U.S. OFFICE OF PERSONNEL MANAGEMENT OFFICE OF THE INSPECTOR GENERAL OFFICE OF AUDITS AUDIT OF THE 2011 AND 2012 TENNESSEE VALLEY COMBIN ED FEDERAL CAMPAIGNS Re p o rt Numbe r 3A- CF-00-1 4-04 1 M arc h 23,2015 -- CAUTION - This audit r epo11 h as been distributed to fede1·al officials who are n sponsible for the administration of the audited program. This audit report may contain proprietary data whic.h is p1·otected by feder al law (18 U.S.C. 1905). T herefon, while this audit r epo11 is available unde1· the Fr eedom of Information Act and made available to the public on the OIG webpage (ltttp:/h vww. opm.gov/our-inspector-geu ernl), caution needs to be exe1·c.i sed before releasing the r epo1·t to the general public as it may contain proprietary information that was redacted from the publicly distributed copy. EXECUTIVE SUMMARY Audit ofthe 2011 and 2012 Tennessee Valley Combined Federal C Why Did We Conduct the Audit? What Did We Find? The main objective of the audit was to We detennined that the PCFO an d LFCC need to strengthen their detennine if the T ellllessee Valley procedm es and controls related to Budget an d Campaign Expenses CFC was administered in compliance and Campaign Receipts and Disbmsements. Om audit identified with 5 CFR 950, including the six areas requiring improvement. responsibilities ofboth the Principal 1. Budget and Campaign Expenses Combined Flmd Organization (PCFO) • We identifi ed $4,500 in unallowable expenses charged to and the Local Federal Coordinating the 2012 campaign . Committee (LFCC). • The PCFO incon ectly charged the 2012 campaign for audit expenses related to the 20 10 campaign. What Did We Audit? • The LFCC did not review or authorize the PCFO 's reimbmsement of campaign expenses. The Office of the Inspector General • The PCFO did not properly repoti its use of campaign has completed a perfotm ance audit of sponsorship funds to the LFCC, and the LFCC did not the responsibilities of the PCFO and document its review an d approval of the PCFO 's campaign LFCC in regards to Budget and sponsorship agreements in its meeting minutes. Campaign Expenses, Campaign 2. Campaign Receipts and Disbmsements Receipts and Disbmsements, • We identifi ed two pledge forms where the PCFO recorded Eligibility, the PCFO 's activities as a incon ect infotm ation . Federation, and Fraud and Abuse for • The PCFO did not have the required policy and procedm es the 201 2 campaign . Additionally, we for un-cashed checks. reviewed the Independent Public Accountant's Agreed-Upon Procedm es audit of the 20 11 campaign. Om audit was conducted from June 23 through 27, 2014, at the PCFO 's offices in Huntsville, Alabama. Additional audit work was completed at om offices in Washington, D .C. and Cranbeny Township, Pellllsylvania. Michael R. Esser Assistant Inspector General for Audits ABBREVIATIONS 5 CFR 950 Title 5, Code of Federal Regulations, Part 950 AUP Agreed-Upon Procedures CFC Combined Federal Campaign CFR Code of Federal Regulations IPA Independent Public Accountant LE Loaned Executives LFCC Local Federal Coordinating Committee OCFC Office of the Combined Federal Campaign OIG Office of the Inspector General OPM U.S. Office of Personnel Management PCFO Principal Combined Fund Organization UWMC United Way of Madison County ii TABLE OF CONTENTS P age EXECUTIVE SUMMARY .......................................................................................... i ABBREVIATIONS ...................................................................................................... ii I. I NTRODUCTION AND BACK G ROUND ................................................................. I II. OBJECTIVES, SCOPE, AND METHODOLOG Y ...................................................3 III. AUDIT FINDINGS AND REC O MMENDA TIONS..................................................8 A. AUDIT GUIDE REVIEW ........................................................................................8 B. BUDGET AND CAMPAIGN EXPENSES ................................... ........................... 8 1. Unallowable Expenses ........................................................................................8 2. Accounting for Audit Expenses ...................................................................... ... 12 3. Review and Authorization of Expense Reimbm semen t .................................... 13 4. Campaign Sponsorships ..................................................................................... 15 C. CAMPAIGN RECEIPTS AND DISBURSEMENTS ............................................. 17 1. Pledge Fo1m EITors ............................................................................................ 17 2. Policies and Procedm es for Un-Cashed Checks ................................................ 18 D . ELIGIBILITY .......................................................................................................... 19 E. PCFO AS A FEDERATION ...................................................................................19 F. FRAUDANDABUSE ............................................................................................ 19 IV. MAJOR C O NTRIBUTORS TO TillS REPORT ....................................................20 APPENDI X ...................................................................................................................21 REPORT FRAUD, WASTE, AND M I SMANAGEMENT ......................................24 I. INTRODUCTION AND BACKGROUND Introduction This final rep01t details the findings and conclusions resulting from our audit of the 2011 and 2012 Tennessee Valley Combined Federal Campaigns (CFC) . The audit was perf01med by the U.S. 