oversight

New Orleans Educational Talent Search Program, Inc.

Published by the Department of Education, Office of Inspector General on 2004-10-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

    NEW ORLEANS EDUCATIONAL TALENT 

         SEARCH PROGRAM, INC. 





                                 FINAL AUDIT REPORT





                                            ED-OIG/A06-D0015 


                                              October 2004





Our mission is to promote the efficiency,                        U.S Department of Education
effectiveness, and integrity of the                                Office of Inspector General
Department's programs and operations.                                            Dallas, Texas
                            NOTICE

Statements that management practices need improvement, as well as
other conclusions and recommendations in this report, represent the
opinions of the Office of Inspector General. Determination of corrective
action to be taken will be made by the appropriate Department of
Education officials.

In accordance with the Freedom of Information Act (5 U.S.C. §552),
reports issued by the Office of Inspector General are available, if
requested, to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.
                        UNITED STATES DEPARTMENT OF EDUCATION 

                                         OFFICE OF INSPECTOR GENERAL 

                                   1999 BRYAN STREET, HARWOOD CENTER, SUITE 2630 

                                              DALLAS, TEXAS 75201·6817 

                                        PHONE, (214) 880·3031 FAX , (214) 880·2492 



                                                     OCT 2 I 21lG4
Robert McFarland, Executive Director
New Orleans Educational Talent Search Program, Inc.
4215 S, Claiborne Avenue
New Orleans, Louisiana 70125

Dear Mr. McFarland:

Enclosed is our final audit report, Control Number ED-OIGIA06-DOOI5, entitled New Orleans
Educational Talent Search Program, Inc, (NOETSP). This report incorporates the comments you
provided in response to the draft report. If you have any additional comments or information
that you believe may have a bearing on the resolution of this audit, you should send them directly
to the following Education Department officials, who will consider them before taking final
Departmental action on this audit:

                                     Jack Martin
                                     Chief Financial Officer
                                     Lead Action Official
                                     400 Maryland Avenue, S,W,
                                     Washington, D.C. 20202

                                     Sally Stroup
                                     Assistant Secretary, Office of Postsecondary Education
                                     U.S. Department of Education
                                     1990 K Street, N.W.
                                     Washington, D.C. 20006

It is the policy of the U. S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein , Therefore,
receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.c. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

                                                          Sincerely,


                                                         /s/
                                                          Sherri L Demmel
                                                          Regional Inspector General
                                                           for Audit

Enclosure

      Oflr mission is /0 promote the efficiency. effectiveness. and jlJlegrity o/the Department's programs and operatjons
                      TABLE OF CONTENTS

Executive Summary                                                  1


Audit Results                                                      2


    FINDING NO. 1 - VIOLATION OF PROGRAM REGULATIONS               2

      Participant Eligibility Was Not Documented 

      NOETSP Did Not Provide Services to Participants 

    RECOMMENDATIONS                                                5


    FINDING NO. 2 - EXCESS CASH                                    7

    RECOMMENDATIONS                                                8


    FINDING NO. 3 - UNALLOWABLE/UNSUPPORTED COSTS                  9

    RECOMMENDATIONS                                               10


    FINDING NO. 4 - SINGLE AUDITS NOT PROPERLY SUBMITTED TO THE   12

                     CLEARINGHOUSE

    RECOMMENDATIONS                                               12


Background                                                        13


Objective, Scope, and Methodology                                 14


Statement on Management Controls                                  15


Appendix A – Unallowable/Unsupported Costs 


Appendix B – Selected Portions of OMB Circular A-122 


Appendix C – NOETSP's Response to Draft Audit Report 


Appendix D – NOETSP's General Concerns 

ED-OIG/A06-D0015 	                                                                     Page 1 of 15


                              EXECUTIVE SUMMARY 

New Orleans Educational Talent Search Program, Inc., (NOETSP), a nonprofit corporation,
materially failed to comply with the Higher Education Act of 1965 (HEA), as amended,
regulations governing the Talent Search Program, and its approved grant application. During the
period September 1, 1998, through December 31, 2002, NOETSP did not (1) comply with the
grant performance requirements, and (2) properly account for $1,937,980 in Talent Search
Program funds.

Violation of Program Regulations – NOETSP materially failed to comply with Talent Search
Program regulations, and did not meet the grant performance objectives stipulated in its
approved grant application. Specifically, NOETSP did not (1) document needs assessments for
its participants, including whether the students were low-income or prospective first-generation
college students, and (2) maintain a record of services provided and educational progress made
by each participant as a result of the services. Based on its material failure to comply with the
grant objectives, NOETSP was not entitled to retain the $1,937,980 received on this grant.

Excess Cash – NOETSP drew down more money from the Department of Education
(Department) than it expended. For the period September 1, 2001, through December 31, 2002,
NOETSP drew down an excess of $301,034.

Unallowable/Unsupported Costs – For the period September 1, 1998, through December 31,
2002, NOETSP received $1,564,061 that was either not allowable or not adequately documented
to support that the cost was allowable under Federal cost principles.

Single Audits Were Not Properly Submitted to the Clearinghouse – NOETSP did not
comply with the Single Audit Act by failing to submit its audit reports for the fiscal years ending
June 30 of 2000, 2001, and 2002. We notified the Department of this condition during our audit.

We recommend that the Chief Financial Officer, in collaboration with the Assistant Secretary for
Postsecondary Education—

 1.1 	 Require NOETSP to return the questioned costs of $1,937,980.
 1.2 	 Calculate and collect imputed interest on the $1,937,980.
 1.3 	 Take appropriate action pursuant to 34 C.F.R. § 74.62 to protect future Talent Search 

       funds. 

 2.1 	 Require NOETSP to return $301,034 in excess cash.
 2.2 	 Calculate and collect imputed interest on the $301,034.
 2.3 	 Calculate and collect excess cash and imputed interest for the period December 31, 2002,
       to present.
 3.1 	 Require NOETSP to return $1,564,061 in unallowable or unsupported costs.
 3.2 	 Calculate and collect imputed interest on the $1,564,061.
 4.1 	 Require NOETSP to submit all required audit reports to the Single Audit Clearinghouse.
 4.2 	 Require NOETSP to resolve the questioned costs of $228,575 and $262,293 shown in the
       audit reports, for the years ended June 30, 2000 and 2001, respectively, and any additional
       corrective action issues identified in the audit resolution process.
(The questioned costs in Findings 2, 3, and 4 are duplicative of the total grant costs questioned in
Finding 1.)
ED-OIG/A06-D0015                                                                        Page 2 of 15



                                      AUDIT RESULTS

NOETSP materially failed to comply with the HEA, specific Talent Search Program regulations,
and its approved grant application. Specifically, NOETSP demonstrated weak management
controls and (1) did not comply with program regulations, (2) drew down more funds than it
expended, (3) spent grant funds on items that were either unallowable under Federal cost
principles or did not adequately document the expenditures, and (4) did not comply with the
Single Audit Act by failing to submit its audit reports for the fiscal years ending June 30 of 2000,
2001, and 2002.

We provided a draft of this report to NOETSP. We received a response dated August 22, 2004,
and received an addendum to the response dated August 25, 2004. We have included the entire
response and addendum as Appendix C to this report. In its response, NOETSP disagreed with
each finding and recommendation, and submitted an explanation and various exhibits to support
its position. We have summarized NOETSP’s response to each finding in the AUDIT RESULTS
section of this report. We also have assessed NOETSP’s general concerns not specific to the
audit findings, and have included that assessment as Appendix D to this report.

After assessing NOETSP’s response and addendum, we have not changed our findings or
recommendations, but we have revised our report to more clearly and fully address issues raised
by NOETSP’s response.


                              FINDING NO. 1 

                   VIOLATION OF PROGRAM REGULATIONS


Participant Eligibility Was Not Documented

NOETSP did not document the required needs assessment for any of its student participants, and
did not document that at least two-thirds of the participants were both low-income and potential
first-generation college students.

A grantee must determine whether a participant is eligible to participate in a Talent Search
Program under 34 C.F.R. § 643.3, which includes determining whether the participant needs one
or more of the services that may be provided pursuant to 34 C.F.R. § 643.4. For each participant,
a grantee must maintain a record of the basis for its determination that the participant is eligible
to participate, including the needs assessment for the participant (34 C.F.R. § 643.32).

Under 34 C.F.R. § 643.10 and § 643.32(b), a Talent Search grantee must serve a minimum of
600 participants per year, and must ensure that at least two-thirds of the participants served will
be low-income individuals who are potential first-generation college students.

A low-income individual is defined, in §402A(g)(2) of the HEA, as an individual from a family
whose taxable income for the preceding year did not exceed 150 percent of an amount equal to
the poverty level determined by using criteria of poverty established by the Bureau of the
Census.
ED-OIG/A06-D0015 	                                                                   Page 3 of 15


HEA § 402A(g)(1) defines a first-generation college student as an individual where neither
parent has completed a baccalaureate degree; or in the case of any individual who regularly
resided with and received support from only one parent, an individual whose only such parent
did not complete a baccalaureate degree.

For dependent students, HEA § 402A(e)(1) states that documentation of status as a low-income
individual is to be made by providing the Department with:

       (A) A signed statement from the individual’s parent or legal guardian;
       (B) Verification from another governmental source;
       (C) A signed financial aid application; or
       (D) A signed United States or Puerto Rico income tax return.

For independent students, HEA § 402A(e)(2) states that documentation of status as a low-income
individual is to be made by providing the Department with:

       (A) A signed statement from the individual;
       (B) Verification from another governmental source;
       (C) A signed financial aid application; or
       (D) A signed United States or Puerto Rico income tax return.

Based on guidance from the Department, examples of available records that we considered to be
adequate documentation were:

   • 	 Student Eligibility Form – This form was acceptable for low-income status if (1) “low
       income” was checked on the form or a dollar amount was filled in and (2) the file
       contained a tax return or other financial information that appeared to support a low-
       income status.

   • 	 Consent/Income Documentation Form – This form was acceptable for first-generation
       status if the form was (1) checked that neither parent had completed college, and (2) the
       information had been obtained from the parent, the guardian, or the participant.

Although NOETSP had individual student files for some of the participants, most of the files
reviewed contained insufficient information to substantiate the eligibility of the participants to
receive grant services. For 1998-1999 through 2001-2002, NOETSP received funding to assist
7,200 individuals (1,800 per budget period). At least 4,800 (66%) of the 7,200 students should
have been documented as being both “low-income” and “first-generation.” However, only 31
students were documented as both low-income and first-generation students during this four-year
period. Our review of NOETSP’s documentation disclosed 109 low-income students, 47 first-
generation students, and 31 students documented as both low-income and first-generation. The
number of adequately documented students was only 0.65 percent (31/4800) of the required
minimum number.
ED-OIG/A06-D0015                                                                      Page 4 of 15


Due to the lack of documentation, NOETSP could not demonstrate that it served the minimum of
600 participants per budget period. To be credited for serving 600 participants, NOETSP must
document each year that 400 (66%) of its program participants were both low-income and first-
generation students. For program years 1998-1999 through 2001-2002, we found only 31 such
participants, which is only 1.9 percent (31/1600) of the required minimum number.

NOETSP Did Not Provide Services to Participants

NOETSP did not maintain a record of services provided to and the educational progress made by
each of the 7,200 participants for whom it received funding for the four-year period reviewed.
According to 34 C.F.R. § 643.32(c), a grantee must maintain a record of the services provided to
the participant and the specific educational progress made by the participant as a result of the
services. Grantees are required to maintain all supporting documents and records pertinent to an
award for a period of three years from the date of submission of the final expenditure report (34
C.F.R. § 74.53(b)).

To assess NOETSP’s performance, we reviewed all available records for Program Years 1998-
1999 through 2001-2002. We reviewed the Annual Performance Reports for Program Years
1998-1999 and 2001-2002 and supporting documentation provided by NOETSP. Although
requested, neither NOETSP nor the Department was able to provide the Annual Performance
Reports for Program Years 1999-2000 and 2000-2001.

In support of the services provided to participants, the documentation provided to us was very
limited and insufficient. Records provided by NOETSP consisted of a wide range of documents.
Many student files contained only a profile sheet and a self-assessment inventory, neither of
which showed services provided. Some of the files contained only consent/income
documentation forms and Free Application for Federal Student Aid forms. Additionally,
documentation of outreach services often consisted of only a summary page and accompanying
sign-in rosters. We did not consider the documentation reviewed to be adequate to substantiate
services provided, and the Department agreed that the documentation was not adequate.

In performing our review, we gave NOETSP credit wherever possible, even though much of the
student-level contact information was limited. For example, we counted a student as a “client
served” if we saw any indication that the student participated in a financial aid application
session or financial aid workshop. In some cases, we obtained names from roster or sign-in
sheets; in other cases, we obtained names from individual student profile sheets. In all cases, we
attempted to obtain data regarding name, address, telephone number, social security number,
school, grade level, acceptance basis, intended college, and service provided. In many cases, we
had only part of such information. Most of the data was handwritten, and we had difficulty
reading some of the names. Some cases might exist where we counted a student twice because
names appeared to be spelled differently, even though the names were quite similar.

Using the expansive approach described above, we reviewed NOETSP’s supporting
documentation for grant performance. NOETSP purportedly had contact with at least 1,800
students in each of the program years, but documentation to substantiate that contact was
inadequate to prove that services were provided. For example, our examination of those records
for Program Year 2001-2002 disclosed that services were provided to only 165 participants, even
ED-OIG/A06-D0015 	                                                                     Page 5 of 15


though NOETSP received funding for 1,800 and reported to the Department that it served 1,950.
The report showed that the total of 1,950 included 1,412 continuing participants. The document
provided by NOETSP to substantiate the number served showed the “TOTAL STUDENTS
SERVICED 2001-2002” to be 1,412 students, and not the 1,950 reported to the Department.
However, that document included the name of the school attended by the student, activities, and
numbers served at the respective schools, but did not include any student names. Furthermore,
97 students were reportedly served in November 2002, which was beyond August 31, 2002, the
end of the budget period. In addition to the document mentioned above which showed 1,412
students served, we obtained another record from NOETSP that showed only 228 students were
served during Program Year 2001-2002. The additional record we received was a computer file
that showed, “Total Students Served 2001-2002”, dated January 28, 2003, which was
approximately five months after the end of the program year.

