oversight

Audit of the 2011 and 2012 Northern Lights 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)

 U.S. OFFICE OF PERSONNEL MANAGEMENT 

    OFFICE OF THE INSPECTOR GENERAL 

             OFFICE OF AUDITS 





                          AUDIT OF THE 2011 AND 2012 

                             NORTHERN LIGHTS 

                        COMBINED FEDERAL CAMPAIGNS 


                                     Re p o rt Numbe r JA- CF-00-1 4-048 

                                                M a r c h 23,2015 





                                                         -- CAUTION -­
This audit report has been distributed to feder al officials who ar e responsible for the administration of the audited program. T his audit
r epo11 may contain proprietary data which is protected by federal law (18 U.S.C. 1905). Therefo1·e, while this audit report is available
under the Freedom of l nfo1·mation Act and made available to the public on the OIG webpage (http://wn~v. opm.gov/our-inspector-genernl),
caution needs to be exer cised befo1·e •·eleasing the report to the general public as it may contain pr op1·ieta•·y info1·mation that was
r edacted from the publicly distributed copy.
            EXECUTIVE SUMMARY 

                               Audit ofthe 2011 and 2012 Northern Lights
                                     Combined Federal C


Why Did We Conduct the Audit?             What Did We Find?

The main objective of the audit was to    As a result of the numerous findings identified (18) in the repott,
detennine if the Notthem Lights CFC       the natm e of the issues discovered, and the LFCC and PCFO 's lack
was administered in compliance with       of adherence to and/or lack ohmderstan ding of the CFC
5 CFR 950, including the                  regulations, we ar e recommending that the U .S. Office of
responsibilities ofboth the Principle     Personnel Management's Office of the Combined Federal
Combined Flmd Organization (PCFO)         Campaign (OCFC) seek to merge the Notth em Lights CFC with
and the Local Federal Coordinating        another campaign, or ensm e that the campaign is administered by a
Committee (LFCC).                         new PCFO that is equipped to han dle the responsibilities of the
                                          CFC. Additionally, as a result of the LFCC's lack of involvement
What Did We Audit?                        in its role of conducting and overseeing the campaign, we
                                          recommend that the OCFC seek to replace the LFCC.
The Office of the Inspector General
has completed a perfotm ance audit of     Of the 18 fin dings identified, the following best illustrate the
the responsibilities of both the PCFO     enotmity of the problems encountered:
and LFCC in regar ds to Budget and        • 	 The PCFO did not disbmse all 2012 campaign receipts; it
Campaign Expenses, Campaign                   charged the 2012 campaign for expenses that were either
Receipts and Disbmsements,                    unallowable or related to other campaigns; it did not make the
Eligibility, and Fraud and Abuse for          initial disbmsement to all charities by the OCFC deadline; it
the 2012 campaign . Additionally, we          did not segregate CFC fmancial records fro m its corporate
reviewed the PCFO's activities as a           finan cial records; and it did not properly allocate indirect
Federation and the Independent Public         general overhead expenses to the CFC.
Accountant's Agreed-Upon                  • 	 The LFCC did not properly authorize the one-time
Procedm es audit of the 20 11                 disbmsements and the PCFO's reimbmsement for campaign
campaign. Om audit was conducted              expenses; it did not provide evidence of meetings between
from June 23 through 27, 2014, at the         Janumy 2012 an d July 2012 (a time frame when significant
PCFO 's offices in St. Paul, Minnesota.       decisions m·e made by the LFCC); it did not provide evidence
                                              of its review of the PCFO's perfonnance prior to renewal of a
                                              multi-yem· agreement; an d its members did not attend meetings
                                              regulm·ly (if at all).




 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
CSM         Community Shares of Minnesota
FEB         Federal Executive Board
IPA         Independent Public Accountant
LOCA        Letter of Credit Account
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




                                   ii
                             TABLE OF CONTENTS 


                                                                                                                          Page
       E XECUTIVE 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.................................................9 


       A. AUDIT GUIDE REVIEW .......................................................................................9 

          1. Agreed-Upon Procedm es Not in Compliance with the Audit Guide .......... ...... 9 


       B. BUDGET AND CAMPAIGN EXPENSES................................... ........................ 11 

          1. Adtninistrative Expenses ................................................................................. 11 

          2. Improper Matching of Receipts an d Expenses ................................................ 18 

          3. LFCC Approval of Campaign Expense Reimbm sement .................................19 

          4. Obsolete PCFO Application Statement ...........................................................22 

          5. Perf01mance Review of the PCFO by the LFCC.............................................23 

          6. PCFO Solicitation Not Documented................................................................25 

          7. Sponsorship Agreement Approval ...................................................................26 

          8. Separ ation of CFC Financial Records ..............................................................27 


       C. CAMPAIGN RECEIPTS AND DISBURSEMENTS ...........................................28 

          1. Undisbm sed CFC Receipts ..............................................................................28 

          2. Untimely Initial Disbm sement. ........................................................................30 

          3. Improper Authorization of One-Time Disbm semen ts .....................................32 

          4. One-Time Disbmsement Threshold Applied Inconectly ................................33 

          5. Outstanding Check Procedmes ........................................................................34 

          6. Pledge Fo1m EITors ..........................................................................................35 


       D . ELIGIB ILITY ........................................................................................................37 

           1. LFCC Members ............................................................................................... 37 


       E. PCFO AS A FEDERATION ................................................................................ .41 

          1. Federation Dues Incompletely Described ....................................................... .41 


       F. FRAUD AND ABUSE ..........................................................................................42 


       G . DISPOSITION OF THE CAMPAIGN .................................................. ............... .42 


IV.    MAJOR C O NTRIBUTORS TO TillS REPORT ................................................. .46 

APPENDIX .................................................................................................................47



REPORT FRAUD, WASTE, AND MISMANAGEMENT ....................................59 

        I. INTRODUCTION AND BACKGROUND 



Introduction
This final rep01t details the findings and conclusions resulting from our audit of the 2011 an d
2012 N 01them Lights Combined Federal Campaigns (CFC) . The audit was perf01m ed 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 an d 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, m emoran da, and
oth er fonns of guidance to Federal offices and private organizations to ensure th at all campaign
objectives are achieved.

Each CFC is conducted by a Local Federal Coordinating Committee (LFCC) and administered
by a Principle Combined Fund Organization (PCFO). The LFCC is responsible for organizing
the local CFC; determining the eligibility of local volunta1y organizations; selecting an d
supervising the activities of the PCFO; encouraging Federal agencies to appoint Loaned
Executives (LE), Federal employees who are temporarily assigned to work directly on the CFC,
to assist in the campaign; ensuring that employees are not coerced to pruticipate 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 effective an d efficient campaign in a fair and
even-handed m anner aimed at collecting the greatest ammmt of charitable contributions possible.
Its responsibilities include training LEs, coordinators, employee keyworkers an d volunteers;
maintaining a detailed schedule of its actual CFC administrative expenses; preparing pledge
f01m s and chru·ity lists; distributing campaign receipts; submitting to an audit of its CFC
operations by an Independent Public Accmmtant (IPA) in accordance with generally accepted
auditing stan dai·ds; 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 Dir ector of OPM; consulting with federated groups on the operation of the
local campaign; an d for establishing and maintaining a system of intem al controls.

Executive Orders No. 12353 an d No. 12404 established a system for administering an annual
chru·itable solicitation drive among Federal civilian an d milita1y employees. Title 5, Code of



                                                 1                           Report No. 3A-CF-00-14-048
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.

This report represents the first audit of the Northern Lights CFC.

The initial results of our audit were discussed with the PCFO during our exit conference on
June 27, 2014. A draft report was provided to both the PCFO and the LFCC for review and
comment on October 22, 2014. Their response to the draft report was considered in preparation
of this final report and is included as an Appendix.




                                                 2                       Report No. 3A-CF-00-14-048
 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 (AUPs) as outlined
           in the CFC Audit Guide.

Additionally, our audit obj ectives 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 retirees were members of the LFCC.




                                                3	                         Report No. 3A-CF-00-14-048
   PCFO as a Federation
       • 	 To determine ifCornmlmity Shares ofMinnesota (CSM) properly distributed funds to
           its federation members, and if expenses charged by CSM (to its federation members)
           were documented properly.

   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 govemment
auditing standards. Those standards 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 bas is for our findings and conclusions based on the audit objectives.

The audit covered campaign years 2011 and 2012. CSM, located in St. Paul, Minnesota, 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 Norihem Lights CFC received campaign pledges, collected campaign receipts, and incuned
campaign administrative expenses for the 2011 and 2012 campaigns as shown below.


   Campaign     I         Total                       Total              Administrative
     Year                Pledges          I          Receipts        I     Expenses
      2011              $1,162,908                  $ 1,097,679              $13 1,775

      2012              $1,084,213                  $ 1,024,866              $121 ,2 17


In conducting the audit, we relied to varying degrees on computer-generated data. Our review of
a sample of campaign expenses and supporiing data, a sample of pledge form entries, and the
distributions 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 intemal control structure in plarming the audit procedures. We
gained an understanding of the management procedures and contt·ols to the extent necessary to
achieve our audit objectives. We relied primar·ily on substantive testing rather than tests of
intemal contt·ols. The audit included tests of accmmting records and such other auditing


                                               4	                         Report No. 3A-CF-00-14-048
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 a sample of actual expenses to supporting documentation. Our sample included 

    144 transactions totaling $36,333 (from a universe of 836 transactions totaling $121,217) 

    that were charged to the 2012 CFC. Specifically, our sample was judgmentally selected 

    using the following methodologies: 

        We selected all transactions greater than $200 (32 transactions totaling $19,382) from
           direct/non-allocated expense accounts;
        We selected the first and last transactions (19 transactions totaling $6,857) from
           multiple categories within the payroll-related expense accounts (Salary Expense,
           Payroll Taxes, and Unemployment Taxes);
        We selected all transactions (42 transactions totaling $5,650) from the Audit Expense
           and Bank and Credit Card Fee expense accounts;
        We selected all first and last month transactions (35 transactions totaling $3,056)
           from the Benefits Insurance, Benefits Retirement, Office Rent/Utilities, Admin
           Insurance, Telecom, and Contracted Services expense accounts;
        We selected five transactions from the Postage/Delivery and Consultant Services
           expense accounts, totaling $754, based on nomenclature review; and
        We selected all transactions from the month with the highest total dollars in expenses
           (11 transactions totaling $634) from the Computer and Web Hosting, Copy and
           Reproduction, Depreciation Expense – Equipment, and Depreciation Expense –
           Software expense accounts.




                                              5	                         Report No. 3A-CF-00-14-048
		 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 75 pledge forms, with pledges totaling $253,693 (out of a universe of 5,292 

    pledge forms, with pledges totaling $1,084,213), 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 the 25 high dollar electronic pledge forms, totaling $168,051; and
        We selected the 50 high dollar paper pledge forms, totaling $85,642.


		 Distribution checks for a sample of 10 federations and organizations, totaling $298,858 in
    disbursed funds (out of a universe of 175 federations and organizations, totaling $879,770),
    to verify that the appropriate amount was distributed in a timely manner. We judgmentally
    selected the nine agencies or federations with the highest total disbursement amount. In
    addition, we also judgmentally selected the PCFO (CSM).

		 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 9 pledge notification and donor letters (from a universe of 317) 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. Utilizing the
    pledge forms previously selected for review, we judgmentally selected all agency codes
    where donors designated $1,500 or more, in aggregate, and elected to release information.

		 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 campaign receipts and disbursements. 





                                               6	                          Report No. 3A-CF-00-14-048
		 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.

		 The PCFO’s responses to questions regarding the process and procedures for the application
    evaluation process.

		 A sample of 10 local organization applications (from a universe of 113 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. We judgmentally selected the top five local organizations and the top four local
    federations with the highest gross pledges. In addition, we also judgmentally selected the
    PCFO (CSM).

		 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 CSM was in compliance with the CFC regulations as a federation for the 2012
campaign, we reviewed the following:

		 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 totaling $2,712 (out of a 

    universe of 12 totaling $5,543 in distributions), to verify that the appropriate amount was 

    distributed in a timely manner. We judgmentally selected the top six federation members 

    with the highest amounts disbursed, excluding the PCFO as a Federation. 





                                               7	                          Report No. 3A-CF-00-14-048
		 CSM’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.




                                                 8	                         Report No. 3A-CF-00-14-048
  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 th e LFCC to complete th e AUP audit of the 2011 campaign did not
      complete its review in accordan ce with the requirements of the Audit Guide.

