Financial Records and Documents of National Organizations Supporting Antipoverty Work

Published by the Government Accountability Office on 1977-10-07.

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

                         DCCUMENT FESUME               /

03964 - [B2834082)
                 (fs                              /7
Financial Records and Documents of National Organization:
Supporting Antipoverty Work. HRD-77-158; B-130515. October 7,
1977. 3 pp. + 2 appendices (41 pp.).

Report to Rep. Cardiss Collins, Chairman, House Committee on
Government Operations: Manpowe-. and Housing Sutcommictee; by
Elmer B. CStaats, Comptroller G neral.
Issue Area. Income Security Programs: Program Non:.toring and
    Administration (1303).
Contact: Human Resources Div.
Budget Function: Education, Manpower, and Social Services:
    Social Services (5C6).
Organizaticn Concerned: Community Services Administration;
    National Center for Community Action.
Congressional Relevance: House Committee on Government
    Operations: Manpover and Housing Subcommittee.

          The Community Services Administration (CSA) needs to
increase control over grantee fundE going to ncngrantee
organizations whose purpose is to support the Government's
antipoverty effort. Findings/Conclusions: Review of the
financial records and documents of five national organizations
that are not Federal grantees and the National Ctnter for
Community Action, a private nonprofit organization that is a
grantee of CSA, showed that: some CSA -rant funds were
ultimately channelled into the lobbying organizations; the
financial and administrative activities of the six organizations
were closely controlled through interlocking directorates and
executive positions; the financial controls necessary for the
prudent expenditure of funds were not maintained for the
nongrantee organizations; and no mechanisms were in use to
evaluate the worth of nongrantee organization functions to the
antipoverty effort. Recommendations: The CSA should establish
basic operational criteria for adoption by nongrantee
organizations that indirectly receive CSA funds requiring:
published annual audits by certified public accountants,
mechanisms for the CSA to assess the l.erformance and
contribution of organization functions to the antipoverty
effort, clear and concise records cf travel and other
organizational expendi-tures in support of community action
agencies' efforts, and provision fcr Federal access to records
of the organizations. CSA should withhold approval of financial
support by grantees of any organization not in conformance with
its operational criteria. (SC)
 B0Y tho Oifie     cof

· W,REPORT OF THE     /                                      /

         Financial Records And Documents
         Of National Organizations
         Supporting Antipoverty Work
         The Community Services Administration
         needs to increase control over grantee funds
         going to nongrantee organizations whose
         purpose is to support the Government's anti-
         poverty effort. Procedures should be set up
         to prevent grantees from financially support-
         ing organizations that do not
                 --keep adequate financial records,

                 -- obtain annual audits by certified pub-
                   lic accountants,
                 --provide Federal access to records, or

                 --adopt procedures for evaluating the
                   contributions of the organizations to
                   the Governments antipoverty effort.

         HRD-77-158                                          OCTOBER 7,1977
                            WASHINGTON. D.C.   Z0114


The Honorable Cardiss Collins
Chairw4oman, Subcommittee on
Manpower and Housing, Committee
on Government Operations
House of Representatives

Dear Madam Chairwoman:

     In response to your letter of May 2, 1977, we have
completed our review of the financial re.or¢ 3 and 6ocurents
uf five national organizations that are not Federal
grantees and the Naticnal Center for Community Action, a
private nonprofit organization that is a grantee of t.e
Community Services Administration.   The stated purpose of these
organizations is to support the community action program
through training, technical assistat,ce, lobbying, or related
activities or a combination tnereof.

     Primary support for three nongrantee national organi-
zations comes indirectly from the Community Services Admin-
istration througn membership dues and registration fees
paid by the Community Services Administration supported
members and from the Community Services Administration
funded travel to organization functions.   Two other
nongrantee organizations were lobbyists funded through
contributions.   The results of our review are described
in appendix I.

     Records of one organization and the Center
nished voluntarily; the records of the other fourwere fur-
organizations were obtained by Committee subpoena. The
records were incomplete in many respects and required sub-
stantial reconstruction for financial audit.   Information
necessary to evaluate the effectiven;ess of the organizations'
functions in supporting community action objectives was not
generally a matter of record

     rJe were able to determine that

     --some Community Services Administration grant funds
       were ultimately channelled into the lobbying

     --tne financial and administrative activities of
       the six organizations were closely controlled through
       interlocking directorates and executive positions,

     --the financial controls necessary for the prudent
       expenditure of funds were not maintained for the
       nongrantee organizations, and

     -- no mechanisms were in use to evaluate the wortn of
        nongrantee organization functions to the antipoverty

      Recognizing that there was a neied for closer Federal
cor.Lrol over the activities of noigr:n ae organizations,
the Director of the Community Serv ces Administzation proposed
new r    latio;s that would prohibit its grantees from
usin:g i. ds fo. membership dues and out -of-state travel to
functions of these organizations without prior Community
Services Admi ilstration approval, and prohiit peyroll
deductions for volurntary contributions to '),oyinq organ-
izations.   Pending implementation of tnese regulations
and needed changes in the management of these organizations,
the Community Service; Administration placed a moratorium
on further use of grant funds to support the organizations.
(See app. II.)

     We are recommending that the Community Services Ad-
ministration establish basic operational criteria for
adoption by nongrantee - rgan.z a t ions that indirectly
receive Community Services Administration funds requiring

     -- published annual audits by certified public

     -- mechanisms for the Community Services Administration
        to assess the performance and contribution of
        organization functions to the antipoverty

     -- clear and concise records of travel and other
        organizational expenditures in support of community
        action agencies' efforts, and

     -- provision for Federal access to records of the

The Community Services AdminiEtration should withhold ap-
proval of financial support Dy grantees of any organization
not in conformance with its operational criteria.


     At the Subcommittee's request, the information presented
in appendix I was not provided for comment to officials of
the nongrantee orgarnizations, the Center, or the Community
Services Administration. We did discuss information in ap-
pendix I that was not generally a matter of official records
received voluntarily or in response to the Committee subpoena
with agents or officials of these organizations, and considered
their views in completing our report.

     This report should be made available by the committee
to the D.partment of Justice for consideration in its ongoing
investigations. As arranged with you;r Office, unless you
publicly announce its contents earlier, we plan no further
distribution of this report until 30 dals from the date of
the report. At that time we will send copies to interested
parties and make copies available to others upon request.
The records furn:-hed tc us pursuant to subpoenas issued
by the Committee on Govern
                         1 ent Operations are being returned
to the Committee under separate cover.

                               S'.ncerely yours,

                              Comptroller General
                              of the United Stetes

APPENDIX I                                          aPPENDIX I



   There are six organizations currently in existence
which were created with the principal objective of
supporting the community action program through such
activities as providing: (1) training, technical as-
sistance, continuing education, and information exchange
to individual members and community action agencies;
(2) a focal point for lobbying efforts regarding anti-
poverty legislation; and (3) a mechanism by which commu-
nity action agencies can influence Community Services
Administration (CSA) policy decisions impacting on
the antipoverty effort.


     The National Center    for Community Action is a CSA
grantee with the stated purpose of provi
                                       gT assistance
to community action agencies and related organizations
through research, information, training, and technical
services.  During the 2-year period ending in March
1977, the Center received CSA grant funds totaling
almost $1.2 million.  In testimony before the House
Government Operations Subcommittee on Manpower and
Housing in March 1977, CSA indicated that the training
and technical assistance provided to community action
agencies by the Center has been of "considerable benefit,"
particularly in recent years when the agency's appro-
priations have been limited for such services.

     The National Community Action Agency Executive
Directors Association  s a prossiona    association
whose membership is limited to executive directors of
community action agencies. The organization's objectives,
as identified in its bylaws, include providing a
mechanism for continuing education and information
exchange for members and for serving as a mea1 ns by
which community action agencies can influence CSA's
antipoverty efforts. while the Directors' Association
is not a direct CSA grantee, the agency permits use
of community action agency grant funds for membership
dues, registration fees, and travel costs connected
with association functions.

    The  National Association for Communit  Development
is a general membership professional organization
established with the stated objectives of encouraging,
promoting, and stimulating community development of
human resources. As such, it conducts workshops and
APPENDIX I                                       .PPiNDIX I

training seminars at its annual convention and during
the year at various locations throughout the country.
The Association maintains two types of memberships--indi-
viduals and community action agencies. Like the Directors'
Association, the Association   for Community Development
is not a direct CSA grantee; however, CSA permits use of
grant funds for agency memberships and for registration
fees and travel costs incurred by community action
agency employees to attend association functions.

     During the March 1977 hearings, CSA estimated that as
mucn as $750,000 of CSA grant funds are spent annually
by community action agencies to support employee partici-
paticn in the activities of the Directors' Association
and Association for Community Development. CSA also stated
during the hearings that the services of the two associations
are of great value and that they provide training and
workshops which are responsive to the needs of community
action agencies.

