SCHEDULE OF AUDIT REPORTS WITH
QUESTIONED OR UNSUPPORTED COSTS

APPENDIX B

($ in thousands)
No. of Questioned Unsupported
Reports Costs Costs
For which no management decision 6 $ 133 $ 2
was made by the commencement of
the reporting period
Which were issued during the = $222 $-
reporting period
Subtotals (A + B) 9 $ 355 $ 2
For which a management decision 6 $ 91 $ 2
was made during the reporting
period
(i) dollar value of disallowed 1 $ 1 $ -
costs
(ii) dollar value of costs not 5 $ 90 $ 2
disallowed
For which no management decision 3 $ 264 $-1/
has been made by the end of the
reporting period
Reports for which no management - - -
decision was made within 6 months
of issuance
Notes:
Vy Followup in process. Decisions made to followup with grantees to obtain information necessary to close

report.


PURPOSE AND REQUIREMENTS OF THE
OFFICE OF INSPECTOR GENERAL SEMIANNUAL REPORT

The Inspector General Act of 1978 requires the IG to keep the F ederal Co-Chairman and Congress
fully and currently informed about problems and deficiencies in the Commission's operations and the
necessity for corrective action. In addition, the Act specifies that semiannual reports will be
provided to the Co-Chairman by April 30 and October 31 and to Congress 30 days later.

The Co-Chairman may transmit comments to Congress along with the report but may not change any

_ part of the report. The specific requirements prescribed in the Act, as amended (Public Law 100-
504), are listed below.

Reporting Requirements

Section 4(a)(2) Review of legislation and regulations Page 7
Section 5(a)(1) Problems, abuses, and deficiencies Page 3
Section 5(a)(2) Recommendations with respect to problems, abuses, and deficiencies Page 3
Section 5(a)(3) Prior significant recommendations not yet implemented *
Section 5(a)(4) Matters referred to prosecutive authorities me
Section 5(a)(5) and Summary of instances where information was refused -
6(b)(2)

Section 5(a)(6) Listing of audit reports showing number of reports and dollar value App A

of questioned costs
Section 5(a)(7) Summary of each particularly significant report +"

Section 5(a)(8) Statistical table showing number of reports and dollar value of App B
questioned costs

Section 5(a)(9) Statistical table showing number of reports and dollar value of App C
recommendations that funds be put to better use

Section 5(a)(10) Summary of each audit issued before this reporting period for which *
no management decision was made by end of the reporting period

Section 5(a)(11) Significant revised management decisions *

Section 5(a)(12) Significant management decisions with which the Inspector General *
disagrees

* None.

* See references to Sections 5(a)(1) and 5(a)(2) for discussion of significant reports.

iii


With respect to the 120 open grants noted in our followup review, closing actions were initiated in
62 cases during the reporting period, with deobligations of $923,059 in 37 cases. Additionally, the
performance periods were extended in about 36 other cases; and progress payments were noted in
several other cases. Consequently, timely action was initiated on most of the cases noted in our
report; and outstanding obligations were substantially reduced. Such action reflects continued
management attention to this area, including the timely availability of funds for use in other projects.
Emphasis should be placed on followup on grants for which little activity is noted prior to the end of
the performance period in order to ascertain the reasons for the condition and identify the potential
for corrective and/or timely action. Such emphasis is particularly applicable to grants for which no
or limited drawdowns have been made during the grant period.

The OIG continued to support ARC’s initiative to close ARC grants administered by other Federal
agencies. Followup actions were initiated with four agencies about 163 grants where available
information indicated project completion. Followup was initiated to facilitate grant closing and
deobligation of any remaining funds.

During this period, we performed 5 compliance surveys in connection with the J-1 Visa Waiver
program in three states. ARC participates as a Federal entity sponsor to assist Appalachian region
communities in providing health care services to medically underserved areas. The program
provides a waiver of the requirement for a foreign physician to return to his/her home country after
completion of medical training in the United States. ARC acts as the interested Government agency
within the Appalachian region, with waivers being approved by the US Department of State and the
Immigration and Naturalization Service based on ARC recommendations.