      The Audit Guide contains specific procedm es to be followed dm ing th e examination by the
      IPA with the primmy objective of determining LFCC an d PCFO complian ce with 5 CFR 950
      and OPM guidance.

      We reviewed the IP A 's work papers an d rep011 in detail to detennine if the IPA followed the
      AUPs as stated in the Audit Guide and to determine if the IPA failed to identify and rep011
      any findings. Om review identified two m·eas where th e IPA did not comply with the
      requirements of the Audit Guide. Specifically, we identified the following issues:

      The IPA did not identify and rep011 findings related to three Audit Guide steps.

      • 	 LFCC Processes, Step l (d) requires the IPA to review the application to verify that it
          did not include a statem ent that the PCFO is subject to the provisions of 5 CFR 950.403 ,
          as this has been removed from the regulations . Om review of the application, which was
          th e same application the IP A reviewed, found the application did include this statement.
          However, the IPA did not identify this en or nor rep01i this as a finding in its rep011.

      • 	 Receipt and Disbursement of Funds, Step 2 requires the IP A to rep011 as a finding all
          instan ces where the PCFO does not break out bank fees, credit cm·d fees, credit cm·d
          receipts, cash/check receipts, payroll receipts, and interest emn ed and rep011 them in the
          appropriate columns on the Schedule of Campaign Receipts and Disbm sements . The
          PCFO did not list its banking and credit car d fees on th e Schedule of Receipts and
          Disbm sements an d did not separ ate credit car d receipts from cash receipts . Om review
          found that the IPA did not rep01i this as a finding .

         The IPA stated th at th e information provided by th e PCFO did not include those items.
         Therefore, it could not detennine th at th ere was any missing infon nation . However,
         based on om discussions with the PCFO, banking fees, credit cm·d fees, and credit cm·d
         receipts did exist in the 2011 campaign. Additionally, as pmi of its due diligence the IPA




                                                9	                             Report No. 3A-CF-00-14-048
   should have inquired regarding those items to determine if they should have been
   included.

		 Receipt and Disbursement of Funds, Step 3(b) requires the IPA to determine if
    disbursements began by April 1st and continued quarterly thereafter. The PCFO made
    disbursements to agencies receiving one-time disbursements on March 29th, but agencies
    receiving quarterly disbursements did not get an initial distribution until April 27th. The
    IPA did not report this as a finding.

   The IPA stated that the procedures performed indicated distributions began on March
   29th, before the required April 1st date and that the step does not specify whether the
   disbursement should be one-time and/or quarterly so it did not report a finding.
   However, 5 CFR 950.901(i)(2) states that the PCFO will distribute all CFC receipts
   beginning April 1st, and quarterly thereafter. Therefore, the PCFO should have
   distributed all available funds with its first distribution by April 1st.

The IPA did not complete two steps required by the Audit Guide.

		 LFCC Processes, Step 1(e) requires the IPA to review the LFCC meeting minutes to
    determine if the LFCC performed a review of the PCFO’s 2010 performance prior to
    renewing the PCFO agreement for the 2011 campaign (if 2011 was a renewal of a multi-
    year agreement). Community Shares of Minnesota (CSM) was in a multi-year agreement
    to serve as PCFO for the 2010-2012 campaigns. The IPA listed this step as not
    applicable because it misinterpreted the statement “renewal of a multi-year agreement” to
    mean renewal of a new agreement altogether and not renewal of a year within the current
    agreement.

		 Receipt and Disbursement of Funds, Step 6 requires the IPA to determine if
    international general designations were distributed in accordance with the regulations.
    The IPA listed this step as not applicable because the PCFO informed it that there were
    no international general designations, and that it could not determine from the
    International Distribution schedule that these designations were made. However, the
    International Distribution Schedule maintained by the IPA in its work papers indicates
    these donations were made.

As a result of the IPA not identifying and reporting findings and not completing all of the
AUP steps as required, the OCFC and LFCC were not made aware of findings and could not
institute corrective actions to improve the efficiency of the campaign.




                                            10 	                        Report No. 3A-CF-00-14-048
         Recommendation 1

         We recommend that the OCFC and the LFCC ensm e that the IPA fully lmderstands the CFC
         and applicable regulations so that it may complete the Audit Guide's A UPs correctly and
         completely.

         Recommendation 2

         We recommend that the OCFC ensm es that the LFCC and the PCFO meet with the IPA prior
         to an d dming th e AUP engagement to discuss the Audit Guide steps, and encom age the IPA
         to ask questions of the OCFC if it is lmsm e of how to complete any of th e required
         procedm es.

         PCFO and LFCC Response:

         The PCFO and LFCC agree with the recommendations. The LFCC will ensm e th at th e IPA
         understan ds the CFC and its regulations by meeting with it prior to th e AUP audit to discuss
         th e audit steps and review the regulations. The LFCC will also encom age the IPA to contact
         th e OCFC dming the audit if there ar e questions regarding completing steps in the Audit
         Guide.

 B.   BUDGET AND CAMPAIGN EXPENSES

      1. Administrative Expenses                                                                 $7,818

         The PCFO incorrectly char ged the 2012 campaign $7,818 for expenses that were related to
         other campaigns or were unallowable to the CFC.
 Expenses charged
    to the 2012        5 CFR 950. 106(b) states that "The PCFO may only recover campaign
campaign included      expenses from receipts collected for that campaign ...." In other words, the
expenses related to    PCFO may only be reimbmsed for its 2012 campaign expenses from the funds
 other campaigns       received for the 2012 campaign. Likewise, 2012 campaign funds should not
and expenses which
                       be used to pay for expenses related to oth er campaigns.
 were unrelated to
     the CFC.
                        We reviewed a sample of expenses charged to the 2012 campaign to determine
         if they were actual, necessruy, and reasonable charges with appropriate supp01ting
         documentation ; if the expenses were related to the CFC; and, if an allocated cost, that the
         methodologies used were reasonable an d supp01ted. Om review identified $7,399 in
         expenses chru·ged to the 2012 campaign th at were related to either the 2011 or 2013
         campaigns and $419 in unallowable expenses.



                                                     11                          Report N o. 3A-CF-00-14-048
    Specifically, we identified the following:

    $7,3991 in CFC-related expenses charged to the 2012 campaign erroneously. We identified 

    the following items as charged in error: 


           $3,900 in audit fees related to the IPA audit of the 2011 campaign.

            PCFO/LFCC Response:

            The PCFO and LFCC do not agree that the audit fees were charged in error. They
            state that the PCFO budgeted $3,900 for the 2012 audit and that the expense was
            included in the March 2014 expense report to close out the 2012 campaign by
            March 31st. They state that in February 2014, they were informed by the OCFC of
            the OIG audit and that the 2012 IPA audit would not be required. The OCFC
            informed the PCFO that it should estimate the costs that would be associated with the
            OIG audit, and the PCFO and LFCC decided to utilize the $3,900 previously
            budgeted for this purpose.

            OIG Comments:

            The PCFO and LFCC do not understand the issue at question here. The finding is not
            related to costs associated with the OIG audit of the Northern Lights CFC, but with
            the PCFO charging and reimbursing itself for IPA audit expenses distinctly related to
            the 2011 campaign from 2012 campaign monies. Specifically, the PCFO’s general
            ledger and supporting documentation show that $3,900 was reimbursed to it from
            2012 campaign monies related to four invoices dated between April and August 2013.
            These invoices clearly state on them that they were for “professional services
            rendered in connection with our agreed upon procedures engagement for the Northern
            Lights Combined Federal Campaign for the campaign ended March 31, 2013.” The
            PCFO in its response stated that the expense was included in the March 2014 expense
            report to close out the 2012 campaign by March 31 (2014), which would be correct.
            However, that expense recorded was for the 2011 campaign and further illustrates the
            PCFO’s lack of understanding of how CFC expenses should be matched with CFC
            receipts. In our opinion, the PCFO was simply charging expenses to the current
            campaign in operation and not determining to which campaign the expenses belong.



1
 The amounts questioned are allowable expenses to the CFC that were applied incorrectly and paid from the wrong
campaign’s receipts. Since the amount questioned is less than one percent of the total receipts of the 2012
campaign, we are treating this amount procedurally and will not require the PCFO to reopen the 2011 and 2012
campaigns to have the 2011 campaign reimburse the 2012 campaign and redistribute the funds.


                                                      12                              Report No. 3A-CF-00-14-048
    We do acknowledge that there are costs incurred by the 2012 campaign related to the
    OIG audit. However, it should be noted that any costs incurred by the PCFO for the
    OIG audit must be reimbursed from 2012 campaign receipts. Because the 2012
    campaign is closed and since the PCFO did not set aside or accrue funds to cover the
    cost of the IPA audit, there are no 2012 campaign funds remaining to reimburse the
    PCFO. If the PCFO wishes to be reimbursed for those costs it must make a special
    request to both the LFCC and the OCFC to obtain permission to do so since the only
    funds currently available are related to either the 2013 or 2014 campaigns.

   $2,685 in travel-related fees for the 2013 CFC Conference.

    PCFO/LFCC Response:

    The PCFO and LFCC do not agree that the travel-related expenses were charged in
    error. They state that the expense related to the 2013 CFC Conference occurred
    during the 2012 campaign and was budgeted as part of that campaign and that, at the
    time of occurrence, there was no approved 2013 campaign budget.

    Additionally, the PCFO and LFCC state that the conference expense should be
    considered in the calendar year incurred and since the agenda covered experiences
    during the 2012 campaign, non-campaign specific training, and discussion of the
    upcoming CFC changes. They state that, according to the CFC regulations, campaign
    expenses should be charged to the year of the campaign.

    OIG Comments:

    The PCFO and LFCC’s response to this portion of the finding clearly demonstrates
    their lack of understanding of how campaign expenses are to be applied to specific
    campaigns.

    Their contention that the expenses related to the conference should be charged to the
    2012 campaign because they were budgeted as part of that campaign, that there was
    no budget for the 2013 campaign at the time the expense was incurred, and that the
    CFC regulations state that campaign expenses are charged to the year of the campaign
    all fall short.

    The CFC conferences put on by the OCFC are meant to prepare for the upcoming
    CFC. Therefore, the related costs for the 2013 conference should be charged to the
    2013 campaign, not the 2012 campaign.




                                       13                         Report No. 3A-CF-00-14-048
   The PCFO and LFCC are absolutely incorrect in their statement that the CFC
   regulations state that campaign expenses are to be charged to the year in which they
   are incurred. 5 CFR 950.106(b) clearly states that the “PCFO may only recover
   campaign expenses from receipts collected for that campaign year.” Therefore, a
   2013 campaign expense may only be reimbursed from 2013 campaign receipts. The
   PCFO’s reasoning that since there was no approved budget at the time the expense
   was incurred, and thus the expense should be charged to the 2012 campaign, is
   incorrect. The PCFO should either absorb the cost of the expense or obtain a
   commercial loan to cover the cost until such time that the campaign receipts to which
   the expense relates are available for reimbursement.

		 $540 in banking fees related to the 2011 campaign. These fees were incurred before
    the 2012 campaign began to receive funds.
		 $158 in setup fees related to the 2013 campaign line of credit account.
		 $105 in equipment lease fees that were related to the 2011 ($79) and 2013 ($26)
    campaigns. The PCFO charged 24 months of lease expense to the 2012 campaign.
		 $11 in insurance expense overcharged to the CFC. The PCFO allocated three years
    of insurance to the CFC over a one-year period.

   PCFO/LFCC Response:

   The PCFO and LFCC agree that the banking fees, setup fees, equipment lease fees,
   and insurance expense were mistakenly charged to the 2012 campaign. The PCFO
   states that it has instituted a checklist that will be used annually to transition between
   campaigns.

   OIG Comments:

   We again reiterate the lack of understanding of the regulations related to allocating
   costs to the appropriate campaign demonstrated by both the PCFO and LFCC. These
   specific errors could have been avoided if the PCFO did not merely charge expenses
   to the campaign in operation at the time. If it would take the time and effort to
   determine first which campaign an expense was related to (which we hope this
   checklist will initiate), these errors could have been avoided.




                                         14 	                         Report No. 3A-CF-00-14-048
    $4192 in unallowable expenses charged to the 2012 campaign. Specifically, we found the
    following:

         		 $256 in banking fees related to non-CFC accounts.

             PCFO/LFCC Response:

             The PCFO and LFCC disagree and state that the banking fees were related to the
             CFC. The amount was charged against CSM’s corporate operations account from
             which it pays CFC expenses, and the fees represent the percentage share that is
             charged to the CFC for utilizing the account.

