The National Endowment for the Arts public affairs specialist Elizabeth Stark confirmed to this reporter that the Arts Council was found ineligible to apply or receive awards.
Stark told Variety, “As reported in the National Endowment for the Arts Office of Inspector General Report Number LS-10-02…the Commonwealth Council for Arts and Culture failed to materially comply with the terms of prior NEA awards.”
Consequently, said Stark, the NEA suspended the Council’s eligibility to apply for or receive future awards until such time as the Council implements the recommendations set forth in the OIG report.
“At this time, the Commonwealth Council for Arts and Culture has not yet presented evidence to the NEA that it has implemented the recommendations,” added Stark.
Moreover, in a letter to the Department of Community and Cultural Affairs Secretary Melvin Faisao on April 29, NEH audit followup official Laurence M. Baden ruled, “Based on the Council’s response to the 14 recommendations, the Council will remain ineligible to apply for or receive awards as directed in the September 29, 2010 letter of determination from the NEA.”
In transmitting the NEA’s position on the recommendations stated in the Aug. 17, 2010 NEH Office of Inspector General’s limited audit report on selected NEA grants to CCAC, Laurence said the NEA evaluated the Council’s responses to the OIG report that contained 18 recommendations, 14 of which addressed the council’s management of the NEA grants.
Based on the letter by Baden to Faisao, the NEA made recommendations and concurred with the findings of the Office of the Inspector General.
Majority of the recommendations made by NEA to the council called for detailed policies and procedures.
According to NEA, the council should develop written policies and implement procedures to ensure Code of Conduct and conflict of interest standards be established in accordance with the CNMI’s Department of Finance Division of Procurement and Supply — CNMI Procurement Regulations and NEA General Terms; and consistent with OMB Circular A-102.
Although the council submitted its written policy in July 2010, OIG determined it didn’t adequately address the deficiencies. The OIG returned the policy to the Council on Jan. 12, 2010 for revisions and it has yet to receive the revised copy.
On the second recommendation, NEA asked for the Council to develop written policy and implement procedures to ensure the accounting system identifies and tracks only accurate and allowable expenditures.
It also called for the system to track separately matching expenditures.
The NEA found the Council failed to submit written policies detailing the new procedures and did not submit evidence of the separate accounts for component matching.
Further, NEA recommended for the Council to develop written policies and implement procedures to ensure only actual and allowable costs are reported on its reimbursement requests and final federal financial report.
The procedures, the NEA stated, must also ensure employees who prepare the requests are familiar with the cost principles of OMB Circulars 102 and A-87; all reports and payment requests should be prepared in accordance with NEA Grants and Contracts Office; and an independent review of the reports and requests be done prior to submission to the NEA.
Instead, the Council, according to the NEA, submitted policies identifying employees and not the positions and procedures asked for.
The NEA’s fourth recommendation called for the council to develop policies and procedures to ensure capital equipment, purchased with federal money, is included in the budget and pre-approved by NEA prior to purchase.
A fifth recommendation asked that policies and procedures should be in place to ensure personnel activity reports are maintained for any employee whose salary is charged, in whole or in part to future grant awards that are $50,000 or more.
The council, according to NEA, responded that it would prepare and maintain these reports but the OIG’s review revealed that these did not include instructions and asked for the council to revise and include detailed procedures for documenting and maintaining personnel activity reports.
The NEA also stated that only allowable travel expenses must be charged to the grant and matching expenditures. The OIG did not find the detailed procedures as requested.
The NEA also asked that all grant funds are committed or obligated before the end of the award period as required.
Again, OIG stated that the council failed to submit written policies and procedures on the above.
It also asked that the council monitor subrecipients as per OMB Circular A-133 and all documentation on the subrecipients must be complete and maintained for a period of three years.
A handbook or manual must be developed, stated the NEA, to contain policies and procedures specifically to managing federal grants.
“However, the Council has not submitted a manual/handbook for the management of federal grants,” wrote Baden to Faisao.
It also asked the council to update its Grant Application Guide to reflect changes in the NEA and federal guidelines.
The council, the NEA stated, has not submitted this.
Further, the council must develop policies and procedures to ensure internal controls are strengthened and provide adequate control over all assets acquired through federal funds, travel for staff, spending authority and distribution of award payments.
It further called for the Council to ensure grants are not awarded to companies ineligible or debarred from receiving federal funds and that it will conduct a Section 504 self-evaluation.
The NEA also asked for the council to submit additional documentation to the OIG to support questioned costs and other allowable costs charged to the grants; otherwise, a potential refund of $337,666 is in the offing. However, after review by OIG, this was reduced to $48,036.
The NEA made a breakdown of the grants and the unallowable costs.
For a total outlay for Grant 05-6100-2053 worth $499,799, the NEA saw $32,859 in unallowable costs and $466,940 as allowable costs.
It questioned $896 in travel expenses.
For Grant 06-6100-2043 in the amount of $423,499, there were $29,906 in unallowable costs, $2,000 in questioned costs and a potential $35,518 in refund.
Under Grant 07-6100-2069 for $501,540, there were $34,370 in unallowable costs and $16,757 in questioned costs and $12,518 in potential refund.
For Grant 08-6100-2056 for $191,254, the council had $165,159 in unallowable costs and $7,543 in questioned costs.
In the August 2010 OIG report, the OIG found the Council charged $574,707 in salaries and fringe benefits to the grants which the NEA and the OIG found questionable. Moreover, the OIG also found the council failed to submit personnel activity reports to support these questioned salaries.
The report also stated the council bought two vehicles with NEA funds without prior written approval as required by the NEA General Terms. The council, the report stated, spent $40,950.
