oversight

Audit of the 2007 and 2008 Inland Northwest Combined Federal Campaigns Spokane, Washington

Published by the Office of Personnel Management, Office of Inspector General on 2011-03-17.

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

                                                     U.S. OFFICE OF PERSONNEL MANAGEMENT
                                                           OFFICE OF THE INSPECTOR GENERAL
                                                                            OFFICE OF AUDITS




Final Audit Report
SUbject:



                    AUDIT OF THE 2007 AND 2008 

                      INLAND NORTHWEST 

                  COMBINED FEDERAL CAMPAIGNS 

                     SPOKANE, WASHINGTON 





                                           Report No. 3A-CF-OO-IO-035


                                          Date: March 17. 2011




                                                          --CAUTION-­
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                            UN ITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                  Washington, DC 20415 



   Office of the
Inspector Gene ral




                                              AUDIT REPORT




                                    AUDIT OF THE 2007 AND 2008 

                                      INLAND NORTHWEST 

                                  COMBINED FEDERAL CAMPAIGNS 

                                     SPOKANE, WASHINGTON 



                     Report No. 3A-CF-OO-IO-035                            Date: 3/17/2011




                                                                            Michael R. Esser
                                                                            Assistant Inspector General
                                                                              for Audits




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                            UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                Washing to n, DC 2041 5 



   Office o f the
ln spcclO r Geneml




                                        EXECUTIVE SUMMARY 





                                   AUDIT OF THE 2007 AND 2008 

                                     INLAND NORTHWEST 

                                 COMBINED FEDERAL CAMPAIGNS 

                                    SPOKANE, WASHINGTON 



                     REPORT NO. 3A-CF-OO-IO-035                             DATE: 3/17/2011

       The Office of the Inspector General has completed an audit of the 2007 and 2008 Inland
       Northwest Combined Federal Campaigns (CFe). The Spokane County United Way, located in
       Spokane, Washington, served as the Princ ipal Combined Fund Organization (PCFO) during both
       campaigns. OUf main objective was to determine if the Inland Northwest CFe was in
       compliance with Title 5, Code of Federal Regulations. Part 950 (5 CFR 950), including the
       responsibilities of both the PCFO and the Local Federal Coordinating Committee (LFCC ). The
       audit identified six instances of non·compliance with the regulations (5 CFR 950) governing the
       CFC .

       The following findings represent the results of our audit work as of the date of this report.

                                          AUDn GUIDE REVIEW

       •     A2reed-Upon Procedures Not in Accordaoce with the CFC Audit Guide                 Procedural

             The Independent Public Accountant did not complete all of the agreed-upon procedures in
             accordance with the CFC Audit Guide.




                                                                                                www.u s aJo ~ s, g ""
                          BUDGET AND CAMPAIGN EXPENSES 


•   CFC Expenses Charged to the Wrong Campaign                                           $5,834

    The PCFO incorrectly charged the 2008 CFC campaign for 10 expense transactions, totaling
    $5,834, which were charged to the wrong campaign year.

•   Expenses Not Identified as CFC-Related Charged to the Campaign                       $1,420

    The 2008 CFC campaign was charged $1,420 for expenses that could not be identified as
    belonging to the CFC.

                     CAMPAIGN RECEIPTS AND DISBURSEMENTS

•   Pledge Card Errors                                                              Procedural

    The PCFO did not comply with the Federal regulations in regards to five pledge cards that
    were not properly completed by donors.

•   Excess Disbursement of CFC Funds                                                     $1,944

    The PCFO disbursed $1,944 in excess of the amounts received for the 2008 campaign.

                                        ELIGIBILITY

•   CFC Charity List Not in Compliance with Regulations                             Procedural

    The 2008 campaign brochure's Charity List order did not comply with OPM Memorandum
    2008-6.

                                   PCFO AS A FEDERATION

Our review ofthe PCFO's activities as a federation showed that it complied with the applicable
provisions of 5 CFR 950.




                                               11
                                                           CONTENTS 


                                                                                                                             PAGE

       EXECUTIVE SUMMARY ............................................................................................... i 


  1.   INTRODUCTION AND BACKGROUND ...................................................................... 1 


 II.   OBJECTIVES, SCOPE AND METHODOLOGY ............................................................2 


III.   AUDIT FINDINGS AND RECOMMENDATIONS ........................................................6 


       A. AUDIT GUIDE REVIEW ...........................................................................................6 


            1. Agreed-Upon Procedures Not in Accordance with the CFC Audit Guide ............ 6 


       B. BUDGET AND CAMPAIGN EXPENSES ................................................................ 8 


            1. CFC Expenses Charged to the Wrong Campaign .................................................. 8 

            2. Expenses Not Identified as CFC-Related Charged to the Campaign ................... 1                                 °

       C. CAMPAIGN RECEIPTS AND DISBURSEMENTS ................................................ 11 


            1. Pledge Card Errors ................................................................................................ 11 

            2. Excess Disbursement of CFC Funds .................................................................... 13 


       D. ELIGIBILITY ............................................................................................................. 14 


            1. CFC Charity List Not in Compliance with Regulations ....................................... 14 


       E. PCFO AS A FEDERATION ...................................................................................... 15 


IV.    MAJOR CONTRIBUTORS TO THIS REPORT ............................................................. 16 


       APPENDIX 	             (The PCFO and LFCC's response, dated November 10,2010, to the
                              draft audit report.)
                     I. INTRODUCTION AND BACKGROUND 


Introduction

This report details the findings and conclusions resulting from our audit of the Inland Northwest
Combined Federal Campaigns (CFC) for 2007 and 2008. 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. In 2008, it consisted of 242 separate local campaign organizations located throughout
the United States, including Puerto Rico, the Virgin Islands, and foreign assignments. The
Combined Federal Campaign Operations (CFCO) at OPM has the responsibility for management
of the CFC. This includes publishing regulations, memoranda, and other forms of guidance to
Federal offices and private organizations to ensure that all campaign objectives are achieved.

