1. Timekeeping The grantee does not require employees to keep timesheets or other time records. Labor cost identified to the various grants/programs was based somewhat on the budgeted salary costs included in the USIA grants and also on a pre-determined percentage of an employee's time allocated between USIA grants and other general programs at Claremont. We recommend that CI establish a system for recording employees daily activities on an official timesheet. A schedule of CI's CY 1982 salaries are detailed in Exhibit C. 2. Allocation of Costs During the course of our review, we discovered that numerous methodologies are used to identify and allocate costs to USIA grants and CI's general programs. According to Mr. Arnn, Secretary of CI who also maintains the books, the percentage used for allocating various expenses were based on the projected revenues for CI. At that time, the revenues were calculated at 40 percent from USIA and 60 percent from other sources. Other percentages were subsequently used to allocate various expenses with no documented basis for why they were chosen. Certain expenses could have been directly charged to either USIA grants or other CI programs rather than arbitrarily allocated by using an undocumented percentage. CI should direct charge expenses where the costs are easily identifiable prior to allocating cost on a percentage basis. For CY 1982, costs charged to the USIA grants represented approximately 70 percent of CI's total costs. USIA grants funds constituted 65 percent of CI's total revenues in CY 1982. Our review of CI's documentation to support booked costs in some instances is unauditable. In certain cases, the only document to support an expense is the canceled check and in others the justification is a receipt or a credit card slip with no adequate explanation for the expense. When supporting receipts were submitted, they did not fully substantiate the claimed expense. The majority of the expenses that lack adequate documentation relate to meals, living allowances, lodging, local transportation, honoraria and seminars/lecturers. associated with some form of travel. Most of these expenses are CI's staff does not prepare travel expense vouchers to support their travel costs. Without this information, there is no reliable basis for accepting these costs. Since there is no voucher, the Auditor cannot determine the purpose of the trip and why the cost was charged to either USIA grants or CI's general fund. We recommend that the grantee initiate written procedures on submitting proper documentation to support all expenses charged to Government grants or contracts. C. Per Diem for Participants Under USIA Grant No. IA-20349-19-G The three seminars under Grant No. IA-20349-19-G have included a per diem rate of $87 per day for each participant. Claremont was informed by someone in USIA's Private Sector program office to use this rate in their budget proposal. This rate was developed by the Office of International Visitors for use in International Visitors grants. The Private Sector office assumed that participants under this grant would be considered international visitors and therefore entitled to this per diem rate. The Latin American Seminar housed the participants at Scripps College in Claremont. The other two seminars will have the participants staying at Pitzer College in Claremont. The Latin American Seminar was completed in January 1983 but none of the 1983 costs were booked as of the date of audit. CI did receive a bill from Scripps College for that program and the statement was for approximately $7,000 in meals and $6,000 in lodging. Although $13,000 is not the total claimed costs for the program when it is compared to the per diem costs of $40,020 budgeted in the grant, there is a substantial cost savings. The total available funds provided to CI to expend on the Latin American seminar under Grant No. IA-20349-19-G was $130,743. This consisted of $117,143 from USIA grant agreement and $13,600 from the Olin Foundation. The actual costs incurred through December 31, 1982, was $71,564 as detailed in Exhibit B. The books and records of CI have not been posted for any costs incurred in 1983. Based on our review of the check register for the period of January through March 1983 and discussions with their Certified Public Accountants, there appears to be another $39,000 of additional expenses incurred on this seminar. Therefore, it is presumed CI has approximately $20,000 of grant funds remaining on the Latin American seminar. The seminar was completed in January 1983. To support this finding, it is recommended that the Contracting Officer request CI to submit a financial report immediately rather than wait the ninety days after the November 30, 1983, expiration date as stipulated in Article V of grant agreement. This same situation may also prevail under the two seminars scheduled for July and August 1983. Exhibit "A" Page 1 of 3 The Claremont Institute Schedule of Costs Claimed Under USIA Grant No. IA-20143-19-G Exhibit "A" Page 2 of 3 Explanatory Notes: 1. 2. A letter dated July 1, 1982, from the Scaife Family Charitable Trusts to Mr. Schramm, President of The Claremont Institute stated a total of $15,000 is enclosed to assist the Institute in sponsoring a month-long International Seminar in American Studies. With these funds and the USIA grant, CI spent approximately $1,500 from their general funds to cover the total costs of the seminar. The questioned costs represent the entire amount claimed for meals ($14,853) and living allowances ($5,576). The participants stayed at Scripps College in Claremont, California during the entire seminar. The cost of meals as provided by Scripps College was $11,063. This was part of the total costs billed by Scripps to CI for the seminar. A further breakdown for cost of the meals is needed in order to determine whether meals were provided to participants only or included other persons such as employees of Claremont or Public Research Syndicated in addition to speakers, lectures, etc. USIA grant funds are not allowed to be used for payment of employees meals when an employee is on official travel status. Also USIA grants should not be charged for meals of speakers, lecturers, etc. when they are already receiving per diem because the grant will incur the costs twice. It would appear that most of $11,063 meal costs will be allowed once the supporting documentation is furnished to the Auditor. The additional meal costs of approximately $3,800 and the total costs of $5,576 for living allowances were unauditable. From our review of documents that were available, CI on various occasions took the participants, instructors, speakers, etc. out to lunch, dinner or some other functions. The bills were charged on credit cards or paid in cash by employees of CI. The grantee also purchased beverages from Lasagna Liquor at various times during the month long seminar. The support for these items of expenses were copies of the credit card slips, unitemized bills or just a receipt without explanation. Therefore, there is no reasonable basis for accepting these charges without obtaining specific documentation. The data to be provided by the grantee should state as a minimum, the purpose of the function, a list of persons who attended, and an itemized statement of the expenses including liquor charges. Certain types of expenses and social functions are considered to be associated with entertainment costs which are unallowable in accordance with OMB Circular A-122, "Cost Principles for Nonprofit Organization". Until the proper documentation is provided, all costs for meals and living allowances are questioned. Exhibit "A" 3. There were two fundraising trips made by Mr. Schramm and one by Mr. Arnn at a total cost of $2,291. The trips in June 1982 were to Dallas, Memphis, Washington and New York. The Auditor mentioned to CI that costs related to fundraising activities which are charged to Government grants are unallowable in accordance with OMB Circular A-122, Section 19, "Interest, fundraising, and investment management costs". Mr. Arnn agreed that both trips should have been charged to CI's general fund. It is recommended that the Agency Contracting Officer request CI to refund travel costs of $2,291 for fundraising trips charged to USIA Grant No. IA-20143-19-G. |