U.S. Comission on Civil Rights
Deficiencies Found in Financial Management and Internal Controls Gao ID: GAO-05-68R March 7, 2005The United States Commission on Civil Rights (Commission) was first established in 1957 as the Commission on Civil Rights. The Commission's life was extended in 1983 and reestablished again in 1994 with its current name. The Commission's purpose is to collect and study information on discrimination or denials of equal protection of the laws because of race, color, religion, sex, age, disability, or national origin, or in the administration of justice in such areas as voting rights, enforcement of federal civil rights laws, and equal opportunity in education, employment, and housing. The Commission has been subject to long-standing congressional concerns over the adequacy of its management practices and procedures, concerns that were reinforced by several GAO reports. In July 1997, we issued a report in which we found broad management problems at the Commission, including limited awareness of how its resources were used. In more recent studies, we found that the Commission lacked good project management and transparency in its contracting procedures and needed improved strategic planning. As a result of these reports and other concerns, we conducted additional work at the Commission. Specifically, Congress asked us to determine whether (1) the Commission's financial transactions (receipts, obligations, and expenditures) for the fiscal year ended September 30, 2003, were properly authorized, approved, and supported and (2) the Commission had effective internal controls over financial transactions and reporting. Congress also asked us to review the manner in which the Commission addressed its budget priorities.
Our tests of the Commission's fiscal year 2003 financial transactions identified substantial deficiencies in the underlying support for a significant level of its expenditures. Specifically, while our tests of $5.3 million of payroll transactions found them to be substantially correct, our tests of $4.9 million of nonpayroll-related transactions, including travel and procurement, found serious deficiencies in the supporting documentation underlying these transactions. These deficiencies precluded us from being able to determine whether as much as 18 percent of the statistically tested nonpayroll-related transactions of the Commission for fiscal year 2003 were valid. Our review of the Commission's internal controls over nonpayroll financial transactions and financial reporting identified fundamental weaknesses in internal controls. We found that the Commission lacked a formal comprehensive set of policies and procedures governing its financial management practices. We also identified serious deficiencies in the Commission's maintenance of financial records, enforcement of travel regulations, adherence to the Federal Acquisition Regulation (FAR) regarding the ordering process for contracted services from commercial vendors, adherence to provisions of the Prompt Payment Act, monitoring of budgetary resources, and cost accumulation and reporting. These deficiencies stemmed from a weak overall control environment, which led to BPD's decision to discontinue providing accounting services for the Commission after fiscal year 2003, citing inadequate management oversight and control. This weak control environment increases the risk of abuse of the Commission's financial resources. Our review of the manner in which the Commission addressed its budget priorities found that the Commission was unable to provide evidence of how its fiscal year 2003 budgetary resources were used to fulfill its statutory duties and to achieve the six goals listed in its fiscal year 2003 annual performance plan. Further, we could not determine how the Commission planned, communicated, and prioritized its budgetary resources, which makes it difficult for the Office of Management and Budget (OMB) and the Congress to understand whether the Commission is using its financial resources to achieve its mission and goals. Given the long-standing congressional concerns over the Commission's management priorities, we believe the Commission could enhance the transparency of its budgetary, financial, and operational activities.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-68R, U.S. Comission on Civil Rights: Deficiencies Found in Financial Management and Internal Controls
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March 7, 2005:
The Honorable F. James Sensenbrenner, Jr.
Chairman:
Committee on the Judiciary:
House of Representatives:
The Honorable Orrin G. Hatch:
Member:
United States Senate:
Subject: U.S. Commission on Civil Rights: Deficiencies Found in
Financial Management and Internal Controls:
The United States Commission on Civil Rights (Commission) was first
established in 1957 as the Commission on Civil Rights.[Footnote 1] The
Commission's life was extended in 1983[Footnote 2] and reestablished
again in 1994[Footnote 3] with its current name. The Commission's
purpose is to collect and study information on discrimination or
denials of equal protection of the laws because of race, color,
religion, sex, age, disability, or national origin, or in the
administration of justice in such areas as voting rights, enforcement
of federal civil rights laws, and equal opportunity in education,
employment, and housing. The Commission has been subject to long-
standing congressional concerns over the adequacy of its management
practices and procedures, concerns that were reinforced by several GAO
reports. In July 1997, we issued a report in which we found broad
management problems at the Commission, including limited awareness of
how its resources were used.[Footnote 4] In more recent studies, we
found that the Commission lacked good project management and
transparency in its contracting procedures[Footnote 5] and needed
improved strategic planning.[Footnote 6]
As a result of these reports and other concerns, you asked us to
conduct additional work at the Commission. Specifically, you asked us
to determine whether (1) the Commission's financial transactions
(receipts, obligations, and expenditures) for the fiscal year ended
September 30, 2003, were properly authorized, approved, and supported
and (2) the Commission had effective internal controls over financial
transactions and reporting. You also asked us to review the manner in
which the Commission addressed its budget priorities.
To respond to this request, we obtained the Commission's fiscal year
2003 transaction files serviced by the Department of the Treasury's
Bureau of the Public Debt (BPD), and the Commission's payroll
transactions serviced by the U.S. Department of Agriculture's (USDA)
National Finance Center (NFC). We examined supporting documentation and
approvals for both statistically and nonstatistically selected
transactions, as discussed later in more detail in the scope and
methodology of this report. We evaluated the Commission's internal
controls over financial transactions and reporting by reviewing
policies and procedures; interviewing Commission staff, including the
former staff director;[Footnote 7] and reviewing the results of our
tests of the Commission's fiscal year 2003 financial transactions. We
also determined the levels of total funding requested and received by
the Commission for fiscal years 1995 through 2005, reviewed the
Commission's fiscal years 2003 through 2005 budget justifications and
its performance plans, and interviewed Commission officials and others
to determine how the Commission's budget priorities were being
addressed.
Results in Brief:
Our tests of the Commission's fiscal year 2003 financial transactions
identified substantial deficiencies in the underlying support for a
significant level of its expenditures. Specifically, while our tests of
$5.3 million of payroll transactions found them to be substantially
correct, our tests of $4.9 million of nonpayroll-related transactions,
including travel and procurement, found serious deficiencies in the
supporting documentation underlying these transactions. These
deficiencies precluded us from being able to determine whether as much
as 18 percent of the statistically tested nonpayroll-related
transactions of the Commission for fiscal year 2003 were valid.
Our review of the Commission's internal controls over nonpayroll
financial transactions and financial reporting identified fundamental
weaknesses in internal controls. We found that the Commission lacked a
formal comprehensive set of policies and procedures governing its
financial management practices. We also identified serious deficiencies
in the Commission's maintenance of financial records, enforcement of
travel regulations, adherence to the Federal Acquisition Regulation
(FAR)[Footnote 8] regarding the ordering process for contracted
services from commercial vendors, adherence to provisions of the Prompt
Payment Act,[Footnote 9] monitoring of budgetary resources, and cost
accumulation and reporting. These deficiencies stemmed from a weak
overall control environment, which led to BPD's decision to discontinue
providing accounting services for the Commission after fiscal year
2003, citing inadequate management oversight and control. This weak
control environment increases the risk of abuse of the Commission's
financial resources.
Our review of the manner in which the Commission addressed its budget
priorities found that the Commission was unable to provide evidence of
how its fiscal year 2003 budgetary resources were used to fulfill its
statutory duties and to achieve the six goals listed in its fiscal year
2003 annual performance plan. Further, we could not determine how the
Commission planned, communicated, and prioritized its budgetary
resources, which makes it difficult for the Office of Management and
Budget (OMB) and the Congress to understand whether the Commission is
using its financial resources to achieve its mission and goals. Given
the long-standing congressional concerns over the Commission's
management priorities, we believe the Commission could enhance the
transparency of its budgetary, financial, and operational activities.
We are making 39 recommendations to the Commission to strengthen its
overall financial management and internal controls.
Background:
The Commission was established by the Civil Rights Act of 1957 to be an
independent, bipartisan, fact-finding federal entity required to report
on civil rights issues. The Commission is authorized to study the
impact of federal civil rights laws and policies and is required to
submit at least one report annually to the President and the Congress
that monitors federal civil rights enforcement in the United States and
other reports as considered appropriate by the Commission, the
President, or the Congress. In addition, the Commission investigates
allegations of individual citizens being deprived of voting rights,
conducts appraisals of federal laws and policies with respect to
discrimination or denial of equal protection of the laws under the
Constitution of the United States, serves as a national clearinghouse
for information, and educates the public to discourage discrimination.