The CFCs 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 ofthe 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 (IP A) in accordance with generally
accepted auditing standards; cooperating fully with the 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 Part 950 (5 CFR 950), the regulations governing CFC operations, sets 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.

This represents our first audit of the Inland Northwest CFC. The initial results of our audit were
discussed with PCFO and LFCC officials during an exit conference held on May 27,2010. A
draft report was provided to the PCFO and the LFCC on September 15,2010, for review and
comment. The PCFO and the 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 our audit was to determine if the Inland Northwest CFC was in
compliance with 5 CFR 950, including the activities of both the PCFO and the LFCC. Our
specific audit objective for the 2007 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 of$150,000 to $999,999).

Additionally, our specific audit objectives for the 2008 CFC campaign were as follows:

   Budget and Campaign Expenses

   • 	 To determine if the PCFO solicitation, application, campaign plan, and budget were in
       accordance with the regulations.
   • 	 To determine if the expenses charged to the campaign were actual, reasonable, allocated
       properly, approved by the LFCC, and did not exceed 110 percent of the approved budget.

   Campaign Receipts and Disbursements

   • 	 To determine if the pledge card format was correct and if the pledge card report agrees
       with the actual pledge cards.
   • 	 To determine if incoming pledge monies were allocated to the proper campaign year and
       that the net funds (less expenses) were properly distributed to member agencies and
       federations.
   • 	 To determine if the member agencies and federations were properly notified of the
       amounts pledged to them and that donor personal information was only released for those
       who requested the release of information.

   Eligibility

   • 	 To determine if the charity list (CFC brochure) was properly formatted and contained the
       required information; if the charitable organization application process was open for the
       required 30 day period; if the applications were appropriately reviewed, evaluated, and
       approved; ifthe applicants were notified of the eligibility decisions timely; and if the
       appeals process for denied applications was followed.

   PCFO as a Federation

   • 	 To determine if the amounts received by the PCFO as a federation reconciled to those
       disbursed by the CFC; if the PCFO properly distributed funds to its federation members;


                                               2

       if expenses charged by the PCFO (to its federation members) were documented properly;
       and if the disbursements made to the federation members were accurate.

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.

The audit covered campaign years 2007 and 2008. The Spokane County United Way, located in
Spokane, Washington, served as the PCFO during both campaigns. The audit fieldwork was
conducted at the offices of the PCFO from May 24 through May 27,2010. Additional audit
work was completed at our Washington, D.C. and Cranberry, Pennsylvania offices.

The Inland Northwest CFC received campaign pledges, collected campaign receipts, and
incurred campaign administrative expenses for the 2007 and 2008 campaigns as shown below:

 ! Campaign                Total                      Total               Administrative
     Year                 Pledges                    Receipts               Expenses

      2007               $480,244                    $469,251                 $61,748

       2008              $493,426                    $470,871                 $71,312


In conducting the audit we relied to varying degrees on computer-generated data. Our review of
a sample of campaign expenses and supporting data, a sample of pledge card entries, and the
distribution of campaign contributions and related bank statements verified that the computer­
generated data used in conducting the audit was reliable. Nothing came to our attention during
our review of the data to cause us to doubt its reliability.

We considered the campaign's internal control structure when planning the audit procedures.
We gained an understanding of the 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 tests of accounting records and such other auditing
procedures as we considered necessary to determine compliance with 5 CFR 950 and CFC
Memorandums.

To accomplish our objective for the Audit Guide Review, we reviewed the CFC Audit Guide
(For Campaigns with Pledges of$150,000 to $999,999) and completed the AUP checklist to
verify that the IPA completed and documented the AUP steps.




                                                3

In regard to our objectives concerning the 2008 campaign's budget and campaign expenses, we
accomplished the following:

   • 	 Reviewed the PCFO's application to verify if it was complete.
   • 	 Reviewed a copy of the public notice to prospective PCFOs and the LFCC meeting
       minutes to verify that the PCFO was selected timely.
   • 	 Traced and reviewed amounts on the PCFO's Schedule of Actual Expenses to the 

       PCFO's general ledger. 

   • 	 Reviewed the PCFO's budgeted expenses, the LFCC's approval of the budget, and
       matched a sample of actual expenses to supporting documentation. Specifically, we
       judgmentally selected 27 expense transaction samples (the highest dollar transactions
       from the Supplies, Printing, Support, and Meetings budget categories occurring from
       March 2008 through December 2008; all 11 expenses incurred before March 2008; the 5
       highest dollar travel-related expenses; all 4 CFC Audit Expenses; and the top Salary,
       Office Space, and Computer Time expenses allocated to the 2008 CFC campaign) for
       review. The sampled expenses totaled $60,282, from a universe of 84 expense
       transactions totaling $71,312.
   • 	 Reviewed the LFCC meeting minutes and verified if 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 2008 campaign's receipts and disbursements were handled in accordance
with CFC regulations, we reviewed the following:

   • 	 Ajudgemental sample of pledge cards from the 2008 PCFO's Donor Pledge Campaign
       Report and compared the pledge information from the report to the actual pledge cards.
       Specifically, we judgmentally selected 45 pledge cards (selected the top 35 pledge cards
       by total amount pledged; 5 pledge cards that had more than 5 agency codes listed; and the
       top 5 undesignated pledge cards) amounting to a sample amount of$1 07,021 from a
       universe of 1,729 pledge cards with a total of $493,426 pledged.
   • 	 Cancelled distribution checks to verify that the appropriate amount was distributed in a
       timely manner.
   • 	 One-time disbursements 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 ofthe
       designated and undesignated amounts due them by the date required in the regulations.
   • 	 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.
   • 	 CFC receipts and distributions from the PCFO's campaign bank statements, campaign
       receipts, and agency disbursements and campaign expense support to verify whether the
       PCFO accurately recorded and disbursed all 2008 campaign receipts and disbursements.
   • 	 All bank statements used by the PCFO to verify that the PCFO was properly accounting
       for and distributing funds.


