The Department of Justice (DOJ) Office of the Inspector General has completed an audit of the Community Justice Empowerment Project (CJEP) grant, awarded by DOJ’s Office of Justice Programs (OJP), Bureau of Justice Assistance, to the National Training and Information Center (NTIC), located in Chicago, Illinois. The purpose of the OJP grant was to provide training, technical assistance, and funding to community-based organizations nationwide to address problems of crime, violence, and substance abuse, and to assist in the revitalization and redevelopment of their communities. House Reports that accompanied the DOJ appropriation statutes designated the NTIC as an earmark.1 Between April 6, 2000, and December 31, 2003, the NTIC was awarded an initial grant and three supplements totaling $3,162,580. We tested the NTIC’s accounting records to determine if reimbursements claimed for costs under the grants were allowable, supported, and in accordance with applicable laws, regulations, guidelines, and terms and conditions of the grant.2
As of February 3, 2004, NTIC had received reimbursement totaling $3,067,800, of which $3,060,151 had been expended as of December 31, 2003. We tested direct costs such as salary and fringe benefits, sub-grantee expenditures, travel and conference costs, consultant fees, and supplies totaling $1,674,497. In brief, our audit revealed significant irregularities in grant activities, significant weaknesses in NTIC’s grant management practices and internal control system, as well as instances of unallowable, unsupported, and unapproved expenses. As a result, we question the entire award amount of $3,162,580.3 Due to the significance of our findings and the questionable nature of some of NTIC’s activities, the OIG Investigations Division initiated a criminal investigation related to this grant.4 Our audit findings are summarized below.
The OJP-approved grant budgets included funding for awards to sub-grantees to address problems of crime, violence, and substance abuse, and to assist in the revitalization and redevelopment of their communities. The grant budgets also included funding for NTIC to conduct conferences in Washington, D.C., and to provide training and opportunities for sub-grantees to gather and discuss their methods and results achieved through grant-funded activity. Our audit revealed significant irregularities related to NTIC’s selection of its sub-grantees and the activities performed at the grant-funded conferences.
Selection of Sub-Grantees
NTIC and its sub-grantees entered into funding agreements amounting to $1,722,500 and a total of $1,701,580 was actually expended through these agreements. According to the special conditions listed in the award documentation issued by OJP, all contracts under this grant were to be competitively awarded unless circumstances precluded competition.
In order to achieve full and open competition as required, NTIC elected to issue a Request for Proposal (RFP) to solicit the sub-grantees. On the surface, NTIC’s solicitation package appeared to comply with the Federal Acquisition Regulation (FAR) guidelines for an RFP.5 The RFP stated that organizations deemed minimally eligible would be reviewed by a selection committee and would be evaluated to the extent that the organization met the following program factors: organizational capability, soundness of the proposed strategy, qualifications of the project staff, clarity and appropriateness of the program implementation plan, and program budget. Further, the RFP required each respondent to submit detailed information about its organization and program as well as other information such as financial statements and staff résumés.
NTIC's files indicated that it focused almost exclusively on one factor that was not identified in the RFP – its perception of the bidding organization's potential ability to influence the funding decisions made by members of Congress, thereby enabling NTIC to maintain its earmark status. For example, one document indicated that NTIC created a list of key legislators, searched for potential sub-grantees that were located within the target constituencies, and assigned staff to contact promising organizations. In addition, the files for 19 of the 36 sub-grantees contained references indicating that NTIC considered an organization’s perceived influence with key legislators. We presented this information to NTIC officials who acknowledged that an organization’s political influence or location within the jurisdiction of a member of Congress favorable to the program was a primary sub-grantee selection factor.6
Moreover, NTIC could not provide complete records of its solicitation and selection process. We were able to determine from copies of letters to unsuccessful bidders from NTIC that it received proposals from approximately 60 organizations. However, NTIC did not have files related to the unsuccessful bidders and the files for successful bidders were in disarray. Moreover, many documents necessary for NTIC to determine minimal eligibility were missing from the files. For example, our review of the files for the 36 organizations that ultimately were selected to receive grant funds revealed that 19 files did not have an audit of financial statements and all 36 were missing the required staff résumés.