The Commission is currently directed by eight compensated, part-time
commissioners who serve 6-year terms on a staggered basis. Four
commissioners are appointed by the President, two by the President Pro
Tempore of the Senate, and two by the Speaker of the House of
Representatives. No more than four commissioners at any one time can be
of the same political party. With the concurrence of a majority of the
Commission's members, the President may also designate a chairperson
and vice-chairperson from among the Commission's members. On December
6, 2004, the President appointed two new commissioners to replace two
with expiring terms. On that same day, the President designated a new
Commission chairperson and vice-chairperson, both of whom were
concurred by a majority of the Commission's members.
A staff director, who is appointed by the President with the
concurrence of a majority of the commissioners, oversees the daily
operations of the Commission and manages the staff in six regional
offices and the Washington, D.C., headquarters. The President also
appointed a new staff director on December 6, 2004.[Footnote 10] The
Commission operates four headquarters units, whose chiefs and managers
report directly to the staff director: the Office of Civil Rights
Evaluation, Office of General Counsel, Office of Management, and
Regional Programs Coordination Unit.
The Commission also has 51 State Advisory Committees (SAC), as required
by statute--1 for each state and the District of Columbia. SACs are
composed of citizens familiar with local and state civil rights issues.
Their members serve without compensation and assist the Commission with
its fact-finding, investigative, and information dissemination
functions.
The Commission receives a quarterly apportionment from OMB to spend its
fiscal year appropriations. Since fiscal year 1995 the Commission has
operated on an annual appropriation of about $9 million with salaries
and benefits constituting about 73 percent. Because of level funding
since fiscal year 1995, the Commission's purchasing power in fiscal
year 2003 had decreased by 24 percent as it had to absorb cost-of-
living and other pay and expense increases. The number of full time
equivalent (FTE) employees has steadily decreased from 95 in fiscal
year 1995 to 64 in fiscal year 2004, a 33 percent decrease.
Enclosure I provides a breakdown of the Commission's available
resources and the use of those resources in fiscal year 2003 (table 1),
as well as the Commission's fiscal year 2003 expenditures population by
budget object class (table 2).
The Accountability of Tax Dollars Act of 2002[Footnote 11] was signed
by the President on November 7, 2002. The act requires the Commission
to annually prepare and submit audited financial statements to OMB and
the Congress. Fiscal year 2004 is the first year the Commission was
required to meet this new statutory requirement.[Footnote 12] Further,
OMB required agencies to submit their audited financial statements for
fiscal year 2004 no later than 6 weeks after the close of the fiscal
year.[Footnote 13] As of February 28, 2005, the Commission's
independent public accountant had not yet issued its audit report on
the Commission's fiscal year 2004 financial statements.
Scope and Methodology:
To review the financial transactions recorded by the Commission during
fiscal year 2003, we examined receipts, obligations, and expenditures
for proper supporting documentation and management approval. Because
our work was limited to a review of transactions recorded by the
Commission for fiscal year 2003, there is a risk that there could be
unrecorded transactions for goods or services that the Commission
purchased before September 30, 2003, that were recorded or paid after
this date. Using statistical sampling, we selected for review 52 salary-
related transactions from a universe of 4,035 transactions totaling
$5.3 million that we obtained from the Commission's payroll processor,
USDA's NFC. We also statistically selected for review 68 nonsalary-
related transactions, such as procurement and rent transactions, which
were selected from a universe of 8,251 transactions totaling $4.9
million that we obtained from the Commission's accounting services
provider, Treasury's BPD. We augmented our statistical samples by
reviewing in detail another 72 transactions selected judgmentally.
These transactions consisted of all travel transactions over $1,000,
all contractual transactions over $10,000, some credit adjustments, and
other expenditures exhibiting unusual characteristics. These 72
nonstatistically selected transactions totaled $0.4 million. Enclosure
II provides a detailed breakdown of our testing approach with respect
to the Commission's fiscal year 2003 financial transactions.
As part of our review of the Commission's financial transactions for
selected procurement transactions, we also interviewed General Services
Administration (GSA) officials about the contracting procedures a
federal agency should use for certain procurement activities and
discussed with current and former Commission officials the contracting
procedures actually used. In addition, we sought to obtain responses
from the Commission's former chairperson on matters related to the
agency's media relations contract, but we did not receive a response.
To determine if internal controls over financial transactions and
reporting were effective, we obtained an understanding of the
accounting procedures and related internal controls of the Commission,
including financial accounting services provided by Treasury's BPD and
payroll processing services provided by USDA's NFC. We reviewed the
policies and procedures used by the Commission, interviewed current and
former Commission staff, and interviewed BPD staff. We also reviewed
the internal control effect of the results of our testing of the
Commission's fiscal year 2003 financial transactions.
To determine the manner in which the Commission addressed its budget
priorities, we reviewed the total levels of funding requested and
received by the Commission for fiscal years 1995 through 2005. We also
reviewed the Commission's budget justifications and its annual
performance plans for fiscal years 2003 through 2005. In addition, we
interviewed current and former Commission officials and others about
the Commission's budget apportionment and allotment processes, and its
budget goals, activities, and projects.
Our audit findings are based on our review of documentation provided to
us by the Commission. In many cases, the documentation initially
provided to us as support for the Commission's financial transactions
was insufficient in demonstrating proper authorization, approval, or
overall validity of the transaction. In those cases where documentation
was lacking, we requested further support from the Commission, if such
support existed. In addition, BPD provided some documentation on behalf
of the Commission and the Commission itself provided some further
support. However, as of an agreed cut-off date of November 24, 2004,
there was a substantial amount of documentation missing that the
Commission's former staff director told us they could not find.
We performed our field work in Washington, D.C., from May 20, 2004,
through December 10, 2004, in accordance with U.S. generally accepted
government auditing standards for performance audits.
Financial Transactions Lacked Adequate Support:
In our review of the Commission's fiscal year 2003 financial
transactions, we found substantial expenditures that lacked adequate
supporting documentation. Salary expenses, which comprised about half
of the Commission's annual expenditures, appeared to be adequately
supported. However, as much as 18 percent of the statistically selected
nonpayroll-related transactions we examined, such as procurement and
other miscellaneous expenses, lacked sufficient support for concluding
whether they were valid. Similar deficiencies were found in the
nonstatistical nonpayroll transactions we tested.
GAO's Standards for Internal Control in the Federal Government
[Footnote 14] identifies the minimum level of quality acceptable for
internal control in the federal government and provides the basis
against which internal control is to be evaluated. Control activities,
one of the five standards for internal control, include a wide range of
diverse activities such as authorizations, approvals, verifications,
and the creation and maintenance of related records that provide
evidence of execution of these activities as well as appropriate
documentation. This standard requires, among other things, the
following:
* All transactions and other significant events need to be clearly
documented, and the documentation should be readily available for
examination. All documents and records should be properly managed and
maintained.
* Only valid transactions are to be initiated or entered into.
* Transactions should be promptly recorded to maintain their relevance
and value to management in controlling operations and making decisions.
* Transactions are to be completely and accurately recorded.
In addition, section 150 of OMB Circular No. A-11, Preparation,
Submission and Execution of the Budget, implements statutory
requirements, by providing that agencies must have a system of
administrative control of funds for obligations and expenditures.
The lack of adherence to these requirements resulted in our finding a
high level of exceptions in our testing of the Commission's fiscal year
2003 financial transactions and raises concerns as to the validity of a
number of these transactions.
Payroll Transactions Were Substantially Correct:
Payroll transactions consisting of direct salaries represented about
half of the Commission's fiscal year 2003 expenditures. We tested a
statistical sample of 52 payroll transactions for fiscal year 2003
consisting of salary expenses to ensure that they were properly
authorized, approved, and supported. We found no substantive errors in
this sample and that the transactions were properly authorized,
approved, and supported. In addition, we tested two salary-related
credit transactions and found them to be properly authorized and
supported. These credit transactions represented corrections of errors
in the transaction records. Although errors may exist in the payroll
transactions we did not test, we can statistically conclude that the
$5.3 million in payroll expenditures in the Commission's records are
valid and adequately authorized, approved, and supported.[Footnote 15]
However, in our testing of the Commission's payroll transactions, we
noted that for two of the three payroll transactions we tested
involving commissioners, time sheets for two biweekly pay periods were
submitted and paid at the same time. The Commission's human resources
director told us that this is not unusual and that commissioners have
submitted time sheets for up to five biweekly pay periods at one time.
