oversight

Audit of 2004 And 2005 Combined Federal Campaigns of New York City, New York, New York

Published by the Office of Personnel Management, Office of Inspector General on 2009-02-04.

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

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                        UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                             Washington, DC 20415


   Office of the
Inspector General




                                         AUDIT REPORT



                              AUDIT OF THE 2004 AND 2005

                           COMBINED FEDERAL CAMPAIGNS OF

                                  NEW YORK CITY

                                NEW YORK, NEW YORK




                Report No. 3A-CF-OO-07-039                                   Date: February 4, 2009




                                                                      ichael R. Esser
                                                                     Assistant lnspector General
                                                                       for Audits



        www.opm.gov                                                                         www.usaJobs.gov
                            UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                                 Washington, DC 20415



   Office of the
Inspector General




                                        EXECUTIVE SUMMARY





                                  AUDIT OF THE 2004 AND 2005

                               COMBINED FEDERAL CAMPAIGNS OF

                                       NEW YORK CITY

                                    NEW YORK, NEW YORK




                    Report No. 3A-CF-OO-o7-039                           Date: February 4, 2009

       The Office of the Inspector General has completed a performance audit of the 2004 and 2005
       Combined Federal Campaigns (CFC) of New York City. The United Way of New York City,
       located in New York, New York, served as the Principal Combined Fund Organization (PCFO)
       during both campaigns. Our main objective was to determine if the CFC of New York City was
       in compliance with Title 5, Code of Federal Regulations, Part 950 (5 CFR 950), including the
       responsibilities of both the PCFO and Local Federal Coordinating Committee (LFCC). The
       audit identified 10 instances of non-compliance with the regulations (5 CFR 950) governing the
       CFC.

                                           AUDIT GUIDE REVIEW

       •       Agreed-Upon Procedures Not in Compliance

               The Independent Public Accountant did not identify a reportable condition or maintain
               sufficient documentation to verify if the agreed-upon procedures were satisfactorily
               completed.




           www,opm.gov                                                                        www.usajobs.gov
                         BUDGET AND CAMPAIGN EXPENSES


•	   PCFO Selection Not Properly Documented

     The LFCC did not provide documentation to support that it selected a PCFO by the
     deadline set by the Federal regulations; however, based on the information provided we
     were able to determine that the selection was made after the deadline date.

                    CAMPAIGN RECEIPTS AND DISBURSEMENTS

•	   Undistributed Campaign Receipts

     The PCFO did not distribute $2,843 in eFC receipts received for the 2005 campaign.

•	   Campaign Expenses Charged to the Incorrect Campaign Year

     The PCFO inappropriately charged $26,250 to the 2005 Campaign for administrative
     expenses that were charged to the incorrect campaign year.

•	   Campaign Expense Reimbursement Not Authorized by LFCC

     The PCFO's campaign expenses were not approved by the LFee before reimbursement.

•	   Incorrect Cut-off Date for CFC Payroll Receipts

     The PCFO used the incorrect cut-off dates for Cl-C payroll receipts and did not identify the
     deposits by payroll office.

• .- -Uneashed Check Procedures Not Implemented

     The PCFO did not follow the guidance foruncashed checks as set forth by the Office of
     Combined Federal Campaign Operations.

•	   Commingling of CFC Funds

     The PCFO commingled CFC cash receipts with cash receipts from other charitable
     campaigns.

•	   Untimely CFC Distributions

     The PCFO did not make distributions of CFC receipts to all participating agencies and
     federations in accordance with the Federal regulations.




                                                u
                                      ELIGIBILITY


•   Laclf.of Support for LFCC Eligibility Decisions

    The LFCC did not maintain sufficient documentation to support that it made the eligibility
    decisions of local organizations' applications.




                                              iii
                                            CONTENTS


                                                                                         PAGE


         EXECUTIVE SUMMARy                                                                    i


 L       INTRODUCTION AND BACKGROUND                                                          1


II.      OBJECTIVES, SCOPE, AND METHODOLOGY                                                   3


III.·     AUDIT FINDINGS AND RECOMEMNDATIONS                                                  7


         A.     AUDIT GUIDE REVIEW	                                                           7


                I.   Agreed-Upon Procedures Not in Compliance	                                7


          B.    BUDGET AND CAMPAIGN EXPENSES	                                                 8


                1.   PCFO Selection Not Properly Documented	                                  8


          C.    CAMPAIGN RECEIPTS AND DISBURSEMENTS	                                          9


                I.   Undistributed Campaign Receipts	                                         9

                2.   Campaign Expenses Charged to the Incorrect Campaign Year                 9

                3.   Campaign Expense Reimbursement Not Authorized by LFCC                   II

                4.   Incorrect Cut-off Date for CFC Payroll Receipts	                        12

                5.   Uncashed Check Procedures Not Implemented	                              12

                6.   Commingling of CFC Funds	                                               13

                7.   Untimely CFC Distributions                                              14


        . I),   ELIGIBILITy                                                                  15


                I. Lack of Support for LFCC Eligibility Decisions	                           15


II.	      MAJOR CONTRIBUTORS TO THIS REPORT                                                  17


          APPENDIX      (The PCFO response, dated June 5,2008, to the draft audit report)

