TAO Report: Lack of oversight supervision also caused delay in timely submission of fed reimbursements

The Territorial Audit Office has found that ASG grant management policies and procedures do not address oversight supervision of the federal grant reimbursement process, which has caused delay in timely submission of reimbursement requests to federal  grantors.


This was among the findings and recommendations made by the TAO in its audit of the  Department of Treasury, Grants Reimbursement Audit of Fiscal Year 2011.


Part one of the report was published in yesterday’s edition focusing on Condition #1 — Indirect costs. There are two conditions cited in the report along with four main recommendations.


For Condition #2, which deals with direct costs, TAO said, “In some instances, reimbursement requests for grant related direct costs are not submitted in a timely manner.”


Direct costs are those costs that can be specifically identified to a particular grant program. For example, direct costs include: compensation of employees that work on a grant, materials acquired for a grant, and equipment or capital items purchased for a grant.


TAO said its auditor found that grants management generally submitted reimbursement requests in a timely manner. For example, grants management, with some exceptions, generally submitted reimbursement requests for salaries, wages, and benefits every two weeks, consistent with when payroll expenses were incurred.


“We also identified instances in which grants management timed vendor payments so that ASG received federal monies before local funds were used,” it says. “However, the audit found several instances in which grants management did not obtain timely reimbursement of local funds spent on federally-funded grant programs.


One of these instances was outside the control of grants management, said TAO adding that limited staffing with grants management contributed to the problems TAO identified.


Additionally, deficiencies in grant management’s internal control system is the other primary cause of this condition.




TAO  cited four examples of instances in which grants management didn’t obtain timely reimbursement of local funds.


One example dealt with the Education Department, in which the first reimbursement for FY 2011 for 14 federal grants was only submitted in January of 2011 — over three months into the fiscal year (which began Oct. 1, 2010.)


This reimbursement request was for $821,071 and included seven payroll periods dating back to September 2010, said TAO, adding that local funds had been used to pay this amount. Additionally, the delay in seeking reimbursement for these expense was because DOE didn’t get a federal grant award approval until January 2011.


TAO says this matter was discussed with the DOE deputy director, who stated that the FY 2011 grant needed to be revised and didn’t get approval until January 2011. Additionally, the deputy director says the delay in the award process for FY 2011 “was an anomaly, as education grants are normally approved around the start of the fiscal year,” said TAO.


Another example cited by TAO is that two reimbursements totaling $751,043 from the previous year were not submitted until October and November of the year 2011. This means, ASG “advanced” this money in local funds for up to a year before reimbursements were submitted.


TAO said the examples cited in the audit demonstrate that limited local funds — collected cash — are outstanding for a much longer time than necessary. “This situation could also be viewed as an interest free loan to the federal government,” said TAO, adding that three of the four examples cited in the report appear to be due to mistakes that were not detected or reimbursement opportunities that were missed or overlooked for extended periods of time.


“We believe that proactive corrective actions by Treasury Department and Grants Management Division can mitigate some, if not all these conditions,” said TAO.




The audit report also pointed out that inadequate staff levels within grants management contributed to these conditions occurring, noting that in FY 2011, grant management had five vacancies out of 10 authorized positions.


“...the grants manager has day-to-day responsibilities on several grants in addition to overall supervisory responsibility,” said TAO. “Furthermore, one staff member is responsible for administrating 27 separate DOE grants.”


TAO said, “Although inadequate staffing is a contributing factor, grants management system of internal controls neither prevented nor detected the problems in a timely manner. Accordingly, grants management needs to establish an effective system of internal controls that can prevent these problems from occurring, or at least detect and correct them in a reasonable period of time.”


“An effective system of internal controls is essential for an organization to meet its mission, goals and objectives,” said TAO adding that the external auditors for the FY2011 Single Audit Report were critical of Treasury’s system of internal controls. (See yesterday’s part one of the audit report)


TAO went on to say that it found grants management policies and procedures “do not address oversight and supervision of the grant reimbursement process” and recommends proper supervision and oversight policies and procedures be established for an effective internal control system.


In his response, ASG Treasurer Dr. Falema’o ‘Phil’ M. Pili concurred, saying that his department is in the process of revising its Grant Division policies and procedures manual that will address these issues including procedures to verify grant expenditures are valid and properly accounted for. He said the revised manual is expected to be implemented by the end of FY 2013.




TAO conducted an exit meeting with Treasury officials on Feb. 21, 2013 to review and discuss the audit findings before they were made final. And in accordance to TAO’s Policies and Manual as well as local law, Treasury was requested to prepare a Corrective Action Plan for submission to TAO 180-days from the date this report was issued. (The report was released on Monday this week).


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