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 2012, it consisted of 184 separate local campaign organizations located throughout the United States, including Pue1to Rico and the Virgin Islands, as well as overseas locations. OPM's Office of the Combined Federal Campaign (OCFC) has the responsibility for management of the CFC. This responsibility includes publishing regulations, memoranda, and oth er fonns 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 volunta1y organizations; selecting and supervising the activities of the PCFO; encouraging federal agencies to appoint loaned executives, or LEs (federal employees who are temporarily assigned to work directly on the CFC) to assist in the campaign; ensuring that employees are not coerced to participate in the campaign; and acting upon any problems relating to noncompliance with the policies and procedures of the CFC. The prima1y goal of the PCFO is to administer an effe ctive and efficient campaign in a fair and even-handed manner aimed at collecting the greatest ammmt of charitable contributions possible. Its responsibilities include training LEs, coordinators, employee keyworkers and volunteers; maintaining a detailed schedule of its actual CFC administrative expenses; preparing pledge f01ms and charity lists; distributing campaign receipts; submitting to an audit of its CFC operations by an Independent Public Accmmtant (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 pa1ticipating organizations, the LFCC, and the Director ofOPM; consulting with federated groups on the operation of the local campaign; and for establishing and maintaining a system of intem al controls. Executive Orders No. 12353 and No. 12404 established a system for administering an annual charitable solicitation drive among federal civilian and militruy employees. 5 Code of Federal 1 Report No. 3A-CF-00-14-041 Regulations (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 previous audit of the Tennessee Valley CFC, which covered the 1998 campaign, was not considered when planning for this audit due to its age. The initial results of our current audit were discussed with PCFO and LFCC officials during our exit conference on June 26, 2014. A draft report was provided to both the PCFO and the LFCC for review and comment on September 30, 2014. Their response to the draft report was considered in the preparation of this final report and is included as an Appendix. 2 Report No. 3A-CF-00-14-041 II. OBJECTIVES, SCOPE, AND METHODOLOGY Objective The primaty pmpose of this audit was to detennine compliance with 5 CFR 950. Our audit objective for the 2011 campaign was: Audit Guide Review • To deten nine if the IPA completed the Agreed-Upon Procedures (AUP) as outlined in th e CFC Audit Guide. Additionally, our audit objectives for the 2012 campaign were as follows: Budget and C ampaign E xpenses • To deten nine if the PCFO solicitation, application, campaign plan, an d budget were in accordan ce with the regulations. • To determine if the PCFO charged the campaign for interest expenses and if the appropriate commercial loan was used. • To determine if expenses charged to the campaign were actual, reasonable, did not exceed 110 percent of the approved budget, and were properly allocated. C ampaign Receipts and Disbursements • To determine if the pledge f01m fon nat was con ect and if the pledge f01m rep01t agrees with the actual pledge f01m. • To detetmine if incoming pledge monies (receipts) were allocated to th e proper campaign and if the net fimds (less expenses) were properly distributed to member agencies an d federations. • To detetmine if the member agencies and federations were properly notified of the amounts pledged to them and that donor personal inf01mation was only released for those who requested the release of inf01mation . Eligibility • To detetmine if the charity list (CFC brochure) was properly f01matted and contained th e required inf01mation . • To detetmine if the charitable organization application process was open for the requir ed 30-day period; if the applications were appropriately reviewed and approved; if the applicants were notified of the eligibility decisions in a timely manner; and if th e appeals process for denied applications was followed. • To detetmine if any non-federal employees or retir ees were members of the LFCC. 3 Report No. 3A-CF-00-14-041 PCFO as a Federation • To determine if the ammmts received by the United Way of Madison Cmmty (UWMC) as a federation reconciled to those disbursed by the CFC; if the UWMC properly disu·ibuted funds to its federation members; if expenses charged by the UWMC (to its federation members) were documented properly; and if the disbursements made to the federation members were accurate. 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 perfonnance audit in accordance with generally accepted govemment auditing standards. Those standar ds require that we plan and perf01m 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 fmdings and conclusions based on the audit objectives. The audit covered campaign years 2011 and 2012. The UWMC, located in Huntsville, Alabama, served as the PCFO during both campaigns. The audit fieldwork was conducted at the PCFO's office from June 23 through 27, 2014. Additional audit work was completed at our Cranbeny Township, Pennsylvania, and Washington, D.C. offices. The Tennessee Valley CFC received campaign pledges, collected campaign receipts, and incuned campaign adminisu·ative expenses for the 2011 and 2012 campaigns as shown below. Campaign I Total Total Administrative Year Pledges I Receipts I Expenses 2011 $2,978,207 $2,879,237 $152,674 2012 $2,919,057 $2,734,430 $144,296 In conducting the audit, we relied to vmying degrees on computer-generated data. Our review of a sample of