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)

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.


        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
           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-

‘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
            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.


          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
           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


     Although  the Office of Economic Opportunity                 had suspended
one of the grants it had made to the Association                  because the

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-

       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.


      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.


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

         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.

       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.

      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.

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



        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