oversight

Audit of 2005 And 2006 Midlands Area CFC Columbia, South Carolina

Published by the Office of Personnel Management, Office of Inspector General on 2008-10-29.

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



                                   2005 AND 2006

                                  MIDLANDS AREA

                            COMBINED FEDERAL CAMPAIGNS

                             COLUMBIA, SOUTH CAROLINA



                  Report No. 3A-CF-OO-08-033                      Dak:October 29, 2008




                                                                       Michael R. Esser
                                                                       Assistant Inspector General
                                                                         for Audits




        www.oprn.gcv                                                                           www.usajobs.gov
                           UNITED STATES OFFfCE OF PERSONNEL MANAGEMENT

                                               Washington, DC 20415


   Office of the
Inspector General




                                       EXECUTIVE SUMMARY





                                        2005 AND 2006

                                      MIDLANDS AREA

                                COMBINED FEDERAL CAMPAIGNS

                                 COLUMBIA, SOUTH CAROLINA



                 Report No. 3A-CF-OO-08-033                        Date:October 29, 2008

      The Office of the Inspector General has completed an audit of the Midlands Area Combined
      Federal Campaigns (eFC) for 2005 and 2006. The United Way of the Midlands, located in
      Columbia, South Carolina, served as the Principal Combined Fund Organization (PCFO) during
      both campaigns. Our main objective was to determine if the Midlands Area CFC 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 five instances of non-compliance with the regulations (5 CFR 950) governing the
      CFe.

                                  BUDGET AND CAt\'lPAIGN EXPENSES

      •        PCFO Expense Reimbursement Not P.-operlv Approved

               The PCFO's campaign expenses were not properly approved and documented by the LFCC
               before reimbursement.

      •        Inappropriate Reimbursement fo.' Audit Fees

               The PCFO incorrectly charged the 2006 ere for audit fees related to theAgreed-Upon
               Procedures for the 2004 Cl'C. The reimbursement was not appropriate because the PCFO
               was not matching the audit fees with the appropriate campaign.




                                                                                         --~._--

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                   CAMPAIGN RECEIPTS AND DISBURSEMENTS

•   One-Time Disbursements Exceed Established Threshold

    The PCFO incorrectly made one-time disbursements for the 2006 campaign to 13 member
    agencies/federations which had designations in excess of the threshold set by the LFCC.

•   One-Time Disbursements Reduced by Incorrect Pledge Loss Percentage

    The PCFO did not reduce one-time disbursement amounts by the appropriate pledge loss
    percentage for the 2006 campaign.

                                       ELIGIBILITY

•   Local Eligibility Determinations

    The LFCC did not directly make and communicate local eligibility determinations to the
    agencies and federations applying for inclusion in the 2006 campaign as required by the
    Federal regulations.




                                             11
                                      CONTENTS
                                                                                   PAGE

       EXECUTIVE SUMMARY	                                          :               :         i


 I.    INTRODUCTION AND BACKGROUND	                                                          1


II.    OBJECTIVES, SCOPE, AND METHODOLOGY	                                                   2


III.   AUDIT FINDINGS AND RECOMMENDATIONS	                                             ,     6


            A. BUDGET AND CAMPAIGN EXPENSES	                                                  6

               1. PCFO Expense Reimbursement Not Properly Approved	                           6

               2. Inappropriate Reimbursement for Audit Fees	                              __ 7


            B. CAMPAIGN RECEIPTS AND DISBURSEMENTS	                                          7

               1. One-Time Disbursements Exceed Established Threshold	                       7

               2. One-Time Disbursements Reduced by Incorrect Pledge Loss Percentage         8


            C. ELIGIBILITy	                                                                  9

               1. Local Eligibility Determinations	                                          9


IV.    MAJOR CONTRIBUTORS TO THIS REPORT	                                                   11


       APPENDIX	 (The PCFO and LFCC's response, dated July 29,2008, to the draft audit
                 report)
                     I. INTRODUCTION AND BACKGROUND


Introduction

This report details the findings, conclusions, and recommendations resulting from our audit of
the Midlands Area Combined Federal Campaigns (CFC) for 2005 and 2006. 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 in Federal installations throughout
the world. It consists of 278 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 OPM 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 CFe, 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 Cf'C
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 No. 12353 and No. 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 eFC operations, sets forth ground
rules under which charitable organizations receive federal employee donations. Compliance
with these regulations is the responsibility ofthe PCFO and LFCC. Management of the PCFO is
also responsible for establishing and maintaining a system of internal controls.       .