     There are three national organizations in addition to
those identified above which weLe created to support the com-
munity action program. Two of these--the National Community
Action Trust Fund and Communities in Action Toqether--are
lobbying organizatiens funded through voluntary contributions
and as such are prohibited from directly or indirectly recei-
ving Federal funds. The National CAA Legislative Forum
is an organization established Ey the Directors' Association
and Association for Community Development to prepare
proposed antipoverty legislation. The Forum is funded
primarily through registration fees for its meetings.
Such fees may be paid from CSA funds.


     Financial records and documents pertaining to four of
the five organizations which are not CSA grantees were
obtained pursuant to subpoenas issued by the House Committee
on Government Operations.  Records of the Center and an-
other organization were furnished voluntarily.  The records
furnish     ed      that the accounting procedures and
practices followed by these organizations were, in many
instances, nut adequate for audit.

     The Association for Community Development's accou-.t-
ing records and related documentation were insufficient
to permit identification of the sources of receipts,
particularly the mrgn tude of funds derived from CSA
grants.  The records dId not contain sufficient infor-
mation for verification of all expenditures, particularly

APPENDIX I                                       APPENDIX I

those related to salaries and       travel.

     Basic accounting records requested in the subpoe-
nas were not provided by the National Community Action
Trust Fund or by the National Legislative Forum for the
period when the current president of the Directors'
Association was Forum Chairman. As a result, it was ne-
cessary for the organizations to request their banks
to furnish copies of checking account receipt and dis-
bursement documents in order to develop partial analyses
of financial activities, and the supporting documentation
for the transactions of both associations was incomplete.
Regarding the Trust Fund, comparison of gross annual
salary schedules with payroll checks indicated that
Federal taxes are not withheld from employees' pay.  The
record of disbursements indicated no payments to the
Internal Revenue Service and no withholding forms were
provided in response to the subpoena.

     While the a-countinq records and related docuw  r.ts
furnished by the Directors' Association for 1975 to 1977
were substantially complete, the association could not
locate the 1974 records requested in the subpoena.   Ac-
cording to the attorney for the Directors' Association,
the Association had considered applying for tax-exempt
status as a nonprofit corporation in 1974, but did not
formally apply at that time.  Three years later questions
were raised by CSA and the Association concerning the
Association's tax status. There was also no evidencL
in the financial records that the organization had filed
Federal income tax returns for the past 2 years, and
to the knowledge of the Association's attorney none have
been filed.

     The documents furnished by the nongrantee organizations
pursuant to the Committee's subpoenas do not contain
information necessary to assess the nature and value
of the services provided by the associations to the com-
munity action programl. Evaluative material on the benefits
derived from annual conventions, such as participants'
assessments describing the objectives and accomplishments
derived from official travel, were not provided.   ased
on CSA estimates and a review cf the financial records
provided, substantial CSA grant funds are expended in
support of membership dues, registration fees and related
participants' travel costs in connection with annual
conferences, and travel costs of officers of the two
principal nongrantee organizations that were not avowed

APPENDIX I                                      APPENDIX I

     At the March 1977 hearings, a CSA official testified
that CSA has not reviewed the financial records of the
five nongrantee organizations because there may be a
question of propriety and right of access. He also indi-
cated that the agency has no formal mechanism for evalu-
ating association sponsored conferences and seminars
attended by CSA employees.

     CSA's policy of not reviewing the financial acti-
vities of organizations which indirectly receive grant
moneys contrasts with the agency's oversight of the fi-
nancial activities of direct grantees, many of which
are funded at levels lower than the amount of grant funds
CSA estimates are expended in support of the Directors'
Association and the Association for Community Development.
CSA requires such grantees to be audited annually by
certified public accountants, and reviews the audit reports
for compliance with agency regulations. Since CSA esta-
blished the regulation permitting grant funds to be
expended in support of the activities of the nongrantee
organizations, it could also revise the regulation to
condition 3uch support on access to their financial records.
CSA could also establish a mechanism requiring formal
evaluations by agency employeec attending association spon-
sored conferences and seminars.


      In January 1976 the president of the Directors' Asso-
ciation, before a meeting of the Association's Board
of Directors, defined the roles of the Association for
Community Development, the Center, ti-e National Legislative
Forum, and the Directors' Association. The Board accepted
the definitions and proceeded to develop and adopt the
following crganization chart (see p. 5) depicting the
relatioinships among the organizations, during which dis-
cussion centered around the reporting requirements of the
Association for Community Development and the Center to
the Directors' Association Board of Directors.

     The records furnished by the organizations refleLt
mutual leadership responsibilities in the Board of
Directors and executive positions.

     --The president of the Directors' Association was a
       rember of the board of directors of the Association
       for Community Development and the Center (a CSA
    -- The president of the Association for Community
       Development was on the board of directors of the
       Directors' Association.

APPENDIX I                                                                 APPENDIX I

                                .ASSOCIATION         F         1   ASSOCIATION FOR

         DIRECTORS          NATIONAL                         LEGISLATIVE
 ASSOCIATION                 CENTER                            FORUM
 COMMITTEES                  CENTER        I I           I     FORUM

NOTE: Trust Find was organized subsequent
       to development of this chart by the
       Directors' Association and the
       Association for Community Development.
                                                              IN ACTION

                                  ASSOCIATIONS AND


APPENDIX I                                         APPENDIX I

     -- The presidents of the Directors' Association and the
        Association for Community Development were also the
        president and treasurer, respectively, of the
        National Community Action Trust Fund, an organization
        created by coordinated action of the officers of the
        two associations for the purpose of engaging in
        lobbying activities pertaining to antipoverty

     -- The secretary-treasurer and two vice presidents of
        the Association for Community Development served on
        the board of directors of the Trust Fund, as did two
        members of the Directors' Association board of

     Communities in Action Together is a corporation which
was set up by the Directors' Association to engage in
lobbying activities. The National Legislative Foruin--esta-
blished to prepare proposed antipoverty legislation--was,
according to its recent past chairman, controlled by the
Directors' Association, the Association for Community
Development and the Trust Fund.

     In September   1976 and March   1977 the Center   began
providing office space and administrative support from CSA
grant funds to the Directors' Association and the Trust Fund,
respectively. CSA has advised the Center that it will dis-
allow expenditures of any Center grant funds to support the
Directors' Association and the Trust Fund (an avowed lob-
bying organization). As of September 15, 1977, both organ-
izations were still occupying Center office space. The
Center was attempting to recover the costs of its support
from the Trust Fund and had asked the Trust Fund to vacate
the Center office space.

     In addition there were a number of interassociation
fund transfers, including two loans of $5,000 each from
the Directors' Association and the Association for Community
Development to the lobbying associations and loans totaling
$1,400 from the Forum to Communities in Action Together.

     The National Community Action Agency Executive Direc-
tors Association is a national organization whose membership
is limited to executive directors of community action
agencies. The Directors' Association, which was established
in 1971, has the stated goals of providing for continuing
education and information exchange for individual
members, a vehicle for presenting problems and alternatives
related to the antipoverty effort to CSA officials, and

APPENDIX I                                       APPENDIX I

a means by which community action agencies can have an
impact on policy decisions affecting their constituency.

     The Directors' Association is governed by an 18 member
board of directors comprised of the 7 association officers,
10 regional representatives, and a representative oZ the
National Association for Community Development.  The officers,
which consist of the president, three vice presidents, the
secretary, the treasurer, and the immediate past president,
are elected by the membership for 2 years and can serve
no more than two consecutive terms in the same office.
The regional representatives are selected by the respective
regions for 1-year terms and can serve no more than three
consecutive terms. The president is the chief executive
officer and has the responsibility for presiding at all
meetings of the Association and its Board of Directors.
He also appoints the chairpersons of all committees and
most of the standing committee members, subject to approval
by the Board.

     Membership dues received by the Association during the
operating year ending April 1977 indicate that about 520, or
60 percent of the directors of community action agencies are
members of the Association.


     CSA permits use of grant funds for membership dues,
registration fees, and travel to Association functions,
which include the annual conference and quarterly board
meetings.  While the financial records obtained pursuant to
the Committee's subpoena do not permit a precise estimate
of the magnitude of CSA funding involved, total receipts
by the Association for the 1977 operating year were almost
$100,000.   pc.,tlse a substantial portion of the moneys
received were from membership due- (almost $26,000) and
annual conference registrations (about $55,000)--both
of which may be reimbursed from CSA grant funds--CSA
funds comprise a majority of the Association's annual
receipts. The balance of moneys received was primarily
from conference exhibitors and advertisers. Furthermore,
unofficial CSA estimates, based on estimated conference
attendance and average travel costs indicate that an
additional $200,000 of travel costs for conference parti-
cipants may be reimbursed by individual community action
agencies from CSA grant funds.

     Because financial records of individual community
action agencies were not reviewed, the amount of CSA
grant funds expended to support members' travel and re-
lated costs to attend board of directors meetings could

 APPENDIX I                                        APPENDIX I

 not be determined.  However, such meetings are held at least
 quarterly in various locations in the country and are
 tended by most board members. For example, during the
 ended September 1976, Directors' Association board
 were held in Washington, D.C.; Fresno, California-
 Tennessee; New Orleans, Louisiana; Detroit, Michigan;
 Hartford, Connecticut and were attended by an average
 15 members.


