Dr. Frank Kardasz  P.O. Box 45048 Phoenix, AZ 85064
e-mail:   
kardasz(at)kardasz.org
Dr. Frank Kardasz, November 1, 2009

According to the Office of Justice Programs (1) the items below are the top ten audit findings that indicate inappropriate grant-
handling. Think ahead about these items so that you will avoid an unfavorable audit finding.

Top 10 Audit Findings

1. Financial Status Reports not submitted timely
2. Accounting procedures need improvement
3. Suspension and Debarment Certifications not obtained
4. Programmatic reporting requirements not met
5. Subrecipients not adequately monitored
6. Fixed assets not adequately monitored
7. Grant management procedures need improvement
8. Segregation of duties not adequate
9. Cash management procedures need improvement; and
10. Procurement procedures need improvement

(1) Office of Justice Programs. (No date). Part III - Chapter 19: Audit Requirements. Retrieved November 1, 2009 from http:
//www.ojp.usdoj.gov/financialguide/part3/part3chap19.

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Below are three examples of unfavorable audit reports.

Office of Community Oriented Policing Services Homeland Security Overtime Program Grant to the City of Philadelphia
Police Department, Pennsylvania

Audit Report GR-70-07-004
September 2007
Office of the Inspector General

Executive Summary

The U.S. Department of Justice (DOJ), Office of the Inspector General (OIG), Audit Division, has completed an audit of the
Homeland Security Overtime Program (HSOP) grant 2003-OL-WX-0016. The Office of Community Oriented Policing Services
(COPS) awarded the City of Philadelphia Police Department (PPD) this grant to fund police overtime for: (1) the PPD’s
Operation Safe Streets (OSS) program, intended to disrupt illicit drug sales in the city, and (2) the PPD’s Counter-Terrorism
(CT) Bureau to plan for terror incidents and to provide community outreach during crises. The PPD received the $3,000,000
grant in September 2003. The PPD contributed an additional $1,001,051 for a required 25-percent share of its total program
costs of $4,001,051.

The purpose of our audit was to determine whether the costs reimbursed under the grant were allowable, supported, and in
accordance with applicable laws, regulations, guidelines, and the terms and conditions of the grant. We also assessed the
PPD’s program performance in meeting grant objectives and overall accomplishments.

We determined that the PPD
did not fully comply with the grant requirements we tested. We reviewed compliance with six
essential grant conditions and found material weaknesses in four of the six areas: (1) grant expenditures, (2) matching
expenditures, (3) reporting, and (4) program performance.

From our sampled expenditures, the PPD
could not provide adequate supporting documentation for $162,201 in grant and
matching expenditures related to OSS overtime. The PPD also could not provide adequate documentation to support $77,059
of the sampled CT grant expenditures. In total, the PPD could not provide documentation for $239,260 in grant expenditures.
We statistically projected these unsupported expenditures across the entire PPD database of grant and matching
expenditures for a total of $1,202,816 in questioned costs for unsupported expenditures.1 The PPD also made $957 in
unallowable expenditures for overtime not related to the grant program. As a result of the deficiencies, we question a total
of $1,203,773 in expenditures. The questioned costs total about 40 percent of the COPS HSOP grant award.

In addition to the questioned costs, we had four management findings related to expenditures, matching, reporting, and
program performance. We found the PPD
commingled the accounting for grant expenses with expenses from other
funding sources
, thereby complicating the audit trail and leading to findings in other areas. Matching expenditures were also
commingled in the accounting records and were not specifically recorded as required.
Not all of the Financial Status Reports
were filed on time
, and due to the commingled accounting, we could not determine if all of the reports accurately reflected
grant activities.

We also determined that the PPD did not demonstrate that grant funds supplement local law enforcement programs and that
instead,
grant funds may have been used to supplant expenditures that otherwise would have been paid for with other
funds
. Finally, we concluded that the PPD did not maintain performance data for grant-funded programs that would have
allowed us to evaluate the extent to which the objectives of the programs were met.

These items are discussed in detail in the Findings and Recommendations section of the report. Our audit objectives, scope,
and methodology appear in Appendix I.

We discussed the results of our audit with PPD officials and have included their comments in the report, as applicable. In
addition, we requested a response to our draft audit report from the PPD and COPS, and their responses are appended to this
report.

Footnotes

1. The Inspector General Act of 1978, as amended, contains our reporting requirements for questioned costs. However, not all
findings are dollar-related. See Appendix II for a breakdown of our dollar-related findings and for definitions of questioned
costs.