The initial results of our audit were discussed with PCFO and LFCC officials during an exit
conference held on June 6, 2008. A draft report was provided to the PCFO and the LFCC on
June 23, 2008 for review and comment. The PCFO and LFCC's response to the draft report was
considered in preparation of this final report and is included as an Appendix.




                                                1

                  II. OBJECTIVES, SCOPE, AND METHODOLOGY


OBJECTIVES


The primary purpose of the audit of the Midlands Area CFC was to determine compliance with
Title 5, Code of Federal Regulations, Part 950. Our specific audit objectives for the 2006
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 in accordance with the 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 undesignated 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 if the PCFO charged its member agencies for expenses in a
             reasonable manner.

Additionally, our audit objective for the 2005 campaign was:

       Audit Guide Review
          •	 To determine if the IPA completed the Agreed-Upon Procedures (AUP) as
              outlined in the CFC Audit Guide (For Campaigns with Pledges $1 Million and
              Greater) for the 2005 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
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.




                                               2

The audit covered campaign years 2005 and 2006. The United Way of the Midlands, located in
Columbia, South Carolina, served as the PCFO during both campaigns. The audit fieldwork was
conducted at the offices of the United Way of the Midlands from June 2 through June 6, 2008.
Additional audit work was completed at our Washington, D.C. office.

The Midlands Area CFC received campaign pledges, collected campaign receipts, and incurred
campaign administrative expenses for the 2005 and 2006 campaigns as shown below:

    Campaign               Total                       Total               Administrative
      Year                Pledges                     Receipts               Expenses

      2005              $1,451,583	                  $1,287,120               $267,991
      2006              $1,485,384	                  $1,286,900               $193,062

In conducting the audit we relied to varying degrees on computer-generated data. Due to time
constraints, we did not verify the reliability of the data generated by the various systems
involved. However, our review did identify a software error that resulted in overpayments
related to one-time disbursements. This audit issue is described in detail in the "Audit Findings
and Recommendations" section of this report. Except for the audit issue mentioned above,
nothing else came to our attention during our audit testing utilizing the computer-generated 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 CFe
Memorandums.

In order to determine that the LFce and PCFO were in compliance with CFe 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.




                                                3

   •	 Reviewed supporting documentation for a judgmental sample ofactual expenses from 13
      expense accounts (out of a total of 31 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:
                                                                                           lh
    •	 A judgmental sample of 25 pledge cards out of 8,426 pledge cards (selected the S
         pledge card from the first 25 pages of the Pledge Card Detail Schedule) 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 PCFO for the 2006 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 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 the Midlands), we reviewed the following:
   •	 Data reported on the CFC Receipts Schedule with supporting documentation to verify
       whether receipts were properly recorded.
   •	 The CFC Distribution Schedule to ensure that the United Way of the Midlands did not
       disburse any funds to me 111 bel' agencies not participating in the 2006 CFC.
   •	 The United Way of the Midlands contract with its member agencies to determine if the
       fees were reasonable and supported.

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.



                                                4

Finally, to accomplish our objective for the Audit Guide Review, we reviewed the CFC Audit
Guide (for campaigns with pledges greater than $1 million) and determined the type of audit to
be completed by the IP A for the 2005 campaign. We also completed the AUP checklist to verify
that the IPA completed and documented the AUP steps.




                                               5

             III. AUDIT FINDINGS AND RECOMMENDATIONS


The PCFO and LFCC administered the 2005 and 2006 Midlands Area CFCs in compliance with
all applicable CFe regulations with the exception of the following areas.

A.   BUDGET AND CAMPAIGN EXPENSES

     1.   PCFO Expense Reimbursement Not Properly Approved

          The LFCe did not appropriately authorize payment of the 2006 campaign expenses to
          the PCFO as required by the Federal regulations.

          5 CFR 950.l04(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. Total reimbursable expenses may not exceed the
          approved campaign budget by more than 10 percent." This provision is a control
          designed to help ensure that the PCFO reimburses itself for only appropriate and
          supportable expenses. Furthermore, 5 CFR 950.106(a) states that the PCFO is to
          recover expenses that reflect the actual cost of administering the campaign and are
          approved by the LFCC.

