International Exchange Programs:

Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program

GAO-04-436: Published: Mar 17, 2004. Publicly Released: Mar 17, 2004.

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Congress created the Russian Leadership Program in 1999 as a pilot project to promote mutual understanding by exposing emerging Russian leaders to the American economic system and democratic institutions. In 2003, Congress renamed the program the Open World Leadership Center, expanded its scope, and extended eligibility to a number of other countries. Because Open World had not been independently evaluated, GAO was asked to review (1) the program's progress toward achieving its overall purpose and (2) whether it has appropriate financial management and accountability mechanisms in place.

Open World has exposed a large, broad, and diverse group of Russians to U.S. economic and political systems. As of December 2003, the program brought about 6,800 men and women from Russia's seven geographic regions to more than 1,200 U.S. communities. Our analysis found that most delegates generally hold highly favorable views of their experience in the program. Many found ways to adapt what they learned to the Russian environment. Also, embassy officials said Open World complemented U.S. mission activities. However, because the program does not have formalized strategic and performance plans with measurable indicators, it is difficult to determine the extent to which it is targeting and reaching the right people and giving them experiences that result in improved mutual understanding. While Open World does survey delegates about their experiences, it has not yet conducted a full program evaluation to determine progress toward its long-term goals. Open World officials agree that such an evaluation is necessary and hope to conduct one in the near future. Open World does not have the formalized financial management and accountability mechanisms that would provide Congress and other decision makers with timely and reliable information about its cost and performance. Now that Open World has permanent status and is expanding its scope, it is appropriate for the program to turn its attention to enhancing these mechanisms. Its procedures for reviewing program transactions and analyzing financial reports have neither been evaluated for their adequacy nor formalized in writing; and it does not prepare financial statements that can be subject to an independent audit. In addition, Open World does not have an audit or financial management advisory committee to advise the Board of Trustees on financial management, accountability, and internal control issues. Finally, Open World is not disclosing the value of services contributed by U.S. volunteers who support the program--information that generally accepted accounting principles encourage entities to disclose, if practicable.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should consider establishing an audit committee or financial management advisory committee to provide the Board of Trustees and management with independent advice on financial management, accountability, and internal control issues.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004 (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program), we recommended to the Chairman of the Board of Trustees of the Open World Leadership Center to consider establishing an audit committee or financial management advisory committee to provide the Board and management with independent advice on financial management, accountability, and internal control issues. In response to our recommendation, in July 2006, the Center's Board of Trustees considered whether to form an audit committee and made the decision to appoint one of its members to oversee the Center's financial management and audit processes. One of the factors considered in making this decision was the relatively small size of the entity. This member is a former CEO of a Fortune 500 corporation and has served on the boards of several major corporations. As a result of the Board's appointment of a member with the requisite experience who can provide independent advice on financial management, accountability, and internal control issues, the Board has strengthened its oversight responsibilities over the Center's financial management and audit processes.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should develop and implement plans for routinely preparing financial statements that are annually subject to an independent audit.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004, (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program) as part of GAO's review of the Open World Leadership Center (OWLC), we found that OWLC did not have appropriate financial management and accountability mechanisms in place. Specifically, OWLC did not prepare financial statements that were independently audited. We recommended that the OWLC develop and implement plans for routinely preparing financial statements that are annually subject to an independent audit. In response to our recommendation, OWLC hired an Independent Public Accountant (an IPA firm) to conduct an auditability assessment which concluded, as of March 2005, that a full-scope audit of OWLC's annual financial statement was possible. Since then, the OWLC initiated annual independent financial statement audits for FY 2005 (Balance Sheet only) at the end of fiscal year 2005 and has continued that process for FYs 2006 (full set of financial statements). The Center contracted on May 15, 2007, with an IPA firm to perform annual audits of its financial statements for FYs 2007 through 2011 and the FY 2007 audit was completed in July 2008. The OWLC has received a clean audit opinion on all financial statements audited. While the FY 2005 audit identified four material weaknesses in internal controls, OWLC's internal controls subsequently improved as no material weaknesses were found during the FYs 2006 and 2007 audits. Collectively, the actions taken by the OWLC to implement a process for preparing annual financial statements and subjecting them to independent audit have provided the Congress and OWLC's Board of Trustees with reliable financial information on OWLC's financial position and operating activities. In addition, the independent audit of the Center's financial statements has contributed to improvement in its internal controls over financial reporting with the identification and resolution of four material weaknesses in internal controls over financial reporting.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should develop and implement controls and requirements for grantees to provide accountability for grant expenditures to ensure that funds are spent for their intended purposes.