                                               4

   • 	 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 LFCC and PCFO were in compliance with CFC regulations in regards to
eligibility for the 2008 campaign, 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 process and procedures for responding to appeals from organizations.

Finally, to determine ifthe PCFO was in compliance with the CFC regulations as a federation
(Spokane County United Way) for the 2008 campaign, we reviewed the following:

   • 	 Data reported on the CFC Receipts Schedule and supporting documentation to determine
       if receipts were properly recorded.
   • 	 The CFC Distribution Schedule to ensure that the Spokane County United Way did not
       disburse any funds to member agencies not participating in the CFC.
   • 	 The Spokane County United Way's 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 ofthe universe taken as a whole.




                                                5

             III. AUDIT FINDINGS AND RECOMMENDATIONS 


A.   AUDIT GUIDE REVIEW 


     1.   AUPs Not in Accordance with the CFC Audit Guide 	                          Procedural

          The IP A utilized by the PCFO and the LFCC to complete the AUPs outlined in the
          CFC Audit Guide did not properly complete 9 of the 20 steps/procedures.

          Chapter III of the Audit Guide prepared by the CFCO "contains specific procedures
          for four requisite elements to be followed during the examination by the IP A."

          We reviewed the IPA's working papers to ensure that it properly completed and
          documented its review of the PCFO's operations for the 2007 campaign. During our
          review, we determined that rather than utilizing "Chapter III IPA Agreed-Upon
          Procedures" from the Audit Guide as its audit program, the IP A chose to re-write the
          audit steps and use its document as the audit program. Consequently, many of the
          details and instructions from the Audit Guide were not included in the IPA's review.
          Specifically, we identified the following problems:

             • 	 Pledge Form Tracking System Step 1: The step required the IPA to select a
                 representative sample of25 pledge forms (cards) from the 2007 campaign.
                 The pledge forms selected should represent all types of donations, including
                 cash, designated, and undesignated funds. Fifteen should be selected from the
                 pledge tracking system and traced to the pledge forms. Ten should be selected
                 from the pledge forms and traced to the pledge tracking system. We found that
                 the IPA only selected 24 pledge cards for review. Additionally, because the
                 IP A rewrote the audit step from the Audit Guide, it did not include all of the
                 review details required in the Audit Guide. Specifically, the IPA did not verify
                 whether the pledge cards selected represented all types of donations (cash,
                 designated, and undesignated funds). Additionally, the sample selected by the
                 IPA did not meet the Audit Guide requirements regarding how many cards
                 should be selected from the pledge tracking system and how many cards
                 should be selected from the pledge forms. As a result, the IPA did not select
                 the sample per the instructions of the Audit Guide.

            • 	 Pledge Form Tracking System Step 3: The step required the IPA to review the
                PCFO's spreadsheet used to track and analyze payroll office receipts to
                determine if it included the following: the amount of payroll deductions by
                payroll office, an estimated amount due from each payroll office by pay
                period, a comparison of the estimated amount due from each payroll office to
                the actual amount received, and any identified instances where actual amounts
                received from a payroll office exceeded the estimated amount. Our review
                found that the IPA did not include this step in its re-written audit procedures.
                As a result, the IP A did not review this area.



                                               6
• 	 PCFO Budget and Administrative Expenses Step 1: The step required the IP A
    to obtain a copy of the PCFO's 2007 application and review it for signed
    statements required by the Federal regulations. However, because the IPA re­
    wrote the audit step from the Audit Guide, it did not include all of the review
    details required in the Audit Guide. Specifically, the IPA's audit step did not
    include a review for the specific statements required by the regulations. As a
    result, we could not determine if this step was properly completed.

• 	 PCFO Budget and Administrative Expenses Step 2: The step required the IPA
    to report all instances where the LFCC did not select the PCFO and approve
    the PCFO's campaign plan and budgeted expenses on or before March 15th
    (2007). However, because the IPA re-wrote the audit step from the Audit
    Guide, its revised audit step did not include a review to determine whether the
    LFCC made the approval by the required date. Additionally, the supporting
    documentation included in the work papers was related to the 2008 campaign
    and not the 2007 campaign. As a result, the IP A did not properly complete the
    audit step.

• 	 PCFO Budget and Administrative Expenses Step 4: The step required the IPA
    to obtain a list of actual expenses incurred by and reimbursed to the PCFO for
    administering the 2007 campaign, and to trace the expenses to the PCFO's
    general ledger. Our review found that the expenses reviewed by the IP A were
    those charged to the 2008 campaign, not to the 2007 campaign. As a result,
    the IP A reviewed the wrong information.

• 	 PCFO Budget and Administrative Expenses Step 5: The step required the IPA
    to compare the actual and budgeted expenses for the 2007 campaign to
    determine if the actual expenses exceeded 110 percent of the budget. Our
    review found that the IPA compared the actual expenses of the 2007 campaign
    to the actual expenses of the 2008 campaign. As a result, the IP A did not
    complete the step properly.