Most importantly, we found evidence that indicated the NTIC staff attempted to hide their actions from OJP. A key NTIC official stated in internal staff meeting notes that, “We need to manage…covering our [posterior] with Justice on getting RFPs out to groups…and accommodating key congress people on [Appropriations Committee] by considering groups they recommend.”
Prohibited Lobbying Activities
Although it is permissible for federally funded entities to engage in lobbying activities at their own expense, federal law 31 U.S.C. §1352(a) prohibits a grantee from expending grant funds to engage in lobbying. This prohibition is reflected in the federal regulations that govern the NTIC grant at 28 C.F.R. Part 69. Specifically, grantees are prohibited from using federal funds to influence a member or employee of Congress, in connection with the making, continuation, or modification of any federal grant. In addition, the restriction was incorporated into NTIC’s award documentation, which required that the restriction also be included in all sub-awards and sub-contracts as well. Finally, NTIC officials signed annual certifications acknowledging the prohibition and included it in the sub-grantee award documentation. However, as detailed below, we found that NTIC actively lobbied, trained and utilized sub-grantee personnel to lobby on NTIC’s behalf, and that NTIC officials attempted to hide their actions from OJP while billing the grant for these activities.
In order to achieve the grant objectives, NTIC was to provide opportunities for sub-grantees to share and discuss methods and programs for increasing community assets and to evaluate their programs more effectively, as well as to provide training to sub-grantee leaders and staff. As a result, NTIC hosted four mandatory national training conferences in Washington, D.C., for sub-grantee personnel and individuals from NTIC.7 In conjunction with these conferences, NTIC spent a minimum of $207,131 in federal funds for transportation, food, and lodging expenses for NTIC personnel and sub-grantee staff and leaders.8
The stated purpose for each of these conferences was a combination of training, mission-related planning, and sub-grantee networking. Although the activities on the official agendas for these conferences appeared legitimate and reimbursable under the terms of the grant, our review of internal documentation such as preliminary agendas, planning notes, and post-event evaluations revealed that these events focused on planning and conducting prohibited lobbying activities and that NTIC officials attempted to hide this from OJP. For example:
The official agenda for the second and third days of the July 2000 conference indicated that attendees would participate in training sessions on “How to Market the Community Justice Project” and role-playing activities. However, the internal planning notes indicated that NTIC trained sub-grantees on lobbying skills on the second day of the conference. Using these new skills, NTIC-led teams of sub-grantees participated in lobbying on Capitol Hill on the third day of the conference.
The official agenda for the second and third days of the July 2001 conference indicated that sub-grantee attendees could participate in two workshops, one on “Fundraising or Working with the Media” and the second on “Marketing the Community Justice Empowerment Project,” and travel to Capitol Hill via bus on the third day. However, the planning agenda for the conference clearly indicated that the conference would adjourn at noon on the second day, OJP officials would depart, and lobbying strategy sessions as well as sessions in which participants practiced their lobbying skills through role play would begin. Finally, post conference feedback documents included specific statements regarding the lobbying such as “lobby period too short.”
An e-mail from NTIC’s Executive Director regarding the September 2002 conference said, “Do we need to cover our [posterior] on our agenda for Monday at 1:00 pm and do fund raising or can we hokey up a title for a workshop ‘understanding how our government works’ or whatever?”
Because NTIC changed the workshop titles to appear to be training-related rather than lobbying-related, we believe that it attempted to conceal from OJP the true nature of the conference activities. Further, we believe that NTIC held the conferences in Washington, D.C., because of its proximity to Congress, thus improving the opportunities for lobbying activities. We also believe the grantee could have maximized the use of grant funds by conducting the conferences in Chicago, Illinois, rather than in Washington, D.C., because NTIC, as well as six sub-grantees, are located in Chicago, and none of these individuals would have incurred travel expenditures. In addition, 13 other sub-grantees were located near NTIC in Wisconsin, Iowa, Indiana, Ohio, Missouri, and Michigan, and 6 sub-grantees were located in states west of Illinois. As a result, airfares and travel times charged to the grant would have been significantly reduced.