This practice could lead to the Commission not recognizing expenses in
the proper period for accounting purposes.
Nonsalary Transactions Lacked Adequate Support:
We tested a statistical sample of 56 nonsalary transactions, including
expenses associated with procurement, payroll benefits, and rent for
fiscal year 2003 to determine if they were properly authorized,
approved, and supported by appropriate documentation. We also tested a
statistical sample of 12 credit transactions. Our testing revealed
significant deficiencies in the support and underlying records for
numerous sampled transactions. Specifically, we found the following:
* For three transactions, the Commission did not provide documentation
to support the validity of the transactions. The transactions consisted
of three entries to write off unusual negative accrued liabilities of
$83,719, accounts receivable of $25,587, and old equipment of $6,366.
In all three cases, the Commission could not provide support to justify
the entries to adjust account balances. In reviewing documentation
provided by BPD, the Commission's former accounting services provider
for fiscal year 2003, we found that BPD had informed the Commission of
its plans to make the accounting entries by a certain date. However,
the Commission did not provide any documentation evidencing its
response to BPD as to whether it had support for the adjustment
amounts. The Commission's lack of supporting documentation increases
the risk that improper transactions could be processed and recorded,
distorting the financial records of the entity.
* For two transactions totaling $17,130, the Commission did not provide
evidence of proper approval of the transactions. The transactions
consisted of payments to vendors for computer and electrical services.
Payment vouchers are approved by the staff director or his designee,
and the absence of such approval could result in unauthorized
transactions being processed, leading to improper payments.
* For four transactions with commercial vendors totaling $10,176, we
found the Commission's contract files to be insufficient: the contract
files did not document (1) the agency's basis for decisions made during
the acquisition process, (2) support for the actions the agency took,
and (3) information for an outside review of the procurement process.
The lack of documentation in contract files necessary to satisfy
internal control standards and procurement regulations increases the
risk that procurement transactions could have been made that were not
in accordance with the requirements of the FAR. This and other
procurement-related matters are discussed later in this report.
Based on the results of our work, we estimate that the combined upper
error limit of nonsalary-related debit and credit transactions that
were not properly authorized, approved, and supported by appropriate
documentation is $883,018.[Footnote 16] In essence, the results of our
statistical testing indicate that as much as 18 percent of the $4.9
million in nonsalary-related expenditure transactions for fiscal year
2003 lacked proper authorization, approval, or validity.[Footnote 17]
In performing our transaction testing, we experienced great difficulty
in obtaining adequate documentation from the Commission in a timely
manner. It took the Commission over 5 months to provide some
documentation for our sampled transactions although former and current
agency officials initially said it would take no more than a week to
accumulate the majority of the documentation for those transactions.
While BPD was able to provide us with some documentation on the
Commission's behalf, as of November 24, 2004, when the Commission
provided to us its final compilation of available documentation, we had
not received adequate documentation for all of the transactions
selected for testing.
Further Transaction Testing Revealed Significant Documentation
Deficiencies:
As part of our review of the Commission's fiscal year 2003 financial
transactions, we augmented our tests of statistical samples of salary-
and nonsalary-related expense transactions by testing an additional
nonstatistical selection of 72 fiscal year 2003 transactions. These
transactions consisted of all 32 travel transactions of $1,000 or more,
all 22 contractual transactions of $10,000 or more, and 18 other
nonsalary transactions that we deemed to be of an unusual nature, such
as credit transactions or other uncommon characteristics. For 38 of
these transactions (53 percent), we found significant deficiencies in
the supporting documentation.[Footnote 18] These deficiencies, by
category of expense activity, are discussed below.
Travel Transactions:
In testing all 32 selected travel transactions of $1,000 or more, we
identified the following deficiencies:
* For 28 transactions, the Commission did not provide adequate evidence
to support airfare expenditures. Airfares should be properly supported
by a payment receipt or itinerary from the travel agency that shows the
amount paid for the ticket and boarding passes to indicate that the
trip was taken. The lack of such supporting documentation may allow
improper travel transactions to be processed and paid. In response to
this matter, the Commission, as part of its efforts to improve its
travel processes, issued memos in November 2004 to its employees and
other travelers[Footnote 19] stating that itineraries or invoices
listing ticket price and boarding passes must be submitted with travel
vouchers.
* For 17 transactions, the Commission did not provide complete evidence
that the trips were actually taken in accordance with the Federal
Travel Regulation.[Footnote 20] For 8 of these transactions, the
Commission did not provide any travel vouchers for $8,657 of the
recorded airfare expenditures. The lack of adequate supporting
documentation may allow the recording of airfare expenditures although
travel may never have occurred or may allow improper travel
transactions to be processed and paid.
* For three transactions, the Commission could not provide evidence
that it ever received reimbursement for travel overcharges totaling
$857. For one of these transactions, the Commission's travel agency
overcharged $538 on a $100 airline ticket and for two transactions,
employees were overpaid and owed $319 to the Commission. The lack of
reimbursement will result in higher travel costs being incurred and
recorded by the Commission.
In total, of the $97,196 in expenditures related to the 32 travel
transactions we tested, $54,847, or 56 percent, was unsupported due to
the deficiencies noted above. The $54,847 unsupported amount includes
$10,674 for which the Commission did not provide any travel vouchers.
In testing travel transactions, we also found 16 instances where the
Commission either did not provide to us evidence of travel
authorizations, or evidence of approval of travel vouchers. However, we
were eventually able to obtain such documentation from BPD.
Contractual Transactions:
In an October 2003 report, we reported that the Commission lacked
sufficient management control over its contracting procedures.[Footnote
21] The Commission routinely did not follow proper procedures for its
fiscal year 2002 contracting activities and had inadequate controls
over the administration of its contracts. These weaknesses continued in
fiscal year 2003. In testing 31 nonstatistically selected contract-
related transactions, including all those of $10,000 or more, we
identified deficiencies in the Commission's transactions with
commercial vendors and its procurement of goods and services as
follows:
* For eight transactions totaling $59,499 involving six commercial
vendors, we found that the Commission did not adhere to the federal
procurement regulations and procedures that were established by GSA
under the FAR and, where applicable, other related guidance. For
example, in procuring services from different commercial vendors on the
GSA Federal Supply Schedule (FSS), we found the following deficiencies
in the Commission's procurement actions:
--The Commission did not satisfy competition requirements[Footnote 22]
in using GSA's on-line shopping service or in reviewing catalogs or
pricelists of at least three contractors on the FSS that provide such
services.
--The Commission's contract files did not document the agency's basis
for selecting the service providers as prescribed by the FAR and the
special ordering procedures of GSA.
In discussions with GSA officials (and consistent with our findings in
our prior work[Footnote 23]), we ascertained that when a contract
exceeds the $2,500 micro-purchase threshold, a federal agency cannot
simply select a contractor because it is on the FSS--the federal agency
has to consider other information before making the selection. Other
information is available through GSA's on-line services or by reviewing
the catalogs or pricelists of at least three contractors on the FSS.
The Commission's circumvention of federal procurement regulations--
including not documenting in the contract files the basis for selecting
contractors--could result in the government incurring potentially
greater costs than necessary to procure goods and services.
* For the Commission's $81,636 fiscal year 2003 media relations
contract[Footnote 24] with a vendor it procured off the FSS, the
contract file we reviewed did not include a Commission-required signed
statement by the contractor that it had no organizational conflict of
interest. We found the Commission's statement of work with the
contractor to basically define organizational conflict of interest to
mean that because of other activities or relationships with persons or
agencies, the contractor might be unable or potentially unable to
render impartial assistance or advice to the Commission, or the
contractor's objectivity in performing needed work is or might be
otherwise impaired, or the contractor has an unfair competitive edge.
On November 24, 2004, the Commission provided us with a signed
statement from the vendor noting that it had no organizational conflict
of interest with the Commission during the contract periods of service
(October 1, 2000, through September 30, 2003). However, this signed
statement was dated November 10, 2004, well after the period of service
under the contracts. By not having contractors' signed statements on-
hand prior to selecting the vendor to provide services, the Commission
made itself susceptible to entering into contracts with businesses that
may have an organizational conflict of interest that could impair
objectivity.