campaign expenses and supp01iing data, a sample of pledge f01m enu·ies, and the disu·ibutions of campaign conu·ibutions 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 intemal conu·ol structure in planning the audit procedures. We gained an understanding of the management procedures and conu·ols to the extent necessmy to 4 Report No. 3A-CF-00-14-041 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 issued by the OCFC. To accomplish our objective concerning the 2011 campaign (Audit Guide Review), we compared the IPA’s working papers to the requirements of the CFC Audit Guide to verify that the AUP steps were completed and properly documented. In regard to our objectives concerning the 2012 campaign’s budget and campaign expenses, we performed the following procedures: Reviewed the PCFO’s application to verify that 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 in a timely manner. Traced and reconciled amounts on the PCFO’s Schedule of Actual Expenses to the PCFO’s general ledger. Reviewed the PCFO’s budgeted expenses and the LFCC’s approval of the budget, and matched all expenses to supporting documentation. Reviewed the LFCC meeting minutes and verified that the LFCC authorized the PCFO’s reimbursement of campaign expenses. Compared actual expenses to budgeted expenses to determine if they exceeded 110 percent of the approved budget. To determine if the 2012 campaign’s receipts and disbursements were handled in accordance with CFC regulations, we reviewed the following: A sample of 69 pledge forms, with pledges totaling $214,574, out of a universe of 6,027 pledge forms, with pledges totaling $2,919,057, from the PCFO’s 2012 campaign pledge form detail schedule and compared the pledge information from the schedule to the actual pledge forms. Specifically, we judgmentally selected the sample utilizing the following methodology: We selected all pledge forms (13 totaling $3,588) with at least one individual pledge in the amount of $0; 5 Report No. 3A-CF-00-14-041 We selected all pledge forms (54 totaling $209,556) with at least one individual pledge equal to or greater than $2,000; and We selected all pledge forms (2 totaling $1,430) with at least one individual pledge to the international general designation. Distribution checks for a sample of 10 federations and organizations, totaling $470,986, out of a universe of 321 federations and organizations, totaling $2,590,134, to verify that the appropriate amount was distributed in a timely manner. Using Microsoft Excel’s random number generator, we randomly selected nine federations and organizations receiving monthly disbursements and then selected the PCFO as a federation for our 10th sample item. One-time disbursements to verify that the PCFO properly calculated pledge loss and disbursed 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 the guidance issued by the OCFC. A sample of 5 pledge notification and donor letters (from a universe of 40) to verify that the PCFO accurately notified the organizations of the amounts due to them and properly released the donor information by the date required by the federal regulations. Using Microsoft Excel’s random number generator, we randomly selected five organizations and/or federations from our pledge form sample that were to receive donor information. CFC receipts and distributions from the PCFO’s campaign bank statements, campaign receipts and agency disbursements, and campaign expense support to verify that the PCFO accurately recorded and disbursed all campaign receipts and disbursements. All bank statements used by the PCFO to verify that the PCFO was properly accounting for and distributing funds. The PCFO’s cutoff procedures and bank statements to verify that funds were allocated to the appropriate campaign. To determine if the LFCC and PCFO were in compliance with CFC regulations regarding eligibility for the 2012 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. Campaign charity lists to determine if they contained all required information. 6 Report No. 3A-CF-00-14-041 The PCFO’s responses to questions regarding the process and procedures followed for the application evaluation process. A sample of 10 local organization applications (from a universe of 128 local organization applications) to determine if the organizations met the requirements for participating in the CFC and if the LFCC sent the eligibility letters by the date required by the federal regulations. Using Microsoft Excel’s random number generator, we randomly selected six local organizations for our sample and then selected all four local federations to review. The LFCC’s processes and procedures for responding to appeals from organizations. The LFCC member listings to verify that all members were active federal employees. To determine if the UWMC was in compliance with the CFC regulations as a federation for the 2012 campaign, we reviewed the following: Data reported on the CFC Receipts Schedule, with supporting documentation, to verify that receipts were properly recorded. The CFC Receipts Schedule and the Federation Distribution Schedule to determine if the percentage of receipts assigned to each organization agreed to the percentage of pledges for that organization. Distribution checks for a sample of 6 federation member agencies (with disbursements totaling $60,358), out of a universe of 19 (with disbursements totaling $282,190), to verify that the appropriate amount was distributed in a timely manner. We judgmentally selected the top six federation member agencies which received the most disbursements in the 2012 campaign. Specifically, we reviewed the disbursement checks from the first four monthly disbursements (July 2013, August 2013, September 2013, and October 2013). The PCFO’s annual report and agreements with its member agencies to determine if member 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. 