oversight

Findings as to Certain Activities of the Montgomery Community Action Committee, Inc., Montgomery, Alabama

Published by the Government Accountability Office on 1971-05-17.

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

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                                           LM095656




Office Of Economic   Opportunity




 Y         COMPTROLLER             GENERAL
              COMPTROLLER     GENERAL       OF     THE    UNITED   STATES
                            WASHINGTON,      DC.     20548




B-130515



Dear   Mr.   Dickinson:

       This is our report      on certain    activities  of the Montgomery
Community     Action    Committee,     Inc., Montgomery,       Alabama,     the
Community     Action Agency which administers            antipoverty    pro-
grams   in the county of Montgomery          under the Economic       Qppor-
tunity Act of 1964, as amended.          The review     was made pursuant
to your request     of September    25, 19’70.

        The Office of Economic     Opportunity,  the Montgomery     agency,
and other parties   mentioned    in this report have not been given an
opportunity  to formally   examine    and comment    on the report.

        As agreed with you, we are sending copies of this report          to
the Director,       Office of Economic     Opportunity, in order that appro-
priate   corrective       actions in areas in need of improvement    may be
undertaken.

       We plan to make no further      distribution     of this report   unless
copies are specifically  requested,     and then we shall make distribu-
tion only after your agreement      has been obtained        or public announce-
ment has been made by you concerning            the contents    of the report.

                                          Sincerely           yours,




                                          Comptroller              General
                                          of the         United    States

The Honorable   William           L. Dickinson
House of Representatives




             50TH ANNIVERSARY             1921- 1971
I
I
I   COMPTROLLER GENERAL'S                                    FINDINGS AS TO CERTAIN ACTIVITIES
I   REPORT TO THE HONORABLE                                  OF THE MONTGOMERYCOMMUNITY
I
I
    WILLIAM L. DICKINSON                                     ACTION COMMITTEE, INC.--
I   HOUSE OF REPRESENTATIVES                                 MONTGOMERY, ALABAMA
I
I
                                                             Office   of Economic Opportunity
I                                                            B-130515
I
I
I
I   DIGEST
    _-----
I
I

    WHY THE REVIEW WAS MADE

           The Montgomery Community Action Committee,          Inc. (the Corporation),       ad-
           ministers   antipoverty     programs in the county of Montgomery, Alabama,
           as a grantee of the Office        of Economic Opportunity       DEO), the Depart-
           ment of Health,     Education,    and Welfare (HEW),
                                                          h**,_    and the
                                                                         '--D '>epartment of
I          Labor.
          ss&*li**j:
           To assist    the poor of Montgomery County, the Corporation       carried out
           acti%-t%%~~fun~ed    by grants of $2 million     by OEO for Community Action
           Programs, $1.4 million     by HEW for the Head Start     program,  and
           $1.4 million    by Labor for manpower training'programs.

           Congressman Dickinson         asked the General       Accounting      Office   (GAO) to
           examine into

              --the     administration     of certain    activities    of the Corporation  and
                  Health Services,      Inc.,  a delegate       agency of the Corporation  that
                  administers      an OEO  Comprehensive
                                        A---*      ..-.-     He.alth Services  Program and

              --actions     taken by the Corporation          and Hea'lth     Services,   Inc.,  to
I
                 correct    deficiencies    reported   by OEO in its          April   1970 audit
                 report    on the Corporation's      activities,

           The Corporation,  OEO, and other parties    mentioned  in this report
           have not been given an opportunity    to formally   examine and comment
           on this report.


    FINDINGS AND CONCLUSIONS

I          Paynaents for amounting   services
           charged to prior  program year

           A constituent     of Congressman Dickinson  charged that Health Services,
           Inc.,   made two payments to a certified    public  accounting  firm during
           the program year which began July 1, 1969, but that the payments were
           charged to the program year which ended June 30, 1969.         The payments
           consisted     of $1,500 in September 1969 for the preparation     of a
     Tear
     --   Sheet
personnel    policy   and procedures   manual under a May 1969 agreement             with
the firm and $4,000 in December 1959 for an audit of the activities
for the program year which ended June 30, 1969, and for assistance                     in
establishing      and implementing   an accounting system.

GAO found that the payments of $5,500 to the certified           public    account-
ing firm were for services    or products  received      during the program
year which began on July 1, 1969, which,       according     to OEO instructions
for Community Action   Programs, should have been charged to that year.
GAO believes,  however9 that the $1,500 payment for the preparation              of
the manual could be considered    an appropriate      charge to the program
year ended June 30, 1969, because the services         of preparing     the manual
were rendered  largely  in that program year.       (See p# 6.)

E'mployment of former executive director
as a cimsuZtc2nt to the Coz-poration
The constituent   charged that the Corporation's   former executive    di-
rector,  Mr. Charles Sheldon, was paid $100 a day as a consultant        to
the Corporation   when he was, in fact,  an employee of the University
of Alabama Medical Center in Birmingham.

GAO found that the former executive            director    was employed by the Cor-
poration     as a consultant   on an "as needed" basis at $100 a day during
the period November 1969 to January 1970.               During this period,        he
served in the capacity       of acting executive        director     for 22 days at
$100 a day and for 5 additional          days without      pay until      the Corpora--
tion employed a new executive         director     in January 1970. QEQapproved
the Corporation's      employment of the former executive              director   and the
University     of Alabama agreed to his serving          as a consultant        to the
Corporation.      (See p. 8.)

Maktencmce of inventory         mcord car&
for medicaZ items
The constituent       charged that   inventory   record cards were not being
maintained      by the Corporation     for medical items stored in a converted
fire   station.

