This is the accessible text file for GAO report number GAO-04-225
entitled 'Corporation For National And Community Service: Better
Internal Control and Revised Practices Would Improve the Management of
AmeriCorps and the National Service Trust' which was released on
February 20, 2004.
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
January 2004:
Corporation for National and Community Service:
Better Internal Control and Revised Practices Would Improve the
Management of AmeriCorps and the National Service Trust:
GAO-04-225:
GAO Highlights:
Highlights of GAO-04-225, a report to Congressional Requesters
Why GAO Did This Study:
The Corporation for National and Community Service (the Corporation)
was created to help meet community needs and expand educational
opportunity by providing education awards to participants. The
Corporation oversees and funds the AmeriCorps program as well as the
National Service Trust (the Trust), which pays the education awards.
From November 2002 to March 2003 the Corporation suspended AmeriCorps
enrollments because there would not have been sufficient funds in the
Trust to pay education awards. GAO was asked to determine (1) if all
AmeriCorps enrollments were accurately recorded, (2) how the
Corporation estimated its funding needs, and (3) if the Corporation
made changes to prevent another enrollment suspension and to address
requirements established in the Strengthen AmeriCorps Program Act. GAO
analyzed laws, reviewed documents, interviewed officials, assessed the
reliability of the Trust database, examined the model used to estimate
funding needs, and surveyed AmeriCorps grantees.
What GAO Found:
Discrepancies between information in the Trust database and
participant documentation indicate that not all AmeriCorps participant
information was accurately reflected in the Trust database. An
estimated 5 percent (8,300) of about 158,000 enrollments from program
years 2000 to 2002 have discrepancies, and about 3 percent (4,400)
have discrepancies that could affect estimates of future probable
expenditures of the Trust. Further, the users’ manual for the Trust
database system had not been updated.
In 2003 the Corporation began using a new model with conservative
assumptions of participant behavior to develop its funding estimates.
Corporation officials explained that they used conservative
assumptions because the AmeriCorps program does not have a long
history from which to extrapolate participant behavior, and the
Corporation wanted to regain credibility after the enrollment
suspension in 2002. Using the new model may be prudent until the
Corporation gains more experience. However, because the new model
increased the Trust’s funding estimates, the Corporation will need to
monitor actual experience compared with the model’s assumptions and
may need to deobligate unused Trust funds. Further, the new model does
not incorporate external factors, such as downturns in the economy,
which may affect funding estimates or the Trust’s balances. The
Corporation recently formed a team to assess the costs and benefits of
adding external factors in its model.
The Corporation has made some changes to its operations that minimize
the likelihood it will need to suspend enrollments in the future.
Corporation officials have been obligating Trust funds when positions
are approved since June 2003, and the communication and coordination
among officials have greatly improved. Changes have also been
implemented and planned to address the Strengthen AmeriCorps Program
Act requirements. However, changes to improve oversight of grantees
have not been fully implemented, and policies related to refilling
vacated positions and converting unfilled positions may limit
enrollments, hinder service delivery, and contribute to the
accumulation of a larger Trust balance.
What GAO Recommends:
GAO recommends that the Corporation make improvements to strengthen
internal control, enhance the accuracy of its budget estimates, ensure
the Trust does not accumulate large balances, and ensure that its
policies support efforts to deliver services. The Corporation
generally agreed with GAO’s recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-225.
To view the full product, including the scope and methodology, click
on the link above. FOR MORE INFORMATION, CONTACT CORNELIA M. ASHBY,
(202) 512-8403 (ASHBYC@GAO.GOV) OR SUSAN POLING (202) 512-2667.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Trust Database and Participant Documentation Discrepancies Could Affect
Estimates of Probable Education Award Expenditures:
The New Model Increased Funding Estimates and Does Not Consider
External Factors:
Operational Changes Should Reduce the Risk of Enrollment Suspensions,
but Two New Policies May Hinder Service Delivery and May Contribute to
Higher Balances in the Trust:
Conclusion:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: The Corporation's Antideficiency Act Violation:
Appendix III: Discrepancies between Trust Data and Participant
Documentation That Could Affect the Amount Owed by the Trust:
Appendix IV: The Service Award Liability Model:
Appendix V: Comments from the Corporation for National and Community
Service:
Appendix VI: GAO Contacts and Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Estimates of Documentation Availability for AmeriCorps State
and National Grantee and VISTA Participants, Program Years 2000-2002:
Table 2: Description of Discrepancies for AmeriCorps State and National
Cases:
Table 3: Description of Discrepancies for AmeriCorps VISTA cases:
Figures:
Figure 1: Flow of Funds and Information for AmeriCorps Education
Awards:
Figure 2: AmeriCorps Enrollments by Program Year:
Figure 3: Estimate of Discrepancies between Trust Data and Participant
Documentation:
Figure 4: Percentage of AmeriCorps Participants Who Earned Education
Awards Compared with the Percentages used in the SAL and the New Model:
Figure 5: Points in AmeriCorps Program Cycle when Deobligation May
Occur:
Figure 6: The SAL Model:
Abbreviations:
NCCC: National Civilian Community Corps:
OIG: Office of Inspector General:
SAL: Service Award Liability:
SSA: Social Security Administration:
SSN: Social Security number:
VISTA: Volunteers in Service to America:
United States General Accounting Office:
Washington, DC 20548:
January 16, 2004:
The Honorable Christopher S. Bond:
Chairman, Subcommittee on VA, HUD, and Independent Agencies:
Committee on Appropriations:
United States Senate:
The Honorable Charles E. Grassley:
United States Senate:
The Corporation for National and Community Service (the Corporation)
was created in 1993 to help meet community needs in education, the
environment, and public safety through activities such as tutoring and
mentoring youth, building affordable housing, cleaning parks and
streams, and helping communities respond to disasters. The Corporation
also helps to expand educational opportunity by providing national
service participants who complete a term of service with funds--$4,725
for a full-time participant in 2002--to help pay for their education.
AmeriCorps is one of three national service programs the Corporation
oversees. The Corporation receives appropriations to fund program
operations and the National Service Trust (the Trust), which provides
money to pay education awards. In fiscal year 2003 the Corporation was
appropriated about $400 million to support AmeriCorps--about $300
million to support program operations and $100 million for the Trust.
From November 2002 to March 2003, the Corporation suspended enrollments
in AmeriCorps because it concluded that there would not be sufficient
funds in the Trust to pay the education awards for all of the 2002
program positions. In April of 2003 we provided a statement for the
record to the Subcommittee on Veterans Affairs, Housing and Urban
Development, and Independent Agencies of the Senate Committee on
Appropriations describing our preliminary observations regarding the
causes for the enrollment suspension and the proposed policy
changes.[Footnote 1] In that statement, we emphasized that had the
Corporation appropriately recorded and tracked its obligations for
education awards to program participants, the Corporation likely would
not have needed to suspend enrollments. In July 2003, Congress passed
the Strengthen AmeriCorps Program Act (Pub. L.No. 108-45). This act
requires the Corporation to obligate funds in the Trust at the time
AmeriCorps positions are approved and to estimate the value of the
education awards based on a formula that considers historical rates of
enrollment in the program and for the earning and use of education
awards. The act also established several other requirements for the
Corporation.
Because of concerns about the Corporation's management of AmeriCorps
and the Trust, you asked us to answer the following questions: (1) Has
all AmeriCorps participant information been accurately recorded in the
Trust database? (2) How does the Corporation estimate the funding
needed to provide education awards through the Trust? (3) Has the
Corporation made management and operational changes that ensure
enrollments will not be suspended in the future and that address the
Strengthen AmeriCorps Program Act requirements?
To answer these questions we used a multifaceted methodology. We
performed a detailed reliability assessment of the Trust database by
comparing information in the database with original enrollment and exit
forms. We obtained enough documentation to compare key information on
363 of 400 cases in our sample, or an estimated 157,045 of the 172,434
enrollments in the 2000 to 2002 program years. We examined the model
used by the Trust to estimate its funding requirements and reviewed
reports of auditors and contractors related to the model. We surveyed
all 148 AmeriCorps grantees for their views on the Corporation's new
enrollment and oversight policies as well as the training and technical
support provided by the Corporation, and obtained a response rate of 71
percent. We also reviewed applicable laws, analyzed Corporation data,
reviewed relevant documents and reports from the Corporation's
Inspector General, and interviewed knowledgeable officials. We
conducted our work between March and December 2003 in accordance with
generally accepted government auditing standards. For more details
about our scope and methodology, see appendix I.
Results in Brief:
Discrepancies between information in the Trust database and participant
documentation indicate that not all AmeriCorps enrollment and exit
information has been accurately recorded in the Trust database. We
estimate that there are discrepancies in about 5 percent (8,300) of
158,000 enrollments from program years 2000 to 2002, and of these,
about 3 percent (4,400) could affect estimates of future probable
expenditures of the Trust. One of the most frequently occurring
discrepancies pertained to cases in which the Trust database showed
participants were still serving while their documentation showed they
had exited the program without earning an award. For example, the
database, as of July 25, 2003, indicated that a participant was still
serving and the documentation showed that this participant had
completed service on August 24, 2002. Our analysis also found that more
than 300 of the participants enrolled between 1999 and 2002 had Social
Security numbers that were invalid or had not been issued and about 170
had numbers for persons listed as deceased in the Social Security death
master file. In addition to the data discrepancies, we found the
documentation for the Trust database difficult and cumbersome to use.
Corporation managers told us the users' manual had not been updated
since it was first prepared in 1995, although there have been many
changes to the system. Documenting systems is an important internal
control that helps organizations ensure that data are reliably
collected and properly used and helps ensure organizations are
positioned to continue operations in the event of a disaster or
emergency.
The Corporation used one model for several years to estimate the
funding needed to provide education awards through the Trust, and in
2003 it developed and used a new model that increased the funding
estimates of the Trust. According to Corporation officials, the
Corporation used the Service Award Liability (SAL) model from 1996 to
2003 to estimate the future probable expenditures of the Trust for past
and current participants, as well as to develop funding estimates for
future participants that it used in its budget requests. Following the
passage of the Strengthen AmeriCorps Program Act in July 2003, the
Corporation developed and used a new model to estimate the funding
needed for future participants. This new model used more conservative
values as compared with the previous model. Corporation officials
stated that they believe their historical data provide a sound basis
for Trust funding estimates. However, they chose to use more
conservative assumptions because the AmeriCorps program does not have a
long history and they wanted to regain credibility after having had to
suspend enrollments last year. As a result, the new model increased the
funding estimates. For example, the SAL model generated a requirement
of about $116 million for fiscal year 2004 for 75,000 participants, and
7,000 scholarships for high school students, while the new model
generated funding estimates of about $133 million for the same number
of participants and scholarship recipients.[Footnote 2] Our analysis
indicates that by using the new model's assumptions, the Trust may
accumulate larger balances than if historical rates were used. This
accumulation in the balance may occur in addition to the reserve
account that is required by the Strengthen AmeriCorps Program Act.
