oversight

Audit of the office of Economic Opportunity Grant to the George Washington University for Operation of the Urban Law Institute

Published by the Government Accountability Office on 1971-04-13.

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

                                                                                    ENCLOSURE
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                                                                    RELEASED


                Audit Of The Office Of
                Economic Opportunity Grant
                To The George Washington
                University For Operation Of
                The Urban Law Institute._,3,,,




                 BY THE COMPTROLLER GENERAL
                 OF THE UNITED STATES



                                                                         APRIL. 13, 197
                                                             ENCLOSURE
                                                               Page 1

                        GENERAL ACCOUNTING OFFICE
                              AUDIT OF THE
                  OFFICE OF ECONOMIC OPPORTUNITY GRANT
                                    TO
                    THE GEORGE WASHINGTON UNIVERSITY
                           FOR OPERATION OF
                       THE URBAN LAW INSTITUTE


                              INTRODUCTION

     Pursuant to a congressional request, we made an audit of the records
pertaining to a grant to the George Washington University for operation
of the Urban Law Institute during the fiscal year ending June 30, 1971o
The grant of $568,880 was made by the Office of Economic Opportunity (OEO).
Our audit was directed toward determining whether the grant funds were
expended in accordance with conditions of the grant and applicable OEO
policies and instructions. We did not attempt to determine how effective
the Urban Law Institute had been in attaining the program objectives for
which the grant was provided.

     We examined personnel records and, on a test basis, financial trans-
actions for the period July 1 to December 31, 1970. Our test of financial
transactions included items amounting to about $124,725 of the $285,534
expended during the 6-month period under the fiscal year 1971 grant. We
reviewed applicable legislation, OEO policies and instructions, and the
grant agreement. We also interviewed officials of the university, insti-
tute, and OEO who had cognizance of the grant. The audit was made at the
George Washington University and OEO headquarters in Washington, D. C.

     Officials of OEO, the university, and the institute have not been
given an opportunity to examine and comment formally on this report, but
the findings were discussed with their representatives.

     The Urban Law Institute program includes training lawyers and has
been funded by the Federal Government since May 1968 as a demonstration
project under section 232 of the Economic Opportunity Act of 1964, as
amended (42 U.S.C. 2825). The objective of the institute's program for
training lawyers is to experiment with and demonstrate new approaches and
methods in the delivery of legal services to groups or classes of disad-
vantaged persons. Under arrangements with private law firms and private
organizations, program participants are to be assigned to work for the
public good under the supervision of senior attorneys. An important ele-
ment in accomplishing this objective is the development of a curriculum
for effectively teaching this type of legal practice. The program also
provides assistance to candidates in obtaining a master's degree in
poverty law. Grants made to the university for operation of the Urban
Law Institute were as follows:
                                                              ENCLOSURE
                                                                Page 2


                 Fiscal year                       Amount

                    19 6 9 a                   $    117,066
                    1970                            331,656
                    1971                            568,880

                            Total              $1,017,602


 Covers the period May 1968 to June 1969.

     The university administers the grant funds under its regular proce-
dures for handling grants and maintains the accounting records for the
grant. Under these procedures expenditures, including payrolls, are first
approved by the institute's management and are then paid by the university
if the expenditures are within the limits of the budget as approved by OEOo
As shown on page 6, expenditures under the fiscal year 1971 grant for the
6-month period ended December 31, 1970, totaled $285,534,

     As of December 31, 1970, the institute's personnel consisted of 16
professional and 12 administrative full-time employees, 13 candidates for
master's degrees in law, one candidate for a law degree, and several part-
time employees. The candidates are required to work 30 hours a week on
institute activities.