          Our review of the LFCC meeting minutes did not identify whether the LFCC
          reviewed and/or approved the payment to the PCFO for its 2006 campaign-related
          expenses. Discussions with the PCFO determined that the actual campaign expenses
          were not submitted to the LFCC for approval because both the PCFO and LFCC
          believed that the approval of the budget for the 2006 campaign was sufficient
          approval for the reimbursement of the expenses. The PCFO said that, in the future,
          the actual campaign expenses will be submitted to the LFCC for approval and the
          approval will be documented in the LFCC meeting minutes.

          As a result of the LFCC not reviewing and approving the actual 2006 campaign
          expenses, the PFCO could have been reimbursed tor non-campaign related expenses
          or been reimbursed for more than 110 percent of the budgeted costs.

          PCFO and LFCC's Comments:

          The PCFO and the LFCC agree with this finding and stated that in the future they will
          ensure that the actual expenses are approved by the LFCC prior to reimbursement.

          Recommendation 1

          We recommend that the OCFCO ensure that the LFCC review, approve, and
          document its authorization of the PCFO's reimbursement tor campaign expenses.




                                              6
          Recommendation 2

          We recommend that the OeFeO work with the LFCC to ensure that it understands its
          responsibilities as related to 5 eFR 950.104.

     2.   Inappropriate Reimbursement for Audit Fees

          The PCFO incorrectly charged the 2006 campaign for audit fees related to the AUPs
          for the 2004 campaign.

          According to 5 CFR 950.1 06(b) "The PCFO may only recover campaign expenses
          from receipts collected for that campaign year."            .

          Based on our review of 2006 campaign expenses, we determined that the PCFO
          incorrectly charged the 2006 campaign for expenses that should have been charged to
          the 2004 campaign. Specifically, we determined that the PCFO received and paid an
          invoice from its IPA for AUPs performed on the 2004 eFC in August 2006.
          Application of a 2004 audit fee to the 2006 Campaign is inappropriate because
          campaigns should only incur expenses related to that year's campaign.

          Application of expenses to the incorrect campaign year will adversely effect the net
          designations due to the charities and result in the wishes of the Cf'C donors to not be
          fully realized.

          PCFO and LFCC's Comments:

          The PCFO and the LFCC agree with this finding and stated that they are instituting
          procedures that will accrue the estimated audit fees for future campaigns, thereby
          properly matching the audit fees with the appropriate campaign year.

          Recommendation 3

          We recommend that the OCFCO and LFCC work with the PCFO to put procedures in
          place to ensure that it properly matches expenses with the related campaign year.

B.   CAMPAIGN RECEIl'TS AND DISBURSEMENTS

     1.   One-Time Disbursements Exceed Established Threshold

          The PCFO made one-time disbursements to 13 agencies which had gross designations
          over the ceiling amount stipulated by the LFCC.

          5 CFR 950.901(i)(3) states, "The PCFO may make one-time disbursements to
          organizations receiving minimal donations from Federal employees. The LFCC must
          determine and authorize the amount of these one-time disbursements."




                                                7
     We reviewed all one-time disbursements made to agencies of the 2006 campaign to
     determine if any agencies with gross designations over the $500 limit authorized by
     the LFCC received such a payment. We identified 13 agencies with gross
     designations in excess of $500 which received one-time disbursements. According to
     the PCFO, it uses CFC Assistant (accounting software for CFCs) which automatically
     calculates what the one-time disbursements will be and the agencies which will
     receive them. However, there was an error with the software that allowed a number
     of agencies with gross designations over the ceiling amount to still receive one-time
     disbursements. The PCFO has tested the software, but could not determine how to
     correct the issue.

     As a result, these agencies' distributions were inappropriately reduced by the average
     of three years pledge loss, which may have increased or reduced the actual funds they
     should have received.

     PCFO and LFCC's Comments:

     The PCFO and the LFCC agree with this finding and state that in the future they will
     manually review the calculations for one-time disbursements to ensure that agencies
     with gross designations above the ceiling amount do not receive a one-time
     disbursement.

     Recommendation 4

     We recommend that the OCFeO and LFCC ensure that the PCFO has polices and
     procedures in place that guarantee only those agencies and federations meeting the
     approved one-time disbursement threshold receive them.

2.   One-Time Disbursements Reduced by Incorrect Pledge Loss Percentage

     The PCFO did not reduce one-time disbursement amounts by the appropriate pledge
     loss percentage for the 2006 campaign.