• 	 PCFO Budget and Administrative Expenses Step 6: The step required the IP A
    to report as a finding all instances where the PCFO did not properly match
    campaign receipts and expenses. The actual expense listing included in the
    IPA's working papers clearly shows that the PCFO charged expenses on a
    calendar year instead of a campaign year basis. This is incorrect because the
    2007 campaign did not begin until the PCFO was officially selected by the
    LFCC. The deadline for this selection in 2007 was March 15, 2007.
    Therefore, any costs incurred before that date do not belong to the 2007
    campaign. As a result, the PCFO was not properly matching campaign
    receipts and expenses. The IP A did not report a finding in this area and, as a
    result, OPM and the PCFO were not made aware of this issue.

• 	 PCFO Budget and Administrative Expenses Step 7: The step required the IPA
    to review a sample of expenses for the 2007 campaign. Our review found that

                                  7

                the IP A reviewed expenses related to the 2008 campaign. As a result, the IP A
                reviewed the wrong infonnation.

             • 	 Receipt and Disbursement of Funds Step 9: The step required the IPA to
                 detennine ifthe PCFO's procedures regarding un-cashed checks were
                 appropriate. Our review found that the IP A did not include this step in its re­
                 written audit procedures. As a result, the IP A did not review this area.

          As a result of not completing the Agreed-Upon Procedures properly, the IPA
          inadvertently misled both OPM and the LFCC to believe that the PCFO was in
          compliance with and had effective controls over compliance with 5 CFR Part 950 and
          OPM guidance.

          LFCC and PCFO's Comments:

          The LFCC and the PCFO agree with this finding and state that they will ensure that
          the IPA follows the OPM audit guidelines. In addition, the LFCC and the PCFO will
          advise the IPA to contact OPM to obtain clarification when necessary.

          Recommendation 1

          We recommend that the CFCO ensure that the LFCC fully implements its corrective
          actions and provides assistance to the IPA as necessary.

B.   BUDGET AND CAMPAIGN EXPENSES

     1.   CFC Expenses Charged to the Wrong Campaign 	                                       $5,834

          The PCFO incorrectly charged the 2008 CFC campaign for 10 expense transactions,
          totaling $5,834, which were charged to the wrong campaign year.

          5 CFR 950.106 (b) states that the PCFO "may only recover campaign expenses from
          receipts collected for that campaign year." In addition, CFC Memorandum 2008-09
          states that because actual expenses are not known until the end of the campaign,
          which is two years from the beginning of the campaign, LFCC's are encouraged to
          authorize reimbursement of an estimated expense amount from the first distribution
          of the campaign. The PCFO then must track all expenses incurred for the campaign
          and make an expense adjustment to the last disbursement for the campaign, either up
          or down, based on the true amount of campaign expense incurred.

          During our review of the PCFO's 2008 CFC campaign expense transactions, we
          identified five expenses totaling $779 that were incurred prior to March 2008 (before
          the official 2008 CFC campaign began). We selected these transactions because we
          suspected that these expenses belonged to the prior campaign. After reviewing the
          supporting documentation, we found that the PCFO charged expenses on a calendar



                                                8

year instead of campaign year basis. The PCFO indicated that this was the way
things were always done and that it did not know that the process was incorrect.

We also reviewed 27 expense transactions to detennine if the costs charged to the
campaign were supported by source documentation, related to the CFC, allocated
reasonably, and charged to the correct campaign year. We identified one transaction,
totaling $555, from April 2008 for CFC awards which included personalization (name
plates). These awards could not be related to the 2008 campaign because the
campaign had not begun the solicitation process.

Additionally, our review of the 2008 CFC campaign expense transactions identified
four transactions, totaling $4,500, for services related to the IPA audit. We selected
these transactions for review because the 2008 campaign, to which they were
charged, was still active and could not be audited at that time. A review of the
transactions confinned that the invoices were related to an audit of an earlier
campaign and not related the 2008 campaign.

CFC Memorandum 2008-9 states that the audit expenses incurred for the audit of a
campaign must be paid from funds from the campaign being audited. Because this
cost is paid after the close of the campaign, the amount should be accrued and
withheld from the last distribution. The Memorandum encourages campaigns to
negotiate a fixed cost agreement with the IP A 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.

As a result of charging expenses to the 2008 CFC campaign on a calendar year basis,
and not to the campaign to which they truly belong, the PCFO is not following the
CFC regulations and could adversely effect the distributions to member agencies and
federations.

LFCC and PCFO's Comments:

The LFCC and PCFO agree with the finding that expense transactions were charged
to the wrong campaign. The LFCC stated that it has implemented a policy for the
annual budget to match the campaign year. Additionally, the LFCC stated that the
PCFO will establish an annual budget for the period of March I through February 28
that will be submitted to the LFCC. This budget will contain the estimated cost to be
accrued for the IPA audit for that campaign.

Additionally, the LFCC and PCFO state that the use of the words "may" and "should"
in the CFC regulations and Memorandums can be interpreted as not binding tenns
and that the regulations and Memorandums should be revised.




                                     9

     OIG Response:

     We disagree with the LFCC and the PCFO's corrective action. The corrective action
     stated by the LFCC and the PCFO does not account for the entirety of the campaign
     cycle. CFC Memorandum 2008-9 clearly states that campaign expenses will be
     incurred over a two year period. However, the corrective action still states that the
     period for expenses is a 12 month cycle.

     Additionally, the LFCC's and PCFO's opinion that the language in the regulations
     and CFC Memorandums is not binding is incorrect. Per our discussions with the
     CFCO, this is discussed with all PCFO's at its yearly CFC workshops.