* We also reviewed seven of the Commission's contract files for
services provided by commercial vendors that the agency selected using
other than the FSS. None of these cases had documentation in the
contract files supporting the agency's basis for selecting the vendors.
In addition, one contract's statement of work lacked a provision on
organizational conflict of interest. This situation makes the
Commission prone to potentially entering into contracts with
contractors that may have an organizational conflict of interest and
could impair objectivity.
* In discussing procurement matters with the former staff director and
the chief of administrative services who handled procurements of less
than $10,000, we found that both had minimal training on procurement
issues. The former staff director approved all procurement decisions at
or above the $10,000 threshold but admitted that his procurement
knowledge was based on primarily on-the-job training and contract law
as an attorney. The lack of training by those responsible for
procurement matters made the Commission susceptible to misinterpreting
federal procurement regulations as it did when obtaining services off
the FSS.
* For one transaction consisting of payment for a Commission meeting
held at a Charlotte, North Carolina, hotel in February 5 and 6, 2003,
we found evidence that the authorizing purchase order for the
transaction was prepared after the actual charge was incurred. A
procurement request for estimated hotel charges of $16,227 was prepared
on January 30, 2003. However, an authorizing purchase order was dated
January 31, 2003, in the exact amount of the bill for $10,739, which
would not have been known until the bill had been issued by the hotel
on February 19, 2003. This indicated that the purchase order was not
prepared on January 31, but rather on February 19 or later, after the
amount of the actual charge was known. The Commission provided us with
no documentation that reflected authorization to procure services in
advance of an authorized order for supplies or services.[Footnote 25]
Procurement authorizations prepared after expenditures are incurred
represent a breakdown in internal controls and could result in an
Antideficiency Act violation.[Footnote 26]
Also related to the February 2003 meeting in Charlotte, North Carolina,
we found that the Commission incurred excessive charges of $660 as
follows:
--The former chairperson's hotel suite cost $169 per night plus $23 tax
for the nights of February 5 and 6. This exceeded the maximum lodging
rate of $81 per night plus $11 tax paid for all other Commission hotel
rooms. The Federal Travel Regulation allows up to 300 percent of the
maximum lodging per diem allowance under certain conditions,[Footnote
27] but we could find no written authorization for this actual expense
in the records provided to us by the Commission.[Footnote 28] Regarding
this matter, a former Commission official referred to a long-standing
agency policy that governs the accommodation practices for
commissioners but could not provide any documentation evidencing the
policy.
--Two no-show charges for room and tax of $92 per night were incurred
(although the hotel did adjust for three other no-show charges). No-
show charges are not an effective use of government funds and can
typically be avoided if reservations are cancelled at least a day in
advance.
--A room charge of $92 for the deputy general counsel was incurred for
the night of February 7, after the meeting was over. The deputy general
counsel provided documentation to us that she paid for this room on her
personal credit card; therefore, it appears that the hotel double-
billed the Commission for this room. We could find no evidence that the
Commission identified this overbilling and received a reimbursement or
credit.
Other Expense Transactions:
Other transactions we included in the nonstatistical selection
consisted of contract and service-related transactions of less than
$10,000, other miscellaneous expenses, and credit adjustments. In
testing these 18 transactions, we identified the following
deficiencies:[Footnote 29]
* For five contract-related transactions with commercial vendors
totaling $19,826, the contract files did not contain evidence of the
Commission's basis for selecting the vendors.
* For one transaction for professional services totaling $3,000, the
Commission did not comply with the Prompt Payment Act's requirement
that it pay interest if vendors are not paid pursuant to their
contractual payment date or within 30 days of receipt and acceptance of
the goods or services. In this case, the Commission submitted the
vendor's reminder invoice, not the original invoice that it had
received several weeks earlier, to its accounting services provider who
processed the payment.
* For one transaction for professional services totaling $3,357, there
was no evidence of the satisfactory receipt of the services.
* For one credit adjustment for an intragovernmental transaction
totaling $9,758, there was no evidence that the Commission
appropriately authorized approval of the transaction.
In addition to these deficiencies, we also found that a transaction
classified as subsistence and support in the Commission's records
should actually have been split among four separate budget object
codes. This transaction consisted of the charges the Commission
incurred for the meeting it held in Charlotte, North Carolina, on
February 5 and 6, 2003. Although the purchase request, receipt, and
acceptance approval all appropriately listed four separate budget
object codes and amounts to be charged, the entire bill was charged to
one budget object code on the purchase order and the processed invoice
as contractual services. Budget object codes should be properly charged
in accordance with section 8.3 of OMB Circular No. A-11. Charging
incorrect budget object codes distorts financial and budgetary
information pertaining to the use of the Commission's financial
resources.
Recommendations:
To address the issue we identified with respect to payroll
transactions, we recommend that the Commission, through its staff
director or his designee, do the following.
1. Instruct commissioners to submit time sheets biweekly or at least
monthly so that the Commission recognizes expenses in the proper period
for accounting purposes.
To address the issues we identified with respect to nonsalary
transactions, we recommend that the Commission, through its staff
director, instruct the Commission chief of budget and finance to do the
following.
2. Review account balances on a periodic and regular basis to identify
unusual account balances.
3. Create and retain appropriate documentation in transaction files to
support accounting entries made to adjust or write off assets and
liabilities.
4. Respond, and document the response, to the accounting service
provider before any accounting entries are made on behalf of the
Commission.
5. Retain sufficient evidence in transaction files to show that all
transactions have been properly approved for payment.
6. Include evidence of transaction authorization, such as a purchase
order, in each voucher package prior to approval for payment by the
staff director or his designee.
7. Prepare purchase authorizations in advance of the expenditure or
provide documentation for any exceptions to be properly approved.
8. Monitor the prompt processing of vendor invoices upon receipt so
that vendors can be timely and accurately paid.
9. Have evidence of the receipt of goods and services prior to
approving transactions for payment and retain such evidence in the
transaction files.
10. Charge the appropriate budget object code as evidenced by
supporting documentation.
11. Ensure that travelers provide appropriate documentation to support
airfare transactions, including a payment receipt or itinerary from the
travel agency that shows the airfare paid and boarding passes to
indicate that the trip was taken.
12. Provide travel vouchers by travelers as evidence that the trips
were taken and to support amounts claimed for reimbursement.
13. Document and retain for review travel transactions including travel
authorizations prepared and signed by the Commission, as well as
Commission-approved travel vouchers.
14. Maintain written justification for any cases where the Commission
approved travel costs for reimbursement although the traveler could not
provide appropriate documentation.
15. Ensure that travel-related overcharges and traveler reimbursements
are timely collected or offset against amounts due.
16. Document in writing policies on travel accommodation practices for
commissioners.
17. Provide written travel policies to assist travelers in
understanding the requirements and procedures to follow.
18. Implement a travel policy requiring travelers to call to cancel a
hotel reservation to avoid a no-show charge.
19. Inform travelers via written communication that reimbursement will
be made only for costs directly related to business purposes for
government travel and not for personal charges.
To address the issues we identified with respect to procurement of
goods and services, we recommend that the Commission, through its staff
director, instruct the Commission chief of administrative services to
do the following.
20. Prepare and maintain contract files, including contract award and
contract administration, to document the basis for Commission decisions
in acquiring goods and services from commercial vendors, to document
each step in the acquisition process, and to document information for
an outside review of the procurement process.
21. Document review of catalogs or price lists for at least three
contractors or a review of information on GSA's on-line shopping
service about the supply or service offered under the schedule before
making a selection when procuring goods or services off the Federal
Supply Schedule.
22. Ensure that all statements of work contain a provision on
organizational conflict of interest and that contract files contain
signed assurances that contractors have no organizational conflict of
interest.
23. Provide for employees responsible for procurement activities to
receive periodic training and updates on federal procurement rules,
regulations, procedures, and issues.
Substantial Deficiencies Exist in the Commission's Internal Controls:
We found serious deficiencies in the design and operating effectiveness
of the Commission's internal controls over financial transactions,
reporting, and budgeting. These deficiencies increase the risk that
transactions will be improperly prepared, processed, and reported. They
also increase the risk of inappropriate use of the Commission's
financial resources and raise serious questions about the Commission's
ability to have a successful audit of its fiscal year 2004 financial
statements.[Footnote 30]
Commission Had No Formal Financial Policies and Procedures:
The Commission lacked a formal, comprehensive set of policies and
procedures to govern its day-to-day financial management practices.