For Program Year 2001-2002, we determined that NOETSP served no more than 165 students.
Therefore, based on our review, the percentage of students that actually received services was
9.2% (165/1800) of the funded student participants, and only 8.5% (165/1950) of the reported
student participants. In each case, the number is well below the regulatory minimum of 600
participants per year.

The documentation of services provided did not satisfy regulatory program requirements.
Neither did the documentation support either the grant performance objectives or the Annual
Performance Reports. If a grant recipient materially fails to comply with the terms and
conditions of an award, the Department can take action to withhold cash payments, disallow all
or part of the costs of the activity, wholly or partly suspend or terminate the current award, and
withhold further awards for the project or program (34 C.F.R. § 74.62).

Because NOETSP did not document the required needs assessment for any of its student
participants, did not document that at least two-thirds of the participants were both low-income
and prospective first-generation college students, and did not maintain a record of services
provided and educational progress made by each participant, NOETSP was not entitled to retain
any of the $1,937,980 in Talent Search Program funding it received during the period September
1, 1998, through December 31, 2002.

                                  RECOMMENDATIONS
We recommend that the Chief Financial Officer, in collaboration with the Assistant Secretary for
Postsecondary Education—

 1.1 	 Require NOETSP to return the questioned costs of $1,937,980.
 1.2 	 Calculate and collect imputed interest on the $1,937,980.
 1.3 	 Take appropriate action pursuant to 34 C.F.R. § 74.62 to protect future Talent Search 

       funds. 

ED-OIG/A06-D0015                                                                       Page 6 of 15


                                    NOETSP’s Comments

Participant Eligibility Was Not Documented

NOETSP stated that it conducted more than 100 site visits and assisted more than 6,000 students
during the period examined. NOETSP attached Exhibits 7 and 8 to provide examples of Student
Profile Sheets, stating that Exhibit 7 was a revised form, which asked for information regarding
the parent’s education. NOETSP also said that 98 percent of its services are provided to students
of the Orleans Parish Public School System (Orleans), stating that 93.5 percent of the Orleans
students are African American and that 75.5 percent of those students are eligible for free and
reduced lunch. NOETSP attached Exhibit 6 to show those Orleans statistics from October 2003.
In addition, NOETSP attached Exhibit 4 to show the income eligibility of Orleans students and
the percentage of Orleans students who were at or below the poverty threshold for Fiscal Years
2002-2003. NOETSP maintained that 60 to 85 percent of the students it served were at or below
the poverty level.

NOETSP Did Not Provide Services to Participants

NOETSP stated, “The staff and management of NOETSP totally and categorically disagree with
this statement.” NOETSP attached Exhibits 1, 2, and 3 to show dates, schools, services
provided, and the number of students served. NOETSP said that each visit outlined in those
exhibits can be confirmed and stated, “A telephone call or letter and the OIG’s site visits should
have confirm[ed] the adequacy of this document.” NOETSP said that it provided more than
5,000 documents to ED/OIG during the three-year period November 2001 through September
2003, and stated that it made every effort to deliver that information in a timely and orderly
manner. NOETSP attached Exhibit 5 to show that ED/OIG acknowledged receipt of the
performance report for 2000-2001, and attached Exhibit 9 to show that performance reports were
sent to ED/OIG. NOETSP also referred to its September 2003 visit to the Dallas ED/OIG
Office, stating, “it appears that records initially shipped in November and December of 2001 was
[sic] not available and apparently stored in a different location from the records shipped in May
of 2003.”

                       OIG’s Response to NOETSP's Comments
Participant Eligibility Was Not Documented

NOETSP’s comments and attached exhibits did not cause us to change the finding or the
recommendations. The exhibits included both sample documentation forms and statistical data
related to the economic status of NOETSP’s student clients. However, those exhibits still did not
satisfy the requirement that, for each participant, a grantee must maintain a record of the basis for
its determination that the participant is eligible to participate, including the needs assessment for
the participant (34 C.F.R. § 643.32). Neither did the exhibits satisfy the requirements that a
Talent Search grantee must serve a minimum of 600 participants per year, and must ensure that
at least two-thirds of the participants served will be low-income individuals who are potential
first-generation college students. (34 C.F.R. § 643.10 and § 643.32(b))
ED-OIG/A06-D0015                                                                        Page 7 of 15


According to Section 402A(e)(2) of the HEA, documentation of status as a low-income
individual is to be made by providing the Department with:

       •   A signed statement from the individual’s parent or legal guardian;
       •   Verification from another governmental source;
       •   A signed financial aid application; or
       •   A signed United States or Puerto Rico income tax return.

As stated in the draft report, NOETSP had individual student files for some of the participants,
but most of the files reviewed contained insufficient information to substantiate the eligibility of
the participants to receive grant services.

NOETSP Did Not Provide Services to Participants

NOETSP’s comments and attached exhibits did not cause us to change the finding or the
recommendations. The sample documentation forms provided still did not satisfy grant
requirements. According to 34 C.F.R. § 643.32(c), a grantee must maintain a record of the
services provided to the participant and the specific educational progress made by the participant
as a result of the services. As stated in the draft report, NOETSP did not maintain a record of
services provided and the educational progress made by each of the 7,200 participants for whom
it received funding for the four-year period reviewed.


                                       FINDING NO. 2 

                                       EXCESS CASH 

NOETSP drew down an excess of $301,034 more than it expended for the period September 1,
2001, through December 31, 2002. According to 34 C.F.R. § 74.22, grant recipients are paid in
advance, provided they minimize the time elapsed between the transfer of funds from the United
States Treasury and the subsequent disbursement of those funds. Cash advances to grantees are
limited to the minimum amounts needed, and should be timed to occur as close as is
administratively possible to actual disbursements. We analyzed NOETSP’s General Ledger
expenditures and determined that NOETSP did not make disbursements in a timely manner.
Thus, NOETSP did not comply with 34 C.F.R. § 74.22 because it maintained a large amount of
cash in excess of documented expenditures. The following table presents a synopsis of
drawdowns, recorded expenditures, and excess draws for the period September 2001 through
December 2002. We did not include the period September 1998 through August 2001 because
NOETSP did not provide sufficient documentation for a proper analysis.


                              Amount   Recorded   Excess Draws Over
             Time Period      Drawn Expenditures Recorded Expenditures
           09/01/01-08/31/02 $ 417,980 $ 349,749       $ 68,231
           09/01/02-12/31/02 $ 380,000 $ 147,197       $ 232,803
                 Total       $ 797,980 $ 496,946       $ 301,034
ED-OIG/A06-D0015 	                                                                     Page 8 of 15


                                 RECOMMENDATIONS 

We recommend that the Chief Financial Officer, in collaboration with the Assistant Secretary for
Postsecondary Education—

 2.1 	 Require NOETSP to return the excess cash of $301,034.
 2.2 	 Calculate and collect imputed interest on the $301,034.
 2.3 	 Calculate and collect excess cash and imputed interest for the period December 31, 2002,
       to present.

(The excess cash amount in Recommendation 2.1 is duplicative of the total grant costs
questioned in Finding 1. Therefore, the recovery of funds under Recommendations 2.1 and 2.2
must be coordinated with the actions taken under Finding 1.)

                                   NOETSP’s Comments
NOETSP stated that the excess cash amount of $232,803 was spent subsequent to December 31,
2002. NOETSP emphasized that the program year ended on August 31, 2003, and stated that the
excess cash was expended between January 1, 2003 and August 31, 2003. NOETSP further
stated that its records show expenditures in excess of $417,980 for the year ended August 31,
2002. NOETSP also stated that the expenditures shown in the draft audit report did not include
or consider the following:

       1. 	 Overlapping time periods for the organization’s fiscal year, which is July 1, to
            June 30th, and the program year, which is September 1, through August 30th.

       2. 	 Accrued and accrual – the draft report appears only to consider the cash
            expenditures for the period and does not take into consideration expenses paid
            after 8/31/02 for this program year.


                      OIG’s Response to NOETSP's Comments
NOETSP’s comments did not cause us to change the finding or the recommendations.
According to 34 C.F.R. § 74.22, grant recipients are paid in advance, provided they minimize the
time elapsed between the transfer of funds from the United States Treasury and the subsequent
disbursement of those funds. Cash advances to grantees are limited to the minimum amounts
needed, and should be timed to occur as close as is administratively possible to actual
disbursements. The issue in this finding is neither the overlapping of the fiscal year and the
program year nor the cash versus accrual basis of accounting. The issue is that NOETSP
regularly drew down funds that exceeded monthly expenditures shown in the organization’s
general ledger. For the year ended August 31, 2002, NOETSP stated that its records show
expenditures in excess of $417,980 (the amount drawn), but the general ledger provided to us
showed expenditures of $349,749. For the period September 2002 through December 2002, the
following table shows amounts drawn versus general ledger expenditure amounts.
ED-OIG/A06-D0015                                                                   Page 9 of 15



                                      Amount         Amount        Excess
                  Month               Drawn         Expended        Cash
                  September 2002    $225,000.00    $ 29,348.40   $195,651.60
                  October 2002      $ 65,000.00    $ 48,205.47   $ 16,794.53
                  November 2002     $ 40,000.00    $ 31,818.76   $ 8,181.24
                  December 2002     $ 50,000.00    $ 37,823.91   $ 12,176.09
                  Total             $380,000.00    $147,196.54   $232,803.46

NOETSP stated that the excess cash amount of $232,803 (61 percent of total drawdowns) was
spent subsequent to December 31, 2002. However, as shown in the table, most of that amount
was drawn into NOETSP’s bank account during the first month of the program year. Therefore,
cash advances were not limited to the minimum amounts needed, and they were not timed to
occur as close as was administratively possible to actual disbursements.


                            FINDING NO. 3 

                    UNALLOWABLE/UNSUPPORTED COSTS 

NOETSP expended $1,564,061 in grant funds on items that were either unallowable under
Federal cost principles or were not adequately documented. Examples of supporting
documentation that we reviewed, if available, included general ledger, bank statements,
cancelled checks, payroll records, invoices, vouchers, and receipts. For the September 1998
through August 2001 portion of our audit period, NOETSP did not provide sufficient
documentation for a proper analysis of expenditures. On that basis, we determined that
$1,140,480 in grant funds received for that period was unallowable.

NOETSP provided records for September 1, 2001, through December 31, 2002. For that period,
NOETSP recorded grant expenditures of $496,946 in its general ledger. We determined that
$423,581 of those costs was either unallowable or unsupported. As shown in Appendix A of this
report, $109,115 of the $423,581 was not allowable under Federal cost principles, and $314,466
was not adequately documented to support that the costs were allowable under Federal cost
principles. The following table presents a synopsis of recorded expenditures and
unallowable/unsupported expenditures for the period September 1, 1998, through December 31,
2002. The unallowable expenditure amounts for September 1, 1998, through August 31, 2001,
represent the entire amount of funds drawn from the Department for those three budget periods.

                                              Allowable/  Unallowable/
                                 Recorded     Supported   Unsupported
                Time Period     Expenditures Expenditures Expenditures
              09/01/98-08/31/99  Unknown       $      0    $ 372,000
              09/01/99-08/31/00  Unknown       $      0    $ 381,000
              09/01/00-08/31/01  Unknown       $      0    $ 387,480
              09/01/01-08/31/02  $ 349,749     $ 48,708    $ 301,041
              09/01/02-12/31/02  $ 147,197     $ 24,657    $ 122,540
                    Total        $ 496,946     $ 73,365    $ 1,564,061
ED-OIG/A06-D0015                                                                     Page 10 of 15


Office of Management and Budget Circular A-122 "Cost Principles for Non-Profit
Organizations" (A-122), effective June 1, 1998, gives detailed guidance concerning allowable
grant costs. Both Attachment A and Attachment B of A-122 prescribe important principles that
relate to NOETSP’s grant administration. Selected portions of A-122 are presented in Appendix
B of this report.

For the period September 1, 2001, through December 31, 2002, over 72 percent of NOETSP’s
unallowable or unsupported costs consisted of payments for salaries, contract labor, and the
mortgage on its building. Appendix A of this report shows the breakdown of all those
questioned costs. NOETSP made mortgage payments that were not approved by the
Department, thereby violating the requirement of A-122, Attachment B-15.c, which states,
“Capital expenditures for land or buildings are unallowable as a direct cost except with the prior
approval of the awarding agency." NOETSP's grant application included "Office Space Rental"
in the budget. However, records obtained from NOETSP do not show that any payment was
ever made for rent or lease purposes. Records obtained from NOETSP show that grant funds
were used to make mortgage payments on the building. One of those records is a letter to us
from NOETSP which states that the "bank loan is the mortgage on the building."

The NOETSP Director was paid $129,053 during the 16 months ended December 31, 2002. The
detail budget submitted by NOETSP shows the Director’s salary to be $61,660 for this time
period. We consider the difference of $67,393 to be unallowable as not reasonable or necessary
for the performance of the grant. In addition, the NOETSP Director received $14,350 in
reimbursement for agency expenses for which there was no documentation. Some of the other
unsupported costs included checks totaling $7,897 made payable to cash for which there was no
documentation to show the reason for the expenditure.

NOESTP did not comply with A-122, did not obtain approval for all expenditures, and did not
maintain adequate documentation for grant costs. The result of that noncompliance is a
questioned cost amount of $1,564,061 for the period September 1, 1998, through December 31,
2002.


                                 RECOMMENDATIONS
We recommend that the Chief Financial Officer, in collaboration with the Assistant Secretary for
Postsecondary Education—

 3.1   Require NOETSP to return $1,564,061 in unallowable or unsupported costs.
 3.2   Calculate and collect imputed interest on the $1,564,061.