                    I. INTRODUCTION AND BACKGROUND


Introduction

This report details the findings, conclusions, and recommendations resulting from the audit of
the New York City Combined Federal Campaigns (CFe) for 2004 and 2005. The audit was
performed by the Office of Personnel Management's (OPM) Office of the Inspector General
(OIG), as authorized by the Inspector General Act of 1978, as amended.

Background·

The CFC is the sole authorized fund-raising drive conducted at Federal installations throughout
the world. It consists of 299 separate local campaign organizations located throughout the
United States, including Puerto Rico, the Virgin Islands, and Foreign assignments. The Office of
Combined Federal Campaign Operations (OCFCO) at aPM has the responsibility for
management of the CFC. This includes publishing regulations, memorandums, and other forms
of guidance to Federal officials and private organizations to ensure that all campaign objectives
are achieved.

CFC's are conducted by a Local Federal Coordinating Committee (LFCC) and administered by a
Principal Combined Fund Organization (PCFO). The LFCC is responsible for organizing the
local CFC, deciding on the eligibility of local voluntary organizations, selecting and supervising
the activities of the PCFO, and acting upon any problems relating to a voluntary agency's
noncompliance with the policies and procedures of the CFC. The PCFO is responsible for
training employee key workers and volunteers; preparing pledge cards and brochures;
distributing campaign receipts; submitting to an extensive and thorough audit of its CFC
operations by an Independent Certified Public Accountant (IPA) in accordance with generally
accepted auditing standards; cooperating fully with OIG audit staff during audits and
evaluations; responding in a timely and appropriate manner to all inquiries from participating
organizations, the LFCC, and the Director of OPM; and consulting with federated groups on the
operation of the local campaign.

Executive Orders 12353 and 12404 established a system for administering an annual charitable
solicitation drive among federal civilian and military employees. Title 5, Code of Federal
Regulations (CFR) 950, the regulations governing CFC operations, set forth ground rules under
which charitable organizations receive federal employee donations. Compliance with these
regulations is the responsibility of the PCFO and LFCC. Management of the PCFO is also
responsible for establishing and maintaining a system of internal controls.

Our previous audit of the CFC of New York City was completed on December 5,2003, covering
the 2000 and 2001 campaigns. The audit report identified 13 areas of non-compliance with 5
CFR 950. All findings have been resolved.

The initial results of our audit were discussed with PCFO and LFCC officials during an exit
conference held on July 27, 2007. A draft report was issued to the PCFO and LFCC on




                                                1

April 24, 2008. The PCFO's response to the draft report was considered in preparation of this
final report and is included as an Appendix.




                                               2

               II. OBJECTIVES, SCOPE, AND METHODOLOGY


Objectives

The primary purpose of the audit was to determine if the New York City CFC was in compliance
with Title 5, Code of Federal Regulations, Part 950. Our specific audit objectives for the 2005
campaign were as follows:

       Eligibility
               •	 To determine if the charitable 'organization application process was open for
                   the required 30 day period; if applications were appropriately reviewed,
                   evaluated, and approved; and if the appeals process for rejected applicants was
                   followed.

       Budget and Campaign Expenses
              •	 To determine if the PCFO's budget was prepared in accordance with
                 regulations.
              •	 To determine if expenses charged to the campaign were actual, reasonable,
                 did not exceed 110 percent of the approved budget, and were properly
                 allocated.

       Campaign Receipts and Disbursements
             •	 To determine if the total amount of funds received for the campaign, plus
                interest income and less expenses, was properly distributed to the designated
                organizations.
             •	 To determine if the total amount of un designated funds was properly allocated
                and distributed to the various CFC participants.

       PCFO As a Federation

              •	 To determine if the PCFO distributed funds only to member agencies.
              •	 To determine ifthe PCFO charged its member agencies for expenses in a
                 reasonable manner.

Additionally, our audit objective for the 2004 campaign was;

       AllQit Guide Review
              •	   To determine if the lPA completed the Agreed-Upon Procedures (AUP) as
                   outlined in the CFC Audit Guide [For Campaigns with Pledges $1 Million and.
                   Greater] (Audit Guide) for the 2004 campaign.