GAO found that the Corporation           did not maintain     such cards for medical
items that were obtained      from surplus       stocks at the Job Corps Center
at Camp Atterbury,   Indiana,       and at Maxwell Air Force Base, Montgomery,
Alabama, and that were stored in a fire             station   which had been con-
verted into a warehouse.        The Corporation,         however3 maintained  certain
controls  over the medical items, such as requiring               requisition slips
approved by a corporation       official     for withdrawal      of items from stock
and keeping the warehouse locked except when items were being with-
drawn from the warehouse.        (See p. 9,)




                                       2
’ I




            OEO's audit report    of April    1970 stated   that Government vehicles    were
            being used by employees of the Corporation          and the delegate  agency
            for unauthorized   transportation     to and from their    homes and that us-
            age logs were not maintained       on the vehicles.

            GAO found that the Corporation         had taken a number of actions            to
            strengthen   control   over the use of the Government vehicles,               such as
            using a form for requesting        the use of vehicles,     preparing        daily re-
            ports on vehicle     use, establishing     motor pools,    providing       space for
            overnight  parking    of vehicles,     and requiring  written     justification
            and approval   for overnight      use of vehicles.

            GAO found, however, that further     improvements     were needed.     In a num-
            ber of instances,   vehicle usage logs were not prepared,        vehicle   re-
            quest forms were not used, and written       authorizations   for overnight
            use of vehicles   were not obtained.     (See p. 11.)

            OEO stated      in its audit report         that a certified     public    accounting
            firm had audited         2,941 payments by Health Services,            Inc., to private
            pharmacies      for prescriptions        and had found that 429 prescriptions            had
            erroneously       included     a professional      fee on drugs not requiring         a doc-
            tor's   prescription        (nonlegend     drugs).    It stated   further    that the
            firm had found that,           in some instances,       the pharmacies     had refilled
            prescriptions        a greater    number of times than specified           by Health Ser-
            vices,     Inc., physicians.
  I
  I         Health Services,       Inc., found that its program under which prescrip-
  I         tions were filled       by private   pharmacies was becoming too costly      and
  I         canceled it effective        December 31, 1969, and required     that thereaf-
  I
  I         ter prescriptions       were to be filled     in its pharmacy and by private
  I         pharmacies     only in emergency situations        or when its pharmacy does
  I
  I         not have drugs on hand.          It also no longer permits the pharmacies to
  I         refill  prescriptions.         (See p* 13.)
  I
             The OEO audit report    stated    that Health Services,       Inc., had not em-
             ployed enough full-time      physicians   to completely     staff   its health
             clinic and that the resultant        use of part-time   physicians      was more
             costly than employing     the necessary     number of full-time       physicians.

             GAO found that Health Services,             Inc, 9 had been unable to employ a
             sufficient     number of full-time        physicians.      Recognizing    the need to
             maintain     needed services,       OEO's Office      of Health Affairs     in January
             1970 approved the employment of part-time                physicians.    In February
             1970, Health Services,         Inc.,   to reduce the cost of using part-time
             physicians,      lowered the hourly       rates paid to part-time       physicians
             from $25 to $15.        Information      obtained     by GAO indicated    that the
             need for part-time        physicians     would continue      in the foreseeable    fu-
             ture.      (See p* 15.)
      Tear
      _-.A- Sheet


                                                      3
                            Contents
                                                                  Page

DIGEST                                                              1

CHAPTER

  1        INTRODUCTION                                             4

  2        CHARGESRELATING TO ADMINISTRATION OF
           CERTAIN ACTIVITIES OF THE CORPORATION
           AND ITS DELEGATEAGENCY, HEALTH SERVICES,
           INC.
                Payments for accounting  services charged
                  to prior program year
                Employment of former executive director
                  as a consultant  to the Corporation
                Maintenance of inventory  record cards
                  for medical items

  3        ACTIONS TAKEN BY THE CORPOMTION AND HEALTH
           SERVICES, INC., TO CORRECTDEFICIENCIES
           REPORTEDBY OEO AUDITORS IN APRIL 1970                  11
               Use of Government vehicles                         11
               Pharmacy program                                   13
               Staffing of health clinic  with part-
                 time physicians                                  15

APPENDIX

      I    Letter dated September 25, 1970, to the
             Comptroller  General of the United States
             from Congressman William L. Dickinson                 19

                             ABBREVIATIONS

GAO        General    Accounting   Office

HEW        Department    of Health,    Education,   and Welfare

OEO        Office    of Economic Opportunity
COMPTROLLER GENERAL'S                                  FINDINGS AS TO CERTAIN ACTIVITIES
REPORTTO THE HONORABLE                                 OF THE MONTGOMERYCOMMUNITY
WILLIAM L. DICKINSON                                   ACTION COMMITTEE, INC.--
HOUSEOF REPRESENTATIVES                                MONTGOMERY, ALABAMA
                                                       Office   of Economic Opportunity
                                                       B-130515


DIGEST
__----

WHYTHE REVIEWWASMADE
     The Montgomery Community Action Committee,        Inc. (the Corporation),      ad-
     ministers   antipoverty     programs in the county of Montgomery,     Alabama,
     as a grantee of the Office        of Economic Opportunity  (OEO), the Depart-
     ment of Health,     Education,    and Welfare (HEW), and the Department     of
     Labor.

     To assist    the poor of Montgomery County, the Corporation     carried out
     activities     funded by grants of $2 million    by OEO for Community Action
     Programs, $1.4 million       by HEW for the Head Start program,  and
     $1.4 million      by Labor for manpower training   programs.

