ATTACHMENT
Page 1

SURVEY QUESTIONNAIRE

Annual Financial Audit obtained:

Performed by:

Approximate annual total of Federal grants:
Approximate annual cost of audit:

Approximate percentage of cost that auditor
attributes to financial statement preparation:

Degree to which the overall audit report is

used by: Management
Program Officials
Finance Officials

Degree to which the financial statements are

used by: Management
Program Officials
Finance Officials

Degree to which the various reports are

understood by: Management
Program Officials
Finance Officials

Degree to which the financial statements are
used to make decisions by:
Management
Program Officials
Finance Officials

Extent of understanding of the financial

statements by: Management
Program Officials
Finance Officials

[ ] Yes
[ ] No

[ ] State Auditor
[| ] CPA Firm
[ ] Other

$

$

percent

Little or
__None _ ___Some Considerable



Of particular importance to the ARC OIG were issues relating to single audit coverage of
nonmajor programs; the adequacy of audit coverage, especially the sufficiency of testing relating
to compliance with laws and regulations; and presentation of results in formats and language
understandable to the report recipients and the public. The recommendations of the task force,
if adopted, should substantially improve the single audit process and better identify the realistic
expectations of single audit, which in tum could reduce the criticisms of single audit especially
with respect to providing Federal managers with information needed in connection with their
program and oversight responsibilities.

The ARC Inspector General performed an external quality review (peer review) during this
reporting period in line with requirements for performance of such reviews by all ECIE members.
These reviews emphasized compliance with generally accepted auditing standards.

The ARC Inspector General, in line with Governmentwide reinvention efforts, has submitted
recommendations dealing with a wide range of issues impacting on OIG efficiency and
effectiveness. These issues range from audit methodologies and Governmentwide projects to
specific subjects such as training and related activities.

VII. REINVENTING GOVERNMENT AND VISION STATEMENTS

Recent reports, recommendations, and publicity have identified concerns about OIG audit
operations, including criticisms about cooperation and coordination with agency management
(auditees) and development of adversarial relationships that have had negative impacts on
program operations. Consequently, there has been substantial discussion and reinforcement of
criteria and actions for strengthening management/OIG relationships without impeding OIG
independence or involving OIGs with prohibited program responsibilities. Some of the criteria
being considered for an OIG vision statement by the PCIE and the ECIE includes working with
management, open relationships with program managers, improving quality, and eliminating
excessive audit requirements.

The ARC OIG supports these criteria and has strived to operate in accord with similar concepts.
Recent examples include:

° A fast response to an entity request for information necessary to determine the
validity of a request for a physician waiver.

to) IG attendance and participation at two seminars directed at improving grantee
financial operations.

oO IG coordination with an independent accounting firm to avoid duplication of
review efforts.

° Auditor efforts to render constructive assistance during reviews. Two recent
responses to draft survey reports from different auditees noted in part as follows:
"We appreciate the professional manner in which ARC auditors conducted this
audit of our project. They were most helpful in pointing out ways to improve our

8


PURPOSE AND REQUIREMENTS OF THE
OFFICE OF INSPECTOR GENERAL SEMIANNUAL REPORT

The Inspector General Act of 1978 requires the Inspector General to keep the Federal 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 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.

R fae Real
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 Page 3

deficiencies

Section 5(a)(3) Prior significant recommendations not yet implemented 7
Section 5(a)(4) Matters referred to prosecutive authorities a
Section 5(a)(5) Summary of instances where information was refused bi
and 6(b)(2)

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

dollar value of questioned costs

Section 5(a)(7) Summary of each particularly significant report ee
Section 5(a)(8) Statistical table showing number of reports and dollar value App B

of questioned costs

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

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

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

iii


Opinion as to the cost benefits or cost
effectiveness of the annual audit by:

Management
Program Officials
Finance Officials

The audit report format could be improved

by:

Reducing the number of reports and
opinions

Simplifying language (¢.g., reducing
accounting terminology, explaining
key financial statement information
in layperson terms)

More clearly identifying extent of
testing, programs tested, and results

Explaining terms like materiality,
reportable conditions, and
significance

A revised audit report format would result in
increased use of the report

Other comments:

Suggestions for change or improvement:

ATTACHMENT

Page 2
Cost Effective Not Cost Effective
Strongly Strongly

_Agree. _Agree Disagree Disagree



SCHEDULE OF AUDIT REPORTS WITH

For which no management decision
was made by the commencement of
the reporting period

Which were issued during the
reporting period

Subtotals (A + B)

For which a management decision
was made during the reporting
period

(i) dollar value of disallowed
costs

(ii) dollar value of costs not
disallowed

For which no management decision
has been made by the end of the
reporting period

Reports for which no management
decision was made within 6 months
of issuance

Includes $24,921 recovered to date and $22,079 on which final actions are in process.