(The unallowable or unsupported costs in Recommendation 3.1 are duplicative of the total grant
costs questioned in Finding 1. Therefore, the recovery of funds under Recommendations 3.1 and
3.2 must be coordinated with the actions taken under Finding 1.)
ED-OIG/A06-D0015                                                                      Page 11 of 15


                                   NOETSP’s Comments
NOETSP stated that it “expended every dollar of the grant funds as provided by OMB Circular
A-122 ‘Cost Principles for Non-Profit Organization’ and provided adequate documentation to
support these expenditures.” NOETSP said that 85 percent of its total expenditures were for
personnel costs and that NOETSP staffing was consistent until this OIG audit began. In
addition, NOETSP’s comments included the following statements:

       Time reports and copies of cancelled checks were submitted as documentation for
       all personnel cost. The lack of adequate documentation for personnel cost was
       obviously an omission and can be obtained.

       The mortgage payment was paid in lieu of rent. Additionally, we provided a copy
       of the lease agreement whereas NOETSP charged the DOE program monthly
       rents of $2,400. See a copy of the commercial lease, exhibit 12.

       Routine expenses . . . are documented with a cancelled check, invoice and
       payment requisition. Any expense where there may be missing documentations,
       duplicate copies may be obtained.


                       OIG’s Response to NOETSP's Comments
NOETSP’s comments did not cause us to change the finding or the recommendations. We
reviewed all records provided to us, including time reports, cancelled checks, the lease
agreement, and other supporting documentation. We did not see adequate documentation that
NOETSP “expended every dollar of the grant funds as provided by OMB Circular A-122.” In
the draft report, we did not address personnel costs as a percentage of total expenditures, but we
did show that the NOETSP Executive Director was paid about twice the amount budgeted for his
position. During the 16 months ended December 31, 2002, he was paid $129,053, but the
detailed budget submitted by NOETSP showed his salary to be $61,660 for that time period. We
still consider the difference of $67,393 to be unallowable as not reasonable or necessary for the
performance of the grant.

During the performance of the audit, we made multiple requests for information, documents, and
records. During our exit conference on September 4, 2003, NOETSP confirmed that all records
had been sent to us, even though NOETSP subsequently found and sent to us six more boxes of
performance data. We received those boxes on September 17, 2003. NOETSP also provided to
us a management representation letter dated January 28, 2004. That letter included this
confirmation, “We have provided to you all records which support our expenditures of grant
funds and our performance of grant objectives.” If NOETSP has any additional documentation
for review, it should be provided to the Department officials identified in the cover letter to this
report.
ED-OIG/A06-D0015 	                                                                    Page 12 of 15


                          FINDING NO. 4 

          SINGLE AUDITS NOT PROPERLY SUBMITTED TO THE 

                         CLEARINGHOUSE 

NOETSP did not comply with the Single Audit Act Amendments of 1996 by failing to timely
submit its audit reports for the fiscal years ending June 30 of 2000, 2001, and 2002. After the
start of our audit, reports were submitted for the years ending June 30, 2000 and 2001, but the
Single Audit Clearinghouse rejected them because the reports were incomplete. As of
September 27, 2004, we have no evidence that NOETSP had an audit performed for the fiscal
year ending June 30, 2002. NOETSP stated that, in the past, the auditor forwarded all reports to
the proper agencies. The audit reports for the years ended June 30, 2000 and 2001 show
questioned costs of $228,575 and $262,293, respectively.

OMB Circular A-133, Subpart B, § 200(a) states, "Non-Federal entities that expend $300,000 or
more in a year in Federal awards shall have a single or program-specific audit conducted for that
year in accordance with the provisions of this part." Further, Subpart C of the Circular, § 320(a)
states, “The audit shall be completed and the data collection form . . . shall be submitted within
the earlier of 30 days after receipt of the auditor's report(s), or nine months after the end of the
audit period . . . ” and § 320(d) states, “All auditees shall submit to the Federal clearinghouse
designated by OMB the data collection form . . . and one copy of the reporting package . . . .”

During the audit, we notified the Department that NOETSP delayed our access to grant records
and had not submitted its audit reports to the Single Audit Clearinghouse as required. We
recommended that the Department take action to withhold cash payments from NOETSP’s
current grant and any future grants, until all records were provided and outstanding Single Audits
were submitted. After our notification, the Department released funds to NOETSP only on a
reimbursement basis (see Background section of this report for details).


                                  RECOMMENDATIONS
We recommend that the Chief Financial Officer, in collaboration with the Assistant Secretary for
Postsecondary Education—

 4.1 	 Require NOETSP to submit all required audit reports to the Single Audit Clearinghouse.
 4.2 	 Require NOETSP to resolve the questioned costs of $228,575 and $262,293 shown in the
       audit reports, for the years ended June 30, 2000 and 2001, respectively, and any additional
       corrective action issues identified in the audit resolution process.

(The questioned costs in Recommendation 4.2 are duplicative of the total grant costs questioned
in Finding 1. Therefore, the recovery of funds under Recommendation 4.2 must be coordinated
with the actions taken under Finding 1.)
ED-OIG/A06-D0015                                                                    Page 13 of 15


                                   NOETSP’s Comments
NOETSP stated that it paid a public accounting firm to complete a Single Audit as provided by
OMB Circular A-133, and said that its fee accountant signed the audit forms to transmit the
documents to the Single Audit Clearinghouse. The response included as Exhibits 10 and 11
copies of the Data Collection Form for the 2000 and 2001 audits. NOETSP assumed that the
audit and all transmittals were complete, but was later informed that certain submittals were not
made and proceeded to correct the discrepancy. Further, NOETSP stated that it has provided
copies of all audits to every requestor, including ED/OIG.


                       OIG’s Response to NOETSP's Comments
NOETSP’s comments did not cause us to change the finding or the recommendations. OMB
Circular A-133, Subpart C, § 320(d) states, “All auditees shall submit to the Federal
clearinghouse designated by OMB the data collection form . . . and one copy of the reporting
package . . . .” We queried the database for the Single Audit Clearinghouse several times during
the performance of the audit, and did so again after receiving NOETSP’s response to the draft
audit report. As stated in the draft report, NOETSP did submit reports for the years ending June
30, 2000 and 2001, but the Single Audit Clearinghouse rejected the reports because they were
incomplete. A query as of September 27, 2004, showed that the June 30, 2000 report status was
“Missing Form” and that the June 30, 2001 report status was “Missing Components/Form
Errors.” The Single Audit Database did not show that a report was submitted for the year ending
June 30, 2002. Neither has NOETSP provided us with a copy of the audit report for that year.
On the basis of these facts, we still conclude that NOETSP did not comply with audit report
submission requirements of the Single Audit Act.


                                      BACKGROUND

NOETSP is a nonprofit corporation that was organized in 1970 under the laws of the State of
Louisiana. The corporation is organized to provide postsecondary educational opportunities to
high school graduates, dropouts, and college students. The organization seeks to achieve its
primary goal by offering financial aid assistance, academic assistance, American College Test
(ACT) preparatory sessions, and outreach counseling sessions. In general, NOETSP seeks to
provide the youth of the Greater New Orleans metropolitan area with the opportunity to become
successful citizens through educational means. The corporation is supported primarily through
grants.

Sections 402A and 402B of the HEA authorize the Talent Search Program, one of the
Department’s TRIO Programs. The Program is governed by the regulations in 34 C.F.R. Part
643. The Talent Search Program provides grants to projects designed to (1) identify qualified
youths with potential for education at the postsecondary level and encourage them to complete
ED-OIG/A06-D0015                                                                   Page 14 of 15


secondary school and undertake a program of postsecondary education; (2) publicize the
availability of student financial assistance for persons who seek to pursue postsecondary
education; and (3) encourage persons who have not completed education programs at the
secondary or postsecondary level, but who have the ability to do so, to reenter these programs
(34 C.F.R. § 643.1).

The Louisiana Office of State Inspector General performed an audit of NOETSP for the period
July 1996 through June 1999, and issued its audit report on May 1, 2000. The report
documented numerous problems with NOETSP’s administration of its Talent Search Program.
Those problems included incomplete financial records, multiple billings, false claims, and
NOETSP’s refusal to provide full access to required records and information.

Additionally, NOETSP’s audited financial statements for the years ending June 30, 2000, and
June 30, 2001, presented respective questioned costs of $228,575 and $262,293. Multiple audit
findings included (1) NOETSP’s failure to reconcile significant differences between the general
ledger and supporting documentation, and (2) NOETSP’s expenditure of grant funds in a manner
that might have violated certain provisions of the grants.



                     OBJECTIVE, SCOPE, AND METHODOLOGY

The objective of our audit was to determine if NOETSP complied with the HEA of 1965, as
amended, specific regulations governing the Talent Search Program, and its approved grant
application. Specifically, we determined whether NOETSP (1) complied with the grant
performance requirements, and (2) properly accounted for Talent Search Program funds.

We held an entrance conference at NOETSP on April 22, 2003, and attempted to begin our
fieldwork at that time, but were denied access to records. We notified the Department that
NOETSP had delayed our access to the requested grant records and that NOETSP had not
submitted its audit reports to the Single Audit Clearinghouse as required. We recommended that
the Department withhold funds from NOETSP until all records were provided and outstanding
Single Audits were submitted. We also recommended that the Department consider suspension
and termination of the grant awards. After this notification, the Department began to release
funds to NOETSP only on a reimbursement basis.

Before our audit began, we obtained some NOETSP documents in response to a 2001 OIG
subpoena. After being denied access to records when we initiated our audit, we obtained
additional documents in response to a 2003 OIG subpoena. We subsequently made multiple
information requests to obtain all documents and records that had been subpoenaed, but never
performed any on-site audit procedures at the grantee’s office. We conducted an exit conference
by telephone on September 4, 2003. However, after completion of the exit conference, NOETSP
officials found additional information pertaining to grant performance. They made that
information available to us by shipping it to our Dallas office. We received a shipment of
documents on September 17, 2003. NOETSP officials also visited our Dallas office on
September 18, 2003, to explain some of the documents.
ED-OIG/A06-D0015 	                                                                  Page 15 of 15


To accomplish our objective, we performed the following procedures:

   •	  Reviewed applicable Federal law and regulations.
   •	  Reviewed grant applications.
   •	  Reviewed prior audit reports.
   •	  Reviewed performance reports.
   •	  Examined NOETSP records, including general ledger, invoices, canceled checks, 

       outreach rosters, and student files. 

   • 	 Visited selected schools and interviewed officials concerning services to students.

Because of our concern about weak management controls, we performed a review of all records
that were made available to us. For the period September 1998 through August 2001, we were
not provided sufficient documentation to determine what expenditures were made by NOETSP.
Additionally, most of the documentation that was provided contained insufficient information to
substantiate that grant services were delivered or that funds were properly expended. Due to this
scope limitation, we questioned all grant funds drawn down during our audit period.

We did not use any sampling technique. We obtained funding data from the Department’s
Grants Administration and Payment System, and we assessed the reliability of funds drawn by
comparing the draws to NOETSP records. We concluded that the data obtained from the
Department was reliable for the purpose of this audit. Our audit period was September 1, 1998,
through December 31, 2002. We performed the audit in accordance with generally accepted
government auditing standards appropriate to the scope of the review, except as discussed above.



                 STATEMENT ON MANAGEMENT CONTROLS

As part of our audit, we reviewed all records that were made available to us. We did not
consider it necessary to gain an understanding of the system of management controls, policies,
procedures, and practices applicable to NOETSP’s administration of the Talent Search Program.
However, our review disclosed weak management controls that adversely affected NOETSP’s
ability to administer the Talent Search grant, and resulted in non-compliance with Federal
regulations, grant terms, and cost principles. Those weaknesses and their effects are discussed in
the AUDIT RESULTS section of this report.
                                                                         Appendix A

                          Unallowable/Unsupported Costs

                    September 1, 1998 – December 31, 2002
                                                                     OMB Circular A-
                     Unallowable      Unsupported         Total         122 Criteria
Cost Category          Costs             Costs           Amount      (See Appendix B)

Grant Funds Drawn
from 09/01/98
through 08/31/01
for Which There
Was No Supporting
Documentation        $1,140,480.00                   $1,140,480.00       A-A.2.g
                                                                       A-A.3 & B-
Salaries             $    67,392.89   $ 135,184.85   $ 202,577.74        7.m(1,2)
                                                                        A-A.2.g &
Contract Labor                        $ 64,316.18    $ 64,316.18        B-7.m(1,2)
Mortgage on                                                            A-A.2.a, g &
Building             $    40,768.42                  $ 40,768.42       B-15.b,c,d,e
Bank Payments                         $ 14,620.72    $ 14,620.72         A-A.2.g
Program Expenses                      $ 13,843.63    $ 13,843.63         A-A.2.g
Travel and                                                           A-A.2.g & B-55.a
Entertainment                         $ 13,196.31    $ 13,196.31
Professional Fees                     $ 11,217.50    $ 11,217.50         A-A.2.g
Dues and                                                                 A-A.2.g
Subscriptions                         $   9,388.30   $    9,388.30
Repairs                               $   8,980.00   $    8,980.00       A-A.2.g
Agency Activities                     $   8,500.00   $    8,500.00       A-A.2.g
Senior Counselor                      $   7,500.00   $    7,500.00       A-A.2.g
Telephone                             $   7,463.38   $    7,463.38       A-A.2.g
Equipment Rental                      $   6,517.06   $    6,517.06       A-A.2.g
Office Supplies                       $   4,212.76   $    4,212.76       A-A.2.g
Consulting                            $   3,000.00   $    3,000.00       A-A.2.g
Insurance                             $   2,717.30   $    2,717.30       A-A.2.g
Utilities                             $   2,099.46   $    2,099.46       A-A.2.g
Other Expenses                        $   1,120.00   $    1,120.00       A-A.2.g
Bank Charges          $     513.95                   $      513.95       A-A.2.a
Accounting            $     440.00                   $      440.00       A-A.2.a
Printing &                                                               A-A.2.g
Reproduction                          $    350.00    $     350.00
Legal Fees                            $    200.00    $     200.00        A-A.2.g
Miscellaneous                         $     38.00    $      38.00        A-A.2.g