     Congressman Dickinson          asked the General      Accounting      Office   (GAO) to
     examine into

         --the    administration     of certain  activities    of the Corporation  and
             Health Services,     Inc.,  a delegate     agency of the Corporation  that
             administers     an OEO Comprehensive    Health Services   Program and

         --actions     taken by the Corporation          and Health     Services,   Inc.,  to
            correct    deficiencies    reported   by OEO in its         April   1970 audit
            report    on the Corporation's      activities.

     The Corporation,  OEO, and other parties    mentioned in this  report
     have not been given an opportunity    to formally   examine and comment
     on this report.


FINDINGS AND CONCLUSIONS
     Paymnts for accosting   services
     charged to prior program gear
     A constituent     of Congressman Dickinson  charged that Health Services,
     Inc.,   made two payments to a certified    public  accounting  firm during
     the program year which began July 1, 1969, but that the payments were
     charged to the program year which ended June 30, 1969.         The payments
     consisted     of $1,500 in September 1969 for the preparation     of a
personnel    policy   and procedures   manual under a May 1969 agreement              with
the firm and $4,000 in December 1969 for an audit of the activities
for the program year which ended June 30, 1969, and for assistance                     in
establishing      and implementing   an accounting system.

GAO found that the payments of $5,500 to the certified          public    account-
ing firm were for services    or products  received    during the program
year which began on July 1, 1969, which, according         to OEO instructions
for Community Action Programs,    should  have   been  charged   to that year.
GAO believes,  however, that the $1,500 payment for the preparation             of
the manual could be considered    an appropriate     charge to the program
year ended June 30, 1969, because the services        of preparing     the manual
were rendered largely   in that program year.       (See p. 6.)

EnpZoyment of former emcutive     director
as a consu2tcmt to the Corporation

The constituent   charged that       the Corporation    's former executive    di-
rector,  Mr. Charles Sheldon,        was paid $100 a day as a consultant        to
the Corporation   when he was,       in fact,    an employee of the University
of Alabama Medical Center in         Birmingham.

GAO found that the former executive            director    was employed by the Cor-
poration     as a consultant   on an "as needed" basis at $100 a day during
the period November 1969 to January 1970.               During this period,        he
served in the capacity       of acting executive        director     for 22 days at
$100 a day and for 5 additional          days without      pay until      the Corpora-
tion employed a new executive         director     in January 1970.          OEO approved
the Corporation's      employment of the former executive              director   and the
University     of Alabama agreed to his serving          as a consultant        to the
Corporation.      (See p. 8.)

Maintenmzee    of inventory     record   cards
for medica     items

The constituent      charged that    inventory   record cards were not being
maintained     by the Corporation      for medical items stored in a converted
fire  station.

GAO found that the Corporation           did not maintain     such cards for medical
items that were obtained      from surplus        stocks at the Job Corps Center
at Camp Atterbury,   Indiana,       and at Maxwell Air Force Base, Montgomery,
Alabama, and that were stored in a fire station               which had been con-
verted into a warehouse.        The Corporation,        however, maintained   certain
controls  over the medical items,           such as requiring     requisition slips
approved by a corporation       official      for withdrawal    of items from stock
and keeping the warehouse locked except when items were being with-
drawn from the warehouse.        (See p. 9.)
OEO audit findings    and
come cti ve ac ti ens txken

OEO's audit report    of April    1970 stated that Government vehicles     were
being used by employees of the Corporation          and the delegate agency
for unauthorized   transportation     to and from their    homes and that us-
age logs were not maintained       on the vehicles.

GAO found that the Corporation         had taken a number of actions            to
strengthen   control   over the use of the Government vehicles,               such as
using a form for requesting        the use of vehicles,      preparing       daily re-
ports on vehicle     use, establishing     motor pools,    providing       space for
overnight  parking    of vehicles,     and requiring  written     justification
and approval   for overnight     use of vehicles.

GAO founds however5 that further     improvements     were needed.     In a num-
ber of instances,   vehicle usage logs were not prepared,        vehicle   re-
quest forms were not used, and written      authorizations    for overnight
use of vehicles   were not obtained.     (See p. 11.)

OEO stated       in its audit report          that a certified     public      accounting
firm had audited          2,941 payments by Health Services,             Inc.,     to private
pharmacies       for prescriptions         and had found that 429 prescriptions               had
erroneously        included      a professional      fee on drugs not requiring           a doc-
tor's    prescription        (nonlegend      drugs).    It stated   further      that the
firm had found that,             in some instances,       the pharmacies      had refilled
prescriptions         a greater     number of times than specified            by Health Ser-
vices,     Inc.,     physicians.

Health Services,        Inc.,  found that its program under which prescrip-
tions were filled        by private   pharmacies was becoming too costly       and
canceled it effective         December 31, 1969, and required      that thereaf-
ter prescriptions        were to be filled     in its pharmacy and by private
pharmacies     only in emergency situations         or when its pharmacy does
not have drugs on hand.           It also no longer permits     the pharmacies   to
refill   prescriptions.         (See pe 13.)

The OEO audit report    stated    that Health Services,       Inc.s had not em-
ployed enough full-time      physicians   to completely     staff   its health
clinic and that the resultant        use of part-time   physicians      was more
costly than employing     the necessary     number of full-time       physicians.