We presented our conclusions to NTIC officials who acknowledged that they assisted sub-grantees in performing lobbying activities during the conferences and that the goal of these activities was to ensure that future appropriations included funds that were earmarked for NTIC. They stated they did not disclose these activities to DOJ personnel in order to protect DOJ staff members from the burden of knowing about these activities.9
In our opinion, these lobbying and sub-grantee selection improprieties, when combined with our other findings (including inadequate controls over expenditures, unallowable personnel costs, improper and unallowable non-personnel costs, and contractor irregularities) invalidate the premise of the grant and taint all other grant activities. As a result, we question the entire award amount of $3,162,580.10
Inadequate Oversight of Sub-Grantees
As noted previously, NTIC awarded over $1.7 million to 36 different sub‑grantees. According to the OJP Financial Guide, grantees are responsible for the accounting and financial recordkeeping of their sub-grantees. The OJP Financial Guide also states that grantees should be familiar with and periodically monitor their sub-grantees’ financial systems, operations, records, and procedures.
In its grant application, NTIC indicated that it would monitor its sub-grantees by making at least 40 site visits each year, or a minimum of 120 visits for the 3‑year grant period. While our review of NTIC records indicated that it had made 166 visits to its sub-grantees during the grant period, 95 of these visits were made to the 6 Chicago-area grantees. In addition, for 7 of the remaining 30 sub-grantees, there was no evidence that NTIC staff ever visited or conducted any monitoring via telephone or through correspondence. Further, NTIC lacked a standardized approach for conducting the reviews and documentation of the visits was largely limited to brief handwritten notes that lacked information about what was reviewed, any problems identified, or related corrective action needed. Little evidence existed that NTIC reviewed the financial operations and records of the sub-grantees it did visit.
As part of our audit, we attempted to verify the existence of NTIC’s sub-grantees by contacting them via letter and telephone, but we were unable to contact 2 of the 36 sub-grantees. Consequently, their records were not available for audit and we question the total funds paid by NTIC to these sub-grantees, which amounted to $27,500.
In addition, NTIC officials informed us that in September 2000 one of its sub-grantees had discovered an apparent embezzlement involving its bookkeeper. At the time of the alleged embezzlement, NTIC had disbursed half of the total grant funds awarded, or $11,250. In November 2000, an NTIC accountant audited the sub-grant. He concluded that NTIC funds were not affected by the embezzlement, but because of the embezzlement and other concerns about the sub-grantee, NTIC ended its contractual relationship and did not disburse the remaining $11,250. However, NTIC made no effort to recover the portion of the advanced funds that the sub-grantee had not reported as expended. Because of the problems with this sub-grantee, we made repeated requests to NTIC to obtain supporting documents for this sub-grantee’s expenditures. These records were not provided. Therefore, we question the entire $11,250 that was paid to this sub-grantee.
NTIC officials also informed us of another circumstance in which the Executive Director of a sub-grantee organization was terminated for a number of irregularities including not paying bills on time and destruction of records. NTIC had awarded this sub-grantee a total of $80,000, which included three Community Justice agreements totaling $70,000 and an award of $10,000 as part of an Elder Abuse Pilot Project. We reviewed this sub-grantee’s expenditure reports to NTIC and noticed that the sub-grantee had not accounted for the $10,000 award. We then visited this sub-grantee, whose officials told us they had no knowledge of the award for $10,000 and could provide no records to support their appropriate use of the funds. NTIC officials had not properly reviewed the sub-grantee’s expenditure reports and the funds remain unaccounted for. As a result, we question the $10,000 as unsupported.
Inadequate Controls over Expenditures
The OJP Financial Guide requires grantees to establish and maintain a system of accounting and internal control that adequately identifies and classifies grant costs. The system must include controls to ensure that funds and other resources are used optimally and expenditures of funds are in conformance with the general and special conditions applicable to the recipient.
As of February 3, 2004, NTIC had received reimbursement totaling $3,067,800, while as of December 31, 2003, NTIC had recorded expenditures totaling $3,060,151, including about $1.7 million that it awarded to its sub-grantees. In our judgment, NTIC’s accounting records did not adequately account for, cross-reference, or compile reports for related expenditures. For example, because there was no link between NTIC’s accounting records and the OJP budget categories, it was not possible for the grantee to examine its compliance with OJP’s requirement that limits transfers of funds between budget categories to a maximum of 10 percent of the award. NTIC’s accounting records also contained several errors that had not been detected, including an overstatement in the amount reimbursed by OJP. This overstatement resulted from two planned and recorded year-end grant reimbursement requests for 2001 and 2002 that were not executed. The draw downs did not occur and NTIC officials were not aware that they had not requested or received the money until we brought it to their attention in November 2003.