Scope and Methodology

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient and appropriate evidence to provide a reasonable basis for our findings and


                                                3

conclusions based on the audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on the audit objectives.

The audit covered campaign years 2004 and 2005. The United Way of New York City, located
in New York, New York, served as the PCFO during both campaigns. The audit fieldwork was
conducted at the United Way of New York City from July 23 through July 27, 2007. Additional
audit work was completed at our Washington, D.C. office.

The New York City CFC received campaign pledges, collected campaign receipts, and incurred
campaign administrative expenses for the 2004 and 2005 campaigns as shown below:

                  Campaign       Campaign            Campaign     Administrative

                    Year          Pledges            Receipts       Expenses

                    2004         $2,820,060       $2,424,766         $279,306


                    2005         $2,802,309       $2,566,262         $308,077



.In conducting the audit we relied to varying degrees on computer-generated data. We relied on
 our limited reviews of samples of campaign expenses and supporting data, pledge card entries,
 and the distribution of campaign contributions and related bank statements to verify that the
 computer-generated data used is reliable. Nothing came to out attention during our review of the
 data to cause us to doubt its reliability.

 We considered the campaign's internal control structure in planning the audit procedures. We
 gained an understanding of management procedures and controls to the extent necessary to
 achieve our audit objectives. We relied primarily on substantive testing rather than tests of
 internal controls. The audit included such tests of the accounting records and such other auditing
 procedures as we considered necessary to determine compliance with 5 CFR 950 and CFC
-mern:orandums.

In order to determine that the LFCC and PCFO were in compliance with CFC regulations in

regards to eligibility, we reviewed the following:

    •	 The public notice to prospective charitable organizations to determine if the LFCC
       accepted applications from organizations for at least 30 days.
    •	 The process and procedures for the application evaluation process.
    •	 Sample eligibility letters to verify they were properly sent by the LFCC.
    •	 The LFCC's processes and procedures for responding to appeals from organizations.

In regard to our objectives concerning the budget and campaign expenses, we accomplished the

following:

    •	 Reviewed the PCFO application and completed the PCFO application checklist.
    •	 Reviewed a copy of the public notice to prospective PCFO's, and LFCC meeting
        minutes related to the selection of the PCFO.
    •	 Traced and reconciled amounts on the PCFO's Schedule of Actual Expenses to the
       PCFO's general ledger.



                                                 4
   •	 Reviewed supporting documentation for a judgmental sample of actual expenses from 10
      expense accounts (out of a total of 20 expense accounts). Accounts were selected based
      on a nomenclature review, as well as high dollar amounts paid.
   •	 Reviewed the LFCC meeting minutes and verified that the LFCC authorized the PCFO's
      reimbursement of campaign expenses.
   •	 Compared the budgeted expenses to actual expenses and determined if actual expenses
      exceeded 110 percent of the approved budget.

To determine if the campaign receipts and disbursements were handled in accordance with CFC
regulations, we reviewed the following:
    •	 A judgmental sample of 25 out of 27,833 pledge cards (selected 15 pledge cards with
        total pledges greater than $1,000, 4 high dollar pledge cards with more than 5 designated
        codes per card, and 6 high dollar pledge cards donated on behalf of an organization) and
        compared them to the Pledge Card report prepared by the PCFO.
    •	 Cancelled distribution checks to verify that the appropriate amount was distributed in a
        timely manner.
    •	 One-time payments to verify that the PCFO properly calculated pledge loss and disbursed
        the funds in accordance with the ceiling amount established by the LFCC.
    •	 The PCFO's most recent listing of outstanding checks to verify that the PCFO was
        following its policy for such checks.
    •	 The Pledge Notification Letters to verify that the PCFO notified the CFC agencies of the
        designated and undesignated amounts due them before the March 15,2006 deadline.
    •	 The donor list letters sent by the PCFO to organizations to verify the letters properly
        notify the organization of the donors who wish to be recognized.
    •	 Forms 1417 provided by the PCFO and the OCFCO to identify material differences.
    •	 The PCFO Distribution Schedule to verify whether monthly disbursements reconcile with
        the PCFO's Campaign Receipts and Disbursements Schedule.
    •	 All bank statements used by the PCFa for the 2005 campaign to verify that the PCFO
        was properly accounting for and distributing funds.
    •	 The PCFO's cutoff procedures and bank statements to verify that funds were allocated to
        the appropriate campaign year.
    •	 The General Designation Options and Undesignated Funds Spreadsheet and the
        Allocations and Disbursements Spreadsheet to verify the disbursements were accurate
        and proportionate to the PCFO's allocation rates.