7 Report No. 3A-CF-00-14-041 III. AUDIT FINDINGS AND RECOMMENDATIONS A. AUDIT GUIDE REVIEW Our review of the IPA's examination of the CFC Audit Guide 's AUP did not identify any deviations from the required review. B. BUDGET AND CAMPAIGN EXPENSES 1. Unallowable Expenses $4,500 We reviewed all expenses charged to the 2012 campaign to detennine if they were actual, reasonable, properly allocated, and supp01i ed. Our review identified $4,500 in lmallowable expenses that were muelated to the 2012 campaign, unauthorized, or unsupp01i ed. Specifically, we identified the following four issues: • $2,030 for a 2011 CFC event charged to the 2012 campaign. 5 CFR 950.106(b) states that the PCFO may only recover campaign expenses from receipts collected for that campaign year. During our review we identified an expense for $2,030 related to a 2011 CFC event that was held on Febmruy 2 1, 2012 . This expense should have been paid from 2011 campaign funds instead of being chru·ged to the 2012 campaign. The PCFO stated that it made an enor in not applying the expense to the con ect yeru·. As a result of this enor, the charities patiicipating in the 2012 campaign did not receive $2,030. We ru·e not recommending an adjustment for this am mmt since the 2011 campaign is closed. Recommendation 1 We recommend that the OCFC direct the LFCC to ensure that the PCFO matches expenses to the conect campaign yeru· during its review of actual campaign expenses. 8 Report No. 3A-CF-00-14-041 PCFO Response: The PCFO agrees with the recommendation and states that it will be more diligent in processing invoices by requiring multiple staff to review invoices for payment to ensm e that they are matched to the proper campaign . • $1,746 in unallowable expenses for food and beverages provided at campaign events. OPM's Directive Prohibiting the Approval of Costs IncmTed for Meals and/or Entertainment, dated March 28, 2012, states that "Effective immediately, LFCCs are instructed not to approve, and PCFOs are directed not to incm any expenses for food, beverages, or entertainment, and no such expenses are to be charged against the proceeds of the campaign ." Additionally, CFC Memorandum 2006-5(B) states that sponsorship agreements should be consistent with applicable federal law, and mles and guidance issued by the Director of OPM. Dming om review we identified $1,746 in food and beverage expenses being charged to the campaign for a CF C ti·aining event ThePCFO held September 19, 2012, and a kickoff event held October 4, 2012 . inappropriately When we explained to the PCFO that food and beverages can't be used sponsorship charged to the campaign following OPM 's Directive, it insisted funds to pay for unallowable food that the amount was paid for using campaign sponsorship funds . and beverages The PCFO stated that its interpretation ofOPM's Directive provided at permitted it to use campaign sponsorship funds to pay for the cost campaign events. of providing food and beverages at campaign events. Conti·aty to the PCFO's intetpretation, CFC Memorandmn 2006-5(B) states that sponsorships must be consistent with mles and guidance issued by the Director of OPM. Therefore, the PCFO's use of campaign sponsorship ftmds should have been aligned with OPM's Directive prohibiting food and beverage expenses. As a result of the PCFO charging food and beverage expenses to the CFC, it misused $1 ,746 in sponsorship ftmds and failed to comply with OPM's Directive. We are not recommending an adj ustment for this amount since the PCFO solicited sponsors for the specific pmpose of covering food and beverage expenses, and the sponsor did not intend for its funds to be disti·ibuted to the charities. 9 Report No. 3A-CF-00-14-041 Recommendation 2 We recommend that the OCFC and LFCC direct the PCFO to implement policies and procedures to prohibit food and beverage expenses from being charged to the CFC, including through the use of sponsorship funds. PCFO Response: The PCFO agrees with the recommendation and states that food or beverages will not be an allowable expense for any CFC related event or function, and it will no longer solicit sponsorship funds to provide food and beverages to federal employees. $530 for gift cards raffled to federal employees as prizes without the approval of agency ethics officials. 5 CFR 950.602(b) states that “Any special CFC fundraising event and prize or gift should be approved in advance by the Agency’s ethics official.” During our review we identified 10 pre-paid visa cards valued at $50 each, plus a $3 transaction fee for each card, that were raffled off as fundraising prizes. To determine if the prizes were considered to be of nominal value, we asked the PCFO if the ethics officials from the federal agencies involved in the CFC approved the raffle prizes. The PCFO couldn’t find any written approvals from agency ethics officials, but it believes the agency officials involved in the event followed protocol. Because the PCFO couldn’t show that agency ethics officials approved the raffle and the $50 gift cards, there is a risk that the event was unallowable with the prize amounts being unreasonable. Recommendation 3 We recommend that the OCFC and LFCC direct the PCFO to implement policies and procedures to obtain and document approval from the appropriate agency ethics officials prior to incurring expenses for raffle prizes. PCFO Response: The PCFO stated that it will use LFCC members to identify the appropriate ethics officials and solicit their approval for any special CFC fundraising event prizes or awards. 