To determine the accuracy and allowability of the costs charged to the grant, we examined expenditures totaling $1,674,497, which included $510,000 awarded to 9 of NTIC’s 36 sub‑grantees.11 In addition, we reviewed 100 percent of NTIC’s personnel-related expenditures consisting of salary and fringe benefit costs totaling $461,926, and judgmental samples of non-personnel expenditures totaling $239,339, and professional services costs of $463,232. We identified significant questioned costs for irregularities in contracting, travel, personnel, and conference expenditures, as summarized below.
Unallowable Personnel Costs
NTIC was reimbursed $461,926 in salary and fringe benefits. We reviewed 100 percent of these costs and identified $123,567 in questioned costs. We noted that NTIC charged the grant for $49,957 in salary costs that were not paid to employees. This occurred because NTIC billed the grant for employee time on an hourly basis and frequently charged 24 hours per day for employees in travel status even though the employees were only paid for their normal 8‑hour day. Additionally, while the OJP Financial Guide prohibits the use of grant funds to pay employee bonuses, NTIC pro-rated its annual bonuses across all of its funding sources, including the OJP grant, resulting in $4,413 in questioned costs. Further, $29,305 in unreversed year-end accruals, as well as a $697 posting error were improperly billed to the grant. Finally, NTIC billed the grant an additional $38,968 in salary for individuals not authorized to work on the grant, and we identified $227 in unsupported salary expenditures.
Improper or Unallowable Non-Personnel Costs
NTIC was reimbursed $433,412 for non‑personnel costs, the bulk of which pertained to travel, conferences, and training-related expenses. We reviewed $239,339 and identified questioned costs of $89,536 in non‑personnel related expenses. For example, NTIC paid different lodging rates for travelers attending the same conference in the same hotel. These higher room rates, most often afforded to NTIC employees, exceeded the allowed federal lodging rate.12 Consequently, in accordance with the OJP Financial Guide, none of the $33,055 in lodging costs should have been charged to the grant. Further, NTIC charged other unallowable costs to the grant, such as hotel in-room movie rental and excessive single-day telephone usage while in travel status ($500 over a 2‑day period). We also noted that NTIC charged the grant $13,074 for unallowable catering expenditures and $11,299 in duplicate billings for airfare.
Consultant Fees and Contracting Irregularities
NTIC spent $453,402 for professional services, representing 14 percent of its overall budget. The major cost within this category was the use of a consultant to evaluate NTIC’s performance on the grant. NTIC representatives entered into an agreement with this contractor to conduct an annual evaluation of the Community Justice Empowerment Project and create a “how to” manual on the basics of forming, operating, and leading a grass roots organization. The contractor was to be paid a total of $400,000 for four work products.
Because the contract exceeded $100,000, the terms of the grant required that it be awarded competitively and NTIC’s grant application indicated that this had been satisfied. During our audit, NTIC officials told us that they had not issued an RFP and they could not provide evidence to support their statements that they had solicited telephone quotes from vendors.
Further, NTIC officials told us that the contractor did not provide the agreed-upon four products and instead provided one overall evaluation of the CJEP program that was delivered in early 2003. When its original contractor also failed to provide the “how to” manual, NTIC reduced his total compensation by $10,000 and assigned an NTIC employee to complete the manual with the agreement that this individual would be paid $7,000 for the task.13 NTIC then paid additional individuals $2,268 for professional services related to the creation of this manual and incurred $8,162 in printing costs. NTIC could not provide evidence that it notified OJP of this deviation from the approved evaluation plan or that NTIC provided OJP the required publication and distribution plan for this manual. NTIC officials also could not provide support for OJP approval of its actions to commission yet another evaluation report that NTIC paid for with $41,176 in grant funds. According to NTIC, this additional evaluation was commissioned to replace the original one.
As a result of the substantial non-performance of the original contractor and the lack of support for the propriety of NTIC’s selection process, we question the entire $390,000 paid to this contractor. In addition, we question the $17,430 expended for the unauthorized “how to” manual, the $41,176 charged to the grant for the replacement evaluation, $3,457 incurred in contractor travel related expenses that were not approved by OJP, the $2,268 in unsupported excess contract costs paid for professional services related to the manual, and $7,699 in unsupported technical assistance professional services contracts.
