oversight

Audit Of The 2008 and 2009 Capital Region Combined Federal Campaigns Albany, New York

Published by the Office of Personnel Management, Office of Inspector General on 2012-03-30.

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 2008 AND 2009 

                         CAPITAL REGION 

                   COMBINED FEDERAL CAMPAIGNS 

                        ALBANY, NEW YORK 





                                             Report No. 3A-CF-OO-II-038

                                                    March
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                                                                 UNITED STATES 

                                            OFFICE OF' PERSONNEL MANAGEMENT 

                                                         WASIDNOTON. DC 2041 5· 1100 



       OF'FICEOF
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                                                                AUDIT REPORT 




                                              AUDIT OF THE 2008 AND 2009 

                                                  CAPITAL REGION 

                                            COMBINED FEDERAL CAMPAIGNS 

                                                 ALBANY, NEW YORK 



                   Report No. 3A-CF-OO-II-038                                                  Date: March 30 t                 2012




                                                                                                Michael R. Esse r
                                                                                                Assistant Inspector General
                                                                                                  for Audits


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                                UN ITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                    Washington . DC 2041 5 


  Offi ce of the
Inspt.'Clor General




                                           EXECUTIVE SUMMARY 





                                      AUDIT OF THE 2008 AND 2009 

                                          CAPITAL REGION 

                                    COMBINED FEDERAL CAMPAIGNS 

                                         ALBANY, NEW YORK 



                      Report No. 3A-CF-00-I 1-038                         Da~:   March 30 , 2012

      The Office of the Inspector General has completed an audit of the 2008 and 2009 Capital Region
      Combined Federal Campaigns (eFe). The United Way of the Greater Capital Region Inc.,
      located in Albany, New York, served as the Principal Combined Fund Organization (PCFO)
      during both campaigns. OUT main objective was to determine if the Capi tal Region eFe 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 12 instances of non·compliance with the regulations (5 eFR 950) governing the
      CFC and questions $67.768.

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

                                              AUDIT GUIDE REVIEW

       •       Agreed-Upon Procedures not in Compliance with the Audit Guide                    Procedural

               The Independent Public Accountant did not properly complete its review of all of the agreed­
               upon procedures in accordance with the Audit Guide.




           w.... w.o pm .go v
                          BUDGET AND CAMPAIGN EXPENSES

•   Unallowable Campaign Expenses                                                        $63,732

    The PCFO incorrectly charged the campaign $63,732 for expenses that were either
    unsupported, related to another campaign, or were charged with an unsupported and
    undocumented allocation method.

•   Campaign Expenses Reimbursed Without Approval                                    Procedural

    The expenses for the 2009 campaign were reimbursed to the PCFO without LFCC approval.

•   PCFO Solicitation                                                                Procedural

    The public notice to solicit for PCFO applications for the 2009 campaign requested that the
    applications be sent to the PCFO and not to the LFCC.

•   Untimely PCFO Solicitation                                                       Procedural

    The LFCC did not select the PCFO for the 2009 campaign by the date set in the CFC
    calendar of events.

                     CAMPAIGN RECEIPTS AND DISBURSEMENTS

•   Allocation and Disbursement of CFC Receipts                                            $4,036

    The PCFO did not disburse all CFC funds held as required by the Federal regulations.

•   Outstanding Check Policies and Procedures                                        Procedural

    The PCFO’s policies and procedures for outstanding CFC checks do not adhere to the
    requirements of the guidance issued by the Office of the Combined Federal Campaign
    (OCFC). Additionally, those procedures followed by the PCFO include steps for contacting
    donors directly, which is expressly forbidden by the Federal regulations.

•   Pledge Card Data Entry Errors                                                    Procedural

    The PCFO incorrectly entered the information from donor pledge cards into its pledge card
    database.

•   One-Time Disbursements                                                           Procedural

    The PCFO did not seek approval from the LFCC before the making of or the setting of the
    ceiling amount for one-time disbursements. Additionally, the PCFO did not correctly
    calculate the pledge loss deducted from the one-time disbursements.


                                                ii
•   Pledge and Donor Notifications                                                   Procedural

    The PCFO did not notify its participating organizations of the amount of undesignated funds
    due to them. Additionally, the PCFO did not retain documentation to support the sending of
    pledge notifications and contributor information for those organizations notified
    electronically.

                                        ELIGIBILITY

•   Agency and Federation Applications                                               Procedural

    The LFCC accepted organizations for participation in the CFC which submitted incomplete
    applications. Additionally, we were unable to determine if the LFCC reviewed or made the
    eligibility decisions on any applications reviewed.

•   Eligibility Decision Letters Issued by Wrong Authority                           Procedural

    The LFCC did not issue the acceptance letters that were sent to organizations applying as
    members for the 2009 campaign. They were issued by the PCFO instead.

                                   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.

                                     FRAUD AND ABUSE

Our review of the PCFO’s fraud and abuse policies and procedures indicated that they were
sufficient to detect and deter potential fraud and abuse activities.

                            DISPOSITION OF THE CAMPAIGN

As a result of the numerous findings and the nature of the issues identified with both the PCFO
and LFCC, it is our opinion that the OCFC should seek to merge the Capital Region CFC with
another geographically adjacent campaign, administered and conducted by a new PCFO and
Local Federal Coordinating Committee (LFCC) that are more equipped to handle the
responsibilities of the CFC.




                                               iii
                                                   CONTENTS
                                                                                                                          PAGE

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

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

 II.   OBJECTIVES, SCOPE, AND METHODOLOGY ........................................................ 3

III.   AUDIT FINDINGS AND RECOMMENDATIONS ...................................................... 7

       A.     AUDIT GUIDE REVIEW ..................................................................................... 7

              1. Agreed-Upon Procedures not in Compliance with the Audit Guide ............... 7

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

              1.   Unallowable Campaign Expenses.................................................................... 8
              2.   Campaign Expenses Reimbursed Without Approval .....................................11
              3.   PCFO Solicitation ...........................................................................................13
              4.   Untimely PCFO Solicitation ...........................................................................13

       C. CAMPAIGN RECEIPTS AND DISBURSEMENTS ............................................. 14

              1.   Allocation and Disbursement of CFC Receipts ..............................................14
              2.   Outstanding Check Policies and Procedures...................................................18
              3.   Pledge Card Data Entry Errors ....................................................................... 19
              4.   One-Time Disbursements ............................................................................... 21
              5.   Pledge and Donor Notifications ...................................................................... 23

       D.     ELIGIBILITY ....................................................................................................... 25

              1. Agency and Federation Applications ..............................................................25
              2. Eligibility Decision Letters Issued by Wrong Authority ................................27

       E.     PCFO AS A FEDERATION................................................................................. 28

       F.     FRAUD AND ABUSE ......................................................................................... 28

       G.     DISPOSITION OF THE CAMPAIGN .................................................................28

IV.    MAJOR CONTRIBUTORS TO THIS REPORT .......................................................... 31

       APPENDIX (The PCFO’s response, dated December 16, 2011, to the draft report.)
                    I. INTRODUCTION AND BACKGROUND
INTRODUCTION

This report details the findings and conclusions resulting from our audit of the Capital Region
Combined Federal Campaigns (CFC) for 2008 and 2009. 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 2009, it consisted of 226 separate local campaign organizations located throughout
the United States, including Puerto Rico and the Virgin Islands, as well as overseas locations.
The Office of the Combined Federal Campaign (OCFC) 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.

Each CFC is 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; determining the eligibility of local voluntary organizations; selecting and
supervising the activities of the PCFO; encouraging Federal agencies to appoint Loaned
Executives to assist in the campaign; ensuring that employees are not coerced in any way in
participating in the campaign; and acting upon any problems relating to a voluntary agency’s
noncompliance with the policies and procedures of the CFC. Loaned Executives are Federal
employees who are temporarily assigned to work directly on the CFC.

The primary goal of the PCFO is to administer an effective and efficient campaign in a fair and
even-handed manner aimed at collecting the greatest amount of charitable contributions possible.
Its responsibilities include training loaned executives, coordinators, employee keyworkers and
volunteers; maintaining a detailed schedule of its actual CFC administrative expenses; preparing
pledge cards and brochures; distributing campaign receipts; submitting to an audit of its CFC
operations by an Independent Certified Public Accountant (IPA) 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 the LFCC. The PCFO
is also responsible for establishing and maintaining a system of internal controls.




