Preliminary Observations on Funding, Oversight, and Investigations and Prosecutions of ACORN or Potentially Related Organizations

GAO-10-648R: Published: Jun 14, 2010. Publicly Released: Jun 14, 2010.

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Eileen Larence
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Nonprofit organizations, such as the Association of Community Organizations for Reform Now (ACORN), play an important role in providing a wide range of public services. To provide these services, these organizations rely on funding through federal grants and contracts, among other sources. Just as it is important for federal agencies to be held accountable for the efficient and effective use of taxpayer dollars, it is also important for these nonprofit organizations to be held accountable for their use of federal funds. ACORN was established in 1970 as a grassroots organization to advocate for low-income families. By 2009, ACORN reportedly had 500,000 members and had expanded into a national network of organizations involved in the development of affordable housing, foreclosure counseling, voter registration, and political mobilization, among other things. ACORN organizations relied on membership dues and on federal and private foundation funding to support various activities. Voter registration fraud allegations in a number of states and widely distributed videotapes depicting what appeared to be inappropriate behavior by employees of several local ACORN chapters spurred calls to identify federal funding provided to ACORN and ACORN-related organizations and for legislation to restrict or eliminate funding. Congress passed provisions restricting the funding of ACORN or any of its affiliates, subsidiaries, or allied organizations in the fiscal year 2010 continuing resolutions, which were followed by several fiscal year 2010 appropriations acts that prohibited any appropriated funds from being awarded to various ACORN or ACORN-related organizations. ACORN officials reported similar cuts in private foundation funding. In March 2010 ACORN officials stated that the national ACORN organization would be terminating its field operations and closing all of its field offices because of the loss of federal and other funding, although some of its related organizations were to remain open. The Consolidated Appropriations Act, 2010, directed us to issue a report on ACORN within 180 days (by June 14, 2010). We also received three request letters from a total of 23 members of Congress asking that we provide information on federal funding provided to ACORN and oversight of the use of this funding. We have combined our work for the mandate and requests to report on the following objectives for fiscal years 2005 through 2009: (1) How much funding did federal agencies award to ACORN or potentially related organizations, and what was the source and purpose of the funding? (2) To what extent did federal agencies apply oversight mechanisms when monitoring awards to ACORN or potentially related organizations to ensure funding was spent appropriately, and how were problems, if any, addressed? (3) To what extent were federal investigations or prosecutions conducted of ACORN or potentially related organizations, and what were the nature and results of these investigations and prosecutions?

Nine agencies-- the Department of Housing and Urban Development (HUD), the Department of Homeland Security (DHS), the Department of Justice (DOJ), the Election Assistance Commission (EAC), NeighborWorks, the Corporation for Public Broadcasting (CPB), the Environmental Protection Agency (EPA), the Department of the Treasury (Treasury), and the National Endowment for the Arts (NEA)--identified approximately $37.5 million in direct federal grants and at least $2.9 million in subawards (i.e., grants and contracts awarded by federal grantees) to ACORN or potentially related organizations, primarily for housing-related purposes during fiscal years 2005 through 2009. These agencies and others included in our review were limited in their ability to identify how much funding they provided to ACORN or potentially related organizations through subawards, generally because agencies are not required to and thus do not collect data on all subawards. Agencies employed several mechanisms--ranging from reviews of progress reports submitted by grant recipients to on-site monitoring--to oversee the eight direct grants for which we received documentation on their oversight process; agencies generally did not identify any problems with seven of the eight grants. Agency officials said that they considered the grant amount and availability of personnel and resources as factors in deciding what type of monitoring to conduct. Agency monitoring efforts identified and resolved a problem with one of eight direct grants to ACORN or potentially related organizations for which we obtained information on oversight. Specifically, NeighborWorks determined that ACORN Housing Corporation had not provided a description of what it planned to accomplish under the grant, as required. After NeighborWorks brought this to the attention of ACORN Housing Corporation officials, these officials subsequently provided the documentation. Oversight of subawards is generally delegated to grantees. EPA, Treasury, NEA, and NeighborWorks grantees provided a total of 15 subawards to ACORN or potentially related organizations. EPA reviewed the grantees' work plans which included subaward information, finding no problem with the subawards. Treasury officials reported that they reviewed grantees' work plans, which identified subgrantees and grantees' related expenditures. They also stated that they found no problem with a subgrant based on an assessment of a grantee that was randomly selected to receive additional oversight. In addition, NEA also reviewed the grantee's final report, which included information on the subgrant, and the subgrantee's program and budget reports, and found no problems with the subgrant. Furthermore, NeighborWorks reported that it reviewed progress reports submitted by its grantees, which included information on their subgrantees, and found no problems with the subgrants awarded to ACORN or potentially related organizations. All six of the agencies that provided direct funding to ACORN or potentially related organizations, in addition to their routine grant oversight, have inspector general (IG) reviews or internal audits of funding to ACORN or potentially related organizations that are completed or were still ongoing as of May 24, 2010. DOJ, which completed its review in November 2009, examined whether internal controls were in place related to the use of DOJ grant funds awarded to ACORN or potentially related organizations and reported that the agency had not conducted an audit or other review of the awards. EPA, Treasury, and NEA have not conducted additional reviews of their subawards beyond the routine oversight. DOJ and the Federal Election Commission (FEC) reported matters, investigations, and cases related to voter registration and election fraud for ACORN or four potentially related organizations, some of which resulted in actions being taken.

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