Total                $1,249,595.20    $ 314,465.45   $1,564,060.65
                                                                                 Appendix B
                                                                                     Page 1 of 2

                Selected Portions of OMB Circular A-122
•   A-A.2.a - To be allowable under an award, costs must be reasonable for the
    performance of the award and be allocable thereto.
•   A-A.2.g - To be allowable under an award, costs must be adequately documented.
•   A-A.3 - Costs must be reasonable. 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.
•   A-A.4.a - A cost is allocable to a particular cost objective, such as a grant, contract,
    project, service, or other activity, in accordance with the relative benefits received.
•   B-7.d.(1) - Costs for which amounts or types of compensation appear unreasonable
    require special consideration and possible limitations. Among such conditions is
    compensation to members of non-profit organizations, trustees, directors, associates,
    officers, or the immediate families thereof. Determination should be made that such
    compensation is reasonable for the actual personal services rendered rather than a
    distribution of earnings in excess of costs.
•   B-7.f.(2) - Fringe benefits are allowable, provided such benefits are granted in
    accordance with established written organization policies. Such benefits, whether treated
    as indirect costs or as direct costs, shall be distributed to particular awards and other
    activities in a manner consistent with the pattern of benefits accruing to the individuals or
    group of employees whose salaries and wages are chargeable to such awards and other
    activities.
•   B-7.m (1), (2) & (3) - (1) Charges to awards for salaries and wages, whether treated as
    direct costs or indirect costs, will be based on documented payrolls approved by a
    responsible official(s) of the organization. The distribution of salaries and wages to
    awards must be supported by personnel activity reports, as prescribed in subparagraph
    (2), except when a substitute system has been approved in writing by the cognizant
    agency. (See subparagraph E.2 of Attachment A.) (2) Reports reflecting the distribution
    of activity of each employee must be maintained for all staff members (professionals and
    nonprofessionals) whose compensation is charged, in whole or in part, directly to awards.
    In addition, in order to support the allocation of indirect costs, such reports must also be
    maintained for other employees whose work involves two or more functions or activities
    if a distribution of their compensation between such functions or activities is needed in
    the determination of the organization's indirect cost rate(s) (e.g., an employee engaged
    part-time in indirect cost activities and part-time in a direct function). Reports
    maintained by non-profit 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. Budget estimates (i.e., estimates determined before the
    services are performed) do not qualify as support for charges to awards. (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 having first
    hand knowledge of the activities performed by the employee, that the distribution of
    activity represents a reasonable estimate of the actual work performed by the employee
    during the periods covered by the reports. (d) The reports must be prepared at least
    monthly and must coincide with one or more pay periods. (3) Charges for the salaries
    and wages of nonprofessional employees, in addition to the supporting documentation
                                                                                 Appendix B
                                                                                     Page 2 of 2

    described in subparagraphs (1) and (2), must also be supported by records indicating
    the total number of hours worked each day maintained in conformance with Department
    of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR Part
    516). For this purpose, the term "nonprofessional employee" shall have the same
    meaning as "nonexempt employee," under FLSA.
• 	 B-15.b, c, d, & e - b. (1) Capital expenditures for general purpose equipment are
    unallowable as a direct cost except with the prior approval of the awarding agency. (2)
    Capital expenditures for special purpose equipment are allowable as direct costs,
    provided that items with a unit cost of $5000 or more have the prior approval of awarding
    agency. c. Capital expenditures for land or buildings are unallowable as a direct cost
    except with the prior approval of the awarding agency. d. Capital expenditures for
    improvements to land, buildings, or equipment, which materially increase their value or
    useful life, are unallowable as a direct cost except with the prior approval of the awarding
    agency. e. Equipment and other capital expenditures are unallowable as indirect costs.
    However, see paragraph 11 for allowability of use allowances or depreciation on
    buildings, capital improvements, and equipment. Also, see paragraph 46 for allowability
    of rental costs for land, buildings, and equipment.
• 	 B-46 - a. Subject to the limitations described in subparagraphs b through d, rental
    costs are allowable to the extent that the rates are reasonable in light of such factors as:
    rental costs of comparable property, if any; market conditions in the area; alternatives
    available; and the type, life expectancy, condition, and value of the property leased. b.
    Rental costs under sale and leaseback arrangements are allowable only up to the amount
    that would be allowed had the organization continued to own the property. c. Rental
    costs under less-than-arms-length leases are allowable only up to the amount that would
    be allowed had title to the property vested in the organization. For this purpose, a less-
    than-arms-length lease is one under which one party to the lease agreement is able to
    control or substantially influence the actions of the other. Such leases include, but are not
    limited to those between (i) divisions of an organization; (ii) organizations under
    common control through common officers, directors, or members; and (iii) an
    organization and a director, trustee, officer, or key employee of the organization or his
    immediate family either directly or through corporations, trusts, or similar arrangements
    in which they hold a controlling interest. d. Rental costs under leases which are required
    to be treated as capital leases under GAAP, are allowable only up to the amount that
    would be allowed had the organization purchased the property on the date the lease
    agreement was executed, i.e., to the amount that minimally would pay for depreciation or
    use allowances, maintenance, taxes, and insurance. Interest costs related to capitalized
    leases are allowable to the extent they meet criteria in subparagraph 23.a. Unallowable
    costs include amounts paid for profit, management fees, and taxes that would not have
    been incurred had the organization purchased the facility.
• 	 B-55 - a. Travel costs are the expenses for transportation, lodging, subsistence, and
    related items incurred by employees who are in travel status on official business of the
    organization. Travel costs are allowable . . . , when they are directly attributable to
    specific work under an award or are incurred in the normal course of administration of
    the organization. b. Such costs may be charged on an actual basis, on a per diem or
    mileage basis in lieu of actual costs incurred, or on a combination of the two, provided
    the method used results in charges consistent with those normally allowed by the
    organization in its regular operations.
                  HUMAN            RESOURCE             DEVELOPMENT




        NEW ORLEANS EDUCATIONAL TALENT SEARCH PROGRAM, INC. 

                          4215 SOUTH CLAIBORNE AVENUE

                             NEW ORLEANS. LOUISIANA 70125

                                    (504) 82 I -8844




     August 22, 2004


     Ms. Sherri l. Demmel
     Regional Inspector General for Audit
     U.S. Department of Education
     Office of Inspector General
     1999 Bryan Street, Suite 2630
     Dallas, Texas 75201-6817



     Re: 	       Response to Draft Audit Report
                 Control Number ED-OICIA16-D0015

     Dear Ms. Demmel:

    We thank you for the opportunity to respond to the draft audit report
    which presents the result of the audit of New Orleans Educational
    Talent Search Program, Inc. covering the period beginning September
    1, 1998 to December 31, 2002. We disagree with each finding and
    recommendation and submit the explanation below and exhibits to
    support our position.

    As you are aware from your review of the organization's formation
    documents, New Orleans Educational Talent Search Program, Inc.
    (NOESTP) has been in existence for more than 30 years. Over this
    period of time the organization has assisted more than 30,000
    disadvantage youths to continue and complete high school and
    continue on with post secondary education and training. Thousands
    have graduated from colleges and universities across this nation and
    the organization has earned the respect and gratitude of these
    students, their family and friends.        NOESTP is proud of its
    accomplishments and contributions to this community and is
    committed to continue to provide this vitally needed assistance to the
    citizens of New Orleans and this nation.



•   OUR SUCCESS IN HUMAN RESOURCE DEVELOPMENT IS INTRINSIC TO OUR FUTURE DESTINIES   •
                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-D0015 Date of Response August 22, 2004
============================--===============================~==




The organization during the period of September 1, 1998 to August
31, 2002 provided service to more than 8,000 middle and high school
youth in New Orleans. Our record and documentation of such service
is indisputable.

This current program year (covering the period 9/1/03 to 8/31/04, we
are proud to announce that we will meet our stated program goal of
1,800 students served. This accomplishment is in spite of the fiscal
constraints that have been imposed on our program by the National
Trio Office via the reimbursement process that was assigned in
September 2003. This process has resulted in our program being due
over $220,000 in grant funds for this program year.

The process has also cost untold man hours in valuable time that could
have been directed at positive program services instead of the
burdening time consuming engagements required by the program
reimbursement procedures that has been imposed this entire year.

In addition to our response to the findings and recommendation, the
management of NOETSP has several concerns regarding the
methodogy and procedures as it relates to how the audit engagement
was conducted.

1. The management of NOETSP was informed by several local high
schools that the OIG/DOE had conducted unannounced on site visits.
Evidently, these site visits did not result in findings contrary to the
documents submitted roster numbering over six thousand signatures
of students who received services. Since there was no mention of this
in the draft audit, we can only conclude there were nothing for the
auditors to cite.

2. The length of the audit and duplication of records requested.
The length of the audit and duplication of requests for records has
seriously handicapped the agency's ability to provide the level of
service it is accustom. The initial contact was made September 2001
(three years ago) and the OIG investigation was to originally cover the
period beginning January 1, 1994 to September 2001. NOETSP was
subpoena and commanded to appear with the records in Dallas, Texas
and the records were boxed and shipped to Dallas. The organization
requested additional time and made two shipments to Dallas on
November 5, 2001 and December 14, 2001. The first shipment
include three (3) storage boxes of records and the second shipment

                                         2

                                                                                 Appendix C
'New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
 Report #ED-OIG/A06-D0015 Date of Response August 22,2004
================~==============================================

included four (4) storage boxes. As explained in our previous letter to
you dated April 25, 2003, the location of the field examination was not
a question of compliance or cooperation, however, a matter of
coordination and communication.         The original OIG subpoena
(Subpoena #1) requested records from 1994 to 2001 which was
shipped to Dallas. The Subpoena #2 requested records from
September 1998 to December 2002.             It was obviously to this
management that Subpoena #2 period overlapped Subpoena #1.
Additionally, the unannounced visit to begin an examination for which
you OIG/DOE started 18 months previous was very confusing the
management and staff. Since this was an ongoing investigation in
which the organization had not received any correspondence or
 communication regarding its status from December 2001 to May 2003,
 management was perplexed by the surprise visit requesting records
 and information which had been previously forwarded to Dallas.

 3.    The draft audit report reflects duplication of questioned and
 unsupported costs and should be revised as to avoid misleading the
 reader or user of this report. Page 1 of the draft report note at the
 bottom of the page states "The questioned costs in Finding 2 and 3 are
 duplicative of the total grant costs questioned in Finding 1". These
 duplicate findings and the enumeration thereof clearly represent faulty
 and irresponsible reporting of the organization's compliance during the
 years under audit. It appears from the draft audit report that the
 organization misspent $3.8 million whereas the total award during the
 period was approximately $2 million. On pages 5 and 7, the practice
 and notes continued to overstate the results of the examination.
 Hopefully, the final report is revised to eliminate the duplicate findings.

 4.    NOETSP is concern about the circulation of the draft audit
 report without the benefit of this organization'S response.         We
 understand that the draft report was circulated only within the
 Department of Education. However, even such limite~ di~tribution,
 may have a negative impact on the viability of this organization should
 the user of this report use it to evaluate the performance of thIS
 organization without the benefit of our respo~se. Is this sta~dard
 auditing procedure to circulate a report without the benefit of
  management response?




                                            3

                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-D0015 Date of Response August 22, 2004
============--==================================================




                                 Finding 1
 NOETSP DID NOT MEET GRANT PERFORMANCE
               Oa.JECTIVES

Participant Eligibility Was Not Documented

Acknowledged by the OIG, NOETSP, provided auditors with files and
documentations that more than 6,000 middle and high school students
were served during the periods being examined. Additionally the OIG
visited several of the schools to confirm the accuracy of the
documentation. We have attached as exhibit 1, 2 and 3, the list of the
schools and the students served during the period under examination.
We conducted more 100 site visits and assisted more than 6,000
students.

We have attached as exhibit 7 and 8 a copy of the Student Profile
Sheet that we used as a part of our documentation during the audit
period and the revised form we are currently using. The revised form
(Exhibit 7) asks for information regarding the parent's education.

Participant eligibility - The vast majority (98%) of the services
NOETSP provides is to students of the Orleans Parish Public School
System. Orleans Parish Public School comprises of 68,000 students of
which 93.5% are African American and 75.5% are eligible for free and
reduced lunch. See exhibit 6, study conducted by University of New
Orleans which summarizes the state of Louisiana statistics from
October 2003. The middle and high school students NOETSP serve are
from the poorest areas of the City of New Orleans and their statistics
reflect even higher percentages of students on the free and reduced
lunch program. We have attached (exhibit 4) the statistics to support
the income eligibility of the students we serve and the number of
students attending these schools who are at or below the U.S.
Guidelines for poverty.

If we conducted a college-testing workshop at Lawless Sr. High School
in New Orleans, La on October 14, 1999 and 107 students are in


                                         4

                                                                                 Appendix C
'New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
 Report #ED-OIG/A06-DOOIS Date of Response August 22, 2004
===============================================================
attendance and 87% of the students attending Lawless are from
families that income is below the federal guidelines for poverty, it is
reasonable to suspect that 87 of these students meets the income
eligibility as required by the federal regulation.

For students to qualify for free or reduced meal the student must be 

from a household with total income below 130 percent of the federal 

guideline for poverty limits.       To receive reduced-price meals, 

household income must be between 130 to 185 of the federal poverty 

level. More than 80 0/0 of the student populations we serve are with 

these guidelines. Additionally, students from households that receive 

food stamps or TANF (Temporary Assistance for Needy Families) are 

automatically eligible for the free school meals. Please note that 

Talent Search regulation only requires that 2/3 of the students 

served meet both 1st generation and low-income criteria. 