Excess Grant Funds
When the grant originally expired in December 2002, approximately $315,780 in grant funds remained unexpended. According to NTIC’s Progress Report covering the period ending December 31, 2002, all OJP-approved grant objectives had been accomplished and sub-grantee contracts had expired. At that time, NTIC requested from OJP a no-cost grant extension through September 2003 stating that the extension was necessary, “in order to allow us to work on the project until the appropriations are approved in Congress.”14 In other words, NTIC was requesting that it be allowed to use the leftover funds to continue operations until Congress approved the appropriations legislation authorizing a subsequent grant award. We believe that NTIC essentially borrowed money from their subsequent award without a noted corresponding reduction in that award and used the funds to pay for unapproved projects and operating expenses not related to the grant. Consequently, we question the $136,918 that was charged to the grant for 2003 activities. Further, we believe that OJP should de-obligate the $94,780 that remained unexpended as of January 2004 when the grant had ended and put these funds to better use.
Conclusion and Recommendations
The overall purpose of the audited grant was to provide training, technical assistance, and funding to community-based organizations, and more than half of NTIC’s grant funds were awarded to these sub-grantees. Although the sub-grantees were supposed to have been selected competitively based upon their ability to run a successful community program, evidence in the grantee’s files and statements by NTIC staff revealed that the majority of sub-grantees were instead selected based upon their connection to influential lawmakers. Moreover, while a major element of the grant was to provide training to these sub-grantees and significant funds were spent for training conferences, considerable portions of these sessions were dedicated to conducting congressional lobbying visits and training sub-grantees in how to conduct successful lobbying activities. Most importantly, we believe that NTIC intentionally misled OJP and attempted to conceal its true activities. As a result of these systemic improprieties, we question the entire amount awarded, or $3,162,580.
Our audit also revealed that NTIC lacked an adequate accounting and internal control system. As a result, we found that sub-grantees were not sufficiently monitored, and we identified significant questioned costs for irregularities in contracting, travel, personnel, and conference expenditures. As a result of these deficiencies, we question transactions amounting to $1,067,932.15 Further, at the close of the grant, $94,780 remained unexpended and could be put to better use if the funds were de-obligated.
As a result of our audit, we have made 37 recommendations to OJP to address the deficiencies we identified during our audit. OJP agreed with all of our recommendations. Our results are discussed in detail in the Findings and Recommendations section of the report. Our audit objectives, scope, and methodology appear in Appendix I.
The Inspector General Act of 1978, as amended, contains our reporting requirements for questioned costs and funds put to better use. However, not all findings are dollar-related. See Appendix II for a breakdown of our dollar-related findings and for definitions of questioned costs and funds put to better use.
We began our audit in October 2003 and contacted the OIG Investigations Division in February 2004. Due to the initiation of the criminal investigation, we postponed reporting our results until the conclusion of the criminal investigation. The Executive Director of NTIC pleaded guilty and served his sentence related to the criminal case. As of March 2008, a civil action under the False Claims Act was pending against NTIC.
According to FAR Subpart 15.203, RFPs are used to communicate requirements to prospective bidders and to solicit proposals. At a minimum, RFPs should describe: (1) the soliciting organization's requirements; (2) the anticipated terms and conditions that will apply to the contract; (3) information required to be in the offeror's proposal; and (4) factors and significant sub-factors (and their relative importance) that will be used to evaluate the proposal.
Cost categories established by NTIC in its accounting system did not isolate the conference expenditures from other travel-related expenditures. As a result, we attempted to determine the conference-related costs by reviewing the general ledger descriptions for each line item. Without a 100-percent review of all transactions and supporting documentation, however, we could not determine precisely how much NTIC spent on these conferences.
Five of these nine sub-grantees were awarded a total of $372,500 and were able to account for funds paid to them by providing sufficient documentation of allowable, grant-related expenditures. Our review of the other four sub-grantees in our sample resulted in questioned costs of $48,750 and the details of our findings were provided in the previous section on sub-grantee oversight.
In some instances, we have questioned costs for more than one reason, resulting in the tally of questioned costs being in excess of grant receipts. A summary of our dollar-related findings appears in Appendix II.