Our tests disclosed that participating physicians were generally complying with program
requirements to provide 40 hours of primary care per week ina medical professional shortage area.
However, in one state, our interim report noted that J-1 physicians were working, at least part time,
at locations not identified on sponsor applications and/or were performing substantial alternate-type
service such as visits to nursing homes or making rounds at local hospitals rather than full-time
service at the approved site. We attributed this situation primarily to the number of J-1 approvals,
which resulted in limited patient caseloads at the approved practice locations. Recommendations
were made with respect to identification of physician need, periodic followup to monitor compliance
with program requirements, notification to employers and J-1 physicians to report changed
conditions, and identification of eligible services.

State actions and initiatives included followup with physicians identified in the report, notification to
sponsors and physicians of service and reporting requirements, increased review of applications for
physicians at new practice sites, and submission of employment verification forms on a semiannual
basis.

A followup survey to determine the status of 32 J-1 Visa Waiver physicians for whom employment
verification forms had not been submitted to ARC as of September 1, 2000, disclosed that, in most
cases, the physicians were on-site and providing the medical services provided. The necessary forms
were subsequently submitted to ARC. In several instances, physicians had not received their waivers
from INS; and recommendations were made to notify ARC when employment started.

Continued emphasis was placed on testing first-time program participants in order to determine and
evaluate the extent of knowledge and understanding of program procedures and requirements.

5


- Program funds are distributed to state and local entities in line with an allocation formula
intended to provide fair and reasonable distribution of available resources. ARC staff have
responsibilities for program development, policy analysis and review, grant development,
technical assistance to states, and management and oversight.

-  Inorder to avail itself of Federal agency expertise and administrative capability in certain
areas, the ARC often relies on other departments and agencies for program administration,
especially with respect to highways and infrastructure projects. For example, the
Appalachian Regional Development Act authorizes the Secretary of Transportation to
administer the Commission's highway programs. Under this arrangement, the Commission
retains responsibility for priorities, highway locations, and fund allocations.

B. OFFICE OF INSPECTOR GENERAL

The ARC OIG is an independent audit and investigation unit. The OIG is headed by an Inspector
General who reports directly to the Federal Co-Chairman.

Role and Authorit:

The Inspector General Act of 1978 (P.L. 95-452), as amended in 1988, states that the IG is
responsible for (1) audits and investigations; (2) review of legislation; and (3) recommendation of
policies for the purpose of promoting economy and efficiency in the administration of, or preventing
and detecting fraud and abuse in, the program and operations of the establishment. In this regard, the
IG is responsible for keeping the Federal Co-Chairman and Congress fully informed about the
problems and deficiencies in ARC programs and operations and the need for corrective action. The
IG has authority to inquire into all ARC programs and activities that are Federally funded. The
inquiries may be in the form of audits, surveys, investigations, personnel security checks, or other
appropriate methods. The two primary purposes of these inquiries are (1) to assist all levels of ARC
management by identifying and reporting problem areas, weaknesses, or deficiencies in procedures,
policies, program implementation, and employee conduct and (2) to recommend appropriate
corrective actions.

Relationship to Other Principal ARC Offices

The States and the Federal Co-Chairman, acting together as the Commission, establish policies for
ARC's programs and its administration. These policies are codified in the ARC Code and
implemented by the Commission staff, which is responsible for monitoring project performance and
providing technical assistance as needed. The Federal Co-Chairman, as the Federal fiscal officer, is
responsible for the proper use and protection of Federal funds, for ensuring compliance with
applicable Federal laws and regulations, and for taking appropriate action on conditions needing
improvement, including those reported by the OIG. The operations of the OIG neither replace
established lines of operating authority nor eliminate the need for the Commission offices to take
reasonable measures to protect and enhance the integrity and effectiveness of their operations. All
Commission offices are responsible for monitoring and evaluating the programs entrusted to them
and reporting information or incidences needing further audit and/or investigation to the IG.