             OIG Comments:

             The method in which the PCFO pays the expenses related to the CFC shows its lack
             of understanding of how the program works. To cover expenses related to the CFC,
             the PCFO obtained a letter of credit account (LOCA), which is allowed according to
             the regulations. When PCFOs elect this option, the LOCA accounts should be
             utilized as CFC-specific checking accounts, and expenses should be paid directly
             from the accounts. In this case however, the PCFO chose to write checks from its
             corporate account to cover CFC expenses and only utilized the LOCA to reimburse
             its operating account. Consequently, because the PCFO obtained the LOCA, which
             itself incurred interest expense paid by the CFC, we contend that the additional cost
             charged by the PCFO because it chose to pay CFC expenses from its corporate
             operations account is an unallowable cost to the CFC.

         		 $140 in CFC banking and credit card fees. These fees are not a reimbursable expense
             as the fees are paid automatically from the CFC’s bank account as reductions to the
             account balance and should not also be included as an expense to the campaign.

             PCFO/LFCC Response:

             The PCFO and LFCC disagree and state that the banking fees and credit card fees
             were associated with credit card payments by individuals for events and were not
             donations. The payments went through the PCFO’s operations account, not the CFC
             bank account, thus they are a reimbursable expense.



2
  As this amount is less than one percent of the receipts received for the 2012 campaign, we will not request that the
PCFO reopen the 2012 campaign to redistribute the funds. However, we will recommend that this amount be repaid
to the campaign currently disbursing funds by the PCFO.


                                                         15 	                              Report No. 3A-CF-00-14-048
       OIG Comments:

       The PCFO and LFCC are mistaken in this regard. The banking and credit card fees
       questioned here were deducted directly from donation monies collected from
       individuals who donated to the campaign using a credit card. Therefore, the expense
       was never actually incurred by the PCFO since it was already accounted for in the net
       credit card receipts received. Therefore, as a result of reporting these banking and
       credit card fees as a reimbursable expense, the CFC was double charged for these
       monies. First, when the fees were deducted from the CFC receipts and then when the
       PCFO was reimbursed for them.

   		 $23 in cell phone setup fees related to expenses for employees that do not charge time
       to the CFC campaign.

       PCFO/LFCC Response:

       The PCFO and LFCC disagree and state that the invoice refers to providing
       information for staff members and synchronizing the cell phones to the PCFO’s
       network. The PCFO also states that the amount is related to a contractor who
       provides assistance to the CFC in financial matters.

       OIG Comments:

       We do not concur with the PCFO and LFCC. The invoiced charges were related to
       two individuals that, according to our audit, did not provide any assistance to the
       CFC. While the PCFO states that the amount relates to one individual who
       performed work for the CFC, it provided no documentation or evidence to support its
       claims.

As a result of charging the 2012 campaign for expenses that were related to other campaigns,
$7,399 was not received by the charities participating in this campaign and the intentions of
the federal employee donors were not met. Additionally, $419 in unallowable expenses was
charged to the 2012 campaign due to the PCFO misapplying corporate expenses to the CFC.

Recommendation 3

We recommend that the OCFC and LFCC direct the PCFO to reimburse the CFC $419 for
unallowable expenses charged to the 2012 campaign. The reimbursement should be made as
undesignated funds to the current campaign.




                                           16 	                        Report No. 3A-CF-00-14-048
PCFO/LFCC Response:

The PCFO and LFCC disagree with the amount questioned and state that it is minimal,
requiring no further action.

OIG Comments:

We do not concur with the PCFO and LFCC. The questioned amount was paid to the PCFO
in error and should be returned to the CFC. While the amount questioned is not significant, it
could still benefit those charities participating in the current campaign. Consequently, we are
not requiring the PCFO to reopen the 2012 campaign. Instead, the amount should be repaid
to the CFC and distributed to the current campaign in operation as undesignated funds.

Recommendation 4

We recommend that the OCFC and the LFCC ensure that the PCFO understands and follows
CFC regulations and OPM guidance when determining to which campaign an expense
belongs.

PCFO/LFCC Response:

The PCFO and LFCC agree with this recommendation. The LFCC states that it will require
the PCFO to provide procedures that ensure compliance and that it will provide appropriate
oversight.

OIG Comments:

While we appreciate the LFCC’s intent to provide oversight, we did not receive information
that detailed how the PCFO would begin to track expenses to ensure that they were charged
to the proper campaign period.

As illustrated in the PCFO and LFCC comments to the individual amounts questioned above
(especially the IPA audit fees and CFC conference expenses), there appears to be a clear
misinterpretation of the regulations regarding CFC expenses by the PCFO. So much so that
it continues to disagree with items which are clearly, as indicated in our comments above,
unrelated to the 2012 campaign. As a result, we are not confident that procedures instituted
by the PCFO would correctly apply all CFC expenses to the correct campaign or if the
LFCC, when reviewing the costs, would identify any expenses that were misapplied.
Therefore, we suggest that the OCFC ensure that the procedures implemented are adequate
and that both the LFCC and the PCFO understand the regulations related to CFC expenses.



                                            17                          Report No. 3A-CF-00-14-048
   Recommendation 5

   We recommend that the OCFC an d LFCC ensure th at th e PCFO implements procedures to
   ensure that only expenses related to the operation of the campaign ar e charged to the CFC.

   PCFOILFCC Response:

   The PCFO and LFCC agree with this recommendation . The LFCC states that it will require
   th e PCFO to provide procedures that ensure compliance and that it will provide appropriate
   oversight. Additionally, the LFCC stated th at it will begin to review line item expenses on a
   bi-monthly basis.

   OIG Comments:

   Although the PCFO and LFCC state that they agree with the recommendation, they have
   demonstrated a clear misunderstan ding of what constitutes a CFC-related expense. The
   PCFO should only charge expenses (directly or indirectly) that ar e clearly related to the CFC.
   For those unallowable amounts questioned above, it was ve1y clear th at th e expenses were
   unrelated to th e CFC.

2. Improper Matching of Receipts and Expenses                                         Procedural

   The PCFO did not properly match CFC receipts and expenses as they relate to indir ect
   (general overhead) expenses during th e 2012 campaign.                         Indirect general
                                                                                overhead expenses
   5 CFR 950.106(a) states that "The PCFO shall recover from the gross           were not properly
   receipts of the campaign its expenses, approved by the LFCC, reflecting         allocated to the
   the actual costs of administering the local campaign."                            appropriate
                                                                                   campaigns and
                                                                                    were instead
   Additionally, CFC Memorandum 2008-09 goes on to clarify this                 charged to the 2012
   regulation by stating that expenses for th e campaign are incuned over a           campai2n.
   two-year period (for the 2012 campaign this would be March 2012
   through March 2014) . It should be noted th at during any one calendar or fiscal year there are
   always, at least, two campaigns operating at the same time; one campaign stmiing up
   (planning and collecting pledges) an d another campaign receiving an d disbursing ftmds.
   Therefore, the costs should not only be allocated between the CFC and the PCFO's other
   lines of business, but also between the different CFC campaigns operating simultan eously.

   For the 2012 campaign, we found th at th e PCFO generally chm·ged expenses recorded
   between April 1, 2012, an d Mm·ch 31 , 2013. Additionally, our expense review identified



                                               18                          Report N o. 3A-CF-00-14-048
  transactions related to general overhead expenses (salaries, benefits, occupancy, and
  depreciation) that were not allocated between the multiple campaigns operating during the
  lifecycle of the 2012 campaign. Although direct expenses (i.e., pledge forms and other
  campaign specific materials) are usually charged early in the campaign, general overhead
  expenses (related to tracking incoming monies, disbursing funds, and closing the campaign)
  continue well after March 31, 2013, and therefore, should not have been fully charged to the
  2012 campaign.

  The PCFO indicated that it uses a fiscal year to charge campaign expenses and stated that the
  only expenses in the second year of the campaign are primarily postage and audit fees.

  As a result of not properly matching CFC receipts and expenses, the PCFO did not accurately
  report the expenses related to the 2012 campaign.

  Recommendation 6

  We recommend that the OCFC and LFCC direct the PCFO to institute policies and 

  procedures in its expense system to accurately track and record campaign expenses 

  throughout the two-year campaign period. 


  PCFO/LFCC Response:

  The PCFO and LFCC agree with this recommendation and state that policies and procedures
  have been instituted to accurately track and record campaign expenses throughout the two-
  year campaign period.

  OIG Comments:

  The PCFO and LFCC did not provide detailed information describing the policies and
  procedures that were implemented. Therefore, we could not determine if those policies and
  procedures are adequate to address the recommendation. We request that the OCFC review
  the procedures to ensure that all expenses, both indirect (general overhead) and direct, are
  charged to the correct campaign, considering that the PCFO merely charged expenses to the
  campaign currently in operation and that its responses to the administrative expense finding
  clearly show a misinterpretation of the regulations.

3. LFCC Approval of Campaign Expense Reimbursement                                 Procedural

  The LFCC did not review or authorize the PCFO’s reimbursement of actual campaign 

  expenses.                             




                                             19                          Report No. 3A-CF-00-14-048
                      5 CFR 950.104(b)(17) states that it is the LFCC's responsibility to
    ThePCFO           authorize the reimbursement of only those campaign expenses that are
 reimbursed itself    legitimate CFC costs and are adequately documented.
   for campaign
 expenses without     Additionally, 5 CFR 950.106(a) states that the PCFO shall recover
receiving approval    campaign expenses, approved by the LFCC, which reflect the actual
 from the LFCC.       costs of administering the 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 must review actual
  expenses, authorize full or pruiial reimbursement, and document this authorization in its
  meeting minutes.

  We reviewed the LFCC 's meeting minutes to detennine if the LFCC reviewed and
  authorized the PCFO ' s reimbursement of campaign expenses. After reviewing the meeting
  minutes, we found no record of their review or authorization of the reimbursement.

  After discussions with both the LFCC and the PCFO, we found that both were lmder the
  impression that only the budgeted expense amount needed approval and that the PCFO could
  reimburse itself for all expenses that didn't exceed the budgeted ammmt. Neither was awru·e
  that the PCFO needed the LFCC 's authorization prior to taking a fhll or prutial
  reimbursement of campaign expenses.

  As a result of not reviewing or auth orizing the PCFO 's reimbursement of actual campaign
  expenses, the LFCC ran the risk of unrelated expenses being chru·ged to the organizations and
  federations in the campaign, thereby reducing the designated ammmts due to them.
  Additionally, by not submitting its expenses for approval prior to reimbursement, the PCFO
  did not allow the LFCC to exercise its authority over the campaign to ensure that only
  legitimate CFC costs ru·e chru·ged to the campaign .

  Recommendation 7

  We recommend that the OCFC direct the LFCC to implement policies and procedures to
  review the PCFO ' s actual campaign expenses, which should be supp01ted by itemized
  receipts and invoices to ensure that the costs are allowable and applicable to the campaign.

  LFCC Response:

  The LFCC agrees with this recommendation and states that procedures have been
  implemented to review the actual expenses related to the CFC.



                                              20                          Report No. 3A-CF-00-14-048
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 agrees with this recommendation and states that policies and procedures have
been implemented in its standing meeting agenda to document authorization and approval of
the PCFO’s reimbursement of actual campaign expenses.

OIG Comments:

We reviewed the LFCC’s standing meeting agenda (included in the Appendix) and did not
identify any mention of the LFCC authorizing or approving the reimbursement of campaign
expenses to the PCFO. The standing meeting agenda does include review of expenses, but
does not include a step for approving reimbursement. The LFCC’s review of expenses
should not be confused with its approval and authorization of the reimbursement of campaign
expenses to the PCFO.

Additionally, the actual authorization and approval of reimbursement is not something that is
done at every LFCC meeting. The approval and authorization of the reimbursement of the
PCFO’s campaign expenses should only be performed around the time of the first and last
campaign disbursement. At the first disbursement, the LFCC should authorize and approve
all incurred and expected expenses for the campaign. At the final disbursement, the LFCC
should review the actual expenses for the full campaign (approximately 24 months) and
determine if the initial reimbursement was enough or if an additional amount should be paid
to the PCFO (if too much was reimbursed initially, then the PCFO should return funds to the
CFC).

Recommendation 9

We recommend that the OCFC and LFCC ensure that the PCFO implements policies and
procedures to submit its campaign expenses to the LFCC for approval prior to reimbursing
itself in the future.