Instead, Commission staff refer to a wide range of federal policies as
needed. GAO's Standards for Internal Control in the Federal Government
refers to control activities as the policies, procedures, techniques,
and mechanisms that enforce entity management's directives. The lack of
formal policies and procedures at the Commission increases the risk
that control mechanisms are not established to ensure proper
accountability over government resources and activities specific to the
needs of the Commission. This was evident in the results of our testing
of travel and contractual transactions previously discussed where the
Commission did not routinely follow proper procedures for its travel
and contracting activities.
Financial Transactions Were Not Adequately Supported:
The Commission experienced great difficulty in providing support for
its fiscal year 2003 financial transactions. It took the Commission
over 5 months to provide us documentation to support the 192
transactions we selected for testing. Even after this extensive period
of time, the documentation for a substantial number of these
transactions was either missing or seriously deficient. GAO's Standards
for Internal Control in the Federal Government requires that all
transactions be clearly documented and that documentation be readily
available for examination. As discussed earlier in this report, the
lack of adequate support resulted in our being unable to determine
whether a significant level of reported activity was valid.
Budgeting and Administrative Funds Control Was Weak:
As with its financial transactions and reporting, we found that the
Commission did not have a budget execution plan to show how it expected
to use its resources nor an adequate administrative system of fund
controls to ensure that spending controls were not exceeded. Agencies
are expected to prepare financial plans and to request an apportionment
from OMB that is based on a careful forecast of obligations to be
incurred for programs or operations planned during the year. The
primary purpose of the apportionment process is to centralize the
Administration's approval of agency spending plans to achieve the most
effective and economical use of these funds and to prevent agencies
from obligating more funds than they are authorized to spend. OMB is
responsible for approving apportionments, which control the rate of
spending during the year by limiting the amount of funds that can be
obligated--typically by time period, program, project, or some other
reporting category.
In addition, the Antideficiency Act requires that an agency head
prescribe, by regulation, a system of administrative control of funds.
This system allots authority to obligate funds to heads of offices and
program managers making them responsible not only for carrying out the
Commission's programs and operations, but for managing funds within
spending controls. In addition, spending plans and their execution are
the starting point for developing budget requests in subsequent years.
Travel Regulations Were Not Enforced:
As discussed earlier, our testing of travel-related transactions for
fiscal year 2003 identified numerous instances in which the Commission
did not enforce the travel requirements contained in the Federal Travel
Regulation, including the requirement to provide complete evidence for
trips actually taken. In addition, based on our review of 32
nonstatistically selected travel-related transactions,[Footnote 31] we
noted that in 15 out of 185 instances where an individual was
reimbursed by the Commission for travel costs, the traveler took more
than 15 days, and as many as 226 days, to submit a voucher for
reimbursement of hotel, per diem, and other charges. This excessive
period is in violation of the Federal Travel Regulation's requirement
that travel vouchers be submitted within 5 working days of the trip or
every 30 days if on continuous travel status. When Commission
processing and payment, which normally ran 30 days, is added, some 60
to 90 days would likely have lapsed since the traveler first made the
charges on a government travel credit card. Rather than pay amounts
from personal funds, this may explain why, according to the
Commission's chief of budget and finance, several Commission
cardholders were delinquent in making their payments on their
government travel cards, in violation of the credit card agreement.
Federal Acquisition Regulations for Procuring Supplies and Services
from Commercial Vendors Were Not Consistently Followed:
Based on our testing of the Commission's fiscal year 2003 financial
transactions involving contract payments to commercial vendors,
including inquiries of former and current Commission staff, the
Commission did not follow the FAR in 10 of the 13 contract-related
transactions tested. In reviewing those 10 contract files, we found no
evidence of the Commission's basis for selecting the contractor. In
addition, for 9 of the 13 contract-related transactions, there was no
evidence in the contract files that the Commission reviewed available
information before selecting the contractor as required under the
FAR.[Footnote 32] This information would consist of price lists of at
least three vendors on GSA's approved vendor list or, in other cases,
solicited offers from at least three vendors.
Included in these nine transactions was the Commission's largest
contract of $81,636 for media relation services. While this contractor
was a GSA FSS contractor, there was no evidence in the contract file
that the Commission reviewed the catalogs or price lists of comparable
contractors on the GSA FSS in accordance with the FAR and GSA's special
ordering procedures (SOPs).[Footnote 33] Such actions circumvent the
competitive selection process, resulting in the government incurring
potentially greater costs than necessary to procure services.
Contract Data Was Not Entered Into the Federal Procurement Data Center:
In reviewing the Commission's reporting on its procurement activities
we found that the Commission did not enter fiscal year 2003 contract
data into the Federal Procurement Data Center (FPDC). According to
federal regulations,[Footnote 34] agencies are required to collect and
report procurement data to FPDC quarterly. The government uses FPDC as
its central repository of statistical information on federal
contracting that contains detailed information on contract actions of
$25,000 or more and summary data on procurements of less than $25,000.
The Commission's failure to report required procurement data evidences
that management did not ensure that the federal directive was carried
out.
Prompt Payment Act Requirements Were Not Consistently Followed:
As our detailed tests of its fiscal year 2003 financial transactions
showed, the Commission did not always pay vendors by the contractual
due date or, if no date was established, within 30 days after receipt
of a proper invoice for goods and services, as specified by the Prompt
Payment Act. Failure to pay within the statutory time frames resulted
in at least $653 of interest being paid to vendors. In addition, we
identified two transactions for which the Commission did not pay
interest to vendors on late payments. The Commission's poor prompt
payment performance caused the government to incur unnecessary costs
for goods and services and is thus a waste of government resources.
Additionally, the failure to pay interest that is rightfully owed to
vendors when payments for services provided are late denies vendors
amounts to which they are entitled and subjects the Commission to the
risk of claims for additional penalties.
Commission's Monitoring of Budgetary Resources Could Be Improved:
The Commission did not use the U.S. Government Standard General Ledger
(SGL) 4000 accounts, which include accounts to track budget authority,
obligations, and outlays necessary to prepare financial statements
(statements of budgetary resources and financing), and required
Treasury financial reports. Instead, the Commission stated that it
tracked its budget on informal cuff records (EXCEL worksheets). This
approach is prone to error if transactions are not properly monitored
and recorded and created differences with budgetary amounts recorded by
BPD on behalf of the Commission that were not periodically
reconciled.[Footnote 35] This became a significant problem in August
2003, when BPD expressed its concern in written correspondence that the
Commission was in danger of overobligating funds, which could have
resulted in a violation of the Antideficiency Act.
Full Costs Were Not Tracked by Project:
The Commission identified hours charged to specific projects on time
sheets, and Commission officials stated that the Commission accumulates
costs by project. However, despite our repeated requests, the
Commission was unable to provide us evidence of how costs were
accumulated by project for fiscal year 2003 and whether administrative
time and other overhead costs such as rent, supplies, travel, and other
costs were included. Federal Accounting Standards have required federal
entities to report the full costs of outputs in general purpose
financial reports since fiscal year 1998.[Footnote 36]
We were able to obtain a Commission cost report for the second quarter
of fiscal year 2004 that showed $397,432 of what appeared to be
primarily direct salary charges for eight projects and $1,192,017 of
primarily total salary charges. These amounts would indicate that
administrative staff salaries not allocated to specific projects were
double the level of direct salary charges. Considering that one-quarter
of the Commission's total fiscal year 2004 appropriation of $9,096,000
would be $2,274,000, the cost report included about half the costs and
thus did not appear to include nonsalary overhead such as rent,
supplies, travel, and other costs.
Commission's Internal Control Environment Was Weak:
The internal control deficiencies discussed above are symptoms of a
long-standing, fundamental problem plaguing the Commission: an overall
weak internal control environment. In an earlier report, we found broad
management problems at the Commission, which appeared to be an agency
in disarray, with limited awareness of how its resources were being
used.[Footnote 37] A lack of these basic, well-established management
controls makes the Commission vulnerable to resource losses due to
waste or abuse.
The control environment reflects management's commitment to and
attitude toward the implementation and maintenance of an effective
internal control structure. The control environment that management
promulgates through the organization will strongly influence the design
and operation of control policies and procedures. It will also
determine how effective controls are at mitigating risks and achieving
results. Further, the environment is affected by the manner in which
the Commission delegates authority and responsibility throughout the
organization. Duties should be segregated to assure that one individual
cannot control all key aspects of a transaction. However, we found that
the Commission's former staff director exercised significant control
over Commission transactions and activities, such that it overrode
internal controls by responsible staff. For example, the former staff
director routinely approved travel vouchers for payment although many
of the transactions lacked adequate supporting documentation.