To determine if the PCFO was in compliance with the CFC regulations as a federation (The
United Way of New York City) we reviewed the following:
   •	 Data reported on the CFC Receipts Schedule with supporting documentation to verify
       whether receipts were properly recorded.
   •	 The CFC Disbursement Schedule to ensure that the United Way of New York City did
       not disburse any funds to member agencies not participating in the 2005 CFC.
   •	 The United Way of New York City's contract with its member agencies to determine if
       the fees were reasonable and supported.




                                                5

The samples mentioned above that were selected and reviewed in performing the audit were not
statistically based. Consequently, the results could not be projected to the universe since it is
unlikely that the results are representative of the universe taken as a whole.

Finally, to accomplish our objective for the Audit Guide Review, we reviewed the CFC Audit
Guide and determined the type of audit to be completed by the IPA for the 2004 campaign. We
also completed the AUP checklist to verify that the IP A completed and documented the AUP
steps.




                                                6

             III. AUDIT FINDINGS AND RECOMMENDATIONS


A.   AUDIT GUIDE REVIEW

     1.   Agreed-Upon Procedures Not in Compliance

          We found that the PCFO's IPA did not comply with all aspects of the January 2006
          CFC Audit Guide's AUPs.

          The Audit Guide states that the IPA performs "specified agreed-upon procedures
          (AUP) over the PCFO's compliance with CFC regulations and OPM guidance, and
          the effectiveness of the PCFO's internal controls over its compliance as of the end of
          the Fall 2004 campaign period and prepares an AUP report on the results .... "
          Chapter In of the guide outlines the specific AUP for the IPA to perform in its annual
          audit of the campaign.

          Our review consisted of verifying that the IPA performed the required audit steps
          identified in the AUP and re-testing of certain transactions relating to campaign
          expenses and pledge card verification. As a result of our review, we identified three
          steps which were not completed in compliance with the AUP:

                 •	 Pledge Card Tracking System, step two, required the IPA to determine if
                    the information entered onto the pledge card agreed with the information
                    in the PCFO's pledge records. The IPA's review of the pledge cards did
                    not identify and report that there was one pledge card that had the
                    incorrect agency code and designation amount.
                 •	 PCFO Budget and Administrative Expenses, step two, required the IPA to
                    review available information (LFCC meeting minutes and/or
                    correspondence from the LFCC to the PCFO) to determine if the LFCC
                    selected the PCFO by the March 15th deadline. The IPA did not maintain
                    copies of the information reviewed to complete this step; therefore, we
                    could not determine if it completed this step adequately.
                 •	 PCFO Budget and Administrative Expenses, step five, required the IPA to
                    select a sample of 10 CFC expenses and trace those selected back to the
                    supporting documentation to determine if the costs were accurate and
                    CFC-related. We requested supporting documentation from the PCFO for
                    five of the expenses reviewed by the IPA and one was not located by the
                    PCFO. The supporting documentation maintained by the IPA did not
                    include any of the expense samples reviewed; therefore, we could not
                    determine if the IPA completed this step adequately.

          As a result of not reporting a pledge card error and not maintaining documentation to
          support its review, the IPA's audit of the 2004 CFC Campaign is not in compliance
          with the Audit Guide requirements.




                                               7

           PCFO Response:


           The PCFO stated that it forwarded the finding to its IPA for review and comment.


           OIG Response:


           The PCFO did not provide any comments and/or documentation from its IPA is

           response to this finding.


           Recommendation 1


           We recommend that the OCFCO and the LFCC work with the PCFO and their IPA to

           ensure that the AUP are completed correctly and that sufficient documentation is

           maintained to support the work completed.


B.   BUDGET AND CAMPAIGN EXPENSES

     1.    PCFO Selection Not Properly Documented

           The LFCC did not provide documentation to support that it selected a PCFO by the
           deadline set by the Federal regulations.

           According to 5 CFR 950.801(a)(3), the LFCC "must select a PCFO no later than
           March 15th."

             We reviewed the LFCC meeting minutes to determine if the PCFO was selected by
             the March ] s" deadline. Review of the March 7, 2005 LFCC meeting minutes
             indicated that the LFCC would review the PCFO application but did not state that the
          .	 PCFO application was approved. The PCFO and LFCC were unable to provide a
             copy of the 2005 PCFO selection letter or any other documentation to support when
             the PCFO was selected.

           As a result, we were unable to determine ifthe LFCC selected the PCFO by the
           deadline set in the Federal regulations.

           PCFO Response:

           The PCFO agrees with the audit finding.