                                           21                          Report No. 3A-CF-00-14-048
   PCFO/LFCC Response:

   The PCFO and LFCC agree with this recommendation and state that policies and procedures
   have been implemented in its standing meeting agenda to ensure that the PCFO submits
   campaign expenses for approval prior to being reimbursed.

4. Obsolete PCFO Application Statement                                                Procedural

   The LFCC selected CSM as the PCFO for the 2010 through 2012 campaigns even though the
   signed application contained a statement which is no longer applicable.

   5 CFR 950.105(c) states that the application submitted by organizations applying for PCFO
   must include the following statements signed by the applicant’s director:
       that the applicant will “administer the CFC fairly and equitably,”;
       that the applicant will “conduct campaign operations, such as training, kick-off and
          other events, and fiscal operations, such as banking, auditing, reporting and
          distribution separate from the applicant’s non-CFC operations,”;
       that the applicant will “abide by the directions, decisions, and supervision of the
          LFCC and/or Director.”; and
       that the applicant’s director acknowledges that it is subject to the provision of 5 CFR
          950.603.

   Additionally, the PCFO is no longer required to include a statement that it’s subject to the
   provisions of 5 CFR 950.403. Federal Register Vol. 71, published November 20, 2006,
   removed 5 CFR 950.403 from the regulations.

   We reviewed the PCFO’s application to ensure that it was signed by an appropriate official,
   contained all required language per 5 CFR 950.105(c), and did not include a statement that
   the PCFO was subject to the provisions of 5 CFR 950.403. Our review found that the
   PCFO’s application included the statement stating that it was subject to the provisions of 5
   CFR 950.403.

   The PCFO stated that it has used the same language in its application for years and did not
   make changes when regulation 5 CFR 950.403 was removed in 2006.

   As a result of preparing and approving a PCFO application with an obsolete statement, the
   PCFO and LFCC have demonstrated a lack of familiarity with the regulations governing the
   CFC.




                                               22                           Report No. 3A-CF-00-14-048
            Recommendation 10

            We recommend that the OCFC ensure that the PCFO and LFCC lmderstand the regulations
            as they pertain to the CFC, and that they institute procedures to regularly review the CFC
            regulations so they are ale1i to changes when they occur.

            PCFOILFCC Response:

            The PCFO and LFCC state th at th ey agree with this recommendation and that they look
            f01ward to the Febmruy 2015 CFC training to obtain an update on th e future changes related
            to the CFC.

            OIG Comments :

            The PCFO and LFCC agree with the recommendation, but they did not provide an
            explanation or con ective action plan to show how they would implement it.

            As illustrated by the many findings and recommendations in this rep01i, the PCFO and LFCC
            have an overall lack of understanding of the CFC regulations. It is their inherent duty in their
            roles as PCFO an d LFCC to tak e an active role in knowing and understanding what the CFC
            regulations m ean, an d they should not rely solely upon CFC training to receive updates. The
            specific change in the regulations questioned here, although minor, occmTed in 2006 and the
            PCFO and LFCC were lmawru·e of it, even though this was a specific item addressed in the
            IPA AUP steps provided to them each yeru·.

        5. Performance Review of the PCFO by the LFCC                                          Procedural

The LFCC could not       We were unable to detennine if the LFCC perf01m ed a review of the PCFO's
provide evidence that    prior campaign perfonnan ce before renewing it for the 2012 campaign.
    it assessed the
PCFO's performance       5 CFR 950.104(c) states that the LFCC may select a PCFO for up to three
prior to renewing its
                         crunpaign periods, subject to renewal each year following a review of
       multi-year
     agreement as 
      perfon nan ce.
   required by the 

      regulations. 
      We reviewed the LFCC meeting minutes to detennine whether the LFCC had
                          conducted a perf01m ance review of the PCFO prior to renewing their agreement
            for the 2012 campaign an d fmmd no mention of a perfonnan ce review. This review should
            be perfonned by the LFCC near the close of one crunpaign an d prior to the strui of the next.
            For the 2012 crunpaign, this would have occmTed sometime between Januruy an d March
            2012 (or eru·lier) . In our pre-audit requests to the PCFO and LFCC, we asked th at all meeting



                                                        23                           Report No. 3A-CF-00-14-048
minutes related to the 2012 campaign be provided. We were only provided minutes related
to five meetings of the LFCC, all of which were after March 2012. A meeting of the LFCC
that would have occurred during the period when a performance review would be expected,
on February 22, 2012, was cancelled.

We requested that the LFCC provide further documentation to show that a performance
review was done or provide an explanation as to why a review was not done. However, we
did not receive a response from the LFCC.

As a result of not holding LFCC meetings during the time frame when a PCFO performance
review would typically be completed and not responding to OIG questions regarding the
performance review, we were unable to determine if the LFCC performed the review or
properly renewed the PCFO for the 2012 campaign.

Recommendation 11

We recommend that the OCFC ensure that the LFCC understands its responsibilities under
the Federal regulations, which include its review of the PCFO’s performance prior to
renewing a multi-year agreement.

LFCC Response:

The LFCC agrees with this recommendation and states that it has always reviewed the
PCFO’s performance prior to renewing a multi-year agreement and that it will ensure that
future reviews are done and documented in the LFCC meeting minutes. It states that
extenuating circumstances (LFCC Chair stepping down, Director of the Federal Executive
Board (FEB) retiring, FEB offices moving to temporary quarters, and LFCC family illness)
led to a time of bare bones oversight and as a result, the LFCC could not access records to
support its review.

OIG Comments:

In its response, the LFCC states that it has always performed a review of the PCFO’s
performance prior to renewing it under a multi-year agreement, but that due to the
extenuating circumstances cited, it could not provide documentation to support its claims.
As a result, we still cannot determine whether the LFCC performed this required review.

Additionally, as demonstrated by the large number of findings and recommendations in this
report, it is clearly apparent that the PCFO’s performance was below average at best and that
the LFCC should have, at least, considered replacing it at some point. However, based on the



                                           24                          Report No. 3A-CF-00-14-048
   LFCC’s clear lack of understanding of its own responsibilities, we do not believe that the
   LFCC would have understood that the PCFO’s performance was below standard and that
   many of its actions were in violation of the CFC regulations.

6. PCFO Solicitation Not Documented                                                  Procedural

   The LFCC did not retain documentation of its solicitation for PCFO for the 2010 campaign,
   in which it awarded a multi-year agreement.

   5 CFR 950.104(c) states that the LFCC must solicit applications for a PCFO on a competitive
   basis no later than a date set by OPM, and that the application period must be open for a
   minimum of 21 calendar days.

   Additionally, 5 CFR 950.104(a) states that “members of the LFCC should develop an 

   understanding of campaign regulations and procedures.” 


   Finally, 5 CFR 950.604 states that “Federations, PCFOs and other participants in the CFC
   shall retain documents pertinent to the campaign for at least three completed campaign
   periods.”

   We requested a copy of the public notice soliciting PCFO applications for the 2012
   campaign, or if under a multi-year agreement the solicitation that covered that campaign, to
   determine if the applications were properly solicited. The PCFO and LFCC were unable to
   provide a copy of the solicitation, the dates for the application period, or the form of
   advertising. We were therefore unable to determine if the application period was open for
   the required amount of time, whether the application period closed by the required deadline,
   or whether the solicitation directed applications to be mailed to the LFCC.

   By not retaining documentation of the solicitation for the current multi-year agreement,
   which includes the 2012 campaign, we were unable to determine if the LFCC adhered to its
   responsibilities set forth in the Federal regulations.

   Recommendation 12

   We recommend that the OCFC direct the LFCC to implement new policies and procedures to
   safeguard all documents pertinent to a campaign for at least three completed campaign
   periods in accordance with the records retention requirements of 5 CFR 950.604.




                                               25                         Report No. 3A-CF-00-14-048
   LFCC Response:

   The LFCC agrees with the recommendation and states that it has implemented new
   procedures for it and the PCFO to ensure that CFC information is maintained for at least
   three completed campaign periods.

7. Sponsorship Agreement Approval                                                     Procedural

   We were unable to determine if the LFCC reviewed and approved a campaign sponsorship
   for the 2012 campaign.

   CFC Memorandum 2006-5 states that the LFCC should review and approve sponsorship
   agreements to ensure that they are consistent with Federal law, ethical rules of conduct for
   Federal employees, and guidance issued by OPM.

   Our review of expenses determined that a $2,000 sponsorship was received for the 2012
   campaign. We requested the sponsorship agreement and proof of LFCC approval of the
   sponsorship from the PCFO. The PCFO stated that there was no agreement received from
   the organization that provided the sponsorship. However, a copy of the CFC’s sponsorship
   request and the cancelled sponsorship check was provided. The PCFO also stated that the
   approval to seek sponsorships went back to 2009 and that the sponsorship was discussed and
   approved as part of the budget approval process.

   There were no meeting minutes, or other documentation, indicating that the sponsorship was
   approved for the 2012 campaign. In fact, there are no official LFCC meeting minutes for
   2012 until August 16th, which was after the sponsor’s check was received (June 29th).

   By requesting and accepting sponsorships without LFCC approval or formal documentation
   thereof, we were unable to determine if the LFCC reviewed or approved the sponsorship or
   verified that the acceptance of the sponsorship was in compliance with applicable Federal
   regulations.

   Recommendation 13

   We recommend that the OCFC ensure that the LFCC understands its responsibilities under
   the CFC regulations and OPM guidance, which includes reviewing and approving each
   sponsorship agreement and properly documenting its decisions.




                                               26                          Report No. 3A-CF-00-14-048
   LFCC Response:

   The LFCC agrees with the recommendation and states that it inconectly issued a blanket
   approval to the PCFO to seek sponsorships. That being said, the LFCC will no longer seek
   sponsorships for future campaigns.

   OIG Comments:

   The LFCC should not dismiss the benefit of obtaining sponsorships because sponsorship
   monies obtained by the LFCC or the PCFO are used to defray the adminisu·ative costs
   incuned by the CFC and, thereby, directly increase the funds disu·ibuted to the charities of
   the campaign .

8. Separation of CFC Financial Records                                                Procedural

   The PCFO is not maintaining all CFC financial records separ ate from its intemal 

   organization's fmancial records. 

                                                                                 The PCFO exposed
   5 CFR 950.105(d)(8) states that it is the PCFO's responsibility to keep       the CFC to the risk
   and maintain CFC financial records separate from the PCFO's intemal               of campaign
   organizational fmancial records.                                                 overcharges by
                                                                                    comingling its
                                                                                  financial records.
   We reviewed the PCFO 's general ledger to detennine if it was
   maintaining the CFC's financial records separate from its corporate
   financial records. Our review fmmd that the PCFO is not separating CFC fmancial records
   from its corporate records.

   As pa1t of our initial audit requests, we asked that the PCFO provide general ledger detail to
   supp01t the amount that it was reimbursed for 2012 campaign expenses ($121 ,217). The
   PCFO provided its corporate general ledger (with expenses totaling $1 ,093 ,920), which did
   not include any CFC-specific accounts (some individual u·ansactions could be identified as
   CFC-related). The PCFO was lmable to provide the specific u·ansactions that amounted to
   the $121,2 17 reimbursed when requested. The PCFO stated that it did not detail allocations
   between CFC and corporate lines of business in its general ledger.
   As a result of not maintaining CFC and corporate fmancial records separately, the PCFO is
   mnning the risk of overcharging expenses to the CFC that are related to other organizational
   activities.




                                               27                            Report No. 3A-CF-00-14-048
     Recommendation 14

     We recommend that the OCFC and LFCC ensure that the PCFO institutes policies and
     procedures to track and report all CFC financial records separately from its corporate
     financial records.

     PCFO/LFCC Response:

     The PCFO and LFCC agree with this recommendation and state that “The LFCC has directed
     the PCFO to develop procedures that would continue the compliance with this
     recommendation.” The LFCC also stated that it would review the PCFO’s progress at a
     future LFCC meeting.

     OIG Comments:

     The LFCC states that it will direct “the PCFO to develop procedures to continue compliance
     with this recommendation.” Our issue with this statement is that there has not been
     compliance with the recommendation because the PCFO has simply commingled all
     financial records (both CSM and CFC) and was not able to provide us with CFC financial
     totals that matched the amounts it was reimbursed.

     The separation of CFC financial records is of immense importance, so much so that multiple
     CFC regulations and memorandum cover this particular area. Specifically, 5 CFR
     950.105(d)(8) as stated in the finding, 5 CFR 950.105(d)(7) regarding the PCFO maintaining
     a detailed schedule of its actual CFC expenses that reconciles to its budget, and 5 CFR
     950.105(c)(2)(ii), where the PCFO provides a signed statement in its application that it will
     keep CFC banking, reporting, and distributions separate from non-CFC business.