                                               1
This represents our first audit of the Capital Region CFC. The initial results of our audit were
discussed with the PCFO officials during an exit conference held on May 26, 2011. The LFCC
did not attend the exit conference. A draft report was provided to the PCFO and LFCC for
review and comment on November 18, 2011. The PCFO’s response to the draft report was
considered in preparation of this final report and is included as an Appendix. The LFCC did not
respond to the draft report.




                                               2
               II. OBJECTIVES, SCOPE, AND METHODOLOGY
OBJECTIVES

The primary purpose of our audit was to determine if the Capital Region CFC was in compliance
with 5 CFR 950, including the activities of both the PCFO and the LFCC.

Our audit objective for the 2008 campaign was:

   Audit Guide Review
   • To determine if the Independent Public Account (IPA) completed the Agreed-Upon
      Procedures (AUP) as outlined in the CFC Audit Guide.

Additionally, our specific audit objectives for the 2009 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; if the applicants were notified of the eligibility decisions in a timely manner;
       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;
     if expenses charged by the PCFO (to its federation members) were documented properly;
     and if the disbursements made to the federation members were accurate.




                                                 3
   Fraud and Abuse
   • To determine what policies and procedures the PCFO has in place related to detecting
      and preventing fraud and abuse, and if they are adequate.

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 2008 and 2009. The United Way of the Greater Capital
Region Inc. (UWGCR), located in Albany, New York, served as the PCFO during both
campaigns. The audit fieldwork was conducted at the offices of the PCFO from May 23
through 27, 2011. Additional audit work was completed at our Washington, D.C. office.

The Capital Region CFC received campaign pledges, collected campaign receipts, and incurred
campaign administrative expenses for the 2008 and 2009 campaigns as shown below.

    Campaign              Total                      Total               Administrative
      Year               Pledges                    Receipts               Expenses
      2008               $410,897                  $386,630                  $74,934

      2009               $355,212                  $326,707                  $75,428

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 in 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
Memoranda.

To accomplish our objective concerning the 2008 campaign (Audit Guide Review), we reviewed
the CFC Audit Guide to verify that the IPA completed and documented the AUP steps.




                                               4
In regards to our objectives concerning the 2009 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 reconciled 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. We judgmentally
       selected all expense categories over $500 (10 expense categories) for review, totaling
       $73,795 (from a universe of 21 categories, totaling $75,428).
   •   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 2009 campaign’s receipts and disbursements were handled in accordance
with CFC regulations, we reviewed the following:

   •   A judgmental sample of 45 contributors with pledge amounts totaling $57,429 (out of a
       universe of 1,730 contributors with total pledges of $355,212) from the PCFO’s 2009
       campaign pledge card detail schedule, and compared the pledge information from the
       schedule to the actual pledge cards. Specifically, we judgmentally selected the top 35
       contributors for review by total amount pledged. Additionally, we judgmentally selected
       the next five contributors (by total amount pledged) whose donation was marked
       “undesignated” and the first five contributors alphabetically who pledged cash amounts.
   •   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 of the
       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 2009 campaign receipts and disbursements.
   •   All bank statements used by the PCFO to verify that it properly accounted for and
       distributed funds.
   •   The PCFO’s cutoff procedures and bank statements to verify that funds were allocated to
       the appropriate campaign year.




                                               5
To determine if the LFCC and PCFO were in compliance with CFC regulations in regards to
eligibility for the 2009 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 Campaign charity list to determine if it contained all required information.
   •   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.

To determine if the PCFO was in compliance with the CFC regulations as a federation
(UWGCR) for the 2009 campaign, 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 UWGCR did not disburse any funds to
       member agencies not participating in the CFC.
   •   The UWGCR’s agreements with its member agencies to determine if the fees were
       reasonable and supported.

Finally, to determine if the policies and procedures related to the detection and prevention of
fraud and abuse were adequate we reviewed the PCFO’s responses to our fraud and abuse
questionnaire.

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.




                                                 6
              III. AUDIT FINDINGS AND RECOMMENDATIONS
A.   AUDIT GUIDE REVIEW

     1.   Agreed-Upon Procedures not in Compliance with the Audit Guide              Procedural

          The IPA utilized by the PCFO and LFCC to complete the AUPs did not complete its
          review in accordance with the requirements of the Audit Guide.

          The Audit Guide contains specific procedures to be followed during the examination
          by the IPA with the primary objective of determining LFCC and PCFO compliance
          with 5 CFR Part 950 and OPM’s guidance.

          We reviewed the IPA AUP report and working papers to ensure that it properly
          followed the AUP as stated in the Audit Guide and that it properly reported audit
          issues as the result of its review. Our audit identified three areas where the IPA did
          not comply with the requirements of the Audit Guide. Specifically, we identified the
          following issues:

          •   PCFO Budget and Administrative Expenses Step 4 requires the IPA to report
              as a finding “all instances where the PCFO is not properly matching campaign
              receipts and expenses.” Our review of the 2009 campaign’s expenses found that
              the PCFO charged the campaign expenses based on a calendar year basis and did
              not attempt to match expenses to the campaign for which they were related.
              Additionally, discussions with the PCFO determined that this was the process it
              had followed for years. However, the IPA did not report this as a finding.

          •   Receipt and Disbursement of Funds Step 3 requires the IPA to report as a
              finding “all instances where the PCFO did not ... disburse all receipts, less
              administrative expenses by the end of the campaign.” Our review of the PCFO’s
              Receipts and Disbursements Schedule for the 2008 campaign, which was attached
              to its AUP report, found that a balance of $38,493 remained for the 2008
              Campaign. The IPA did not report this issue as a finding in its report.

          •   Receipt and Disbursement of Funds Step 7 requires the IPA to report as a
              finding instances where the one-time disbursements and ceiling amounts were not
              approved by the LFCC. Our review of the 2009 campaign found that the PCFO,
              not the LFCC, authorized both the making of and the ceiling amount for one-time
              disbursements. Additionally, discussions with the PCFO determined that this was
              its normal practice for one-time disbursements for a long period. However, the
              IPA did not report this as a finding.

          As a result of the IPA’s apparent lack of understanding of the CFC and its related
          regulations, the OCFC, the LFCC, and the PCFO were not alerted to areas of concern
          which could lead to donor designations not being properly handled and disbursed.



                                               7
          Recommendation 1

          We recommend that the OCFC ensures that the LFCC meets with the IPA prior to
          and during the AUP engagement to discuss the Audit Guide steps and results, and
          encourages the IPA to ask questions of the LFCC or the OCFC if it is unsure of how
          to complete any of the required procedures.

          PCFO’s Response

          The PCFO agrees with the recommendation.

B.   BUDGET AND CAMPAIGN EXPENSES

     1.   Unallowable Campaign Expenses                                                $63,732

          The PCFO incorrectly charged the campaign $63,732 for expenses that were either
          unsupported, belonged to a prior campaign, or were charged with an unsupported and
          undocumented allocation method.

          We reviewed a sample of campaign expenses charged to the 2009 campaign to
          determine if the expenses were actual, necessary, and reasonable charges with
          appropriate supporting documentation; if the expenses were related to the CFC; and,
          if an allocated cost, that the methodologies used were reasonable and supported. As a
          result of our review, we identified campaign expenses totaling $63,732 that we are
          questioning because the costs were unsupported, did not belong to the 2009
          campaign, or were allocated costs that did not have supported or documented
          allocation methodologies. Specifically, we identified the following:

          •   $54,502 in expenses allocated to the campaign (Salaries and Benefits, Occupancy,
              and Temporary Employees) for which the PCFO did not provide sufficient
              documentation to support the allocation methodology. The PCFO only provided
              percentages used, but did not have any other documentation to support those
              percentages. We therefore could not determine if the methodology reasonably
              allocated the CFC its fair share of the costs.

              CFC Memorandum 2006-5 Section D states that allocated expenses, such as
              indirect salaries and overhead, “must be supported by a reasonable allocation
              methodology.” Furthermore, it is our expectation that the allocation methodology
              should be supported by quantifiable documentation.

