Results of Audits of the Community Services Administration and Selected Community Action Agencies

Two reviews involved the Community Services Administration's (CSA) and selected community action agencies' management of Federal funds. The first review was performed to investigate allegations of misuse and abuse of Federal funds disclosed by audits of selected community action agencies and to determine if action had been taken to correct the management deficiencies which permitted the misuse and abuse to occur. The effort concentrated in four areas; excess cash on hand, inadequate control over closely related service organizations, dual reimbursement of grantee expenses, and inadequate control over fixed assets. The latter review concentrated on whether CSA has a system of internal controls. Good internal controls are the most effective deterrent to fraud, embezzlement, and related illegal acts. Millions of dollars of excess Federal cash have been retained by community action agencies. Such excess cash in the hands of grantees increases the Federal Government's operating costs in the form of interest that the Treasury pays on the money it borrows. Hundreds of thousands of dollars of Federal funds have been transferred to closely related nonprofit service corporations. Some of these organizations have been used to circumvent restrictions on the use of grant funds, to defederalize and funnel grant funds for later use, or to acquire buildings and other assets, some of which are being held outside the reach of the Government and some of which have been sold. In addition, millions of dollars of Federal funds have been used to pay for the same expenses twice. Fixed assets purchased with Federal funds have been lost, stolen, or disposed of improperly. Many internal control weaknesses were identified during the vulnerability audit at CSA. The primary cause of CSA vulnerability is that CSA has not placed enough emphasis on forcing the requirement that strong internal controls be in place throughout its organization. CSA must emphasize strongly to Federal and grantee managers the importance of internal control.