I. INTRODUCTION

The Inspector General Act Amendments of 1988 (P.L. 100-504) provided for the establishment of an
Office of Inspector General (OIG) at 30 designated Federal entities, including the ARC. The ARC
OIG became operational on October 1, 1989, with the appointment of an IG and provision of
budgetary authority for contracted audit and/or investigation activities.

I. BACKGROUND

A. APPALACHIAN REGIONAL COMMISSION

The ARC was established by the Appalachian Regional Development Act of 1965 (P.L. 89-4). The
Act authorizes a Federal/State partnership designed to promote long-term economic development on
a coordinated regional basis in the 13 Appalachian States. The Commission represents a unique
experiment in partnership among the Federal, State, and local levels of Government and between the
public and private sectors. It is composed of the Governors of the 13 Appalachian States and a
Federal representative who is appointed by the President. The Federal representative serves as the
Federal Co-Chairman with the Governors electing one of their number to serve as the States’ Co-
Chairman.

- Through joint planning and development of regional priorities, ARC funds are used to assist
and encourage other public and private resources to address Appalachia's unique needs.
Program direction and policy are established by the Commission (ARC Code) by the vote of
a majority of the State members and the affirmative vote of the Federal Co-Chairman.
Emphasis has been placed on highways, infrastructure development, business enterprise, and
human resources programs.

- Administratively, the Office of the Federal Co-Chairman, with a staff of 11, and the
Commission, with a staff of 48, are responsible for ARC operations. The States maintain an
Office of States’ Representative (3 persons) that has primarily liaison responsibilities. All
personnel are located in Washington, DC. The Commission staff's administrative expenses,
including salaries, are funded jointly by Federal and State funds; the States! Representative
staff is funded entirely by the States; and the Federal Office staff is funded entirely from
Federal funds.

- The Commission's appropriation for FY 2001 is $77.4 million. ARC was fully reauthorized
by Congress in FY 1999 for the first time since 1982. Also, about $641 million was
appropriated in FY 2001 for carrying out the provisions of section 106%y) of P.L. 102-240
relating to the construction of, and improvements to, corridors of the Appalachian
Development Highway System (ADHS). The funding which will be distributed among the
states with unfinished ADHS segments includes about $390 million for which ARC has
allocation authority.


claims, support for expenditures, and purchases not included in budget. Questioned costs
approximated $222,000; and potential deobligations for use on other projects approximated several
million dollars.

In several instances, project accountability needed improvement to ensure that project funds were
expended for intended purposes. For example, in one instance involving a complex multi-phase/task
project with ARC funding of $967,941, various factors, including multi-agency responsibilities,
changed staffing, and limited project oversight, restricted the extent to which allocations,
expenditures, and results could be timely verified. Although followup efforts and record searches by
the grantee located documentation to support expenditures, recommendations were directed at
strengthened grantee and ARC accountability, oversight, and monitoring for future grants that
involve multi-agency funding and responsibilities, consolidation of many tasks, and division of work
between ARC and non-ARC geographic areas.

In one instance, utilization of funds totaling $400,000 were delayed substantially because of grantee
disagreements with respect to project implementation. As of our review, $200,000 had been drawn
down for purchase of equipment by the grantee for a distance learning project; and $200,000
remained in the project account at ARC. The initial $200,000 was obligated in September 1995.
Payment of the additional $200,000, which had been approved in April 1999, was contingent on the
system being completed and operational. Our on-site followup in January 2001 disclosed that the
initial grant was used to purchase equipment. However, the equipment essentially was unused and
remained in the delivery cartons that had been received about one year previous. Recommendations
were directed at immediate action to ensure project completion, including equipment utilization and
expanded distance learning, or recovery of the $200,000 previously provided and deobligation of the
remaining $200,000.

