline prices as well as other
petroleum products, maintenance & repair services, spare parts, cost
of insurance and initial cost as well as financing charges for
acquisition of vehicles are much higher compared to Mainland USA.
Lower mileage reimbursement is proving to be a disincentive to staff
and increases the pressure on management to provide official
vehicle/s as an alternative. We doubt that this alternative would be
affordable. We can only hope that some generous soul would donate
such vehicle.

As stated in the draft report, this particular travel cost incurred by one
of the lawyers employed by our contractor, Guam Legal Services
Corp., was inadvertently charged to the PAIR program funded by
USDOE when it should have been charged to PADD and PAIMI
funded by USDHHS. Atty. Brian Bishop of GLSC attended a
Disability Skills Workshop for Lawyers in the US mainland and per
agreement between Advocacy Office and GLSC, each agency
contributed half of the total cost.

3. Miscellaneous Costs:

  a. We do not concur with the determination that the separate room
  rented for $4OO/month (450 sq. feet total space which translates to
  88.9 cents per sq. ft.- quite a steal; our landlord gave us a big break
  here) is idle and unused. Aside from storing old records and
  official files which can not be disposed of until the statute of
  limitations run out, it has served us well to store other things
  which we use for periodic events such as outsized banners, posters,
  lanterns, promotional materials, etc. It can hardly be called
  "incidental storage". It is also used for board meetings,
  PAIMVPAIR advisory council meetings, Tri-Agency Consortium
  meetings, small group meeting area for other nonprofit
  organizations such as Parents-Agencies Networking, Inafa Maolek,
  a nonprofit mediation group, Fil-Am Society of Architects &

45

 
b .

C .

APPENDIX 5
Page 13 of 15

Engineers with whom we promote ADA-compliant design and
construction of buildings, ad hoc groups such as Circle of Friends
and ADA Now! Steering Committee. It is also used as a computer
learning and work area for some of our volunteers, clients and
members of the BOD (we have set up 3 old computers in this
room). It also serves as a reading room and audio-visual room for
those who avail of our small library of books, magazines, audio
and videotapes.

When we moved from a 3,000 square feet office (actually a large
multilevel house behind Hafa Adai theatres) to Micronesia Mall,
it's amazing how much materials we managed to accumulate. We
had to store some of our "excess baggage" in the Board President's
house. When we moved from Micronesia Mall to our present
location, we ended up with a lot of more stuff we needed to store.
We consolidated everything and rented a commercial storage space
where we can retrieve some things we needed and to store some
which we no longer needed in our daily operation. The decision to
finally dispose what we can came rather late but we still ended up
with some stuff which have no commercial value but still needed
to be stored as mentioned above in item a. We were paying
$1.8O/sq. A. for the commercial storage space as opposed to 90
cents to the extra room mentioned in a. above. We don't believe
that needed storage space is unnecessary.

Before one jumps into conclusion how extravagant we were with
computer systems, let us consider the following: Of the 5 computer
systems referred to in the draft report., 3 are obsolete models of the
"286" vintage which are, for practical purposes, non-upgradable,
namely, 1 ancient Wang PC with 10 megs hard drive which
operates on a simulated IBM DOS, 1 Junior PC with both CPU and
monitor in a single housing and 40 megs hard drive, 1 old Epson
which was the granddaddy of the Equity series pulled out of
production 4 years ago; we also have 1 IBM clone of the "386"
vintage purchased 8 years ago but still serviceable. The fifth
computer mentioned is an Epson laptop of the "486" vintage with
80 megs of hard drive space mostly used for activities outside our
office. This has proven to be a lifesaver standby system everytime
our unreliable electric power system does a number on our
stationary units. Except for this laptop, the four other obsolete and

46

 
APPENDIX 5
Page 14 of 15

d .

e .

near-obsolete systems have limited capabilities to run new
software and to convert to Windows 95 operating system. To keep

up with the times such as the intemet, email, management
information systems, in-house bookkeeping, desktop publishing,
etc., we needed to purchase an upgraded "486" system at a time
when the PC Pentium state of the art systems were already in the
market. That's why our Epson Action Tower 3000 was bought at
bargain price, by Guam standards. After over a year, our office

a

hired a new caseworker for our newest program, PAIR. It was at
this time that the cost of a basic Pentium 75 system went down to
almost the level of the 486's. With its purchase, we were able to
finally avail of Windows 95, the newest operating system, the new
fiontier opened to us via Internet, and the wonders of multimedia
softwares. Please remember that we did not invent the industrial
credo of "planned obsolescence". Whether keeping up with the
times is a vice or a virtue is of course debatable. We like to think
that it is a virtue.

If we are to be penalized for purchasing essential advertising to tell
our community where persons with disabilties, our specifc target
group, can find us, or to tell members of our organization and the
general public when and where we are going to have a general
membership meeting and an election of officers, or to invite people
to attend a conference on assistive technology where they can gain
new, valuable and essential information which would impact their
lives, then so be it. We want to say though that we accept it bitterly
and under protest. On behalf of persons with disabilties, we fmd
such ruling highly questionable.