          •   $7,605 in expenses charged to the 2009 campaign that were related to earlier
              campaigns. The questioned expenses include $4,700 that was related to the audit
              of the 2007 campaign as well as $2,905 in expenses that were related to the 2008
              campaign, such as incentives, awards, and luncheons. Finally, the PCFO
              incorrectly charged expenses to the 2009 campaign based on a calendar year
              basis, rather than based on the campaign that the expenses were related to.


                                              8
    According to 5 CFR 950.106(b) “The PCFO may only recover campaign
    expenses from receipts collected for that campaign year.” Additionally, CFC
    Memorandum 2008-09 clarifies regulation 5 CFR 950.106(b) by explaining “the
    expenses incurred for the audit of a campaign must be paid from funds from the
    campaign being audited.” In our opinion this clarification applies to all CFC
    expenses, not just audit related expenses.

•   $1,625 in postage expense for which the PCFO was unable to provide any
    detailed supporting documentation. A portion of the costs included in this amount
    were related to newsletters sent. However, we received no information to prove
    they were sent or how they related to the CFC. The amount questioned also
    includes $630 in postage allocated without support for the methodology used and
    $278 in postage that should have been charged to the 2008 campaign (incurred
    prior to start of the 2009 campaign).

    5 CFR 950.105(d)(7) states that the PCFO is responsible for maintaining itemized
    receipts for the actual CFC administrative expenses charged.

As a result of the PCFO not providing documentation to support allocation methods
used, charging campaign expenses on a calendar year basis, and not maintaining
complete records of CFC expenses, the campaign was overcharged $63,732.

We are not recommending that the PCFO reimburse the 2009 campaign $7,605 in
campaign expenses as well as $278 in postage because the earlier campaigns in
question (2007 and 2008) are closed and have no remaining funds.

Recommendation 2

We recommend that the OCFC direct the PCFO to distribute $54,502 in unsupported
allocated expenses to the agencies and federations that participated in the 2009
campaign. Additionally, we recommend that the OCFC and LFCC ensure that the
PCFO puts procedures in place which ensure that all expenses allocated to a
campaign are based on verifiable methodologies.

PCFO’s Response

The PCFO disagrees and states that it provided documentation to support the
allocation methodology determinations and that its methodologies are based on actual
time spent on the CFC by all staff on a monthly basis.

OIG’s Response

The PCFO states that it provided supporting documentation for its allocation
methodologies. We disagree. The PCFO provided a narrative of its methodologies
which stated the percentages applied when determining the amounts allocated to the
CFC. However, no supporting documentation was provided to support the



                                    9
determination of those percentages, which was initially requested in our draft report.
Because the PCFO has still not provided this information, we are now questioning the
allocated expenses as unsupported.

Recommendation 3

We recommend that the OCFC and the LFCC ensure that the PCFO understands it
responsibilities when charging allocated costs to the CFC and that the methodologies
used are quantifiable and supported by documentation.

PCFO’s Response

The PCFO agrees with the recommendation.

Recommendation 4

We recommend that the OCFC and LFCC work with the PCFO to ensure that it
institutes policies and procedures for the PCFO to track, document, and charge a
campaign’s expenses to its respective campaign period.

PCFO’s Response

The PCFO agrees with the recommendation. That being said, it states that it
“recognizes the intent of this section of the regulations; however, 12 months of
expenses are allocated to each campaign and the expenses do not fluctuate
significantly. Additionally it is the PCFO’s responsibility to provide the best service
for the lowest cost so that the agencies receiving funds have a relatively low
administrative cost charged against their designation. The process recommended may
cause administrative costs to go up significantly due to additional bookkeeping
requirements. The PCFO agrees to comply with this recommendation as best as
possible. We find this recommendation to be cumbersome and costly to implement.”

OIG’s Response

We disagree with the PCFO’s response. The PCFO states that it recognizes the intent
of the regulations. However, it also states that it will “comply with this regulation as
best as possible.” It is the responsibility of the PCFO to ensure that the campaign is
run in accordance with the regulations at all times.

The PCFO correctly states that during the period of our review “12 months of
expenses are allocated to each campaign.” However, the PCFO’s following of this
process is in conflict with the regulations. An individual campaign occurs over a
period of approximately 24 months, not 12 months as stated by the PCFO. All
expenses incurred in the operation of the 2009 campaign should be tracked and
charged to that campaign in accordance with the regulations. We acknowledge the
PCFO’s concern for maintaining a cost effective campaign. However, the PCFO’s



                                     10
     accounting policies and procedures for a campaign’s expenses are to be in accordance
     with the CFC regulations.

     Recommendation 5

     We recommend that the OCFC direct the PCFO to reimburse the 2009 campaign’s
     participating agencies and federations $1,347 in unsupported postage expense.
     Additionally, we recommend the OCFC and LFCC ensure that the PCFO institutes
     policies and procedures for maintaining appropriate expense documentation.

     PCFO’s Response

     The PCFO agrees with the recommendation.

     OIG’s Response

     We accept the PCFO’s response. However, it did not provide a corrective action plan
     that demonstrates how it will maintain campaign related expense documentation for
     both direct and indirect costs. Additionally, as the PCFO did not provide
     documentation to support the charges in question, $1,347 should be reimbursed to the
     member agencies and federations of the 2009 campaign.

2.   Campaign Expenses Reimbursed Without Approval                           Procedural

     The PCFO did not submit its actual 2009 campaign expenses for approval for
     reimbursement to the LFCC. Additionally, the LFCC did not take an active role in
     the campaign and did not request the PCFO to provide the expenses for review and
     approval.

     5 CFR 950.106(a) states that “The PCFO shall recover from the gross receipts of the
     campaign its expenses, approved by the LFCC, reflecting the actual costs of
     administrating the local campaign.”

     Furthermore, 5 CFR 950.104(b)(17) states that it’s the LFCC’s responsibility for
     “Authorizing to the PCFO reimbursement of only those campaign expenses that are
     legitimate CFC costs and are adequately documented.”

     Finally, CFC Memorandum 2008-09 explains that the approval of actual expenses by
     the LFCC is separate from the approval of budgeted expenses. The LFCC must
     review actual expenses, authorize full or partial reimbursement, and document its
     authorization in its meeting minutes.

     We reviewed the LFCC meeting minutes to determine if the LFCC authorized and
     approved the reimbursement to the PCFO of only those campaign expenses that were
     legitimate CFC costs that were adequately documented. Our review of the minutes
     found no indication of the LFCC’s authorization or approval of the PCFO’s



                                        11
reimbursement of campaign expenses. According to the PCFO, when the LFCC
approved the campaign plan and budget (included in the PCFO application) for the
2010 campaign, the LFCC also approved the actual expenses of the 2009 campaign as
those costs were included with the 2010 budget figures. The PCFO also stated that it
has not provided the LFCC with detailed expense documentation for means of
determining if the expenses were appropriate because the LFCC is not active and that
it has difficulty in getting the LFCC to perform its duties.

The PCFO is correct that the 2009 actual expense figures were included in its 2010
application to become PCFO. However, the PCFO is incorrect in stating that the
LFCC authorized or approved its reimbursement when it selected it as the PCFO.
The sole purpose of the 2010 PCFO application (which included the campaign plan
and budget) is to select a PCFO for the next campaign and not to approve the actual
costs for reimbursement. Additionally, the costs known to the PCFO at the time of
solicitation for PCFO applications should not be final and should only be estimates to
be reconciled prior to the final disbursements to agencies.

As a result of the PCFO’s misunderstanding of its responsibilities to obtain
authorization and approval from the LFCC prior to reimbursing itself, the PCFO did
not allow the LFCC to exercise its authority over the campaign to ensure that only
legitimate CFC costs are charged to the campaign. Additionally, as a result of not
taking an active role in the conduct of the 2009 campaign and not requesting to
authorize and approve the PCFO’s reimbursement of campaign expenses, the LFCC
may have allowed costs that were not related to the CFC to be charged to the
campaign.

Recommendation 6

We recommend that the OCFC ensures that both the LFCC and PCFO understand
that the PCFO’s reimbursement for only those campaign expenses that are legitimate
and adequately documented CFC costs must be authorized and approved by the
LFCC prior to reimbursement. Additionally, the PCFO and LFCC should present to
the OCFC a detailed corrective action plan that demonstrates how a campaign’s
expenses will be authorized, reviewed, and approved by the LFCC prior to
reimbursement.

PCFO’s Response

The PCFO agrees with the recommendation.