Followup contacts with one grantee for which a final report necessary to support grant closing had
not been received were unsuccessful, resulting in a recommendation for recovery of $9,000 paid to a
subgrantee, The cause of this situation was a lack of oversight over the subgrantee, resulting in a
project intended to improve the civics education curriculum for elementary school students being
unsuccessful to date.

In the area of project closeouts, ARC continued aggressive efforts to ensure timely followup and
project closings; and during the reporting period, actions included 322 project closings with about
$2.3 million dollars in deobligations that can be utilized for additional projects. These actions
included deobligations of $923,059 for 37 grants noted in our followup report issued during this
period.

This OIG followup report identified 120 grants with expiration dates prior to September 30, 2000,
that contained balances approximating $7 million. This included 40 grants with balances of
$3.6 million for which no drawdowns had been initiated as of October 30, 2000, and 39 grants with
balances of $2.7 million for which drawdowns of less than 50 percent had occurred.

However, ARC actions have resulted in substantial reductions of the period between project
performance expiration and grant closings and/or project extensions. For example, we noted only 12
open grants with zero or less than 50-percent drawdowns for which project expiration dates were
prior to April 1, 2000; and actions were initiated during the reporting period to close 8 of these
grants.


APPALACHIAN REGIONAL COMMUSSION

INSPECTOR GENERAL'S

SEMIANNUAL REPORT

TO CONGRESS

OCTOBER 1, 2000 - MARCH 31, 2001



In order to maximize use of available resources directed at reviewing ARC activities, emphasis will
continue to be placed on nonstandard reporting formats including memorandum, letter, and survey
reports. Although such reporting formats reduce the time and resources necessary for review
completion, the results and information included in such reports is based on evidence and supporting
documentation consistent with generally accepted auditing standards.

Ve OIG HOTLINE

A regionwide toll-free hotline was previously established to enable direct and confidential contact
with the ARC OIG in line with governmental and longstanding OIG initiatives as identified in the IG
Act of 1978 to afford opportunities for identification of areas subject to fraud, waste, or abuse.
However, contacts with the ARC OIG relative to public complaints or concerns continue to be
primarily received through ARC staff, on regular OIG phone lines, or from other OIG offices.
During the reporting period, followup action was initiated on calls identifying concerns with actions
by several grantees.

Also, numerous hotline calls were received with respect to matters for which other agencies have
jurisdiction. This resulted primarily from the ARC OIG hotline apparently being the first such OIG
listing in some telephone directories, resulting in ARC OIG being contacted by citizens who did not
know the appropriate agency for handling their concerns. The ARC OIG facilitated the complaint
process by identifying the applicable agency based on complainant information and providing the
correct OIG hotline number.

VI. LEGISLATIVE AND REGULATORY REVIEW

Primary efforts in this area continued to be related to potential legislative initiatives with respect to
OIG operations. The ARC OIG continues to support legislation that would provide improved
protections for IGs, including designated and career IGs, by consideration of alternatives such as
removal for cause criteria and term limits. During the reporting period, additional legislation
impacting IGs was resubmitted; and the IG commented on the various initiatives noted in the
proposed legislation. Specifically, the IG concurred with proposals dealing with term limits,
reporting to Congress and additional oversight of OIG offices. With respect to the consolidation of
some designated OIGs, the IG recommended that such action be deferred pending additional study,
including contact and discussion with the applicable OIGs and parent agencies.

vil. OTHER

The Inspector General continues to serve as the representative of the Executive Council on Integrity
and Efficiency on the Audit Committee of the President’s Council on Integrity and Efficiency and is
involved with issues related to OIG oversight of work performed under the Single Audit Act.