           Recommendation 2

           We recommend that the ocFCO ensures that the LFCC selects the PCFO by the date
           set forth in the Federal regulations, maintains documentation to support the selection,
           and understands its responsibilities under the Federal regulations regarding the
           selection of a PCFO for future campaigns.




                                                8
c.   CAMPAIGN RECEIPTS AND DISBURSEMENTS

     1.   Undistributed Campaign Receipts	                                                   $2,843

          The PCFO did not distribute $2,843 in CFC receipts received to the CFC campaign's
          member agencies.

          5 CFR 950.901 (i)(2) states "The PCFO is responsible for the accuracy of
          disbursements it transmits to recipients." It further states that at "the close of each
          disbursement period, the PCFOrs CFC account shall have a balance of zero."

          Our review consisted of comparing the PCFO's CFC cash receipts and disbursements.
          Specifically, we identified the following errors:

                  •	 A $1,635 balance in the PCFO's cash receipts and disbursements schedule
                     that was not disbursed.
                  •	 Errors in recording payroll receipts totaling $1,208.

          As a result of the PCFO not properly closing out the CFC account, the CFC's member
          agencies did not receive their proportional share of $2,843.

          PCFO Response:

          The PCFO agreed with $1,208 of the questioned amount and did not respond to the
          remaining questioned amount.

          OIG Response:

          The original finding in the draft report questioned $1,635 simply as undistributed
          CFC receipts. The documentation provided by the PCFO and LFCC did not address
          this amount and the changes made to our review as a result of the documentation
          provided did not affect it. Therefore, the amount remains questioned and is rolled
          into the total amount questioned.

          Recommendation 3

          We recommend that the OCFCO and LFCC ensure that the PCFO distributes $2,843
          to the member agencies of the 2005 campaign due to the PCFO not closing out its
          CFC account properly after the end of the campaign.

     2.   Campaign Expenses Charged to the Incorrect Campaign Year

          The PCFO inappropriately charged $26,250 to the 2005 Campaign for expenses
          related to an earlier campaign.




                                                 9
5 CFR 950. 106(b) states, "The PCFO may only recover campaign expenses from
receipts collected for that campaign year. Expenses incurred preparing for and
conducting the CFC cannot be recovered from receipts collected in the previous
year's campaign." Likewise, prior campaign year expenses should not be recovered
from the receipts of a future year's campaign.

During our review of the administrative expenses we judgmentally selected 13 CFC
expense transactions, totaling $231,728 in CFC costs charged to the 2005 campaign,
to determine if the expenses were actual, reasonable, and properly allocated. Our
review determined that $26,250 charged to the 2005 campaign was related to an audit
of the 2003 CFC campaign. Any audit fees related to the current campaign (2005)
would likely be incurred after the close of the campaign. However, these fees were
incurred and billed during the 2005 campaign and thereby could not be related to the
2005 campaign. The PCFO stated that the audit expenses were "accounted for on a
cash basis rather than an accrual basis" and that it felt the difference was "not
significant."

As a result of charging campaign expenses to the wrong campaign, the PCFO is not
properly matching expenses with receipts for that campaign period.

PCFO Response:

The PCFO does not agree with this finding and stated that any audit of a given CFC
campaign cannot begin untilalJ funds collected have been paid to the charities. The
PCFO has found it reasonable to estimate the amount chargeable to any given
campaign to be the actual amounts paid during the given year. The PCFO stated that
the $26,250 was reserved for the 2005 audit based on the cost incurred from the 2003
audit.

OIG Response:

The PCFO did not provide any documentation to support its assertion that the costs
identified were reserved for audits related to the 2005 campaign year. Our review
determined that the questioned costs were related to actual invoices and were paid to
the IPA out of 2005 campaign year funds and were not "reserved."

Additionally, the OCFCO has recently updated its guidance to clarify this issue and
further support our position. It states that because IPA audit expense is "paid after the
close of the campaign, the amount should be accrued and withheld from the last
distribution. We encourage campaigns to negotiate a fixed cost agreement with the
Independent Public Accountant (lPA) so that the actual amount can be known prior to
the close of the campaign. If campaigns are unable to negotiate a fixed cost
agreement, an estimated amount should be withheld based on prior experience and
discussions with the auditor." According to discussions with the OeFCO, although
the memorandum (eFC Memorandum 2008-09, dated November 14,2008) was




                                     10

     issued after the date of our audit, this has been the opinion of the OCFCO since the
     inception of the CFC Audit Guide.

     Recommendation 4

     We recommend that the OCFCO direct the PCFO to follow the guidelines set forth in
     eFC Memorandum 2008-09 in regards to CFC Audit Expense Reimbursement for
     future campaigns.