     With numerous regulations outlining what the PCFO must do regarding CFC expenses, it
     failed to follow them to the extent that when asked it could not provide an itemized list of
     expenses totaling the amount it was reimbursed for the 2012 campaign.

C. CAMPAIGN RECEIPTS AND DISBURSEMENTS

  1. Undisbursed CFC Receipts                                                               $10,532

     The PCFO did not properly record all 2012 campaign receipts, which resulted in $10,532 in
     campaign funds not being disbursed to charities.




                                                 28                           Report No. 3A-CF-00-14-048
           5 CFR 950.105(d)(8) states "All financial records an d bank accmmts must be kept in
           accordance with generally accepted accounting principles."

                       Additional, 5 CFR 950.901 (i)(2) states "The PCFO is responsible for the
  Charities of the     accm acy of disbmsements".
2012 campaign did
not receive $10,532
in funds as a result    We u·aced all receipts and disbmsements fro m the CFC bank statements and
   of the PCFO's        reconciled them to the PCFO 's Campaign Receipts and Disbmsement Schedule
errors in recording     an d to th e u·ansactions maintained in the PCFO 's accounting softwar e to
   CFC receipts.        determine if all CFC ftmds received were properly disbmsed. Om review found
                        that $10,532 in CFC ftmds was not disbmsed. Based on om review, it appears
           as if the PCFO did not reconcile the amounts that it entered into its CFC softwar e with the
           amounts recorded in its accounting software.

           As a result of the PCFO not accm ately recording all 2012 campaign receipts, $10,532 in
           donations were not disbm sed to the participating charities.

           Recommendation 15

           We recommend the OCFC an d LFCC direct the PCFO to disu·ibute $10,532 in CFC ftmds to
           the charities that patt icipated in the 2012 campaign.

           P CFOILFCC Response:

          The PCFO and LFCC disagree with the recommendation an d maintain th at th ere was a
          misunderstanding between the software applications an d the operations workfl ow for th e
          campaign. The bank statements do not reflect u·ansactions belonging to other campaign
          periods, but comparing the bank statements to the general ledger will identify to which
          campaign the u·ansactions belong. We have provided the OIG with a detailed comparison of
          the bank statements to the general ledger and a detailed list of data enu·ies to om CFC
          software.

           OIG Comments:

          Om review of the schedules provided by the PCFO and LFCC (one representing the ammmts
          recorded in the general ledger an d another representing the amounts rep01ted in the CFC
          software) determined that the schedules did not reconcile. In om analysis of the additional
          documentation provided by the PCFO and LFCC, we relied upon the general ledger schedule
          and found that most of the infon nation contained in th e ledger reconciled to th e bank
          statements. Fmt her review deten nined that a majority of the $10,532 questioned relates to



                                                      29                         Report No. 3A-CF-00-14-048
   2012 CFC funds received between February 2013 and February 2014 (according to the
   PCFO’s general ledger) that were not recorded in the CFC software which the PCFO utilizes
   to determine distributions to charities.

   Recommendation 16

   We recommend the OCFC and LFCC direct the PCFO to ensure their financial records are
   accurate and in compliance with CFC regulations.

   PCFO/LFCC Response:

   The PCFO and LFCC agree with the recommendation and state that they have instituted a
   work plan and check list to correct this.

   OIG Comments:

   The procedure check list and work plan provided by the PCFO and LFCC provide high level
   procedures. However, no detailed procedures were provided. As a result, we cannot
   determine if what the PCFO and LFCC plan to institute will be beneficial.

   We do recommend that the PCFO institutes procedures to reconcile the bank statements,
   general ledger, and CFC software to ensure that all CFC receipts are recorded and that the
   receipts are applied to the correct campaign period.

2. Untimely Initial Disbursement                                                      Procedural

   The PCFO did not make the initial disbursement to organizations receiving quarterly 

   distributions by the April 1, 2013 deadline set in the CFC Calendar of Events for the 2012 

   campaign. 


   5 CFR 950.901(i)(2) states that the PCFO will distribute all CFC receipts beginning April 1st, 

   and quarterly thereafter. Therefore, the PCFO should have distributed all available funds 

   with its first distribution by April 1st. 


   We reviewed the PCFO’s Receipt and Disbursement Schedule and the disbursement check 

   support to determine if the PCFO made an initial disbursement by April 1, 2013. 

   A review of the actual disbursement check support showed that the PCFO did not make the 

   first disbursement until April 26, 2013. 





                                               30                          Report No. 3A-CF-00-14-048
We inquired as to why the disbursements were sent after the deadline and were informed that
the initial disbursement for organizations receiving one-time disbursements was made on
March 29, 2013. However, the initial disbursement to organizations receiving quarterly
distributions was not made until April 26th.

According to the PCFO, it considers the one-time disbursements the initial disbursement and
the quarterly disbursements to be the second disbursement. The PCFO also stated that it has
disbursed CFC funds using this method for at least the last 10 years.

By not making initial disbursements to all organizations by the deadline set in the CFC
Calendar of Events, the PCFO delayed funds that the charities were planning to receive for
maintaining operations.

Recommendation 17

We recommend that the OCFC and LFCC require the PCFO to institute procedures to ensure
that it adheres to the CFC Calendar of Events deadlines for disbursing campaign funds to all
organizations, including one-time and quarterly disbursements.

PCFO/LFCC Response:

The PCFO and LFCC state that they disagree with the finding, but agree with the
recommendation. They “understood ‘begin to distribute’ as a timeframe, not an absolute
date. The LFCC has directed the PCFO to institute procedures to comply with this
recommendation ….”

OIG Comments:

Again, the PCFO and LFCC’s response clearly shows their lack of understanding of the CFC
regulations. In the case of this finding, while they state that they don’t agree with the issue,
they will change their procedures to adhere to the recommendation.

The CFC Calendar of Events, which the PCFO and LFCC referred to in their response, is
provided to the PCFO and LFCC as a reminder mechanism for important deadlines during
the campaign and does not replace the regulations. Additionally, the Calendar of Events in
this case directs the PCFO and LFCC to 5 CFR 950.901(i)(2), which states that the PCFO
will distribute all CFC receipts beginning April 1st, and quarterly thereafter.

It should also be noted that the CFC Audit Guide, which both the PCFO and LFCC should be
fully acquainted with, includes steps for the IPA to determine if disbursements were begun



                                             31                          Report No. 3A-CF-00-14-048
   by April 1st. The Audit Guide also states that if a campaign has limited funds as of April 1st
   then the order of precedence would be to have the PCFO expense reimbursement paid first,
   followed by one-time disbursements, and then by the quarterly/monthly disbursements.
   Based on our review, as of the April 1st deadline the Northern Lights CFC had enough funds
   on hand by March 31st to make all necessary disbursements.

3. Improper Authorization of One-Time Disbursements                                   Procedural

   The LFCC did not authorize one-time disbursements or approve a threshold amount for the
   2012 campaign.

   5 CFR 950.901(i)(3) states that the PCFO may only make one-time disbursements to
   organizations receiving minimal donations if the LFCC authorizes them and approves the
   threshold amount of the disbursements.

   Additionally, 5 CFR 950 defines an LFCC as “the group of Federal officials designated by
   the Director to conduct the CFC in a particular community.”

   We reviewed the LFCC meeting minutes and other communications to determine if the
   LFCC authorized one-time disbursements and approved a threshold amount. We were
   unable to identify in the LFCC meeting minutes where the LFCC approved or authorized the
   amount of one-time disbursements. The PCFO provided a copy of an email request that was
   made to the LFCC requesting approval to make one-time disbursements, which was
   approved by the chair of the LFCC.

   We requested the LFCC to provide documentation that this was voted on by all LFCC
   members or to provide an explanation as to why it was not. We did not receive a reply from
   the LFCC.

   By definition the LFCC is a “group of Federal officials” and not only the chairperson.
   Therefore, the approval of the one-time disbursements by the LFCC chairperson alone was
   not a valid decision of the LFCC as a “group of Federal officials.”

   As a result of the LFCC chairperson improperly making CFC decisions for the LFCC as a
   group, the LFCC membership did not have an opportunity to exercise its authority in
   administering the CFC.




                                               32                          Report No. 3A-CF-00-14-048
   Recommendation 18

   We recommend that the OCFC ensure that the LFCC has instituted procedures to ensure that
   decisions related to one-time disbursements are voted on by its members and that the vote is
   recorded in the minutes of an LFCC meeting.

   PCFO/LFCC Response:

   The PCFO and LFCC agree with the recommendation.

4. One-Time Disbursement Threshold Applied Incorrectly                              Procedural

   The PCFO made quarterly disbursements to 10 organizations that received designations
   below the threshold for one-time disbursements.

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

   We reviewed the disbursements made by the PCFO to determine if it properly disbursed
   funds to organizations that met the threshold amount utilized by the PCFO when making the
   one-time disbursements. During our review we identified 10 organizations that met the
   criteria to receive one-time disbursements and received quarterly disbursements instead. The
   PCFO was uncertain as to why this occurred.

   As a result of not applying the one-time disbursement threshold correctly, the quarterly
   disbursements made to organizations of the 2012 campaign were not accurate. It should be
   noted that the result of the error was determined to be immaterial.

   Recommendation 19

   We recommend that the OCFC and LFCC direct the PCFO to institute policies and
   procedures to ensure that one-time disbursements are made to all organizations that meet the
   pre-determined threshold.

   PCFO/LFCC Response:

   The PCFO and LFCC agree with the recommendation and state that the LFCC has directed
   the PCFO to institute procedures to ensure that one-time disbursements are made to all
   organizations that meet the pre-determined threshold set by the LFCC.



                                              33                         Report No. 3A-CF-00-14-048
5. Outstanding Check Procedures                                                      Procedural

   The PFCO did not follow its policies and procedures for the disposition of un-cashed checks.

   CFC Memorandum 2006-5 directs PCFOs to develop and follow policies and procedures
   regarding the disposition of un-cashed checks. The procedures should include at least three
   documented attempts to contact the payee. The policy should be documented and
   implemented when a check remains un-cashed after six months. Our review of the PCFO’s
   policies and procedures for un-cashed checks did not identify any discrepancies with the
   memorandum.

   However, when we reviewed the PCFO’s Outstanding Checks List to determine if any
   checks were outstanding for six months or more, we discovered four checks that were
   outstanding for more than six months. We asked the PCFO to provide documentation of the
   follow-up attempts made to the organizations. The PCFO replied that it overlooked the four
   checks and that attempts to contact the payee had yet to be made. The PCFO stated that it
   has since attempted to contact the organizations.

   As a result of not following its procedures for un-cashed checks, CFC funds were not
   received by these organizations in a timely manner or distributed properly as undesignated
   funds if these organizations were no longer operating.

   Recommendation 20

   We recommend that the OCFC and LFCC ensure that the PCFO is properly following its
   policies and procedures for handling un-cashed checks.

   PCFO/LFCC Response:

   The PCFO and LFCC agree with this recommendation and state that the LFCC has directed
   the PCFO to provide an outstanding check report at each meeting of the LFCC.

   OIG Comments:

   The PCFO and LFCC’s suggested corrective action is incomplete. Merely reporting on
   outstanding checks at an LFCC meeting does not meet the requirements of CFC
   Memorandum 2006-5, which were not followed during the 2012 campaign. We suggest that
   this report include detail as to the attempts made to contact the payee after a check has been
   outstanding for more than 6 months. The LFCC should also require the PCFO to maintain
   documentation of those attempts to contact the payees.



                                               34                          Report No. 3A-CF-00-14-048
6.		 Pledge Form Errors                                                                Procedural

   Our review identified four pledge forms with various errors.

   5 CFR 950.105(d)(1) states that it is the responsibility of the PCFO to honor employee
   designations.

   Additionally, CFR 950.105(d)(3) states that it is the responsibility of the PCFO to train
   keyworkers to check and ensure the pledge form is legible, to verify mathematical
   calculations, and to ensure the donor’s release of personal information is filled out properly.

   5 CFC 950.402(d) provides guidance for the handling of pledge forms with mathematical
   errors present on them. In all cases, the guidance instructs the PCFO to “honor the total
   amount pledged” on the pledge form.

   Finally, 5 CFR 950.105(d)(6) states that it is the responsibility of the PCFO to honor the
   wishes of donors who choose not to release any personal information.