     Recommendation 2

     We recommend that the CFCO and the LFCC ensure that the PCFO implements
     procedures to track and allocate expenses to the correct campaign year according to
     CFC Memorandum 2008-9.

2.   Expenses Not Identified as CFC-Related Charged to the Campaign                 $1,420

     The PCFO charged the 2008 CFC campaign for expenses, totaling $1,420, which
     could not be identified as belonging to the CFC.

     5 CFR 950.1 05 (d) (7) states that the PCFO is responsible for "Maintaining a detailed
     schedule of its actual CFC administrative expenses, with, to the extent possible,
     itemized receipts for the expenses."

     We reviewed 27 expense transactions to determine if the costs charged to the
     campaign were supported by source documentation, related to the CFC, allocated
     reasonably, and charged to the correct campaign year. We identified four expense
     transactions (travel reimbursements) where the documentation maintained did not
     indicate if the expense was related to the CFC campaign. Since the PCFO works with
     other campaigns, there is a risk of charging costs from other campaigns to the CFC.
     Therefore, the expense documentation maintained should explain in detail the nature
     of the expense and its relationship to the CFC campaign.

     By not indicating on the expense supporting documentation how the expense was
     CFC-related, the PCFO could charge non-CFC expenses to the campaign.

     LFCC and PCFO's Comments:

     The LFCC and the PCFO disagree with this finding. They stated that the expense
     transactions were clearly matched as CFC-related. The LFCC and the PCFO also
     stated that they have developed a new reimbursement form which has the CFC logo
     on it, which will be used for the PCFO to reimburse its employees for local travel
     with a detailed explanation of the charges.


                                         10 

          OIG Response:

          We disagree with the LFCC's and the PCFO's comments. The supporting
          documentation provided by the PCFO for the travel reimbursements questioned did
          not indicate ifthe reimbursements were related to CFC travel (there were no
          itineraries or any statements regarding the purpose of the trips on the documentation
          provided to us for review).

          Additionally, the LFCC's and PCFO's corrective action regarding the development of
          a new travel form with the CFC logo on it and a detailed explanation of the charges
          should also be supported by an itinerary and all invoices related to the trip.

          Recommendation 3

          We recommend that the CFCO and the LFCC ensure that the PCFO implements
          procedures to properly identify, on the supporting documentation, all CFC-related
          costs charged to the campaign.

C.   CAMPAIGN RECEIPTS AND DISBURSEMENTS

     1.   Pledge Card Errors                                                          Procedural

          Our review for pledge card accuracy identified five pledge cards for which either the
          pledge information was not properly completed by donors, or designations were made
          to more than five agencies per pledge card. Additionally, our review of the PCFO's
          policies and procedures related to pledge cards determined that the PCFO does not
          fully understand its responsibilities for not contacting donors in regard to their pledge
          cards' mathematical errors.

          5 CFR 950.105 (d) (4) states that the PCFO is responsible for ensuring that no
          employee is questioned in any way as to his or her designations or the amounts except
          by keyworkers, loaned executives, or other non-supervisory Federal personnel.

          5 CFR 950.105 (d) (3) states the PCFO should ensure that key workers are trained to
          check to ensure the pledge card is legible, verify the arithmetic, and ensure that the
          donor's release of personal information is properly completed.

          The 2008 Inland Northwest CFC campaign brochure section "Can I Specify Which
          Organization Will Receive My contribution?" states on page 17 that additional
          designations (Le., more than five) may be completed on a second pledge card.

          We reviewed a sample of 45 pledge cards to determine whether they were entered
          into the PCFO's pledge card database correctly. Specifically, we compared the actual
          pledge card to the database to determine if the following items were entered correctly:
          donor name, charity code(s) and amounts donated, total amount donated, and the



                                               11 

donor's choice to release personally identifiable information. Our review identified
five pledge cards with errors. Specifically, we found:

• 	 Two pledge cards with mathematical errors which were not identified or corrected
    by the keyworker prior to the cards being sent to the PCFO. Upon receipt of the
    cards, the PCFO identified the mathematical errors and rather than make the
    allowed corrections per the Federal regulations or send them back to the
    keyworker for clarification, it called the donor directly to correct the problem.
    Based on our discussions with the PCFO and its responses to related pledge card
    questionnaire items, it did not understand that it should not be contacting the
    donor directly. This is a conflict of interest issue as the PCFO should not be in
    charge of collecting and disbursing the funds, as well as clarifying questionable
    designations.

• 	 Two pledge cards where the donor did not complete the personal information
    section. We found a series of four pledge cards, completed by the same donor,
    where two cards had the personal information section (i.e., name, agency, and
    work address) completed and two with that information blank. The PCFO was
    able to identify the two blank cards as belonging to the same donor because these
    were the only four cards in the envelope and because of handwriting similarities.
    However, the PCFO did not consider this a problem and, therefore, did not advise
    its keyworkers that they should ensure that all pledge cards are properly
    completed by the donors before they are forwarded to the PCFO for processing.

• 	 One pledge card where the donor designated to more than five agencies. This
    error was not identified by either the keyworker or the PCFO. Upon discussion
    with the PCFO, it was determined that it did not understand that it could not be
    done.

As a result of contacting a donor directly, the PCFO could be seen as trying to
influence the Federal employee's donation. Additionally, by accepting incomplete or
incorrectly completed pledge cards, without obtaining donor clarifications via the
keyworker, the PCFO is running the risk of misinterpreting donor intentions. Finally,
by allowing donors to designate to more than five agencies on pledge cards, the
PCFO could misunderstand the donor's designations.