10 Report No. 3A-CF-00-14-041 $194 in unsupported expenses for the LFCC’s travel to attend the 2012 CFC conference. 5 CFR 950.105(d)(7) states that it is the responsibility of the PCFO to maintain “a detailed schedule of its actual CFC administrative expenses with, to the extent possible, itemized receipts for the expenses.” During our review we found that the LFCC’s reimbursement for expenses related to the 2012 CFC conference was not fully supported. Specifically, we identified $194 in expenditures that had no support. We requested documentation for this expense amount, but it was not provided. As a result, we consider this amount unallowable and question the $194 that was reimbursed to the LFCC instead of going to the charities that participated in the CFC. Recommendation 4 We recommend that the OCFC direct the LFCC and PCFO to implement policies and procedures to ensure that expenses incurred by LFCC members are supported by adequate documentation prior to reimbursement by the PCFO. Additionally, the PCFO should maintain the documentation as part of its schedule of actual expenses. LFCC Response: The LFCC did not provide a response to this recommendation. PCFO Response: The PCFO agrees with the recommendation and states that it will verify all lodging, meals, and incidental expenses to the applicable GSA per diem rates. Additionally, the PCFO states that prior to payment, it will require and maintain full documentation for any travel or expense reimbursement made to a federal employee traveling on behalf of the campaign. OIG Comments: We accept the PCFO’s response but note that since the recommendation requires input from the LFCC, the OCFC should ensure that the LFCC implements a corrective action plan of its own. 11 Report No. 3A-CF-00-14-041 Recommendation 5 We recommend that the OCFC and LFCC direct the PCFO to distribute $194 in unallowable expenses as undesignated funds to the charities participating in the current (2013) campaign. PCFO Response: The PCFO states that it agrees with reimbursing the campaign $194 for unsupported LFCC travel expenses. 2. Accounting for Audit Expenses Procedural The PCFO incorrectly charged the 2012 campaign $6,000 for audit expenses related to the 2010 campaign. 5 CFR 950.106(b) states that the PCFO may only recover campaign expenses from receipts collected for that campaign. Additionally, CFC Memorandum 2008-09 states that “expenses incurred for the audit of a campaign must be paid using funds from the campaign being audited.…Because this cost is paid after the close of the campaign, the amount should be accrued and withheld from the last distribution. [The OCFC] encourages campaigns to negotiate a fixed cost agreement with the [IPA] so that the actual amount can be known prior to the close of the campaign. If campaigns are unable to negotiate a fixed cost agreement, an estimated amount should be withheld based on prior experience and discussions with the auditor.” During our review of the PCFO’s 2012 campaign expenses, we identified one invoice, totaling $6,000, for IPA services rendered in connection with an audit of the 2010 campaign. Because the audit was related to the 2010 campaign, it should not have been paid using 2012 campaign funds. The PCFO stated that it made an error in not accruing the funds from the 2010 campaign to pay for the audit incurred in 2012 (CFC audits are conducted at the close of the campaign, approximately 18 months after the solicitation period). As a result of the PCFO charging the IPA audit expenses to the wrong campaign, the PCFO reduced the funds available to be disbursed in the 2012 campaign by $6,000. However, we are not recommending an adjustment for this amount since the 2010 campaign is closed. 12 Report No. 3A-CF-00-14-041 Recommendation 6 We recommend that the OCFC and LFCC direct th e PCFO to implement policies and procedures to properly accmmt for and accm e audit expenses in accordance with CFC Memoran dum 2008-09. PCFO Response: The PCFO agrees with the recommendation and is taking con ective action to include accming audit expenses beginning with th e cunent campaign. OIG Comments : We accept the PCFO 's response and ask that its new policies and procedures for accounting for and accming audit expenses be documented an d provided to the OCFC an d LFCC for rev1ew. 3. Review and Authorization of Expense Reimbursement Procedural The LFCC did not review or authorize the PCFO 's reimbursement of campaign expenses. 5 CFR 950.104(b)(17) states that it is the responsibility of the LFCC to authorize the PCFO 's reimbursement of only those campaign expenses that are legitimate CFC costs and are adequately documented. Additionally, 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 administering the local campaign." Finally, CFC Memorandum 2008-09 states that the approval of "actual expenses by the LFCC is separate from the approval of the expense budget. The LFCC ThePCFO must review actual expenses, authorize full or pruiial reimbursem ent, reimbursed itself an d document this authorization in its m eeting minutes." for campaign expenses without We reviewed the LFCC's meeting minutes to determine if the LFCC authorization from the LFCC. reviewed an d authorized the PCFO 's reimbursement oflegitimate CFC expenses. Our review found that there was no record of the LFCC reviewing or authorizing the reimbursement of the 2012 expenses. 