While Corporation officials acknowledged that these changes may cause
larger balances in the Trust, they said they would be able to
deobligate funds at several points in the AmeriCorps program life cycle
and could adjust the assumptions in the future. While there may be
large balances in the Trust, there are external factors, such as the
strength of the economy and the support for volunteerism, that could
either reduce these balances or further increase them. The Corporation
has reported that external factors have affected its programs, but has
not incorporated into its model the possible effects these factors
could have on its estimates. The Corporation recently formed a
management improvement team to assess the costs and benefits of
incorporating external factors into its model. Building in
consideration of external factors could further improve the quality of
the Corporation's estimates.
The Corporation has made changes that minimize the likelihood of a need
to suspend enrollments in the future, and changes have been implemented
and planned to address the Strengthen AmeriCorps Program Act
requirements. However, some operational changes have not been fully
implemented, and two new policies are of concern to grantees. Prior to
the suspension of enrollments, the Corporation did not record an
obligation to the Trust fund at the time it created positions,
officials did not communicate regularly about the number of positions
created or the number of participants enrolled in AmeriCorps relative
to Trust resources, and the Corporation allowed grantees various
flexibilities concerning the enrollment of participants. Beginning in
July 2003, Corporation officials began obligating Trust funds when they
approved positions in accordance with the Strengthen AmeriCorps Program
Act. Corporation officials have placed greater emphasis on monitoring
the availability of funds in the Trust, and the communication and
coordination between officials responsible for managing the Trust and
officials responsible for creating positions have greatly improved.
Since March 2003, Corporation managers have been tracking AmeriCorps
enrollments on a biweekly basis, investigating discrepancies in counts
between its enrollment system and the Trust database, and monitoring
enrollments in relation to the availability of funds in the Trust. The
Corporation also tightened grantee program rules and now requires
grantees to provide timely enrollment information. For example,
grantees can no longer enroll more participants than are specified in
their grant award, and grantees are now required to enroll participants
within 30 days of their starting work. The Corporation has plans to
improve the process for monitoring enrollments, to improve grantee
oversight, and to meet the requirements of the Strengthen the
AmeriCorps Program Act. However, two new policies are of concern to
grantees because they believe these policies may limit enrollments and
hinder service delivery. If these policies reduce enrollments, balances
in the Trust may be further increased. Under current policy, if a
participant enrolls in a program and drops out before earning an award,
the grantee cannot offer the position to another applicant for the
balance of the term of service. Grantees are also prohibited from
exchanging a full-time position for an equivalent value of part-time
positions. More than 80 percent of the respondents to our survey stated
that the policy prohibiting refilling positions will have a negative
effect on the program operations of their subgrantees, and 75 percent
of the respondents stated that the policy prohibiting them from
converting positions would hurt their ability to provide services.
Also, these policies could hinder the Corporation's ability to fulfill
its mission and reduce the number of participants and the number of
earned education awards, thereby contributing further to the balance of
funds in the Trust.
We are recommending that the Corporation's chief executive officer
review and document the Corporation's data assurance processes, update
and improve Trust database system documentation, incorporate external
factors into its Trust estimates, and assess enrollment policies to
determine whether they have negatively affected service delivery and
contributed to the balance of funds in the Trust.
The Corporation's chief executive officer provided written comments on
a draft of this report and generally agreed with our recommendations.
Additionally, he suggested several changes to help clarify the report,
which we incorporated as appropriate. These comments are discussed in
the report and are shown in appendix V.
Background:
The Corporation is part of the USA Freedom Corps, a White House
initiative to foster a culture of citizenship, service, and
responsibility, and help all Americans answer the President's Call to
Service.[Footnote 3] The Corporation maintains administrative field
offices in almost every state. AmeriCorps was created in 1993 and is
one of three national service programs the Corporation oversees: the
Senior Corps, AmeriCorps, and Learn and Serve America. AmeriCorps
consists of three programs: AmeriCorps State and National (state and
national), AmeriCorps VISTA (Volunteers in Service to America), and
AmeriCorps NCCC (National Civilian Community Corps). AmeriCorps
programs for tribes and territories are included in state and national
programs.
The Corporation makes grants from its program appropriations to help
grant recipients carry out national service programs. These include
programs that tutor and mentor youth, build affordable housing, teach
computer skills, clean parks and streams, run after-school activities,
help communities respond to disasters, and those that are related to
homeland security. About 60 percent of the Corporation's fiscal year
2003 grant funds for AmeriCorps programs went to state service
commissions, tribes, and national direct grantees[Footnote 4] for
AmeriCorps State and National programs, which award subgrants to
nonprofit groups, which then enroll the AmeriCorps participants. The
remaining grant and administrative funding paid for VISTA and NCCC
participants--about 32 percent and 8 percent respectively, in 2003.
AmeriCorps is open to U.S. citizens and nationals or lawful permanent
resident aliens age 17 and older. Participants in the AmeriCorps
program can receive stipends as well as health benefits and child care
coverage. For example, about one-half of AmeriCorps participants
received a $9,300 living allowance and health benefits in program year
2002. Those participants who successfully complete a required term of
service earn a national service education award that can be used to pay
tuition, fees, and expenses for undergraduate school, graduate school,
or an approved school-to-work program, or to pay back qualified student
loans. In exchange for a term of service, full-time AmeriCorps
participants earned an education award of $4,725 in program year 2002.
VISTA participants can elect to receive a cash stipend instead of an
education award. About one-third of VISTA participants chose to take
the stipend rather than the education award in 2002. Figure 1
illustrates the flow of the funds and information for the AmeriCorps
program.
Figure 1: Flow of Funds and Information for AmeriCorps Education
Awards:
[See PDF for image]
[End of figure]
According to the Corporation's Trust database, AmeriCorps enrollments
more than doubled between 1994 and 2000. Overall AmeriCorps enrollments
increased from about 25,000 in 1994 to about 42,000 in 1999, to over
59,000 in 2001. Enrollments fell in 2002 because of the suspension of
enrollments and were legislatively limited to 50,000 in 2003. The
Corporation requested Trust funding to support 75,000 new enrollments
for 2004.
AmeriCorps enrolls participants on a full-time and a part-time basis.
Part-time participants who serve 900 hours or less annually earn
education awards proportional to the hours served. During the first
three years when AmeriCorps programs enrolled participants, 60 percent
or more of the participants served in full-time positions. By 2000 less
than 50 percent of the participants were full-time, and Corporation
officials stated that they are planning for about a 50/50 full-time/
part-time mix in 2004. Trends in total enrollment from 1994 to 2002,
and projected enrollment for 2003, and the full-time and part-time mix
of participants for each year are shown in figure 2.
Figure 2: AmeriCorps Enrollments by Program Year:
[See PDF for image]
Note: Program year 2003 figures are planned positions.
[End of figure]
Additionally, AmeriCorps enrolls "education award only" participants.
AmeriCorps does not pay these participants a living allowance or other
benefits, but it provides funding to grantees for administrative
purposes only, about $400 annually per participant. However, each
education award participant receives an education award equivalent to
that earned by a paid AmeriCorps member. More than half of the
AmeriCorps enrollment growth has come from grants that provide
participants no benefits other than the education award. The
Corporation reports there has been high interest in these grants in
recent years. Enrollments for these positions increased from fewer than
6,500 in 1999 to almost 16,000 in 2001. All participants--full-time,
part-time, and education award--have up to 7 years after they
successfully complete their service to use their education
awards.[Footnote 5]
AmeriCorps also distributes funds to high school students through
Presidential Freedom Scholarships. These scholarships are valued at
$500 for each participant. For 2003 and 2004, the Corporation planned
to award about 7,000 Presidential Freedom Scholarships.
The Government Corporation Control Act requires the Corporation to have
an annual audit of its financial statements.[Footnote 6] The
Corporation prepares its financial statements using generally accepted
accounting principles that are used by private sector corporations and
federal corporations. The Corporation plans to include a statement of
net cost and a statement of budgetary resources as supplemental
information in its annual Performance and Accountability Report by
fiscal year 2005.
The Corporation's financial statement auditor reported that in fiscal
year 2002 the Corporation approved AmeriCorps national service
positions in excess of the number of positions that the Trust could
support. In November 2002 the Corporation suspended enrollments in
AmeriCorps. Several factors contributed to the need to suspend
enrollments, including a lack of communication among staff responsible
for program and Trust operations. The Office of the Inspector General
(OIG) reported in April 2003 that the AmeriCorps program approved
grants for thousands of positions more than were used in the
Corporation's model to estimate the funding needs of the National
Service Trust. On July 24, 2003, the OIG reported the Corporation had
enrolled more AmeriCorps participants than the Corporation's National
Service Trust could support, and as a result, beginning in 2000, the
Trust's liabilities exceeded the funds it had available from
appropriations and interest earnings.[Footnote 7] In that report, the
OIG concluded that the Corporation had violated the Antideficiency Act.
The Antideficiency Act prohibits an employee or officer of the United
States government from making or authorizing an expenditure or
obligation exceeding an amount available in an appropriation.[Footnote
8] The Corporation submitted an Antideficiency Act report to OMB, but
as of December 2003, the report, including the amount of the
deficiency, had not been submitted to the President and the
Congress.[Footnote 9] For more information see appendix II.
Trust Database and Participant Documentation Discrepancies Could Affect
Estimates of Probable Education Award Expenditures:
Discrepancies between the information in the Trust database and
participant documentation indicate that not all AmeriCorps enrollment
and exit information has been accurately recorded in the Trust
database.[Footnote 10] Some of these discrepancies could affect the
estimated probable expenditures of the Trust because these data are
used to estimate the amount of education awards the Corporation will
ultimately pay. Furthermore, the Corporation does not have complete or
current user documentation for the Trust database. Without clear
documentation explaining the components of the database, the
Corporation may be at risk of not being able to properly interpret and
analyze its participant data.
Trust Database and Participant Documentation Discrepancies Could Affect
Estimates of How Much the Corporation Owes in Education Awards:
Out of about 172,000 enrollments in program years 2000 to 2002, we
obtained sufficient documentation to estimate the extent of
discrepancies for about 158,000 enrollments.[Footnote 11] We estimate
that about 5 percent (8,300 enrollments) have a discrepancy between the
Trust database and participant documentation.[Footnote 12] Of these,
about 3 percent (4,400 enrollments) could affect estimates of future
probable expenditures of the Trust.[Footnote 13] Figure 3 illustrates
these results.
Figure 3: Estimate of Discrepancies between Trust Data and Participant
Documentation:
[See PDF for image]
[End of figure]
Several of the discrepancies that could affect what is owed by the
Trust were similar in nature. One of the most frequently occurring
discrepancies pertained to cases in which the Trust database showed
participants were still serving while their documentation showed they
had exited the program without earning an award. For several other
cases, the Trust data showed VISTA participants were still serving
while the documentation showed they had elected to receive a cash
stipend instead of an education award. According to an AmeriCorps
official, cash stipends are not paid from funds in the Trust. In
several other cases, the Trust data showed participants were still
serving while their documentation showed they had signed up for a
shorter term of service and should have exited the program. The
Corporation acknowledged it would need to take further action to
determine the actual status of these cases. The specific discrepancies
we found that could affect the amount owed by the Trust are described
in appendix III.