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004, (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program) we concluded that Open World Leadership Center (OWLC) did not formalize the financial management and accountability mechanisms needed to provide the Congress and other decision makers with timely and reliable program information, we noted that OWLC lacked formal grant management policies needed to establish control and accountability of grantee expenditures. In response to our recommendation, OWLC took a series of actions implement formal policies and requirements intended to strengthen accountability and control over grantee expenditures. In March 2005, OWLC implemented a written requirement that grantees submit expense reports with required receipts, or in lieu of receipts, have a "Single Audit" in accordance with OMB requirements which resulted in a clean auditor opinion on the entity financial statements. At the same time, OWLC also implemented a written requirement that all grantees submit an expense variance report identifying differences between their actual grant expenses and the amounts established in approved grant budget. In addition, OWLC implemented (March 2005) grant variance policy now prohibits variances of greater than 10 percent unless the variance has been approved by OWLC officials in advance. Further, OWLC formally required (March 2005) that all grantee-provided expenditure reports and related receipts or a completed Single Audit report are reviewed by the OWLC management officials prior to approving the final grant payment. With regard to expenditure reporting by grantees, OWLC established (March 2005) written policies requiring all grantees to submit quarterly report on the status of their grant funds. OWLC established (March 2005) a written requirement that grantee submit, prior to fiscal year end, a spreadsheet that included all expenditures against each grant for use in reconciling reported information to grant-related information maintained in the OWLC accounting system and OWLC grant files. In 2006, OWLC began creating its own spreadsheet of all prior year open grants and all current year grants. This spreadsheet listed applicable financial data including total grant award advances through the end of September 2006 and expenditures against the grant per the Financial Status Report. Collectively, these actions have established and strengthened the grant management, accountability, and control mechanisms needed provide the Congress and other decision makers with timely and reliable grant information and to effectively safeguarding OWLC's grant funds.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should develop and implement written, management-approved policies, procedures, and internal controls for Open World's resources and expenditures.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004, (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program) as part of GAO's review of whether the Open World Leadership Center (OWLC) had appropriate financial management and accountability mechanisms in place, we found that the established procedures for reviewing and approving transactions and analyzing financial reports had not been formalized in written policies. We also found that OWLC had not evaluated whether these procedures provided adequate internal control or codified them into management-approved policies that OWLC staff were required to follow. We recommended that the OWLC develop and implement written, management-approved policies, procedures, and internal controls for Open World's resources and expenditures. In response to our recommendation, in September 2007, the OWLC developed and implemented written, management approved policies, procedures, directives, and internal controls for the effective operation of OWLC's financial reporting. The OWLC has formalized (September 2007) procedures and directives governing the initiation, authorization, processing, review, approval, and documentation of transactions and analysis of financial reports. OWLC strengthened its program administrative operations and financial reporting by formalizing their policies and procedures that OWLC staff are required to follow and evaluating whether these procedures provide adequate internal control. OWLC's internal control enhancements also include efforts, beginning in March 2008, to develop and implement vulnerability assessment and internal control review tools which should strengthen its ability to monitor internal control. Having formalized policies, procedures and internal controls also helps strengthen the accountability for stewardship of government resources and achieving effective results. Collectively, the actions taken by OWLC to implement formalized its policies, procedures, and internal controls have provided OWLC's management with a framework for planning, directing, and controlling their operations to help achieve OWLC's objectives.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should assess whether the current procedures provide adequate internal control over expenditures and grantee oversight.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004 (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program), we recommended to the Chairman of the Board of Trustees of the Open World Leadership Center to assess whether the current procedures provide adequate internal control over expenditures and grantee oversight. In response to our recommendation, the Center contracted with an independent public accountant (IPA) to conduct an auditability assessment, which was submitted on April 15, 2005. In addition to concluding that the Center's financial reporting structure is sufficient to allow an efficient, full-scope audit, the IPA made recommendations to address inadequate procedures. Specifically, the IPA recommended that the Center (1) further document financial policies and procedures after the Library of Congress established its new financial system and (2) develop accounting policies for further tracking of grant advance payments and reimbursements. As a result of the auditability assessment, Open World has taken measures to ensure that its current procedures provide adequate internal control over expenditures and grantee oversight to enhance the Center's management of its exchange programs.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should strengthen the program's mechanisms for collecting data and reporting on program performance.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004 (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program), we recommended to the Chairman of the Board of Trustees of the Open World Leadership Center to strengthen the program's mechanisms for collecting data and reporting on program performance. In response to our recommendation, in March 2007, the Interim Executive Director for Open World reported that the Center has implemented eight measurement tools to assess program performance, namely: (1) benefit to America, (2) multipliers, (3) partnerships, (4) projects, (5) reciprocal visits, (6) press, (7) gift in-kind contributions, and (8) professional advancement for delegates. In addition, the Center staff met with the Open World logistical contractor in March 2007 to refine existing survey tools and identify further survey needs in accordance with the Strategic Plan for Fiscal Years 2007 through 2011. The plan states that the Center has developed a set of metrics to be used to gauge the progress made on these objectives and has determined where other metrics need to be developed. In addition, the Center will provide key stakeholders with an Annual Program Performance Report that provides progress on, as well as changes to, the Strategic Plan. As a result of these efforts that strengthen Open World's data collection mechanisms, the Center has greatly enhanced its ability to evaluate the success of its exchange programs.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should establish strategic and performance plans that articulate Open World's direction and set measurable goals and indicators.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: In March 2004 (International Exchange Programs: Open World Achieves Broad Participation; Enhanced Planning and Accountability Could Strengthen Program), we recommended to the Chairman of the Board of Trustees of the Open World Leadership Center to establish strategic and performance plans that articulate Open World's direction and set measurable goals and indicators. In response to our recommendation, in August 2006, the Board of Trustees approved a Strategic Plan for Fiscal Years 2007-2011. As a result, the Open World Leadership Center now has a strategic plan to enhance the management of the program. The strategic plan defines the Center's mission, core values, key goals, outcomes, and performance measures, using the principles of the Government Performance and Results Act (GPRA). The plan also includes provisions for periodic reviews and allows for mid-course corrections and modifications.