B. INVESTIGATIONS

The Inspector General Act of 1978, as amended, provides that the IG may receive and investigate
complaints or information concerning the possible existence of an activity constituting a violation of
law, rules, or regulations; mismanagement; gross waste of funds; or abuse of authority. The OIG
does not employ criminal investigators. Should the need arise, the matter would be referred to the
Federal Bureau of Investigation or assistance would be contracted with another Federal OIG. Also,
the results of investigations may be referred to the appropriate Federal, State, or local prosecutive
authorities for action. During the reporting period, the Inspector General conducted followup
administrative inquiries with respect to several hotline concerns; and several additional inquiries are
in process.

IV. AUDIT PLANNING

The OIG will be alert for new or revised areas of ARC operations based on the priorities and
emphasis of ARC management, including results of strategic planning initiatives. Audit planning
will include consideration of such initiatives with the overall goal being to ensure coverage of high
priority, including high dollar, areas in order to assist management to fulfill their responsibilities for
effective and efficient program operations.

Of particular importance is maintaining the flexibility of the audit plan to address changing needs
and priorities. Coordination with ongoing ARC efforts to implement an entity-wide strategic plan is
considered an important element of planning, and discussions with ARC management have identified
several areas for review.

The OIG's strategies and objectives for the next 5 years are defined in a strategic. plan. The FY 2001
Annual Plan provides the operational details for OIG activities planned during FY 2001 to
implement this strategic plan. We expect to revise this strategic plan periodically until our
experiences validate our planning assumptions and we have achieved a comfort level with how we
have programmed activities over this extended time period.

Additional emphasis will be placed on coordinating OIG reviews with ARC implementation of the
Government Performance and Results Act (GPRA) and revised operational procedures resulting
from reauthorization legislation requirements. In order to provide some coverage of ARC funds that
are administered by other agencies, e.g., construction and technical projects, we are coordinating
with the OIGs at the applicable agencies and reaching concurrence for ARC OIG review of some of
these projects.

FY 2001 audit work includes about 40 individual grant audits in the Appalachian States; additional
followup on grants with completed budget periods, grant extensions, and project results; and tests of
the J-1 Visa Waiver program. Continued emphasis will be placed on audit followup and corrective
action plans, including working with agency management to address open issues and achieve audit
resolution and closure.


Funding and Staffing

The OIG funding level for FY 2001 is $468,000. For FY 2000, approximately 29 percent will be
expended for contract audit services; 57 percent, for salaries and benefits; 7 percent, for travel; and 7
percent, for all other activities (training, equipment, space, supplies, etc.).

Initial OIG operations included authorization for an Inspector General and a Confidential Assistant.
A senior auditor was employed in the latter half of FY 1991; no additional staff have been employed.
Grant review activities continue to emphasize use of contracted services (e.g., independent public
accounting firms or other OIG offices) supplemented by programmatic and performance reviews
directed by OIG staff. Investigative assistance is provided by other OIG offices on an as-needed
basis. This approach has been deemed the most appropriate to date in view of the nature of ARC
operations and limited resources. However, we would welcome initiatives that would facilitate
sharing of investigative resources in order to strengthen this aspect of OIG operations.

Wi. OG ACTIVITY
A. AUDITS

During the reporting period, 26 reports were issued, including 18 individual reviews, 1 followup
review, 5 J-1 Visa Waiver compliance reviews, and 1 programmatic survey. At the end of the
reporting period, 1 program review and 4 grant reviews were in process. The division of OIG
resources results in audit work being performed by a combination of permanent and contractor staff.
Emphasis continues to be placed on surveys of ARC operations and programs, completion of grant
audits, audit planning, and audit resolution and followup.

During the term of the OIG operations at ARC, various recommendations, based on audit testing,
have been made to ARC management with respect to improving operations in such areas as
accountability, financial management, fund obligations and deobligations based on project activity,
implementation of cost principles, and audit followup. Programmatic issues, with respect to grant
administration, project results, and internal control systems, have been addressed.

