B-164031(1) d- RELEASED Dear Mr. White This report 1s in reply to your request dated Novem- ber 13, 1970, which transmitted a letter and lnformatlon sent to you by Mr. Thomas R Howell, Sr., president of Howell Elec- tronlcs, Incorporated. In his letter to you, Mr. Howell lndl- cated that, because of the serious extent of mismanagement wlthln the United States National Student Assoclatlon, he was concerned with what may be happening to Federal grant funds awarded to the Assoclatlon. We contacted 17 Federal departments and agencies which, we believed, might have awarded contracts or grants to the As- soclation, to obtain lnformatlon on the amount of Federal funds Involved and to ldentlfy those contracts and grants that were active during the period July 1, 1968, through December 31, 1970 * Our comments relative to the contracts and grants that were active during that period follow. AGENCIES WHICH AWARDED CONTRACTS AND GRANTS TO THE ASSOCIATION The Offlce of Education, Department of Health, Education, and Welfare, the Department of State, and the Offlce of Eco- nomlc Opportunity were the only departments and agency of those contacted that had active contracts or grants with the Assocla- tlon during the period July 1, 1968, through December 31, 1970. Offlclals ,of these departments and agency (hereinafter referred to as agencies) informed us that they had not awarded any addl- tlonal grants or contracts to the Assoclatlon as of June 1, 1971. The Department of State also had awarded a grant to the United States National Student Travel Assoclatlon, Inc , a sep- arate organlzatlon which, however, had Assoclatlon o-fflcers serving on its board of directors. The most recent of these contracts and grants was awarded In June 1968 Our review of the files and other lnformatlon made avall- able to us by the three Federal agencies showed that the con- tracts and grants awarded totaled $483,840. Details of the contracts and grants are as follows. 50 TH ANNIVERSARY 1921- 197 ia B-164031 (1) Department of State Grants Number SCC-40903 (Unlted States Natlonal Stu- dent Assoclatlon) Per lad September 1, 1967, to August 31, 1968 Amount $14,578 Purpose To assist the Assoclatlon in admlnlster- lng a contlnulng educational proJect for five Algerian students studying In the United States Number SCC-40985 (United States National Stu- dent Association-Education Travel, Inc. I) Per lad March 15 to December 31, 1968 Amount $100,205 Purpose To enable the Association to carry out a project provldlng for eight groups of selected African youths and stu- dent leaders to observe recent develop- ments in contemporary American activi- ties ‘hame subsequently changed to United States National Student Travel Assoclatlon, Inc Department of State records showed that the Department intended to use the results obtained under these grants to as- sist It in carrying out the U S. cultural exchange program. Office of Economic Opportunity Contract Numb e r B89-4248 Period September 5, 1967, to September 5, 1968 Amount $63,196 Purpose Demonstration program for selection and training of a pllot group of Volun- teers in Service to America organizers. 2 B-164031(1) Grants Number CG-8138 Period April 15, 1968, to April 15, 1969 (Sus- pended on February 13, 1969) Amount $150,996 Purpose To seek new ways of expanding the ef- forts of Pennsylvania college students in the war on poverty Number CG-8289 Period June 15, 1968, to June 14, 1969 Amount $67,355 Purpose Technical assistance grant to provide tutorial and community education as- sistance to community action agencies. Office of Economic Opportunity records showed that the results obtained under these grants and contract were to be used, in general, by the Office of Economic Opportunity to enhance the effectiveness of certain antipoverty programs for which it was responsible Office of Education Contract Number OEC-2-7-062955-2839 Period February 1, 1967, to February 1, 1969 Amount $87,510 Purpose Provide for the development of reliable methods for the evaluation of under- graduate curriculum and instruction. We were informed by Office of Education officials that the results obtained under this contract were to be used to demonstrate to officials of institutions of higher education the effectiveness and potential value of student research Into the administration of such institutions OPERATIONS UNDER THE GRANTS AND CONTRACTS Although the Office of Economic Opportunity had suspended one of the grants it had made to the Association because the 3 B-164031 (1) project was not being carried out as intended, officials of the three agencies stated that they were satisfied, in gen- eral, with the performance of both the Association and the United States National Student Travel Association, Inc. The agencies, however, experienced dlfflculty in obtaining re- quired financial information and in effecting recoveries of funds arising from audit exceptions taken by Federal audi- tors. The grants and contracts that we reviewed provided, in general, for reporting by the grantees or contractors of amounts expended and progress made toward the accomplishment of grant or contract objectives. In addition, the contracts provided that the Federal Government have access to, and the right to examine, documents of the contractor or any of its subcontractors pertinent to the contract. DEPARTMENT OF STATE A Department of State official told us that the perfor- mance of both the Association and the United States National Student Travel Association, Inc., had been satisfactory and that the program work carried out under the grants had been done very well by both organizations. The official said, however, that some financial reporting problemslhad arisen with respect to three of the grants--SCC-40725, see-40903, and SCC-40985. According to the official, grant SCC-40985 (see p. 2) was the last grant made by the Department to either of the organizations. An audit covering five grants to the Association was per- formed by Department of State auditors during June 1968, and a report was issued In February 1969. The auditors reported that a charge of $319.50 under grant SCC-40903 had not been 1Although this grant was not active at the time of our review, we are discussing It herein because of the Department’s prob- lems in obtaining refunds. 