In addition to the internal control issues discussed above, the extent
to which the Commission's internal control environment is weak is
further evidenced by BPD's decision in September 2003 to discontinue
providing accounting services for the Commission. On September 9, 2003,
BPD informed the Commission that it would not renew the interagency
agreement to provide accounting services to the Commission for fiscal
year 2004. BPD believed that management control and oversight of
Commission resources were inadequate, which they indicated could lead
to overobligation of funds, resulting in a violation of the
Antideficiency Act.
In a December 9, 2003, letter to the Commission's former staff
director, BPD outlined its various concerns about the financial
management of the Commission during fiscal year 2003 that had almost
led to the Commission violating the Antideficiency Act. While the
Commission, through the former staff director, maintained that the
discontinuance of BPD accounting and procurement services stemmed
purely from cost considerations, our review of the financial
transactions of the Commission, and the internal control issues we
identified during our review, are consistent with BPD's expressed
concerns about the state of the Commission's financial management
practices.
Prior to November 2002, the Commission was not required under federal
law to prepare annual financial statements or have them subjected to
independent audit. However, with the enactment of the Accountability of
Tax Dollars Act of 2002, the Commission became subject to an annual
financial statement audit requirement. Fiscal year 2004 was the first
year for which the Commission was required to submit annual audited
financial statements to the Congress and OMB. We found no evidence that
the Commission had ever had its financial statements audited or was
required to. Given the serious internal control issues we identified as
a result of our testing of financial transactions and our review of the
Commission's internal controls, it is highly unlikely that the
Commission will be able to obtain a successful first-year audit of its
fiscal year 2004 financial statements. Additionally, it is also clear
that the Commission did not comply with the accelerated financial
reporting deadline of November 15, 2004, for federal entities, required
by OMB to take effect beginning with financial statements for fiscal
year 2004. As of February 28, 2005, the Commission's independent public
accountant had not yet issued its audit report on the Commission's
fiscal year 2004 financial statements.
Recommendations:
To strengthen the Commission's internal controls, we recommend that the
Commission, through its staff director or his designee, take the
following actions.
24. Work with the Commission's current accounting service provider to
develop specific policies and procedures for the Commission with
respect to control activities and the processing, recording, and
reporting of financial transactions.
25. Require that all financial transactions be properly approved and
supported before being processed and that documentation for
transactions be readily available.
26. Develop financial or operating plans and have periodic budget
execution reviews of the status of obligations against these plans.
27. Establish an administrative fund control system to hold managers
accountable for executing the budget against financial or operating
plans.
28. Require that the financial management system support the
administrative fund control system.
29. Require that travel transactions be timely submitted for
reimbursement in accordance with the Federal Travel Regulation and be
processed promptly.
30. Require that all aspects of the Commission's procurement of goods
and services be properly documented, including the method of
solicitation, competition, and selection, in accordance with the FAR.
31. Report required fiscal year 2003 procurement data to the Federal
Procurement Data Center.
32. Implement procedures for reporting future years' procurement data
to the Federal Procurement Data Center on an annual basis.
33. Require that payments to commercial vendors be properly processed
and timely made in accordance with the requirements of the Prompt
Payment Act.
34. Establish controls to timely monitor and reconcile budgetary
transactions between Commission cuff records and its service provider
reports.
35. Accumulate and report complete and adequate cost information by
project.
36. Strengthen the Commission's internal control environment by
documenting management's commitment and attitude in implementing and
maintaining an effective internal control structure, including audits
and the adequate segregation of duties.
Commission's Budgetary Resources Are Not Linked to its Mission and
Goals:
In reviewing the manner in which budget priorities were addressed, we
found that the Commission was unable to provide evidence of how its
fiscal year 2003 budgetary resources were used to fulfill its statutory
duties and to achieve the six goals listed in its fiscal year 2003
annual performance plan.[Footnote 38] For example, the Commission could
not determine the extent and amount of budgetary resources expended in
fiscal year 2003 for one of its goals: public services announcements
(PSAs). Further, we could not determine how the Commission planned,
communicated, and prioritized its budgetary resources, which makes it
difficult for OMB and the Congress to understand whether the Commission
is using its financial resources to achieve its mission and goals.
While projects to be funded were generally approved by the
commissioners, the Commission's former staff director determined how
budgetary resources were actually spent. Given the long-standing
congressional concerns over the Commission's management priorities, we
believe that the Commission should take the initiative to improve the
linkage of its resources to its statutory duties and goals through
better planning and budget execution, and to enhance the transparency
of its budgetary, financial, and operational activities.
Statutory Authority:
The Congress provides broad direction to the Commission through its
authorizing legislation, which mandates that the Commission investigate
allegations that certain citizens are being deprived of their right to
vote by reason of their color, race, religion, sex, age, disability, or
national origin, or by reason of fraud. The Commission's statutory
duties are also to
1. study and collect information relating to discrimination or denials
of equal protection of the laws under the Constitution of the United
States because of color, race, religion, sex, age, disability, or
national origin, or in the administration of justice;
2. make appraisals of the laws of the federal government with respect
to discrimination or denials of equal protection of the laws under the
Constitution of the United States because of color, race, religion,
sex, age, disability, or national origin, or in the administration of
justice;
3. serve as a national clearinghouse for information relating to
discrimination or denials of equal protection of the laws under the
Constitution of the United States because of color, race, religion,
sex, age, disability, or national origin, or in the administration of
justice; and:
4. prepare PSAs and advertising campaigns to discourage discrimination
or denials of equal protection of the laws under the Constitution of
the United States because of color, race, religion, sex, age,
disability, or national origin, or in the administration of justice.
In addition, the Commission is required to submit to the President and
the Congress at least one report annually that monitors federal civil
rights enforcement efforts in the United States.
Planning:
While the Commission's duties are explicitly laid out in its
authorizing statute, the annual appropriations process gives the
Commission discretion in how it will use its budgetary resources to
meet its mission. For fiscal years 2003 through 2005, the general
language contained in the Appropriations Committee reports states "The
Commission investigates charges of citizens being deprived of voting
rights and other civil rights, and collects, studies, and disseminates
information on the impact of Federal laws and policies on civil
rights."[Footnote 39] This language does not contain specific direction
regarding how appropriations are to be applied to specific budget
priorities or projects. Therefore, it is the responsibility of
Commission management to plan, communicate, and prioritize the use of
its budgetary resources to demonstrate fulfillment of its statutory
duties and achievement of its goals.
The Commission listed six civil rights goals in its fiscal years 2003
through 2005 performance plans, which appear consistent with its
statutory mission. However, we found that the Commission was unable to
provide evidence linking its goals, funding requests, and accounting
information needed to support the costs of current projects and
activities. For example:
* In its fiscal year 2003 budget request for appropriations, the
Commission maintained that it has been unable to effectively
communicate and disseminate information to the public as a result of
its outmoded technology and equipment. However, the Commission provided
no cost information on the resources needed to effectively upgrade its
technology and equipment, nor did it provide information on how such an
investment would further its ability to achieve its goals.
* In its fiscal year 2004 budget request for appropriations, the
Commission stated that it needed to hire at least another 10 employees
to meet emerging issues and address new projects. However, the
Commission again provided no detailed cost information for these two
items, or the program effect if these employees were not hired.
For the performance budgeting display, OMB Circular No. A-11 states
that, to the extent possible, agencies should attempt to align budget
accounts with programs and distinguish among the components that
contribute to different strategic goals and objectives. However, OMB
Circular No. A-11 specifically notes that this requirement is only
applicable to major programs and activities. Additionally, the circular
does not require that agencies show the financial costs associated with
their goals and activities, nor does it require that agencies present
information by project or activity. Consequently, while providing cost
information by goals and proposed projects and activities and linking
budget requests to performance plans would be informative, there is no
requirement for the Commission to present information by project in the
President's Budget or in its congressional budget submission.
Another mechanism that can be used to link budgetary resources to
actual performance is a strategic plan. However, we had previously
reported that the Commission had not updated or revised its GPRA-
required strategic plan and goals since 1997.[Footnote 40] As a result,
the Commission continued to rely on strategic goals developed in 1997
to formulate its current annual goals. Without revisiting its strategic
goals, the Commission does not have a firm basis on which to develop
its annual goals. We have previously made recommendations to the
Commission to update its strategic plan and to ensure that performance
plans and reports include all elements required under GPRA.