LFCC and PCFO's Comments:

The LFCC and the PCFO agree with this finding. The LFCC and the PCFO stated
that they will ensure that 5 CFR 950.105 (d) (3) and (4) and all regulations pertaining
to Campaign pledge cards shall be adhered to. The LFCC also stated that it has
implemented a policy to correct pledge card mathematical errors and the PCFO, on
behalf of the LFCC, will contact the donors to inform them of the action taken to
correct the errors.




                                     12
     OIG Response:

     We accept the LFCC's and the PCFO's corrective action regarding the correction of
     pledge card errors identified. However, the PCFO's statement that it will contact the
     donor on behalf of the LFCC and inform the donor of the action taken to correct
     mathematical errors is in violation of the regulations and is unnecessary. According
     to the regulations only "non supervising Federal personnel" may contact donors
     directly. Correction of mathematical errors on a donor's pledge card does not effect
     the "total" pledged. The only changes made as a result of correcting mathematical
     errors are to the amounts designated to individual charities. Therefore, it is not
     necessary to contact the donor in these cases.

     Additionally, we also noted that the LFCC's and the PCFO's corrective action did not
     address the recommendation of training keyworkers to ensure that donors complete
     the pledge forms correctly, legibly, and precisely before they are turned into the
     PCFO.

     Recommendation 4

     We recommend that the CFCO and the LFCC work with the PCFO to ensure that it
     understands its responsibilities regarding direct contact with Federal employees
     concerning their donations.

     Recommendation 5

     We recommend that the CFCO and the LFCC ensure that the PCFO properly trains its
     CFC keyworkers to ensure that donors complete pledge forms correctly, legibly, and
     precisely before sending them to the PCFO.

2.   Excess Disbursement of eFe Funds                                                   $1,944

     The PCFO disbursed $1,944 in excess of the amounts received for the 2008
     campaIgn.

     5 CFR 950.901 (i) (2) states that at the close of the disbursement period (i.e.,
     campaign) the PCFO's CFC account shall have a zero balance.

     Using the PCFO's bank statements and disbursement schedule, we traced all
     campaign receipts from the bank statements to the PCFO's records of receipts and
     disbursements to determine the following: if the PCFO was properly accounting for
     2008 campaign receipts, ifthe receipts were allocated to the correct campaign year,
     and if all receipts received were disbursed to members of the 2008 campaign. Our
     review found that the PCFO inadvertently disbursed $1,944 more to the members of
     the 2008 campaign than was received. As of the time of our audit, the PCFO did not
     understand why this over-disbursement occurred, however, it was looking into it.



                                          13 

        As a result of this over-disbursement of funds to the 2008 campaign, other campaigns
        will receive less funds to distribute to the participating agencies and federations,
        causing donor wishes to not be followed.

        LFCC and PCFO's Comments:

        The LFCC and the PCFO agree with this finding and state that the LFCC Chair or
        Vice-Chair will review the financial statements each month with the PCFO during the
        disbursement of campaign donations to ensure that all CFC funds are disbursed
        completely and appropriately.

        Recommendation 6

        We recommend that the CFCO and the LFCC ensure that the PCFO implements
        procedures to properly track incoming receipts and outgoing disbursements to ensure
        that all CFC funds are disbursed completely and properly.

D.   ELIGIBILITY

     1. CFC Charity List Not in Compliance with Regulations                          Procedural

        The 2008 campaign brochure's charity list order did not comply with OPM
        Memorandwn 2008-6.

        5 CFR 950.401 (g) (2) states that the order of the charity list will be annually rotated
        in accordance with OPM instructions.

        Memorandum 2008-6, dated June 25, 2008, dictates the order ofthis list. For 2008,
        the CFC charity list order is: 1) Local Organizations, 2) National/International
        Organizations, and 3) International Organizations. The order of these parts and the
        order of federations in each part cannot be altered by the campaigns.

        We reviewed the 2008 campaign brochure'S charity list to determine if it contained
        the information required per CFC Memorandwn 2008-6 and if the charities were in
        the correct order. We found that the charity list produced by the PCFO for the 2008
        campaign was in the wrong order.

        The CFCO designates the order of the campaign brochure each year to ensure that
        certain types of organizations are not treated favorably. By not producing the
        brochure in the order prescribed by the CFCO, the PCFO inadvertently showed
        favoritism to those organizations listed first and may have influenced the Federal
        donors.

        LFCC and PCFO's Comments:

        The LFCC and the PCFO agree with this finding and state that the LFCC Chair and
        Vice-Chair will review the charity list order prior to authorizing it to be printed to

                                             14 

        ensure that it is in compliance with the OPM charity list issued for that campaign
        year.

        Recommendation 7

        We recommend that the CFCO and the LFCC ensure that the PCFO complies with
        the CFC regulations and applicable CFC Memorandums regarding the charity list
        order for the campaign brochure.

E.   PCFO AS A FEDERATION

     Our review of the PCFO's activities as a federation showed that it complied with the
     applicable provisions of 5 CFR 950.




                                            15 

              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

                 Auditor-In-Charge

            Auditor



                  Group Chief,

                  Senior Team Leader

             Senior Team Leader




                                       16 

                                                                                                                                       APPENDIX



m
9
                 Inland Northwest 

                 Combined Federal Campaign 

 20 N washington #100
         ,AlA. 99201
spokane. V'
                         """'"E'-"1O,"'9"'...""'....""""",,.·.'..9,,0"',""".0..""...".66-·   fOlON0\ (T~9)P~3~;625f 1
                                                                                                                        • FA.X (509) 624·084 0




                                                                                                   10 Novembe r, 2010


        Special Audits Group


        The LFCC and PCFO would like to                                                                                    for their help
        and guidance during the audit process. The .                    I      I              th.e
        audit helped ensure the aud it went smoothly and had a minimal impaci on the PCFO preparing
        for the 201 0 campaign. Part of the feedback received indicated our procedures are fin e however
        we could improve our procedures by adopting the procedures of other programs which are
        si mpler and/or more cost effective.