GAO found that Health Services3              Inc.,  had been unable to employ a
sufficient     number of full-time         physicians.      Recognizing    the need to
maintain     needed services,        OEO's Office      of Health Affairs     in January
1970 approved the employment of part-time                 physicians.    In February
1970, Health Services,         Inc.,    to reduce the cost of using part-time
physicians,      lowered the hourly        rates paid to part-time       physicians
from $25 to $15.        Information       obtained     by GAO indicated    that the
need for part-time        physicians      would continue      in the foreseeable     fu-
ture.      (See pB 15.1



                                            3
                                      CHAPTER 1


                                    INTRODUCTION

        The Montgomery      Community Action    Committee,   Inc.,  here-
inafter    referred   to as the Corporation,       is an Office    of Eco-
nomic Opportunity       (OEO) Community Action       Agency that admin-
isters    antipoverty     programs    in the county of Montgomery,
Alabama,    under grants      from OEO; the Department     of Health,
Education,      and Welfare     (HEW); and the Department     of Labor.

        By letter       dated September       25, 1970, Congressman
William    L. Dickinson         requested     that we examine into charges
made by Mr. Milton           H. Magi11 regarding          the administration
of certain       activities       of the Corporation         and of the Health
Services,      Inc.,      a delegate    agency of the Corporation            that
operates     an OEO Comprehensive            Health    Services   Program for
the Corporation.            (See app. I.)        Mr. Magi11 was a former
office    manager for Health           Services,     Inc.

       Our review was made during                the period       October     through
December 1970 at the Corporation's                    office    in Montgomery,
Alabama.        In accordance        with an agreement          reached     in dis-
cussions     with Congressman           Dickinson,        we examined into the
charges made by Mr. Magill,                with the exception          of the
charge concerning           the independence          of a certified        public
accounting        firm engaged by the Corporation,                  We examined
also into the actions             taken by the Corporation             and Health
Services,       Inc.,     to correct     deficiencies        revealed     in an OEO
audit    report       dated April     6, 1970.

         The OEO audit         was made in October and November 1969
and included           a review     of management controls,             administra-
tive    procedures,          and operations       of the Corporation's             OEO-
funded activities.               The audit     report     commented on (1) the
unauthorized           use of Government         vehicles     by Corporation         em-
ployees,       (2) payments by Health             Services,       Inc.,    for pre-
scriptions        filled      by private     pharmacies       for poor patients
participating           in the Comprehensive           Health     Services      Program,
and (3) staffing             of the Health       Services,      Inc.,    health
clinic      in Montgomery,          Alabama,     with part-time         physicians.
We did not make an evaluation                  of the effectiveness             of the
Corporation's           antipoverty      programs.



                                             4
       We reviewed    the Corporation          and Health     Services,   Inc.,
records   and interviewed        Mr. Milton       H. Magill;    Mr. Charles        -
Sheldon,    the former      executive     director     of the Corporation;
Mrs. Doris Robertson,         a former partner         in the certified
public   accounting     firm;    and other persons         associated   with
the Corporation      and Health       Services,     Inc.

       The Corporation,         a nonprofit     corporation,       was orga-
nized on October        15, 1965, to develop,          conduct,      administer,
and coordinate       antipoverty      programs     in Montgomery       County,
Alabama.    As    of   November    1970,    the   Corporation's       governing
board was composed of 48 members, of which 16 represented
the public     sector,     16 represented       the poor,       and 16 repre-
sented various       business     and community       organizations.         At
that time,     the Corporation        employed about 550 persons              to
administer     its programs.

      According      to the latest     data available       at the time of
our field    review,     39,830 families      were living      in Montgomery
County,    which had a total       population      of 163,000;     42 percent
of the families        had incomes of less than $3,000.              To assist
the poor of Montgomery         County,     the Corporation       at the time
of our review      was carrying     out activities       that were funded
by grants    of $2 million      by OEO for Community Action             Pro-
grams, $1.4 million         by HEW for the Head Start          program,      and
$1.4 million      by Labor for manpower training            programs.




                                          5
                                   CHAPTER 2


                 CHARGES RELATING TO ADMINISTRATION

             OF CERTAIN ACTIVITIES          OF THE CORPORATION

        AND ITS DELEGATE AGENCY, HEALTH SERVICES.                   INC.

PAYMENTS FOR ACCOUNTING SERVICES
CHARGED TO PRIOR PROGRAM YEAR

       Mr. Magi11 charged       that Health      Services,      Inc.,     had
made two payments        to a certified     public     accounting      firm
during    the program year which began July 1, 1969, but that
the payments were charged           to the program year which ended
June 30, 1969.        The payments consisted         of $1,500 in Septem-
ber 1969 for the preparation            of a personnel      policy     and pro-
cedures manual under a May 1969 agreement                with the firm and
$4,000 in December 1969 for an audit               of the activities          of
Health    Services,    Inc.,  for the program year which ended
June 30, 1969, and for assistance            in establishing          and im-
plementing      an accounting     system.

      OEO instructions          for Community Action      Programs provide
that payments may be made up to 3 months after                  the close of
a program year and may be charged              to that program year for
goods or services          that had been received      during     that pro-
gram year.        OEO officials     informed    us that the intent          of
this  instruction        is to deter OEO grantees       from spending          ex-
cess funds on hand at the end of a program year for goods
or services       that will     not be delivered     or provided      until
the following        program year.

         In May 1969, Health          Services,    Inc.,  entered   into a
verbal     contract   with a certified          public   accounting    firm to
prepare     a personnel       policy     and procedures    manual.     The firm
worked on the manual in May, June, and July 1969 and in
July 1969 provided         drafts      of the manual to the executive
director     of the Corporation           and to the coordinator       of
Health     Services,    Inc.,      for review.

       In August 1969, the firm submitted      a $1,500 invoice                 to
Health   Services,    Inc., for work performed    on the manual.
On September      30, 1969, Health  Services,  Inc.,   paid the


                                        6
invoice    with funds for the program year ended                        June 30, 1969.
During    November 1969, the firm,       at no additional                   charge,
performed     further     work on the manual to make                  it more com-
plete.     The    completed    manual was delivered       to            and accepted
by the Corporation          and Xealth Services,    Inc.,               in December
1969.