OIG’s Response

We accept the PCFO’s response. However, the recommendation was directed toward
both the PCFO and LFCC. As the LFCC did not provide a response to the draft
report, the OCFC should confirm their understanding in the resolution of this
recommendation.



                                    12
3.   PCFO Solicitation                                                          Procedural

     The public notice to solicit for PCFO applications for the 2009 campaign requested
     that the applications be sent to the PCFO and not to the LFCC.

     5 CFR 950 104(c), states the LFCC’s responsibilities for selecting a PCFO, including
     that the “LFCC must solicit applications on a competitive basis for the PCFO...”

     We reviewed the public notice issued to solicit for applications to serve as the PCFO
     during the 2009 campaign to determine if the LFCC solicited for the PCFO and
     selected the PCFO in a timely manner. Our review found that the solicitation
     requested that those wishing to apply for PCFO for the 2009 campaign were to send
     the application to the UWGCR, the PCFO during the 2008 campaign, rather than the
     LFCC. According to the PCFO, it made the solicitation and instructed applications to
     be sent to its address because the LFCC does not take an active role in its duties and
     that it was more effective for it to be done in the manner described.

     While it is acceptable for PCFOs to post solicitation notices on behalf of the LFCC, it
     is a potential conflict of interest for the PCFO to receive application responses.
     Additionally, as a result of the PCFO receiving the application responses, the LFCC
     is not performing its duties as required by the regulations. Finally, the LFCC could
     be misinformed of viable applicants for the position due to this conflict of interest.

     Recommendation 7

     We recommend that the OCFC ensures that the LFCC understands its responsibilities
     in regards to soliciting for and selecting a PCFO [5 CFR 950.104(c)] and that it
     institutes procedures to ensure that the PCFO applications are sent directly to the
     LFCC and not to the PCFO.

     PCFO’s Response

     The PCFO agrees with the recommendation.

     OIG’s Response

     We accept the PCFO’s response. However, as the recommendation was directed
     toward the LFCC, which did not provide a response to the draft report, the OCFC
     should ensure their understanding in the resolution of this recommendation.

4.   Untimely PCFO Solicitation                                                 Procedural

     The LFCC did not select the PCFO for the 2009 campaign by the date set in OPM’s
     2008/2009 Calendar of Events.




                                         13
          5 CFR 950.801(a)(3) requires that the LFCC must select a PCFO no later than a date
          to be determined by OPM. Additionally, the CFC 2008/2009 Calendar of Events
          states that the deadline for the LFCC to select a PCFO was February 23, 2009.

          We reviewed the LFCC meeting minutes and the PCFO selection letter to determine
          if the LFCC selected the PCFO by the February 23, 2009 deadline set in the CFC
          2008/2009 Calendar of Events. Our review of the LFCC meeting minutes found that
          the LFCC selected the PCFO on March 25, 2009. Additionally, the letter notifying
          the UWGCR was issued by the LFCC on March 27, 2009. Discussion with the LFCC
          determined that it planned to meet on the deadline date. However, it could not
          coordinate its members to meet. Therefore, it decided to meet on March 25th when
          all members could be present.

          As a result of not selecting the PCFO according to the timetable set by OPM, the
          LFCC is potentially hampering the PCFO’s ability to run an effective campaign and
          risks delaying the PCFO’s administrative responsibilities that are required to be
          fulfilled throughout the new campaign.

          Recommendation 8

          We recommend that the OCFC ensures that the LFCC understands its responsibilities
          as related to the selection of a PCFO (5 CFR 950.801) and that it institutes procedures
          to ensure that the selection of the PCFO is done by the date set by OPM.

          PCFO’s Response

          The PCFO agrees with the recommendation.

          OIG’s Response

          We accept the PCFO’s response. However, as the recommendation was directed
          toward the LFCC, which did not provide a response to the draft report, the OCFC
          should ensure their understanding in the resolution of this recommendation.

C.   CAMPAIGN RECEIPTS AND DISBURSEMENTS

     1.   Allocation and Disbursement of CFC Receipts                                     $4,036

          The PCFO did not disburse $4,036 in CFC funds held, as required by the Federal
          regulations. Additionally, the PCFO did not apply all CFC deposits to the correct
          campaign period.

          We traced and agreed all amounts reported by the PCFO as campaign receipts and
          disbursements to the bank statements to determine if the PCFO properly allocated
          CFC deposits to the correct campaign, that the CFC funds were maintained in an
          interest-bearing account, and that all CFC funds received were disbursed to members



                                              14
of the campaign. Our review identified two errors and a potential problem based on
the PCFO’s banking practices. Specifically, we identified the following:

•   We identified two deposits that were allocated to an incorrect campaign. The net
    effect of these incorrectly allocated deposits resulted in the PCFO disbursing
    excess funds in the amount of $1,259 to members of the 2009 campaign. Because
    the campaigns affected by these inaccurately posted CFC deposits are closed, we
    will not recommend that the PCFO reopen the campaigns to correct the error, as
    the monies have been already disbursed.

    5 CFR 950.105(d)(1) states that the PCFO is responsible for honoring employee
    designations. Additionally, 5 CFR 950.901(i)(2) states that the PCFO is
    responsible for the accuracy of the disbursement that it transmits to its member
    agencies and federations. As such, in order to honor employee designations and
    accurately distribute CFC receipts, the PCFO must accurately record the deposits
    received to the correct campaign period.

•   We found that the PCFO utilized a money market bank account to earn interest on
    campaign funds, as its CFC checking account was non-interest-bearing. Our
    review found that on December 3, 2009, the PCFO moved $80,000 (related to the
    2008 campaign) from the CFC checking account to the money market account to
    raise the principle in order to earn more interest. Prior to the transfer of funds the
    account had a balance of $3,933 and earned less than $1 of interest per month, but
    during the period of the transfer, interest of $19 or more was earned each month.
    When the $80,000 was required to make the final distributions to the 2008
    campaign, it was transferred out of the money market account (on March 22,
    2010) back into the CFC checking account. However, the interest of $100 earned
    during the transfer period (December 2009 through March 2010) remained in the
    money market account and was not distributed to the 2008 campaign. No other
    funds were transferred into the money market account during the 2009 campaign
    (April 2010 through February 2011) and $2 additional interest was earned during
    this time bringing the balance of CFC funds maintained in the money market
    account to $4,036 (rounded).

    The regulations clearly state that all CFC funds must be distributed to member
    agencies at the end of each distribution period. Therefore, any amounts held in
    the money market account should have been distributed as well when the $80,000
    was transferred out in March 2010. As a result, it is our determination that the
    PCFO failed to distribute the remaining balance of the money market account,
    which amounted to $4,036, as of February 28, 2011 (plus any interest
    accumulating since that date), to the member agencies of the 2009 campaign (the
    active campaign at the time of our audit).

    5 CFR 950.105(d)(8) states that the interest earned on all CFC accounts should be
    distributed in the same manner as all other CFC receipts. Also, 5 CFR




                                      15
    950.901(i)(2) states that at the end of the disbursement period the PCFO’s CFC
    account shall have a balance of zero.

•   Lastly, during our review we determined that the PCFO, beginning with the 2010
    campaign, changed banking institutions and that the new CFC account was
    interest-bearing. This change resulted from a UWGCR policy of rotating banks
    periodically.

    It is our opinion that the policy of rotating banks is unnecessary and can cause
    unintended problems in the receiving of and accounting for CFC funds.

As a result of withholding CFC funds from disbursement in a money market account,
the PCFO did not distribute all CFC funds to member agencies of the campaign. This
resulted in an underpayment to those agencies and federations of $4,036.

Recommendation 9

We recommend that the OCFC and the LFCC require the PCFO to implement more
stringent procedures to properly allocate incoming CFC receipts to the proper
campaign period, especially during the months where payroll deposits for different
campaign periods overlap.

PCFO’s Response

The PCFO agrees with the recommendation.

Recommendation 10

We recommend that the OCFC and the LFCC require the PCFO to close the CFC
money market account and to distribute the amount maintained in the account ($4,036
as of February 28, 2011) plus any accumulated interest to the currently open
campaign.