Regarding this "improperly paid interest of $2,000" for a Xerox
machine which we could never hope nor afford to buy outright
that's why we leased it, we can only say please forgive us. That
goes as well for all the honest mistakes we made.

RECOMMENDATIONS:

1. The Board of Directors will ensure that the Executive Director
advise the USDHHS and USDOE of the questioned costs and their
resolution.

14
47

 
APPENDIX 5
Page 15 of 15

2. The Board of Directors will ensure that the Executive Director
revises the current local mileage reimbursement rate to conform to
that used by the Government of Guam. This was already done.

3. The Board of Directors will ensure that the Executive Director
develops and implements procedures which provide for all charges
to Federal grants to be in compliance with requirements of OMB
Budget Circular A-122 and, where required by specific regulations
or grant conditions, for Federal approval of planned expenditures
to be obtained before costs are incurred.

Thank you very much for your attention and patience. Should you have any
questions, please don't hesitate to contact us.

Respectfully yours,

President,
P.A.M. dba Advocacy Office

15

48

 
APPENDIX 6
Page 1 of 2

STATUS OF AUDIT REPORT RECOMMEhiDATIONS

Finding/Recommendation
   Reference

A.1, B.1, C.1,andD.l   Management
                   concurs;
                additional
                information
                needed.

A.2

A.3

A.4

Management
concurs;
additional
information
needed.

Management
concurs;
additional
information
needed.

Management
concurs;
additional
information
needed.

         .
ctlon Reaurred

Provide a target date to advise the U.S.
Department of Health and Human
Services (Administration on
Developmental Disabilities and the
Substance Abuse and Mental Health
Services Administration) and the U.S.
Department of Education (Region IX) of
the questioned costs, and either resolve the
questioned costs or arrange for repayment.

Provide a target date for preparation and
submission of indirect costs proposals to
the cognizant audit agency for approval in
accordance with requirements of U.S.
Office of Management and Budget
Circular A-122.

Provide a target date for developing and
implementing an accounting system that
separately tracks revenues and
expenditures by each Federal and non-
Federal program and a personnel activity
system that accounts for and reports the
distribution of personal services costs
(direct and indirect) among each Federal
and non-Federal program.

Provide a target date for developing and
implementing procedures to ensure that all
financial reports required by the grant
agreements are submitted to the grantor
agencies in a timely manner and that
annual budgets are prepared and approved
by the Board of Directors and submitted to
the grantor agencies.

49

 
APPENDIX 6
Page 2 of 2

Finding/Recommendation
  Reference

.    .
tlon Rewred

B2 .

Management Provide a target date for developing and
concurs;   implementing procedures to ensure that
additional  Advocacy Office clients and services meet
information  the eligibility requirements contained in
needed.   Federal law and grant agreements and
     regulations and that Advocacy Office
     personnel prepare and maintain case files
     in accordance with guidelines issued by
     the National Association of Protection and
     Advocacy Systems.

C.2

D.2      Implemented No further action is required.

D.3

Management Provide a target date for developing and
concurs;   implementing procedures which provide
additional  for all charges to Federal grants to be in
information  compliance with requirements of Office of
needed.   Management and Budget Circular A-122
     and, where required by specific
     regulations or grant conditions, for
     Federal approval of planned expenditures
     to be obtained before costs are incurred.

Management Provide a target date for developing and
concurs;   implementing procedures which provide
additional  for: (1) procurement actions to be
information  conducted in accordance with Titles 34
needed.   and 45, Section 74.40, of the Code of
     Federal Regulations; (2) all equipment
     purchases in excess of $500 to be
     approved by the grantor agency before the
     procurement actions are executed while
     the Advocacy Office is designated a high
     risk grantee; (3) written contracts to be
     awarded and executed before the
     Advocacy Office incurs costs for goods or
     services, including legal services; and (4)
     personal property acquired with Federal
     funds to be documented and controlled in
     accordance with Titles 34 and 45, Section
     74.34, of the Code of Federal
     Regulations.

50

 
Sending written documents to:            Calling:

     Wthin the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street, N.W.
Mail Stop 5341
Washington, D.C. 20240

Our 24.hour
Telephone HOTLINE
l-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
l-800-354-0996

Outside the Continental United States

Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division - Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

(703) 2359221

North Pacific Retion

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flares Street
Suite 807, PDN Building
Agana, Guam 96910

(700) 550-7428 or
COMM 9-O1l-671-472-7279

 
Toll Free Numbers:
l-800-424-5081
TDD l-800-354-0996

FTS/Commercial Numbers:
(202) 208-5300
TDD (202) 208-2420
HOTLINE

1849 C Street, N.W.
hkil stop 5341
Washington, D.C. 20240