13 Report No. 3A-CF-00-14-041 The PCFO’s campaign expense policy stated that it provides an actual versus budgeted expense schedule to the LFCC in February each year, and then fully reimburses itself with the first campaign disbursement. However, our review of the February 2012 through March 2014 LFCC meeting minutes found no record of the PCFO presenting this expense schedule, no record of the PCFO presenting supporting documentation for any expenses, and no record showing that the LFCC reviewed and authorized the expenses prior to the PCFO reimbursing itself during the first campaign disbursement in March 2013. As a result of not reviewing or authorizing the PCFO’s reimbursement of actual campaign expenses, the LFCC ran the risk of unrelated expenses being charged to the organizations and federations in the campaign, thereby reducing the designated amounts due to them. Recommendation 7 We recommend that the OCFC direct the LFCC to implement policies and procedures to document its review of the PCFO’s actual campaign expenses, which should be supported by itemized receipts and invoices, to ensure that the expenses are allowable and applicable to the campaign. Recommendation 8 We recommend that the OCFC direct the LFCC to implement policies and procedures to document its authorization and approval of the PCFO’s reimbursement of actual campaign expenses. LFCC Response: The LFCC did not provide a response to these recommendations. PCFO Response: The PCFO agrees with the recommendations and states that it updated its policies and procedures to include the following corrective actions: CFC expenses will require approval of the LFCC Chair or Vice Chair prior to purchasing; CFC expenses will require approval of its CFO and review by its CEO prior to purchasing; A budget to actual expense report will be presented in full to the LFCC at each LFCC meeting and the presentation will be documented in the LFCC meeting minutes; and 14 Report No. 3A-CF-00-14-041 The PCFO will not be reimbursed for campaign expenses until it receives approval from the full LFCC and a signed reimbursement form by the LFCC Chair. OIG Comments: We accept the PCFO’s response but note that the first two changes in its policies and procedures are unnecessary and likely time consuming. What is important is that the LFCC be given the opportunity to review the PCFO’s request for reimbursement before the reimbursement occurs, which is addressed in the fourth change above. Also, since these recommendations require input from the LFCC, the OCFC should ensure that the LFCC implements a corrective action plan of its own. 4. Campaign Sponsorships Procedural The PCFO did not properly report its use of campaign sponsorship funds to the LFCC, and the LFCC did not document its review and approval of the PCFO’s campaign sponsorship agreements in its meeting minutes. CFC Memorandum 2006-5(B) states that the PCFO should submit an actual expense report to the LFCC that shows the full cost of each expense line item and entails the reductions from each sponsor for that line item. For example, if one sponsor assisted in covering the cost of kick-off events, the line item on the report to the LFCC should show the full cost of the kick-off events, the amount provided by the sponsor toward that cost, and the resulting net cost to the campaign. Additionally, CFC Memorandum 2006-5(B) states that “Sponsorship agreements should be reviewed and approved by the LFCC to ensure that acceptance of such sponsorships is consistent with applicable federal law, including ethical rules governing the conduct of federal employees and rules and guidance issued by the Director of OPM.” Finally, 5 CFR 950.104(b)(1) states that the responsibilities of the LFCC include maintaining minutes of LFCC meetings. We reviewed the PCFO’s 2012 campaign sponsorship agreements with GEICO in the amount of $2,000 and the Redstone Federal Credit Union in the amount of $1,000 to determine if (1) the sponsorship funds were excluded from the PCFO’s 2012 campaign budget, (2) the LFCC reviewed and approved the sponsorship agreements, (3) the sponsorship agreements clearly stated the dollar amount provided by the sponsor to the campaign, and (4) the PCFO submitted an actual expense report to the LFCC showing the 15 Report No. 3A-CF-00-14-041 application of sponsorship funds to off-set expense line items, and to verify the sponsorship check amounts. We found that the PCFO submitted an actual expense report to the LFCC that did not show how sponsorship funds were used to off-set expense line items, and the LFCC did not document its review or approval of the PCFO’s campaign sponsorship agreements in its meeting minutes. The PCFO stated that its failure to properly report the sponsorship funds was due to oversight. As a result of not showing how sponsorship funds were used to off-set expenses, the PCFO did not provide accurate information to the LFCC to allow its oversight of the PCFO and sponsorship activities. Additionally, because the LFCC did not document its review and approval of the PCFO’s sponsorship agreements in its meeting minutes, we could not determine if it approved the PCFO’s sponsorships or verify that the acceptance of the sponsorships was in compliance with applicable federal law and OPM guidance. Recommendation 9 We recommend that the OCFC and LFCC direct the PCFO to implement policies and procedures for reporting the use of sponsorship funds to the LFCC in compliance with CFC Memorandum 2006-5(B). PCFO Response: The PCFO agrees with the recommendation and states that it will no longer solicit sponsorship funds or gifts due to the risk of regulatory error. OIG Comments: The PCFO’s response stating that it will no longer solicit sponsorship funds or gifts due to the risk of regulatory error is misguided. First, we would like to point out that sponsorship funds benefit the CFC by offsetting the PCFO’s administrative costs. All that we ask is that the sponsorship agreements are properly reported to and reviewed by the LFCC and that the PCFO follows CFC regulations related to how it uses sponsorship funds. Asking that the PCFO follows the regulations it pledged to adhere to should in no way discourage the PCFO from soliciting sponsorship funds or elicit this kind of a response. Second, if the PCFO decides to no longer solicit sponsorship funds or gifts, there is still a chance that sponsors will offer unsolicited contributions to the CFC. Therefore, the PCFO does need policies and procedures in place to properly report sponsorship funds to the LFCC in compliance with CFC Memorandum 2006-5(B). 