OIG followup tests and reviews of statistical information have reflected positive ARC actions to
address these issues and resulting improvements in program operations. For example, timely use of
funds and project closings continue to be emphasized; and the number of funded projects with large
unobligated balances has been substantially reduced. ARC conferences, training, and seminars
continue to emphasize accountability, financial management systems, and allowable costs.
Additionally, ongoing ARC actions, such as revisions of accounting systems and service agreements,
strategic planning, including assessment of appropriate internal and external performance measures;
and issuance of revised policies and procedures and guidance to grantees, are in line with OIG
recommendations and executive and legislative initiatives to improve Government operations.

Grant reviews disclosed that projects were being implemented in accordance with program
requirements and grant agreements. Emphasis was placed on testing the eligibility of expenditures,
availability of matching contributions, and achievement of grant objectives. Exceptions were noted
in isolated instances with respect to untimely use of grant purchases, expenditure of funds after the
expiration of the grant period, revisions of budgets without obtaining required approval, travel

3


EXECUTIVE SUMMARY

During this reporting period, 26 reports were issued, including 18 individual grant reviews, 1 grant
followup report, 1 program review, 5 J-1 Visa Waiver compliance reviews, and | J-1 program
review. At the end of the reporting period, 4 grant reviews were in process. Recommendations in
grant reviews were directed at improved reporting and eligibility of expenditures. During the
reporting period, ARC management continued to emphasize timely followup and review of expired
grants. This action resulted in management actions to close out 322 projects and deobligate about
$2.3 million from 97 projects during the reporting period. This included deobligation of $923,059
applicable to 37 projects noted in prior audit reports.

Grant reviews disclosed that projects were being implemented in accordance with program
requirements and that grantees generally had satisfactory accounting systems and internal controls.
Exceptions noted included insufficient documentation of costs and delayed use of grant-related
purchases. Questioned costs of about $222,000 and potential deobligations of several million dollars
were identified for followup. Also, followup actions were initiated with basic agencies to obtain
information necessary to close additional grants.

Surveys of the J-1 Visa Waiver program in three states disclosed that tested physicians were
generally practicing in accordance with program requirements as respects practice location and type
of medical services provided. In one state, followup review disclosed state action to address an
excess number of J-1 physicians resulting from insufficient patient workload that necessitated
physicians working at other than approved locations and/or concentrating on services such as nursing
home visits or hospital rounds.

During the reporting period, the IG continued as the designated IG’s representative on the Audit
Committee of the President’s Council on Integrity and Efficiency, addressed an audit forum, and
remained active in an ongoing dialogue on various issues impacting the OIG community, including
the extent of single audit quality reviews.

di


SCHEDULE OF AUDIT REPORTS WITH

APPENDIX C

RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE

No. of Dollar Value
Reports ($ in thousands)
For which no management decision was made by the 3 $ 298
commencement of the reporting period
Which were issued during the reporting period 2 $_ 4.800
Subtotals (A + B) 5 $ 5,098
For which a management decision was made during the 4 $ 2,498
reporting period
(i) dollar value of recommendations that were agreed 3 $ 1,086 1/
to by management
--based on proposed management action 3 $ 1,086 1/
--based on proposed legislative action - -
(ii) dollar value of recommendations that were not 2 $ 1,412 2/
agreed to by management
For which no management decision has been made by the 1 $ 2,600 3/
end of the reporting period
Reports for which no management decision was made - -
within 6 months of issuance
Notes:
Vv Includes deobligations applicable to grants noted in prior reports. Also, additional actions, including
closings and deobligations, based on ARC management initiatives are summarized in the report body.
2 Includes final payments justified based on review of grants identified in prior reports.
v Includes grants for which ongoing followup action is in process for grants identified in prior and new

reports. A management decision was made to followup on cases reported but final action not completed.


