The Office of the Inspector General, Audit Division, has completed an audit of three grants awarded to the Heartland Alliance for Human Needs and Human Rights (Heartland Alliance), a non-profit corporation located in Chicago, Illinois. The first grant, a Legal Assistance for Victims Grant, was awarded by the U.S. Department of Justice (DOJ), Office on Violence Against Women (OVW). The remaining two awards and one supplement were Services for Human Trafficking Victims Discretionary Grants awarded by the DOJ, Office of Justice Programs (OJP).1 The general purpose of all three grants was to assist victims of human trafficking in obtaining legal and social services.
As of September 30, 2006, Heartland Alliance was awarded a total of $2,039,397. At that time, Heartland Alliance’s records showed a total of $1,774,552 in grant-related costs, of which $1,632,221 had been reimbursed by OJP.
Our audit included a review of Heartland Alliance’s accomplishment of grant goals and its compliance with the following essential grant conditions: (1) accounting and internal controls, (2) grant drawdowns, (3) budget management and control, (4) grant expenditures, (5) grant match requirements, and (6) grant reporting. We tested the grant accounting records to determine if reimbursements claimed under the grants were allowable, supported, and in accordance with applicable laws, regulations, guidelines, and terms and conditions of the grants. Specifically, we tested federally reimbursable direct costs, such as consultant and contractual fees, supplies, and travel totaling $242,485; salary and fringe benefit costs of $21,534; and indirect costs of $175,610. In total, we reviewed $439,630, or about 26 percent of the $1,707,036 federally reimbursable expenditures as of September 30, 2006.2 In addition, we reviewed the grantee’s adherence to the match requirements in two of the three awards.
The OJP Financial Guide requires grant recipients to establish and maintain accounting and internal control systems to accurately account for funds awarded to them, including the identification and accounting for receipt and disposition of all funds, funds applied to each budget category included in the approved award, and non-federal matching contributions. However, our review of Heartland Alliance’s accounting system indicated that it did not permit the grantee to readily consolidate grant expenditures and receipts by grant. As a result of these weaknesses, the grantee was unable to identify and account for, in total and/or by budget category, which specific expenditures were reimbursed by OJP.
The OJP Financial Guide states that discretionary awards made by OJP offices and bureaus are available for use within the grant award period. Any funds not properly obligated within that period will lapse and revert to the awarding agency. Heartland Alliance drew down $33,803 in administrative expenses for grant 2002-WLBX-0026 that were obligated and paid in September 2004, after the grant period of availability had expired. Because the grantee did not receive authorization from OJP to extend the award period, we question the $33,803 in grant funds that were not properly utilized within the period of availability.
The OJP Financial Guide permits a grantee to transfer funds between approved budget categories without OJP approval if the total transfers are 10 percent or less than the award amount. Requests for transfers over 10 percent must be submitted to OJP for approval. We found that for grant 2002-WLBX-0026, Heartland Alliance transferred funds in excess of the allowable 10 percent amount by $44,527 without OJP approval.
For grant number 2002-WLBX-0026, we found that the grantee paid $23,009 in salaries and $3,410 in fringe benefits for a Legal Supervisor position that was not authorized in the OJP-approved budget. We therefore question these amounts.
OMB Circular A-122 requires that charges for salaries and wages be based on documented payrolls approved by a responsible official of the organization, be prepared each month reflecting the actual activity of each employee, and be signed by the individual employee or by a responsible supervisor having first-hand knowledge of the activities performed by the employee. Further, the distribution of activity must represent a reasonable estimate of the actual work performed by the employees. We found that employees working under the grants did not complete the necessary after-the-fact time reports of their actual activities on a monthly basis, nor were these reports signed by a responsible official who could attest to the actual activity. As a result, we question all expenditures in salaries ($902,122) and in fringe benefits ($174,479) due to the lack of adequate supporting documentation.
The OJP Financial Guide states that indirect costs are costs that are not readily assignable to a particular project, but are necessary to the operation of the organization and the performance of the project. Indirect costs are calculated based upon direct costs. Because we have questioned a portion of Heartland Alliance’s direct costs due to a lack of adequate supporting documentation or factors related to the allowability of the expenditures, we also question the indirect costs associated with those direct costs. Based on our calculation of questioned direct expenditures, we question a total of $139,901 for the associated indirect expenditures.
The grantee anticipated meeting its 25-percent match commitment for grant number 2003-VTBX-K002 by utilizing its own employees for salary and fringe benefit support and acquiring pro-bono services, such as legal help, housing, and medical assistance for other category commitments. However, similar to our finding related to federally reimbursed salaries, the grantee was unable to provide the necessary support to satisfy the A-122 documentation requirement, including post-activity reports. Therefore, we question a total of $70,580 for these unsupported matching contributions for salary and fringe benefits. We also question an additional $40,000 in matching pro-bono legal services, which was not adequately supported.
Finally, Heartland Alliance’s records included non-personnel match expenditures totaling $178,225 for travel, supplies, indirect costs, consultants, and contractors. The majority of these matching costs were provided as pro-bono legal services from service providers such as consultants and contractors. According to the OJP Financial Guide, when the rate for such services exceeds $450 (excluding travel and subsistence costs) for an 8-hour day, a written prior approval is required from the awarding agency. When we compared the valuations of pro-bono services reported by the grantee to the valuations permitted in the OJP Financial Guide, we determined that the grantee did not adhere to this guidance. For example, the grantee valued legal services in some cases at between $150 and $400 per hour. We determined that these services should have been valued at no more than $450 per 8-hour day or $56.25 per hour. As a result, we question $63,009 in expenditures that exceeded the maximum daily rate.
Our report contains 23 recommendations to address the preceding issues, which are discussed in detail in the Findings and Recommendations section of the report. Our audit objectives, scope, and methodology appear in Appendix II.
At the time this grant was awarded in 2002, the Office on Violence Against Women was a program office within the Office of Justice Programs. The Office now reports to the Attorney General through the Office of the Associate Attorney General.