     Disbursements by the Directors' Association during
1977 operating year totalled about $88,000, of which
S66,000 was related to the annual conference.  Of the remain-
ing $22,000 of disbursements, more than $12,000 was
travel during the period by the president of the Associatioi.

     The annual conference was held in Atlantd, Georgia,
ing October 1976 and was attended by about 1,000 participants.
About $24,500 was paid to the hotel hosting the conference
and was comprised of expenses for dinners and luncheons
of about $20,000, gratuities of about $2,600, exhibit
rental of $900, liquor and hospitality of $551, and
laneous expenses of about $400.

      According to the treasurer of the Directors' Associ-
ation, a further disbursement was made to the hotel
August 1977, after the period covered by the Committee
subpoena.   The expenses incurred by the Association re-
lated to conference bills furnished in response to
subpoena which totalled about $2,300, and were primarily
for room charges of about $2,100 and liquor and hospita-
lity of almost $200. While the nature of about $1,100
of charges transferred from one room to another could
determined from the records, the expenses were apparently be
charged to the president's room and presumably included
lodging.   The remaining room charges of about $1,000 con-
sisted primarily of restaurant expenses of almost
and individual room rental for the conference consultant
of almost $300.

     Of the remaining disbursements of about $41,000 for
convention, about $37,000 was paid to a consultant
to the board of directors by the president and retained
organize and manage the conference.  There was no evidence
in the minutes that the board had considered any other
organizations to manage the conference. While the consultant
expenses had been offset to some extent by about $15,000
iin receipts from conference exhibitors and advertisers,
a number of these were Federal and community action agencies
and state community action associations.

APPENDIX I                                       APPENDIX I
     The disbursements of about $12,000 for travel by the
president of the Directors' Association covered the 14-month
period from October 1975 to January 1977. Durinc the period,
the president made over 40 trips and was in travel status
for 137 days, or about 43 percent of total available work
days and 31 percent of total calendar days. In uany in-
stances, expense receipts were missing or incomplete.

     During the period from April 1976 to January 1977,
when the president made 19 trips, the Directors' Asso-
ciation treasurer noted 16 instances where expense
statements submitted did not contain required certifi-
cations and original signatures. For example, the president
traveled to Puerto Rico in January 1977 to attend the
inauguration of the Governor and to visit a local community
action agency. The expense statement submitted to the
Directors' Association for reimbursement contained neither a
certification n~r an original signature. While the expenses
claimed and reimbursed amounted to about $366, Including
$310 for accommodations, the Association treasurer computed
the allowable expenses at $175.  Regarding six other trips,
the treasurer's computations of allowable expenses on a per
diem basis were s.gnificantly lower than those claimed;
in five cases the differences were between $35 and $68
and in the sixth the difference was almost $230.

      .n several instances the president did not request
ieimi irsement from the Association for airfare. Because
the records of his local community action agency were not
reviewed, it could not be determined whether the airfares
were reimbursed from local CSA grant funds. Examples in-
clude the Puerto Rico trip discussed above, the Atlanta
Conference, and a November 1975 trip to the Virg.n Islands
to attend the Tenth Anniversary of a local community
action agency. Regarding the latter trip, the president
was reimbursed by the Association for accommodations
and meals of about $200, but did not request reimbursement
from the Association for the airfare of about $550.

     There is no evidence in the documentation furnished of
controls over travel of the Association president, such as
review and approval by the board of directors of proposed
travel itineraries supporting available budgets. Finally,
while the position of president is uncompensated, CSA
funds the president's salary as executive director of a
community action agency and is therefore indirectly sup-
porting Directors' Association activities during those
workdays he is absent from the local agency on Association

APPENDIX I                                      APPENDIX I

     Directors' Association bylaws specify that each dis-
bursement of funds requires the signature of the treasurer
and the president or officer performing the duties of the
president. The Association's primary checking account is
maintained in Los Angeles, California, where the current
treasurer is an executive director of a community action

     In early 1977 the Association opened another checking
account in Washington, D.C., in connection with activities
of the Association office funded by the National Center
for Community Action discussed below. Disbursements from
this account during the 5-month period ended in May 1977
totalled about $960 and were primarily for meeting expenses
of $830.
     Deposits to the Washington, D.C., account during the
period amounted to about $1,900 and were derived primarily
from registration fees for the quarterly board of directors
meeting of almost $900 and from sales of Association products
of about $800.  The products, which include T-shirts, bumper
stickers, cuff links, lapel pins, and paperweights were
similar to those sold at the annual convention and were
acquired from the conference consultant.

     The motion adopted by the Board authorizing establish-
ment of the account specified it was a fund-raising account
for deposit of receipts from the sale of products. The
motion did not authorize deposit of meeting registration
fees or disbursements for meetings and other expenses,
nor did it constitute an amendment to the bylaws regarding
required signatures on disbursements. Nevertheless, checks
were drawn on the Washington, D.C., account for such ex-
penses and were signed by the president and a member of the
staff of the Washington, D.C., office, rather than by the
treasurer as required in the bylaws.
     According to the attorney for the Directors' Asso-
ciation, the Asscciation had considered applying for
tax-exempt status as a nonprofit corporation in 1974,
but did not formally apply at that time. Three years later
the president of the Directors' Association, apparently in
conjunction with questions raised by CSA on the Associ-
ation's relationship with the Trust Fund (see p. 28), asked
the Association's attorney for his opinion on the impact
this relationship might have on its status as a tax-exempt
organization. The attorney recommended that the president
obtain a formal ruling from the Internal Revenue Service
regarding the impact of the relationship, but noted that
he had not been provided evidence that the Association
had received a determination of tax exemption from the

  APPENDIX I                                     APPENDIX I
Internal Revenue Service. T: re is no evidence in the
records obtained pursuant to the subpoena that the Asso-
ciation has filed any tax returns for at least 2 years,
and to the knowledge of the Association's attorney no
such returns have been filed.
Directors' Association actions

     The records and documentation reviewed do not provide
sufficient information to assess the value to the community
action program of the activities engaged in by the Directors'
Association.  In terms of the Association's budget, the major
expenditures are incurred for the annual conference and for
travel by the president. Documentation was not available to
determine whether a 5-day conference held once a year merits
an investment of grant funds which CSA estimates may exceed
$250,000. Also the benefits derived from substantial travel
of the Association president could not be assessed due to
limited documentation and records of the results obtained
from the travel.

     In September 1977, the Directors' Association engaged
the services of Main Lafrentz & Co., Certified Public
Accountants. The services to be provided by the firm include
     -- Examining and expressing an opinion on the
        Association's financial statements of
        September 30, 1978.
     -- Recommending irternal recordkeeping procedures
        and controls necessary to insure that all dis-
        busements are properly authorized and documented
        and that travel expenses are in accordance with
        Federal Government travel regulations.
     -- Assisting the Association in implementing
     -- Taking steps to attempt to qualify the Association
        as a tax-exempt organization under the Internal
        Revenue Code.
     -- Identifying and reviewing on request required
        government filings.
     -- Reviewing Association procedures for the election
        of officers and ascertaining that the requirements
        in the bylaws are complied with.
     -- Sending copies of all reports prepared in connection
        with the Association's financial or other matters
        to CSA upon completion.

     The firm noted the understanding that its reports will
be available for inspection by Association members and
representatives of the Federal Government. In order to
effectively carry out its services, the firm specified that
certain changes recently adopted by the Board of Directors

APPENDIX I                                         APPENDIX I

must be implemented, including establishing the Associa-
tion's principal place of business in Washington, D.C.,
and maintaining exclusively in tnat office all corporate
and financial records, bank accounts, and adequate staff
to perform the recordkeeping functions.

     The Association president noted concurrence with the
terms of the engagement and the services to be provided.


     The National Association for Community Development was
incorporated in March 1965 to serve in an exclusively chari-
table and educational capacity, with the stated objectives
of encouraging, promoting, and stimulating the community
development of human resources.   It serves as one of several
general membership organizations of the community action
world and coi, iders itself a recognized spokesman for
community action agencies and the country's poor.

     The Association's membership is drawn from individuals
and agencies who are active supporters of the program con-
cept and dues from its members constitute one of its
primary sources of revenue. It is governed by an elected
board of directors intended to reflect a geographic and
ethnic balance in all represented areas. The directors
serve 3-year terms with one-third elected annually. Asso-
ciation officers are elected for 2-year terms and the
president acts as board chairman. The Association employs
a director and other administrative employees to administer
daily operations.

     The Association's records furnished in response to the
Committee subpoena were provided piecemeal over a period of
several weeks. Financial records furnished were insuffi-
cient to identify revenues and in many cases expenses
lacked supporting documentation. In addition, although
Association records indicate that at least two annual
budgets were adopted during the period covered by the
subpoena, only one budget was provided.

Fundinnand inembershi   sources
     The Association for Community Development's financial
statements show its primary sources of funds are membership
dues and proceeds from its annual conference. Association
bank records show gross receipts of about $95,000 in 1974;
$341,000 in 1975; $108,000 in 1976; and $47,000 from
January through April 1977.  Bank deposits and other records

APPENDIX I                                       APPENDIX I

provided in response to the Committee subpoena were insuffi-
cient to identify most sources of these receipts, including
those derived indirectly from CSA grant funds.