The annual statistics provided by the State of Louisiana Department of 

Education shows that 60 to 85 percent of students at or below the 

poverty level at the schools we service. Comparing the outreach 

service documentations we provided to the chart attached, please note 

during the period under review we visited every high school on this 

list. These are the schools with the greatest need. 


 NOETSP Did Not Provide Services to Participants

 The staff and management of NOETSP totally and categorically 

 disagree with this statement. Exhibits 1, 2 and 3 list the dates, 

 schools, activities (Services provided) and the number of students 

 served. The staff of NOETSP would conduct workshops with as many 

 as 150 to 200 students in attendance.        These workshops were 

 coordinated with the principals and counselors of the schools listed. 

 We would disseminate information regarding post-secondary 

 education, ACT Assessment Testing and other pertinent college 

 preparatory information.     The coordination and planning for these 

 workshops would normally involve weeks of preparation and 

 discussions with school representatives. 


 Some of the workshops were conducted exclusively with NOESTP 

 personnel. Some workshops and particularly career day pro.gra~s, 

 may have involved other participants, such as local . university 

 representatives, community and civic leaders, etc. Depending on the 

 type of workshop being conducted, the documentation to the students 

 served may have varied. A workshop in which NOESTP conducted 

 excluSively, students may have been required to sign in and complete 


                                           5
                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIG/DOE
Report #ED-OIG/A06-D0015 Date of Response August 22,2004
===~=~=========================================================

a student profile sheet. The amount of time allocated to NOESTP staff
also determined the amount and type of documentation.

However, each visit outlined in exhibit 1, 2 and 3 can be confirmed
and it should be noted in the audit report if the workshop was or was
not conducted and attended by NOESTP staff. A telephone call or
letter and the OIG's site visits should have confirm the
adequacy of this document.

NOESTP provided the OIG/DOE with more than 5,000 documents over
a three-year period beginning in November 2001 to September 2003.
We made every effort to deliver this information in a timely and
orderly manner. This audit period and scope was extensive and
massive and this tiny community based organization, unlike large
universities with massive staff and support personnel, has been
severely hampered during this period. We have, however, managed to
continue providing services to the citizens of this community.

Cataloging and inventorying this massive amount of documents has
been quite a chore of this small staff. However, with regards to the
Annual Performance report for year 2000-2001, your office
acknowledge receipt of it on page 17 of 17, which I have label as
exhibit 5. Box number 4 of the initial boxes mailed in December of
2001 included performance reports and may have included the 1999­
2000 report. See exhibit 9 "item 56 - performance reports". Earlier
pages listed performance reports and during our visit in September
2003, it appears that records initially shipped in November and
December of 2001 was not available and apparently stored in a
different location from the records shipped in May of 2003.



                               FINDING 2
                              EXCESS CASH
 Finding number 2 states that the organization drew down an excess of 

 $301,034 more than it expended for the period September 1, 2001 

 through December 31, 2002. 


 The excess cash in the amount of $232,803, for the audit period ended 

 December 31, 2002 was spent subsequent to December 31, 2002. 

 The audit cut off period is mid year (an interim period) and the 



                                          6
                                                                                 Appendix C
'New Orleans Educational Talent Search Program, Inc. Audit Response to OIG/DOE
 Report #ED-OIG/A06-D0015 Date of Response August 22,2004
===============================================================
program year ended August 31, 2003. The excess cash was expended
between January 1, 2003 and August 31, 2003.

Based upon the records of NOESTP, the organization expenditures for
the year ended August 31, 2002, exceeded $417,980. It appears that
the expenditures reported in the draft audit report do not include or
consider the following:

   1. 	 Overlapping time periods for the organization's fiscal year
        which is July 1, to Jun 30th, and the program year, which i~
        September 1, through August 30 th •
   2. 	 Accrued and accrual - the draft report appears only to consider
        the cash expenditures for the period and does not take into
        consideration expenses paid after 8/31/02 for this program
        year.




                  FINDING 3
        UNALLOWABLE/UNSUPPORTED COSTS

NOETSP expended every dollar of the grant funds as provided by OMB
Circular A-122 "Cost Principles for Non-Profit Organization" and
provided adequate documentation to support these expenditures.

Eighty-five (85 0/0) percent of the total expenditures are personnel cost.
The staff of NOETSP was consistent until this OIG audit began. The
staffing conSisted of Director, Deputy Director/Sr. Counselor, Outreach
Coordinator, Financial Aid Counselor, secretary/receptionist and
support personnel, to include work-study students, a janitor and fee
accountant.     Time reports and copies of cancelled checks were
submitted as documentation for all personnel cost.           The lack of
adequate documentation for personnel cost was obviously an omission
and can be obtained. We had lengthy discussion with staff regarding
the signing of the time sheets by the Executive Director. The position
of NOESTP is that with the approval of the check disbursement
documents was adequate authorization that the employees time was
accurate. Additionally, each of the organizations primary full time staff
was paid a fixed salary and accumulated monthly annual and sick
leave.


                                         7
                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-DOOIS Date of Response August 22, 2004
===============================================================
The mortgage payment was paid in lieu of rent.    Additionally, we
provided a copy of the lease agreement ~hereas NOESTP charged the
DOE program monthly rents of $2,400. See copy of the commercial
lease, exhibit 12.

Routine expenses such as telephone, equipment rental, building
repairs, insurance, utilities, senior counselor and office supplies are
documented with a cancelled check, invoice and payment requisition.
Any expense where there may be missing documentations, duplicate
copies may be obtained.



                FINDING 4 

SINGLE AUDITS NOT PROPERLY SUBMITTED TO 

           THE CLEARINGHOUSE 


NOETSP engaged a local public accounting firm, Charmaine Philips
Platenburg and paid this firm to complete a single audit as provide by
OMB A-133. The firm completed its fieldwork in September 2001 and
we obtained a completed copy of the report in October 2001. On
October 4, 2001 my fee accountant signed the audit forms to transmit
the documents to the Single Audit Clearinghouse (See exhibits 10 and
11) We paid the balance ($2,500) of the $10,000 audit fee on
November 27, 2001 with the assumption that the audit and all
submittals were complete.

We were later informed that certain submittals were not made and
immediately preceded to correct this discrepancy. However, to date
we have provided every requestor including the Department of
Education Trio Program, ED's Post Audit Group and OIG/DOE staff with
copies of all audits




                                          8

                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-DOO15 Date of Response August 22, 2004

Again, we thank you for the opportunity to respond to this draft report
and would hope some of the comments and concerns listed below can
be corrected and/or addressed in the final report.

Should you have any questions, need additional information or
clarification, please advise.




Sincerely,

 ~ow-rN~~
Robert P. McFarland

Cc:   Enclosures




                                          9

                                                                                  Exhibit 1
NEW ORLEANS EDUCATiONAL TALENT SEARCH PROGRAM                                                           Appendix C
OUTREACH SERVICE




                                                               Number of
                                                               of Students
Date       School                Activity                      Served                  Box# Item #

  3/25/1999 S.T. Reed Sr High   FAFSA                                   37                 3           9972
  212811999 S.T. Reed Sr High   FAFSA                                   24                 3           9973
  412711999 S.T. Reed Sr High   FAFSA                                     8                3           9974
  212311999 Douglas Sr. High    FAFSA                                   54                 3           9975
  2/25/1999 Kennedy Sr. High    ACT Workshop                           127                 3           9976
    2/911999 Kennedy Sr. High   FAFSA                                   51                 3           9977
  9/1011998 Kennedy Sr. High    ACT Workshop                           198                 3           9978
  9/10/1998 Kennedy Sr. High    FAFSA                                  298                 3           9979
  10/7/1998 Lawless Sr. High    FAFSA                                   41                 3           9980
 10/12/1998 Warren Easton Sr.   FAFSA and ACT                          186                 3           9981
 10/15/1998 Clark Sr. High      ACT Workshop                            41                 3           9982
 10/29/1998 Carver Sr. High     ACT Workshop                             28                3           9983
   11/9/1998 Abramson Sr. High  ACT Workshop                             40                3           9984
 11/10/1998 Cohen Sr. High      Career Day                               26                3           9985
   12/8/1998 Landry Sr. High    ACT Workshop, .                          19                3           9986
 12/10/1998 S.T. Reed Sr High   ACT Workshop                             40                3           9987
     1/6/1999 John McDonogh      ACT Workshop                            24                 3           9988
     2/9/1999 Kennedy Sr. High   FAFSA                                 198                  3           9989
     3/9/1999 Fortier Sr. High   FAFSA                                   17                 3           9990
     3/5/1999 Success Express    FAFSA                                   30                 3           9991
     3/2/1999 Carver Sr. High    FAFSA                                   24                 3          9992
                                                Career Da)               71
                                                                                              .,....   C)oo-:)
   3/30/1999 McDonogh #28 Middle School                                                                "'vvV

   2/11/1999 Rabouin Sr. High    FAFSA                                  117                   3        999.1



  2/27/1999 Nat! Trio Day 
          Univ. of La SE                      22                    3       9997
  8/31/1999 Walk in sheets 
         Walk in                             30                    3       9996
  8/31/1999 Kennedy Sr. High 
       Fo!!owup contact sheets            104                    3       9978

             Total outreach served                                    1855


 Follow up contact

   8/31/1999 Various outreach sheets with contacts with
              counselors andlor students                                                                9995

  12/1212002 Lawless Sr.             Folders omitted                         64
       - -
         - -                                                                                     Appendix C
                                                                       Exhibit 2
NEW ORLEANS EDUCATIONAL TALENT SEARCH PROGRAM
OUTREACH SERVICE




                                                              Number of
                                                              of Students
Date       School                  Activity                   Served               Box# Item #

 9/19/2000 Abramson Sr. High       ACT                                170              2     36    178
   9/712000 Carver Sr. High        ACT                                 32              2     38      32
 9/20/2000 Fortier Sr. High        ACT                                151              2     35    151
 11/8/2000 Fortier Sr. High        ACT                                150              2     42    150
 9/28/2000 Kennedy Sr. High        ACT                                 93              2     34      93
   2/512001 Kennedy Sr. High       ACT                                167              2     47    167
12111/2000 Kennedy Sr. High        ACT                                 79              2     48      79
12/14/2000 Kennedy Sr. High        Financial Aid                       25              2     51      25
  11/212000 L. B. Landry High Sc   FASFAIACT                           27              2     46      27
11/10/2000 L.B. Landry High Sc     FASFAIACT                           83              2     45      83
  4/10/2001 L.B. Landry Jr. Hi     8th graders                         74              2     43      74
  5/22/2001 L.B. Landry Sr. Hi     ACT                                 13              2     44      13
  1/25/2001 L.B.Landry Sr. Hi      Financial Aid                       67              2     53      80
  9/18/2000 Lawless Sr. High       ACT                                  18             2     37      18
  2/19/2001 Rabouin Sr. High       ACT                                 98              2     49      98
  2/22/2001 Various                ACT                                 76              2     50      76
    7/912127 Various                Financial Aid                     120              2     52     120
  8/31/2001 Folders of walk ins·    Financial Aid                           ...
                                                                            J::;
                                                                                       2      54       5
  1/23/2001 Abramson Sr. High       Financial Aid                        3             2      55      3
  11/8/2000 B.T. Washington Sr      Financial Aid .                     14              2     56    14
 11/30/2000 L. B. Landry High Sc    ACT                                  3              2     57     3
 11/29/2000 Fortier Sr. High        ACT                                 42              2     58    42
 10/20/2000 Kennedy Sr. High        College Day                         55              2     59    55
 10/27/2000 O.Perry Walker          Financial Aid                      111              2     60   112
   12/6/2000 Cohen Sr. High         Financial Aid                       34              2   71.1
   2/15/2001 Cohen Sr. High         FASFAIACT                           20              2   71.2
   11/9/2000 L.B. Landry High Sc    FASFAIACT                           24              2   71.3




 TOTAL COUNT OF STUDENT OUTREACH                                      1754                         1698

   8/31/2001 Various Folders         Student Profile Sheets            333              4           333
   8/31/2001 Various Folders         Student Profile Sheets            251              5           251




 TOTAL COUNT OF STUDENT OUTREACH                                       2338                        2282
                                                                                                      EXhibit 3
                                                                      Number of
                                                                      of Students
Date       School                 Activity                            Served          Box# item #

  1/6/2000 John Mc Donogh        Financial Aid                                 52         1      1     52
 1/11/2000 Fortier Sr. High      Financial Aid                                 74         1      2     79
 1/10/2000 Robouin Sr. High      Financial Aid                                129         1      3    147
 1/13/2000 Lawless Sr. High      Financial Aid                                107         1      4    107
11/10/1999 Cohen Sr. High         College Day                                  52         1      5     52
10/29/1999 O. Perry Walker Sr     CollegelCareer Day                           58         1      6     58
10/22/1999 Fortier Sr. High       ACT                                          98         1      7     98
 11/8/1999 Fortier Sr. High       ACT (Entreprenuerial Class)                  17         1      8     20
 9/15/1999 John Mc Donogh         ACT                                          17         1      9     16
 9/14/1999 Carver Sr. High        Financial AidlACT                            84         1     10    100
 1112/1999 Kennedy Sr. High       Financial AidlACT                           194         1     11    199
10113/1999 L.B. Landry Sr. High Financial Aid                                  42         1     12     43
10/14/1999 Lawless Sr. High       ACT                                          51         1     13     51
  9/1611999 M. Abramson Sr Hi     ACT                                             1       1     14        1
    2/312000 Cohen Sr. High       ACT Seminar                                   24         1    15     24
  1/27/2000 Landry Sr. High       Financial Aid                                 64         1    16      64
  212312000 Kennedy Sr. High      Financial Aid                                 61         1    17      61
  2/19/2000 Fellowship Baptist Church          Financial                        13         1    18      13
    219/2000 S.T. Reed Sr. High   Financial Aid                                 41         1    19      41
  1/25/2000 McMain Magnet HS Financial Aid                                      10         1    20      10
  2114/2000 F. Douglas Sr. High    Financial Aid                                37         1    21      37
  4/18/2000 S.T. Reed Sr. High     Financial Aid                                28         1    22      28
  3/28/2000 S.T. Reed Sr.High      ACT         7th Graders                      28         1    23      28
  3/24/2000 B.T. Washington        Career Day                                     4        1    24        4
   3/16/2000 Abramson Sr. High     Financiai Aid                                33         1     25     34
     3/1/2000 Kennedy Sr. High     Financial Aid                                70         1     26     78
   2/29/2000 R.abouin Vacationa!   Financial AJd                                  3        1     27       3
   1/19/2000 B.T. VVashlngton Sr Financial Aid                                   30        1     28      30
   9/13/1999 YMCA                  Financial Aid                                  4        1     29       4
   11/2/1999 O. Perry Walker Sr    Financial Aid                                 69         1    30     69
   11/1/1999 John Mc Donogh        ACT                                           19         1    31 19
   11/5/1999 S.T. Reed Sr. High    ACT                                           34         1    32 34
   11/3/1999 Abramson Sr. High     ACT                                         169          1    33169
   8/17/2000 Villarge D'Armes       ACT                                          14         1   35 14
    3/28/2000 F.C. Williams         Career Day Middle Sch 7th & 8th              44         1   40  44
    5/11/2000 Fortier Sr. High      Financial Aid                                52         1   41  52
    3/21/2000 B.T. Washington       Career Day                                   26         1   54  26

