REPORT OF AUDIT THE MID-AMERICA COMMITTEE FOR Grant No. IA-20404-19-G This report has been approved for release and is transmitted to the following offices for information and such actions as may be indicated in the body of the report. The Office of Audits, United States Information Agency has no objection to the release of this report, at the discretion of the Contracting Officer, to duly authorized representatives of The Mid-America Committee. Release to the public of any grantee information contained in this report is prohibited in 18 USC 1905. "B-1" Application of FRLC Drawdowns and Source of Costs Summary of Costs Claimed and Audit Recommendations Thomas H. Miner Travel and Labor Costs Claimed and Audit Computation of Overhead Rate REPORT OF AUDIT: The Mid-America Committee for I SUMMARY OF FINDINGS Grant costs of $124,512 were examined. As a result of the audit, the following is recommended to the Contracting Officer for appropriate action: disallow costs of $829, resolve questioned costs of $32,154 and accept costs of $91,529. The grant summary is shown in Exhibit A. Details of the cost findings are shown in Exhibit B. Grant terms provide for a provisional overhead rate of 64% of direct salaries and employee benefits. The grantee did not propose an overhead rate for audit. It was found that the grant provisional rate was computed on an erroneous premise. Utilizing the grantee financial statements for the year ended October 31, 1982, the Auditor computed an overhead rate of 86% applicable to direct salaries and employee benefits. It is recommended that the Contracting Officer negotiate a final overhead rate based upon the 86% rate. Details of the overhead findings are shown in Paragraph V.B. and Exhibit C. The grantee estimates that an additional $13,500 of costs will be incurred to complete the grant. Although final costs have not been incurred, this audit may be considered final, subject to the incurrence of completion costs. Refer to Paragraph V.C. for details. The accounting system of the grantee was found unacceptable for the accumulation of costs against U.S. Government contracts and grants. Until the grantee's system has been deemed acceptable, the Contracting Officer should not issue additional grants, or contracts, to the grantee. Refer to Paragraph V.D. for details. Without the prior approval of the Contracting Officer, the grantee has advanced $72,635 of Federal Reserve Letter of Credit (FRLC) funds to the curriculum consultant, MacKenzie & McCheyne, Inc. At April 30, 1983, the consultant had incurred $65,901 of the claimed costs of $124,512. Refer to Paragraph V.E. for details. The grantee has claimed $8,419 of direct labor and travel for Mr. Thomas B. Miner, the President of the Mid-America Committee. This claim appeared excessive in relation to grant terms. It is recommended that the Contracting Officer disallow $60 and resolve questioned costs of $6,159. Refer to Paragraph V.F., Exhibit B and Exhibit B-1 for details. The audit focused on Grant No. IA-20404-19-G and included $124,512 of claimed costs which covered the period September 30, 1982 through April 30, 1983. The amount of claimed costs was not based upon a public voucher submitted to the Agency, but upon workpapers prepared by the grantee during the audit. It is the intention of the grantee to include the workpaper costs in the public voucher claim when it is submitted. Although final costs have not been incurred, this audit may be considered final, subject to the incurrence of completion costs. The grantee estimates that the completion costs will total approximately $13,500. The examination also included the computation of an overhead rate for the year ended October 31, 1982. The grantee did not prepare an overhead rate proposal for audit. The rate was computed based upon the public accountant's report for the year ended October 31, 1982 and discussions with the grantee. The audit was conducted at the grantee's office in Chicago, Illinois and at the office of the curriculum consultant, Mackenize & McCheyne, Inc., located in Washington, D. C. The examination substantially dealt with vendor invoices and cancelled checks. Except for a small portion of costs recorded in the accounts of Thomas H. Miner and Associates, Inc., the bulk of the costs had not been recorded in the grantee's accounts. The examination was made in accordance with the terms of the grant and generally accepted auditing standards, and included such tests of the accounting records and such other auditing procedures as were considered necessary under the circumstances. It is important to recognize that the explanatory notes to the exhibits are an integral part of this report and should be read in conjunction with the related text. III PURPOSE OF THE GRANT The purpose of the grant was to assist the grantee in conducting two seminars lasting two weeks each for media officials from Latin America and the Middle East and North Africa. The seminars consisted of a series of concentrated lectures focusing on all aspects of the media, including print, radio and television. In addition, lectures were given on the American political system and U.S. foreign policy objectives. The purpose of the seminars was to provide media training assistance to government officials and their armed forces in Latin America, the Middle East and North Africa in order to strengthen their effectiveness in the "War of Ideas", and specifically in media relations and overall information preparation and distribution. The Latin American seminar covered the period November 29 through December 11, 1982 (10 Program Days) and included 14 participants from 9 countries. The seminar was held in Washington, D. C. (7 Program Days) and New York City (3 Program Days). The Middle East and North Africa seminar covered the period February 28 through March 11, 1983 (9 Program Days) and included 7 participants from 7 countries. The seminar was held in Washington, D. C. (5 Program Days), Chicago, Illinois (2 Program Days) and New York City (2 Program Days). IV GRANTEE ORGANIZATION AND REVENUE The Mid-America Committee is a nonprofit corporation with offices in Chicago, Illinois. It shares office space with Thomas H. Miner and Associates, Inc., the private consulting firm of Mr. Thomas H. Miner. The officers and employees of the Committee are: Mr. Thomas H. Miner, President, Ms. Kaarina Koskenalusta, Executive Director, Ms. Karen Minnice, Program Director, Ms. Glennie Wilding-White, Project Director and Accountant, Ms. Alice Dymbrowski, Secretary, Mr. Scott Fraser, Part-time Bookkeeper, and Mr. Joseph Marini, Part-time Research Assistant. Except for Mr. Fraser, all officers and employees of the Committee are on the Committee's payroll. Mr. Fraser is on the payroll of Thomas H. Miner and Associates, Inc. In addition, it should be noted that Ms. Koskenalusta is classified as an officer and employee. However, she is a consultant on a $40,000 a year retainer to the Committee. For the year ended October 31, 1982, the Committee's balance sheet showed total assets of $97,087, current liabilities of $106,812 and a fund balance deficit of $9,725. The statement of revenues and expenses showed an excess of revenues over expenses of $29,846, based on total revenues of $317,250 and expenses of $287,404. The source of the Committee's revenue was: The grantee received no revenue during this period from the U.S. Government. Evidently, the last Government contract was with the State Department in 1975. V FINDINGS A. Costs As a result of the audit of claimed costs of $124,512, the following is recommended to the Contracting Officer for appropriate action: The recommended accepted costs include overhead adjusted by the recommended overhead rate. If the negotiated rate is higher than the recommended rate, the accepted costs will be adjusted upward accordingly. Similarly, the accepted overhead amount will increase if the Contracting Officer reinstates all or some of the disallowed and questioned direct labor costs. |