     Annual membership dues are established by the Associa-
tion's board of directors and currently range from $7.50
for low-income individual membership to a high .f $500 for
community action agencies with large budgets.   While a CSA
regulation permits the use of grant funds to pay agency
membership dues, Association records supplied in response
to the subpoena were inadequate to identify the composition
of the membership for the last 3 years.   Its financial
statements for January 1975 to October 1975 show that
$86,763 was received in membership dues and contributions
for that period.  Financial statements for calendar year
1976 show membership receipts of $58,595.

     The Association's membership records indicate consider-
able fluctuations and inconsistencies in individual and
agency memberships.   For example, in June 1975 it placed its
individual and agency memberships at 16,000 and 200 respec-
tively, and in September 1975 at 14,000 and 130 respectively.
Six months later in March 1976, its director reported to the
to the quarterly board meeting that the number of individual
members had dropped to less than 10,000.   In February 1977,
responding to questions from the Chairwoman, Manpower and
Housing Subcommittee, the Association stated that its
membership was approxinately 20,000.   HoweveL, in response
to the Committee's subpoena, it provided a listing reflect-
ing memberships at July 1977 of 5,056 individual and 41
agency members.   Dues from these members totalled $54,367,
of which $11,675 or 21 percent represents community action
agency memberships.   The ability of the National Association
for Commtunity Development to function as a general member-
ship organization representing the community action organi-
zations must be considered in the context of the community
action program which comprises about 860 community action
agencies with about 110,000 staff members.

Board meetings

     The Association for Community Development's bylaws
provide for regular quarterly meetings of the board of
directors.  A CSA travel regulation considers travel
costs to these meetings an allowable expense for community
action agencies.  During 1976 board meetings were held in
Little Rock, Arkansas; Washington, D.C.; Houston, Texas;
and San Francisco, California.  In addition to these regular

APPENDIX I                                        APPENDIX I

board meetings, the Association's president has the authority
to call meetings of the executive committee wnich consists of
Association officers and all committee chairpersons who are
board members.  In 1976, executilrT committee meetings were
held in Chicago, Illinois; New Orleans, Louisiana; and Lake
Tahoe, Nevada.
     The Association's records also indicated that in 1975
Association subcommittees held meetings in San Diego,
California, and Miami   Florida.  In the past its president
justified m=.zctngs in high-cost areas on the basis that it
allowed participants new opportunities      -hich they would
probably never have been exposed. Du;,     the September 30
to October 2, 1976 board meeting, the aiociation's presi-
dent informed the members that CSA officials had called his
attention :o numerous meetings held in various sections
of the couatry and questioned the amount of coordination
between these meetings and regularly scneduled board meet-
ings. Because of this, the Associatioa's board accepted
a policy position that all subcommittee meetings be sche-
duled in conjunction with regular quarterly board meetings
and that any extraordinary meetings be called by the
     The president testified in March 1977 that the Associa-
tion tries to hold its board meetings in different geograph-
ic sections of the country but that most of them are held
centrally because of travel difficulties.

     Association subcommittee chairmen presented reports on
their activities during the regular quarterly board meet-
ings. Details of these reports were not always included
in the board minutes. Therefore, the overall effectiveness
and usefulness of the Association's subcommittees could not
be assessed.

Conferences and training
     The National Association for Community Development
considers itself both a professional organization and an
organization through which those interested in the community
action concept can expres, their concerns; share methods,
services and delivery systems; and develop ideas. At its
annual conferences, it conducts workshops and seminars
covering various aspects of community development pro-
grams.  Association records for 1975 indicated that at least
two additional training seminars were held a' different
locations in the country.

APPENDIX I                                         APPENDIX I

     While sufficient information was ,Iot made available
to objectively evaluate the effectiveness and usefulness
of these workshops, or the extent o' community action
agency participation in them, CSA's former acting director
testified during hearings in March 1977 that they are
responsive to the needs of the community action agencies.
The acting director also testified that CSA has not
established a formal structure for evaluating the use-
fulness of these workshops and seminars.   In addition,
records furnished in response to the subpoena contained
no evidence that the Association had an established
mechanism for evaluating these training sessions.

     Although the Association's bylaws provide for an annual
report by its president, no such reports which could be
used to assess the Association's effectiveness were provided
in response to the subpoena. The Association's attorney
doubted the existence of any annual reports.

        Substantial portions of receipts from annual Associa-
tion conferences are derived from community action agency
funds. Registrations for conference participants are con-
sidered allowable expenses from agency budgets by CSA, as
are the related travel costs. CSA estimates the Associa-
tion's annual conference expenses incurred by community
action agencies amounts to $50,000 in registration fees and
$250,000 in travel expenses. From available records it
appeared that many community action agencies send large
delegations of participants to the conferences. The regis-
tration information available for the Association's 1975
conference disclosed that 5 agencies paid pre-registration
fees for 15 or more participants. Three of these agencies
paid fees for 40 or more participants. These five agencies
accounted for $9,500 or about 28 percent of all 1975
conference registration fees.
Program expenditures

     The Association for Community Development's bank rec-
ords show disbursements of about $89,089 in 1974; $147,591
in 1975; $102,258 in 1976; and $46,897 for the first 4
months in 1977. Its major expenditures have been for pay-
roll, presidential and staff travel, communications,
and rent. There were some expenses in the largest expense
categories--salary and presidential travel and expenses--
which could not be reconciled with supporting documentation.

     Salary expenses--the largest expenditure category--
amounting to about $71,596 from January 1974 through April

APPENDIX I                                              APPENDIX I

1977 were incurred to meet the payroll of the national head-
quarters staff, consisting in 1976 of a director and three
staff members, and averaged about 19 percent of the Associa-
tion's expenditures.   Its payroll checks were drawn on
accounts from three separate banks and in eight instances
employees received multiple checks during the same pay
period from two separate accounts, with each check in the
amount of the employee's regular compensation.   The purpose
for these payments could not be determined from the records.

      Association Eresident's travel and expenses -F $24,472
accounute-   F--about  7.2 p.ercent -o t Ase--soc-iation'
                                         --               s total
expenditure of almost $338,938 during calendar year 1974
through 1976.     For the first 4 months in 1977 it amounted
to $10,451 and accounted for about 22 percent of total
expenditures for that period.       From April 1974 through
December 1976, the Association's president made 44 trips and
was in travel status for 144 workdays, or about 19 percent
of the total workdays available.         During January 1977 through
April 1977, the president made 9 trips and was in travel
status for 44 workdays or about 54 percent of tutal workdays
available.   During these periods, CSA funded the president's
salary as executive director of a community action agency,
thereby indirectly supporting Association activities during
those workdays he was absent from the local agency on
Association travel.     There is no evidence in the documenta-
tion provided of controls over presidential travel, such as
review and approval by the board of directors of proposed
travel itineraries supporting available budgets.

     Expense records provided in response to the Committee
subpoena indicated several instances of unusually high
accommodations and hospitality costs, and insufficient
documentation for travel expenses incurred.  Four out of
36 instances of presidential travel during 1975 and 1976
required lodging rates of $75 or more a night in high-cost
living areas.  Board entertainment and hospitality costs
were in excess of $135 for several trips during 1976 and
January through April 1977.

     Examples of these   trips    include:

     -- A 3-aay trip Uy the Association president to Chicago,
        Illinois to attend an Association executive committee
        meeting.  Hotel room charges were $97.29 per day.
        Claims for board entertainment were $161.70 and con-
        sisted of restaurant expenses.

APPENDIX I                                         APPENDIX I

     -- A 3-day trip to ,Nasnington, D.C., to attend a National
        Association for Comn.mjnity Development and Directors'
        Association ineeting.   Hotel room cnarges for 2 days
        were $90.10 and $7Y.50.    Restaurant charges of $58.04
        were also claimed for the trip.

     -- A 4-day trip to Washington, D.C., to attend a quarterly
        board meeting.  Hotel charges of $422 were not fully
        documented and $85.65 was claimed for board members'

      Association records also disclosed at least one apparent
overpayment for travel oy the Association president during
1974.   In June 1974, the Association's travel records indicate
that the president received $280 per diem advance at $40 per
day from his community action agency for a 7-day trip to Wash-
ington, D.C., on Association business.   The president's hotel
expenses for this trip were $407.19 which he paid with his
personal credit card.   The president was reimbursed $409.19
from Association funds for this trip.   The Association reim-
bursed the president's community action agency $280 for the
per diem.   From the available records, it appears that The
president received a $280 overpayment for this trip.

Regional affiliates

     The National Association for Community Development's
bylaws provide for affiliate membership for regional organi-
zations of Association members who have elected officers
and established bylaws which have been approved by the board
of directors.  According to the Association's counsel, these
regional organizations are autonomous and not controlled by
the National Association.  Although records of these regional
organizations were not included in the Committee subpoena,
because they are affiliated with the National Association
it may be that community action agency grant funds are also
used for any travel expenses incurred by members.