                                              ,
                                              {




             TOTAL COUNT OF STUDENTS OUTREACH                                 1853                    1909
FY 2002-03 MFP Accountability Report
                                                         -
                                                         -           School Data

                                                                    Type     Oct I
                                                                                                 Accountability Data

                                                                                                             Perform-
                                                                                                                                             Student Data ,
                                                                                                                                               Advanced PI
                                                                                        Grade    Perform-                 %          %
                          School Name                  City          of     Enroll-                            ance                          ;I TakingAP
                                                                                        Span    ance Score              Poverty   Minority
                                                                   School   ments                             Label                            Courses

Orlealls Parisil - 64
             Marion Abramson Senior High School    New Orleans    High        1,757     8-12      22.4         UlS        81.7      99.1            4
             Aleee Fortier High School             New Orleans    High        1,003     8-12      13.0         U/S        59.8      99.7         N/A
             Booker T. Washington School           New Orle'lns   ~            697     8-12       10.9         U/S       72.3      100.0         N/A
             Fredrick A. Douglass High School      NewOrle;lns    ~            935     8-12       13.7         U/S       85.9      99.6          N/A
            John F. Kennedy Senior High School     NewOrle:~      \ligh       1,482    8-12      25.1         U/S        40.0      99.7          N/A
            John McDonogh Senior High School        New Orle:lns ~           1,260     8-12      22.2         U/S        66.9      99.2          N/A
            Joseph S. Clark Senior High School      NewOrieilns High           867     8-12      22.2         UlS        69.9      99.8          58
            L.B. Landry High School                New Orle,U1s High           582     8-12      21.8         UlS        59.8      99.3         NlA
            Lawless High School                     New Orleilns High         609      8-12      25.7         UlS        87.0     100.0         NlA
            O. P. Walker Senior Hi~h School        New OrietlnS High         1,077     8-12      27.0         UlS        61.4      98.0         N/A
            Rabouin Career Magnet High School      New Orleans High           719      8-12      51.7         NW         76.8      99.2         N/A
            Sarah Towles Reed Senior High School   NewOrletlns High          1,386     8-12      36.2         U/S        49.5      99.1         NlA
            Walter L. Cohen High School            New Orle,lns High          796      8-12      12.8         UlS        69.7      99.2         NlA
            Carver Middle School                   NewOrletlns Mid            365      7-8       26.7         UlS        84.4      99.5         NlA
            Charles 1. Colton Middle School        NewOrlellns Mid            882     6-8       29.8          U/S       90.2      99.7          N/A
            Edward Phillips Middle School          New Orleans .\1id          331     6-8       24.4          U/S       87.9      99.7          N/A
            F.W. Gregory Junior High School        New OriellnS Mid           999     7-9       39.5          U/S       61.9      99.8          N/A
            Fannie C. Williams Middle School       New Orleans Mid           1,150    6-8       39.9          UlS       86.8      99.3          N/A
            Israel Meyer Augustine Middle School   New Orleans \1id           595     6-8       22.3          UlS       87.1      99.7          NlA
            L. B. Landry Middle School             New Orleans Mid            316     7-8       24.8          U/S       90.2      99.4          N/A
            Livingston Middle School               New Orleans Mid           929      6-8       25.2          U/S       92.2      99.0          NlA
            Martin L. King Middle School           New OrlellnS Mid          431      7-8       32.9          U/S       91.9      99.8          N/A
            McDonogh #28 Middle School             New Orle;lns Mid          333      7-8       34.5          UlS       92.5      99.1          N/A
            Murray IIenderson Middle School        New Orleflns Mid          274      6-8       44.7          UlS       94.2      99.6         NI"
            P.A. Capdau Middle School              NewOr!ellns \1id          250      7-8       25.1          UlS       82.4      99.6         NJ        t%j
            SJ. Green Middle School                New Orlelms Mid           437      6-8       23.7          U/S       87.9      99.3         Ni        ~
                                                                                                                                                         ::Y
            SophieB. Wright Middle School          New Orleans Mid           501      6-8 - ' __25~~          U/S       90.0      98.4         Nl        1-"
                                                                                                                                                         0'
                                                                                                                                                         1-'­
                                                                                                                                                         c1"

                                                                                                                                                         ~
          - , 	 ,-.,::'-':     \NO LaDle on IniS   COX)
                                       Box 10
          No label on the box
          In the top of the box was a small paper box containing:              EXhi bi t   5
          1. An invoice from lOSCapital
          2. Vendors Lists pages 1-8 and 13-16
                                                                                   Appendix C
          3. General Ledger as of May 9, 2003 pages 1-24
          4. Balance Sheet as of September 2, 2001
          5. Balance Sheet as of June 3, 2002
          6. Balance Sheet as of December 31, 2002
          7. Profit & Loss Setember 2001 through June 2002 (2 pages)
          8. Profit & Loss July 2001 through December 2002 (2 pages)
          9. Profit & Loss Detail September 1,2001 through May 9,2003 (13 pages)

          Then there were folders
          Labeled
 1 	 Old Timesheets
          Not in a folder:
          Outreach Summary 2002-2003
          Outreach Summary 2001-2002
          High School Profile Sheets 2000-2001
          Outreach Summary 1999-2001
         Labeled Folders:
     2 	 TRIO Day 2001
           Field Trip 2001 BirminghamITuskugee Trip
     3     Chaperons Consent/Roster
     4     Field Trip Consent Forms (Original)
     5     Birmingham Tuskogee Confirmations
     6     Trip Orientations
     7     Annual TRIO Trip Colleges-Museums-McWane Ctr 2002
     8     TRIO Day 2001                                    .
     9     High School Info Forms
     10    Ta!ent Search P,udit Reports 2000 &. 2001
     11 Grant Avo/ard ~~otification 2003-2004: 2004 ..200.5
     12 Giant Award Notification 9-01-00 - 2001

*-   13 	 TS A'Nard Notification 1999-2000; 2000-2001; 2001-2002
     ~~ TS Annual Performance Reprot 'fR 2001-02
      I;:) Bank (Whitney) FY01 and 02
     16 Organizational Chart & Board of Directors
     17 Current & Former Employees
      18 Board Minutes
      19 Description of Accounting System & Chart of Accounts
      20 Policy & Procedure Manual
      21 LSED Grant #267 43,000
      22 Balance Sheet as of 5/31/00
       23 LSED Grant (extra copies)




                                       Page 17 of 17
                                                                 Exhibit 6
Orleans Parish Public Schools                                    Appendix  C

Orleans Parish Public schools is the largest school district in
the state of Louisiana. State statistics from October 2003
found:
  • 74.5% attend public schools
  • 68,354 students
  • 93.5% African American
  • 6,592 (9.7%) Special Education
  • 75.5% Free and Reduced Lunch
  • 4,552 teachers
  • 711 instructional aides
  • 130 schools
Next: Summary of Testing Data

Map of Orleans Parish




                                tl>!!'N l)n~  ust rnap
                                 is dispja';ed below




                  M·d-City
                                     ~':L':y.~_r__ ~·!.!.Q!J:j
                                            '(~:~r.1




                                                                 7/22/2004
                HUMAN                                  •    OEVELOPMENT
                                                                                       Exhibit 7
                                                                                       Appendix C
  NEW ORLEANS EDUCATIONAL TALENT SEARCH PROGRAM, INC.
                        4215 SO:.JTH   CLAIBORN&: AVENUe:

                           NE:W ORLEANS. LOUISIANA 70125

                                   (l504) 821 ·Sli44




                          STUDENTPROmLESHEET 

                                 PLEASE PRINT 

                      DATE: ____________--_________

Student's Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Student's Social Security #: _______".-_U.S. Citizen: Yes_No__
Date of Birth: _ _~_ _ _ _ _ _ Race: _ _ _ _ _ _- __ Sex: _ _ __
Addre$! ______________________________________
                                                                          (zip)
Tclepho~e#:~~----------------------------------------­
          (Home)            (Work)          (CeJIIBeeper)
Parent's Name: _______________________                                    ~   _ __

Intended Colleje(s):
          ______________________                       ________________________
      1.
                                             ~3-




           __       ______________         __        ______________________
      2.
                ~                      ~        ~4




CoJlege Major. ______

School's Name: ___________________ Grade: ________

CC)un~elor: ~~      ______________ Phone Number: _______

G.P.A.! _ _ _ ACT Score: _ _ _ _ _ Rank: ________________

Service(s) needed; please check all that apply:

    ACT Workshop                                           __ G,E.D. Information
    Career Day/Career:- Counseling
    Financial Aid Workshop                                      Voc·Tech Information
     Other
 Does either parent ha"Ve a bac('.alaureate (4year) college degree? ________




OUR SUCCESS IN HUMAN RESOURcE Ce:VgLOPMENT IS INTRINSIC TO OUR FUTURE DESTINIES            •
                                                                                                    Exhibit 8
                               HUMAN           •
                                                -                      •      01i:VI:LO..MltNT
                                                                                     b   .C.             Appendix C

            NEW    ~HLEANS                 EDUCATIONAL TALENT SEARCH PRDGRAM, 'INC.
i                                           • • ,1S SOUTH CLAleOAH£ AVENUE

                                               Naw ORLEAN•• LOUI.''''... A ~OIJ.S




                                           STUDENT PROFILE SHEET

                                     Date: ,\ -1    Q   ~



Student's Name: _ _-'"'I_--...._
                     EDITED      _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __


Student's Social Security #:_EDITED
                             _ _ _ _ _ _ _ _ Driver's License #:_ _ _ _ _ _ _ __

                   EDITED
Address:_ _ _ _----~_---------------------
                       EDITED
Telephone Number:, _ _ _-==----:_____--....~------_:____:_:__-----
                                     (Hqme)                  (Work)                 (Cell/Beeper)

                   EDITED
Parent's NalDe:_________________________________

Intended College(s):


       2. _~U

       3.   ULl.
Cullege Major!     Art.. (0....r1 ~ "'.3

Sehoo)'s Namc:--..O~,-.;..+~~;.:.:.(~ro;;-u.')~r:.,.l.;Vf...;..I'-'(-------------:---------_ __
Counselor:.-:,"=---:-______________
                      EDITED        Phone Number: _ _ _ _ _ _ _ _ __
                                                    EDITED
G.p.A.__~"_'·~"___ Act Score:_ _ _~_ _ Rank:_ _ _ _ _ _ _ _ _ _ _ _ _ _ __

Please check:

 o    Acr Workshop
 o.   Financial Aid Workshop
 g/   Career Day/Care(;~/conege Coun~eling
 o    Other _ _ _ _ _ _ _ _ _ _ __
    "t.l      l"ew~weeK

    42        Office Depot                                       Exhibit 9
~

,   43        Petty Cash
    44        PBCC                                                Appendix C
    45        PCWorld
    46        Fed Ex
    47        Coca Cola
    48        Cox Communications
    49        AT&T Communications
    50        Armstrong Business Center
    51        AT&T
    52        Bell South
    53        National Insurance Service
     54       Office Sign-In Sheets
     55       Office PolicieslProcedures
     56    .?f-
              Performance Reports
     57        Six iYlonth Report
     58        FAFSA Sessions (Sign In)(Walk In)(Appointments)
                                                                                                                                                                         Exhibit 10
Comp\Atl'l thi:~,for;n as required b,,'''MQ r;,....u!.. r A.1,),) "",,~:...
 f S - -; L 'I G '.                 , ..... - ......... ........,       ,,~ I"\.....             .. "       : ' ,,' ....... ",
                                                                                                                                Single Audit.Claaringh(
                                                                                                                                1201',' E.-::'1OtlrStre"it" ~...