($ in thousands)

No. of
Reports

2

Questioned
—Costs —

$ 422

$ 595

$ 73

$ 47

$ 522

$ 396

APPENDIX C

Unsupported
—Costs _

wy

Includes one report, involving $396,000, where a management decision was made to pursue the audit

recommendations; but final management decisions on disallowances are being finalized.

Includes two reports where management decisions to pursue the audit recommendations have been

made but audit resolution is in process.


officials and financial managers emphasized cost allocation plans, use of financial information,
use of audit reports, and applicable cost principles. These activities, while sponsored by ARC,
provide a Governmentwide benefit since many of the grantees receiving ARC funds also receive
substantial funds from other Federal entities. Thus, actions to improve ARC grantee operations,
including controls, systems, and implementation of applicable grant requirements, will have
residual benefits.

The ARC OIG will continue to address these issues, including periodic followup on the extent
of actions initiated and results obtained, and, as noted below, will report on issues needing
continued attention.

° An audit of tourism grants administered by the Appalachian Tourism and Research
Development Center at Concord College, West Virginia, disclosed a need for
improved financial management systems, including internal controls, to better
ensure fiscal accountability and eligibility of claimed costs. We noted questioned
or unsupported costs of $46,869 related primarily to indirect costs, salaries, fringe
benefits, and ineligible items such as a feasibility study and incorrect charges.
The problems were caused in part by use of the Concord College Foundation
rather than the college's accounting system. Also, we noted that the use of the
Concord College Foundation resulted in state procurement procedures not being
implemented. Grantee actions included transfer of the grant accounts to the
college accounting system in March 1992, improved financial and accounting
systems, scheduling of an independent audit of recent grants, preparation of a cost
allocation plan, and return of $24,676 to date. Audit resolution is continuing.

re) Other grant audits, especially of new grantees, identified financial system
problems resulting in weaknesses with respect to documentation of costs including
matching contributions or activities. ARC auditors worked with grantees with
respect to needed system improvements and documentation of costs. Additionally,
ARC was notified of the need to provide new grantees with the applicable OMB
circulars dealing with cost principles in order to preclude continued problems in
the noted areas.

to) We reiterated disclosures with respect to untimely reports and/or unapproved
scope or grant agreement changes and applicable recommendations for improved
ARC and grantee coordination and cooperation to correct such conditions.

Co) A review of audit followup policies, procedures, and actions identified a need for
improvements in these areas to ensure that OIG reports are reviewed and
processed timely, including followup actions to ensure implementation of agreed
to recommendations. Recommendations included establishment of a report control
system, followup time frames, assignment of responsibilities, identification of
auditee actions and increased feedback to OIG. Also, a followup survey was
initiated to evaluate the extent of followup on open audit reports.

0 A followup survey on the status of open housing program grants with balances
approximating $350,000 disclosed that actions had been initiated on the 9 grants

4


I. INTRODUCTION

The Inspector General Act Amendments of 1988 (P.L. 100-504) provided for the establishment
of an Office of Inspector General at 34 designated Federal entities, including the ARC. The
Appalachian Regional Commission (ARC) Office of Inspector General became operational on
October 1, 1989, with the appointment of an Inspector General and provision of budgetary
authority for contracted audit and/or investigation activities.

U. 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 is 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.

oO Administratively, the Office of the Federal Co-Chairman, with a staff of 11, and
the Commission, with a staff of 50, 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.

te) The Commission's appropriation for FY 1994 is $249 million, which is divided
approximately $160 million for highway projects, $85.6 million for non—-highway
projects, and $3.4 million for administrative expenses. The FY 1994 appropriation
compares with $190 million for FY 1993. ARC is authorized through its current
appropriation.

0 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

1


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

General disagrees

* None.

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


APPENDIX D

DEFINITIONS OF TERMS USED

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

Questioned Cost

Unsupported Cost

Disallowed Cost

Funds Be Put To Better Use

Management Decision

Final Action

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.

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

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

A recommendation made by the OIG that funds could be
used more efficiently if management took actions to
implement and complete the recommendation.

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.

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.


Funding and Staffing

The OIG Funding level for FY 1993 was $380,000. For FY 1993, approximately 39 percent was
expended for contract audit services; 50 percent, for salaries and benefits; 4 percent, for travel;
and 7 percent, for all other activities (training, equipment, space, supplies, etc.). The OIG
funding level represents about 35 percent of the total funds available to the Office of the Federal
Co-Chairman. FY 1994 funding for OIG is $380,000, with the division of expenditures
continuing at the approximate percentages as noted for FY 1993.