Election difficulties

      T.e minutes of the Association for Community Development's
boarc of lirectors indicate a past problem in the election
of its national officers and board members.   The minutes
show that du:ing the 1975 elections a gross error was dis-
covered in tne ballots after they had been mailed to the gen-
eral membership.   Apparently a validated membership list
was not used in mailing the ballots.   To correct this error,
a second set of ballots was mailed out and the first ballots
were invalidated.   The accounting firm handling the ballot-
ing process reported that 15,132 ballots were mailed and
8,242 eligible ballots were returned.

APPENDIX I                                         APPENDIX I

     One of the Association's regional affiliates proposed
that the election be declared null and void because large
numbers of members did not receive ballots which, in effect,
disenfranchised them.  The affiliate also claimed that both
sets of ballots were used to determine the election outcome.
It further claimed that the Association's president, who was
also a candidate in the election, violated his position in
that he bypassed the Association's nominating committee and
provided the accounting firm handling the election with a
supposedly valid membership list.  The affiliate's proposal
was not accepted by the Association's board of di_-_tors.


     Tne National Community Action Trust Fund was established
in 1976 oy the National Community Action Agency Executive
Directors Association and the National Association for
Community Development to act as their fund raising unit for
influencing Federal legislative and executive policy regard-
ing community action agencies, ard promoting national aware-
ness of the services performed by the agencies and the need
for continuation of such service..  Its activities are ad-
ministered by 14 trustees consisting of the 6 elected officers
of the Directors' Association, 5 officers of the Association
for Community Development, and 3 independent trustees elected
by these officers.

Funding   sources

      CSA instructions place restrictions on tne use of grant
 funds for lobbying activities and do not allow the funds to
 oe used for influencing legislation. Therefore, the Trust
 Fund rel es principally on voluntary contributions from com-
munity action agency employees for its support.     General
membership contributions are $13 annually and are usually
made through weekly payroll deductions.    In addition, Trust
Fund records in September 1976 indicated that both the
Directors' Association arca the Association for Community
Development voted that each community action agency executive
director should make a $50 personal contribution to the
fund.   Community action agency employees' dues were generally
consolidated into one contribution check and therefore the
extent to which executive directors participated could not
be determinea.   The Fund's September 1976 income report,
however, indicated that eight executive directors ilad made
persocial contributions.  The Trust Fi.nd's bank recordis show
receipts o   about $28,270 for 1976 a.nd $15,974 for tie first
3 months of 1977.

     The Trust Fund's bank records also showed that large con-
tributions were received from several state community action

APPENDIX I                                             APPENDIX I

associations. Records at four of these state associa-
tions were reviewed to determine if any part of the contri-
bution consisted of Federal grant funds. For three of
the associations it did not appear that grant funds were
used in the contributions.
     At the fourth state association reviewed, the Trust
Fund contribution was financed from annual membership
dues and net procLcds from quarterly professional meetings
sporsored by the state association. These meetings were
in turn financed by a registration fee of $10 per person.
State association records indicate that community action
agencies probably paid for the members' registration fee out
of grant funds. Therefore, CSA grant funds were probably
involved in the contribution.
Adequacy of financial records

     During its first official board meeting in July 1976,
the Trust Fund's counsel stressed the importance of keeping
extremely accurate and complete financial records. However,
Trust Fund officials were unable to locate almost all finan-
cial records subpoenaed ty the Committee. In their attempts
to obtain financial recorse,      t:he Fund's officials and attor-
ney were unsuccessful ii: '.oc;ting the former national coordi-
nator who had knowledge   i .xi .ting records. Records provided
pursuant to the subpoena   'r   o]sjed mainly of copies of re-
ceipts, unsupported and unudii:rd financial reports, and a
listing of employee annual salaries. Almost all disbursement
information had to be obtained directly from the Fund's bank.

     Through itpril 22, 1977, Trust Fund Dank records show
total disbursements of $40,506 from its operating account
and $1,355 from its petty cash account. The largest disburse-
ments were for salaries, legal expenses, travel, office equip-
ment, mailings, and payments to the Association for Community
Development, and Communities in Action Together, a registered
lobbying organization under contract with the Fund to conduct
its lobbying activities.

      Trust Fund salary expenses for five employees amounted
to $16,747, or about 41 percent of its total expenditures.
Analysis of these costs suggests that the Fund paid its
employees gross wages and did not withhold either Federal,
State, or local income taxes. Bank records contained no
records of any payments oy the Trust Fund to the Internal
Revenue Service or the District of Columbia government.
Also, annualized salary payments to employees matched or
exceeded the salary levels on the listing provided by the

APPENDIX I                                     APPENDIX I

     In December 1976, the Trust Fund estimated that its 1977
operating budget would De $28,825, excluding lobbying ex-
penses.   Its estimated salary expense for two employees was
$19,200 or 67 percent of total expenditures.   However, the
Trust Fund had three individuals employed as of July 1977
at annualized salaries of $43,000, including the national
coordinator's salary of $20,000.

     The Fund's budget for 1977 provided for travel expendi-
tures of $2,500, but actual travel records were not furnished
in compliance with the subpoena.  The Fund's bank records
showed $2,380 marked as travel expenses for July 1976
through Aprii 1977--about 6 percent of total expenditures.
One check for $251.48 marked travel expenses was made out
to the president, another $123 check marked as travel ex-
peuse to meet with the Fund's president was made out to
"cash," and a third check of $246.20 was written to the
president's community action agency for meeting expenses.
One additional check for $50 was made out to "cash" and marked
as per diem expense for the former national coordinator.

      Although the bylaws state that all withdrawals shall
be signed by the treasurer and the chairperson or his de-
signee, Trust Fund bank records contained numerous examples
of checks signed only by the Fund's former national coordi-
nator.   During the period October 1976 through February 1977
the former coordinator, without obtaining cosignatures of
other Fund officials, wrote 29 checks from the Fund's operat-
ing account totaling $7,220 or about 18 percent of total ex-
penditures from that account.   Five of these checks amount-
ing to $2,683 were for her own salary and two of the five
were made out to "cash."

     During October and November 1976, the coordinator
wrote three checks to herself for $267 each.  One of these
checks was annotated as consultant fees for 2 days service;
the other two were not annotated.  During December 1976
through February 1977, the coordinator wrote sev2n other
checks amounting to $1,650 to  cash"; four of these amount-
ing to $950 were endorsed by her.  The endorsement on the
other three checks could not be determined.  One additional
check for $200 was made to "cash" and noted as a loan
to be replaced thru payroll deductions.

      Although it is possible that some of these checks
were meant as compensation for the coordinator's employ-
ment, the actual purpose and use of the checks could not
be determined.   It was also noted that during her last 2
months of employment, January and February 1977, the
former coordinator received seven salary checks totaling
$3,742.   These checks were written in the amount of her
ususal biweekly salary and three were signed only by

APPENDIX I                                       APPENDIX I

her. As previously stated, Trust Fund officials and its
attorney could not locate the former national coordinator
to obtain information on the Fund's financial activities.

     The Trust Fund made payments of $900 and $2,000 to
Communities in Action Together. These payments were made
in November 1976 and January 1977 respectively. The first
check may De the fulfillment of a resolution adopted by
the Fund at its first board meeting wherein the Fund would
assume all pre-existing obligations of the Action Committee
for Community Services, a Committee formed by the Directors'
Association, the Association for Community Development, and
another organization, Coalition for the War on Poverty, to
fight the attempted dismantlement of the Office of Economic
Opportunity. The second check is apparently partial pay-
ment of a $5,000 contract between the Trust Fund and Com-
munities in Action Together dated January 29, 1977. Under
this contract, Communities in Action Together was to pre-
pare a publication aid in the dissemination of information
of any and all Federal Legislative and/or Executive matters
relating to community action programs.

     The Trust Fund also made payments totaling $4,000 to
the Association for Community Development. According to the
Fund's board minutes, the Association had loaned Comunities
in Action Together $5,000, and at least $2,500 of the Fund's
payments to the Association were in repayment of this loan.
Association for Community Development records indicated, how-
ever, that both it and the Directors' Association each loaned
the Trust Fund $5,000 as an initial effort to unify the associa-
tions supporting community action. The Association for Com-
munity Development's banK records show a $5,000 loan to the
Fund. The Association's check was first endorsed Ly the Trust
Fund and then by Communities in Action Together. The records
of Communities in Action Together show a $5,000 receipt from
the Association for Community Development. Without pertinent
records, the actual circumstances of this loan could not be
     While its stated purpose is in part to lobby or influence
legislation, it appears that the Fund, in addition to its
arrangements with Communities in Action Together, primarily
seeks to further its objectives through distribution of "Action
Alerts."  Six Action Alerts were provided in response to the
subpoena. The alerts averaged about 3 pages each and contain
information or community programs and pertinent legislation.
Recipients of these alerts are Lrged to support legislation
favorable to community action programs and are provided in-
instructions on how to do so.