                                                                                                                                                                          Appendix C
a tates.:..~ca "Qvernments, an~ Non-Profit Organizations." .                                    , ~~; ..,;, ~:., ,::~,~,~ ,,",' Jaffarsonville.'IN·0\713:c.
  PART I                       . GENERAL INFORMATION (To be ccmp!eted'byaudit~, exci!p(fo·f'It.e."Cif.~t~~};;::::· :'~,;~~"                                                '. : ~:
· Fiscal year ending date for this submission                                          2. Type of Circular A-i33 a u d i t '
                                                                                                                                               •.... '.' .t'·-·
       Munth             Oav      v..,.,.                                                                                              ,,'     ."       <: '
            /~
             r
                    /,~,j
                         ,~
                                I,,;, -;~()
                                    ,.                                                      ,
                                                                                                ~
                                                                                                I!::l      \Jingle audit      2
                                                                                                                                0 Program-specific
                                                                                                                                   '      ..:, . , audit
• Audit period covered                                                                                                      4. Date received by Federal
                                                                                       FEDERAL
      , ~Annu~1                     30        Other-               Months              GOVERNMENT                              clearinghouse             '
      20 Biennial                                                                      USE ONLY

• Employer Identification Number (EIN)

      a.     AUdi~~~'El~"           \d;;\C\1Ic\o\t/\Jrl                b. Are multiple EINs covered in this report?                             ,OY65               2~O

i.AUDITEE.INFORMATION                                                                  7. AUDITOR INFORMATION (To be completed by auditor)
       a. Auditee name




                                                                                                                                                             ZIP Coce
                                                                                                                                                             o      /.2
            c. Auditee contact                                                                        c. Auditor contact


                 Title                                                                                      Title                ,
                  cpt                           . 1//-'11   /'7/                                                . I/"          'lco/c;C/~r
       Ii   d. Auditee contact telephone                                               \'         d. Auditor contact telephc:f'ne
                                                                                                 1\


        .      (sCG{) f';; l - t./t.(.ff                                                         .    (j-O q)           r
                                                                                                                  if) - I f I I
                                                                                                 ! e. tl.udltor contact F.o.,X (Oorier-a!!                                              1
                                                                                                  I          (5'(;I.1)5"CeI -        If/I../                                            I
                                                                                                  If.        Auditor contact E-mail (Option.:!/)                                        I
                                                                                                      I
                                                                                                      II
                                                                                                                                                                                        I
                                                                                                                                                                                        I
                                                                                                                                                                                        I

             g.AUDITEE CERTIFICATION STATEMENT-This is                                                    g. AUDITOR STATEMENT - The data elements and                                  \1


                to certify that, to the best of my knowledge and                                             information included in this form are limited to those .
                belil::f, (he duditee has: (1) Engag~d an auditor to                                         prescribed.by Ol\A8 Circular A-133, The information
               "perfOrm an audit in accordance with the provisions of                                        included in Parts II and 11\ of the form, except for Part
                 OMS Circular A- 133 forthe period described in Part \,                                       III, Items 5 and 6, was transferred from the auditor's
                 Items 1 and 3;.(2) the auditor has completed such                                            report(s) for the period described in Part 1;.ltems 1
                 audit and presented a signed audit report which                                              and 3, and is not a substitute for such reports, The
I                states that the audit was conducted in accordance                                            auditor has not performed any aUditing procedures
 \I              with the provisions of the Circular; and, (3) the                                             since the date of the auditor's report(sl. A copy of the
                  information included in Parts I, H, and :II of this data                                     reporting package required by OMS Circular A·133,
                  collection form is accurate and complete, I declare                                          which includes the complete auditor's. report(s), is
 \                                                                                                             available in its entirety from the auditee at the
                  that the foregoing is true and correct,
                                                                                                               address provid~d in Part I of this form. As required by
                                                                                                               OM8 Circular A-133, the information inParts It and
  \                                                                                                             111 of this form was entered in this form by the auditor
                                                                                                                based on information included in the reporting
                                                                                                                package, The auditor has not performed any
                                                                                                                additional auditing procedures in connection with the
                                                                                                                completion of this form.
                                                                                                            Signature of auditor                             Date

                                                                                                           &aw. .               . -~~!t,,_~ 1#  :/'
                                                                                                                                                               Month
                                                                                                                                                                  10 /
                                                                                                                                                                          Day
                                                                                                                                                                         4 /01
                                                                                                                                                                                     Year
                                                                                                                                                               Appendix C

        PART I                  . GENERAL INFORMATION (To be completed byauditee, except.fodtemJJ.}:r:··:: . . .:::{:,· '. ".:::.:,{
1. Fiscal year ending date for this submission                                 2. Type of Circular A-133 audit.·· ..                 .....~ .. , :,,",: ,. ' ... ,

                                                                                                                      d p:o:g;;;~~~:~~·~ifi~·i~d;t
          Month           Day      Year
             {p      I    30     I ~(JO   I                                         , (E"§ingle audit             2

3. Audit period covered                                                                                         4. Date received by Federal
                                                                               FEDERAL
        ,lErAnnual                  30 Other-               Months             GOVERNMENT                          clearinghouse ::
        20 Biennial                                                            USE ONLY

5. Employer Identification Number (EIN)

     . a.    Audit~eEIN 111~IJ~~ol~ls-IJI                        h. Are multiple EINs covered in this report?                       ,DYes               2~0

6. AUDITEE.lNFORMATION                                                            7. AUDITOR INFORMATION (To be completed by auditor)
          r---------------------------------------~
          a. Auditee name                                                            a. Auditor name



                  City

                                                            ZIP Code
                                                            ?                              L .
           c. Auditee contact                                                         c. Auditor contact 

                                                                                          Name 

                                                                                                  I	   (;   I
                  Title                                                                   Title             ,
I                h-XP ;-( r'vf /)/I"r'                  r                            \ 611/")                   If/op?ot7f3F'
I       "1 d. ~~~it;\e ~ont.act te!~~~9~e                                            Id. ";"udit~.r contact teleph'6ne
I 	.           i!7CC; I P i - "1'(l .fd                                              \ 	 \)Ci,/i       j-~       I -      /I! I
          \ c. A'..:ditee CO:1tact FAX (Optional)

 \         I f.    ~uditle      contact E-mail iOptiona/j                            If. Auditor contact E-mail                (Optional)
 I i                                                                                  i
 II 	      ~----------------------------_4
             g. AUOlTEE CERTIFICATION STATEMENT - This is                             g. 	AUDITOR STATEMENT - The data elements and
 I                 to certify that, to the best of myknowfedge and 
                       information included in this form are limited to those
                   belief, the auditee has: (1) Engagedan auditor to 
                     prescribed by OMB Circular A·133. The information

 I                 perform an audit in accordance with the provisions of 

                   OMB Circular A-133 for the period described in Part I, 

                   Items 1 and 3; (2) the auditor has completed such
                    audit and presented a signed audit report which
                                                                                           included in Parts II and III of the form, except for Part
                                                                                           \II, Items 5 and 6, was transferred from the auditor's
                                                                                            report(s) for the period described in Part I, Items ,.
                                                                                            and 3, and is not a substitute for such reports. The
     \	             states that the audit was conducted in accordance 

                    with the provisions of the Circular; and. (3) the 

                                                                                            auditor has not peiformed any auditing proceduies
                                                                                            since the date of the auditor's report(s). A copy of the
                                                                                                                                                                            I
                    information included in Parts I, 11, and 111 of this data 
             reporting package required by 0t:-'1B ~ircular A-1~3,
                    collection form is accurate and complete. I declare 
                   which includes the complete auditor s report(s), IS
                    that the foregoing is true and correct. 
                                available in its entirety from the auditee at the
                                                                                             address provided in Part I of this form. As required by
                                                                                             OMB Circular A-133, the information inParts II and
                                                                                             1\1 of this form was entered in this form by the auditor
                                                                                             based on information included in the reporting
                                                                                             package. The ~~ditor has not p~rformed a.ny .
                                                                           Year              additional auditing procedures In connection With the
                                                                          01                 completion of this form.
                                                                                          Signature of auditor                     Date
                                                                                                                                               Month        Day      Year
                                                                                                                                                  10 I 1 101
d.                                                                                                                                   Exhibit 12

                                             COMMERCIAL LEASE 
                                                                 Appendix C
     This lease is made betwe~n New Orleans Educational Talent Search Auency , herein called L~ssee, and
        New Qrleans Educational Talent Search Progrnm,J~.L, herein called Lessor. Lessee hereby offers to
     leMe from Lessor the premises situatcd ill tho City of New Orleans ,COUl\ty/PariSh of Orleans ,State of
     Louisiana ,described as the two-story, steel and cement block office building comprising approximate ly 4 000
     square feet with adjacent land measuring approximately 60' x 155' zoned B-2, bearing municipal address of 4215
     South Claibome Avenue. New Orleans. Louisiana 70125 ,upon the following TERMS and CONDITIONS:

     1. Term and Rent. Le~sor.demises the above premises for a term of                               )Ie3IS, commencing
     July 1. 1999 , and termmatlng on enY of conlracl period         or sooner as provided herein at the annllal rental
     of       Two Thousand Four Hundred Dollars lS2,400.00), payable in equal'itlstaUments in advance on the first
     day of each month for that months' rental, during the tenll of this lease. All rental payments shall be made to
     Lessor at the address specified above.

     2. Use. Lessee shall use and occupy the premises for Office and program space . The premises shall be used
     for no other purpose. Lessor represents that the premises may lawfully be used for such purpose.

     ·3. Care and Maintenance of Premises. Lessee acknowledges that the.prcil1ises are in. good order and repair,
      unless otherwise indicated herein. Lessee shall, at his owri expense and at all times, maintain the premises in good
      and safe condition, including p late glass, electrical wiring, plumbing and heating installations and any other system
      or equipment upon the premises and shall surrender the same, at termination hereof, in as good condition as
      received, normal wear and tear excepted. Lessee shall be responsible for all repairs required, excepting the roof,
      exterior walls, structural foundations, and

     be maintained by Lessor. Lessee shall also maintain in good condition such portions, adjacent to the premises,
     stich as sidewalks, driveways, lawns and shrubbery, which would othcrwisc bc required to be maintained by
     Lessor.

      4. Alterations. Lessee shall not, without first obtaining the written consent of Lessor, make any alterations,
      additions or improvements, in, to or about the premises.

      5. Ordinances and Statutt!5. Lessee shall comply with all statules, ordinances and requirements ofall municipal,
      state and federal authorities now in force. or which may hereafter be in force, pertaining to the·premises.
      occasioned by or affectitlg the use thereof by Lessee.

      6. Assignment and Subletting. Lessee shall not assign this lease or sublet any portion of the premises without
      prior written consent ofthe Lessor, which shall not be unreasonably withheld. Any such assignment or subletling
      without consent sh~ll be void and, at the option of the Lessor, may terminat(l this lease.

      7. Utilities. All applications and connections fcrnecessal"'j utility services onthe demised premises shall be mad~
      in the name of the Lessee only, and Lessee shall be solely liable for utility charges as tMy become due, including
      those for sewer, water, gM, electricity, and telepholle services.

      8. Entry and Inspection. Lessee shall pennit Lessor or Lessor's agents to enter upon the premises at re:lsol1able
      times and upon reasonable notice, for the purpose of inspecting the same, and will permit Lessor at allY time within
      sixty (60) days prior to the expiration of this lease, to place upon the premises allY usual "To Let" oc "For Lease"
      signs, and permit pecsons desiring the lease the sanle to inspect the premises thereafter.

       9. Possession. IfLessor is unable to deliver possession ofthe premises at the conID1encement hereof, Lessor shall
       not be liable for any damage caused thereby, nor shall this lease be void or voidable, but Lessor shall not be liable
       [or any reUl until possession is delivered. Lessee may tenuinate this lease ifpossessiol' is not delivered within
       _ _ _ days of the commencement of the term hereof.

       10. Indemnification of Lessor. Lessor shall not be liable for any damage or injury to Lessee, or any other person
       or in any property, occurring on the demised premises or any part thereof. and Lessee agrees to hold Lessor
       halmless from allY claims for damages, no matter how caused.

       11. Insurance. Lessee. at his expense, shall maintain plate glass and public liability insurance including bodily
       injucy and property damage insuritlg Lessee and Lessor with minimum coverages as follows:

       Lessee shall provide Lessor with a Certificate of Insllrance showing T,essor as additional insured. The Certificate
       shall provide for :l ten-day written notice to Lessor in the event of cancellation or material change of coverage.
       To the maximum extent pemlitted by insurance poliCies, which may be owned by Lessor or Lessee. Lessee and
       Lessor, for the benefit of each other, waive allY and aU rights of subrogation which might otherwise exist.

        12. Eminent Domain. If the prelnises or any part thereof or any estate therein, or any other part of the building
        materially affecting Lessee's use of the premises, shall be t<lken by eminent domain, this lease shall terminate 011
        the date when title vests pursuant to such taking. TIle rent, and any additional rent, shaH be apportioned as of the
        termination date, and any rent paid for any period beyond that date shall be repaid to Lessee. Lessee shall not be
        entitled to any part of the (lw(lrd for Sl1ch tnking or any paymel1t in lieu thereof, b\lt Lessee may me a claim f01" ally
         taking of fixtmes and improvements owned by Lessee, allli for moving expenses.
                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIG/DOE
Report #ED-OIG/A06-D0015 Date of Response August 22,2004
===============================================================

      ADDENDUM TO DRAFT AUDIT RESPONSE 

            DATED August 25, 2004 


This submittal is a follow up to the telephone conversation on
Monday evening, August 23, 2004, between Mr. Philip Cook and
Mr. Robert P. Mcfarland where NOETSP informed the OIG's
office of this follow up documentation.

 Based on advisement from our legal team we respectfully
 submit this addendum to be included as a part of the original
 submittal.

 The most critical factor with respect to the audit report is the performance
 evaluation review technique used by the auditor. If there is an error in the
 premise there will be an error in the conclusion.

 That section of the report captioned OBJECTIVE, SCOPE AND METHODOLOGY
 states, "We did. not use any sampling technique". However the preceding
 paragraph states: "To accomplish our objective, we performed the following
 procedures...      Visited selected (emphasis ours) schools and Interviewed
 officials concerning services to students".

 This is certainly a recognized and accepted audit procedure. 

 Otherwise, It would be impossible to perform any audit. 


 Therefore we question the refusal of the auditor to accept our statistical
 calculation that given the fact that 93.5% of the school system Is African
 American and 75.5% are eligible for free lunch/ then that 75.5% are also
 eligible for NOET5P services.

  For the auditor to state that because there were only 165 official student
  eligibility forms on file that is the total number of students qualified to receive
  services Is Illogical. To then extrapolate that figure into a two million dollar
  overpayment defies ail auditing guidelines.

 To take this one-step further. Did the auditor exam each and every check
 and voucher in the boxes of material submitted??? This is not to say that
 corrections and changes are not in order. The computerization of the entire
 office has been undertaken and is 35% complete.