PCFO’s Response

“The PCFO strongly disputes this recommendation. That fact that there are funds left
in a bank account at the end of a period is a timing issue, not an undistributed balance
issue. During the 30 day period after the close of a quarter, funds continue to come in
which represent the amount intended for distribution in the next quarter. For
example, if a quarter closes on 12/31, the distribution for that quarter includes all
funds collected up to that point, but are not sent out until 1/31 at the latest. As a
result of this, funds continue to be deposited into the checking account during the
month, which will then be distributed in the next quarterly payout. The PCFO may
not fully transfer the funds out of the money market because there may be enough
funds in the checking account for that quarterly distribution. This is a cash
management technique used to maximize earnings on the funds. As was explained to



                                     16
the audit team, cash management of campaign funds requires a careful balance
between keeping enough funds in the campaign’s checking account to minimize bank
fees, while utilizing the interest bearing account when beneficial.”

OIG’s Response

We disagree with the PCFO’s response. According to the PCFO, the intent of having
a money market account and a separate CFC bank account was to move funds
between the accounts in order to “maximize earnings and minimize fees.” However,
during the scope of our audit the PCFO did not do this. In fact, the only transfer of
funds between the two accounts, as described in the finding, was a one-time transfer
(in and out) of $80,000 related to the 2008 campaign. No transfers of 2009 funds
were made. In January 2011, the PCFO opened a new interest-bearing checking
account for the CFC which, in our opinion, forgoes the need to maintain CFC funds
in a money market account. As a result, we maintain that the PCFO should close the
money market account and distribute the funds to the participating agencies and
federations of the current campaign. We believe a simple interest-bearing checking
account fulfills the requirements of the regulations as interest is earned on idle CFC
funds while avoiding complications in the accounting, valuation, and disbursement of
a specific campaign’s funds at the close of that campaign.

We acknowledge the PCFO’s legitimate concern to maximize interest income while
minimizing banking fees on CFC funds. However, the PCFO’s approaches should
not stretch past the limitations of CFC regulations. Additionally, the primary concern
of the PCFO should be the accurate accounting for and disbursement of CFC funds
raised for a particular campaign’s beneficiaries as a campaign’s funds are invested
and divested within a short period of time and thus do not accrue a considerable
amount of interest income. If the PCFO is concerned with the cost effectiveness of
maintaining an interest-bearing checking account, the PCFO may seek approval from
the OCFC to maintain funds in a non-interest bearing checking account, or for the
OCFC to review the PCFO’s investment strategies.

Recommendation 11

We recommend that the OCFC and the LFCC direct the PCFO to cease its practice of
“rotating bank accounts” and, in doing so, ensure that the account maintained for the
CFC is an interest-bearing account.

PCFO’s Response

The PCFO disagrees, stating that the “Bank Rotation Policy” that it follows is a
policy of the UWGCR, in which every five years the agency’s banking relationships
go out for bid to ensure that the most cost effective and efficient bank products are
being used.




                                    17
     OIG’s Response

     We disagree with the PCFO’s response. The PCFO states that the “Bank Rotation
     Policy” is a policy of the UWGCR. However, policies and procedures of the
     UWGCR for CFC funds should not conflict with CFC regulations or guidance.
     According to 5 CFR 950.105(c)(2)(iii), the PCFO must “abide by the directions,
     decisions, and supervision of the LFCC and/or Director.” Additionally, CFC
     Memorandum 2003-11 describes that regularly changing bank accounts can cause
     problems because payroll offices do not always make the change in bank account and
     electronic routing numbers in a timely manner. Furthermore, now that the PCFO has
     the CFC funds in an interest-bearing bank account, it is our opinion that it should
     maintain the funds in that bank account unless a more cost effective and efficient
     bank product becomes available (as approved by the LFCC, or the OCFC if a non-
     interest-bearing account).

2.   Outstanding Check Policies and Procedures                                 Procedural

     The PCFO’s outstanding check procedures do not incorporate all of the requirements
     set by the OCFC in CFC Memorandum 2006-5. Also, the PCFO’s procedures
     include a step which would cause it to violate the Federal regulations by contacting
     donors directly regarding their designations.

     CFC Memorandum 2006-5 part C states that the PCFO’s outstanding check
     procedures should include at least three documented follow-up attempts to reach the
     payee by phone and E-mail. Additionally, if it is determined that the payee is no
     longer active, then the funds must be distributed among the remaining agencies and
     federations of that campaign as undesignated funds.

     Additionally, 5 CFR 950.105(d)(4) states that it is the PCFO’s responsibility to ensure
     that “no employee is questioned in any way as to his or her designation or its amount
     except by keyworkers, loaned executives, or other non-supervisory Federal
     personnel.” Any contact by the PCFO of any donor is in violation of this regulation.

     We reviewed the PCFO’s outstanding check procedures to determine if they are
     aligned with the guidance set forth by the OCFC in CFC Memorandum 2006-5.
     From our review of the procedures we determined that the PCFO only contacts the
     payee once. This procedure falls short of the Memorandum’s guidance for the payee
     to be contacted and followed up with at least three times.

     Additionally, the PCFO’s procedures state that if the check remains un-cashed after
     90 days “the donor is contacted and asked to redirect their designation.” This
     procedure does not follow the Memorandum’s directive for outstanding checks to be
     distributed as undesignated funds to remaining organizations of that campaign.
     Furthermore, as stated earlier, it calls for the PCFO to contact the donor directly,
     which is strictly prohibited by the Federal regulations.




                                         18
     As a result of not following the procedures as set by the OCFC in CFC Memorandum
     2006-5, the PCFO is not ensuring, to the best of its ability, that donor monies are
     distributed to those agencies designated and that monies are accounted for according
     to OCFC directives. Additionally, by instituting procedures that would cause it to
     contact donors directly regarding their designations, the PCFO is risking alienating
     donors who, as a result of the contact, may feel pressured by the PCFO.

     Recommendation 12

     We recommend that the OCFC and the LFCC direct the PCFO to update its
     procedures relating to outstanding checks to fully encompass the OCFC instructions
     for outstanding checks in CFC Memorandum 2006-5.

     Recommendation 13

     We recommend that the OCFC and the LFCC ensure that the PCFO understands its
     responsibilities outlined in 5 CFR 950.105(d)(4) and that it should never contact a
     donor directly.

     PCFO’s Response

     The PCFO agrees with the recommendations.

3.   Pledge Card Data Entry Errors                                             Procedural

     Our pledge card review identified 36 pledge card data entry errors which resulted in
     the PCFO incorrectly releasing donor information to the agencies donated to,
     incorrectly inputting pledge information, and accepting pledges submitted on an
     invalid form.

     We reviewed a sample of 45 contributor’s 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 pledge card database report to determine if the
     following items were entered correctly: donor name, each charity code and amount
     designated to each code, total amount donated, and the donor’s choice to release
     personally identifiable information. Additionally, we verified that the donor signed
     the pledge card to authorize payroll deductions by the CFC. We identified the
     following errors:

     •   31 instances where the PCFO incorrectly released the donor’s pledge amount and
         name to the agencies donated to, when the donor did not check the box to release
         the information. Discussion with the PCFO determined that these were probably
         entry errors during the processing of the pledge cards.

     •   Two instances where the PCFO incorrectly released the donor’s home address or
         E-mail address (one time each). On each pledge card in question, the donor wrote


                                         19
    in their address. However, the donor did not mark the box on the pledge card
    which clearly states that “only checked options will be processed.” Discussion
    with the PCFO determined that it felt that the donor’s intent, by writing in their
    address information, was to have the information released. According to the
    OCFC, during this time period, the donor must have marked the necessary box
    and have entered their respective address for the information to be released to the
    appropriate agency or federation. The OCFC did note that this was a point of
    confusion among many PCFOs and that it modified the pledge card format for the
    2011 campaign to remove the checked box requirement for releasing both home
    and E-mail addresses.

    5 CFR 950.105(d)(6) states that it is the responsibility of the PCFO to honor “the
    request of employees who indicate on the pledge form that their names, contact
    information and contribution amounts not be released to the organization(s) that
    they designate.”

•   One instance where the donor entered what appears to be the bi-weekly or per pay
    period deduction amount in the “annual amount” column of the pledge card. The
    PCFO incorrectly multiplied that amount by 26 (number of pay periods in a year)
    to determine the amount designated to each agency.

    5 CFR 950.402(d) states that in “the event the PCFO receives a pledge form that
    has designations that add up to less than the total amount pledged, the PCFO must
    honor the total amount pledged and treat the excess amount as undesignated
    funds.”