     5 CFR 950.901(i)(3) states, "The PCFO may deduct the proportionate amount of each
     organization's share of the campaign's administrative costs and the average of the
     previous 3 years pledge loss from the one-time disbursement"

     We reviewed all one-time disbursements made to agencies of the 2006 campaign to
     determine if the appropriate amount of pledge loss was withheld by the PCFO. Our
     review determined that the PCFO incorrectly calculated and applied pledge loss of
     9.9 percent to the disbursements for those agencies and federations receiving a one­
     time disbursement. The actual pledge loss which should have been deducted from the
     one-time disbursements was 12.9 percent. Per our discussions with the PCFO, it
     acknowledges the error and is working to correct the error for future campaigns.




                                          8
          As a result of applying a lower shrinkage percentage to agencies receiving one-time
          disbursements, those agencies received slightly higher disbursements and agencies
          receiving monthly disbursements received slightly less than they should have.

          PCFO and LFCC's Comments:

          The PCFO and the LFCC agree with this finding and indicated that the problem
          occurred as a result of an error by CFC Assistant, a software program used by the
          PCFO. The PCFO has not been able to replicate the error in the system, but will take
          extra steps to verify the calculation manually prior to making the one-time
          disbursements for future campaigns.

          Recommendation 5

          We recommend that the OCFCO and the LFCC ensure that the PCFO applies the
          appropriate pledge loss percentage to one-time payments in future campaigns.

C.   ELIGIBILITY

     1.   Local Eligibility Determinations

          The LFCC did not directly make and communicate local eligibility determinations for
          the agencies and federations applying for inclusion in the 2006 campaign as required
          by the Federal regulations.

          5 CFR 950.1 04(b)(3) states that the LFCC is responsible for "Determining the
          eligibility of local organizations that apply to participate in the local campaign. 11
          Additionally, 5 CFR 950.204(e) states that "The LFCC shall communicate its
          eligibility decisions by a date to be determined by aPM ...."

          We reviewed the LFCC meeting minutes and eligibility notification letters to
          determine if the LFCC made and communicated the eligibility decisions for
          charitable organizations applying to participate in the campaign. As a result of our
          review, we determined that the LFCC did not make or communicate the decisions for
          the 2006 campaign. The LFCC set up an "Eligibility Committee" made up of five
          Federal employees to "establish an annual application process consistent with CFR
          950.204 and in accordance of the annual work calendar established by the Office of
          Personnel Management for organizations that wish to be listed in the Local Charity
          List in the annual Combined Federal Campaign brochure." The committee's
          responsibilities included: learning and enforcing all of the eligibility requirements
          according to CFR 950.204, reviewing local Federation and agency applications for
          inclusion in the upcoming campaign, and signing local application's acceptance and
          denial letters. Our review determined that none of the members of the Eligibility
          Committee were members of the LFCC and its decisions were not reviewed or
          approved ~y the LFCC.




                                                 9
It is the responsibility of the LFCC to make and communicate local eligibility
decisions for the campaign. The LFCC may set up a committee, such as the
Eligibility Committee now in place, to review the applications and appeals and make
recommendations to the LFCC; however, the LFCC must make those decisions and
communicate the acceptances and denials to the applying Federations and/or
agencies.

By not making these eligibility determinations directly, the LFCC runs the risk of
ineligible Federations and/or agencies being improperly included in the CFC.

PCFO and LFCC's Comments:

The PCFO and the LFCC agree with this finding, On its CFC Organization Chait, the
Eligibility Committee is seen as a group equal to the Federal Executive Cornmitee
(FEC). Consequently, the LFCC did not believe having an FEC member serve on the
Eligibility Committee to be necessary. For future campaigns, the LFCC will ensure
that one of its members serves as the Chairman of the Eligibility Committee and
presents the findings of the committee to the LFCC.

Recommendation 6

We recommend that the OCFCO ensure that the LFCC understands its
responsibilities regarding local eligibility decisions and communication of those
decisions to the applicants as outlined in 5 CFR 950.104(b)(3) and 5 CFR 950.204(e).