3.   Campaign Expense Reimbursement Not Authorized by LFCC

     The LFCC did not authorize the PCFO reimbursement for 2005 CFC campaign
     expenses as required by the Federal regulations.             .

     5 CFR 950.1 04(b)(17) states that the LFCC is responsible for "Authorizing to the
     PCFO reimbursement of only those campaign expenses that are legitimate CFC costs
     and are adequately documented."

     We reviewed the LFCC meeting minutes to determine if the LFCC authorized the
     PCFO to reimburse itself for expenses pertaining to operating the 2005 campaign.
     Our review of those minutes did not identify where the LFCC authorized the PCFO's
     2005 campaign expenses for reimbursement. Per discussion with the LFCC it was
     determined that it believed that the approval of the PCFO application and budget also
     approved the PCFO's expenses and that no other approval was necessary.

     As a result of not reviewing and approving the PCFO's reimbursed expenses, the
     LFCC runs the risk of the CFC being charged for expenses that are not legitimate
     CFC costs.

     PCFO Response:

     The PCFO disagrees with the finding arid states that the LFCC has been reviewing the
     year-end expenses incurred by the PCFO since 2006 (for campaign year 2005-2006).

     DIG Response:

     The PCFO did not provide any documentation to support that the LFCC reviewed and
     approved the PCFO's 2005 campaign expenses prior to reimbursement, as is required
     by the regulations.                 .

     Recommendation 5

     We recommend that the OCFCO ensures that the LFCC understands its
     responsibilities in regards to authorizing reimbursement of legitimate and adequately
     documented campaign expenses and that it does so in the future.




                                          11

4.   Incorrect Cut-off Date for CFC Payroll Receipts

     The PCFO incorrectly used January 15th as its cutoff date for determining which
     campaign to allocate incoming receipts to and does not track each receipt individually
     by payroll office as recommended by the OCFCO.

     CFC Memorandum 2003-11 states, "Any checks received on or before January 31
     without supporting documentation should be applied to the prior campaign. Checks
     received after January 31 should be applied to the current campaign."

     CFC Memorandum 2006-5 states that, "all campaigns should be tracking receipts by
     payroll office. Discrepancies should be brought to the attention of the payroll office
     and/or DCFCO as soon as possible so that resolutions can be made ina timely·
     manner."

     We reviewed the PCFO's responses to the policies and procedures questionnaire to
     determine how they handle cut-off dates for deposits. In addition, we interviewed
     personnel to gain an understanding of the cut-off dates used by the PCFO.

     Per our discussions with the PCFO it was determined that it uses January 15th as its
     cut-off date because many payroll offices do not provide the needed documentation to
     determine which campaign year the distributions belong to. However, the PCFO did
     state that the payroll offices began improving recently and that the issue may resolve
     itself in the future.

     As a result of not tracking each receipt by payroll office as recommended by the
     OCFCO and using an incorrect cut-off date, the PCFD runs the risk of misapplying
     incoming CFC payroll receipts to the wrong campaign year.

     PCFO Response:

     The PCFO agrees with the audit finding.

     Recommendation 6

     We recommend that the DCFCO and the LFCC ensure that the PCFO follow the
     guidance outlined in CFC Memorandums 2006-5 and 2003-11.

5.   Uncashed Check Procedures Not Implemented

     The PCFO did not follow the guidance set forth by the OCFeO in CFC Memorandum
     2006-5 and implement policies and procedures for uncashed checks.




                                          12

     CFC Memorandum 2006-5 Part C states that the "PCFO must develop and follow
     policies and procedures regarding uncashed checks." The memorandum also provided
     suggested procedures to be followed for checks uncashed for more than six months.

     We reviewed the PCFO's responses to the policies and procedures questionnaire
     regarding uncashed checks. Also, we reviewed the PCFO's outstanding check log to
     determine if any CFC distribution checks older than six months were outstanding at
     the time of the audit.

     Discussions with the PCFO determined that it has no formal policy in place other than
     reissuing the check after it is one year old. It also stated that if the Finance
     Department noticed a significant uncashed check, it may try to call the agency, but
     that those calls were not documented.

     If CFC disbursement checks are allowed to go uncashed without following
     procedures similar to those recommended by the OCFCO, the PCFO runs the risk of
     not properly disbursing CFC funds as required by the regulations.

     PCFO Response:

     The PCFO agrees with the audit finding.

     Recommendation 7

     We recommend that the OCFCO and LFCC ensure that the PCFO institutes the
     policies arid procedures necessary to adequately handle uncashed CFC checks as
     suggested in Part C of CFC Memorandum 2006-5.