4 B-164031(1) allowable and that $2,496 (representing unexpended funds and an audit exception to certain expenditures) should have been refunded to the Government under grant SCC-40725 which had been completed at the time of the audit. The audit report stated that, except for these items, the Association~s records had been reliable and that compliance with the financial pro- visions of the grants had been satisfactory, Correspondence in the grant file showed that the Depart- ment had advised the Association’s comptroller on numerous occasions that the Association was to refund the amounts cited in the audit report and to submit the final financial report which was due in October 1968. In correspondence in Septem- ber 1969, the Assoc1-ation’s executive vice president informed the Department that the Association’s comptroller had resigned in September on 1 hour’s notice and that the Association had been unaware of the Department’s earlier requests. The execu- tive vice president stated that the comptroller had not kept the Association’s financial accounts up to date, and he re- quested a month to put the accounts in order and to assess the situation referred to by the Department This request was granted In December 1969 the Assoclatlon’s attorneys, in respond- lng to a departmental follow-up letter, stated that it had become apparent that the Association had extensive financial obligations, of which Its officials had been unaware, and that the situation had created a serious financial crisis which had to be handled on a priority basis. Correspondence from the attorneys during the period Decem- ber 1969 through July 1970 recounted the AssociationVs finan- cial difficulties and its efforts to liquidate debts of more than half a million dollars by paying off its creditors on a pro rata basis. The attorneys requested that the Association be given the opportunity to make one payment in settlement of the Department’s claim and expressed a willingness to discuss the matter In detail. B-164031(1) A meeting was held between offlclals of the Department and an attorney for the Assoclatlon In September 1970. Adds- tlonal contacts were made with the attorney In October 1970 and January 1971. At the completion of our work in May 1971, no agreement had been reached regarding the settlement of these grants. Information in the Department's flies indicated that lt was notlfled In December 1969 that the United States NatIonal Student Travel Assoclatlon, Inc., had filed a voluntary bank- ruptcy petition with the District Court of the United States for the Southern District of New York. A Department audit re- port stated that a representative of the Department's audit staff had attempted Po audit 10 grants which had been entered Into with the United States National Student Travel Assocla- tnon, Inc., between 1965 and 1968, but, because of the unavall- ablllty of records and docuhents, the auditor had been unable to complete the audit. The report stated further that the United States National Student Travel issoclatlon, Inc., had filed all required reports and had refunded the unexpended funds on all of these grants except SCC-40985. Informataon in the grant file showed that the Department had decided not to pursue Its contingent claim, estimated at $4,172, for the unexpended balance under grant SCC-40985 be- cause Its auditors could not locate records to establish a claim and because the performance of the United States Na- tional Travel Assoclatlon, Inc., had been satisfactory. OFFICE OF ECONOMIC OPPORTUNITY An Offlce of Economic Opportunity offlclal Informed us that the Assoclatlonss performance under grant CG-8138 had been determined to be unsatisfactory and that the grant was suspended In February 1969 and about $42,000 of expended funds were recovered. The offlclal said that the Office of Economic Opportunity also reviewed grant CG-8289 to determine whether there were any mayor problems with the Assoclatlonqs perfor- mance under that grant but that no problems had been found. 6 B-164031 (1) With respect to our lnqulry as to the Assoclataon’s per- formance under the contract B89-4248, an Office of Economic Opportunity offlcral sard that he could not recall the con- tract nor locate anyone st111 with the agency who was familiar with the contract. Our review of the contract flies revealed no lnformatron relating to the Assoclatlon’s performance un- der the contract An Office of Economic Opportunity internal audit report Issued In February 1969 on a llmlted audit of grants CG-8138 and CG-8289 and a report issued In March 1969 on a supple- mental audit of these two grants stated that the auditors had not considered the Assoclatronfs control over Federal funds to be adequate and that the Assoclatlon had expended funds ap- placable to various programs wlthout regard to the regulations on the restrlctlve use of the funds. The reports questioned expenditures of about $6,000 under these grants. The Defense Contract Audit Agency, in Its report dated August 1, 1969, on the final audit of CG-8138, requested Ly the Office of Eco- nomic Opportunity, questioned expenditures of about $39,000, lncludlng an expenditure of about $1,100 previously questioned by Office of Economic Opportunity auditors. We were informed by an Office of Economic Opportunity internal auditor that, of the total amount of about $44,000 questioned by the Defense Contract Audit Agency and Offrce of Economic Opportunity auditors, all but about $14,000 had been either recovered or otherwise resolved. An Office of Economic Opportunity internal audit agency offrclal informed us also that his office would follow up on the Offrce of Economrc Op- portunlty’s actions to recover the remaining amounts questioned. According to an Office of Economic Opportunity Internal auditor, a final audit of grant CG-8289 had not been requested, but an audit of contract B89-4248 by the Defense Contract Au- dit Agency had been requested. He added that the latest infor- mation In the files rndrcated that the Defense Contract Audit Agency had been waltlng for the Assoclatlon to submit the final voucher for payment before beginning the audit 7 B-164031(1) OFFICE OF EDUCATION Office of Education offlclals informed us that the Asso- clatlon's performance under the contract was considered satls- factory and that Its final report was accepted by the Offlce of Education In September 1970. Offlclals Informed us also that the Assoclatlon had not submltted Its final voucher for payment and that a final audit, If one were made, would not be lnltlated until the Assocnatlon submitted the voucher. The three agencies and other partles mentloned in this report have not been given an opportunity to formally examine and comment on this report. Sincerely yours, Comptroller General of the United States The Honorable Richard C. White House of Representatives 8
Federal Contracts and Grants With the United States National Student Association
Published by the Government Accountability Office on 1971-06-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)