Retrieved October 31, 2009 from http://www.justice.gov/oig/grants/g7007004.htm

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Police Hiring Supplement Grant Awarded to the County of Sacramento Sheriff's Department, California

U.S. Department of Justice
Audit Report GR-90-98-018
April 1998
Executive Summary

The Office of the Inspector General, Audit Division, has completed an audit of a grant awarded by the U.S. Department of
Justice (DOJ), Office of Justice Programs (OJP), Bureau of Justice Assistance, to the County of Sacramento, California,
Sheriff's Department (SCSD). In December 1993, the SCSD received a grant of $1.9 million to hire or rehire 20 sworn officers
under the Police Hiring Supplement program (PHS). The purpose of the grant was to enhance community policing efforts.

We found the following weaknesses during our audit regarding the grant conditions:

The SCSD failed to comply with two basic DOJ grant requirements. The SCSD
did not establish separate cost accounting
centers (accounts) and was commingling the funds
received from the PHS grant with other grant and County revenues used
to fund operations. Because the SCSD failed to comply with the aforementioned grant requirements, we determined that the
fringe benefit costs ($644,255) for the sworn officers hired under the PHS grant were unsupported by the accounting records.

The PHS grant expired on April 30, 1997 with $89,125 in unexpended, obligated federal funds. A grant extension has not been
approved; therefore, OJP should de-obligate the $89,125 and put the funds to better use.

Retrieved October 31, 2009 from http://www.justice.gov/oig/grants/g9098018.htm

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Community Capacity Development Office Grants to the Community Agencies Corporation of New Jersey for the Clinton Hill
Weed and Seed Site, Newark, New Jersey

Audit Report GR-70-09-001
Office of the Inspector General
October 2008
Executive Summary

The U.S. Department of Justice (DOJ) Office of the Inspector General (OIG), Audit Division, has completed an audit of five
grants awarded to the Community Agencies Corporation of New Jersey (CAC). The Office of Justice Programs (OJP),
Community Capacity Development Office (CCDO) awarded these grants totaling $1,025,000 under the Weed and Seed
Program to CAC as the fiscal agent in support of the Clinton Hill Weed and Seed site operated in the South Ward and Clinton
Hill area of Newark, New Jersey. The CCDO Weed and Seed program was intended to prevent, control, and reduce violent
crime, drug abuse, and gang activity in high-crime neighborhoods.

The objective of our audit was to determine whether the costs reimbursed under the grants were allowable, supported, and in
accordance with applicable laws, regulations, guidelines, and the terms and conditions of the grants. We also assessed CAC’
s performance in meeting the grant objectives and its overall accomplishments.

We determined that CAC did not fully comply with the grant requirements we tested. We reviewed compliance with six
essential grant conditions and found
weaknesses in three of the six areas: (1) agreement expenditures, (2) requests for
grant funding, and (3) reporting.

We determined that CAC commingled grant funds for three out of the five grants we reviewed. We also determined that CAC
charged $12,753 for
unallowable expenditures that were incurred after the grant period had expired.

Additionally, we identified $16,798 of
unsupported funding requests because CAC took an advance drawdown of grant
funds without incurring the actual expenditures
.

Because of these deficiencies, we identified $29,551 in questioned costs.1

Lastly, we found that CAC
did not always comply with prescribed cash management practices, and did not include
matching expenditures or unliquidated obligations on its quarterly Financial Status Report
s as required under the reporting
guidelines.

In the area of program performance, for those grants specific to the implementation of the Weed and Seed strategy, we
determined the expenditures made by CAC were consistent with and generally working towards the accomplishment of the
goals and objectives of the grants.

These items are discussed in detail in the Findings and Recommendations section of this report. Our audit objectives, scope,
and methodology appear in Appendix I.

We discussed the results of our audit with CAC officials and have included their comments in the report, as applicable. In
addition, we provided CAC and OJP a copy of the draft report and their responses can be found in the appendices. Our
analysis of both responses, as well as a summary of actions necessary to close the recommendations can be found in
Appendix V of this report.

Footnotes

1. The Inspector General Act of 1978, as amended, contains our reporting requirements for questioned costs. However, not all
findings are dollar-related. See Appendix II for a breakdown of our dollar-related findings and for definitions of questioned
costs.
GRANTS AND FOUNDATIONS
Example Unfavorable Audit Reports