Nearly all the discrepancies that will not affect the amount owed by
the Trust were for cases without an enrollment date on the form,
although an enrollment date was in the database. These cases do not
affect the estimate of what the Trust owes because other information in
the documentation was consistent with the database, such as whether or
not the participant earned an award. Corporation officials told us an
enrollment date should be recorded on the forms and that they would
issue clarifying instructions to grantees.
According to Corporation officials, there are numerous processes
designed to help ensure the accuracy and validity of its data. However,
the results of our analysis raise questions about the effectiveness of
some of these processes. The Corporation has controls over who may
enter or change participant information in the Web-Based Reporting
System (WBRS), and several edit and data checks are in place to ensure
data is entered properly and completely. For example, only a grantee's
program director can certify that participants have completed their
service and qualified for an award, and WBRS will not allow grantees to
enroll more participants than the number of slots they were awarded.
Corporation officials also stated that a number of data checks are
performed when WBRS data are transferred to the Trust database. For
example, after each weekly upload, an error report is generated showing
such things as participants who had not been officially enrolled in the
Trust and duplicate enrollments. Furthermore, the Corporation's fiscal
year 2001 Performance and Accountability Report noted that the
Corporation had instituted a procedure to randomly sample and verify
enrollment and exit data on an annual basis. However, Corporation
officials could not provide any reports documenting the results of
these reviews.
Our analysis of the Trust data also found that out of 186,000
participants enrolled during program years 1999 to 2002, 313
participants had Social Security numbers (SSNs) that were invalid or
that the Social Security Administration (SSA) had not issued, and 169
had SSNs for persons listed in SSA's death master file. In about 75
percent of these last cases, the name and birthday of the individual in
the SSA death file differed from the information in the Trust database.
In the remaining 25 percent of cases, the name and birthday matched,
but either the SSA records show the individual had died more than 30
days before the service completion date shown in the Trust database or
no completion date was in the Trust database, indicating these
participants may be listed as still serving.
Corporation officials told us that some of these cases could be the
result of data entry errors. They also said that, on occasion, grantee
officials create records for nonexistent individuals, including mock
SSNs, to test how the data entry system works. However, these erroneous
data are not routinely cleared from the database, according to
Corporation officials. Since these cases are in the database, they are
considered as enrolled participants. Such records for nonexistent
individuals will cause the Corporation to overstate the estimated
amount owed by the Trust for education awards. In November, 2001, the
Corporation entered into an agreement with SSA to test the validity of
the SSNs of newly enrolled participants. Corporation officials provided
information showing that they completed a SSN match under this
agreement in May 2002 and found that 2,910 participants out of about
58,000 that did not match SSAs records. Corporation officials stated
that they were undertaking an internal review to resolve these
discrepancies. The Corporation has not done any subsequent matches, but
officials told us that because of our findings, they would reconsider
this. Corporation officials also said that while the database could be
improved, there are safeguards to prevent an unauthorized person from
claiming an award. For example, the postsecondary institution the
participant is attending must verify that he or she is a student there,
and the award funds are sent directly to the institution. Nonetheless,
since there are tens of thousands of different individuals joining
AmeriCorps every year and given the concerns about how SSNs are used
and protected, particularly in light of the rise in identify theft, it
may be in the Corporation's best interest to regularly verify the
accuracy of the SSNs.[Footnote 14] Without valid SSNs in the Trust
database on its participants, the Corporation cannot be certain that it
has accurate information on its participants and that all participants
meet the eligibility criteria.
The Corporation Has Not Updated Its Users' Manual for the Trust
Database:
We found the system documentation for the Trust database was difficult
to use and, in some instances, out of date. As a result, we had to rely
on oral testimony and e-mails provided by Corporation officials and the
WBRS support contractor for information about the system. The users'
manual for the database was prepared in 1995. However, Trust database
managers told us that this manual does not reflect all system changes
since that time.[Footnote 15] The Corporation has a data definition
dictionary for the Trust database intended to describe the data fields
used in the database and what information they represent. However, the
document we obtained does not provide definitions or labels for the
data fields. Without this information, we were not able to identify
what the data fields represented, nor would any new users of the system
be able to identify the data fields. In commenting on a draft of this
report, Corporation officials stated that the system documentation,
including the data definition dictionary, was formatted to facilitate
use by system developers rather than laypersons. We were also only able
to obtain a partial written inventory of edit and data checks used for
the database. We had to rely on two Corporation employees knowledgeable
about the system's components to explain the type of information in
each of the data fields, identify the data fields used in determining
education awards, and determine what related data and edit checks were
used.
Documenting how data systems are to be used is a common, and required,
management practice.[Footnote 16] Without clear or up-to-date system
documentation explaining the data elements in the Trust database, and
procedures for validating the data, the Corporation may be at risk of
using incorrect data for its estimates of future probable expenditures.
Also, the Corporation would be dependent upon a few employees who are
familiar with the system to produce reports or prepare analyses of the
data. Documenting systems is an important internal control that helps
organizations ensure that data are reliably collected and properly used
and helps ensure organizations are positioned to continue operations in
the event of a disaster or an emergency.
The New Model Increased Funding Estimates and Does Not Consider
External Factors:
In 2003, the Corporation began using a new model to estimate the
funding needed to provide future education awards through the Trust.
This new model used conservative values that increased the Trust's
funding estimates as compared with the previous model. Corporation
officials believe the historical data they possess provide a sound
basis for Trust funding estimates. However, they chose to use more
conservative values because the AmeriCorps program does not have a long
history and they wanted to regain credibility after having had to
suspend enrollments in 2002. In addition, the Trust fund now includes a
reserve account required by the Strengthen AmeriCorps Program Act. The
Corporation's model also does not include a way to consider the
possible effects that external factors could have on its estimates. If
the Corporation does not ensure its funding estimates for future
education awards are as reasonable and complete as possible, millions
of federal dollars may accumulate in the Trust and not be available to
help support this or other programs.
The New Model Increased the Estimated Funding Needed for the Trust:
The Corporation used one model, the SAL model, to estimate both the
probable expenditures of the Trust for past and current participants
and the funding needed to provide education awards for future
participants. According to Corporation officials, the SAL model was
used from 1996 to 2003. In 2003, the Corporation developed a new model
and revised its method for developing the Trust's future funding
estimates.
The SAL model is still used to estimate probable education award
expenditures for past and current participants. The reliability and
supportability of the estimates produced by earlier versions of the SAL
model have been examined by outside auditors on two separate
occasions.[Footnote 17] The auditors asked to review and assess the
Trust model determined that the model produced reliable estimates for
the period examined. However, they suggested functional enhancements
and provided model documentation to the Corporation. Other auditors
also reviewed the model as part of the annual audits of the
Corporation's financial statements.[Footnote 18] These auditors
advised the Corporation that controls and checks on the model's data
should be strengthened. They also recommended that automated techniques
be periodically used to systematically review the model's database and
that the Corporation should consider several minor changes to the model
to enhance the reasonableness of its estimates.[Footnote 19] We also
reviewed the SAL model and found that the key factors and assumptions
used to develop the accounting estimates were generally reasonable.
Furthermore, neither the Corporation's IG nor our assessment found that
the SAL model was a key factor that contributed to the suspension of
enrollments in 2002. For information on the structure and content of
the SAL model, see Appendix IV.
In the new model, the Corporation used more conservative values for the
rates at which education awards are earned and used. The Strengthen
AmeriCorps Program Act states that the Corporation shall use a formula
for estimating Trust obligations that takes into consideration
historical rates of relevant participant behavior. In considering
historical rates, the Corporation officials commented that they believe
the historical data they possess provides a sound basis for Trust
funding estimates and having extra funds available in the Trust--as
compared with those estimated by the SAL model--might be prudent,
particularly since the AmeriCorps program does not have a long history
from which to extrapolate trends in participant behavior--only one
cycle has been completed. The officials also noted that the new model's
assumptions do not differ significantly from the historical averages.
For example, the rate at which participants earn awards in the former
model is about 75 percent, while the new model uses a rate of 80
percent. Further, the officials said they chose to use more
conservative values because they wanted to regain credibility after
having had to suspend enrollments in 2002. These officials said that
they wanted to ensure that the Corporation would have adequate funds in
the Trust and avoid any possible need to suspend enrollments again. It
may be appropriate to gain some experience with the new model and
current participant behavior before adjusting the assumptions used.
The Strengthen AmeriCorps Program Act also required the Corporation to
consult with the Congressional Budget Office (CBO) on its model
formula. CBO focused its analysis on the Corporation's discount rate
and reported that the Corporation used a discount rate that is more
conservative than the one it uses when calculating the costs related to
proposed legislation.
When the new model's assumptions are used, the Corporation's Trust
funding estimates were greater for the same number of participants than
if the values in the SAL model were used. We calculated that the cost
to provide education awards for up to 75,000 AmeriCorps participants
and 7,000 Presidential Freedom scholarship recipients using SAL model
assumptions was about $116 million. Using the assumptions in the new
model, the Corporation's funding estimate was about $133 million for
the same number of participants and scholarship recipients. The total
amount in the Trust also may be higher because the act required the
Corporation to include a reserve account. Corporation officials told us
the reserve account value of 10 percent of the funding estimate was a
value reached through discussions with congressional staff, and this
value could change in subsequent years.
The New Model Assumptions May Increase Balances in the Trust:
Our analysis indicates that by using the assumptions in the new model,
the Trust may accumulate more funds than have been needed to pay
estimated education awards in the past. For instance, the Corporation's
data show the Trust funding estimates are $13 million and $17 million
more, respectively, when 50,000 and 75,000 participants are assumed,
and the new award levels and the award earning and usage rates are used
than those used in the SAL model. Not only are the assumptions in the
new model greater than those used in the SAL model, but the SAL model
assumptions are higher than the actual rates in most years. For
example, the percentage of AmeriCorps participants who earned education
awards has fluctuated since the beginning of the program. The rate
decreased from a high of about 75 percent in 1994 to 68 percent in
1998, and then increased to 73 percent in 2001. The rate used in the
SAL model for earned awards was about 75 percent--the highest average
percentage rate achieved in the history of the program.[Footnote 20]
Figure 4 compares the actual rates at which education awards were
earned with the rate used in the SAL model and the rate used in the new
model. If future participant behavior reflects the behavior of most
past participants, the Trust fund balance may increase more using the
new model assumptions than it would using the estimates produced by the
SAL model. It may be appropriate for the Corporation to gain some
experience with the new model and current participant behavior before
adjusting the assumptions used.
Figure 4: Percentage of AmeriCorps Participants Who Earned Education
Awards Compared with the Percentages used in the SAL and the New Model:
[See PDF for image]
[End of figure]
The Corporation acknowledges that the new model may create Trust
balances that are greater than if historical rates were used if future
participant behavior mirrors historical behavior. The Corporation chief
financial officer said that there are opportunities to periodically
deobligate funds during the program cycle. Funds could be deobligated
from the Trust if (1) the positions created in the grant awards are
less than the full-time-equivalent number of the positions approved,
(2) all positions are not filled, (3) participants drop out before
earning an education award, and (4) participants who earn awards do not
use them. Figure 5 illustrates the points when the Corporation can
deobligate funds.
Figure 5: Points in AmeriCorps Program Cycle when Deobligation May
Occur:
[See PDF for image]
Note: Shaded boxes are points at which Trust funds may be deobligated.