       In September   1969, Health        Services,     Inc.,    engaged the
firm to audit    its activities        for the program year ended
June 30, 1969.      In November 1969, Health            Services,      Inc.,
engaged the same firm to assist            it in establishing         and im-
plementing    an adequate     accounting       system and to provide          the
Corporation    and Health     Services,      Inc.,   with biweekly        prog-
ress reports    showing the extent         of implementation         of the
system and the problems         encountered.

        On December 5, 1969, the firm furnished                     the Corpora-
tion and Health        Services,     Inc.,    with the first            of four
progress    reports.       The firm9s      audit    report      to the Corpora-
tion was issued        on December 6, 1969.             The firm submitted
a $4,000 invoice        to Health      Services,      Inc.,     on December 11,
1969, which included          $3,600 for the audit             and for work per-
formed on the accounting            system and an estimate                of $400
for additional        work necessary       to test      the system in opera-
tion.     On December 15, 1969, Health              Services,         Inc.,       paid
the $4,000 invoice         with OEO program funds for the year
ended June 30, 1969.            The firm issued         additional          progress
reports    to the Corporation          and Health       Services,         Inc.,        on
December 22, 1969, and January               19, 1970.         In its final
progress     report    dated February        6, 1970, the firm reported
that the accounting          system and internal            controls        of Health
Services,      Inc.,   had been adequately           implemented.              In Octo-
ber 1970, both the coordinator               of Health       Services,           Inc.,
and a partner        in the certified        public     accounting          firm       in-
formed us that verbal           approval     had been obtained              from the
OEO Atlanta       Regional    Office     to use funds for the program
year ended June 30, 1969, to pay the $4,000 invoice.

       In November 1970, the coordinator             of Health    Services,
Inc.,   requested      OEO headquarters'      advice    as to how the
cost of an audit        of activities     for the program year which
began July 1, 1969, which was to be conducted                  in the follow-
ing program year,         should be funded.       OEO told Health       Ser-
vices,    Inc.,   that    audit    costs should   be   paid  from   funds    for
the program  year during        which the audit  services          were ren-
dered., even though the        audit might cover a prior           program
year.

        The OEO Atlanta     Regional     Auditor     informed       us in Decem-
ber 1970 that under OEO-prescribed               procedures      for Community
Action     Programs    the $1,500 and $4,000 payments               should have
been made from funds for the program year which began
July 1, 1969, instead         of from funds for the program year
ended June 30, 1969.          He stated,     however,      that he would
recommend to OEO that no adjustment               be made because Health
Services,      Inc. 's books for the program year ended June 30,
1969, had been closed         and that any funds left            over from
that program year had been reprogrammed                 for use during       the
following      program year.     He also said that he would in-
struct     the Corporation     and Health      Services.,     Inc.,     on how
transactions       of this  type should be handled            in the future.

        In our opinion,        the use of program funds for the year
ended June 30, 1969, to pay the $1,500 invoice                 for prepara-
tion of the manual was not an unreasonable               treatment    of the
transaction,        even though it was contrary       to OEO instruc-
tions,     because the manual was prepared        largely      in May and
June 1969.         However,    the $4,000 payment to the firm was for
audit     services    rendered    in the program year which began
July 1, 1969, and therefore            should have been charged as a
cost in that year.

EMPLOYMENT OF FORMER EXECUTIVE DIRECTOR
AS A CONSULTANT TO THE CORPORATION

        Mr. Magi11     charged    that the Corporation's    former   ex-
ecutive    director,     Mr. Charles     Sheldon,  was paid $100 a day
as a consultant        to the Corporation      when he was, in fact,     an
employee of the        University     of Alabama Medical   Center in
Birmingham.

       In August 1969, Mr. Sheldon resigned             his position   as
executive   director     of the Corporation        because he had ac-
cepted a full-time       position    with the University       of Alabama
Medical   Center,    which was to begin on October           1, 1969.    At
the request     of the Corporation's        executive    committee,   he
agreed to remain in the Corporation's              employment    in an an-
nual leave status      until     his 39 days of accrued       annual leave
had been used.       During     this period   of leave,    which ended on
November       9, 1969,        he     served       the   Corporation          in   the       capacity
of acting        executive          director.

        As of November          9, 1969,       the Corporation’s            executive
committee       had not selected            a new executive          director.         With
OEO approval,           the former      executive      director        was engaged        as
a consultant          to serve      on an “as needed”           basis      until     a new
executive       director       could    be chosen.         OEO’s approval            of his
fee as a consultant             was not required           because       the fee did
not exceed        $100 a day.         As a full-time          employee         of the Uni-
versity     of Alabama        Medical       Center,    the former          executive      di-
rector     obtained        the university’s         approval       to work as a paid
consultant        to the Corporation.

        The former      executive       director        worked    at the Corpora-
tion’s      office    in an acting        capacity        for  6 days in November
1969,     8 days in December           1969,      and 8 days in January           1970,
for    which      he was paid     $100 a day.           In addition,        he spent
5 days at the Corporationss                 office      during    this    period,    for
which     he received      no pay.        The     Corporation        subsequently      em-
ployed      a new executive        director        who began work on Janu-
ary 19, 1970.

MAINTENANCE          OF INVENTORY               RECORD CARDS
FOR MEDICAL          ITEMS

       Mr. Magi11     charged        that     inventory                record   cards         were
not being    maintained       by the Corporation                         for  medical         items
stored    in a converted        fire      station.