6.   Commingling of CFC Funds

     The PCFO commingled CFC cash receipts with cash receipts from other charitable
     campaigns,

     5 CFR 950.105 (d)(8) states that the PCFO is responsible for "Keeping and
     maintaining CFC financial records and interest-bearing accounts separate from the
     PCFO's internal organizational financial records and bank accounts."

     We reviewed all bank transactions related to the 2005 CFC campaign to determine if
     the monies were properly accounted for, received and disbursed. We determined that
     the PCFO used a separate account to deposit cash donations. The PCFO stated that
     the account was used "for internal control, safety and security purposes. The amounts
     [CFC funds] are then drawn and sent to the appropriate campaign account."

     Our review noted that CFC cash donations were deposited into the account; however,
     we were unableto ascertain the transfer of these monies into the CFC checking   .




                                         13

     account. In addition, we determined that the account where CFC cash donations were
     deposited included other monies unrelated to the CFC campaign.

     As a result of depositing CFC cash donations in a non-CFC dedicated account, the
     PCFO runs the risk of not properly accounting for and disbursing all CFC donations
     as is required by the Federal regulations. The commingling of funds by the PCFO
     could have had an impact on the $2,843 in undistributed CFC funds noted in the
     "Undistributed Campaign Receipts" finding on page 9 of this report.

     PCFO Response:

     The PCFO agrees with the audit finding and stated that a CFC-only bank account has
     been set up for this purpose.

     Recommendation 8

     We recommend that the OCFCO and LFCC ensure that the account(s) set-up by the
     PCFO removes all potential risk of commingling CFC and PCFO funds.

7.   Untimely CFC Distributions

     The PCFO did not distribute all CFC receipts to participating agencies and

     federations in accordance with the regulations.


     5 CFR 950.901 (i)(2) states, "For campaigns with gross receipts in excess of
     $500,000, the PCFO will distribute all CFC receipts beginning April 1, and monthly
     thereafter."

     We reviewed the PCFO's Distribution Schedule and cancelled distribution checks to
     determine if the PCFO distributed funds by April 1 and monthly thereafter.

     Our review identified three instances where the PCFO did not adhere to the
     regulations. Specifically, we found that:

            •	 The PCFO did not make initial payments to 212 member agencies or
               federations by April 1, 2006, as required by the regulations.
            •	 The PCFO did not make monthly payments to 239 member agencies or
               federations as specifically required by the regulations.
            •	 The PCFO did not make disbursements ofCFC receipts to any of the 344
               member agencies or federations receiving designations in June or
               November 2006.

     It should be noted that the CFC regulations (5 CFR 950) were revised November 20,
     2006. This revision effected the regulation cited in this finding to state that the PCFO
     shall transmit disbursements to member agencies and federations at least quarterly
     beginning April 1.



                                          ]4
          As a result of not making distributions ofCFC receipts in accordance with the Federal
          regulations, the agencies and federations may not be able to effectively manage their
          operations.

          PCFO Response:

          The PCFO agrees with the audit finding.

          Recommendation 9

          We recommend that the OCFCO and the LFCC ensure that the PCFO distributes all
          CFC receipts beginning April 1, and quarterly thereafter.

D.   ELIGIBILITY

     1.   Lack of Support for LFCC Eligibility Decisions

          The LFCC did not maintain sufficient documentation to support that it made the
          eligibility decisions of local organizations' applications.

          5 CFR 950.1 04(b)(3) states that the LFCC is responsible for "Determining the
          eligibility of local organizations that apply to participate with the local campaign."

          According to 5 CFR 950.1 04(b)(1), the LFCC is responsible for "Maintaining
          minutes of the LFCC meetings ...."

          During our review of the LFCC's local organization application evaluation process,
          we reviewed the LFCC's meeting minutes to determine if it made the local eligibility
          decisions, and not the PCFO. From our review of the minutes, we were unable to
          discern if the LFCC made the eligibility decisions. Per discussions with the LFCC
          and PCFO, there were some meetings (conference calls) where no meeting minutes
          were taken. As a result, the minutes provided were incomplete.

          As a result of not documenting or maintaining detailed LFCC meeting minutes
          regarding eligibility decisions, we could not determine that the LFCC made those
          decisions as required by the regulations.

          PCFO Response:

          The PCFO agrees with the audit finding.

          Recommendation 10

          We recommend that the oeFCO ensures that the LFCC puts policies and procedures
          in place to document and maintain support for its decisions regarding the eligibility of
          local organizations that apply to participate in the local campaign.



                                               15

Recommendation 11

We recommend that the OCFCO ensures that the LFCC understands its
responsibilities regarding determining the eligibility of local organizations that apply
to participate in the local campaign.