[End of figure]
Corporation officials said any deobligated funds would become available
for other enrollments. They also said these funds would be used to fund
other awards in current and future program years, and would be
considered as reductions in subsequent budget requests. Furthermore,
Corporation officials stated that the annual financial audit will
address whether the size of the reserve account and the assumptions
used are prudent.
As of December 2003, the Corporation had two studies under way
examining AmeriCorps participants' attrition rates and their
utilization of earned awards.[Footnote 21] These studies focus on the
frequency with which awards are earned and used. Corporation officials
said that these studies have provided information that aids them in
understanding AmeriCorps attrition and award usage, but they have not
resulted in recommendations for policy changes that could affect the
assumptions used in the model.
External Factors Not Considered in Developing Estimates:
Although Corporation reports indicate that external factors have
affected program participation levels, these factors are not included
in either model, nor have the Corporation officials taken them into
account when they submit their funding request for the Trust.
Estimating models should account for factors external to the business
or entity that can affect the reasonableness of the estimates. Several
factors can affect the assumptions used by the Corporation to estimate
its budget needs. These factors include the state of the economy, the
cost of postsecondary education and the availability of financial aid,
and the levels of interest in volunteerism. Neither of the
Corporation's models takes into account any external factors that could
change future trends when it creates its assumptions or calculates its
final budget estimates. Corporation officials stated that the models
are not sophisticated enough to account for all of these factors.
However, the Corporation has formed a Management Improvement Team to
examine the potential costs and benefits of upgrading the model to
account for some external factors.
External factors could affect the number of AmeriCorps participants, as
well as the attrition rate and use of awards once enrolled. For
example, if unemployment rates are high, more participants may be
willing to enroll, since they could receive a stipend as well as future
education awards. Additionally, if postsecondary education costs
increase, more participants may be likely to ensure they earn, and
afterward use, their education awards. The Corporation has acknowledged
that external factors have prevented it from achieving program goals.
In its fiscal year 1999 and 2000 Performance Reports, the Corporation
said it believed the strong economy was partly to blame for the
Corporation's not achieving its program year 1998 and 1999 enrollment
goals. In its fiscal year 2002 Performance and Accountability Report,
the Corporation said the high level of interest in volunteerism
following September 11, 2001, and the President's Call to Service
contributed to higher levels of AmeriCorps enrollments than were
anticipated.
Operational Changes Should Reduce the Risk of Enrollment Suspensions,
but Two New Policies May Hinder Service Delivery and May Contribute to
Higher Balances in the Trust:
The Corporation has implemented and planned substantive changes that
should minimize the risk of an enrollment suspension in the future, and
it has met or plans to meet the requirements established by the
Strengthen AmeriCorps Program Act. Our previous statement and testimony
from the Corporation's Inspector General identified several factors
that contributed to the conditions surrounding the November 2002
suspension in enrollments.[Footnote 22] The Corporation has made
changes to address these factors. However, grantees raised concerns
about two new policies because they may limit enrollments and hinder
service delivery. If these policies reduce enrollments, balances in the
Trust may be further increased.
The Corporation Has Improved Aspects of Its Operations:
The Corporation has made changes to address the three conditions that
we reported contributed to the need to suspend enrollments in
AmeriCorps.[Footnote 23] The Corporation had not recognized its
obligation to fund participant education awards. There was a lack of
communication among program, grants management, and Trust officials
with regard to the number of AmeriCorps positions the Trust could
support. Finally, because they did not require grantees to provide
timely enrollment information, Corporation and AmeriCorps managers
could not be certain about the number of AmeriCorps participants and
their effect on the Trust.
The Corporation's obligation practices comply with the Strengthen
AmeriCorps Program Act. In accordance with this act, the Corporation
began obligating Trust funds when it approved positions in AmeriCorps
grants beginning in June 2003. As of September 2003, the Corporation
had obligated fiscal year 2003 appropriated Trust funds for about
46,000 of the 50,000 AmeriCorps positions.
Greater emphasis has been placed on monitoring the availability of
funds in the Trust, and the communication and coordination between
officials responsible for managing the Trust and officials responsible
for creating positions have greatly improved. Since March of 2003, the
Corporation has been tracking AmeriCorps enrollments on a biweekly
basis, investigating discrepancies in counts between its enrollment
system and the Trust database, and monitoring the enrollments against
the capacity of the Trust. These results are made available to high-
ranking program and financial management officials of the Corporation,
who meet monthly to discuss the results of these exercises.
The Corporation has also tightened the controls and eliminated much of
the flexibility it previously gave grantees. Grantees are now
prohibited from enrolling more participants than specified in their
grant awards, and the Corporation modified WBRS to prevent grantees
from enrolling more participants than the number of positions contained
in the grant award. To better monitor progress toward its enrollment
goals and their effect on the Trust, the Corporation now requires
grantees to report certain data about potential participants to the
Corporation prior to their actual enrollment. If a potential
participant does not enroll within 45 days of the expected start date,
the file on the potential participant is deleted. If the individual
enrolls as scheduled, the grantee must complete the enrollment process
within 30 days of the participant beginning work. The Corporation added
a tool to WBRS that allows managers to monitor the average number of
days between a participant's start date and enrollment. According to
the Corporation, 60 percent of program year 2002-2003 grantees have
improved the average time between participants' start dates and the
reporting of their enrollment compared to their performance in program
year 2001-2002. However, less than 50 percent of the program year 2002-
2003 grantees reported an average time from start date to enrollment of
30 days, or less.
In addition, the Corporation provided training and technical support to
assist grantees with the system changes and new enrollment
requirements. Most of the AmeriCorps grantees who responded to our
survey said the training was adequate to meet the new requirements. Of
the AmeriCorps grantees who responded, 80 percent said that the
Corporation provided enough training and technical support to help them
meet these new requirements. However, in written responses some
grantees said they would like to receive training more frequently and
believed it would be beneficial if the Corporation could provide
training directly to subgrantees, rather than just to grantees.
Additionally, about 7 percent of the responding grantees said that as a
result of the new requirements, they or their subgrantees would have to
perform additional tasks in their enrollment procedures. One of the
responding grantees said that because it had over 150 part-time
positions, and only limited staff, the requirement to enter data on
participants twice imposed a significant burden.
Some Changes Have Not Been Fully Implemented:
Corporation officials stated that they are planning to improve
oversight of grantees' performance. The Corporation plans to create
consolidated reports in WBRS to facilitate oversight of the performance
of its grantees, such as the state commissions and national direct
grantees. This will allow them to identify programs having enrollment
reporting problems more quickly and allow them to focus their oversight
on those most in need of attention. Additionally, the Corporation plans
to strengthen grantee oversight requirements to ensure that grantees
are overseeing their subgrantees' compliance with enrollment procedures
and time frames. The Corporation updated the administrative standards
for the state commissions' process for monitoring their subgrantees'
compliance with the enrollment procedures. These standards also include
the expectation that state commissions will consider a subgrantee's
compliance with the enrollment procedures and time frames in their
funding decisions. The Corporation issued this guidance to the
commissions in November 2003. In commenting on the draft report,
Corporation officials said that the revised standards will be piloted
in spring 2004 and then submitted to OMB for review in early fiscal
year 2005. The Corporation also plans to establish a schedule for its
staff to review grantees' enrollment cycle times and provide additional
training and technical assistance to grantees.
There are two provisions in the Strengthen AmeriCorps Program Act that
increase the oversight of Trust operations. The first provision
requires that the Corporation's chief executive officer (CEO) certify
annually in a report to Congress that the Corporation is in compliance
with other sections of the act. The second provision requires an annual
audit of the accounts and records supporting the national service
positions, and the National Service Trust estimate to fund those
positions--referred to in the act as the Corporation's trust
obligations. The act requires the CEO to include this annual audit with
the CEO certification report forwarded to Congress. Although the audit
has been completed, the Corporation has not yet provided its report to
Congress.[Footnote 24] The auditor found, after accounting for the
model's assumptions and reserve account, the Trust still had about $10
million of its fiscal year 2003 appropriation available for awards as
of September 30, 2003. The acting CEO certified the Corporation's
compliance with the act in the management representation letter
provided to the Corporation's Inspector General on November 13, 2003.
Corporation officials said they also plan to include the CEO
certification and the audit of the estimated obligations in its 2003
Performance and Accountability report to Congress.
Two Policy Changes May Limit Enrollments and Contribute to Balances in
the Trust:
Prior to the suspension in enrollments, the Corporation allowed
grantees to replace a participant who left AmeriCorps before earning a
full award and to convert an unfilled position to a different number of
positions with an equivalent value of education awards. For example, if
a grantee had a difficult time recruiting full-time participants, it
could convert the full-time position into two half-time positions. In
an effort to help ensure the Trust would not incur education award
expenditures greater than its funds, the Corporation established
policies that prohibit grantees from replacing participants and
converting full-time positions. With these policies, if a participant
enrolls in a program but then leaves after 1 week, the grantee cannot
replace that person, and if a grantee has one full-time position but
can only find people willing to work part-time, the grantee cannot
convert that position to two half-time positions but instead can only
fill it with one part-time person. The Corporation established these
policies because it estimated that the Trust could only support a
finite number of 2002 positions. Subsequently, Congress placed a 50,000
limit on the number of total AmeriCorps enrollments that could be
filled with the 2003 Trust appropriations. However, as of November
2003, Congress has not included an enrollment limit in the proposed
2004 Trust appropriations.
The policies prohibiting grantees from refilling vacated positions and
converting unfilled positions helped the Corporation officials to
control enrollments and helped them to comply with the legislatively
imposed limit, which in turn helped ensure the solvency of the Trust.
However, grantees who responded to our survey said that these policies
may hinder their ability to provide services. Additionally, these
policies may lead to fewer enrollments and coupled with the
Corporation's obligation practices and the model assumptions may
contribute to a higher balance of funds in the Trust.
Our survey of AmeriCorps grantees shows that of those grantees that
responded, 80 percent reported that the prohibition regarding the
refilling of positions will have a generally or very negative effect on
their program operations. Three-quarters of respondents reported that
this policy will force changes in their program operations or those of
their subgrantees or operating sites. Eighty-one percent reported that
that it will limit enrollments and hinder their ability to provide
services. Sixty-five percent reported that the policy will require
changes to the services provided. Respondents reported that they may
have to recruit more carefully, or not report recruitments until the
latest possible time, to maximize the likelihood participants will
remain in the program. This will affect AmeriCorps participants as well
as those being served. One respondent in our survey commented,
Our subgrantees must now rethink their member enrollment and
termination policies. In the past, programs could "take a chance" on
enrolling a potential member who showed promise but who may have also
had potential risk factors. They were able to do this because they
could refill the slot if the member did not work out. In relation to
terminating members, subgrantees will now be somewhat hesitant to
release a member who is not performing as expected, because they will
not be able to refill the slot.