     The university's Office of Public Relations, in its "Monday Report"
dated March 1, 1971, stated that the university's National Law Center had
announced that it planned to sever its ties with the institute because
the institute was evolving into a large public-interest law firm over
which it had no control,

                                    FINDINGS

     We found that the Federal grant funds were expended in accordance with
the conditions of the grant and applicable OEO policies and instructions
except for a few expenditures discussed below. To put these questioned
expenditures in proper perspective, we want to point out that the amounts
of the questioned items were small both in relationship to the total of the
institute expenditures and in comparison to amounts we have questioned in
reviews of other OEO demonstration grants. Furthermore, the university
records maintained for the grant compare favorably with those maintained
by most other OEO grantees whose records we have reviewed. The university
has orderly financial management procedures and an adequate accounting
system; for the most part, its expenditures are well supported by appropri-
ate documentary evidence.

     In addition to our review of financial transactions, we also reviewed
the quarterly reports submitted by the institute to OEO for the period
                                                              ENCLOSURE
                                                                Page 3


covered by our review to determine whether the activities reported by the
institute were within the scope of activities contemplated under the terms
and conditions of the grant. The institute reported on (1) its accomplish-
ments in developing teaching material for university courses in urban law,
(2) cases pending and under litigation in which it was involved, and (3)
other activities such as providing guidance and assistance to disadvantaged
economic and social groups. The activities of the institute, as described
in the quarterly reports to OEO, were, in our opinion, within the scope of
activities contemplated by the terms and conditions of the grant.

     There has been some confusion by certain OEO headquarters officials
responsible for administering the grant as to which OEO instructions ap-
plied to this grant. OEO has not issued a complete set of instructions and
requirements that are applicable to demonstration grants, the type of grant
under which the institute is funded. As early as February 1965, OEO had
planned to issue instructions applicable to such grants. As a stopgap
measure, OEO since 1965 has relied, in part, on its instructions applicable
to community action grants although some of the instructions do not apply
to a demonstration grant.

    Details of the expenditures which we questioned follow.

LIMITATION ON STARTING SALARIES OF NEW EMPLOYEES

     OEO instructions governing compensation of employees of grantees re-
quire that starting salaries of new employees paid over $5,000 annually
be limited to an increase of 20 percent over their prior salary or $2,500,
whichever is less, unless OEO approval is obtained.

     Our review of employees' personnel folders for the 36 employees hired
by the institute during the period July 1, 1970, through December 31, 1970,
showed that incomplete or no information had been obtained on prior salaries
of 12 employees. For these employees we were thus unable to determine
whether the salary limitation had been complied with. We were informed by
a university personnel official who had responsibility for maintaining
records of employees' qualifications that he was unaware of the OEO require-
ment governing starting salaries and therefore had not always obtained
prior salary data.

     Our review of the personnel folders for the 24 employees which con-
tained complete prior salary data revealed that two employees had received
starting salaries in excess of the OEO limitation. The folders contained
no evidence that the required OEO approvals had been obtained. The annual
salaries of these two employees exceeded the limitation by $627 and $877,
respectively. The amounts actually paid to the two employees in the
6.month period covered by our review exceeded the limitation by a total of
$360. The university advised us that the two employees' salaries had been
                                                              ENCLOSURE
                                                                Page 4


set at these levels so that their salaries would be consistent with the
university's pay scale for comparable work.

     In March 1971, we discussed this matter with officials of the univer-
sity and OEO. Subsequently, by letter dated April 1, 1971, OEO advised
the institute that the starting salaries granted to the two employees
were approved.

OVERHEAD

     The terms of the OEO grant provide for the university to be reimbursed
for its overhead from grant funds at the rate of 20 percent of the approved
grant personnel costs. The university in computing the reimbursement ap-
plied the overhead rate to personnel costs and stipends paid to candidates
for master's degrees. These stipends, however, were not classified as
personnel costs in the OEO-approved budget for the grant.

     The budget provided for financial assistance to 16 candidates for
master's degrees in the form of a stipend to each of $6,800 and classified
the amount budgeted as nonpersonnel costs. The university, by applying
the overhead rate to these nonpersonnel costs, charged the grant for addi-
tional overhead of about $6,000 for the period July 1, 1970, to
December 31, 1970.