•   One instance where the PCFO incorrectly identified a pledge as undesignated
    when the donor entered a valid 2009 campaign agency code.

    5 CFR 950.105(d) states that it is the PCFO’s responsibility to honor employee
    designations.

•   One instance where the PCFO accepted a list of additional pledges which were
    not entered onto a valid pledge card, but on a blank paper attached to the pledge
    card. Furthermore, the PCFO contacted the donor directly to confirm the
    designated agencies listed on the attached form.

    The 2009 CFC Brochure instructs the donor that if they wish to make more than
    the five designations allotted on the pledge card that they may complete an
    additional pledge card to do so. Therefore, it is our opinion that designations
    provided on any other form should not be accepted by the PCFO and should be
    treated as undesignated funds. Additionally, 5 CFR 950.105(d)(4) states that it is
    the PCFO’s responsibility to ensure that “no employee is questioned in any way
    as to his or her designation or its amount except by keyworkers, loaned
    executives, or other non-supervisory Federal personnel.” Any contact by the
    PCFO of any donor is in violation of this regulation.


                                    20
     As a result of these errors, the PCFO did not accurately honor the donor’s pledges.
     Additionally, by contacting the donor directly regarding pledges, the PCFO may have
     inadvertently influenced the donor’s designations.

     Recommendation 14

     We recommend that the OCFC and the LFCC direct the PCFO to institute procedures
     to ensure that donor release of information is properly entered and that checks are
     made to ensure the accuracy of the information in its database to the original pledge
     card.

     Recommendation 15

     We recommend that the OCFC and the LFCC ensure that the PCFO understands the
     procedures surrounding pledge cards when the designations do not total to the amount
     pledged and that it understands that only those pledge modifications outlined in 5
     CFR 950.402(d) are permitted.

     Recommendation 16

     We recommend that the OCFC and the LFCC ensure that the PCFO understands that
     only those pledges entered on authorized pledge forms represent valid designations
     and that it instruct its keyworkers to return any pledge cards where donors attach
     additional designations on an unauthorized pledge form to the donor to have the
     donor complete the necessary pledge forms for all of the designations.

     Recommendation 17

     We recommend that the OCFC and the LFCC ensure that the PCFO understands that,
     in accordance with 5 CFR 950.105(d)(4), it may not contact donors directly in regards
     to pledge questions and that it must work through keyworkers, loaned executives or
     other non-supervisory Federal personnel when reaching out to donors in this manner.

     PCFO’s Response

     The PCFO agrees with the recommendations.

4.   One-Time Disbursements                                                   Procedural

     The PCFO did not seek approval from the LFCC for either the making of or the
     setting of the ceiling amount for one-time disbursements to agencies and federations
     with gross designations of less than $1,000. Additionally, the PCFO did not properly
     calculate the pledge loss amount deducted from the agencies and federations
     receiving the one-time disbursements, resulting in a reduction of the amount paid to
     them of $291.



                                        21
According to 5 CFR 950.901(i)(3), “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. 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. This is the only approved application of adjusting for pledge
loss.”

Additionally, CFC Memorandum 2008-9 provides detailed instructions explaining
how to calculate one-time disbursements.

We reviewed the minutes of the LFCC meetings where discussion and decisions
regarding the campaign were made by the LFCC to determine if the LFCC made
the decisions regarding one-time disbursements. We did not identify in those records
where the LFCC approved the making of one-time disbursements or set a ceiling
amount for those disbursements for the 2009 campaign. We also did not identify
where the PCFO brought the LFCC a request for approval of either of these items.
Discussion with the PCFO determined that it made the determination to make the
one-time disbursements and set the ceiling threshold, but we were unable to
determine why approval was not sought or received prior to making the
disbursements.

Additionally, during our review of the one-time disbursements made, we recalculated
the pledge loss percentage, using figures provided by the PCFO, to determine if the
one-time disbursement amount paid was correct. Our review found that the PCFO
applied too large a percentage of pledge loss to the agencies and federations receiving
one-time disbursements, which resulted in an underpayment of $291 (in total). The
error occurred as the result of how the PCFO accounted for $7,254 in pledges
received over and above the amounts pledged for two government agencies. The
PCFO notated that the $7,254 should be added to the pledge amount for the two
agencies and in doing so the PCFO increased the pledges receivable for the campaign
in question. However, the PCFO was unable to provide support to show that the
pledge amount reported for the two agencies in question should be increased.
Therefore, we calculated the pledge loss without increasing the pledged total which
resulted in a lower pledge loss percentage than that calculated by the PCFO and a
greater amount due (by $291) to the agencies receiving one-time disbursements.

As a result of not requesting approval for one-time disbursements and approval of the
one-time disbursement ceiling amount, the PCFO did not permit the LFCC to
exercise its discretion over the operation of the campaign. Additionally, by not
correctly calculating pledge loss, the PCFO underpaid those agencies receiving one-
time disbursements by $291. As we consider this underpayment amount to be
immaterial, we are not requesting that adjustments be made to the one-time
disbursements.




                                    22
     Recommendation 18

     We recommend that the OCFC and the LFCC require the PCFO to seek approval for
     both the making of and the setting of the ceiling amount for one-time disbursements
     before they are made for future campaigns.

     Recommendation 19

     We recommend that the OCFC and the LFCC ensure that the PCFO understands the
     method of calculating pledge loss as outlined in CFC Memorandum 2008-9 for those
     agencies and federations receiving one-time disbursements.

     PCFO’s Response

     The PCFO agrees with the recommendations.

     OIG’s Response

     We accept the PCFO’s response. However, the PCFO did not articulate a corrective
     action plan that would have allowed us to objectively review the processes that it will
     take to seek approval from the LFCC for both the making of and threshold for one-
     time disbursements. The OCFC should review such a plan for the resolution of this
     recommendation.

5.   Pledge and Donor Notifications                                             Procedural

     The PCFO did not notify its participating organizations of the amount of
     undesignated funds due to them. Additionally, the PCFO did not retain
     documentation to support the sending of pledge notifications and contributor
     information for those organizations notified electronically.

     5 CFR 950.901(i)(1) states that the PCFO will notify all participating organizations of
     the amounts designated to them and the amount of undesignated funds allocated to
     them. Additionally, 5 CFR 950.601(c) states that the PCFO will forward contributor
     information for those donors that indicated that they wished to release information to
     the recipient organizations.

     Furthermore, according to 5 CFR 950.604, PCFO’s “...shall retain documents
     pertinent to the campaign for at least three completed campaign periods. For example,
     documentation regarding the 2006 campaign must be retained through the completion
     of the 2007, 2008, and 2009 campaign periods (i.e. until early 2010).”

     We reviewed 12 pledge notifications and donor acknowledgements to determine if
     the PCFO notified the organizations of the 2009 campaign of their pledge amounts
     (both designated and undesignated funds) and of donors who wished to be recognized
     for their donation by March 15, 2010. During our review we identified two issues:



                                         23
•   We determined that each of the PCFO’s pledge notifications reviewed only
    notified the member organization of the amounts designated to them by donors,
    but did not indicate the amount of undesignated funds that were allocated to them;
    and

•   We identified three organizations for which the PFCO was not able to provide
    sufficient supporting documentation to show that the notification letters and donor
    acknowledgements were sent to the organizations. Specifically, the PCFO
    provided copies of the pledge report and donor acknowledgement reports with a
    note stating that the information was E-mailed to the appropriate organization.
    Further discussion with the PCFO determined that it did not have any further
    documentation to support that the E-mails were sent because the sent E-mails
    were not maintained by the PCFO.

As a result of not reporting all funds (designated and undesignated) pledged to the
agencies and federations in the pledge notifications, the PCFO did not report accurate
pledged funds information to the participants of the 2009 campaign.

Additionally, as a result of the PCFO not retaining sufficient documentation to
support campaign activities, we were unable to determine if the PCFO appropriately
notified all member organizations of the 2009 campaign of their pledge amounts and
donor acknowledgements. Timely and accurate notifications to the member
organizations of the campaign are paramount to the planning of their charitable
enterprises.

Recommendation 20

We recommend that the OCFC and the LFCC direct the PCFO to include the amount
of both the designated and undesignated funds allocated to its member agencies and
federations in the pledge notifications sent for each campaign as required by the
regulations.

