Millions in unallowable costs for NHHC itemized by NEG
Unallowable and questionable costs pointed out by Human Resources Director Le’i Sonny Thompson as part of the National Emergency Grant (NEG) contract with the Native Hawaiian Holding Company, consisting of travel expenses, housing accommodations, transportation (rentals and buses), salaries including non NEG employees being paid and lease expenses to Community Investments Corporation (CIC) were revealed in an expenditure analysis report prepared by NEG Employees and leaked to Samoa News.
The NHHC was contracted by the government to provide training and employment in the contact center industry for 900 NEG participants and authorized to operate job placement and supportive services in a setting that would serve as part of the Workforce Investment Act (WIA) Workforce System.
This project was funded by the U.S. Department of Labor’s NEG grant and was administered by the local Department of Human Resources.
NHHC partnered with Pacific Resources Inc. a local company owned by Michael McDonald and his wife Paula Stevenson-McDonald.
According to the five-page report, $18,939.38 was paid to Lumana’i Development Corporation and Sharon Stevenson as payment for rent, which was for Mr. and Mrs. McDonald’s housing accommodation that was determined to be an unallowable cost.
There was also $14,444 that was listed under Lease Expenses for the Community Investment Corporation (CIC) and $1,800 paid to Lumana’i Development Corporation — the lease agreement was not available for review and these are also considered unallowable costs.
The housing allowances and lease expenses were paid from the Administrative costs for which $174,286.07 was allocated, yet according to the Administrative Provision under the title 1workforce investment act, (subpart B) the costs of administration are costs associated with performing, accounting, budgeting, financial and cash management function for procurement, property management, personnel management, payroll functions, audit functions, developing systems and procedures required by administrative functions and etc.
The report states that $2,646,506.42 was allocated for the Supporting Services and $207,763.14 was expenses listed under “Outside Services” paid to the CIC for support of NHHC staff for training on Human Resources procedures and processes.
“This does not support direct impact to the (NEG) participants and is described more as an employer cost, this is not allowable under the Supporting Services.” There were also expenses for $51,578.66 for travel costs and this is also unallowable under Supportive Services, says the report.
Transportation expenses were in the amount of $92,905.92 for participants and NHHC staff. The backup documents to justify these costs reflect charges to a local bus company to transport participants from the One Stop Career and Training Center in Tafuna, to various worksites, mainly the Cocoa Project worksites, these charges have no support documents.
Also, Samoa News notes that invoices charged to NHHC by a local car rental company (which is not in the report, that Samoa News obtained) are in the amount of $8,575 for rentals in the month of May 2, 2012. Another invoice was in the amount of $4,900 for the month of June 2012 where FJ Cruisers and Nissan Rogues were rented out for over a period of 10 months.
According to the report, of the $1,546,006 which was allocated for the NEG funded training services, there are salaries expenses of $1,048,047.14, among this are 38 participants who were paid who were non-NEG participants.
There are also expenses for $42,717.06 related to the Job Fairs and included food expenses of $17,409.87. These expenditures are unallowable without submission of proper invoices, source documentation and how these costs support a participant’s training and employment plan.
Other questionable costs are classified under communications where expenses were $2,368,766 and the report notes that these were for the use and provision of the Tele Presence equipment, yet there are no invoices for the use of equipment in a training plan that directly impacts the training and employment placement of the participants. The report states this benefited 325 participants, yet there is no proof of training plans, curriculum or schedules or documentation in the participants’ files.
Training and Education training was in the amount of $362,336.60, which is a questionable payment that cannot be supported with proper invoices such as remittances made to a Methodist Church, and local business man, and a local company and other individuals “that unexplainably do not have direct impact on Training Services” and these costs do not support the NEG funded training.
According to the report, supporting services is WIA services grant participants received for transportation, childcare or dependent care necessary to enable the participants to attend a training and employment action.
Also included in the report are “Professional Fees” in the amount of $594,355.45 that was paid to OGC (Samoa News was unable to identify this company) and Dearborne International that was paid from “Other Expenses” to which $174,286.07 was allocated.
“No invoices were available for review, it was noted during the interviews that Dearborne International manages the NHHC, and this payment was for these management services, which is an unallowable expense.“ The NHHC cannot sub-contract their services to another vendor, the NHHC is the only project operator under the scope of work for this contract,” says the report.
Other general compliance observations of the NHHC operating procedures was the process for selection of vendors, where there were no standardized and documented procedures to execute fair selections of local vendors for contract services (i.e., leased equipment, property purchases, communications, transportations rentals etc). Many of the expenditures are Sole Source practices with an absence of other company estimates for cost comparison; these imply biased practices towards certain vendors that are considered questionable.
Also the use of off island vendors, indicate the payment for services to non-local companies that do not directly benefit the local economy. “While it is acceptable that there are services that require off island coordination, the training services and general project management expenditures should be managed with necessary, reasonable and allowable considerations to retain maximum benefits to the participants.
“There is also a lack of documented invoices, back-up documentation and close alignment of the project budget to the project strategy and scope of work.
“An incoherent and disorganized fiscal plan that does not support the actual costs of $5,520 per participant as outlined in the NHHC scope of work” is stated in the report; and Samoa News will report on the Program Review and other interesting developments in later editions.
In the meantime, ASCA employees who were hired under the NEG program by NHHC have written the United Stated Department of Labor asking for an investigation to be launched into the use of federal grant funding for non-grant purchases by NHHC and how employees were treated. A report on this and other developments in tomorrow’s issue.