          OEO instructions              for    Community         Action      Programs         re-
quire      that     Community        Action      Agencies          maintain        inventory
records       on all       items     of equipment            in stock,         including          those
obtained        from      surplus       property       of other         agencies.           In March
1969,      the Corporation              obtained       OEO’s approval              to obtain
certain       medical        supplies        and equipment            at no cost          from      the
Job Corps         Center       at Camp Atterbury,                Indiana,        which      was in
the process          of being         closed.       The Job Corps              Center’s         trans-
fer     document       listed       181 units       of equipment,              involving          88
different         items,       and supply        items        (drugs      and medicines)
which      were not specifically                 identified.              The Job Corps             as-
 signed      costs     of about          $25,000     to the items            transferred.

         The    Corporation           stored   the items            in    an old      fire       station
that     had    been donated            to the Corporation                by the      city       of


                                                     9
Nontgomery       for     use as a warehouse.          In addi tion r medical
items    obtained        by the Corporation       from    surplus      stock     at
Maxwell     Air    Force     Ease) Montgomery,       Alabama,       were    stored         in
the warehouse         S The Corporation        did not establish            inventory
record    cards      for    any of the medical       items     stored     in the
warehouse      s

         The warehouse         was under      the custody          of a Corporation
official       who informed         us that     he kept      the warehouse        locked
except     when medical          items    were being       withdrawn     by Health
Services,        Inc.,     for   use in its      medical       program.      He in-
formed     us also       that    he approved      all    requisition       slips     for
medical      items     withdrawn       from   the warehouse.

       We made a physical            count    of the equipment         items       stored
in the warehouse          and summarized          the requisition         slips      cov-
ering   items    withdrawn         in an attempt        to account     for      the 88
equipment     items     received      from     the Job Corps       Center.         We
were able     to account         for   55 of the items         but could        not ac-
count   for   overages       in three      items     and shortages       in 30 items.

        A Corporation        official        informed      us that     some of      the
shortages     might      have been      attributable         to the failure           to
prepare    requisition         slips    for      all  items    issued.

        A Corporation         official    told     us that    the     drugs      and med-
icines      on hand in the warehouse             were worthless           and would        be
destroyed.          Also,   the Corporation’s         executive         director       told
us that      the equipment          items would     be screened,          unservice-
able    items      would  be destroyed,        and inventory          cards      would     be
prepared       for    the serviceable       items.

       The   OEO Regional      Auditor       informed     us that    inventory
records    for    the equipment       should      have been maintained          by
the Corporation       and that      he would       review     the Corporation’s
compliance      with  this   requirement          during    the next    OEO audit.




                                           10
                                     CHAPTER 3


                   ACTIONS TAKEN BY THE CORPORATION

                AND HEALTH SERVICES.           INC. a TO CORRECT

                DEFICIENCIES       REPORTED BY OEO AUDITORS

                                  IN APRIL     1970

          The OEO Atlanta           Regional     Auditor   made an audit        in Octo-
ber and November 1969 of the Corporation's                        OEO-funded         ac-
tivities.          The audit        report    dated April     6, 1970, revealed
deficiencies           in (1) the use of Government              vehicles     by Cor-
poration        employees,         (2) payments by Health         Services,        Inc.,
for prescriptions             filled       by private    pharmacies      for poor
patients        participating          in the Comprehensive         Health     Services
Program,        and (3) staffing            of the Health     Services,      Inc.,
health      clinic       in Montgomery,        Alabama,    with part-time         physi-
cians.

       The results  of our inquiries    into the corrective                      ac-
tions   taken by the Corporation     and Health   Services,                   Inc.,
through    November 1970 are discussed      in the following                    sec-
tions.

USE OF GOVERNMENT VEHICLES

       The OEO audit   report   stated            that Government   vehicles
were being used by employees         of         the Corporation   and of the
delegate    agency for unauthorized               transportation  to and
from their    homes and that usage              logs were not maintained     on
the vehicles.

        At the time of the OEO audit,        the Corporation      had is-
sued instructions      requiring   all drivers        to maintain  motor
vehicle    usage logs showing odometer          readings   for all trips
made.     Because the Corporation      did not have a motor pool or
a parking     area for its vehicles,      staff     members were allowed
to keep assigned      vehicles   at their    homes overnight.

         The Corporation      responded  to the audit   report    in a
letter     dated May 22, 1970, to the OEO Atlanta          Regional    Of-
fice.      The letter    stated    that (1) the maintenance     of a usage


                                          11
log for,each      vehicle     had been instituted,     (2) all     employees
to whom vehicles         were assigned    had been instructed       on the
proper    method    of maintaining     the log and that       it should    be
submitted     upon completion       of each trip,  and (3) a permanent
file    was being    maintained     on the use of each vehicle.

          In July       1970,     the Corporation          established             four     motor
pools       and issued        instructions        requiring         that       after      working
hours       all    vehicles      were to be parked            in spaces            available         at
these       pools e The instructions                provided        that       vehicles,         when
needed        at night,       could      be obtained       only    after         a vehicle         re-
quest       form,     stating       the reason      for    which      the      vehicle         was
needed)         had been approved           by a program          or staff           director.

         At the time          of our review,             the Corporation            had 87 sur-
plus     Government         vehicles        of various          types     which     were used
in the operation              of its      programs.          These vehicles            had been
acquired        from     the General          Services       Administration            during        the
previous        4 years.         The Corporation             had no written            procedures
for     determining         its    vehicle        requirements.            Its    practice         was
to review         General       Services        Administration            surplus      vehicle
listings        and to verbally             check with         program       directors        to
determine         whether       a vehicle         was needed         and,    if so, to pre-
pare     a transfer         property        form and submit             it to OEO for           ap-
proval      .   OEO instructions              for    Community        Action      Programs
provide       that     procurement          of surplus         Government         vehicles         by
Community         Action      Agencies        does not require             a written        justi-
fication        of need.