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 will 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 are participating
with other OIG offices to facilitate sharing of investigative resources in order to strengthen this
aspect of OIG operations. The OIG will continue to monitor this situation as well as the
efficiency and effectiveness of the use of contracted services.

WW. OG ACTIVITY
A. AUDITS

During the reporting period, 15 reports were issued, including 9 grant reviews and 6 survey
reports. At the end of the reporting period, 4 grant reviews and 2 surveys were in process and
followup action to resolve open recommendations was being emphasized. 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 reporting period,
~ the Inspector General continued as Vice Chair of the Executive Council on Integrity and
Efficiency (ECIE), which is comprised of 34 statutorily designated Office of Inspectors General
and nonstatutory Inspectors General, the Inspector General was heavily involved with efforts to
ensure implementation of ECIE responsibilities for effective and efficient OIG operations.

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 program operations in such areas
as accountability, financial management, fund obligations and deobligations based on project
activity, implementation of cost principles, and audit followup.

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 has been emphasized; and the number of funded projects, including business
development and housing revolving loan funds with large unobligated balances, has been
substantially reduced. ARC conferences, training, and seminars have emphasized accountability,
financial management systems, and allowable costs. For example, training directed at LDD

3


APPALACHIAN REGIONAL COMMISSION

INSPECTOR GENERAL'S

SEMIANNUAL REPORT

TO CONGRESS

APRIL 1 - SEPTEMBER 30, 1993


testing in areas such as staff monitoring and followup on open grants with completed budget
periods, administrative expenses, grant extensions, and enterprise development programs.

Also, emphasis will continue to be placed on programmatic and performance reviews. Limited
resources generally preclude substantive testing of a specific subject or function, but audit
planning includes identification of program subjects that can be tested in conjunction with audits
of individual grants. For example, programmatic reviews of subjects such as leadership and
tourism grants should provide expanded and overall information with respect to the particular
subject areas; and the benefits to management are deemed sufficient to continue this type of work
despite a resource induced reduction in the number of individual grant audits and/or the testing
of financial and compliance issues.

In a similar vein, Government emphasis on accountability and performance measures will be
incorporated in audit planning. Audit effort during the initial years of ARC OIG operations has
concentrated on financial management, including use of funds, and testing grantee compliance
with grant requirements, including fund control and expenditure. While financial and compliance
testing will continue, it is anticipated that testing and evaluation of performance in terms of
individual grants achieving intended objectives and overall benefits derived from ARC activities
will be the subject of increased audit attention.

In order to maximize use of available resources directed at reviewing ARC activities, increased
emphasis continues 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.

The OIG will also be alert for new or revised areas of ARC operations based on the priorities
and emphasis of a new administration. 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 fulfill responsibilities for effective and efficient program
operations.

Vv. OIG HOTLINE

During the prior reporting period, a regionwide toll-free Hotline was 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. Additionally, and possibly as a result of Government initiatives
with respect to reinventing Government, ARC officials have received several inquiries from
concerned citizens; and the OIG is following up on these concerns. Efforts were initiated during
this period to publicize the hotline by notifications to contractors and grantees, and field visits
will evaluate the extent to which employees were made aware of this system.


noted in our prior survey report. Additionally, ARC had identified several other
grants with balances approximating $150,000 for additional review. As a result,
fund deobligations and grant close—outs were initiated. During our followup, we
identified 4 additional grants with balances of about $309,000 that appeared
subject to fund deobligations. Actions are in process to close grants that contain
most of the unexpended balance.

to) Followup review on the J-1 waiver program, which provides waivers for foreign
physicians with respect to a 2-year stay in the US upon completion of medical
training, disclosed the program was generally working in accordance with
applicable rules and regulations.

to) In-process work includes a survey of 69 LDDs in Appalachia in order to ascertain
the extent of costs and use of financial-related audits and recommendations for
improvement. The review resulted from grantee comments noted during our
regular audit work and at ARC training seminars with respect to the cost and
value of these audits in relation to available funds. The results of this review,
including any appropriate recommendations, will be included in our next
semiannual report and should provide useful information in line with ongoing
efforts to improve the format, content, understanding, and use of financial audits
and financial statements. An example of the survey questionnaire is included as
an attachment.