TABLE OF CONTENTS

Page

Executive Summary eae eee e nent ete e tenet nett nee e eee e ee eees ii
Purpose and Requirements of the OIG Semiannual Report =—=—seeeeeeeeee iii

I. Introduction hatte cent cece eee eee e renee nent eee eres iL
Il. Background Re ee 1
Appalachian Regional Commission vee erect recente teen etter eee ees 1
Office of Inspector General sentence crete teeter eter e eet eee eeees 2

I. OG Activity hee eee ene e teen terre tee e teen teen eee 3
AUditS «§«»- «htt ewe cere recente ne en eects oneeneesceaer 3
Investigations rete tent eee tee e eee n ete e eee e ete eee ee es 6

IV. AuditPlanning vee e nett eee teeter teeter eet ee eee ee ees 6
V. OlG Hotline «eee tree e eee teen eet e eee e teen eee 7
VI. Legislative & Regulatory Review eee secre eects eter eens teens enna 7
VIL. Other rete see neneccnen eens see eeteseceees a

Appendices A. Schedule of Audit Reports Issued
October 1, 2000 through March 31, 2001

B. Schedule of Audit Reports with Questioned or Unsupported Costs

Cc. Schedule of Audit Reports with Recommendations that Funds be put to
Better Use

D. Definition of Terms Used

B


APPALACHIAN 4 Proud Past, Office of the Inspector General
REGIONAL A New Vision
commission

AR

May 31, 2001

MEMORANDUM FOR THE FEDERAL CO-CHAIRMAN

SUBJECT: Semiannual Report to Congress

In accordance with the requirements of the Inspector General Act Amendments of 1988, Public Law 100-504,
I am pleased to submit the semiannual report of the Office of Inspector General (OIG) for the period
October 1, 2000, through March 31, 2001.

During this reporting period, 26 reports were issued, including 18 individual grant reviews, 1 grant followup
report, | program review, 5 J-1 Visa Waiver compliance reviews, and 1 J-1 program review. At the end of the
reporting period, 4 grant reviews were in process. Recommendations in grant reviews were directed at
improved reporting and eligibility of expenditures. During the reporting period, ARC management continued
to emphasize timely followup and review of expired grants. This action resulted in management actions to
close out 322 projects and deobligate about $2.3 million from 97 projects during the reporting period. This
included deobligation of $923,059 applicable to 37 projects noted in prior audit reports.

Grant reviews disclosed that projects were being implemented in accordance with program requirements and
that grantees generally had satisfactory accounting systems and internal controls. Exceptions noted included
insufficient documentation of costs and delayed use of grant-related purchases. Questioned costs of about
$222,000 and potential deobligations of several million dollars were identified for followup. Also, followup
actions were initiated with basic agencies to obtain information necessary to close additional grants.

Surveys of the J-1 Visa Waiver program in three states disclosed that tested physicians were generally
practicing in accordance with program requirements as respects practice location and type of medical services
provided, In one state, followup review disclosed state action to address an excess number of J-1 physicians
resulting from insufficient patient workload that necessitated physicians working at other than approved
locations and/or concentrating on services such as nursing home visits or hospital rounds.

During the reporting period, the IG continued as the designated IG’s representative on the Audit Committee of
the President’s Council on Integrity and Efficiency, addressed an audit forum, and remained active in an
ongoing dialogue on various issues impacting the OIG community, including the extent of single audit quality
reviews.

The continued support of the OIG by ARC management and utilization of OIG reports and recommendations
have contributed to improved controls and operations, The Inspector General Act of 1978, as amended by the
Inspector General Act Amendments of 1988, provides that this report be forwarded to appropriate
Congressional committees within 30 days and that you provide whatever additional comments you consider
appropriate.