16 Report No. 3A-CF-00-14-041 Recommendation 10 We recommend that the OCFC direct the LFCC to implement policies and procedmes to document its review and approval of all campaign sponsorship agreements in its meeting minutes. LFCC Response: The LFCC did not provide a response to this recommendation after the PCFO stated it will no longer solicit sponsorship funds. OIG Comments: Since the recommendation requires input from the LFCC, the OCFC should ensm e that the LFCC implements a conective action plan regardless of the PCFO stating it will no longer solicit sponsorship ftmds . C. CAMPAIGN RECEIPTS AND DISBURSEMENTS 1. Pledge Form Errors Procedural We identified two pledge fonn enors where the PCFO recorded the wrong infonnation . 5 CFR 950.105(d)(l ) states that it is the responsibility of the PCFO to honor employee designations. We reviewed a sample of pledge f01ms to dete1mine if the infonnation on the fonns matched the PCFO's pledge f01m detail schedule. Specifi cally, we verified the donor names, charity codes, amounts donated, total amounts, and the ThePCFO donor's choice to release their personal infonnation. Additionally, we recorded the wrong also reviewed the pledge forms to dete1mine if any changes or edits information from identified were made by the donor only, if the paper pledge f01ms two pledge forms, resulting in the reviewed did not include more than five designations per fonn, and if donor's wishes not the donor signed the payroll deduction authorization when required. being met. Dming om review, we identified the following two pledge f01ms where the inf01mation recorded by the PCFO did not match. • We identified one pledge f01m where the donor wished to release his name, address, email, and the amount of the donation to the designated organizations and federations, but the PCFO failed to record this infonnation in its database; and 17 Report No. 3A-CF-00-14-041 We identified one pledge form where the donor’s address on the form did not match the address recorded in the PCFO’s database. The PCFO stated that these were manual input errors. As a result of these two errors, the donor’s wishes were not met and the designated organizations and federations did not receive the correct donor information. Recommendation 11 We recommend that the OCFC and LFCC verify that the PCFO institutes quality assurance procedures to help ensure the accuracy of its pledge form data entries. PCFO Response: The PCFO agrees with the recommendation and states that, during each campaign period, it will run pledge reports and use the pledge reports to cross-reference and cross-check pledge report data against pledge card information. 2. Policies and Procedures for Un-Cashed Checks Procedural The PCFO’s policies and procedures for un-cashed checks did not comply with the OCFC’s guidance. CFC Memorandum 2006-5(C) states that PCFOs must develop and follow policies and procedures regarding un-cashed checks. The OCFC recommends that the policy be documented, and implemented after a check has gone un-cashed for six months. The procedures should include at least three documented follow-up attempts to reach the payee by phone or e-mail, and if it is determined that the payee is no longer active, the funds must be distributed among the remaining organizations for that campaign as undesignated funds. We reviewed the PCFO’s un-cashed check policy and procedures, and determined that it did not comply with OCFC’s guidance. Specifically, the PCFO’s policy does not state that it applies to checks that have gone un-cashed for six months and the procedures do not include making at least three documented follow-up attempts to reach the payee by phone and e-mail. The PCFO stated that it followed the OCFC’s guidance in practice but failed to update its written policies and procedures. As a result, the PCFO may not be adequately monitoring the status of un-cashed checks and there is a risk that charities are not receiving the funds allocated to them. 18 Report No. 3A-CF-00-14-041 Recommendation 12 We recommend that the OCFC and LFCC require the PCFO to modify its existing policy and procedures for un-cashed checks to comply with CFC Memorandum 2006-5(C). PCFO Response: “[The] PCFO has updated its written policy to reflect the current guidelines to reflect Memo 2006-5(C).” D. ELIGIBILITY Our review of the campaign’s eligibility process showed that it complied with the applicable provisions of 5 CFR 950. 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 policies and procedures for fraud and abuse indicated that they were sufficient to detect and deter potential fraud and abuse activities. 