Similarly, most of the respondents reported that the policy on
converting unfilled positions will affect program operations and
service delivery. About 75 percent of respondents reported that this
restriction will negatively affect their operations and require them to
change their operations. Seventy-five percent reported that it will
hinder service delivery, and 60 percent reported that it will cause
changes in services provided. Respondents commented that the authority
to convert positions allowed them to respond positively to changing
circumstances and better address community needs. One respondent noted
that without being able to convert positions, applicants will not be
accommodated if their availability does not conform to the slots
provided in the grant. Positions, therefore, could go unfilled.
Furthermore, if these policies result in fewer enrollments, the balance
in the Trust may grow. As previously mentioned, since the passage of
the Strengthen AmeriCorps Program Act, the Corporation obligates funds
for all AmeriCorps positions when the grants are approved and prior to
participants actually enrolling. Also, the new model the Corporation
uses for developing funding estimates assumes 100 percent enrollment
for all positions created. If enrollments do not reach the approved
levels, and if Corporation officials do not regularly and diligently
monitor enrollments and periodically deobligate funds, the funds in the
Trust may accumulate.
Internal Control Weaknesses Remain:
Financial statement auditors have reported several internal control
weaknesses or conditions at the Corporation and whether the Corporation
has improved those previously identified. For example, the auditors
reported that the grant approval policies and procedures were a serious
weakness in fiscal years 1999 and 2000. The reports for 2001 and 2002
show that the Corporation improved in this area and the auditors did
not list this as a concern in the 2003 report.
However, the Corporation continues to have some internal control
problems. The fiscal year 2003 audit reported a continuing internal
control problem regarding the Corporation's monitoring of grantee
activities. This problem was also cited in the audit reports for fiscal
years 2001 and 2002. Additionally, as previously stated, we found that
the Corporation has not fully implemented its efforts to improve
oversight of grantees' performance, its procedures do not ensure
accurate data in the Trust database, and the Corporation's ability to
fully use the data on its participants may be limited because the
users' manual for the database has not been kept current.
In light of these internal control weaknesses and the concerns related
to the problems that lead to the suspension in enrollments, having an
auditor review internal control would provide a measure of assurance
over the Corporation's accountability and internal control. Auditor
opinions on internal control are a critical component of monitoring the
effectiveness of an entity's risk management and accountability
systems. When an auditor renders an opinion on internal control, the
auditor is providing reasonable assurance that the entity has
maintained effective internal control over financial reporting
(including safeguarding of assests) and compliance such that material
misstatements, losses, or noncompliance that are material to the
financial statements would be detected in a timely fashion. The auditor
also reports on any significant deficiencies or material weaknesses in
the internal control over financial reporting. An opinion on internal
control is appropriate and necessary for major government entities and
in other cases where an opinion on internal control would add value and
mitigate risk.[Footnote 25]
Conclusion:
The suspension of AmeriCorps enrollments had a serious impact on the
Corporation's operations, resulting in both internal and external
scrutiny. This scrutiny revealed many shortcomings with the
Corporation's management of the AmeriCorps program and the Trust. Since
the suspension in enrollments, the Corporation has made significant
changes to some of its operating procedures and internal controls. Most
notably, the Corporation began obligating Trust funds when AmeriCorps
positions were created, and key Corporation officials have been much
more focused on ensuring adequate funds are in the Trust.
However, weaknesses still existing in the Corporation's procedures and
internal control could negatively affect the Trust or hinder the
Corporation's ability to fulfill its management responsibilities. For
instance, discrepancies between the Trust database and the participant
data indicate that the Corporation does not have adequate internal
control procedures to ensure the accuracy of its data. Accurate and
complete participant information in the Trust database is critical.
This information plays a significant role in estimating the education
awards owed by the Corporation and ensuring they are awarded properly.
Inadequate system documentation is an internal control weakness that
could limit the Corporation's ability to maximize its use and
understanding of the data it possesses. Without valid SSNs in the Trust
database on its participants, the Corporation cannot be certain that it
has accurate information on its participants and could indicate that
not everyone participating in the program meets the eligibility
criteria.
In addition, other changes are needed to enhance the Corporation's
efforts to be good stewards of public funds while fulfilling its
mission. Given the Corporation's relatively short history, and
fluctuation in its program data, it may be prudent for the Corporation
to use factors and value in its model that provide some additional
funds in the Trust. Nonetheless, future funding estimates for the Trust
should be as reasonable and complete as possible to minimize the
accumulation of large balances in the Trust. The Corporation needs to
balance its efforts to ensure the Trust does not assume future probable
expenditures in excess of its funds with the mission and goals of the
grantees and subgrantees that enroll AmeriCorps participants to help
meet community needs. Policies that do not balance these goals may also
contribute to the accumulation of balances in the Trust. If the
Corporation does not ensure its funding estimates are as reasonable and
complete as possible and does not regularly and diligently monitor
enrollments and periodically deobligate funds, millions of federal
dollars may accumulate in the Trust and not be available to help
support other federal programs. Finally, obtaining an auditor's opinion
on internal control over financial reporting as part of its annual
financial statement audits would provide additional accountability and
assurance.
Recommendations:
To improve the management of AmeriCorps and the National Service Trust,
we recommend that the chief executive officer of the Corporation take
the following nine actions:
To ensure the Trust receives accurate data for use in its model
estimates and Trust database,
* implement a strategy to correct discrepancies between the Trust
database and the enrollment and exit forms,
* review and document the effectiveness of its data assurance
processes,
* regularly verify the accuracy of the SSNs of its participants.
To better ensure that the Corporation has data that are readily
available and is positioned to continue operations in the event of a
disaster, emergency, or employee turnover, and:
* update the users' manual for the Trust database and develop an
inventory of edit and data checks used for the database.
To provide additional assurance over internal control and to minimize
the related risks,
* obtain an auditor's opinion on the adequacy of the internal control
over financial reporting as part of the annual financial statement
audit.
To enhance the accuracy of Trust budget estimates and ensure the Trust
does not accumulate large balances,
* create a means to take into account the possible impact that external
factors may have on participant behavior in its funding estimates and
budget requests,
* establish and execute a periodic deobligation schedule for unused
Trust obligations, and:
* review the assumptions being used in the new funding model after the
Corporation gains more experience with the new model and current
participant behavior.
To ensure its policies support its mission and grantees' efforts to
deliver services while also providing adequate management controls,
* evaluate the enrollment policies regarding refilling and converting
positions.
Agency Comments and Our Evaluation:
We received written comments from the chief executive officer for the
Corporation for National and Community Service. These comments are
reprinted in appendix V. The chief executive officer agreed with eight
of the nine recommendations and identified the actions planned to
address them. As for the other recommendation--to obtain an auditor's
opinion on the adequacy of the Corporation's internal control over
financial reporting as part of the annual financial statement audit--
the chief executive officer stated that he would refer it to the
Corporation's Office of Inspector General, since that office contracts
for the annual financial audit.
Additionally, the chief executive officer identified several areas that
needed further clarification. He pointed out that the system
documentation for the Trust module of eSPAN was not outdated, as we
said in our draft, and informed us that the documentation is up to date
but neither it nor the data dictionary is maintained in a laypersons'
format. We modified the report to better reflect this information. The
chief executive officer stated that the Corporation believes that the
historical data currently used to estimate Trust funding provides a
sound basis for the estimates. We modified the language in the report
to reflect the Corporation's views. Further responding to the chief
executive officer's comments, we (1) deleted the statement that the
Corporation planned to begin using Generally Accepted Accounting
Principles for federal government entities, (2) added program year
information to better describe the comparison of the average time
between participants' start dates and reporting of their enrollment,
(3) made it clear that the Corporation's oversight efforts will focus
on its grantees--the state commissions and national direct grantees,
(4) updated the status of the Corporation's revised administrative
standards, and (5) changed the date when the CEO certification was
provided.
Further, the chief executive officer expressed the view that our
discussion of the Antideficiency Act violation focused on the amount of
the deficiency at a specific time in the past and does not calculate
the amounts deobligated over time. He also states that it is the
Corporation's view that the deficiency is the amount needed at this
time to liquidate obligations. We disagree and we revised this section
of the report to explain that the Antideficiency Act requires an agency
to report the amount of the violation at the time the violation
occurred. The chief executive officer also stated that the $64 million
deficiency appropriation should be sufficient. The report does not
reflect nor did we calculate the amount the Corporation needs to
liquidate its obligations.
As we agreed with your office, unless you publicly announce the
contents of this report earlier, we plan no further distribution of it
until 30 days from the issuance date. We will then send copies to the
Chief Executive Officer of the Corporation for National and Community
Service and make copies available to others who request them. At that
time, the report will also be made available at no charge on GAO's Web
site at http://www.gao.gov.
If you have any questions about this report, please call me on (202)
512-8403 or Carolyn Taylor on (202) 512-2974. Other contacts and staff
acknowledgments are listed in appendix VI.
Cornelia M. Ashby:
Director, Education, Workforce and Income Security Issues:
Signed by Cornelia M. Ashby:
[End of section]
Appendix I: Scope and Methodology:
To determine if the activities of AmeriCorps participants were
accurately recorded in the Trust database, we performed a data
reliability test comparing information in the Trust database with
information from original enrollment and exit forms completed by the
participants and their AmeriCorps program managers. We obtained data
files from the Web-Based Reporting System (WBRS) and the System for
Programs, Agreements, and National Service Participants (SPAN). SPAN is
the database used by the Trust. We performed general checks on these
files to look for invalid data such as Social Security numbers that are
invalid or have not been assigned. Because of a lack of documentation
describing the data fields in detail, particularly for SPAN, we held
several discussions with Corporation officials and contractor staff to
resolve technical issues associated with the data files and to identify
data fields to use in our reliability test. Based on these discussions,
we developed a list of WBRS data fields that would document
participants' enrollment, exit, and award eligibility. At our request,
Corporation staff provided a list of corresponding SPAN data fields.
The population we performed the reliability test for consisted of
172,434 state and national direct grant program and VISTA individual
enrollments that were in the SPAN database as of July 25, 2003, and
enrolled during the 2000, 2001, and 2002 program years. Each individual
enrollment consisted of a discrete period of time a specific individual
was an AmeriCorps participant at a single grantee. We did not sample
National Civilian Conservation Corps (NCCC) participants because they
constitute a small percentage of AmeriCorps enrollments (less than 3
percent).
We drew a stratified random sample of 400 enrollments from this SPAN
database. The population was stratified into four groups on the basis
of program enrollment (i.e., state and national direct grant program or
VISTA) and exit status (i.e., had exited from the program or not). With
this statistically valid probability sample, each enrollment in the
study population had a nonzero probability of being included, and that
probability could be computed for any enrollment. Each sample element
was subsequently weighted in the analysis to reflect the sample design.
The weighting factors were computed as the ratio of the population to
the sample within each stratum. We express confidence in the precision
of our estimates as a 95 percent confidence interval.[Footnote 26]
Corporation regulations require that participant documentation be kept
on file for 3 years from the date a participant finishes his or her
term of service.[Footnote 27] Documentation for VISTA participants is
maintained at the Corporation's state field offices and for state and
national participants the documentation is maintained at the grantee's
or subgrantee's office. The Corporation sent requests for the
participant documentation to the appropriate grantees for each
enrollment in our sample. The grantees sent the documents to the GAO
headquarters in Washington, DC. We reviewed the documentation to make
sure all applicable forms were submitted. Because of a larger than
expected number of nonresponses and incomplete document submissions, we
made a second request to the grantees that had not provided complete
documentation. In total we allowed program officials 6 weeks to provide
the documents.