APPENDIX I                                          APPENDIX I


     The National Legislative Forum is an organization with
the stated objectives of developing antipoverty legislation
and suggesting strategies to obtain its passage.  Participation
in the Forum is open to all who wish to participate, but voting
membership is limited to about 80 individuals comprised of
state community action association presidents, regional repre-
sentatives to the Directors' Association board, regional Forum
coordinators, and regional Association for Community Development
representatives.  Officers, consisting of a chairman and vice-
chairman, are to De elected annually by the voting members.
However, as noted below, the chairman is currently appointed by
the president of the Directors' Association.

Financial activities

     Total receipts by the Forum during the 18-month period
ending May 15, 1977, were about $4,800.   The receipts con-
sisted of registration fees for meetings of about $3,400 and
loan repayments received from Communities in Action Together--
a lobbying organization--of about $1,400.

     Disbursements during the period totalled about $2,300,
leaving a cash balanc-_ for the Forum at May 15, 1977, of about
$2,500.  Disbursements included the loans of about $1,400 to
Communities in Action Together, subsequently repaid during the
period; hotel expenses incurred in connection with Forum
meetings of almost $600; and clerical and legal expenses of
about $130.  At the end of the period, the Forum had out-
standing obligations of about $9,000 to a community action
agency for expenses incurred by the agency's executive
director in his capacity as Forum chairman.

     Basic financial records of the Forum     .foi~sted in the
Committee's subpoena for the period prioi ,d November 1975
could not be located.  As a result, it was: Necessary for the
president of the Directors' Association, wno was chairman of
the Forum during that period, to obtain copies of checking
account transactions frcm the bank handling the Forum'3
account at that time.  He had also no' furnished the records
to the succeeding chairman in 1975 despite his successor's

     The documents provided by the bank show total deposits to
the Forum's checking account of about $11,400 during the period
from May 1974 to December 1975.  Because sufficient documen-
tation was not furnished, the sources of the receipts could
not be determined.  However, records furnished pertaining to a
September 1975 Forum meeting indicate that in most instances

APPENDIX I                                       APPENDIX   I

participants' registration fees were billed to local community
action agencies.

     Checks drawn on the account during the period totalled
about $11,100. The disbursements were primarily to hotels--
about $2,000; political dinner committee--$2,000; the
treasurer of the Forum--about $1,900; and Communitics in
Action Together (the national lobbying organization)--about
     CSA instructions place restrictions on the use of grant
funds for lobbying activities and do not allow such funds
to be used for influencing legislation. Since it appears
that registration f,~es for at least one meeting were billed
to local community action agencies, which may have been
the customary practice, and because disbursements were made
by the Forum to Comritunities in Action Together, CSA grant
funds may have beern used to support lobbying activities.
Relationships with other associations

     The stated objectives of the Forum were adopted by re-
solution at the 1976 Directors' Association annual conference.
The resolution specified that proposed legislation and stra-
tegies to obtain passage would be developed by the Forum
within broad parameters specified by the boards of directors
of the Directors' Association and the Association for Community
Development. It also stated that the officers were to be
elected annually by the voting members of the Forum. However,
at a subsequent meeting the Directors' Association board
adopted a resolution which modified the previous resolution by
specifying that the Forum be recognized as the standing legis-
lative committee of the Directors' Association and that the
voting membership and chairperson of the Forum be appointed
by the Association president.
     In a letter to community action agency directors i.i
August 1976, the chairman of the Forum noted he had beeJl
told the Forun was a subcommittee of the Directors' Associa-
tion, the Association for Community Development, and the
Trust Fund, and stated he would resign if the Forum continued
to be directed by and accountable to those organi7ations.
He indicated his belief that the Forui, is useless unless
it is permitted to act as the legislative arm of the com-
munity action program, rather than as a subcommittee of the
national associations.


     Communities in Action Together was established in
March 1973 bD the Directors' Association to promote the

APPENDIX I                                         APPENDIX I

Forum's legislative policies and to function as an organizing,
advocacy, information and lobbying arm for community action
agencies.  Since the organization engages in lobbying activities,
CSA instructions prohioiting support from grant funds apply.

     During 1976. the national associations shifted emphasis
on lobbying activities from Communities in Action Togetner to
the National Community Action Trust Fund.   Although the fi-
nincial records of Communities in Action Together show receipts
cf about $',2,500 from January through July 31, 1976, its
bank balance as of March 31, 1977 was less than $800.   Minutes
of an April 11, 19!7, board of directors conference call dis-
closed a zero bank balance as of April 8, 1977.

     In addition, the organization's financial records prior
to April 1976 were unavailable because they were in the
possession of the Department of Justice.

     Because of these circumstances, a detailed analysis
of the financial activities and records of Communities in
Action Together was not prepared.  However, certain trans-
fers of moneys from other organizations, including the
F'rum and the Association for Community Development, ate
discussed elsewhere in this report because the moneys were
apparently derived from CSA grant funds


     The National Center for Community Action--a private,
nonprofit corporation located in Washington, D.C.--was
established in January 1974 Dy the Directors' Association to
provide an ongoing and comprehensive program of research,
information, training, technical, and other supportive serv-
ices to community action agencies, with the assistance of
CSA funds.

     The Center is governed by a 27-member board of di-
rectors.  Twenty members of the board are selected by state
and regional community action associations and include 1
community action agency executive director from each of the
10 CSA Legions, and 10 additional persons from the le-
gions wno are not community action agency directors.   The
remaining seven members of the Board include five from
other washington, D.C.-based organizations; the president
of the Directors' Association; and the immediate past
chairman of the Center's doard.

     Until 1975, when the bylaws were changed, the Directors'
Association president appointed 10 persons to the Board.

APPENDIX I                                        APPENDIX I

Memoers of the doard are not salaried, but can be compen-
sated for unusual and exceptional services rendered. The
Board appoints an Executive Director who manages the Center's

     The Center has three operating departments which carry
out its activities: Research and Information; Field Ser-
vices; and Network Services. The Research and Information
department monitors, collects, and disseminates information
on Federal legislation of interest to the organization's
clients. The Field Services department provides training
to community action agencies. The Network Services de-
partment collects, compiles, and disseminates information
on programs in operation at the community action agencies.

     The Center's first annual report, covering the period
April 1, 1974 through March 31, 1975, showed a total of
$158,573 expended for personnel, consultants, office
expenses, and travel. The expenses were funded from sup-
port received from the following community action agencies
funded by CSA:

      South Middlesex Opportunity Council
         Framingham, Massachusetts             $131,785
      Community Progress Council
        York, Pennsylvania                       91,300
          Total                                $223,085
     In April 1975, CSA began funding the Center as a Federal
grantee. Total Federal funding from April 1975 to March 1977
was $1,165,650.  In addition, $57,000 was generated from the
sale of publications and training programs.

     Center expenditures through March 1977 included approx-
imately 12 percent for travel, 4 percent for consultants,
34 percent for consumable items such as rent and utilities,
and 50 percent for salaries. The Center's 1977 budget in-
cludes salary provision for 19 employees totaling $311,000 of
which $33,075 is for its executive director.  Review work was
directed to the interrelationship of the Center with non-
grantee organizations.
Relationship with other organizations

      As a nonprofit corporation, the Internal Revenue Serv-
.ice exempts the Center from taxation. This exemption may
be revoked if the Center does not comply with certain con-
ditions which include that it not engage in lobbying or
use its funds in substantial part to influence legislation.

                                                  APPENDIX I

      On December 19, 1975, the chairman of the Center's
 board wrote to the Legislative Forum concerning
                                                 the involve-
 ment of the Center in Forum activities. The chairman indi-
 cated that the Center did not have any official relationships
 with any national community action mechanism other than
 its funding relationship with CSA headquarters. He further
 stated that the Center recognizes the importance and necessity
 of working as closely as possible with the cther organizations,
 but feared any misunderstanding of its relationship to other
 functional lobbying groups might jeopardize its tax exemption,
 postal service mailing permit, and even its grant which con-
 tained a clearly worded special condition Frohibiting lobby-
 ing activities.

      In January 1976, the president of the Directors' Asso-
ciation introduced a motio. at the Center's quarterly board
meeting recommending tha- the Center make a grant to the
rectors' Association of $50,000 for administrative services.
The motion was passed and in February 1976 the Center approved
the funding to provide the Directors' Association with office
space and equipment in the Center's office, separate tele-
phnone services, publication of the Directors' Association
newsletter, maintenance of its files, handling of all its
correspondence, travel budget and per diem allowances for
the Association, central accounting, and bookkeeping and
cretarial services. In addition, the Center was to provide
the Directors' Association with two full-time staff members.

     On February 12, 1976, CSA notified the Center that
terms of the Federal grant to the Center did not provide the
transferring funds to another agency. CSA instructed the for
Center to submit a formal request to CSA for approval of
this transaction.

     On March 23, 1976, the Center formally requested CSA
approval of the assistance to be provided to the Directors'
Association, asking that such approval be retroactive to
January 1976.

     CSA responded to the Center on March 26, 1976, that
its application could not be considered without a statement
of work and that funding could not be retroactive to January
1976. CSA specified that the Center should provide rationale
for how the Directors' Association would assist in achieving
the Center's objective, increasing the Center's operating
efficency, and benefiting the population served by the Center.