         O\'erall Note
         The acronym CFCO is used in all recommendations but is. no t de fined in the docu ment. The
         LFCC and PCFO are unable to find the definition of the ac ronym CFCo. If this acronym shou ld
         reflect Combined Federal Campaign Operations, ident ified as OeFO on page I , it is unclear how
         the OCFO is able to verify or ensure the recommendations arc implemented by the PCf O,

          A. 	 Agreed Upon Procedures Not in Compliance With the Audit Guide : Auachcd is
               LeMasters Daniels, Cert ified Public Accountants and Advisors. The LfCC and PCfO will
               ensure that the IPA will fo llow QPM Audit Guideli nes. We wi ll also advise rPA to contact
               arM to obtai n clarification, when necessary.
          B. 	 Budget and Campaign Expenses

              1. a Improper Matching of CFC Expenses and Receipts : Expenscs charged to thc
                   wrong campai gn year.

                   The LFCC and pcro agree with the find that ex pense transactions were charged to
                   the wrong campaign ycar. This issue was due to setting the budget based on a ca lendar
                   ~ear ( J anua ~y to December) instead of a campai gn year (March to February) resu lt ing
                   In expenses III January and February being charged to the wrong campaign.

                   The LFCC agree with Reco mmendation 2 and have imp!emented a policy for the
                   annual hudget to match the campaign year. The PCFO shaH establish an annu a! budget
                   for the period of March I through February 28. The arulUal budget submitted by the ~
                   PCFO shaH contain Ihe estimated cost to be accrued fo r the [ndependent Public
                   Accountant (LP A) audi t for that campaign.

                   The LFCC and pcro do not agree with the finding o f expcnse transaction s for the
                   mon ths of January and February being chargcd 10 the wrong campaign year as slat..:d



         Page I of 4
      as a finding in five (5) different paragraphs in I~is sect ion . ~s it is stated in this 

      sect ion, it can be interpreted as being five (5) different findtngs. 


      While the LFCC and PCFO agree to set the budget calendar to. match the campaign
      ea Ien d ar, bo th the LFCC and PCFO recommend the language 10 the   . Memora. ndu m and
      CFR be modified to binding terms under meeting federal contracting reqUIrements.
      CFe Memorandum 2008-9, page 2, Accounting for Audit Expenses, and ~ CFR
      950.1 06(b) stales "The PCFO may only reeo.ver ca~1Pai ~n expense from receIpts .
      collected for that campaign year. Because th is cost IS paid after the close of campaIgn,
      the amount shou ld be accrued. The LFCC should include a note in their LFCC
      comp liance assessment report. " The lenns 'may' and 'shou ld.' are not normally
      interpreted as contractually binding terms by federal contract mg stan~ards . The LFCC
      shall change their policy to require the PCFO 'shall meet' these reqUIrements and not
       simply reference the Memorandum and CFR.

    I.b Improper Matching oreFe Expenses and Receipts: Expenses identified as not
           belonging to the CFe.

       The LFCC and PCFO do not agree with this finding. Based on our review of the 14
       expense transactions (totaling 57,254) all expense transactions were clearly matched as
       CFC related. The transactions were directly matched to CFe budgeted expenses (i.e.,
       postage, annual scheduled travel). Review of additional expense transactions before
       and after that period also resulted in finding all expenses were clearly matched to CFe
       work.

       The LFCC and PCFO were unable to identi fy the six (6) expense transactions that
       were not con finned as CFC related . Sce page 4, I ~l bullet point. totaling S I ,3 34. The
       LFCC and PCFO do agree with expense transactions during this period were charged
       to the wrong campaign year.

       The LFCe and peFO do not agree with the four (4) ex pense Attached is the answer
       provided by IPA. transactions whicb did not indicate if the tra vel was related to CFe.
       See page 4, 3'd bullet point, totalingSl,420. While the expense was reported on the
       reimbu rsement forms with the PCFO logo (United \Vay). the detailed information
       clearly stated CFC and the location traveled. The only information not included on the
       reimbursement forms was the specific pe rson or group visited during the travel.

       The LFCC and PCFO believe Recommendation 3 and Recommendation 4 are the
       same recommendation stated twice. The LFCC and PCFO request the
       recommendations be modified to reflect the single recommendation identified .

       The LfCe and PCFO have developed a new reimbursement fonn which has CFC logo
       on it. We wi ll ensure eac h reimbursement has detai l explanation what the charges
       were for.




Page20f4
  C. C ampaign Receipts and Disbursements

      1. 	 Pledge Cards Errors

               The LFCC and peFO concur with findin gs and Recommendation 5 and
               Recommendation 6. The PCFO and LFCC shall ensure that 5 CFR 950 .1 50 (d)
               (3&4) and all regulations pertaini ng to Campaign Pledge Cards shall be adhered to.