Recommendation 21

We recommend that the OCFC and the LFCC direct the PCFO to institute procedures
to ensure that documentation is maintained to support all pledge notifications and
donor acknowledgements sent for future campaigns.

PCFO’s Response

The PCFO agrees with the recommendations.




                                    24
D.   ELIGIBILITY

     1.   Agency and Federation Applications                                          Procedural

          The LFCC accepted applications from two local organizations and two local
          federations which did not provide sufficient documentation to be accepted for
          participation in the CFC. Additionally, we did not identify any applications where we
          could determine if it was an LFCC member who reviewed the application and made
          the eligibility decision.

          We reviewed 10 applications (7 local organizations and 3 local federations) to
          determine whether each local organization or local federation provided the
          appropriate documentation and made the appropriate certifications to be a member of
          the campaign. Our application review found 16 deficiencies. We identified 5
          deficiencies related to local federations and 11 deficiencies related to local
          organizations. Specifically, we identified the following deficiencies:

          •   We identified two applications (one federation and one local organization) in
              which the applicants did not check all of the certifications required to be made in
              the application. The local organization left three of the certifications blank and
              the local federation left one blank. OPM Forms 1647-C and 1647-D state that not
              checking the box indicates that the organization does not agree with the
              certification and, therefore, should have been denied entry into the campaign.

          •   We identified one local organization application which did not provide
              documentation to support and demonstrate that it has a substantial local presence
              in the geographical area covered by the campaign. This local organization should
              not have been admitted as a member of the campaign without this information.

              5 CRF 950.204(b)(i) states that “Substantial local presence is defined as a staffed
              facility, office, or portion of a residence dedicated exclusively to that
              organization, available to members of the public seeking its services or benefits.”

          •   We identified one local federation application which did not include a copy of its
              annual report. Without such documentation, the local federation should have
              been denied membership in the campaign.

              5 CFR 950.204(d)(6) states that to be eligible, the federation must “Prepare an
              annual report which includes a full description of the organization’s activities and
              accomplishments. These reports must be made available to the public upon
              request.”

          •   All 10 of the local federation and local organization applications that we reviewed
              did not clearly indicate an LFCC review or determination of eligibility (approval
              or denial).



                                               25
   5 CFR 950.104(b)(3) states that the LFCC is responsible for “Determining the
   eligibility of local organizations that apply to participate in the local campaign.
   This is the exclusive responsibility of the LFCC and may not be delegated to the
   PCFO.”

According to the PCFO, it initially reviews all applications received for participation
in the CFC and compiles a list of organizations that it believes are either compliant or
not compliant with the application requirements. The list is then provided to the
LFCC for it to make a final determination on each organization’s eligibility.

Our review of the materials (checklists) used by the PCFO in its initial review led us
to believe that the errors related to the unchecked certifications and missing
documentation can be directly traced to those materials not incorporating all the
regulation requirements. As a result of using incomplete checklists in its initial
reviews of applications, the PCFO inadvertently proposed organizations for inclusion
in the campaign which submitted incomplete applications.

Further discussion with the PCFO determined that it did not know why the
application checklists were not signed by a reviewer or did not indicate approval or
denial. The LFCC did not respond to our questions related to this issue during our
audit. Each year OPM’s OCFC releases to all campaigns application review sheets
that incorporate all regulation requirements and include space for the LFCC to
indicate the results of its review and to sign the review sheet. As a result of the LFCC
not indicating its review or using the OPM review sheet, we could not determine the
eligibility decisions made or who made the decisions for organizations to participate
in the 2009 campaign.

Recommendation 22

We recommend that the OCFC ensures that the LFCC understands its responsibilities
in regards to determining eligibility of local organizations applying to participate in
the local campaign [5 CFR 950.104(b)(3)].

Recommendation 23

We recommend that the OCFC direct the LFCC to institute procedures to completely
review all incoming applications for each campaign to ensure that only those
organizations meeting the regulation requirements are admitted as members of the
campaign.

Recommendation 24

We recommend that the LFCC use the application review sheets created by the OCFC
to review the applications and that it clearly indicates the eligibility decision made
(approval or denial), and that a member of the LFCC affirms the decision with a
signature.



                                     26
     PCFO’s Response

     The PCFO agrees with the recommendations.

     OIG’s Response

     We accept the PCFO’s response. However, as the recommendations were directed
     toward the LFCC, which did not provide a response to the draft report, the OCFC
     should ensure that they understand the recommendations during the resolution phase.

2.   Eligibility Decision Letters Issued by Wrong Authority                      Procedural

     The LFCC did not issue the acceptance letters that were sent to organizations
     applying as members for the 2009 campaign as required by the regulations.

     5 CFR 950.801(a)(5) states that the LFCC “must issue notice of its eligibility
     decisions...” Additionally, 5 CFR 950.204(e) states that “The LFCC shall
     communicate its eligibility decisions...”

     We reviewed a sample of letters sent to notify local federations and organizations
     which applied for inclusion in the 2009 campaign to determine if the notifications
     were sent within 15 days of the application closing date and if the notifications were
     issued and communicated by the LFCC. Our review of the eligibility notification
     letters determined that the letters were issued and signed by the PCFO instead of the
     LFCC. Discussion with the PCFO determined that it was unaware of the requirement
     about acceptance letters being signed by the LFCC.

     Eligibility decision letters issued by the improper party risks having incorrect
     information communicated to the applicants and does not hold the proper authority, in
     this case the LFCC, accountable for its decisions.

     Recommendation 25

     We recommend that the OCFC ensure that the LFCC and the PCFO understand the
     responsibilities of the LFCC as outlined in the regulations, especially those regarding
     the issuance of [5 CFR 950.801(a)(5)] and communication of [5 CFR 950.204(e)]
     eligibility decisions.

     Recommendation 26

     We recommend that the OCFC directs the LFCC to institute procedures to ensure that
     it properly issues and communicates its eligibility decisions to those local federations
     and organizations applying for inclusion in the campaign.




                                          27
          PCFO’s Response

          The PCFO agrees with the recommendations.

          OIG’s Response

          We accept the PCFO’s response. However, as the recommendations were also
          directed toward the LFCC, which did not provide a response to the draft report, the
          OCFC should ensure that they understand the recommendations during the resolution
          phase.

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.

F.   FRAUD AND ABUSE

     Our review of the PCFO’s fraud and abuse policies and procedures indicated that they were
     sufficient to detect and deter potential fraud and abuse activities.

G.   DISPOSITION OF THE CAMPAIGN

     Based on the numerous issues identified in this report, it appears that both the LFCC and
     PCFO lack the ability to conduct and coordinate the local CFC. Additionally, the LFCC
     was clearly lax in its oversight of these campaigns.

     This report documents numerous instances where both the PCFO and LFCC did not fulfill
     their responsibilities as outlined in 5 CFR 950.

     In summary, we noted the following seven issues involving the PCFO:

        1. Did not submit its actual expenses for the 2009 campaign for approval for
           reimbursement to the LFCC.
        2. Incorrectly charged the campaign expenses that were either unsupported, related to
           another campaign, or were charged with an unsupported and undocumented
           allocation methodology. Additionally, in its response, the PCFO did not appear
           overly eager to comply with our recommendations and the requirements of the
           Federal regulations regarding properly matching expenses with the appropriate
           campaign.
        3. Did not properly record donors’ intended contributions to the CFC as well as
           donors’ intended release of information to organizations.
        4. Did not include all of the 2006-5 Memorandum’s recommendations in its uncashed
           checks policies and procedures.




                                               28
   5. Did not disburse all CFC funds held as required by the Federal regulations.
      Additionally, in its banking policies, the PCFO seemingly asserts the priority of
      UWGCR policies over the CFC regulations.
   6. Did not seek approval from the LFCC for either the making of or the ceiling amount
      for one-time disbursements. Additionally, the PCFO did not properly calculate the
      pledge loss amount deducted from the agencies and federations receiving the one-
      time disbursements.
   7. Did not notify its participating organizations of the amount of undesignated funds
      due to them. Additionally, the PCFO did not retain documentation to support the
      sending of pledge notifications and contributor information for those organizations
      notified electronically.

