Project Safe Neighborhoods Grant Awarded to the Baylor Health Care System Foundation

Audit Report GR-80-05-005
June 2005
Office of the Inspector General

The Office of the Inspector General, Audit Division, completed an audit of Project Safe Neighborhoods Grant Number 2003-GP-CX-0157, awarded by the U.S. Department of Justice (DOJ), Office of Justice Programs (OJP), to the Baylor Health Care System Foundation (Baylor Foundation or Foundation). Project Safe Neighborhoods (PSN) is a nation-wide commitment to reduce gun crime in America. The effectiveness of PSN is based on the ability of federal, state, and local agencies cooperating in a unified offensive led by the United States Attorney in each of the 94 federal judicial districts across the United States. Through collaboration with federal, state, and local law enforcement, each U.S. Attorney will implement the five core elements of PSN — partnerships, strategic planning, training, outreach, and accountability — in a manner that is contoured to fit the specific gun crime problems in that district. The goal is to create safer neighborhoods by reducing gun violence and then sustaining that reduction. The U.S. Attorney’s Task Force Selection Committee for the Northern District of Texas selected Baylor Foundation as the sole grantee to act as fiscal agent. The U.S. Attorney certified the selection committee’s appointment. Though the fiscal agent is the entity responsible for the funds they receive, the activities of the fiscal agent and subrecipients are guided by the PSN Task Force and its gun violence reduction strategy throughout the life of the project. Between October 1, 2002, and September 30, 2004, the Baylor Foundation was awarded $1,110,282. On August 20, 2004, approximately one month prior to the end of the official award date, the Foundation’s management requested a grant extension for the unliquidated portion of the funds — $851,057. The grant extension was approved for one year through September 30, 2005. The Baylor Foundation’s approved budget for FY 2003 was $1,110,282, of which 10 percent, or $111,000, was budgeted for administrative oversight.1 Of the remaining $999,282, approximately 38 percent, or $380,647, was set aside for juvenile programs. The remaining 62 percent, or $618,635, was slated for general purpose programs. As part of the audit, we tested the Baylor Foundation’s compliance with five essential grant conditions — reporting, grant drawdowns, budget management and control, grant expenditures, and monitoring of subrecipients. We found weaknesses in each of the five areas tested. We also tested the accounting records to determine if reimbursements claimed for costs under the grants were allowable, supported, and in accordance with applicable laws, regulations, guidelines, and the terms and conditions of the grant. As a result of the deficiencies identified below which are based on the transactions sampled, we question $198,527 in grant funds received.2 Financial Status and Program Reporting The Baylor Foundation submitted the June 30, 2004, Financial Status Report (FSR) at least 30 days late. The two required Program Reports were received by OJP four and nine days late. The Foundation did not accurately report actual grant activity for all subrecipients. In addition, we found that several subrecipients did not submit monthly or semiannual accounting of grant activity to the Foundation. Grant Drawdowns As of July 6, 2004, the Baylor Foundation received $259,225, or 23 percent of the $1,110,282 award. One of the drawdowns exceeded expenses by $5,000 for the quarter ending December 2003. Budget Management and Control The Baylor Foundation did not have the most current or complete budgets in each subrecipient file. In addition, we found that the Foundation’s own worksheets did not have accurate balances that agreed with the budgeted amounts in the subrecipients’ files. Subrecipient worksheet totals exceeded the grant application budget by over $70,000. Reimbursements to Subrecipients The Baylor Foundation did not have contracts on file for each subrecipient. Therefore, we question all subrecipient reimbursements in the amount of $198,527. The Foundation reimbursed expenses for several subrecipients that did not provide adequate supporting documentation. We also found that several nonconforming costs were reimbursed without comparing the supporting documentation to the approved budget. Overall, the Baylor Foundation lacked adequate controls to ensure that grant funds were properly accounted for. The lack of detail associated with processing transactions, insufficient management oversight, and a lack of determining whether the fiscal agent or the U.S. Attorney’s Office was responsible for fiscal management contributed to the inadequate management of grant funds. Based on our sample of transactions, we found expenses in the amount of $145,459 charged to the grant that were unsupported, nonconforming, and questionable. Since these costs occurred at the subrecipient level, the $145,459 is included in the $198,527 previously questioned for lack of contracts. Monitoring of Subrecipients The Baylor Foundation had not established policies and procedures for monitoring subrecipients, including monitoring activities, incorporation of OMB Circular A-133 audit requirement into the award documentation, verification of audit requirements, sanctions for non-compliance, and corrective action plans. Special Conditions The Baylor Foundation did not comply with four of the ten special conditions stipulated in the grant award documentation. Recommendations Our report contains 22 recommendations to address the preceding issues. They are discussed in detail in the Findings and Recommendations section of the report. We discussed the results of our audit with the Baylor Foundation management and the U.S. Attorney’s Office for the Northern District of Texas and included their comments in the report as applicable. Our audit objectives, scope, and methodology are in Appendix I. A summary schedule of grant budget amounts and related costs per cost category are in Appendix II. A list of subrecipients affiliated with this Project Safe Neighborhoods grant is in Appendix III. Footnotes According to the Bureau of Justice Assistance Guide to 2003 Project Safe Neighborhoods Grants, the selection committee may allocate funds in the overall budget for use of the fiscal agent in administering funds and meeting specific requirements, but such funds cannot exceed 10 percent of the total grant. The Inspector General Act of 1978, as amended, contains reporting requirements for questioned costs and funds to better use. However, not all findings are dollar-related. See Appendix II for a breakdown of our dollar-related findings and definitions of questioned costs and funds to better use.