    Recommendation: To enhance Open World's management, particularly in light of the program's expansion, the Chairman of the Board of Trustees of the Open World Leadership Center should estimate and disclose the value of contributed services from U.S. volunteers to better reflect the total scope of the program.

    Agency Affected: Open World Leadership Center

    Status: Closed - Implemented

    Comments: Since our March 2004 report, OWLC has taken a series of actions needed to enable it to collect, measure, and disclose information on the value of contributed in-kind services "those related to private home lodging, meals, local transportation, and cultural activities" provided to visiting Open World program participants by U.S. program volunteers. As part of a pilot project for the program cycle, OWLC developed a form and related instructions for use by grantees in collecting needed information and estimating the value of contributed in-kind services provided by their U.S. program volunteers. As part of the pilot, OWLC had a number of grantees complete the forms use in planned reporting in early 2007. For the 2007 program cycle, OWLC expanded its pilot project to require all grantees participating in the program to collect information and submit forms estimating the value of contributed in-kind services provided to visiting program participants by U.S. program volunteers. In 2008, OWLC contracted for assistance in developing estimated value of all contributed in-kind services for the 2007 program cycle. The contractor required to organize the 2007 forms submitted by grantees, identify and obtain missing information from grantees, and use the information provided by grantees to estimate the total value of contributed in-kind services from U.S. volunteers. According to the contract OWLC officials, the contractor is currently working on the 2007 estimate and is to submit the resulting estimated value for OWLC review and approval by August 30, 2008. According to OWLC officials, once approved, they plan to include the estimated value of contributed 2007 in-kind services in their regular reporting to Congressional appropriation subcommittees and include it as part of the FY 2010 budget submission. In addition, OWLC officials are considering disclosing the estimate on OWLC's public Web site and in the Center's upcoming annual report for 2007.

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