   We reviewed a sample of 75 pledge forms to determine if the pledge form data matched the
   PCFO’s pledge form report. Specifically, we verified the donor name, charity code number
   and amount donated, total amount donated, and the donor’s choice to release their personal
   information. Our review of the PCFO’s data entry accuracy identified four pledge forms
   with errors.

   Specifically, our review identified the following errors:

        		   One special event pledge form had multiple alterations that put the total gift in
              doubt. Our review of the pledge form found two amounts ($1,167.93 and
              $2,075.50) entered into the total gift box of the pledge form. The pledge form also
              had two different amounts entered as a designation to the one charity listed
              ($2,075.50 and $2,068.50). The PCFO’s database listed both the total gift and
              designation for this pledge form as $2,068.50. As no other supporting
              documentation was provided, we cannot determine if the amount entered by the
              PCFO was correct.

        		   One pledge form had multiple alterations. First, the total gift amount was changed
              from $2,600 to $1,600 and individual amounts to the five charities from $520 each
              to $320 each. No donor initials were present, so we cannot determine who made
              these changes. Additionally, the pay period amount was changed from $100 per
              pay period to $61.54 (again we could not determine who made this change).



                                                35 	                        Report No. 3A-CF-00-14-048
           Finally, the PCFO, considering that the $61.54 pay period amount times 26 pay
           periods equals $1,600.04, altered the total gift amount to $1,600.04 rather than
           accept the total gift amount as the regulations stipulate. The PCFO then added
           $0.01 to four of the five charities receiving designations.

     		   One pledge form where the pledge form database indicates the donor chose to
           release their address. However, a review of the pledge information showed that the
           donor did not make this choice. The PCFO stated that this was the result of a data
           entry error.

     		   One pledge form where the charity code did not match the charity code on the
           pledge form report. The PCFO indicated that this was a data entry error on its part.

As a result of these errors, the PCFO did not meet its responsibility to honor employee
designations.

Recommendation 21

We recommend that the OCFC and LFCC direct the PCFO to ensure its pledge form
processing procedures are followed, especially those procedures regarding pledge forms with
apparent mathematical errors so that the “total gift” amount is always the amount honored.

PCFO/LFCC Response:

The PCFO and LFCC disagree with this recommendation (related to the first two bullets)
stating that the PCFO currently has procedures in place for this situation. Specifically, it
states that it has provided the OCFC with a pledge form problem resolution matrix, which
documents the procedures in place, annually for 10 years.

OIG Comments:

We reviewed the pledge form processing procedures provided by the PCFO and LFCC and
determined that they follow the requirements of the regulations with one exception. In its
steps to resolve issues related to situations where the “per pay period total does not equal the
total gift due to rounding” its resolution is to assign a proportionate share to each designation
using the dollars per pay period. This is incorrect.

The only time a charity designation should be adjusted is when those individual designations
exceed the total gift. The PCFO should never consider the “per pay period total” when
determining if a pledge form is completed correctly. The only things it should pay close



                                             36 	                         Report No. 3A-CF-00-14-048
        attention to ar e th e total gift and th e individual amounts designated to charities. The payroll
        offi ce of th e donor will detennine how much is deducted from their pay check based on th e
        total gift (divided by th e number of pay periods) and not based upon what the donor enters
        into the pay period amount section of the pledge f01m .

        The two pledge fon n en ors disputed by the PCFO an d LFCC are still questioned because,
        although the resolution matrix procedures have steps to conect the en ors identified, the
        en ors still occmTed. We lmderstand that enors occur fr om time to time, but the PCFO
        should su·ive to ensure that all of its procedures ar e followed consistently so that all pledge
        forms ar e recorded conectly.

        Recommendation 22

        We recommend that the OCFC and LFCC direct the PCFO to institute procedures related to
        pledge f01m s with alterations that cannot be verified as made by the donor to ensure that the
        changes were made by th e donor. The procedures could include having the keyworkers
        ensure that pledge f01ms ar e initialed by the donor if changes ar e present or by sending
        pledge f01m s back to th e donor for verification .

        P CFOILFCC Response:

        The PCFO and LFCC agree with this recommendation an d state that the PCFO has
        implemented procedures (as directed by the recommendation) for the 2014 campaign.

D.   ELIGIBILITY

     1. LFCC Members                                                                           Procedural

        Only 7 of the 15 LFCC members attended at least 50 percent of the meetings at which
        attendan ce was recorded and the LFCC did not achieve 50 percent attendan ce at any of these
        meetings. Additionally, th e LFCC did not hold meetings regar ding the 2012 campaign until
        August 2012, missing th e opportunity to make important campaign decisions required of it
        by th e Federal regulations.

                       According to 5 CFR 950.101 the LFCC is "the group ofFederal officials
 The LFCC could        designated by the Director to conduct the CFC in a pmiicular community."
 not demonstrate
adequate oversight
   of the CFC.         Additionally, 5 CFR 950.104 (a) states that "All members of the LFCC should
                       develop an lmderstanding of campaign regulations and procedures."




                                                      37                            Report No. 3A-CF-00-14-048
Finally, 5 CFR 950.104 (b) outlines the LFCC’s responsibilities, which include, but are not
limited to:
           Maintaining minutes of LFCC meetings;
           determining the eligibility of local voluntary organizations;
           monitoring the work of the PCFO and ensuring compliance with the regulations;
           authorizing reimbursement of campaign expenses;
           encouraging Federal agencies to appoint Loaned Executives to assist in the
             campaign;
           ensuring that Federal 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.

We reviewed the list of LFCC members, their terms of service during the 2012 campaign,
and the LFCC meeting minutes to determine if the members were active. To determine if the
members were active we utilized the quorum requirements of Roberts Rules of Order (that a
“quorum is a majority of the entire membership”) that at least 50 percent of the members
should be in attendance at each meeting. Our review of the three meetings at which
attendance was recorded in the minutes found that none of the meetings had at least 50
percent attendance. Further review found that only 7 of the 15 members attended at least half
of the meetings and that 4 members did not attend any meetings.

Through discussions with the PCFO and LFCC, the LFCC indicated that sometimes
members would call in for meetings and that the campaign spans across five states making it
difficult for members to attend meetings in person. Additionally, the LFCC stated that the
members that called in were not usually included on the attendees list. We subsequently
asked the PCFO and LFCC to provide updated attendee lists for the meetings, but they were
unable to provide any additional information.

Additionally, we noted that the LFCC did not hold meetings related to the 2012 campaign
until August 2012, and that only one meeting was held during calendar year 2012. The
period of January through July 2012 was a crucial time frame for the 2012 campaign, when
many important campaign decisions and approvals (such as selection of or renewal of the
PCFO, approval of one-time disbursements, review of charity applications, and approval of
campaign expense reimbursements) should have taken place, all of which are required by the
regulations.

None of the meeting minutes provided contained any information on decisions made by the
LFCC. The LFCC and PCFO stated that not all meeting minutes were maintained due to
various factors such as email cleanout and computer crashes. The LFCC also indicated that it


                                           38                         Report No. 3A-CF-00-14-048
conducted many of its decisions via email communications. However, it was unable to
provide documentation of any decisions made by email.

As a result of poor attendance at meetings, the LFCC is not benefiting from those members’
input or votes on decisions and approvals. Additionally, by not holding meetings from
January through July 2012, the LFCC put the PCFO in the position of either delaying
campaign activities until it met or moving forward with activities without proper approvals
by the LFCC.

LFCC Response:

The LFCC does not concur with portions of the finding. It states that despite numerous
obstacles, the LFCC and PCFO still had meetings in January, February, April, and June of
2012. In its January 2012 meeting the 2012 budget was approved, the CFC awards breakfast
plans were finalized, and the performance of the PCFO was reviewed. The PCFO was
unable to provide minutes of the meeting, but states that the fact that the CFC awards
breakfast was held on February 16, 2012, after which the LFCC met to review charity
applications, is evidence of the January 2012 LFCC meeting actually occurring.

The LFCC also states that there were many extenuating circumstances that affected its
meetings in 2012 and that failure to acknowledge these circumstances has distorted the
LFCC’s performance, which has always been conscientious and dedicated.

OIG Comments:

The LFCC did mention much of this information to the OIG auditors during our on-site visit.
However, without documentation in LFCC meeting minutes (which are required by the
regulations) we could not, and still cannot, prove that these meetings actually took place or if
there were an adequate number of members in attendance to make them valid meetings. The
LFCC’s overall lack of attention to detail by not recording meeting minutes or including all
discussions and decisions in those meeting minutes kept is very concerning. In the LFCC’s
role of oversight of the CFC attention to detail is of upmost importance.

Recommendation 23

We recommend that the OCFC direct the LFCC to record attendance at all meetings,
including those members attending via telephone.

LFCC Response:

The LFCC states that it agrees with the recommendation.


                                             39                          Report No. 3A-CF-00-14-048
OIG Comments:

The LFCC agreed with the recommendation, but in its efforts to explain the many
extenuating circumstances encountered during the 2012 campaign, it failed to provide a
corrective action plan related to this recommendation.

Recommendation 24

We recommend that the OCFC direct the LFCC to ensure that its meeting minutes are
maintained in accordance with the regulations.

LFCC Response:

The LFCC agrees with the recommendation and states that meeting minutes are retained for
three campaign periods according to the regulations.

OIG Comments:

The LFCC states that it maintains all meeting minutes. However, we were not provided any
meeting minutes prior to August 16, 2012. Therefore, it is our opinion that the OCFC should
direct the LFCC to ensure that all of its meetings have minutes taken.

Recommendation 25

We recommend that the OCFC direct the LFCC to ensure that it meets during those periods
when approvals required by the Federal regulations are to be made, or at a minimum, holds
an email poll of the members to record their votes on those matters and record those votes in
the next meeting’s minutes.

LFCC Response:

The LFCC agrees with the recommendation and states that it pre-schedules its meetings on a
bi-monthly basis and that procedures will be added to incorporate e-mail voting and the
documenting of those votes in the meeting minutes.




                                           40                          Report No. 3A-CF-00-14-048
E. PCFO AS A FEDERATION

   1. Federation Dues Incompletely Described                                              Procedural

      The PCFO charged its federation members’ dues although its Annual Report did not include
      the required description as required by the regulations. Additionally, as this required
      information was not included by the PCFO in its Annual Reports, the LFCC should not have
      accepted the PCFO’s federation application to participate in the CFC.

      5 CFR 950.303(e)(2)(iii) requires that a federation’s annual report must include an accurate
      description of the federation’s membership dues and/or service fees received by the
      federation from the charitable organizations’ participating members. The information must
      clearly present the amounts raised, the sources of contributions, the cost of fundraising, and
      how costs are recovered from donations.

      We reviewed the PCFO’s 2012 annual report to determine if it contained an accurate
      description of any membership dues or service fees charged to its federation members for
      participating in the CFC. The annual report lists the total amount collected for dues and the
      cost of fundraising during 2012. However, it did not include sources of contributions or how
      the costs were recovered from donations. Additionally, we requested a copy of any written
      agreements between the PCFO and its federation members, but were informed by the PCFO
      that there were no such agreements. The PCFO stated that they believed that showing the
      amount of dues collected was sufficient for compliance with the regulations.

      Additionally, the LFCC accepted the PCFO’s federation application for the 2012 campaign
      although the required description of membership dues was not included in its Annual Report.
      The simple inclusion of the dues and fundraising amounts does not meet the regulation
      requirement to also clearly present “the sources of contributions” and “how costs are
      recovered from donations.”

      As a result of its lack of understanding of the regulation requirement, the PCFO is not
      meeting its requirements as a federation member of the CFC. Additionally, by accepting the
      PCFO’s application to participate as a federation, the LFCC risks permitting participation in
      the CFC by federations that do not follow the regulations.

      Recommendation 26

      We recommend that the OCFC and LFCC direct the PCFO to include information describing
      the sources of contributions and how costs are recovered from donations in its future annual




                                                  41                           Report No. 3A-CF-00-14-048
        reports. If this information is not included, the PCFO should not be permitted to participate
        as a federation in future campaigns.

        PCFO/LFCC Response:

        The PCFO and LFCC agree with the recommendation and state that the PCFO is not
        currently serving as a federation.

        OIG Comments:

        It should be noted that if the PCFO chooses to serve as a federation in the future then it must
        update its annual reports to include the required information.

        Recommendation 27

        We recommend that the OCFC direct the LFCC to ensure that all federations accepted to
        participate in the CFC meet all of the requirements for membership as outlined in 5 CFR
        950.303. If any requirement is not met, the application should be denied.