               The LFCC has imp lemented the follow ing policy:

               If PCFO find s any mathematical or agency code errors, the PCFO shall notify onc of
               the following individuals requesting they contact the person making the pledge to
               request they correct the error. If the error is not corrected, the PCFO shaH contin ue
               contacting others on the list until the error is corrected .
               • 	 Key campaign contacts for that agency
               • 	 The campaign coordinator fo r the person's office or agency
               • 	 LFCC members that may have contact ~ith the individual
               • 	 Loan Executives
               • 	 Other non-superv isory federal, mi litary, or U.S. postal personnel.
               • 	 LFCC Chair and Vice-Chair

               [f PCFO receives is unable to reso lve the error on the pledge foml , th e LFCC Chaif
               shall authorize the PCFO to take one of the follow ing actions:
               • 	 If the error is a mathematical error resulting in the entire pledge amount NOT
                    being assigned to a charity, the remaining amount w ill be assigned as
                    Undesignated Funds.
               • 	 Irthe error is a mathemat ical error resulting in the su m o f the pledgc(s) exceedi ng
                    the total amount pledged, the amount pledge to each charity will be reduced
                    proportionally so the su m is equa l to the total amollnt pledged.
               • 	 lfthe erro r is an incorrect agency code, the funds will be ass igned as
                    Undesignated Funds.
               If the PCFO is required to take one of the actions listed above, the PCFO, on behalf
               of the LFCC Chair, will send a letter to the individual pledging inform ing them of the
               action taken and referencing this procedure.

      2. 	 Over-disbursement of CFe Funds

        The LFCC and CFO concur with the findin gs and Recomme ndation 7. The PCFO shal l
        follow LFCC polices and procedures for Monthly Financial Statement Rccom;i liati on.

        The LFCC has reviewed the established policies and procedures for Month ly Fin ancial
        Statement Reconc ili ation with the PCFO. In addition to ensu ring the PCFO is foll owing
        the established policies and procedures, the LFCC Chai r or Vice-Chair shall review the
        financial statements each month with the PCFO during the disbursement of the 2010
        campaign donations to ensure that all CFC fu nds are disbursed comp letel y and properly .



Page 3 o f 4
 I).   Eligibility

       I.   crc Charity List Not in Compliance With the Regulations
       The LFCC and PCFO agree with the find ings and Recommendation 8. The LFCC Chair
       and Vice-Chair shilll review the Charity List order pri or to authorizing the Chanty List to
       be printed to ensu re it is in compliance with the aPM Charily List order issued for thaI
       campaIgn year.




Page 4 of 4
LeMasrerDclr1iels ." 



         October 6, 2010




         920 N. Washi ngton, Suite 100
         Spokane. WA 99201

         Re: Offiet: of Per$Onn~·1 Management Audit Report



         You have ask"d us to romm~n t on th.. ;n.~I"nrPf; (>1 no:>rH;I>mp liana.> 0011''(\ by II", Office of Personnel Man":;t'ment
         (OI'M) in their report dated ScptcmbEor 15, 2010. rcMive to the audit that agenC)! performed on thc 2007 and 2008
         Inla nd Northwl~1 Combinl'<.l Federal Cam pigm. vore have T':!vicwed thc tiraft rc?Or! and offer thc commcnt~ that
         follow.

         Under section A, "Audit Guide R<.'ticw," lhl' i"~Fm lists se\l('ral i:1st<lnCl'S of nof'.~ompl ian~'(' that pertain to Ii'lL'
         Agreed-U pon ProcOOuT('!; (AU f' ) S'?:vicc we perform(d for the 2007 campaign. Spc<:ifiOllly, tht;> report points out
         Ih.. ! we w;oo a customized program i(,T perfO~'1\il'g Ire Ff()cC<i :' rcs rath.!r th.:l n Ihc audit guide prepan.>d by the
         Combined FooNal Campaign Operatior'! :OFCO). The dral, re-port note 3tha t our cuslomb~d program did nol
         (Ontol in allll'll' sleps lisled in Ihe opeo auc.!1 guide and, as J result, some procedures that should have bi.>en
         pt.'rformed were inadvert('fltly or.litk-d by us.

         It was our underst,mding that a~! the rroced u[e~ ~.';,~ d!J(l for an a~ccptable AUP servire were ind uded in ou r
         customized program whkh was tailou.-C: for your organiza..ion a1,d developed to perform an efficient and (Ost
         eflee!ive engagement. In Q)':r' p"rinr, 0i.J~ prc",r"m to II.e OFCO audit g'~ ide, we do not disagree with thl!
         ~mments made by theOPM .! f we 2.re ~ml';agcd to l,erfo!'Tll tl lisservice for theCFC in the future, we will usc the
         J'Jdil gui de preparoo by the orco and wiU con~1.! 1 1 with th<.1TI, '-IS thej ncte in "RC(:()mmcndation 1," if ,,":c have
         any questions or n':.'('d clarification on the proo."Clu rc:.: that n~j to be perfo.med .

         A~  yuu know, you had asked us to be avai lilble \0 come to the crc offi(l;' ouring th~ week that the OPM
         po:rforrnL"Cl their .ludit field work last Yay to ar.sIVer qlJC!iti cn~ !he auditor::; may have h<ld. We, indeed, had
         severa l fX'Opk' "on call" to respond to their in<1uirics, if askOO. I'm d isappointed that no onc contacted us at t hat
         time as we wou ld have appreciated the opportunity to diSOJss the procedures th?t were omitted and whJI the
         appropriate Jction is 10 take in Ihe future.

         We regret that these instanCES of noncompl iance were noled in our work and apologb:e for any incorwenicn(('
         Ih i ~ has (aused you or thl! CFe rkase rontact me if you need anything furthcf.


         Sinrere~y.




                                                                      601 w.:-<t Rivenidt ~ut ' Suitt 700 • Spobne. WI< 99101-0622
                                                                        109.614.015 • (I,~) 5G~. 624.U7~ • W'oYW. h!~'lo:n1,,";"'. tom