Not all grantees provided us with complete participant documentation
for the cases we randomly selected. We did not receive any of the
documentation needed to assess whether enrollment information was
accurately recorded for an estimated 14,055 of the 172,434 enrollments
in the 2000 to 2002 program years. Although we received incomplete
documents for an estimated 30,176 enrollments, we were able to compare
key information with the SPAN data. Corporation officials expressed
surprise that we did not receive all of the documents requested. Table
1 shows estimates of documentation availability for all enrollments
during program years 2000-2002.
Table 1: Estimates of Documentation Availability for AmeriCorps State
and National Grantee and VISTA Participants, Program Years 2000-2002:
Ninety-five percent confidence intervals shown in parentheses.
AmeriCorps state and national;
Number of enrollees: 157,045;
No documentation available: 7.6% (4.3 - 12.4%);
Incomplete documentation available: 15.9% (11 - 21.8%);
Complete documentation available: 76.5% (70.5 - 82.5%).
AmeriCorps VISTA;
Number of enrollees: 15,388;
No documentation available: 13.4% (8.5 - 19.6%);
Incomplete documentation available: 34.3% (27.1 - 41.6%);
Complete documentation available: 52.3% (44.7 - 59.9%).
Total;
Number of enrollees: 172,434;
No documentation available: 8.2% (5 - 12.4%);
Incomplete documentation available: 17.5% (13 - 22.8%);
Complete documentation available: 74.3% (68.9 - 79.8%).
Notes: Totals may not add because of rounding.
[End of table]
Grantee officials are responsible for entering and updating all
information about participants. Participants complete enrollment and
exit forms at the start and completion, respectively, of their terms of
service. Grantee officials complete and sign other portions of these
forms certifying the participant's enrollment and exit dates and
whether or not the participant earned an education award. The grantee
officials enter the participant's information into WBRS.[Footnote 28]
It is then transferred to the Trust database on a weekly basis.
Since participant data from the Trust database were used to calculate
the Corporation's future probable expenditures of the Trust for past
and current participants as well as develop its funding estimates for
future participants that it uses in its annual budget requests, we
focused our comparison on key fields that would affect the estimates.
According to Corporation officials, these include the enrollment date,
the number of hours the participant committed to serve, the number of
hours actually served, and the participant's termination status--
whether or not the participant completed the term of service and earned
an award. We recorded as a discrepancy any case where the information
for these fields in the documentation did not match the information
recorded in SPAN or the information appeared to be inconsistent with
enrollment period rules such as participants still serving when other
information indicates they should have finished their term. We assessed
whether the discrepancies would affect what the Trust owed. We provided
a list of the discrepancies to Corporation officials for further
investigation. In several cases, they were able to explain why we found
a discrepancy and document that the case was accurately recorded in the
Trust database. We did not include these cases in our discrepancy
count.
To answer the question of how the Corporation develops its funding
estimates for the Trust, we reviewed the models used by the Trust to
develop its funding estimates. We obtained electronic versions of the
models and input data to assess whether the models worked as described
by Corporation officials. We gained an understanding of the controls
over the preparation of the estimates and supporting data. We also
learned about the controls over the sources of data and external
factors that could affect the estimates. We verified the consistency of
assumptions with historical data and the reliability of historical
data. We considered whether changes in business or industry would cause
other factors to become significant, and questioned Corporation
officials regarding the possible impact of changes in Corporation
operations on the factors. We also performed a test of calculations in
the model. We obtained and reviewed revisions to the model recommended
by auditors and contractors, and the changes planned for future budget
submissions. We discussed all these issues with knowledgeable staff in
the chief financial officer's office and conducted several hands-on
sessions during which the Corporation staff demonstrated how the model
worked and was used. Additionally, we obtained and reviewed financial
statement reports from the Corporation's IG and assessed the sections
of those reports that discussed the models and the supporting data.
To determine if the management and operational changes to controls put
in place following the suspension in enrollments in November 2002 would
be effective, we reviewed Corporation memos and related data to check
the progress of and compliance with these reforms and we interviewed
knowledgeable staff. We also surveyed 148 AmeriCorps grantees--state
commissions, national direct parent organizations, education award
programs, tribes and territories--and asked their views on the new
enrollment and oversight policies as well as the adequacy of the
training and technical assistance provided by the Corporation. In
developing the questionnaire, we reviewed memos implementing the new
policies and met with Corporation officials to gain a better
understanding of the new policies. We also obtained comments from
Corporation officials on a draft of the questionnaire. We pretested the
questionnaire in person or by telephone with the four grantee groups--
state commissions, national direct grantees, education award programs,
tribes and territories. Guided by the pretest results and comments from
the Corporation, we revised the questionnaire to ensure that all
questions were fair, relevant, and easy to understand and answer. In
addition, we tested the questionnaire to ensure that completing it
would not place too great a time burden on grantees. Overall, we
received responses from about 71 percent of the grantees (105 of the
148 surveyed). Response rates for each type of grantee were: state
commissions (81 percent), national direct (73 percent), education award
programs (60 percent), tribes and territories (54 percent).
To establish whether the Corporation obligated funds in excess of the
amount available in the Trust, we reviewed applicable statutes
concerning how federal funds should be obligated and the 1993
Corporation legislation. We also reviewed reports related to the
violation issued by the Corporation's OIG and its financial statement
auditor. We clarified legal issues through correspondence with legal
counsel from the Corporation and the Office of Management and Budget
(OMB).
We reviewed the internal control processes related to various
Corporation activities using the Standards for Internal Control in the
Federal Government.[Footnote 29]
We conducted our work between March and December 2003 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: The Corporation's Antideficiency Act Violation:
In July 2003, the Corporation's Office of the Inspector General (OIG)
reported that the Corporation had obligated funds in excess of the
amount available to it in the National Service Trust. In that report
the OIG noted that the Corporation had suspended participant enrollment
on November 15, 2002, because it was concerned that the Trust would not
have sufficient funds to cover education awards. At the time, in
November 2002, Corporation did not record education award obligations
in the Trust Fund until it paid education awards to eligible
participants, so it had no assurance that adequate funds were
available. The Corporation amended AmeriCorps grants to suspend
enrollments and did not permit any additional enrollments until
Congress appropriated additional funds to the Trust in March 2003.
However, the suspension came too late. In February 2003, the
Corporation's financial statement auditor reported that, in fiscal year
2002, the Corporation had approved AmeriCorps national service
positions in excess of the number of positions that the Trust could
support.[Footnote 30] The July 2003 OIG report stated that the
Corporation had enrolled more AmeriCorps participants than the Trust
could support, and as a result, the "[t]rusts' liabilities, based on
appropriations and interest forbearance[Footnote 31] expected to be
paid, exceeded the Trust's appropriations and interest earnings
beginning in 2000."[Footnote 32] The report also stated that the
Corporation had violated the Antideficiency Act.[Footnote 33]
Additionally, the OIG report stated that the Corporation estimated that
the violations resulted in a Trust deficiency of approximately $64
million. This $64 million was derived from a reconstruction of the
Trust's financial status that the Corporation prepared at the Office of
Management and Budget's (OMB) request. In its July 25, 2003, response
to the OIG's report, the Corporation conceded that it had violated the
Antideficiency Act but disagreed with the amount of the violation
reported by its OIG and stated that the financial reconstruction was a
draft that was prepared "while the legal landscape was still
unfolding."[Footnote 34]
We suspect that the $64 million amount of the violation may be
understated. In two legal opinions, in April and June 2003, we
explained that the Corporation incurred, and was required to record, an
obligation at the time it awarded a grant approving a new participant
slot.[Footnote 35] We concluded that the Corporation, by waiting to
record an obligation until it paid an education award, was under
recording its obligations. In addition, we explained that the
Corporation could not, without specific statutory authority, record an
obligation on the basis of estimates of what it would have to pay when
education awards are earned (its probable accounting liability). We
stated that the Corporation should record its maximum potential
liability. As our legal opinions established, the Corporation under
recorded its obligations by recording (1) obligations at the time of
drawdown rather than at grant award and (2) estimates of what it would
have to pay rather than the full potential costs of the education
awards.
In 2002, OMB advised the Corporation that it should record obligations
as the grantees enrolled new participants. OMB also advised the
Corporation that it should record the amount of the obligation based on
estimates of what enrolled participants will draw down in the future,
using historical information, such as attrition rates and actual usage
by participants who complete a term of service and earn an education
award. The Corporation had already been developing these estimates for
its budget request to the Congress.
At the time of the enrollment suspension, while the Corporation had not
yet instituted the practice of recording obligations as the grantees
enrolled participants, it took into consideration the consequences of
recording obligations at the time of enrollment in its financial
reconstruction for OMB and concluded that if the Corporation had been
recording obligations at the time of enrollment, the deficiency would
be $279 million. We suspect that $279 million might also understate the
amount of the violation at the time the violation occurred because the
Corporation still would have recorded estimates, as opposed to the
maximum potential liability, and still would have failed to record
obligations when incurred---at time of grant award. The Corporation
submitted an Antideficiency Act report to OMB, but as of December 2003,
the report, including the amount of the deficiency, had not been
submitted to the President and the Congress.[Footnote 36]
In our June 6, 2003, legal opinion we noted that the Corporation could
seek legislation that would permit it to use an estimation model for
recording its obligations, and that this model could be similar to the
process that would be used to determine the Corporation's probable
accounting liability. [Footnote 37] On July 3, 2003, the Congress
passed the Strengthen AmeriCorps Program Act,[Footnote 38] permitting
the Corporation to record obligations based on estimates, as it had
been doing without statutory authority prior to the passage of the act.
The act redefined what an obligation is for purposes of the AmeriCorps
program by authorizing the Corporation to "record as an obligation an
estimate of the net present value of the national service educational
award associated with the position, based on a formula that takes into
consideration historical rates of enrollment in such a program, and of
earning and using national service educational awards for such a
program."[Footnote 39] With regard to when the Corporation incurs a
liability, the act requires the Corporation to change its obligation
practices by specifying that the Corporation obligate funds from the
Trust at the time it awards a grant approving a new participant slot,
rather than at time of enrollment.[Footnote 40]
Nevertheless, the Corporation must report the amount of its
Antideficiency Act violation based on the legal requirement in place at
the time the violation occurred. According to the report by the
Corporation's OIG, and conceded by the Corporation, the Corporation's
violation occurred beginning in fiscal year 2000, before the
Corporation obtained legal authority to alter its obligation practices.
Had the Corporation reported its violation at the time it occurred, the
Antideficiency Act would have required it to report a violation
calculated in consideration of the cost of new participant slots
approved at the time the Corporation awarded new grants, and not based
on an estimate of what these participants would cost the Corporation in
the future. The Corporation should calculate its Antideficiency Act
violation for purposes of its report to the President and Congress
based on the requirement in place at the time the Corporation incurred
the overobligations.