     We brought this matter to the attention of the university's comptroller,
who advised us that the university would seek to obtain OEO's approval to
reclassify the stipends as personnel costs.

TRAVEL EXPENSES

     OEO instructions require that travel by employees of grantees be
authorized and paid for in accordance with the Standardized Government
Travel Regulations. Our examination of travel expenditures of about
$5,900--selected from the total expenditures of $9,800 for the period
July 1, 1970, to December 31, 1970--showed that the university had not
followed certain administrative practices required by the regulations re-
lating to the authorization and approval of travel on an actual expense
basis.

      The regulations permit travel expenses to be paid on the basis of a
per diem rate of up to $25 or of actual travel expenses. The regulations
require, among other things, that conditions be prescribed under which
reimbursements may be authorized or approved for actual travel expenses
and that such conditions shall restrict travel on an actual expense basis
to those travel assignments where necessary subsistence costs are unusally
high.
                                                              ENCLOSURE
                                                                Page 5


     The university followed the practice of reimbursing institute employ-
ees o- the basis of their actual travel expenses and had not prescribed
conditions restricting such travel. Although the amount of the reimburse-
ments to some institute employees for actual travel expenses exceeded the
amount allowable under the regulations on a per diem basis of $25, we
were unable to determine the amount of the overages and underages because
some of the travel claims did not show the departure and arrival times
which affect a per diem computation. However, of the $5,900 travel ex-
penses that we examined only $1,500 was for per diem type travel.

     University officials advised us that it was the university's policy
to pay actual travel expenses for its employees and, since the grant was
being funded through the university, they were of the opinion that the
university's travel policy should apply to the institute. We were ad-
vised also that they were not aware of the OEO requirement that the
Standardized Government Travel Regulations were to be followed.

SALARY CEILINGS

     The grant contains a requirement that salaries of institute employees
in excess of $15,000 must be approved by the Associate Director, Office of
Legal Services, OEOo We found that two employees, one is the director of
the institute, were being paid salaries from grant funds of $17,500 and
$18,000 without approval from OEO. Although the institute notified OEO on
August 18, 1970, of the salaries being paid to these two employees, OEO
and institute officials were unable to furnish us with evidence that the
salaries had been approved.

     In March 1971, we discussed this matter with officials of the univer-
sity and OEO. Subsequently, by letter dated April 1, 1971, OEO advised
the institute that the salaries being paid the two employees in excess of
$15,000 were approved.

FINANCIAL REPORTING

     For the months of May 1970 through January 1971, the university did
not prepare and submit to OEO monthly financial reports as required by OEO
instructions┬░ An OEO directive states that delinquent reports by grantees
impair OEO's ability to administer grants and to meet its financial report-
ing responsibilities to the Congress and other Federal agencies.

     Although OEO did not receive the required monthly financial reports,
we found no record indicating that OEO had sought to obtain the reports0

     In February 1971, we brought this omission to the attention of univer-
sity officials with the result that the required reports were prepared and
promptly submitted to OEO.
                                                                ENCLOSURE
                                                                  Page 6



     The expenditures under the fiscal year 1971 grant for the period
July 1, 1970, to December 31, 1970, are shown below.

                                                         Amount
        Expense category                                expended

    Salary--faculty full time                          $     8,750
    Salary--nonacademic                                    108,214
    Wages--part-time personnel                              21,973
    Stipends--candidates for degrees                        30,075
    Personal services, other                                23,522
    Telephone                                                3,923
    Travel                                                   8,831
    Conferences--includes about $1,000 for travel            2,481
    Printing                                                10,556
    Program development                                      6,026
    Tuition--candidates for degrees                          6,753
    Office expense                                          10,221
    Books and material                                         657
    Staff benefits                                          14,620
    Overhead--preliminary, subject to adjustment
      at end of fiscal year                                28,932

          Total                                         $285,534