         We reviewed        vehicle       request       forms      and usage       logs     for
43 vehicles--29            sedans,      eight      pickup      trucks,       and six sta-
tion     wagons--that          were used during             a l-week       period      in Sep-
tember      1970.      Although       the Corporation              had instituted           pro-
cedures      intended        to control        the use of Government                 vehicles,
we found       that     (1) vehicle         request       forms     were not used by
three     of the four          motor    pools,       (2) vehicle         request       forms
used at the fourth              motor     pool     did not show the justification
for use of six vehicles,                   (3) usage        logs were not available
for     15 vehicles        used during         this     l-week      period,       and (4)
written      authorizations           were not obtained               by drivers         of
three     vehicles       that     were taken         home overnight           on a total         of
10 occasions.




                                                   12
        In December       1970,      Corporation          officials         told    us that
they   had not tested          compliance         with      the new vehicle             control
procedures     since      the motor        pools      were established              in July
1970 D They said          that    training        their       employees         to fill      out
the vehicle      usage      logs was a constant                 educational         process.
They agreed      that     all    motor     pools      should        be using      the vehi-
cle request      form     and stated         that     written        procedures         would
be established        for     acquiring        needed       vehicles.

        The Corporation’s            executive       director        told    us in Decem-
ber 1970 that          he would      take    action      to ensure        that    (1) em-
ployees        were  instructed        on the prescribed             procedures        for
use of vehicles,             (2) vehicle       usage     logs    were properly           main-
tained       and reviewed,       (3)    vehicle      request       forms     were    prop-
erly    filled      out and used by all             motor     pools,      and (4) a re-
view of the Corporation’s                 vehicle      requirements          was made.

        The OEO Regional              Auditor    told   us that            he would   provide
for   a review   of these             procedures      in OEO’s            next review    of
Corporation    activities.

PHARMACY PROGRAM

         The OEO audit           report     stated      that      a certified           public
accounting          firm    had audited         2,941     payments         by Health         Ser-
vices,      Inc.,       to private      pharmacies          for     prescriptions            and
had found         that     429 prescriptions            erroneously            included        a
professional            fee on nonlegend           drugs      (drugs       not requiring          a
doctor’s       prescription).             It stated         further        that      the firm
had found         that,     in some instances,              the pharmacies              had re-
filled      prescriptions            a greater       number       of times         than    speci-
fied     by Health         Services,      Inc.,      physicians.

         On July         26, 1968,        Health       Services,         Inc.,       awarded       a con-
tract      to Pharmacy           Services,         Inc.,      for     administration             of a
pharmacy        program        which      provided        that      prescriptions            for    leg-
end and nonlegend                drugs      from     Health        Services,         Inc.,     physi-
cians      could      be filled          by participating               pharmacies         which      in
turn    would       bill      Health       Services,        Inc.        Under      this    contract,
the pharmacies              received,         as a fee,         an amount          equal     to 50
percent       of the cost            of items        not requiring             a physician’s
prescription             (nonlegend)          and a $1.25           professional           fee for
each item requiring                  a prescription              (legend).           The Health
Services,         Inc. , physicians              used prescription                 forms     as a
means of authorizing                   the patient’s            purchase         of nonlegend


                                                   13
drugs.        On September      1,        1969,   the       contract     was amended     to
provide       for a professional              fee of        $1.65    for  each prescrip-
tion    item.

        The certified            public  accounting       firm engaged  by Health
Services,     Inc. 9 to          make an audit      of its activities    for the
program    year     ended        June 30, 1969,      reviewed   the pharmacy    pro-
gram and found that professional                         fees of         $1.25 were errone-
ously charged by participating                        pharmacies          for nonlegend
drugs.        The accounting         firm      reported      these    erroneous
charges,       which   involved         bills       for 429 of 2,941          prescrip-
tions      examined)     to the OEO Atlanta              Regional       Office       in Decem-
ber 1969.         At the request             of OEO, the firm         extended          its
audit      to include,      on a statistical-sampling                  basis,        bills
for    all    24,166   prescriptions             filled    at a cost        to the pro-
gram of $99,653          during      the program         year     ended June 30, 1969.

       This    extended          audit   revealed     additional     overcharges       on
the basis      of which          we estimated     that     the overcharges
amounted     to about           $1,900   on the approximately          2,500   nonleg-
end prescriptions               during   the program       year.

         For       the program         year     which       began July        1, 1969,        the
Health         Services,        Inc.,      approved         budget        for the pharmacy          pro-
gram totaled             $120,640.          As of October               31, 1969,      Health      Ser-
vices,         Inc.,     had disbursed            $68,000        and was committed              to pay
another          $81,000      for     outstanding           prescriptions          which      allowed
for    refills         by pharmacies.              Because         of this      anticipated         bud-
get overrun,             Health       Services,         Inc.,      recalled       all    outstand-
ing prescriptions                 which     allowed         for    refills      by pharmacies
and canceled             the program          effective          December       31, 1969.          As
of that          date,     Health      Services,          Inc,     had disbursed          $99,461.

        On January       1, 1970,        Health       Services,        Inc.,    revised      its
procedures        to require       all     prescriptions            to be filled        by the
Health     Services,       Inc.,     in-house         pharmacy.          The new proce-
dures    provided,       however,        that     prescriptions           could    be filled
by private       pharmacies        in emergency            situations        or when the
Health     Services,       Inc.,     pharmacy         did not have a prescribed
item.      From cancellation             of the program             on December        31,
1969,    through     July      31, 1970,        payments         to the pharmacies
totaled      $3,850.