The Antideficiency Act requires an agency to report all relevant facts
and a statement of actions taken.[Footnote 41] Accordingly, an agency,
among other things, must inform the President and Congress if a
violation occurred and in what amount, and request from the Congress,
if needed, a deficiency appropriation. Even though an agency may cure a
violation, it is still required to report the violation to the
President and Congress. Because the Corporation's legal requirement for
recording obligations differs today from the requirement that was in
place when this violation occurred, the Corporation, in fact, may not
need additional appropriations to cure the violation. Regardless, the
Corporation should report the actual amount of the violation, but
advise Congress of the changed circumstances. We have not assessed and
do not address whether the Corporation will need additional funds to
meet its current potential liabilities. To the extent that the
Corporation identifies a need for additional appropriations as a result
of its Antideficiency Act violation, the Corporation should include
that request in its Antideficiency Act report.
[End of section]
Appendix III: Discrepancies between Trust Data and Participant
Documentation That Could Affect the Amount Owed by the Trust:
Table 2: Description of Discrepancies for AmeriCorps State and National
Cases:
State, national participants case number: 1; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant still
serving. WBRS report provided in lieu of exit form indicates member was
to complete service on 4-6-03.
State, national participants case number: 2; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant completed
term and earned full award. Award eligibility status was left blank on
exit form.
State, national participants case number: 3; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant still
serving. Documentation provided shows participant completed service and
earned award.
State, national participants case number: 4; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant still
serving. Enrollment form shows participant signed up for summer term on
8-15-02 with expected completion date of 8-14-03.
State, national participants case number: 5; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant still
serving. Enrollment form shows participant signed up for summer term on
8-15-01 with expected completion date of 8-14-02.
State, national participants case number: 6; Description of discrepancy
(Trust data as of July 25, 2003): Trust data show participant still
serving. Enrollment form shows participant signed up for summer term on
8-15-02 with expected completion date of 8-14-03.
Source: GAO analysis.
[End of table]
Table 3: Description of Discrepancies for AmeriCorps VISTA cases:
VISTA participants case number: 1; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant exited on 3-18-02 as an early
termination and was not eligible for an award.
VISTA participants case number: 2; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Exit form shows participant completed service as scheduled on 8-24-02
and is eligible for a full award.
VISTA participants case number: 3; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant resigned on 3-21-03 and is not eligible
for an award.
VISTA participants case number: 4; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant resigned on 4-30-01 and is not eligible
for an award.
VISTA participants case number: 5; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant exited on 2-28-01.
VISTA participants case number: 6; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant served 305 days
with completion date of 10-9-00. Exit form shows completion date of 12-
9-00. (Enrolled 12-10-99.).
VISTA participants case number: 7; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Exit form shows participant exited early, 1-13-03, and is not eligible
for award.
VISTA participants case number: 8; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows enrollment period ended 2-4-03 and on 2-19-03,
participant changed benefit to cash stipend.
VISTA participants case number: 9; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant completed as
scheduled and is eligible for award. Exit form shows participant not
eligible for an award because cash stipend was chosen.
VISTA participants case number: 10; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant changed benefit to cash stipend before
completing term.
VISTA participants case number: 11; Description of discrepancy (Trust
data as of July 25, 2003): Trust data show participant still serving.
Documentation shows participant changed benefit to cash stipend before
completing term.
Source: GAO analysis.
[End of table]
[End of section]
Appendix IV: The Service Award Liability Model:
The Service Award Liability (SAL) model used SPAN data on the actual
behavior of past and current AmeriCorps participants as the basis for
assumptions of future participant behavior. These data included the
proportion of participants who earned awards, the percentage of earned
awards used, the period when awards were used, and the size of the
average award. Also included in the calculations were past and
anticipated appropriations, net of rescissions, as well as the actual
and expected interest earnings of the Trust balance in order to arrive
at the estimates of the funding needed for future
participants.[Footnote 42] The model used the portfolio of the Trust's
investments--the proportion held as short-and medium-term treasury
securities--to calculate a discount rate, which in turn is used to
convert future funding needs into a net present value.[Footnote 43]
Corporation officials would then adjust the resulting estimate to
account for any accumulated funds in the Trust. Figure 5 shows how the
SAL model works.
Figure 6: The SAL Model:
[See PDF for image]
Note: Shaded boxes represent data used by the SAL model.
[End of figure]
[End of section]
Appendix V: Comments from the Corporation for National and Community
Service:
CORPORATION FOR NATIONAL & COMMUNITY SERVICE:
January 7, 2004:
Cornelia M. Ashby, Director:
Education, Workforce, and Income Security Issues:
U.S. General Accounting Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Ms. Ashby:
Thank you for the opportunity to review and comment on the General
Accounting Office's (GAO) draft report on the National Service Trust
(GAO-04-225). As I begin my tenure as Chief Executive Officer at the
Corporation, I am pleased that the issues that gave rise to the pause
in enrollments have been resolved and that appropriate internal
controls have been put in place to prevent a reoccurrence in the
future. The new procedures reflect the hard work by Corporation staff to
improve operations and implement changes based on valuable guidance
from Congress and the Administration.
I also appreciate GAO's concern that the improved procedures may result
in the National Service Trust accumulating more funds than are needed
to pay education awards. However, as noted in the report, the
Corporation's new procedures include steps to monitor Trust activity
and to deobligate funds for AmeriCorps positions not utilized by
grantees. In addition, the adequacy of the obligated and reserve
balances in the Trust will be assessed on an annual basis as part of
the audit required under the Strengthen AmeriCorps Program Act. These
procedures provide ample opportunity to adjust future appropriations
requests to prevent significant surpluses from accumulating in the
Trust.
Corporation staff has also reviewed the report. The Corporation
generally agrees with the information presented in the report and is in
the process of implementing its recommendations. However, several areas
need further clarification. These matters, as well as a brief response
to each recommendation, are presented on the following pages.
Signed by:
David Eisner:
Chief Executive Officer:
Enclosure:
Corporation Response to Draft General Accounting Office Report: Better
Internal Controls and Revised Practices Would Improve the Management of
AmeriCorps and the National Service Trust (GAO-04-225, Dated December
18, 2003):
CLARIFICATIONS:
In the Results in Brief section of the draft report (as well as in the
body of the report) GAO states that the system documentation for the
Trust module of eSPAN is outdated and has not been updated since 1994.
This is incorrect. eSPAN system documentation:
is maintained in the Oracle Designer repository and is up to date. Since
this is system level documentation, it is not maintained in a
layperson's format but in a format that is advantageous to the work of
the developers. This also holds true for the data dictionary. The
Corporation does agree that the user manual for the Trust module needs
to be updated.
In the Results in Brief section of the report (as well as in the body
of the report) GAO states that the Corporation used more conservative
assumptions in the new model because the AmeriCorps program does not
have a sufficient history from which to extrapolate participant
behavior, and the Corporation wanted to regain credibility after having
to suspend enrollments. This is incorrect. The Corporation believes
that, although trend data will improve over time, the historical data
currently used to estimate Trust funding needs does provide a sound
basis for the estimates. In addition, while the current assumptions
used to estimate Trust obligations are slightly more conservative than
those used in the past, they are consistent with historical trends as
well as with the assumptions recommended by Senator Bond in his floor
statement accompanying passage of the Strengthen AmeriCorps Program
Act.
On page 10 of the draft report, GAO states that the Corporation plans
to begin using Generally Accepted Accounting Principles (GAAP)
standards for federal government entities by 2005. However, the
Corporation's financial statements are currently prepared in accordance
with policy established by the Federal Accounting Standards Advisory
Board (FASAB) for government corporations. As such, no changes to the
basic financial statements are contemplated absent new guidance from
FASAB. However, the Corporation does plan to include a statement of net
cost and a statement of budgetary resources as supplemental information
in its annual Performance and Accountability Report by fiscal 2005.
On page 23 of the draft report, GAO states, "According to the
Corporation, over the last year, while 60 percent of all grantees have
improved their average time between participants' start dates and the
reporting of their enrollment, less than 50 percent of grantees had
reported an average time from start date to enrollment of 30 days or
less." To clarify, this information is based on a comparison of
grantees at a point in time during the 2002-03 program year (which
corresponds generally to the 2003 fiscal year) to their performance in
the 2001-02 program year (which corresponds generally to the 2002
fiscal year). This information does not reflect grantees' performance in
the current program year (2003-04) or the implementation of oversight
and management improvements.
On page 24 of the draft report, GAO states "The Corporation plans to
create consolidated reports in WBRS to facilitate oversight of all
grantees' performance. This will allow them to identify programs having
enrollment reporting problems more quickly and allow them to focus
their oversight on those most in need of attention." This is generally
correct, but the Corporation clarifies that its oversight will focus on
its grantees-the state commissions and direct grantees such as the
national direct and education award programs. In turn, grantees will be
responsible for oversight and management of performance at the sub-
grantee and individual operating program level. Also on page 24, the
Corporation clarifies that it has revised its administrative standards
for state commission monitoring of the subgrantees' compliance with the
enrollment procedures. These revised standards will be piloted in
spring 2004 and then submitted for OMB review after the pilot phase in
early fiscal 2005.
Also on page 24 of the draft report, GAO states that the Chief
Executive Officer's (CEO) certification required by the Strengthen
AmeriCorps Program Act has not been completed. This is incorrect. As
part of the annual financial statement process the acting CEO certified
the Corporation's compliance with the Act. The certification was
included in the management representation letter provided to the
Corporation's Inspector General on November 13, 2003. The certification
is also included in the Corporation's annual Performance and
Accountability Report which will be sent to Congress in early February.
Finally, Appendix II, in discussing the Antideficiency Act, appears to
focus exclusively on the amount of the deficiency attributable to
national service positions we approved in excess of available resources
in the National Service Trust at a specific time in the past. The
appendix calculates this amount without regard to the fact that amounts
for lapsed education awards would be deobligated over time; in our
view, the deficiency is the amount actually necessary at this time to
liquidate obligations related to those national service positions.
Based on our analysis, which employs the experience-based obligation
approach that Congress provided for in the Strengthen AmeriCorps
Program Act, we believe that the $64 million deficiency appropriation
that Congress appropriated last spring should be sufficient to
liquidate these obligations.
RECOMMENDATIONS:
GAO Recommendation:
Implement a strategy to correct discrepancies between the Trust
database and the enrollment and exit forms.
Corporation Response:
The Corporation agrees with this recommendation. Data supporting member
enrollment and exit status is maintained by the Corporation's grantees,
which are primarily nonprofit organizations and state governments
required to obtain an audit under OMB Circular A-133. The Corporation
plans to revise the compliance testing requirements for the AmeriCorps
program contained in OMB Circular A-133 to include testing of data
submitted by grantees to the National Service Trust database. The
Corporation will also review grantee management of enrollment and exit
data as part of its grantee monitoring procedures.
GAO Recommendation:
Review and document the effectiveness of the Corporation's data
assurance processes.
Corporation Response:
The Corporation agrees with this recommendation. The Corporation will
better document the data processing that occurs between eSPAN and WBRS
and generate standardized reports around the data exchange between the
two systems that will produce consistent reliable data. In addition,
within the next two years the Corporation plans to begin integrating
WBRS functionality into eSPAN, thus eliminating the need to reconcile
between the two systems.