     At the Center's May 1976, board of directors meeting,
concern was raised as to why the Directors' Association re-
quest had not been funded. The Board agreed that it should

APPENDIX I                                       APPENDIX I

not wait for approval from CSA and unanimously voted to im-
plement its previous decision to provide $50,000 for the
Association including office space and staff at the Center's

      In early June 1976 the Center resubmitted its funding
proposal with the inclusion of a new Center organizational
component to be known as the Community Action Aency Liaison
Services. The proposed purpose orFt-Tls  new component was
to provide timely information to local community action
agencies about the activities of state, regional, and na-
ticnal community action organizations and related groups.
The major product of the new component was to be a monthly
Community Action Agency Newsletter.
      On June 14, 1976, CSA notified the Center by letter that
no CSA funds were approved for use in support of the Directors'
Association. CSA told the Center that its grant renewal would
oe delavyed because, among other things, the Center lacked an
activity plan for the year, and questions still existed con-
cerning the Center's relationship with the Directors' Asso-
ciat.on. CSA specified that, regardless of the close rela-
tionship between the executive directors and CSA, funding
support of their professional association through the Center's
grant was questionable.

     On June 17, 1976, the chairman of the Center's board
responded stating that his revised proposal resolved any
concerns regarding internal administrative services being
furnished by the Center to the Directors' Association, and
CSA subsequently approved one staff person in the Center's
budget for the liaison organizational component.

      In a November 1976 Center board meeting an earlier
rotion by the Center's executive director to sublease
Center office space in Washington to the Directors' Asso-
ciation, the Trust Fund and the Association for Community
Development was brought up for reconsideration. The Center
director noted that the board had already passed a motion
to support the Directors' Association staffing proposal
and that this had been accomplished by changing the job
description and title of the present incumbent to liaison
officer. The Center board then unanimously adopted a motion
to sublease office space to the Trust Fund and the Associa-
tion for Community Development.   In addition, the president
of the Director's Association suggested that a motion be
introduced to invite the president of the Association for
Community Development to become a member of the Center's
board of directors. This motion was introduced by another
individual and was unanimously approved by the board.

APPENDIX I                                          APPENDIX I

     In January 1977, the Center offered to lease office
space to the Trust Fund for $250 per month.  This offer was
addressed to the president of the Directors' Association
who also is president of the Trust Fund.  Although the
Center apparently agreed to sublease office space to the
Trust Fund for $250 per month. there was no evidence pro-
vided by the Center that any rental payments had been

     During a s.te visit on February 24, 1977, a CSA project
manager noted that the Center's liaison staff person was
located in a new Center section called the Directors Associa-
tion Section, and that the person nad a secretary which
was not approved in the budget.  In conversation with the
liaison officer, the CSA project manager determined that
their publication was not a Community Action Agency Newsletter,
but the newsletter of the Directors' Association entitled
"The CAP Director" which had previously been published by
the Directors' Association.  The Association's office and
staff had been operating at the Center since September 1976.

     On March 2, 1977,   CSA advised the chairman of the Center's
board that:

             "We have become aware of improprieties in
              tile operations of the Center's activities
              * * * setting up a Secretariat for NCAAEDA
              [Directors' Association].   As you are aware,
              a request for grant amendment to the previous
              grant was submitted to CSA to allow the Cen-
              ter to provide for services to NCAAEDA.
              This amendment was never approved.   Also
              the matter was withdrawn from consideration
              by letter received from the Chairman of
              the Board dated June 17, 1976."

     The Center's board considered the memo at a March 4,
1977, meeting but took no action on the matter.  The
Center's executive director announced to the hoard that the
Trust Fund had moved into the Center's quarters and a pre-
liminary agreement had been reached on the accommodations.

     In response to questions raised on the relationships
between the Center and the Directors' Asiociation, the president
of the Directors' Association wrote to the Director of CSA on
March 14, 1977, requesting a meeting on the issue.  The letter
objected to a ruling by CSA's general counsel which identified
the Directors' Association as a lobbying organization ineligible
for CSA funding.  The letter emphasized potential benefits of

APPENDIX I                                        APPENDIX I

colocating the Directors' Association office with the Center,
but did not address the Center support being furnished to the
Trust Fund.
     On August 8, 1977, the executive director of the Center
issued a letter which ordered the Trust Fund to vacate its
present office space within the Center within 30 days.   In
addition, the Center billed the Trust Fund for debts owed
to the Center of $3,878. This amount includes: $1,000
for unpaid rent for the period March through June 1977;
postage $1,098; telephone $744; messenger services $27;
printing costs $354; office supplies $95; and construction
costs for office space $560.
     As of September 14, 1977, the Center was still providing
staff for the Directors' Association. In addition, the Trust
Fund and the Directors' Association were still occupying office
space at the Center.  The CSA project manager said that since
the Center had not discontinued funding staff supporting the
Directors' Association, related Center expenses would be dis-
allowed by CSA. Although CSA took no other specific actions
against the Center for violating a CSA directive, the proj-
ect manager said the new grant will contain a specific prohi-
bition against the Center's providing any assistance to other

                                                          APPENDIX I'.

         Comm unity WASHINGTON, D.C. 20506
         Services Administrationa
                                                       SEP 1 4 177

   TO:   Community Action Agency Executive Directors
         Community Ac-ion Agency Board Chairmen

   The time has come for the Community Services Administration
    (CSA) to assert itself with regard to the national community
   action agency organizations. While these organizations
   not directly supported by CSA grant funds, their primary are
   support comes indirectly frons CSA, through membership dues
   and registration fees paid by CSA supported members, and
   through CSA funded travel to organization functions. CSA
   fully recognizes the value of national association, the
   for member agencies to confer,                            reed
                                   and the need to develop a
   unified national voice on issues
  However, if CSA is to continue as ofa primary
                                        importance to the poor.
  of such activity, it must take responsibilityfunding  source
                                                  for insuring
  fiscal and programmatic integrity. Under current structuring,
  these organizations, not b:ing grantees, are not subject
  CSA's safeguards regarding travel, consulting contracts, to
  audit, conflict of interest, and other requirements. CSA
  has permitted the anomaly of CSA funded organizations
  free of CSA regulations.                                being

   This freedom from CSA oversight might be tolerable if
  quality of leadership in the associations was of such  the
  unquestionable ability and integrity as to assure proper
  use of CSA funds. Unfortunately, such leadership is
  in evidence. Key officers in both the National Community
  Action Agencies Executive Directors Association (NCAAEDAE
  and the National Association for Community Development
  (NACD) have shown leadership deficiencies in administering
  their own local community action agencies which  make
  continued CSA support of such leadership on the national
  level inadvisable.

APPENDIX II                                               APPENDIX II


CSA has received varied allegations concerning the actions
of these leaders in their administration of the national
organizations.     'I,the current anomalous structure, CSA
 cannot freely    e :igqate these allegations. However, CSA
 can and has ins.    gated the performance of these leaders
 in the administration of their own agencies. Among the
 findings are the following:
    (1) As a CAA executive director, one officer
        spent S19,000 of local CAA funds for NACD
        and NCAAEDA travel in one year.
    (2) A review of his local CAA audits from
        1967 through 1974 indicates consistently
        inadequate accounting practices.
   (3) He fragmented renovation bills to circum-
       vent CSA's requirement that all grantee
       expenditures in excess of $500 receive
       prior CSA approval.
   (4) He permitted CSA funds to be used to pay
       for a large color television set and an
       expensive stereo set for which there was
       no apparent program purpose.
    (5) He permitted CSA funds to be used to
        purchase $210 worth of football and
        basketball tickets. He admitted that
        there was no programmatic purpose for
        these purchases.
    (6) He spent approximately $900 of poverty
        funds to repair his personal residence.
        He later reimbursed the agency.
    (7) His CAA paid a $1,371 annual premium on
        his personal life insurance policy and
        $82 on another policy.

APPENDIX II                                               APPENDIX II


        (8) He took a trip at his agency's expense
            to Hawaii to speak at a Region IX CAA
            Directors meeting which had been can-
            celled before he left. Claiming he was
            nwver informed, he stayed in Hawaii six
        (9) By letter of August 15, 1977, CSA's
            Regional Office disallowed $59,000 of
            his agency's travel costs because of
            inadequate documentation.
     An executive officer in the other national community
     organization has just resigned his position as a CAA
     director, leaving it in a condition that required CSA to
     summarily suspend further use of CSA funds. However, he
     has just been salaried by the national association of
     which he is president at a level in excess of $40,000.
     This person, while a community action agency director
     was responsible for the following:
        (1) His agency paid for an expensi"e stereo
            system for his agency-leased automobile.
        (2) In May 1974, he received $5,245 for "unused
            leave". He was required to repay this but
            he again improperly peid himself $10,300
            for "unused leave" upon his recent resigna-
        (3) He has consistently purchasea Fir-st class
            air fare when on community action agency
        (4) He expended CSA funds in the purchase
            of $10,000 worth of unneeded ball point

        (5) His CAA paid for life membership for him
            and his wife in the United Air Lines Red
            Carpet Club.