         For      the program     year which            began      August   1, 1970,
Health         Services,    Inc.,    budgeted           $6,000      for   emergency


                                                 14
prescriptions      and as of       September     30, 1970, had disbursed
$1,382 for this        purpose.      The professional      fee paid for
each legend prescription            was reduced     to $1.50 and the pol-
icy of allowing        refills     of prescriptions      in emergency   situ-
ations     was discontinued.

      Our review   of the bills   for 10 percent    of 310 prescrip-
tions  filled   by private  pharmacies  during    August and Septem-
ber 1970 revealed     no payments of professional      fees for non-
legend drugs e

STAFFING OF HEALTH CLINIC
WITH PART-TIME PHYSICIANS

      The OEO audit     report         stated    that Health  Services,    Inc.,
had not employed enough            full-time       physicians to completely
staff  its health   clinic         and that the resultant       use of part-
time physicians   was more           costly    than employing   the neces-
sary number of full-time             physicians.

       At     the time of the OEO audit             in October       1969, the
Health      Services,      Inc.,     budget for the program year which be-
gan July 1, 1969, provided                funds for the employment              of six
full-time        general    physicians       and the services          of medical
specialists        for a total        of 4 hours weekly.           Also included
were funds adequate              to operate     the health     clinic      between
the hours of 7:30 a.m. and 8:30 p.m.,                     5 days a week.           In
practice,        however,     Health     Services,     Inc.,   was able to em-
ploy on a full-time              basis only two general          physicians        who
worked from 7:30 a.m. to 4:30 p.m. each day and used the
funds programmed for the other                  four full-time         physicians
and the medical           specialists       to pay part-time         general      physi-
cians from Maxwell Air Force Base to operate                         the health
clinic      from 4:30 p*m. to 8:30 p*m.

       Recognizing   the need to maintain          essential      services
and because Health      Services,     Inc.,   had been unable          to em-
ploy a sufficient      number of full-time         physicians,       the OEO
Office   of Health   Affairs,     Washington,      D.C.,     in January     1970
approved    the employment      of part-time      physicians.        In Feb-
ruary   1970, Health    Services,     Inc.,   to reduce the cost of
using part-time     physicians,     lowered     the hourly      rates    paid
to the part-time     physicians     from $25 to $15.




                                          15
        In response       to the OEO audit         report,         the Corporation
informed       OEO on May 22, 1970,         that     Health        Services,        Inc.,
had been unsuccessful            in its   attempts         to hire       more full-
time    physicians      and, because      the clinic          was to remain             open
from    7:30    a.m.  to 8:30 p.m.       each day,         part-time         physicians
would     have to be used.         On July      10, 1970,          the OEO Regional
Deputy     Director     informed    the OEO Regional               Auditor      that      the
Corporation’s        explanation       on this     matter        was adequate          and
that   he considered         the audit    point      closed.

          Our follow-up           of this   matter     in November       1970 indi-
cated      that      Health      Services,    Inc.,    would  have to continue
using      part-time         physicians.        The Health    Services,       Inc.,      co-
ordinator          informed       us that   he had contacted         two universi-
ties,      advertised          in two national        medical  journals,        and cor-
responded          with     1’2 physicians      in an attempt      to employ        more
full-time          physicians        but that     his efforts    had been unsuc-
cessful.
APPENDIX
----




 17
                                                                                                                APPENDIX   I




Mr.    Elmer      B.   Staats
Comptroller          General    of    the               United         States
General       Accounting       Office
441     G Street,        N. W.
Washington,          D. C. 20548

Dear        Mr.        Staats:

           One of my constituents,                     retired        Air      Force       Major     Milton
H. Magill,         was   employed         as Office           Manager        for     Health       Services,
Inc.,    which        is a delegate           agency        of   the     Montgomery            Community
Action     Agency,       Montgomery,            Alabama.           Major       Magi11       has     made
certain      allegations          involving          the      management           of MCAC and
Health     Services,        Inc.,       which       I shall        appreciate            your     investi-
gating.

                  Specifically,             I   would       like       for      you   to   look     into           the
following              allegations:

                  1.       A Certified            Public     Accountant          was paid       $1,500
                           in September             1969   for    writing        a procedures
                           manual       which       has  not    been      prepared,       and    which
                           was    charged         to program        year      B, which      ended
                           .Iune    30,     1969.

                  2.       A voucher         for   $4,000            was     paid     in December           1969
                           and was       charged       to        program         year    B.

                  3.       The CPA firm          did      not     maintain          its    independence
                           since      one of     the      firm's        partners         audited        and
                           certified      MCAC's          financial           statements          and     was
                           performing        duties          of MCAC employees                 at   the     same
                           time.

                  4.       Mr.       Charles       Sheldon,      former     MCAC executive
                           director,           is being     paid       $100  per    day  as           a         con-
                           sultant          when    he is,    in     fact,   an employee                   of       the
                           University            of Alabama        Medical     Center    in
                           Birmingham.




                                                            19
APPENDIX I




   I4r .    Elmer        E.     Staats                                 -2-                      September                25,      1970




                    5.    Inventory              and      stock     record      cards      are             not         being
                          maintained               for      medical       items     stored            in         a     con-
                          verted         fire        station.

                    X shall          appreciate            your         also    investigating                    any      related
   activities             in       the    management              of      MCAC.

                With           kindest          regards,          I     am


                                                                                   Sincerely          yours,




                                                                                  WM.     L.     DICKINSON



   WLD:bg




                                                                                                                           U.S.     GAO   Wash.,   D.C.


                                                                        20