B. INVESTIGATIONS

The Inspector General Act of 1978, as amended, provides that the Inspector General may receive
and investigate complaints or information concerning the possible existence of an activity
constituting a violation of law, rules, or regulations or mismanagement, gross waste of funds, or
abuse of authority. The OIG does not employ special investigators. Should the need arise, the
matter would be referred to the Federal Bureau of Investigation or assistance would be contracted
with another Federal Office of Inspector General. Also, the results of investigations may be

referred to the appropriate Federal, state, or local prosecutive authorities for action.

There were no independent ARC OIG investigations during this period, but a grant audit was
coordinated with an ongoing investigation by a state agency. However, several OIG Hotline calls
were followed up to determine the need for investigation. In one instance, the complaint was
forwarded to another OIG office; and in two cases, it was determined that additional action was
not warranted. Also, several citizens’ concerns were received by ARC officials and were turned
over to the ARC OIG for followup.

Iv. AUDIT PLANNING

Emphasis in FY 1994 will be placed on audit followup to determine the extent to which specific
report recommendations are addressed and to assess actions completed or necessary with respect
to overall issues or causes resulting from individual reports. During FY 1994, audit work will
also include individual grant audits in about five states, headquarters surveys, and followup

5


review, grant development, technical assistance to States, and management and
oversight.

oO In order 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 Office of Inspector General 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 Authority

The Inspector General Act of 1978 (P.L. 95-452), as amended in 1988, states that the Inspector
General 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 Inspector General 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 Inspector General 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 Offi

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 Inspector General.

is)


EXECUTIVE SUMMARY

During this reporting period, 15 reports were issued, including 9 grant reviews and 6 headquarters
surveys. Primary recommendations were directed at improved accounting, financial systems, and
internal controls. We also identified ARC actions with respect to issues previously raised by
OIG, including timely use of funds, and noted substantial accomplishment in this area. At the
end of the reporting period, 6 reviews were in process, ie., 4 grant reviews and 2 surveys,
including one dealing with the use of financial audit information by the Local Development
Districts (LDDs) in the Appalachian region.

Of particular significance were our continued emphasis on improved grantee financial
management systems, accomplishment of grant objectives, eligibility of claimed costs, and
adequacy of the entity followup system. Recommendations were made for improvements in these
areas.

Our reviews are conducted in accordance with criteria outlined in a draft OMB vision statement
that emphasizes the following points relative to OIG activities.

° working with management to design effective management systems and improve
program operations and service delivery;

° building strong, open relationships with program managers based on a shared
commitment to improving program operations;

° continually improving quality of products;
0 working with management to eliminate excessive audit requirements.
Examples of specific activities related to these elements are noted in the report detail.

~ The Inspector General continued as the Vice Chair of the Executive Council on Integrity and
Efficiency (ECIE), which was established by Executive Order in May 1992 to provide for
coordination and cooperation between the 34 designated Office of Inspectors General. This
responsibility included participating as a member of the President's Council on Integrity and
Efficiency and required extensive coordination and liaison between OIGs, OMB, and
Congressional sources with respect to OIG activities. The Inspector General appreciates the
support, cooperation, and assistance provided by ARC management to facilitate performance of
ECIE Vice Chair responsibilities.

The Inspector General addressed several seminars on OIG related issues and led an ECIE peer
review during this reporting period.

ii


financial management of this initiative" and "I would like to compliment Ms. ... of
your staff who we found to be very knowledgeable and helpful during the course

of the audit.”


APPENDIX B

SCHEDULE OF AUDIT REPORTS WITH

No. of Dollar Value
Reports ($ in thousands)

For which no management decision was made by the 0
commencement of the reporting period

Which were issued during the reporting period 2 $ 3290"

Subtotals (A + B) 2 $ 329

For which a management decision was made during the - =
reporting period

(i) dollar value of recommendations that were - -
agreed to by management

—-based on proposed management action - =

—-based on proposed legislative action - -

(ii) dollar value of recommendations that were not - -
agreed to by management

For which no management decision has been made by the 2 $ 329
end of the reporting period

Reports for which no management decision was made 0 0
within 6 months of issuance

Primarily represents potential deobligations from inactive revolving loan fund grants. Management has initiated
effective actions in this area and is monitoring open grants for additional actions. Action is in process to close
out grants containing the bulk of the noted funds.