                                    10

             IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

              Auditor-In-Charge

               Auditor


                Group Chief

                  Senior Team Leader




                                       11

                                                                                                       Appendix


1800 Main Street
Columbia, SC 29201
lei 80)-733-5400                                                                                       ~09 AUG     6RCVO
fax 803-779"]803
www.uway.org




                                                                                                 UniledWay
                                                                                                 of the Midlands
                 july 29, 2008




               . Office of Personnel Management

                 Office of the Inspector General

                 1900 E. Street, NW, Room 6400

                 Washington, DC 20415-1100





                 This is in response to your correspondence dated June 23. 2008 regarding a draft
                 report detailing the results of the 2005 and 2006 Midlands Area Combined Federal
                                                                                        I

                 Campaign (CFe) audit conducted by the Office of Personnel Management.'

                We appreciate your recommendations and have addressed each of the findings
                highlighted in your report. Enclosed is United Way of the Midlands' response. It was
                a pleasure working with you and                  during the audit process.

                 If I can be of further assistance, please contact me by telephone,               or
          -_~ .. by email,




                Director

                Midlands Area CFC





               - Enclosure




what matters."
                        BUDGET AND CAMPAIGN EXPENSES


•   PCFO Expense Reimbursement Not Properly Approved

    The PCFO's campaign expenses were not properly approved and documented by the LFCC
    before reimbursement.

    PCFO and LFCC's Comments:

    The PCFO and the LFCC agree with this finding. In our annual application, we typically
    have presented the previous year's budget and actual results. We also submit the proposed
    budget. Going forward, we will ensure that the actual expenses are approved by the LFCC
    prior to reimbursement.


•   Inappropriate Reimbursement for Audit Fees

    The PCFO incorrectly charged the 2006 CFC for audit fees related to the Agreed Upon
    Procedures for the 2004 CFC. The reimbursement was not appropriate because the PCFO
    was not matching the audit fees with the appropriate campaign.

    PCFO and LFCC's Comments:

    The PCFO and the LFCC agree with this finding. We are learning better how to match
    expenses with the actual campaign. Since we do not incur the audit fees relative to a given
    campaign until approximately two years after the fact, we will begin accruing these charges
    based on our best estimates in the future. We have accrued the most recent audit bill to the
    2007 campaign. However this billing, which was recently incurred, was for the 2006
    campaign. The audit bill for the 2007 campaign will not be incurred until sometime in
    2009. One remedy would be to accrue a double audit bill against the 2007 campaign. Until
    we hear further, we will accrue one year's audit billing.


                   CAMPAIGN RECEIPTS AND DISBURSEMENTS

•   One-Time Disbursements Exceed Established Threshold

    The PCFO incorrectly made one-time disbursements for the 2006 campaign to thirteen
    member agencies/federations which had designations in excess of the threshold set by the
    LFCC.

    PCFO and LFCC's Comments:

    The PCFO and the LFCC agree wit this finding. The United Way of the Midlands uses
    CFC Assistant as its CFC Campaign Administrative software. When the one-time
    disbursement figure of $500 is input into the software, the software calculates a payout for
    every organization whose net paid amount after shrinkage and administrative expenses is
    less than $500. Unfortunately this results in the gross amount exceeding the $500 one time
    payout limit. In the future, we will fine tune this calculation to ensure that the gross pay
    amounts do not exceed $500.


•   One-Time Disbursements Reduced by Incorrect Shrinkage Percentage

    The PCFO did not reduce one-time disbursement amounts by the appropriate average three
    year pledge loss (shrinkage) percentage for the 2006 campaign.

    PCFO and LFCC's Comments:

    The PCFO and the LFCC agree with this finding. The CFe Assistant software apparently
    had a "glitch" in doing this calculation for the 2006 campaign. The percentage is based on
    a three year moving average. Manually, and re-executing this transaction in a test
    environment, we did determine that the percentage amount calculated was in error. We
    have not been able to replicate the error, but will take extra steps to verify the calculation
    manually prior to making the one-time disbursements next year.

                                        ELIGIBILITY

•   Local Eligibility Determinations

    The LFCC did not directly make and communicate local eligibility determinations to the
    agencies and federations applying for inclusion in the 2006 campaign as required by the
    Federal regulations.

    PCFO and LFCC's Comments:

    The PCFO and the LFCC agree with this finding. On our CFC Organization Chart, the
    Eligibility Committee is seen as a group equal to the Federal Executive Committee.
    Therefore, it was not seen as a requirement that a member of the FEC serve on the
    Eligibility Committee because they had equal authority on the organization chart, We have
    corrected this by securing a member of the FEC to serve as the Chairman of the Eligibility
    committee. The Chairman will make a presentation at the June FEe meeting.