Inspector General

Enclosure

1666 CONNECTICUT AVENUE, NW WASHINGTON, DC 20009-1068 (202) 884-7675 Fax (202) 884-7596

Alabama Kentucky Mississippi North Carolina Pennsylvania Tennessee Wost Virginia

Georgia Maryland New York Ohio South Carolina Virginia


APPENDIX A

SCHEDULE OF REPORTS ISSUED OCTOBER 1, 2000 TO MARCH 31, 2001

: “Entity and Tide ; Program Dollars Gucteacal 22 | weade taken
| poe ae ak = Ss ‘or ContracuGrant ‘Unsupported Uses
| ee : Amount Costs

O1-1(H) J-1 Visa Waiver Program—Pennsyivania, Special Report

01-2(H) J-1 Visa Waiver Program—Alabama, Special Report

01-3(H) J-1 Visa Waiver Program—Northwest Alabama.

O1-4(H) J-1 Visa Waiver Program—Southwest Pennsylvania

01-5(H) Expired Grants Update $7,500,000 $4,600,000
01-6(H) West Virginia Intemational Development Unit 166,851 $13,000

01-7(H) New York Workforce Commetitiveness 120,000

01-8(H) West Virginia Technology Training Center 650,000,

01-9(H) Corridor G Tourism Project 260,120

1-11) Appalachian by Design 121,166

o1-12¢H)__|_J-1 Visa Waiver Program—Tennessee

01-14) Georgia Intemational Trade Initiative Program 967,941

O1-15(H) J-1 Visa Waiver Program—Employment Verification Survey

01-18(H) Maryland Regional Education Service Agency 400,000,

O1-19CH) ‘estern North Carolina Connect 762,277,

01-21¢H)__|_Eimore County Telecommunications Project 400,000 200,000 200,000
01-22(H) Scott County, Tennessee, Emergency and Health Services Complex 84,000,

01-23(H) _| Cooke County, Tennessee, Dental Program 75,000

o1-24(H) _|_ Bledsoe County, Tennessee, Dental Program 32,095

01-25(H) Foundation of Appalachian Ohio 164,300

01-264) Appalachian Kentucky Water Resource Planning 300,000

01-28(H) Haralson County, Georgia, Adult Literacy 420,000.

01-29(H) Appalachian Georgia Early Childhood Initiative 1,077,952

01-30(H) Catoosa County, Georgia, Adult Literacy 117,860

o1-34(H) _|_North Carolina Partnership for Children 247,119

01-35(H) Kentucky Civies Education for Elementary School Students 16,000 9,000

TOTALS '$ 13,882,681 s $ 4,800,000
. A cost the Otfice of Inspector General has questioned because of an alleged violation of law, regulation, contract, or other agreements governing the expenditure of funds; such

cost is not supported by adequate documentation; or the expenditure of funds for the intended purpose is unnecessary or unreasonable. Includes required matching
contributions.

. Funds the Office of Inspector General has identified in an audit recommendation that could be used more efficiently by reducing outlays, deobligating program or operational

funds, avoiding unnecessary expenditures, or taking other efficiency measures, such as timely use of funds,


APPENDIX D

DEFINITIONS OF TERMS USED

The following definitions apply to terms used in reporting audit statistics:

Questioned Cost A cost which the Office of Inspector General (OIG) questioned
because of an alleged violation of a provision of a law, regulation,
contract, or other agreement or document governing the expenditure
of funds; such cost is not supported by adequate documentation; or
the expenditure of funds for the intended purpose is unnecessary or
unreasonable.

Unsupported Cost A cost which the OIG questioned because the cost was not supported
by adequate documentation at the time of the audit.

Disallowed Cost A questioned cost that management, in a management decision, has
sustained or agreed should not be charged to the Commission.

Funds Be Put To Better Use A recommendation made by the OIG that funds could be used more
efficiently if management took actions to implement and complete the
recommendation.

Management Decision Management's evaluation of the findings and recommendations

included in the audit report and the issuance of a final decision by
management concerning its response to such findings and
recommendations, including actions concluded to be necessary.
Interim decisions and actions are not considered final management
decisions for the purpose of the tables in this report.

Final Action The completion of all management actions that are described in a
management decision with respect to audit findings and
recommendations. If management concluded that no actions were
necessary, final action occurs when a management decision is issued.