GAO Recommendation:
Regularly verify the accuracy of the social security numbers of
participants.
Corporation Response:
The Corporation agrees with this recommendation. The Corporation
entered into a Memorandum of Understanding with the Social Security
Administration and tested SSN data in the national Service Trust during
fiscal 2002. The Trust office will be required to perform the data
verification and resolve discrepancies on an annual basis, or more
frequently if warranted by the results.
Corporation Response to Draft General Accounting Office Report: Better
Internal Controls and Revised Practices Would Improve the Management of
AmeriCorps and the National Service Trust (GAO-04-225, Dated December
18, 2003):
GAO Recommendation:
Update the system documentation for the Trust database, particularly
the data dictionary, and develop an inventory of edit and data checks
used for the database.
Corporation Response:
The Corporation agrees with this recommendation. While the Corporation
believes that the system documentation is up-to-date, we will continue
to strengthen the documentation within Oracle Designer by implementing
more rigorous style guidelines and adding additional details to the
current data dictionary to enable it to be more user friendly. The
Corporation will also assess the reporting that is currently available
within Oracle Designer to accommodate the development of an inventory
of edit and data checks.
GAO Recommendation:
Obtain an auditor opinion on the adequacy of the Corporation's internal
control over financial reporting as part of the annual financial
statement audit.
Corporation Response:
The Corporation's Office of Inspector General contracts with an
independent public accounting firm to perform the annual audit of the
Corporation's financial statements and testing of internal controls. We
will forward GAO's recommendation to the Inspector General for his
consideration.
GAO Recommendation:
Create a means to take into account the possible impact that external
factors may have on participant behavior in funding estimates and
budget requests.
Corporation Response:
The Corporation agrees with this recommendation. The Corporation's
Management Improvement Team has begun a project to assess whether
unemployment rates, post secondary school enrollment levels, and other
external factors can be correlated to the earning and usage rates of
education awards. These elements will be factored into the Corporation's
budget modeling to the extent practical.
GAO Recommendation:
Establish and execute a periodic deobligation schedule for unused Trust
obligations.
Corporation Response:
The Corporation agrees with this recommendation. The Corporation's
revised Trust procedures include steps to monitor Trust activity and to
deobligate funds for AmeriCorps positions not utilized by grantees.
GAO Recommendation:
Review the assumptions being used in the new funding model after the
Corporation gains more experience with the new model and current
participant behavior.
Corporation Response:
The Corporation agrees with this recommendation. The Corporation's
procedures require the bi-weekly review of enrollment data and the
preparation of quarterly financial reports for the Trust based on the
most recent information on the earning and usage rates for AmeriCorps
members. As part of these processes the Corporation will review the
assumptions being used in the funding model and revise them if
necessary.
GAO Recommendation:
Evaluate the enrollment policies regarding refilling and converting
positions.
Corporation Response:
The Corporation agrees with this recommendation. AmeriCorps program
staff will monitor and assess the impact of this policy on grantees and
recommend revisions to the policy in the future if necessary.
[End of section]
Appendix VI: GAO Contacts and Acknowledgments:
GAO Contacts:
Carolyn M. Taylor (202) 512-2974 or taylorcm@gao.gov Anthony DeFrank
(202) 512-4377 or defranka@gao.gov:
Staff Acknowledgments:
In addition to those named above, the following individuals made
important contributions to this report: Joel Marus, Susan Higgins,
Elizabeth Lessmann, Patrick diBattista, Hannah Laufe, Thomas Armstrong,
James Rebbe, Julie Phillips, LuAnne Moy, Bob Deroy, Jennifer Popovic,
and Avrum Ashery.
FOOTNOTES
[1] U.S. General Accounting Office, Corporation for National and
Community Service: Preliminary Observations on the National Service
Trust and AmeriCorps, GAO-03-642T (Washington, D.C.).
[2] AmeriCorps distributes funds to high school students through
Presidential Freedom Scholarships. These scholarships are valued at
$500 for each participant.
[3] On January 29, 2002, during the State of the Union Address,
President George W. Bush said "My call tonight is for every American to
commit at least two years--4,000 hours over the rest of your lifetime-
-to the service of your neighbors and your nation."
[4] State service commissions are governor-appointed public agencies or
private nonprofit organizations that distribute AmeriCorps funding
within a state. The Corporation reported there are 52 state service
commissions, with one each in the District of Columbia, American Samoa,
and Puerto Rico, and one in every state except South Dakota. National
direct grantees are charitable organizations that operate in more than
one state, such as the American National Red Cross. The Corporation
provided a list of 48 national direct grantees.
[5] Funds deposited into the Trust and obligated for education service
awards remain available without fiscal year limitation. For example see
Consolidated Appropriations Resolution, 2003, Pub.L.108-7 ("…of which
$100,000,000, to remain available without fiscal year limitation, shall
be transferred to the National Service Trust for educational awards…")
[6] 31 U.S.C. §§ 9105, 9106.
[7] Office of Inspector General Report 03-007, The National Service
Trust: Internal Control Weaknesses Cause an Anti-Deficiency Act
Violation at the Corporation for National and Community Service, July
24, 2003.
[8] 31 U.S.C. § 1341(a).
[9] The Antideficiency Act requires that if an officer or employee of
the United States government violates the act, the agency head "shall
report immediately to the President and Congress all relevant facts and
a statement of actions taken." 31 U.S.C. §1351. OMB Circular A-11
instructs agencies to submit the transmittal letter and report from the
agency head to the President through OMB. Circular A-11 § 145.7.
[10] The database used by the Trust is called SPAN, for System for
Programs, Agreements, and National Service Participants.
[11] Some participants were enrolled for more than one term of service
during this period.
[12] With a 95 percent confidence interval between 3 and 9 percent.
[13] With a 95 percent confidence interval between 1 and 6 percent.
[14] U.S. General Accounting Office, Social Security Numbers:
Government Benefits from SSN Use, but Could Provide Better Safeguards.
GAO-02-352 (Washington, D.C.) May 31, 2002.
[15] An updated e-SPAN operator's guide was issued in August 2002 for
use by VISTA programs.
[16] Agencies are required by OMB to follow Federal Financial
Management Systems Requirements issued by the Joint Financial
Management Improvement Program (JFMIP). These include maintaining
comprehensive and up to date systems documentation. JFMIP is a joint
undertaking of the U.S. Department of Treasury, GAO, the Office of
Management and Budget and the Office of Personnel Management, working
in cooperation with one another and other agencies to improve financial
management practices in Government.
[17] See OIG Audit Report Number 01-49, June 15, 2001, Assessment of
the Service Award Liability Calculation, Price Waterhouse Coopers,
December 10, 2001.
[18] See OIG Audit Report Number 03-01, February 4, 2003, Audit of the
Corporation for National and Community Service Fiscal Year 2002
Financial Statements.
[19] Audit Report Number 03-02. Recommended Improvements to the
Corporation's Internal Controls, Fiscal Year 2002 Management Letter.
January 24, 2003.
[20] We are using the SAL model from June 30, 2003. The rate shown is
for the 1994 program year.
[21] These studies are called the AmeriCorps Attrition Overview Study
and the AmeriCorps Education Award Utilization Survey.
[22] Testimony of J. Russell George, Inspector General of the
Corporation for National and Community Service, Before the Subcommittee
on VA, HUD, and Independent Agencies of the Senate Committee on
Appropriations. April 10, 2003.
[23] U.S. General Accounting Office, Corporation for National and
Community Service: Preliminary Observations on the National Service
Trust and AmeriCorps. GAO 03-642T (Washington, D.C.) April 10, 2003.
[24] Audit Report 04-03, Audit of the Corporation for National and
Community Service's National Service Trust Schedule of Fiscal Year 2003
Budgetary Resources and Obligations, October 31, 2003.
[25] U.S. General Accounting Office, Government Auditing Standards.
GAO-03-673G (Washington, D.C.) June 2003.
[26] Because we used a sample (called a probability sample) to develop
our estimates, each estimate has a measurable precision, or sampling
error, that may be expressed as a plus/minus figure. A sampling error
indicates how closely we can reproduce from a sample the results that
we would obtain if we were to take a complete count of the universe
using the same measurement methods. By adding the sampling error to and
subtracting it from the estimate, we can develop upper and lower bounds
for each estimate. This range is called a confidence interval. Sampling
errors and confidence intervals are stated at a certain confidence
level--in this case, 95 percent. For example, a confidence interval at
the 95-percent confidence level means that in 95 out of 100 instances,
the sampling procedure we used would produce a confidence interval
containing the universe value we are estimating.
[27] In certain circumstances, paper forms are not required. For
example VISTA summer associates do not need to complete an enrollment
form. Also, VISTA has developed a practice of not requiring programs to
complete the certification section of the paper exit form if the
program official who certifies the award status of the participant is
the same individual who would complete this section in e-Span. Several
cases for which paper forms are not required were included in the
sample and we considered these cases as ones for which complete
documentation was provided.
[28] VISTA participants do not enroll through WBRS. They are enrolled
by Corporation officials at AmeriCorps state offices into the Trust
database through eSPAN, an enrollment program that feeds into SPAN
directly.
[29] U.S. General Accounting Office, Standards for Internal Control in
the Federal Government. GAO/AIMD-00-21.3.1 (Washington, D.C.) November
1999.
[30] Audit of the Corporation for National and Community Service's
Fiscal Year 2002 Financial Statements, Audit Report 03-01 at 24, KPMG,
Feb. 4, 2003.
[31] Interest forbearance refers to the payment of student loan
interest by the Corporation for the participant during the period of
service.
[32] Office of Inspector General Report 03-007, The National Service
Trust: Internal Control Weaknesses Cause an Anti-Deficiency Act
Violation at the Corporation for National and Community Service, July
24, 2003.
[33] The Antideficiency Act prohibits an employee or officer of the
United States government from making or authorizing an expenditure or
obligation exceeding an amount available in an appropriation. 31 U.S.C.
§ 1341(a).
[34] Preliminary Response by Corporation for National and Community
Service to the July 24, 2003, Office of Inspector General Report 03-
007, July 25, 2003.
[35] See B-300480, April 9, 2003 and B-300480.2, June 6, 2003, for a
more detailed discussion of the obligation practices of the
Corporation.
[36] The Antideficiency Act requires that if an officer or employee of
the United States government violates the act, the agency head "shall
report immediately to the President and Congress all relevant facts and
a statement of actions taken." 31 U.S.C. §1351. OMB Circular A-11
instructs agencies to submit the transmittal letter and report from the
agency head to the President through OMB. Circular A-11 § 145.7.
[37] B-300480.2, June 6, 2003.
[38] Pub. L. No. 108-45, 117 Stat. 844 (2003).
[39] Id. at § 2(b)(1)(B), 117 Stat. at 844.
[40] Id. at § 2(b)(A)(ii), 117 Stat. at 844.
[41] 31 U.S.C. §1351.
[42] Trust funds are held in Treasury securities.
[43] Net present value refers to the amount required today to provide a
stream of benefits over a number of years. In the case of AmeriCorps,
the period of eligibility is about 9 years from the start of the
program year. The Corporation uses the weighted average interest
earnings of the Trust's portfolio as its discount rate.
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