19 Report No. 3A-CF-00-14-041 IV. MAJOR CONTRIBUTORS TO THIS REPORT Special Audits Group , Auditor-In-Charge , Group Chief, , Senior Team Leader 20 Report No. 3A-CF-00-14-041 APPENDIX TENNESSEE VALLEY COMBINED FEDERAL CAMPAIGN LFCC and PCFO’s Comments received 10/30/2014 I. Audit Findings and Recommendation A. Audit Guide Review No comment required. B. Budget and Campaign Expenses I. Unallowable Campaign Expenses Deleted by OIG – Not Relevant to Final Report $2,030.00 for the 2011 CFC victory celebration charged to the 2012 campaign. After a review of our records, we accept that we made an error in applying the expense to the correct year. Deleted by OIG – Not Relevant to Final Report Corrective Action: PCFO, in processing invoices, will be more diligent with multiple staff reviewing invoices to be paid to insure that they are applied to the proper campaign. Deleted by OIG – Not Relevant to Final Report $1,746 in unallowable expenses for food and beverages provided at campaign events. Our interpretation at the time of the event was that campaign dollars could not be used for food for CFC events. Therefore, we specifically solicited and used sponsorship dollars, not raised from any federal employee or agency, to pay for food and beverages. The donating organization did not intend for the dollars to be disbursed as an undesignated donation to listed agencies. (Updated Finding to Include this Information) Corrective Action: Food and/or beverage will not be an allowable expense for any CFC event, function or CFC related event or function. Additionally, we will no longer solicit sponsorship dollars to provide food and beverage to federal employees. $530 for gift cards (and gift card purchasing fees), raffled to federal employees as prizes without the approval of agency ethics officials. We were unable to locate any documents noting approval for gift cards. However, many top officials were involved in the process of coordinating CFC events. We 21 Report No. 3A-CF-00-14-041 believe but, cannot verify whether those officials followed protocol for government employees concerning gifts. (Updated Finding to Include this Information) Corrective Action: PCFO will use LFCC members to identify among the 60 federal organizations within the Tennessee Valley CFC the appropriate ethics officials to solicit their approval for any special CFC fund raising events prizes and/or awards. $194.00 in LFCC Chair travel expenses to attend the 2012 CFC conference was unsupported. Deleted by OIG – Not Relevant to Final Report Corrective Action: PCFO will verify all per diem requests through the appropriate resource and require and maintain full documentation for any travel and other reimbursement for CFC chair, CFC employees, CFC designee (requested by CFC chair to transact business for CFC) prior to reimbursement. PCFO agrees it should be required to reimburse the TVCFC $194.00 for the identified error. II. Accounting for Audit Expenses Deleted by OIG – Not Relevant to Final Report We agree that we made an error in not accruing the audit fee as required by the policies. Deleted by OIG – Not Relevant to Final Report Corrective Action: PCFO will use this audit cycle to correct for the non-accrual of audit expense. Deleted by OIG – Not Relevant to Final Report III. Review and authorization of expense reimbursement Deleted by OIG – Not Relevant to Final Report PCFO agrees that it did not provide LFCC the opportunity for proper review of the final campaign expenses that were reimbursed to PCFO. Deleted by OIG – Not Relevant to Final Report Corrective Action: PCFO has changed its policy and procedures. All expenses related to CFC must be approved by the Chair or Vice Chair prior to purchasing. Additionally, those expenses have to be approved by United Way CFO and are reviewed by PCFO CEO. A budget to actual report is presented to full LFCC at each scheduled meeting. A notation of the presentation is being made in the meeting minutes. PCFO will not be reimbursed for campaign expenses without approval from full LFCC and a signed reimbursement form by LFCC Chair. 22 Report No. 3A-CF-00-14-041 IV. Campaign Sponsorships eleted by OIG- Not Relevant to Final Report Corrective Action: PCFO will no longer solicit or accept sponsorship ftmds or gifts due to the risk of regulat01y enor. C. Campaign Receipts and Disbursements I. Pledge Form Errors eleted by OIG- Not Relevant to Final Repor Corrective Action: Throughout the pledge card processing period th e PCFO will nm pledge rep01is an d use the pledge reports to cross-reference an d cross check pledge rep01i data vs pledge card infonnation . II. Accounting for Audit Expenses eleted by OIG- Not Relevant to Final Report PCFO written policies did not reflect the updated OCFC i!telines. However, PCFO was and is orrating under those guidelines. llilt.Mtfil I l!.ijdltt!lftfltj1!ft1 ittii.Ji.. ijiii.J. l eleted by OIG- Not Relevant to Final Re or Corrective Action: PCFO has updated its written policy to reflect the cmTent guidelines to reflect Memo 2006-S(C) . eleted by OIG- Not Relevant to Final Re ort Date LFCC Chair 23 Report No. 3A-CF-00-14-041 Report Fraud, Waste, and Mismanagement Fraud, waste, and mismanagement in Government concerns everyone: Office of the Inspector General staff, agency employees, and the general public. We actively solicit allegations of any inefficient and wasteful practices, fraud, and mismanagement related to OPM programs and operations. You can report allegations to us in several ways: By Internet: http://www.opm.gov/our-inspector-general/hotline-to- report-fraud-waste-or-abuse By Phone: Toll Free Number: (877) 499-7295 Washington Metro Area: (202) 606-2423 By Mail: Office of the Inspector General U.S. Office of Personnel Management 1900 E Street, NW Room 6400 Washington, DC 20415-1100 -- CAUTION -- This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of Information Act and made available to the public on the OIG webpage (http://www.opm.gov/our-inspector-general), caution needs to be exercised before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy. 24 Report No. 3A-CF-00-14-041
Audit of the 2011 and 2012 Tennessee Valley Combined Federal Campaigns
Published by the Office of Personnel Management, Office of Inspector General on 2015-03-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)