In its last congressional oversight hearing, the Commission was
criticized for poor management practices, the lack of detailed project
costs, and disregard of OMB budget procedures and its own budgeting
process by failing to submit its fiscal year 2002 budget to
commissioners for approval.[Footnote 41] During that hearing, one of
the commissioners stated that while the Commission requested a
substantial budget increase each year, in the commissioner's view, the
Commission is unable to effectively plan from month to month, let alone
for the year.[Footnote 42]
Budget Execution:
The Commission does have a mechanism to provide more meaningful
information on the use of its budgetary resources through the
apportionment process. An apportionment is a plan on how budgetary
resources will be spent, which is approved by OMB. For fiscal year
2003, the quarterly apportionment the Commission received from OMB on
how to spend its $9 million appropriation was presented by budget
object class, which in essence presented the breakout in broad
categories such as salaries, benefits, and travel. However, OMB
Circular No. A-11 states that a key purpose of the apportionment
process is to identify meaningful program reporting categories that
agencies will report their obligations against in their SF-133, Reports
on Budget Execution and Budgetary Resources. Agencies can work with OMB
to develop meaningful reporting categories that will better inform
congressional oversight committees on how budgetary resources are being
prioritized and directed. Through this process, the Commission has an
opportunity to explain how its funding will be used to affect the
achievement of its statutory duties.
The Commission has not taken advantage of this opportunity. Instead,
the Commission's former staff director determined how quarterly funding
would be spent by broad budget object class. In reviewing the
Commission's fiscal year 2003 budgetary and financial records, we found
no established mechanisms or defined benchmarks to link budget plans or
reported expenditures to goals, activities, or projects.
For example, although required to prepare PSAs and advertising
campaigns, we could find no evidence that the Commission compiled or
reported any information on how much of its fiscal year 2003 budgetary
resources were actually used for these activities. In reviewing the
Commission's requests for appropriations for fiscal years 2003 through
2005, we found that the Commission reported disparate information on
PSAs. In its fiscal year 2003 request for appropriations, the
Commission's plans for PSA activity were limited. It stated that it
planned to air at least one PSA and, to the extent possible with
available funding, develop and implement a single public service
advertising campaign.
In testing the Commission's fiscal year 2003 transactions, we
identified at least $18,788 of payments to a media services contractor
for media outreach and story placement to newspapers, television, and
radio stations, which included public announcements concerning voting
rights in Florida. However, we could find no evidence of a formal PSA
campaign that linked back to the Commission's fiscal year 2003 request
for appropriations. This lack of information organized around mission
and goals makes it difficult for OMB and the Congress to understand,
and the Commission to explain, how existing budgetary resources are
prioritized and spent. In turn, it raises questions about whether the
Commission's budget requests for additional funding are supportable.
Further, in its fiscal year 2004 request for appropriations, the
Commission reported detailed information on its fiscal year 2002 PSA
national radio campaign, The American Way. While this information
stated that more than 460 radio stations had aired the PSA an average
of 131 times and had reached an audience of over 161 million, this
campaign was barely mentioned in the Commission's fiscal year 2003
budget request. In addition, the 2004 request stated that in fiscal
year 2003, the Commission began work on a Spanish language PSA and
would continue this work into fiscal year 2004, in addition to
developing a fifth PSA campaign. Again, we could find no linkage of
budget resources to PSA goals, activities, or projects.
Assessment:
We found that the Commission has never assessed its programs nor had
its programs rated and evaluated by OMB in terms of outcomes, outputs,
and inputs.[Footnote 43] OMB officials indicated that its oversight of
the Commission has been limited because of its small size and budget.
Consequently, OMB has not performed a Program Assessment Rating Tool
(PART) on the Commission and none is currently planned.[Footnote 44]
PART was developed to assess and improve program performance so that
the federal government can achieve better results. A PART review helps
identify a program's strengths and weaknesses to inform funding and
management decisions aimed at making the program more effective. PART
therefore looks at all factors that affect and reflect program
performance, including program purpose and design; performance
measurement (including outcomes, outputs, and inputs), evaluations, and
strategic planning; program management; and program results. Because
PART includes a consistent series of analytical questions, it allows
programs to show improvements over time, and allows comparisons between
similar programs. Although not required, the Commission could use PART
as a tool in its planning process to achieve better results.
Recommendations:
We recommend that the Commission, through its staff director, instruct
the Commission chief of budget and finance, or his designee, to take
the following actions.
37. Work with OMB within the apportionment process to identify
meaningful program reporting categories that the Commission can use to
report its obligations against in its SF-133, Reports on Budget
Execution and Budgetary Resources, and other external reports.
38. Consider the costs and benefits of doing program self-assessments
and evaluate programs in terms of outcomes, outputs, and inputs.
39. Use the Program Assessment Rating Tool to identify weaknesses in
Commission programs and to assist in the planning process.
Commission Comments and Our Evaluation:
We received written comments from the Office of the Staff Director of
the U.S. Commission on Civil Rights, which represented the official
response of the agency. In its comments, the Commission agreed with our
report's findings and further stated that our report will serve as a
useful guide as the agency begins to reform its financial management
and internal controls. The Commission's comments are reproduced in
their entirety in enclosure III.
Unless you publicly announce its contents earlier, we plan no further
distribution until 30 days after the date of this letter. At that time,
we will send copies of this report to the Chairman of the U.S. Civil
Rights Commission and other interested parties. In addition, this
report will also be available at no charge on the GAO Web site at
http://www.gao.gov.
If you or your staff have any questions, please contact me at (202) 512-
3406 or by e-mail at sebastians@gao.gov or Roger R. Stoltz, Assistant
Director, at (202) 512-9408 or by e-mail at stoltzr@gao.gov. Key
contributors to this report were Charles E. Norfleet, Ryan D. Holden,
Esther Tepper, Viny Talwar, Sharon O. Byrd, F. Abe Dymond, Jacquelyn N.
Hamilton, and Denise M. Fantone.
Signed by:
Steven J. Sebastian:
Director:
Financial Management and Assurance:
Enclosure I:
Resources and Expenditures:
Table 1: Commission on Civil Rights Schedule of Fiscal Year 2003
Appropriations, Obligations, and Outlays:
Account: Appropriations;
Amount: $9,096,000.
Account: Less: .0065 rescission;
Amount: $-59,124.
Account: Available appropriation;
Amount: $9,036,876.
Account: Less: Unobligated appropriations;
Amount: $-22,005.
Account: Obligations;
Amount: $9,014,871.
Account: Less: Unexpended obligations*;
Amount: $-258,432.
Account: Outlays;
Amount: $8,756,439.
Source: President's Budget and Department of the Treasury, Bureau of
the Public Debt.
[*] This amount consists of $223,276 of payables and $35,156 of
undelivered orders, which represent the value of goods and services
ordered that have been obligated but have not been received.
[End of table]
Table 2: Commission on Civil Rights Schedule of Fiscal Year 2003
Expenditures:
[See PDF for image]
Source: Department of the Treasury, Bureau of the Public Debt.
[**] The difference of $1,485,223 between the expenditure population
and outlays in table 1 is caused by proprietary accounting adjustments
such as $501,182 of old equipment written off as fully depreciated,
while outlays contain both current and prior year payments.
[End of table]
Enclosure II:
Table 1: Statistical Samples and Population Summary:
[See PDF for image]
Source: GAO analysis of Commission data.
[End of table]
Table 2: Nonstatistically Selected Transaction Summary:
[See PDF for image]
Source: GAO analysis of Commission data.
[End of table]
Table 3: Statistically Selected and Nonstatistically Selected Summary:
[See PDF for image]
Source: GAO analysis of Commission data.
[End of table]
Enclosure III:
Comments from the United States Commission on Civil Rights:
UNITED STATES COMMISSION ON CIVIL RIGHTS:
WASHINGTON, D.C. 20425:
OFFICE OF STAFF DIRECTOR:
February 1, 2005:
Steven Sebastian:
Director:
Financial Management and Assurance Division:
Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Re: GAO Draft Report:
Dear Mr. Sebastian:
We appreciate the opportunity to respond to the draft report prepared
by the Government Accountability Office's Financial Management and
Assurance Team regarding the U.S. Commission on Civil Rights' financial
management and internal controls. Over the last several years, the GAO
has issued a series of reports that collectively portray the Commission
as being, in the GAO's term, an "agency in disarray." This newest
report further refines that portrait, presenting a sobering analysis of
the state of the agency as new management now assumes responsibility
for its direction. The report's findings are serious, detailed, and
alarming. They will serve as a useful guide as we begin to reform our
financial management and internal controls.