In addition, we noted the following five issues involving the LFCC:

   1. Did not select the PCFO for the 2009 campaign by the date set in OPM’s 2008/2009
      Calendar of Events.
   2. Did not ensure that 2009 PCFO applications were sent directly to the LFCC.
   3. Did not request the PCFO to provide the 2009 campaign expenses for review and
      approval.
   4. Did not completely review all applications for the 2009 campaign.
   5. Did not properly issue and communicate its eligibility decisions to organizations
      applying for inclusion in the 2009 campaign.

Furthermore, the LFCC illustrated an apparent lack of concern for the CFC as it:

   1. Only assembled itself for three meetings related to the 2009 campaign: Review and
      approve PCFO’s campaign plan and budget (March 25, 2009); Review organization
      applications for 2009 campaign (April 28, 2009); Review 2009 campaign results
      (April 21, 2010).
   2. The PCFO expressed concern that it has difficulty in convening the LFCC for
      meetings and that the LFCC does not take an active role in its required
      responsibilities.
   3. Did not attend the audit entrance conference or the exit conference.
   4. Did not respond to any of the draft report findings and recommendations; more
      notably, to findings and recommendations specific to the LFCC.

As a PCFO, the UWGCR is responsible for conducting an effective and efficient campaign,
acting as the fiscal agent of the LFCC, and ensuring that donor designations are honored.
The LFCC is responsible for selecting a qualified PCFO, coordinating the local campaign,
and being the central point of information regarding the CFC among Federal employees.
To be successful, the PCFO and LFCC must work together to establish and implement
policies, procedures, and controls necessary to ensure that their responsibilities are carried
out in an efficient and effective manner in accordance with the Federal regulations.




                                          29
Recommendation 27

As a result of the numerous findings and the nature of the issues identified with both the
PCFO and LFCC, it is our opinion that the OCFC should seek to merge the Capital Region
CFC with another geographically adjacent campaign, administered and conducted by a new
PCFO and Local Federal Coordinating Committee (LFCC) that are more equipped to
handle the responsibilities of the CFC.




                                         30
             IV. MAJOR CONTRIBUTORS TO THIS REPORT
Special Audits Group

           , Auditor-In-Charge


                 , Group Chief,

                , Senior Team Leader




                                       31
Recommendation 4

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands its
responsibilities when charging allocated costs to the CFC and that the methodologies used are
quantifiable and supported by documentation.


Recommendation 5

The PCFO recognizes the intent of this section of the regulations; however, 12 months of
expenses are allocated to each campaign and the expenses do not fluctuate significantly.
Additionally it is the PCFO’s responsibility to provide the best service for the lowest cost so that
the agencies receiving funds have a relatively low administrative cost charged against their
designation. The process recommended may cause administrative costs to go up significantly
due to additional bookkeeping requirements. The PCFO agrees to comply with this
recommendation as best as possible. We find this recommendation to be cumbersome and costly
to implement.


Recommendation 6

The PCFO will work closely with the OCFC and the LFCC to ensure that supporting
documentation for all costs (direct and indirect) charged to the CFC are maintained and available
for audit.


Recommendation 7

The PCFO will work closely with the OCFC and the LFCC to ensure that legitimate campaign
expenses are adequately documented and authorized and approved by the LFCC prior to
reimbursement.


Recommendation 8

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands its
responsibilities in regards to soliciting and selecting a PCFO (5 CFR 950.104 (c)).


Recommendation 9

In the future, the PCFO will work closely with the OCFC and the LFCC to ensure that public
notices for soliciting for PCFO applications are made by, or at the direction of, the LFCC, and
that applications are sent directly to the LFCC.
Recommendation 10

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands its
responsibilities as related to the selection of a PCFO (5 CFR 950.801).



Recommendation 11

The PCFO will work closely with the OCFC and the LFCC to ensure that it institutes procedures
to ensure that the selection of the PCFO is done by the date set by OPM.


Recommendation 12

The PCFO will implement more stringent procedures to properly allocate incoming CFC receipts
to the proper campaign period, especially during months where payroll deposits for different
campaign periods overlap.


Recommendation 13

The PCFO strongly disputes this recommendation. That fact that there are funds left in a bank
account at the end of a period is a timing issue, not an undistributed balance issue. During the 30
day period after the close of a quarter, funds continue to come in which represent the amount
intended for distribution in the next quarter. For example, if a quarter closes on 12/31, the
distribution for that quarter includes all funds collected up to that point, but are not sent out until
1/31 at the latest. As a result of this, funds continue to be deposited into the checking account
during the month, which will then be distributed in the next quarterly payout. The PCFO may
not fully transfer the funds out of the money market because there may be enough funds in the
checking account for that quarterly distribution. This is a cash management technique used to
maximize earnings on the funds. As was explained to the audit team, cash management of
campaign funds requires a careful balance between keeping enough funds in the campaign’s
checking account to minimize bank fees, while utilizing the interest bearing account when
beneficial.


Recommendation 14

The “Bank Rotation Policy” is a policy of the PCFO (United Way of the Greater Capital Region)
which ensures that every five years the agency’s banking relationships go out for bid. This
ensures that the most cost effective and efficient bank products are being used.
Recommendation 15

The PCFO will work closely with the OCFC and the LFCC to update its policies and procedures
relating to outstanding checks to fully encompass the OCFC instructions for outstanding checks
in CFC Memorandum 2006-5.


Recommendation 16

The PCFO will work closely with the OCFC and the LFCC to ensure that the PCFO understands
its responsibilities outlined in 5 CFR 950.105 (d) (4) and that it will not contact the donor
directly.


Recommendation 17

The PCFO will work closely with the OCFC and the LFCC to strengthen its procedures to ensure
that the donor release of information is properly entered and that checks are made to ensure the
accuracy of the information in our database to the original pledge card.


Recommendation 18

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands the
procedures surrounding pledge cards where the designations do not total to the amount pledged
and that it understands that only pledge modifications outlined in 5 CFR 950.402 (d) are
permitted.


Recommendation 19

The PCFO will work closely with the OCFC and the LFCC to ensure that only those pledges
entered on authorized pledge forms represent valid designations.


Recommendation 20

The PCFO will work closely with the OCFC and the LFCC to instruct keyworkers to return any
pledge cards where donors attached additional designations on an unauthorized pledge form to
the donor to have the donor complete the necessary pledge forms for all of the designations.
Recommendation 21

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands that it
may not contact donors directly in regards to pledge questions and that it must work through
keyworkers, loaned executives and other non-supervisory Federal personnel when reaching out
to donors.


Recommendation 22

The PCFO will work closely with the OCFC and the LFCC in both the making of and the setting
of the ceiling amount for one-time disbursements.


Recommendation 23

The PCFO will work closely with the OCFC and the LFCC to determine the method of
calculating pledge loss for those agencies and federations receiving one-time disbursements.


Recommendation 24

The PCFO will work closely with the OCFC and the LFCC to ensure that both the amount of
designated and undesignated funds allocated is included in the pledge notifications sent to
agencies and federations.


Recommendation 25

The PCFO will work closely with the OCFC and the LFCC to ensure that documentation is
maintained to support all pledge notifications and donor acknowledgements sent in the future.


Recommendation 26

The PCFO will work closely with the OCFC and the LFCC to ensure that the LFCC understands
its responsibilities in regards to determining eligibility of local organizations applying to
participate in the local campaign (5 CFR 950.104 (b)(3)).


Recommendation 27

The PCFO will work closely with the OCFC and the LFCC to institute procedures to completely
review all incoming applications to ensure that only those organizations meeting the regulation
requirements are admitted as members of the campaign.
Recommendation 28

The PCFO will work closely with the LFCC to use the application review sheets created by the
OCFC to review applications and that it clearly indicates the eligibility decision made (approval
or denial) and that a member of the LFCC affirms the decision with a signature.


Recommendation 29

The PCFO will work closely with the OCFC and the LFCC to ensure that it understands the
responsibilities of the LFCC as outlined in the regulations, especially those regarding the
issuance of (5 CFR 950.801 (a) (5)) and communication of (5 CFR 950.204 (e)) eligibility
decisions.


Recommendation 30

The PCFO will work closely with the OCFC and the LFCC to ensure that the LFCC properly
issues and communicates its eligibility decisions to those local federations and organizations
applying for inclusion in the campaign.


Please feel free to call me at                    if you have any questions.

Sincerely,




Capital Region CFC Director