Alleged Financial Irregularities at the Upper East Tennessee Human Development Agency, Kingsport, Tennessee

HRD-80-68: Published: Mar 10, 1980. Publicly Released: Mar 20, 1980.

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The Upper East Tennessee Human Development Agency (UETHDA) is a public agency that develops and operates community action and other human resource programs in eight Tennessee counties. UETHDA receives funding from the Community Services Administration (CSA), other Federal agencies, and State and local agencies. Subsequent to a congressional request that it review the use of Federal funds by UETHDA, GAO learned that the Division of State Audits of the Tennessee Comptroller of the Currency was making a comprehensive review of UETHDA financial operations and records. Accordingly, it was agreed that GAO limit its work to monitoring the State's audit and reviewing the results of an investigation by the Inspection Division of CSA.

The State audit and the CSA investigation disclosed questionable financial practices involving retroactive lump-sum payments to certain upper-eschelon UETHDA officials from a pension fund established without approval, advancing vacation pay and salaries to certain employees, and making interest-free loans to employees. Numerous deficiencies in UETHDA program management were also apparent. State auditors revealed irregularities and deficiencies in the performance of a certified public accounting firm retained by UETHDA for fiscal years 1975-1977 and reported the firm to the State board of accountancy. Action was taken to recover the improper payments made to UETHDA officials from the pension fund and officials at CSA headquarters stated that CSA would help UETHDA strengthen and improve its operations by making more onsite visits, providing more technical assistance, and providing more intensified training to UETHDA board members.

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