CSA Followup to Problems at the Nicholas County Community Action Association, West Virginia

AFMD-81-48: Published: May 6, 1981. Publicly Released: Jul 7, 1981.

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GAO reviewed the effectiveness of Community Services Administration (CSA) Region III efforts to correct management and financial problems at the Nicholas County Community Action Association. A CSA investigation had reported that the Association: (1) was maintaining and using an unaudited, income-producing account without the complete knowledge, approval, or control of its board of directors; (2) employed an Executive Director and another staff member who were receiving salaries from multiple sources; (3) used questionable bidding and procurement practices for large capital expenditures; (4) was making loans of funds and property that were contrary to CSA regulations; (5) had a board of directors that was not viable and served only as a rubber stamp for the executive director's will; and (6) had its Department of Labor employment program terminated because of a lack of fiscal controls, falsified documents, and the use of ineligible enrollees.

GAO found that the actions the CSA regional office directed the Association to take were untimely and did not substantially change the grantee's operations. Decisive action, effective monitoring, and internal communication can lead to swifter correction of grantee problems, such as those of the Association. There was poor communication between the Association and the CSA regional office. The regional office closed its audit of the income-producing account and, in effect, wrote off questionable expenditures. It demanded that the Association account for the questionable expenditures and notified the Association that it was subtracting the amount from the Association's 1981 funding. The State also intends to initiate action to recover questionable funds from the Association. GAO found no evidence of new abuses. However, financial weaknesses related to the problems uncovered by the investigation still exist. The present decentralized accounting system makes a precise determination of all funding sources and expenditures extremely difficult. The CSA regional office made the Association's board accountable for resolving issues raised by the investigation, without subsequently seeing that corrective action was taken. Continuing problems were not reported to the regional office. CSA officials often are inexperienced in public accounting and find CSA regulations confusing. CSA is reluctant to invoke punitive actions because of the effect on the program recipients. As the agencies are funded by many grant funds, the decentralized accounting system makes precise accounting difficult.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of Community Services should require Region III to take the necessary action needed to correct the current problems at the Association. Such action should include (1) seeing that the Association's board of directors is fully cognizant of its management responsibilities; (2) informing the board of the importance of fulfilling those responsibilities; and (3) insisting that, as a requirement for continued funding, the Association implement a more simplified, centralized accounting system.

    Agency Affected: Community Services Administration

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of Community Services should require Region III to improve its grant monitoring and internal communication procedures to provide for the exchange of information gathered during site visits to grantees.

    Agency Affected: Community Services Administration

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of Community Services should follow up within 6 months on the action taken by Region III to correct the problems at the Association and to improve its grant monitoring and internal communication procedures.

    Agency Affected: Community Services Administration

 

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