Page

Executive Summary wee eee eee eee eres esses ste ees ii
Purpose and Requirements of the OIG Semiannual Report —. .-- +--+ +++ iii

L Introduction we ee eee reer eee etter errr eter renee eeee eens J
Il. Background wee eee eee eee eee terete seen reeres seers recess 1
Appalachian Regional Commission... ee eee eee eee etter eete 1
Office of Inspector General «- ee ee ee eee eee errr rere errrrsssssss 2

TI. OIG Activity se eee e cece cece cece cree eseseeeereeeeerereees 3
Audits cee cece eee eee reece eee e ee ee sence ser ees ee eees 3
Investigations wee eee eee rere erent te eres eereer ese sees 5

IV. Audit Planning wee eee eee eee eee eee ete t ener eee steer sees 5
V. OIG Hotline eee eee eee eee teeter teen eens ree ee ness 6
VI. Legislative & Regulatory Review ...---+-++sseereeserrsrrresc css 7
VIL. Other ee cece eect e eee e cnet e ee ee ners enceaeeeeeercres 7
VIII. Reinventing Government and Vision Statements ....------++++eeerrrees 8

Appendices A. Schedule of Audit Reports Issued
April 1 through September 30, 1993

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

Cc. Schedule of Audit Reports with Questioned or Unsupported Costs
D. Definition of Terms Used

E. Questionnaire


a ere REGIONAL COMMISSION

OFFICE OF

INSPECTOR GENERAL

1666 Connecticut Avenue, N.W.
Washington, D.C. 20235
202/673-7822

December 3, 1993

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
for the period April 1 through September 30, 1993.

During this period, operational activities included issuance of 15 individual reports, including
9 grant reviews and 6 program surveys. Primary recommendations were directed at improved
accounting, financial systems, and internal controls. We also identified ARC actions with respect
to issues previously raised by OIG, including timely use of funds, and noted substantial
accomplishment in this area.

Of particular significance was the continuing responsibilities of the Inspector General as the Vice
Chair of the Executive Council on Integrity and Efficiency (ECIE), which was established by
Executive Order in May 1992 to provide for coordination and cooperation between the
34 designated Office of Inspectors General. This responsibility included participating as a
member of the President's Council on Integrity and Efficiency and required extensive
coordination and liaison between OIGs, OMB, and Congressional sources with respect to OIG
activities. The Inspector General appreciates the support, cooperation, and assistance provided
by ARC management to facilitate performance of ECIE Vice Chair responsibilities.

The Inspector General addressed several seminars on OIG related issues and led one ECIE peer
review team during this reporting period.

The continued support of the Office of Inspector General 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


VI. LEGISLATIVE AND REGULATORY REVIEW

Primary efforts in this area continued to be related to requests for input about potential legislative
initiatives with respect to OIG operations. The ARC OIG supports 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. Also, the ARC OIG supports extension of the
Program Civil Fraud Penalties ‘Act to include designated entities, improved protection of
designated IG budgets, comparable pay for designated IGs, and criteria consistent with current
qualification requirements for Presidentially appointed IGs.

vil. OTHER

The Inspector General continued as the Vice Chair of the Executive Council on Integrity and
Efficiency, which was established by Executive Order in May 1992. The ECIE, which is chaired
by OMB, is comprised of the 34 statutorily designated IGs and other administratively established
IGs and is intended to promote the efficiency and effectiveness of the IG community. As such,
the Vice Chair serves as a coordinator and liaison for ECIE members in dealings with OMB,
Congress, and the PCIE.

Specific activities, which required considerable resource use during the reporting period, included
coordinating monthly ECIE meetings, conducting committee meetings, transmitting IG related
information to all members, correlating and summarizing ECIE positions on various issues,
representing ECIE members’ interests, briefing OMB and Congressional staff, coordinating
training conferences, and representing ECIE at PCIE meetings.

Primary ECIE activities undertaken with the support and assistance of ECIE members, especially
the TVA OIG, have included completion of the first ECIE annual report summarizing FY 1992
audit and investigative results at 34 designated IG offices; the annual ECIE training conference,
which emphasized inspections and evaluations; preparation of an ECIE Action Plan denoting
various projects and activities, including an investigative assistance project to improve
investigative proficiency; and development of an automation/information sharing/advance

techniques forum to assist ECIE members to maximize use of limited resources.

The ECIE Vice Chair responsibilities and workload, although considered of the highest
importance by the ARC OIG, required a substantial expenditure of time and resources in order
to address member issues and ensure ECIE actions in line with the Executive Order. The normal
workload attributable to coordinating and addressing interests and concerns of member entities
was increased by the inherent activity and concerns resulting from a change in Administration.
Consequently, ARC OIG time was diffused between ECIE and ARC activities during this
reporting period; and the OIG appreciates the support of ARC management with respect to the
IG's involvement as the ECIE Vice Chair.

The PCIE Task Force on Single Audit, which included the ARC Inspector General, issued its
report and recommendations to OMB for consideration. The report highlights new and revised
single audit policy and procedures that should ensure improved and more meaningful single audit
reports. The Inspector General made presentations at several seminars with respect to the study.

7


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