Again, we thank you for the opportunity to respond to this report and
to use it as a tool for improving our financial management. We
appreciate the seriousness of the weaknesses that you have identified
and believe that your report has been an important service to this
agency.
Sincerely,
Kenneth L. Marcus:
Staff Director:
[End of section]
(196018):
FOOTNOTES
[1] Civil Rights Act of 1957, Pub. L. No. 85-315, 71 Stat. 634 (Sept.
9, 1957).
[2] Civil Rights Commission Act of 1983, Pub. L. No. 98-183, 97 Stat.
1301 (Nov. 30, 1983).
[3] Civil Rights Commission Amendments Act of 1994, Pub. L. No. 103-
419, 108 Stat. 4338 (Oct. 25, 1994).
[4] GAO, U.S. Commission on Civil Rights: Agency Lacks Basic Management
Controls, GAO-/HEHS-97-125 (Washington, D.C.: July 8, 1997).
[5] GAO, U.S. Commission on Civil Rights: More Operational and
Financial Oversight Needed, GAO-04-18 (Washington, D.C.: Oct. 31,
2003).
[6] GAO, U.S. Commission on Civil Rights: Management Could Benefit from
Improved Strategic Planning and Increased Oversight, GAO-05-77
(Washington, D.C.: Oct. 8, 2004).
[7] The former staff director's employment at the Commission was
terminated on December 6, 2004.
[8] The FAR, established to codify uniform policies and procedures for
acquisition by executive agencies, applies to acquisitions of supplies
and services made by federal executive agencies with appropriated
funds.
[9] Codified at 31 U.S.C. §§ 3901-3904 and implemented at 5 C.F.R.
1315.
[10] The majority of the Commission's members concurred with the
President's appointment.
[11] Pub. L. No. 107-289, 116 Stat. 2049 requires the Commission and
other covered executive agencies that were not previously required to
obtain an annual audit under another statute to begin submitting annual
audited financial statements to the Congress and OMB.
[12] The act permitted the OMB Director to exempt a covered agency from
the requirement in any given fiscal year if its budget in that fiscal
year does not exceed $25 million and if the Director determines that an
audited financial statement is not warranted due to an absence of risks
associated with the agency's operations, demonstrated performance, or
other relevant factors. While OMB exempted the Commission from the
reporting requirement in fiscal years 2002 and 2003, it denied the
Commission's request for an exemption from the audit requirement for
fiscal year 2004.
[13] In 2001, OMB announced the executive branch's intention to
significantly accelerate agencies' financial reporting time line,
requiring that for fiscal year 2004 and thereafter they issue their
financial statements by November 15, which is about 6 weeks after the
end of the fiscal year.
[14] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
[15] During our testing of payroll transactions, we classified errors
as substantive errors or internal control errors. Substantive errors
would be errors that call into question the dollar amount of some or
all of a given transaction. Internal control errors are instances in
which specific internal control criteria are not met. In some cases, an
error could represent both an internal control deficiency and a
substantive error.
[16] Our estimate is based on a 63 percent confidence level, with a
tolerable error of $100,820. We chose a 63 percent confidence level
because we augmented our statistical test with a nonstatistical test of
additional nonsalary-related expenditure transactions, as discussed in
the scope and methodology.
[17] During our testing of nonsalary transactions, we classified errors
as substantive errors or internal control errors. Substantive errors
would be errors that call into question the dollar amount of some or
all of a given transaction--for example, a payment for services that
had not been received would constitute a payment made in error. Another
example would be a payment recorded in the accounting records for which
there is no documentary evidence to support the fact that a
disbursement was made. Internal control errors are instances in which
specific internal control criteria are not met--for example, a
transaction was not properly authorized for payment. In some cases, an
error could represent both an internal control deficiency and a
substantive error.
[18] Some of the transactions contained multiple deficiencies.
[19] The Commission issued a memo to its State Advisory Committee
representatives, of which there are 15 for each of the 50 states and
the District of Columbia, who are not employees, but when authorized,
may travel at the expense of the Commission.
[20] The Federal Travel Regulation was promulgated by GSA and is
codified at 41 C.F.R. chapters 300-304. It implements statutory
requirements and executive branch policies for travel by federal
civilian employees and others authorized to travel at government
expense.
[21] GAO-04-18.
[22] FAR 8.405-2.
[23] GAO-04-18.
[24] The fiscal year 2003 contract was initially established under a
purchase order with an amount to not exceed $156,000. In September
2003, the Commission made two downward modifications totaling $74,364,
leaving an obligated amount of $81,636.
[25] According to FAR 1.602-1(b), no contract shall be entered into
unless the contracting officer ensures that all requirements of law,
executive orders, regulations, and all other applicable procedures,
including clearances and approvals, have been met.
[26] An Antideficiency Act violation occurs when a government employee
makes or authorizes an expenditure or obligation in excess of an amount
available in an appropriation for the expenditure or obligation (31
U.S.C. § 1341(a)) or an amount available in an apportionment or an
amount permitted by regulation involving the subdivision of
appropriated funds (31 U.S.C. § 1517(a)).
[27] 41 C.F.R. 301-11.30.
[28] Approval of actual expenses is usually in advance of travel and at
the discretion of the agency. See 41 C.F.R. 301-11.302.
[29] Some of the transactions contained multiple deficiencies.
[30] As of February 28, 2005, the Commission's independent public
accountant had not yet issued its audit report on the Commission's
fiscal year 2004 financial statements.
[31] Most of the 32 selected travel transactions represent payment to
Citibank USA for travel costs charged by individuals traveling on
behalf of the Commission for a specific period. For example, a selected
travel transaction may include charges for 10 travelers.
[32] The FAR requires, with limited exceptions, that the agency's
contracting officer--an agency official who has the authority to enter
into, administer, or terminate contracts and make related
determinations and findings--promote and provide for full and open
competition in soliciting offers and awarding government contracts. The
competitive procedures available for use in fulfilling the requirement
for full and open competition are as follows: (a) sealed bids, (b)
competitive proposals, (c) a combination of competitive procedures, and
(d) other competitive procedures.
[33]
[34] GSA may establish SOPs for a particular schedule. Unless otherwise
noted, SOPs take precedence over the procedures in FAR 8.405. See FAR
8.403.
[35] 48 C.F.R. 4.602.
[36] While the Commission did not use the SGL 4000 accounts, BPD, as
the Commission's accounting service provider, did utilize them.
[37] FASAB Statement of Federal Financial Accounting Standard (SFFAS)
No. 4, Managerial Cost Accounting Standards (Washington, DC.: July 31,
1995), as modified by SFFAS No. 9, Deferral of the Effective Date of
Managerial Cost Accounting Standards (Washington, DC.: October 1997).
In addition, section 221.3 of OMB Circular No. A-11 encourages agencies
to include full costs to achieve program outputs. If full costs cannot
be precisely calculated, agencies should prepare their best estimate or
approximation of the full cost.
[38] GAO/HEHS-97-125.
[39] The Government Performance and Results Act (GPRA) of 1993 requires
federal executive agencies--including independent commissions--to
submit strategic and annual performance plans as well as report
annually on progress made. Annual plans show how an agency intends to
carry out its objectives and measure its performance in reaching long-
term strategic goals.
[40] H.R. CONF. REP. No. 108-10, at 772 (2003); H.R. REP. No. 108-221,
at 145 (2003); and H.R. REP. No. 108-576, at 119 (2004).
[41] GAO-05-77.
[42] Outcomes describe the intended result or consequence that will
occur from carrying out a program or activity. Outputs are the goods or
services produced by a program or organization and provided to the
public or others. Inputs are resources, often measured in dollars, used
to produce outputs and outcomes.
[43] However, OMB plans to assess 20 percent of all federal programs
annually such that all programs would be eventually reviewed over a 5-
year period represented by the fiscal years 2004-2008 budgets.
[44] Hearing before the Subcommittee on the Constitution, Committee on
the Judiciary, House of Representatives, 107TH Cong. 16 (Apr. 11,
2002).
[45] Id. (Statement of Commissioner Thernstrom).