APPENDIX II                                              APPENDIX II


     (6) His CAA spent funds to repair homes
         of persons ineligible for services.
     (7) His most recent audit haj $166,000
         inquestioned costs including $32,000
         related to NACC travel.
     (8) His CAA allegedly spent $3,5GJ to
         secure 700 memberships in and con-
         trol of NACD.
     (9) Twenty-two of his CAA employees
         attended a community action con-
         vention inWashington, at a travel
         expense of $10,500.
   It is hardly appropriate for CSA to continue support of
   such leadership, -'rticularly where the organizations
   in question are not subject to CSA regulation. Too often
   have the scanlals of the few hurt the efforts of the many.
   We are aware that there ismovement toward reform from
   within these organizations. However, CSA cannot afford to
   sit on the sidelines while reform from within succeeds or
   Until the leadership of these agencies changes, and until
   the appropriate regulatory and audit safeguards are in
   place, we must declare a moratorium on the expenditure of
   CSA funds in support of these organizations. The at-ached
   regulations, published in the Federal Register, will pro-
   hibit further expenditure of CSA funds for membership dues
   in national community action organizations and for out-
   of-state travel without prior CSA approval. A formal
   interpretation of CSA Instruction 6907-la prohibits
   further payroll deductions for voluntary private contri-
   butions to political organizations .uch as the National
   Community Action Trust Fund. In some instances such
   contributions have allegedly been less than voluntary.
   The issuance of these regulations should not be construed
   as a lack of CSA support, either financial or philosophical,
   for independent and effective national association by
   community action agencies. We do not intend to control

APPENDIX II                                             APPENDIX II


      or dominate such association. However, we do intend to
      insure that where CSA funds support community action
      association, such funds are not misused, that bank
      accounts are open to inspection, that annual audits are
      performed, that democratic procedures are followed, and
      that CSA travel, consulting and other appropriate regu-
      lations are religiously followed.
      We look forward to supporting an effective, independent
      national voice for community action agencies and are
      confident that by working together, we can reach a re-
      solution in which CSA's responsibilities and your needs
      will be effectively met.

      Gr ela (Grace) Olivarez
      cc:     Regional Directors
              Regional Counsels

 APPENDIX II                                               APPENDIX II

                      Title 45 - Public Welfare

 Subpart - Grantee Payment of Professional Dues

 AGENCY: Community Services Administration
 ACTION: Proposed Rule
 SUMMARY: This rule co ifies a Community Services Administration
 policy on payment of dues to professional associations with grant
 funds, which was previously unpublished in the Federal Register,
 and changes it to require that CSA approve all professional organiza-
 tions which receive such dues out of grant funds.   This change is to
control payments in excessive amounts and for purposes which would
be contrary to CSA regulations if carried out directly by CSA grant-
ecs.   This rule is intended to give CSA the authority to determine
which professional organizations may benefit from such indirect CSA
DATES: Comments on this proposed rule must be received on or be-
fore October 20, 1977.
ADDRESSES: Comments should be addressed to _Ms. Faye Rattner,
Chief, Policy Development & Review Division, Community Services
Administration, Office of Community Action, 1200 19th Street, N.W.,
Washington, D.C     20506.

 APPENDIX II                                                APPENDIX II

 SUPPLEMIlNTARY INFORMATION:            Previous to September 19, 1972
 when Section 623 of the Economic Opportunity Act of 1964, as amended,

 was enacted, CSA (then OEO) was not required to publi.sh its regula-

 tions in the Federal Register.   OEO Instruction 6710-02 was promul-
 gated in 1971 and includes a provision governing professional dues which

 is modified by this rule.

 AUTHORITY:       Sec. 602, 78 Stat 530, 42 U.S,.   2942.

                                            _laciela (Grace) Olivarez-..

45 CFR 1068 is proposed to be amended as follows, effective

November 5, 1977:


         1068. 30-1 Applicability,
         1068. 30-2 Restrictions on charging professional dues
                    to grant funds.

1068. 30-1 Applicability.

This subpart is applicable to all grantees receiving financial

assistance from the Community Services Administration.

1068.30-2    Restrictions on charging professional dues to grant


Professional dues that may be charged to grant funds (including

non-Federal share) are limited to a single membership for the

grantee in any appropriate professional organizations; memberships

APPENDIX II                                                APPENDIX II


may not be purchased for any individual or delegate agency.    Such

proposed expenditures of funds for professional memberships must

be included as an attachnent to the "other cost category ' on the bud-

get form in an application for funding or refunding.   The attachment

must identify the name of the professional organization, the amount

of the proposed membership and include a brief description of the

purpose of that organization.

 APPENDIX     II                                                APPENDIX II

                          Title 45 - Public Welfare


Subpart - Prohibition of Salary Checkoff fo.- Political Activities

AGENCY: Community Services Administration.

ACTION:       Final rule - Interpretative rule.

SUMVLMARY:         This is an interpretation of the CSA regulation (45 CFR

1069.8-5(e)) prohibiting payroll deductions from grantee employees'

salaries which exctends this prohibition to national groups involved

in political activity.     The National Community Action Trust Fund is

presently receiving contributions through payroll deductions from

CSA grantees' employees' salaries on the basis of a letter from

former CSA Director Martinez allowing this practice.           This rule will

eliminate the National Community Action Trust Fund or any similar

organization from receiving these contributions through such payroll


EFFECTIVE DATE: This interpretation stall take effect November 5,


FOR FURTHER INFORMATION CONTACT:                   John C. Meyer, Office

of General Counsel, Community Services Administration, 1200 19th

Street, N.W., Washington, D.C.          20506; phone, 202-254-5690.

SUPPLEMENTARY INFORMATION:                  Shortly after §1069. 8-5(e) was

issued, CSA received two letters dated May 20 and June 2, 1976 from

the National Community Actio:A Agency Executive Directors' Association

 APPENDIX II                          ~                    APPENDIX II

 expressing concern that payroll deduction contributions to the

 National Community Action Trust Fund would be considered in

violation of this regulation.   By letter of June 23, 1976 then Direc-
tor Martinez assured them that contributions to the Trust Fund were

not intended to be covered.     Upon reconsideration of this question,
CSA finds that the language of the regulation does clearly cover the

Trust Fund and similar organizations.      As CSA does not wish as a
matter of policy to encourage even the indirect channelling of CSA

grant funds to the Trust Fund or other such organizations, this in-

terpretation is reversed.
Interpretative regulations do not require public comment and are

normally effective immediately; however, in this instance, CSA is

delaying the effective date until November 5 to give grantees time to

adjust their systems to the reinterpretation of this regulation by ter-

minating these payroll deductions.
Therefore, the following interpretation of 45 Code of Federal Regula-

tions 1069.8-5(e) is adopted;   the prohibition in that paragraph, "no
contribution may be collected for any political activity through any

deduction from the paycheck of any grantee, if that employee is paid

with CSA funds", is hereby interpreted to prohibit the use of such de-

ductions for voluntary contributions to the National Community Action

Trust Fund or any other national entity which engages in such political

     AUTHORITY:     Sec. 602, 78 Stat 530, 42 U.S.C. 2942.

                                                ciela (Grace) Olivarez
 APPENDIX II                                                 APPENDIX II

                     'j'itl   4'1 - I Iulic W tlI'ar:


 Subpart - Restrictions on Charging Out-of-State Grant Funds
           (CSA Instruction 6 910-la)
 AGENC.Y: Community Services Administration

 PCTION: Proposed Rule

 SUMMARY:      This proposed rule would replace the present CSA
 requirement for prior, written CSA approval of grantee use of

 grant funds for travel outside of the grantee's community with

 a requirement for such approval only for out-of-State travel.

 It would eliminate exceptions to the requirement for prior CSA

 approval for travel to meetings of professional associations

 whose efforts are closely related to the poverty program and

 travel to interview prospective employees or procure services,

 supplies, or equipment.      Thus grantee travel within a State
 will not require prior, written CSA approval and all grantee

 travel out-of-State does require such approval, except for travel

 in response to an invitation from CSA.

DATES: Comments on this proposed rule must be received on

or before October 20, 1977.
It is proposed to make this rule effective November 5, 1977.

ADDRESSES: Comments should be addressed to Ms. Faye

Hattner, Chief, Policy Development and Review Divisio I,

Community Services Administration, 1200 19th Strati, N.W.

Washington. D.C.    20506.

 APPENDIX II                                                APPENDIX II


AUTIIOt{ITY:   Sec. 602, 78 Stat 530, 42 U.S.C. 2942.

                                        Graciela (Grace) Olivarez

Therefore, it is proposed to amend 45 CFR 1069. 3-5 as follows,

effective Novecmber 5, 1977:

§1069. 3-5 Restrictions on charging out-of-State travel costs to

grant funds.

(a) Grantees may use CSA grant funds for out-of-State travel costs

incurred by grantee and delegate agency employees, consultants,

and members of governing and administering boards without obtain-

ing prior CSA approval, if the travel meets the conditions outlined

below and meets the geographical limitations of §1069.3-6:

1) Travel in response to a specific invitation from CSA to attend a

conference or meeting for the purpose of furthering grantee activity.

2) For the District of Columbia only, if the travel is within a radius

of 50 miles of the grantee's or delegate agency's headquarters.