                                     16

               IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

                  Auditor-In-Charge



                  Chief

                   Senior Team Leader

Jill S. Henderson, Deputy Assistant Inspector General for Management




                                             17

                                                                                                           APPENDIX





          The New York City Combined Federal Campaign





June 5,2008

                                                                                                                'ooJU" 16

Office of Personnel Management
GIG, Special Audits Group
1900 E Street NW
Room 6400
Washington, DC 20415



Enclosed you will find the United Way of New York City (PCFO) response and
attachments for the Audit draft conducted by the Office of the Inspector General,
Special Audits Group.

On behaif of the LFCC, we would like thank you for giving the NYC-CFC the
opportunity to address areas of non-compliance. If you have any further inquiries
on any of the items, please feel free to contact me or any member of the United
-Way of New York City staff.




           ? P~rl< AVAnllA ?nrl Flnor N"w York. NY 10016· Teleohone: /2121 251-4015· Fax: (212) 251·2439
A.   F'ISCAL MANAGEMENT


     1.   Expenses Charged to the Incorrect Campaign Year                              $26,250

          PCFO Response:

          The audit of any given CFC campaign cannot commence until all funds collected
          have either been paid to the charities or disbursed to the PCFO for expenses paid in
          the name of the campaign. The PCFO must make an estimate of the amount of the
          audit by an independent CPA finn. UWNYC has found it reasonable to estimate the
          amount chargeable to any given campaign to be the actual amounts paid (or accrued)
          during the given year. In this way, each campaign bears the cost of one audit. The
          $26,250 was reserved for the 2005 audit based upon the cost incurred for the 2003
          audit.

          The final disbursements for the 2005 campaign were made March 21,2007. The
          independent CPA auditors completed their audit June 15,2007. The first progress
          billing in connection with the 2005 campaign was made in the amount of $17,000 on
          June 7,2007. The final billing (which UWNYC is obligated to pay) had not been
          rendered.

     2.   Unaccounted and Unsupported Campaign Receipts                                  $8,280

          PCFO Response:

                                     DELETED BY OIG

                       NOT RELEVANT TO THE AUDIT REPORT


          •   $1,175 error in recording payroll donations
              - Internal cash log was reconciled with the Amalgamated Bank Statements (0310).
          It was noted that there were two deposits that were not reported in the cash log.
          Specifically, from the April 2006 statements, a deposit for $758 was not reported; and
          from the May 2006 statements, a deposit for $450 was not reported.
          (Note: It is not clear where the amount of$I,175 derives since we are coming up with
          a total of$I,208. The $758 and $450 are highlighted on the cash log. The $450 was
          originally deposited 03/30/06. The bank returned the check which was re-deposited
          05/02/06)
          Cash Log Documentation Attached and relevant amounts are highlighted.

                                     DELETED BY GIG

                       NOT RELEV ANT TO THE AUDIT REPORT
                                   DELETED BY OIG


                      NOT RELEVANT TO THE AUDIT REPORT





  4.	    Campaign Expense Reimbursement

         PCFO Response

         The LFCC has been reviewing the year-end expenses incurred by the PCFO since
         2006 (for campaign year 2005-2006). This has been on-going to the present year.

  5.	    Incorrect Cut-off Date for Deposits

         PCFO Response:

         The PCFO concurs with the findings of non-compliance and accept the Auditors
         recommendation.

-- 6.·   Un-Cashed Check Procedures

         PCFO Response:

         The PCFO concurs with the findings of non-compliance and accept the Auditors
         recommendation.

  7.	    Commingling of CFC Funds

         PCFO Response:

         The PCFO has set-up another bank account specifically for this purpose. The PCFO
         concurs with the findings of non-compliance and accept the Auditors
         recommendation.
     8.	   Untimely Disbursements

           PCFO Response:

           The PCFO concurs with the findings of non-compliance and accept the Auditors
           recommendation.




                                    DELETED BY OIG


                        NOT RELEVANT TO THE AUDIT REPORT





B.     ELIGIBILITY

     1.	   Unsupported PCFO Selection

           PCFO Response:

           The PCFO concurs with the findings of non-compliance and accept the Auditors
           recommendation.

     2.	   Lack of Support for LFCC Eligibility Decisions

           rCFO Response:

           The PCFO concurs with the findings of non-compliance and accept the Auditors
           recommendation.


                                    DELETED BY DIG


                        NOT RELEVANT TO THE AUDIT REPORT

D.	   AGREED UPON PROCEDURES

      1.	   Agreed Upon Procedures not in Compliance                                  Procedural

            PCFO Response:

            The PCFO forwarded section D. Agreed Upon Procedures to
            PriceWaterhousef.oopers, the external auditors for review and comments.