        PCFO/LFCC Response:

        The PCFO and LFCC agree with the recommendation and the LFCC has directed the PCFO
        to include this item as part of the LFCC charity review training provided each year.

F.   FRAUD AND ABUSE

     Our review found that CSM had no policies and procedures in place related to fraud and abuse.
     It is our opinion that the findings identified in this audit were not the result of fraud. However,
     CSM’s lack of fraud policies and procedures may have weakened its efforts in protecting CFC
     funds and assets from instances of fraud and abuse. As part of our audit we did notify CSM of
     our concerns and suggest that they put policies and procedures related to fraud in place.

G. DISPOSITION OF THE CAMPAIGN

     Based on the number of findings, the nature of the issues identified in this report, and the PCFO
     and LFCC’s lack of understanding of the CFC regulations, it is our opinion that the PCFO and
     LFCC are not equipped to handle the responsibilities of the CFC.




                                                      42                           Report No. 3A-CF-00-14-048
5 CFR 950.101 defines the PCFO as th e organization tasked with                 ThePCFOand
administering th e local campaign. Additionally, 5 CFR 950.105 outlines         LFCC are not
specific responsibilities of th e PCFO. Lastly, all of the remaining CFC         equipped to
regulations related to the administration of the local CFC apply to and            properly
must be followed by the PCFO.                                                   administer and
                                                                               oversee the CFC.
The PCFO did not follow or display competent knowledge and
understan ding of th e CFC regulations and/or guidance related to the following areas:
         •   Proper charging and u·acking of CFC expenses;
         •   Expense reimbursement approval;
         •   Con ect PCFO application language;
         •   Segregation of CFC fmancial records;
         •   Disbursement of all CFC monies received;
         •   Proper timing of CFC disbursements;
         •   Proper pledge fo1m procedures;
         •   Federation member dues descriptions in the Annual Report;
         •   One time disbursement application; and
         •   Outstan ding check procedures.

5 CFR 950.101 defines the LFCC as a group of Federal officials charged with conducting the
CFC in a particular community. Additionally, 5 CFR 950.104 outlines the oversight
responsibilities of the LFCC.

The LFCC did not follow or display competent knowledge and understanding of the CFC
regulations and/or guidan ce related to the following areas:
         • Expense reimbursement approval;
         • PCFO application language;
         • Federation application review;
         • PCFO perfonnance reviews; and
         • One time disbursement and sponsorship agreement approvals.

Additionally, the LFCC displayed a lack of involvement in its role of oversight as displayed in
th e following areas:
           • Lack of regular LFCC meetings;
           • Poor LFCC member attendance at meetings;
           • Lack of documentation of LFCC decisions required by the CFC regulations; and
           • Lack of responsiveness to questions during our audit.




                                                43                          Report No. 3A-CF-00-1 4-048
As a result of the numerous findings, the nature of the issues identified in this report, the LFCC
and PCFO’s lack of adherence to and/or lack of understanding of the CFC regulations, and the
PCFO and LFCC not meeting their responsibilities for administering and conducting an effective
and efficient campaign, we have made the following recommendations:

Recommendation 28

We recommend that the OCFC seek to merge the Northern Lights CFC with another campaign
or ensure that the campaign is administered by a new PCFO that is equipped to handle the
responsibilities of the CFC.

PCFO/LFCC Response:

The PCFO and LFCC disagree with the recommendation and state that the facts do not support
the recommendation as they do not agree with a majority of the findings. Additionally, they state
that all of the findings agreed to have been addressed. They also state that the competency of the
Northern Lights CFC is evidenced by the successful campaigns that have demonstrated
leadership in innovative promotion and technological improvements.

OIG Comments:

The first job of the PCFO and LFCC is to ensure that an effective and efficient campaign is
conducted each year in accordance with the regulations of the CFC. Although the parties
involved may have had the best interest of the charities in mind while running the campaigns, the
regulations related to the CFC appeared to be of secondary interest.

Based on our review of the Northern Lights CFC, the many findings and recommendations, and
the consistent comments by the PCFO and LFCC which demonstrate a lack of understanding of
the regulations, it is our opinion that our recommendation is valid and that the OCFC should
consider replacing the PCFO.

Recommendation 29

Additionally, as a result of the LFCC’s lack of involvement in its role of conducting and
overseeing the campaign, we recommend that the OCFC seek to replace the LFCC.

PCFO/LFCC Response:

The PCFO and LFCC disagree with the recommendation and state that although the LFCC had
significant turnover during the 2012 campaign, its chair and Federal Executive Board Director



                                               44                          Report No. 3A-CF-00-14-048
have attended the last two CFC training conferences. Additionally, they feel that a majority of
the findings in the report have been addressed and were operational for the 2013 campaign.
Lastly, they feel that the LFCC Board is very involved in all levels of the Northern Lights CFC.

OIG Comments:

We understand that the LFCC had experienced significant turnover around the start of the 2012
campaign. We have no evidence to indicate if the LFCC has maintained better records or had
better member attendance at meetings since our audit in June 2014. Therefore we cannot
determine if those issues have improved or not.

However, by the start of our audit and the time we received the response to our draft report, those
new members of the LFCC had been in place for almost three years. Additionally, as evidenced
by the many responses that demonstrate a lack of understanding of the regulations pointed out in
this report, the LFCC still does not have a grasp of the basics of the CFC and its oversight.

As a result, we suggest that either the OCFC work closely with the current LFCC over the next
few campaigns or that the OCFC consider replacing the LFCC.




                                                45                          Report No. 3A-CF-00-14-048
 IV. MAJOR CONTRIBUTORS TO THIS REPORT

Special Audits Group

              , Auditor-In-Charge

              , Auditor




                 , Group Chief,               


                , Senior Team Leader 





                                         46       Report No. 3A-CF-00-14-048
                                                                                      APPENDIX 





                                    Northem Lights
                             COMBINED FEDERAL CAMPAIGN 

                                   December 19, 2014 



 eleted by OIG- Not Relevant to Final Repor           RESPONSE: Rep01iNo. 3A-CF-00-14-048
Group Chief, Special Audits Group
United States Office of Personal Management
Office of the Inspector General, Office of Audits

 eleted by OIG- Not Relevant to Final Repor

Enclosed is our response to your draft rep01i detailing the results of the audit of the 2011 and
2012 N01ihem Lights Combined Federal Campaign (CFC). Community Shares of Minnesota,
located in St. Paul, Minnesota, served as the Principal Combined Fund Organization (PCFO)
during both campaigns. We have responded to all findings contained in the draft rep01i by
annotating the report itself. The responses ar e contained at the end of each recommendation in
BOLD BLUE.

We expect th at th e attached documentation and responses, which include action plans, most of
which ar e ah eady in place, will resolve the findings an d the conclusions for the final rep01i.
Alth ough some fmdings ar e valid, we are disappointed by the fact that most findings to which we
have responded were discussed with the auditors and our comments were not included in the
draft rep01i.

We consider this rep01i as an opportunity to con ect deficiencies and make improvements, and
continue in our passion for CFC with conscientious oversight.

Sincerely,




   Northern Lights CFC Co-Chair           CFC M anager 

   M98 Air Traffic M anager               Community Shares of Minnesota 

   Federal Aviation Administration        1619 Dayton Ave. Suite 323 

   Minneapolis Approach Control (M98)     St . Paul, MN 55104 

   6311 341h Ave. S. 

   Minneapolis, MN 55450-2906


 eleted by OIG- Not Relevant to Final Repor




                                            47                              Report No. 3A-CF-00-14-048
OIG Comment: As the PCFO and LFCC’s responses to the draft report findings and
recommendations were imbedded within the body of the draft report, we extracted only those
comments that were relevant to the Final Report as follows. Please note, we adjusted the
recommendation numbers, where necessary, to coincide with our final report.


Agreed-Upon Procedures Not in Compliance with the Audit Guide

Recommendation 1: We agree with this recommendation. The LFCC will ensure that the IPA
fully understands the CFC and applicable regulations by conducting a meeting with the IPA prior
to 2013 Audit. We expect notification of the upcoming Audit in March of 2015. Once we
receive notification, we will schedule a meeting with the IPA to review the CFR, the current
Audit Guide AUPs, and findings of the 2012 OIG Audit. We will discuss the Audit Guide steps,
and encourage them to contact the OCFC during the Audit if they are unsure of how to complete
the required procedures.

Recommendation 2: We agree with this recommendation.


Administrative Expenses

$3,900 in audit fees related to the IPA audit of the 2011 campaign: We do not concur with
this finding. The $3900 in audit fees was budgeted for the 2012 audit, which was scheduled for
late spring 2014. This expected expense was included in the final 2012 expense report to the
LFCC in March of 2014, meeting the requirement to close out 2012 with the last distribution by
March 31.

In late February, 2014, we were advised by OCFC that we would have an OIG audit, and the
regular IPA audit would not be required. We were also told that we should estimate expenses
associated with the OIG audit. We made the decision to let the $3900 already budgeted for the
IPA audit stand as our estimated expense for the OIG audit.

$2,685 in travel-related fees for the 2013 CFC Conference: We do not concur with this
finding. The attendance and expenses for the 2013 CFC conference occurred during the 2012
campaign, and were budgeted as part of that campaign. At the time the registrations were
required, there was no approved 2013 budget.

We believe the appellation of “2013 Conference” is more appropriately considered the calendar
year of occurrence. The agenda of the 2013 Conference encompassed review of 2012
experiences in the credit card pilot and the Universal Giving pilot, as well as non-campaign-


                                          48                             Report No. 3A-CF-00-14-048
specific training, and discussion of 2016 changes-to-come. Per CFR part 950, campaign
expenses are charged to the year of the campaign. We contend that the expenses were
appropriately charged to the 2012 campaign.

$550 in banking fees related to the 2011 campaign: We agree these are 2011 expenses that
were mistakenly charged to 2012.

$158 in setup fees related to the 2013 campaign line of credit account: We agree with this
finding. The PCFO has instituted a checklist that will be utilized annually as campaigns
transition.

$105 in equipment lease fees that were related to the 2011 and 2013 campaigns: We agree
with this finding.

$11 in insurance expense overcharged to the CFC: We agree with this finding.

$256 in banking fees related to accounts not utilized by the CFC: We do not concur with this
finding. This amount is from the Western Bank account which is the operations account for
CSMN. CSMN pays the expenses of CFC, and the $256 in fees represent the percentage share
that is charged to CFC as an appropriate reimbursable expense.

$140 in CFC banking and credit card fees: We do not concur with this finding. The $140
reimbursed fees represent fees associated with credit card payments by individuals for an event
such as the Awards breakfast. It is not a donation. The payments went through the CSMN
operations account, not the CFC bank account, thus it is a reimbursable expense.

$23 in cell phone setup charges related to expenses for employees that do not charge time to
the CFC campaign: We do not concur with this finding. An examination of the invoice shows
no reference to cell phone repair charges. The invoice refers to providing information for staff
members and contractor that was necessary to synchronize personal cell phones to CSMN
network after a new server was installed The referenced amount is a contractor who provides
assistance to CFC in financial accounting requirements for Audit, 990 and CSMN finance
committee, and communication is necessary to the CFC in scheduling meetings.

Recommendation 3: We do not concur. We propose that this amount is minimal and requires
no further action.

Recommendation 4: We agree with this recommendation. The LFCC shall require the PCFO,
beginning with the annual budget review in January, to provide procedures that ensure
compliance and will provide appropriate oversight per the recommendations.


                                           49                             Report No. 3A-CF-00-14-048
Recommendation 5: We agree with this recommendation. The LFCC shall require the PCFO,
beginning with the annual budget review in January, to provide procedures that ensure
compliance and will provide appropriate oversight per the recommendations. Specifically, line
item review of expenses will be included in bi-monthly LFCC reviews.


Improper Matching of Receipts and Expenses

Recommendation 6: We agree with this recommendation. The LFCC and PCFO have
instituted policies and procedures to accurately track and record campaign expenses throughout
two year campaign period.


LFCC Approval of Campaign Expense Reimbursement

Recommendation 7: We agree with this recommendation. Policies and procedures have been
implemented to review the PCFO’s actual expenses and itemized receipts for 2013 and 2014
campaign.