                                          10
                                                                                Appendix C
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-DOOlS Date of Response August 22, 2004
======================--========================================
Lastly, we find it odd that the auditors have claimed to have found
only 165 student records; one of our senior counselors along produced
over 300 fully documented folders annually from her "inhouse/inreach"
student services activities. The director annually served 400 students
per year faCilitated and leverage by his 34 years experience and
outreach into the community.         The other in house counselors
numbering three annually served 150 students each. Students served
during large events "such as Annual Student College Interview
session sponsored by the National Scholarship Service and Fund for
Negro Students at the New Orleans Convention Center may not have
been counted in your audit review. In one of those years 2001/2002
we serviced over 250 students with over 3000 students in attendance.
CSX Railroad College Jamboree, held at the Union Train Station of New
Orleans and we serviced more than 150 students. Another important
event that it appears the auditors missed, was the NOESTP sponsored
a three-day bus trip to Tuskegee University and the University of
Alabama at Birmingham. The pertinent highlights of this trip included
the following:

    1. 	 Twenty five (25) students with three parent chaperones and
         three staff.
    2. 	 Very modern Loew's bus line transportation mode.
    3. 	 Visits to comprehensive science complex in downtown
         Birmingham and the IMAX Theater.
    4. 	 An outstanding dining experience at outstanding restaurants in
         the Birmingham area.
    5. 	 Three night stay at the newest Marriott in the Birmingham
         area.
    6. 	 An all day visit to college day at Tuskegee Institute, in
         Tuskegee, Alabama.
    7. 	 A visit to the Booker T. Washington and Carter G. Woodson
          Federal shrine located on the campus.
    8. 	 One and a half page summary from each of the students
          partiCipants describing what the trip experience meant to them.

 "We consider this to rank among the finest of some estimated
 1.500 students trips that take place in the Trio Community
 annually".

 You probably don't have these numbers either, however, these
 services are documented and can readily be made available.

 We would like to suggest that before the audit report is finalized that our
 accountant/information systems consultants meet with the auditor to

                                         11 

                                                                                Appendix C
      ..
New Orleans Educational Talent Search Program, Inc. Audit Response to OIGIDOE
Report #ED-OIG/A06-D0015 Date of Response August 22,2004
                                                                 -­ - - ­
review the program evaluation procedures and make any needed
adjustments.



Sincerely,


 ~beJ- P }11~ ~                                            

Robert P. McFarland

Cc:        Enclosures




                                         12 

                                                                                  Appendix D
                                                                                      Page 1 of 5

                           NOETSP’s General Concerns
In both the draft report response and the related addendum, NOETSP expressed concerns about
our audit methodology and procedures. We have summarized those general concerns below and
provided our response to those concerns. The general concerns expressed by NOETSP in its
response were presented as Numbers 1 through 4. The concerns expressed by NOETSP in the
addendum were not numbered, but we have numbered them in this report for ease of reference.
These concerns are presented sequentially, beginning with Number 5.


1 - OIG Visits to Selected High Schools

The management of NOETSP was informed by several schools that ED/OIG conducted
unannounced site visits. Since we did not mention those visits in the draft report, NOETSP
concluded that we received nothing from our school visits to cite in the report. NOETSP stated,
“Evidently, these site visits did not result in findings contrary to the documents submitted
[including] roster[s] numbering over six thousand signatures of students who received services.”

OIG’s Response

NOETSP’s conclusion about the site visits is incorrect. We made the visits in an effort to obtain
reasonable assurance that additional performance documentation provided by NOETSP in
September 2003 (after our exit conference) was valid. We sought that assurance by obtaining
verification through interviews that NOETSP provided services at schools that were listed in the
documents. Nothing came to our attention that caused us to conclude that the additional
documentation was not valid. However, we did not obtain assurance that the documentation of
services provided was sufficient.


2 - Length of Audit and Duplication of Records Requested

NOETSP stated that the length of the audit and the duplication of requests for records seriously
handicapped the agency’s ability to provide the level of service to which it is accustomed.
NOETSP referred to records requested by means of two ED/OIG subpoenas, and stated that the
time periods covered by those subpoenas overlapped. The following timeline and statements
summarize the points made by NOETSP:
   • 	 September 2001 – ED/OIG began an investigation that was to cover the period January 1,
       1994, through September 2001.
   • 	 November 5, 2001 – After requesting additional time, NOETSP made two shipments to
       Dallas in response to a 2001 OIG subpoena. The first shipment was made on this date.
   • 	 December 14, 2001 – The second of the two shipments was made to Dallas on this date.
   • 	 April 25, 2003 – NOETSP sent a letter to ED/OIG stating that the location of the field
       examination was a matter of coordination and communication instead of a question of
       compliance or cooperation.
   • 	 Subpoena #1 – This subpoena requested records for the period 1994 to 2001.
                                                                                  Appendix D
                                                                                     Page 2 of 5


   • 	 Subpoena #2 – This subpoena requested records for the period September 1998 to 

       December 2002. 

   • 	 Overlap – It was obvious to NOETSP that the time periods covered by the subpoenas
       overlapped.
   • 	 Surprise Visit – NOETSP stated that it had not received any OIG correspondence or
       communication regarding its status from December 2001 to May 2003. NOETSP stated
       that “the unannounced visit to begin an examination for which you OIG/DOE started 18
       months previous was very confusing [to] the management and staff.” NOETSP stated
       that it was perplexed by ED/OIG’s surprise visit requesting records and information,
       which had been previously forwarded to Dallas.

OIG’s Response

The length of the audit and the need for duplicate record requests was directly attributable to
NOETSP’s continued inability or unwillingness to provide records and documents in a timely
manner. As discussed in the OBJECTIVE, SCOPE, AND METHODOLOGY section of this report, we
were denied on-site access to records when we initiated the audit, so we never performed any
audit procedures at the grantee’s office. Therefore, we requested documents by means of a
subpoena issued in May 2003. We subsequently made multiple information requests in an effort
to obtain all documents and records that had been subpoenaed.


3 – Duplication of Questioned and Unsupported Costs

NOETSP referred to our statement that “The questioned costs in Findings 2 and 3 are duplicative
of the total grant costs questioned in Finding 1.” NOETSP stated that the draft audit report
“should be revised as to avoid misleading the reader or user of this report,” and also stated its
desire for the final report to be “revised to eliminate the duplicate findings.” NOETSP also made
the following statements:

       These duplicate findings and the enumeration thereof clearly represent faulty and
       irresponsible reporting of the organization’s compliance during the years under
       audit. It appears from the draft audit report that the organization misspent $3.8
       million whereas the total award during the period was approximately $2 million.

OIG’s Response

Each finding, along with its questioned cost amount, is valid and stands on its own. For Findings
2, 3, and 4, we noted that the questioned costs were duplicative because we had already
questioned total grant costs in Finding 1. If the Department requires the return of total
questioned costs in Finding 1, then NOETSP would not return the costs associated with Findings
2, 3, and 4 because those costs are already included in the total questioned costs in Finding 1.
However, if the Department does not require the return of all funds under Finding 1, then the
questioned costs in Findings 2, 3, and 4 would have to be addressed and any amount disallowed
by the Department would have to be returned. Therefore, the questioned costs are not
                                                                                     Appendix D
                                                                                         Page 3 of 5

duplicative, and our reporting is not faulty and irresponsible. Additionally, our objective review
of NOETSP’s records does not allow us to eliminate any finding. We would have questioned the
amount for Finding 2, Finding 3, or Finding 4 if there had been no other finding. In our opinion,
the findings and questioned costs are clearly presented, and they should not be misleading to
readers and users of the report.


4 – Circulation of Draft Audit Report

NOETSP stated its understanding that the draft audit report was distributed only within the
Department of Education, but was concerned about the circulation of the report without the
benefit of NOETSP’s response. NOETSP said that “even such limited distribution, may have a
negative impact on the viability of this organization should the user of this report use it to
evaluate the performance of this organization without the benefit of our response.” NOETSP
also asked, “Is this standard auditing procedure to circulate a report without the benefit of
management response?”

OIG’s Response

Prior to submitting its response to the draft report, NOETSP called ED/OIG to express its
concern on this subject, and asked if its response could be sent to other recipients of the report.
We explained that NOETSP’s complete response would be included with the final audit report.
We also told NOETSP that a copy of the response could be sent to the Assistant Secretary of the
Office of Postsecondary Education. The standard OIG procedure calls for an auditee such as
NOETSP to submit its response to ED/OIG, who will in turn include that entire response with
the final audit report package. In our opinion, NOETSP’s concern about circulation of the draft
audit report has no impact on either the audit or its resolution.


5 – Performance Evaluation Review Technique

NOETSP stated, “If there is an error in the premise there will be an error in the conclusion.”
NOETSP referred to the procedure that we performed by visiting selected schools and
interviewing officials concerning services provided to students, and recognized that the
procedure was necessary to perform any audit. Then NOETSP questioned our assessment of
student eligibility, maintaining that eligibility for free lunch equates to eligibility for Talent
Search services. Specifically, NOETSP stated that 93.5 percent of the school system is African-
American and that 75.5 percent of the students are eligible for free lunch, emphasizing that the
free-lunch students (75.5 percent) are also eligible for NOETSP services. NOETSP also stated
that it is illogical for us to report that the total number of students qualified to receive services
was limited to 165 students that had official student eligibility forms on file. In addition,
NOETSP stated that our extrapolation of that figure into a two million dollar overpayment defies
all auditing guidelines.
                                                                                     Appendix D
                                                                                         Page 4 of 5

OIG’s Response

As stated by NOETSP, we did visit schools and interview officials. We also performed the other
five procedures listed in the Objective, Scope, and Methodology section of the report. We did
not base our assessment of student eligibility or grant performance merely on school visits and
interviews. NOETSP quoted accurately our draft report statement, “We did not use any
sampling technique.” We did not employ sampling because, as we stated in the draft report, “we
performed a review of all records that were made available to us.” Audit sampling is used when
only a limited number of records is to be reviewed.

We do not question the percentages of African-American students and those eligible for free
lunches. However, we do question NOETSP’s documentation of student eligibility, and
emphasize that regulations require grantees to maintain eligibility records for each participant on
an individual basis. “For each participant, a grantee must maintain a record of the basis for its
determination that the participant is eligible to participate, including the needs assessment for the
participant” (34 C.F.R. § 643.32). We cannot accept NOETSP’s “statistical calculation” that
students are eligible for Talent Search services just because they are eligible for free lunches.
Our review of all records provided to us did not support a conclusion that NOETSP maintained
adequate eligibility records on an individual participant basis. NOETSP’s reference to “165
official student eligibility forms” is incorrect. We reported 165 students as the number that
received services during Program Year 2001-2002. Concerning the “two million dollar
overpayment,” we did not extrapolate any number. We questioned total grant costs because
NOETSP did not demonstrate that it properly documented student eligibility and grant
performance, including NOETSP’s failure to meet the regulatory requirement to serve a
minimum of 600 participants per year. In our opinion, we have made no error in either premise
or conclusion.


6 – Examination of Checks and Vouchers

NOETSP wanted to know if we examined every check and voucher in the boxes of material
submitted for our review. NOETSP also stated, “This is not to say that corrections and changes
are not in order. The computerization of the entire office has been undertaken and is 35%
complete.”

OIG’s Response

We examined all records, including every check and every voucher, provided to us. We did not
question any cost for which we saw adequate documentation. We do not know what type of
corrections and changes might be in order. The 35 percent completion of the office
computerization is irrelevant. Whether records are computerized or not, adequate documentation
must always be maintained. This concern about checks and vouchers does not change our audit
conclusions.
                                                                                   Appendix D
                                                                                       Page 5 of 5

7 – Student Service Activities

NOETSP was concerned that we might have missed some documents pertaining to services
provided to students, and specifically mentioned the following things:
   • 	 One senior counselor produced over 300 fully-documented folders annually.
   • 	 The Director himself served 400 students annually.
   • 	 Each of the other three in-house counselors served 150 students annually.
   • 	 Students served at large events might not have been counted. More than 250 students
       were served at one event, and more than 150 were served at another.
   • 	 NOETSP sponsored a three-day bus trip to Tuskegee University and the University of
       Alabama at Birmingham, and listed pertinent highlights of the trip. The last highlight
       stated that the 25 student participants prepared summaries (one and one-half pages in
       length) that described what the trip experience meant to them.

NOETSP also stated, “You probably don’t have these numbers, either, however, these services
are documented and can readily be made available.”


OIG’s Response

We examined all records that were provided to us, and did not question any service for which we
saw adequate documentation. Concerning the three-day field trip to Alabama, we reviewed
information that showed the trip was made in April 2001. An overall summary of the trip stated
that students were to submit essays summarizing their experiences, but we saw no essay in the
records provided to us, even though we did see a blank student evaluation form. Since NOETSP
has confirmed, through its Management Representation Letter dated January 28, 2004, that all
records have been made available to us, there should be no pertinent documents available at this
point that we have not already evaluated. Therefore, NOETSP’s concern about student service
activities, including the field trip, has no impact on our audit conclusions.


8 – Desire to Meet with Auditor

At the end of the addendum, NOETSP stated, “We would like to suggest that before the audit
report is finalized that our accountant/information systems consultants meet with the auditor to
review the program evaluation procedures and make any needed adjustments.”


OIG’s Response

We conducted our audit in accordance with generally accepted government auditing standards
appropriate to the scope of the review, so we see no need for the accountant or the consultants to
review our program evaluation procedures. NOETSP denied on-site access to records; yet we
allowed multiple opportunities for NOETSP to send records to us. Additionally, the Director and
his accountant made a trip to Dallas to explain the performance documents in the six boxes that
NOETSP found after our audit work was concluded and an exit conference was conducted. At
that time, NOETSP confirmed that all records had been made available to us. If more documents
are now available, they should be provided to the Department officials identified in the cover
letter to this report.