Recommendation 8: We agree with this recommendation. Policies and procedures have been
implemented to document authorization and approval of PCFO’s reimbursement of actual
campaign expenses. (See Standing Agenda on page 56)

Recommendation 9: We agree with this recommendation. Policies and procedures have been
implemented for the approval process of submitted campaign expenses prior to reimbursement to
the PCFO. (See Standing Agenda on page 56)


Obsolete PCFO Application Statement

Recommendation 10: We agree with this recommendation. The LFCC Co-chairs, and vice
chair and PCFO look forward to receiving OCFC‘s guidance regarding future changes related to
CFC’s structure and requirements at the training scheduled for February of 2015. The scheduled
March LFCC meeting will include Briefing on conference topics and CFC changes.




                                           50                            Report No. 3A-CF-00-14-048
Performance Review of the PCFO by the LFCC

Recommendation 11: We agree with this recommendation. The LFCC has always reviewed the
PCFO’s performance prior to renewing a multi-year agreement. The LFCC will ensure a full
review is done and fully documented in minutes for the final year of this multi-year agreement.

In January, 2012, the LFCC experienced a major transition: the FEB Director retired, the LFCC
Chair stepped down, the FEB offices moved to temporary quarters, and the new LFCC Chair’s
father became ill, necessitating her to take an extended time off. The meeting s were still held as
described above, however these extenuating circumstances led to a time of bare bones oversight,
and not reflective of normal policies and procedures of this committee. Minutes and
documentations were housed at FEB offices at the time. The transition of people and location,
including computer records led to a short time when we could not access records.


PCFO Solicitation Not Documented

Recommendation 12: We agree with this recommendation. New procedures are in place so that
the LFCC, MN FEB, and PCFO all have a method to safeguard documents pertinent to a
campaign for three completed campaign periods.


Sponsorship Agreement Approval

Recommendation 13: We agree with this recommendation. The LFCC did give blanket
approval to the PCFO to seek sponsorships at a meeting prior to 2009. The campaign no longer
seeks sponsorships, and has not since 2013.


Separation of CFC Financial Records

Recommendation 14: We agree with this recommendation. The LFCC has directed the PCFO
to develop procedures that would continue the compliance with this recommendation. The LFCC
will review PCFO’s progress at scheduled March LFCC meeting.


Undisbursed CFC Receipts

Recommendation 15: We do not concur with this finding. We contend there was a
misunderstanding of the software applications used and the operations workflow for the


                                            51                              Report No. 3A-CF-00-14-048
campaign. The bank statements do not show the appropriate campaign year for deposits,
whereas the General Ledger does. Comparing the bank statements with the General Ledger
makes this clear. The PCFO has provided the auditor with a detailed comparison of the bank
statement to General Ledger, and detail of the date entries into CFC Assistant (the disbursement
software) from the General Ledger.

Recommendation 16: We agree with this recommendation. See LFCC Work Plan and PCFO
Check List.


Untimely Initial Disbursement

Recommendation 17: We do not concur with findings, but do agree to recommendation. The
PCFO and the LFCC understood “begin to distribute” as a timeframe, not an absolute date. The
LFCC has directed the PCFO to institute procedures that comply with this recommendation for
2014 disbursements.


Improper Authorization of One-Time Disbursements

Recommendation 18: We agree with this recommendation.


One-Time Disbursement Threshold Applied Incorrectly

Recommendation 19: We agree with this recommendation. The LFCC has directed PCFO to
institute policies and procedures to ensure one-time disbursements are made to all organizations
and meet pre-determined threshold.


Outstanding Check Procedures

Recommendation 20: We agree with this recommendation. The LFCC has directed the PCFO
to provide an outstanding check report at the LFCC’s bi-monthly meetings.




                                           52                              Report No. 3A-CF-00-14-048
Pledge Form Errors

Recommendation 21: We do not concur with all of the findings, and overall agree with the
recommendation. Addressing the findings individually, we disagree with the first two and
concur with the second two findings.

We contend that Annual Audit Guide, Appendix B, #3 addresses this recommendation and that
procedures are in place. A resolution matrix (See pages 57 and 58) has been submitted annually
for 10 years to the OCFC, and has been accepted. This matrix documents the procedures that
have been in place.

Recommendation 22: We agree with this recommendation. The LFCC has directed, and the
PCFO has implemented this procedure that was included in key worker training for the 2014
campaign.


LFCC Members

Recommendation 23: We agree with recommendation, but we do not concur with all of the
findings. The LFCC did meet in January at the MN FEB office in their temporary location. At
this meeting, the 2012 Budget was approved, the CFC Awards breakfast plans were finalized,
and the performance of PCFO was reviewed. This was explained to the auditor, and though we
could not produce minutes, we can show that it is evident by the resulting events. On February
16, 2012 we held our Awards Breakfast, after which we also held a meeting to set the date of our
charity application review. The charity review was held in April, as evidenced by application
review sheets which were signed by LFCC members.

Additionally, there were several extenuating circumstances that affected our meeting schedule
January through April of 2012.

      The MN FEB Director and vice-chair of the LFCC retired December 31st, 2011.
      The LFCC Chair was new in position in January of 2012.
      The New LFCC Chair’s father was diagnosed terminally ill on January 3, and passed
       away on January 27th, requiring her absence to from work, and only availability by
       phone for a period of time. At the same time, the Chair’s work computer crashed, and all
       documents prior to this were lost.
      The PCFO CFC manager suffered sudden loss of a brother and sister between December,
       2011 and April, 2012 which required her absence.
      The Assistant FEB Director stood in as vice-chair during this time, until new MN FEB
       director came on board, which was spring of 2012.

                                           53                             Report No. 3A-CF-00-14-048
      The new LFCC chair and campaign co-chair attended the OPM CFC training for first
       time in late February 2012.
      The MN FEB office was temporarily moved, due to renovations of the Federal building,
       and computer records were not able to be recovered when office was moved to its
       temporary location. This was complicated by the retired FEB director not being available
       after December 31, 2011.

Despite the numerous obstacles we faced in this timeframe, the LFCC and PCFO still had
meetings in January, February, April, and June to conduct our business. In addition we held a
successful Awards Breakfast, we conducted our charity review, we attended OPM training, and
planned for the upcoming 2012 campaign. We utilized email to approve artwork and theme for
2012 campaign in May of 2012. None of this could have been accomplished if we did not meet.
We contend that failure to acknowledge these circumstances that were explained to the auditor
has distorted LFCC performance which we contend has always been conscientious and
dedicated.

Recommendation 24: We concur with this recommendation. Meeting minutes are retained at
the MN FEB office for three campaign periods, per regulations.

Recommendation 25: We concur with this recommendation. LFCC meetings are scheduled a
year in advance bi-monthly. Procedures will be added to incorporate e-mail votes and
documented in the meeting minutes following the vote.


Federation Dues Incompletely Described

Recommendation 26: We would agree with this recommendation; however the PCFO has not
applied as a federation since 2013.

Recommendation 27: We concur with this recommendation. The LFCC has directed the PCFO
to include in this item in the training provided to the LFCC charity review training for 2015.


Disposition of Campaign

Recommendation 28: We do not agree with this recommendation, and feel that the facts do not
support the recommendation. We do not agree with a majority of the findings, as supported with
attached documentation and explanation. The findings that we do agree with have been
addressed. The competency of the Northern Lights CFC is evidenced in the successful



                                          54                             Report No. 3A-CF-00-14-048
campaigns that have demonstrated leadership in innovative promotion and technological
improvements.

Recommendation 29: We do not agree with this recommendation. Although the LFCC and the
MN FEB both had significant turnover in 2011-2012; a new LFCC Chair and new FEB Director
were appointed in 2012: the chair and current MN FEB Director and Assistant attended the last
two training conferences. A majority of the findings in this report had been addressed and were
operational for the 2013 campaign. We contend that the current LFCC board, which includes the
Director and Assistant MN FEB Director are very involved in all levels of the Northern Lights
Campaign.




                                          55                             Report No. 3A-CF-00-14-048
Provided as part of the PCFO/LFCC Response:
LFCC Standard Meeting Agenda Template




                                    Northern Lights 

                             COMBINED FEDERAL CAMPAIGN 

                                1619 Dayton Ave, Ste 323 

                                   St. Paul MN 55104 


                                  LFCC Meeting Agenda 

                             STANDARD MEETING TEMPLATE 


                       Deleted by OIG – Not Relevant to Final Report

   1.		 Review Previous Meeting Minutes
   2.		 New Business
           a.		 Scheduled events
           b.		 Campaign-related decisions
                    i.		 Applications review and decisions
                   ii.		 Materials for next campaign – theme, posters, booklets, special events,
                         goal
                  iii. Solicitation of volunteers
                  iv.		 Review of Campaign progress

   3.		 Ongoing Business
           a.		 Review of line-itemized CFC Expenses to date, with receipts.
           b.		 Review of PCFO work plan and written policies and procedures showing
                oversight of the campaign expenses
           c.		 Compliance with procedural requirements for LFCC and PCFO.
           d.		 Outstanding Check Report

   4.		 Adjourn

   5.		 Next Meeting Date:




                                            56 	                             Report No. 3A-CF-00-14-048
Provided as part of the PCFO/LFCC Response:

                                                 Northern Lights CFC
                                           Problem Pledge Resolution Matrix

Category/Problem Desc.                 Resolution Steps                                                           Person Responsible
MATH
Designations less than total gift      1. Check for second card with missing information                          Ofc Manager/verifier
                                       2. If no card is found, Per Regulation CFR 950.402, assign                 Ofc Manager/verifier
                                       remainder to undesignated

Designations greater than total gift   1. Contact Agency Coordinator                                              CFC Manager
                                       2. If unable to get donor's intent, allocate total gift proportionately,   CFC Manager
                                       per CFR 950.402

Amount per pay period total does       1. Per Regulation CFR 950.402, assign a proportionate share to             CFC Manager
not equal total gift due to            each designation using dollars per pay period
rounding,

DESIGNATION
Designated organization not found      1. Verify that organization was approved using final approval list         CFC Manager
in CFC Assistant                       from OPM
                                       2. If approved, enter in CFC Assistant                                     CFC Manager
                                       3. If not approved, contact agency coordinator to ascertain donor's        CFC Manager
                                       intention.
                                       4. If unable to get donor's intention after 2 attempts, per Regulation     CFC Manager
                                       CFR 950.402, assign to undesignated.

ILLEGIBLE
Can't read donor name                  1. Contact Agency Coordinator.                                             CFC Manager
                                       2. If unable to obtain identity enter gift with name “Donor Name           CFC Manager
                                       Unknown”.

Can't read amounts.                    1. Contact Agency Coordinator to ascertain donor's intention               CFC Manager

Can't read designations                1. Contact Agency Coordinator to ascertain donor's intention               CFC Manager
                                       2. If unable to contact the donor after 2 attempts, per Regulation         CFC Manager
                                       CFR 950.402, assign to undesignated.

Can't read acknowledgement             1. Contact Agency Coordinator to get information                           CFC Manager
information.
                                       2. If cannot contact donor, mark “Do Not Acknowledge”                      CFC Manager


PAY PERIOD
Donor selects the wrong pay            1. Contact coordinator                                                     CFC Manager
period interval

NEW PROBLEM
No description available for           1. CFC MANAGER determines best resolution based on issue.
problem




                                                             57                                           Report No. 3A-CF-00-14-048
CFC NEXUS ONLINE
Donor makes duplicate pledge       1. Contact Agency Payroll contact and Agency Coordinator.            CFC Manager
                                   Determine which pledge to keep (they are numbered) OR if donor
                                   meant to make two pledges.
                                   2. If donor wants only one, delete pledge in CFC Nexus               CFC Manager


Donor requests pledge be           1. Inform Agency Payroll contact and Agency Coordinator (if they     CFC Manager
cancelled                          have not already been informed) to remove from agency's list.
                                   2. Delete pledge in CFC Nexus                                        CFC Manager


Donor has trouble registering or   1. Verify that donor is at Northern Lights CFC Nexus site (and not   CFC Manager
making a pledge. Usually, donor    at the CFC Nexus demo site).
contacts CFC Manager directly or
through email.
                                   2. Open CFC Nexus Admin website and verify that employee is          CFC Manager
                                   not blocked because of too many attempts.
                                   3. If necessary, provide donor with new password to access.          CFC Manager
                                   4. Walk donor through process as outlined in CFC Nexus help          CFC Manager
                                   guides.
                                   5. If cannot resolve, contact Arkiom for assistance


Employee Express Online
Employee calls with problem        1. Donors are directed to contact the EEX help desk.
related to EEX




                                                       58                                        Report No. 3A-CF-00-14-048
                                                                                                                         



                                       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.

                                                                       59                                          Report No. 3A-CF-00-14-048