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Office of the 

Inspector General 

UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 


Washington, DC 20415 


AUDIT REPORT 

AUDIT OF THE 2005 AND 2006 


COMBINED FEDERAL CAMPAIGNS 


OF SOUTH PUGET SOUND 


TACOMA, WASHINGTON 


Report No. 3A-CF-OO-08-034 Date: February 19 r 2009 

Michael R. Esser 

Assistant Inspector General 

for Audits 

----.-------.------.-----~----------,-------------:-:-

www.opm.gov www.usajobs.goli 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 


Washington, DC 20415 


Office of the 

Inspector General 

EXECUTIVE SUMMARY 


AUDIT OF THE 2005 AND 2006 


COMBINED FEDERAL CAMPAIGNS 


OFSOUTHPUGETSOUND 


TACOMA, WASHINGTON 


Report No. 3A-CF-OO-08-034 Date: Februar),>19 , 2009 

The Office ofthe Inspector General has completed an audit ofthe South Puget Sound Combined 

Federal Campaigns (CFC) for 2005 and 2006. The United Way ofPierce County, located in 

Tacoma, Washington, served as the Principal Combined Fund Organization (PCFO) during both 

campaigns. Our main objective was to detennine ifthe South Puget Sound CFC was in 

compliance with Title 5, Code of Federal Regulations, Part 950 (5 CFR 950), including the 

responsibilities of both the PCFO and Local Federal Coordinating Committee (LFCC). The 

audit identified seven instances ofnon-compliance with the regulations (5 CFR 950) goveming 

the CFC. 

AUDIT GUIDE REVIEW 

• Agreed-Upon Procedures Not in Compliance 

The PCFO's Independent Public Accountant's audit of the 2005 campaign did not comply 

fully with all aspects ofthe 2007 Audit Guide. 

BUDGET AND CAMPAIGN EXPENSES 

• Campaign Expenses 

The PCFO did not maintain sufficient documentation for CFC campaign expenses and 

inappropriately charged the 2006 campaign for costs related to a prior campaign. 

www.opm.gov www.usajobs.gov 
• Notification Letters Not Maintained 

The PCFO did not provide documentation to support that pledge notification letters and 

donor lists were sent to its member agencies and federations as required by the regulations. 

• PCFO Application Not in Compliance 

The LFCC approved a PCFO application that wa$ not in compliance with all ofthe 

requirements outlined in 5 CFR 950.105 (c). 

CASH RECEIPTS AND DISBURSEMENTS 

• Campaign Receipts Not Disbursed Properly $1,016 

The PCFO did not disburse $1,016 in CFC receipts and did not disburse all CFC funds in 

the CFC account during each disbursement period for the 2006 campaign. 

• Pledge Card Error 

The PCFO did not identify an improperly completed pledge card which allowed funds to be 

allotted to agencies not designated by the donor. 

• Pledge Loss Calculated Incorrectly on One-Time Disbursements 

The PCFO calculated pledge loss incorrectly for all agencies and federations receiving onetime disbursements in the 2006 campaign year. 

11 
CONTENTS 


PAGE 

EXEClJTIVE SUMMARY ... ~ .............. , ............................................................................. i 


I. INTRODUCTION AND BACKGROUND...................................................................... 1 


II. OBJECTIVES, SCOPE, AND METHODOLOGY .......................................................... 3 


III. AUDIT FINDINGS AND RECOMMENDATIONS ........................................................7 


A. AUDIT GUIDE REVIEW ....................................................................................... 7 


1. Agreed-Upon Procedures Not in Compliance ................................................... 7 


B. BUDGET AND CAMPAIGN EXPENSES ............................................................ 8 


1. Campaign Expenses ........................................................................................... 8 


2. Notification Letters Not Maintained ................................................................ 11 


3. PCFO Application Not in Compliance ............................................................ 12 


C. CASH RECEIPTS AND DISBURSEMENTS......................................... ' ............. 13 


1. Campaign Receipts Not Disbursed Properly ................................................... 13 


2. Pledge Card Error ............................................................................................ 14 


3. Pledge Loss Calculated Incorrectly on One-Time Disbursements .................. 15 


IV. MAJOR CONTRlBUTORS TO THIS REPORT ........................................................... 16 


APPENDIX (The PCFO's response, dated October 20,2008, to the draft audit report) 
I. INTRODUCTION AND BACKGROUND 


Introduction 

This repmi details the findings, conclusions, and recommendations resulting from our audit of 

the South Puget Sound Area Combined Federal Canlpaigns (CFC) for 2005 and 2006. The audit 

was perfonned by the Office of Personnel Management's (OPM) Office of the Inspector General 

(OIG), as authorized by the Inspector General Act of 1978, as amended. . 

Background 

The CFC is the sole authorized fund-raising drive conducted in Federal installations throughout 

the world. It consists of278 separate local campaign organizations located throughout the 

United States, including Puelio Rico, the Virgin Islands, and Foreign assignments. The Office of 

Combined Federal Campaign Operations (OCFCO) at OPM has the responsibility for 

management of the CFC. This includes publishing regulations, memorandums, and other fonns 

of guidance to Federal officials and private organizations to ensure that all campaign objectives 

are achieved. 

CFC's are conducted by a Local Federal Coordinating Committee (LFCC) and administered by a 

Principal Combined Fund Organization (PCFO). The LFCC is responsible for organizing the 

local CFC, deciding on the eligibility of local voluntary organizations, electing and supervising 

the activities of the PCFO, and acting upon any problems relating to a voluntary agency's 

noncompliance with the policies and procedures of the CFC. The PCFO is responsible for 

training employee key-workers and volunteers; preparing pledge cards and brochures; 

distributing campaign receipts; submitting to an extensive and thorough audit of its CFC 

operations by an Independent Certified Public Accountant (1PA) in accordance with generally 

accepted auditing standards; cooperating fully with OIG audit staff during audits and 

evaluations; responding in a timely and appropriate manner to all inquiries from participating 

organizations, the LFCC, and the Director ofOPM; and consulting with federated groups on the 

operation of the local campaign. 

Executive Orders 12353 and 12404 established a system for administering an annual charitable 

solicitation drive among Federal civilian and military employees. Title 5, Code of Federal 

Regulations 950 (5 CFR 950), the regulations governing CFC operations, sets forth ground rules 

under which charitable organizations receive Federal employee donations. Compliance with 

these regulations is the responsibility of the PCFO and LFCC. Management of the PCFO is also 

responsible for establishing and maintaining a system ofintemal controls. 

Our previous audit of the South Puget Sound CFC was completed in 2000 and covered campaign 

years 1997 and 1998. The audit identified one area of non-compliance, which was satisfactorily 

resolved through the OCFCO. 

The initial results of our audit were discussed with PCFO officials during an exit conference held 

on May 22, 2008. A draft report was provided to the PCFO and the LFCC on August 26, 2008 
for review and comment. The PCFO's response to the draft report was considered in preparation 

ofthis final report and is included as an Appendix. 

2 

II. OBJECTIVES, SCOPE, AND METHODOLOGY 


OBJECTIVES 


The primary purpose of the audit ofthe South Puget SOlmd·CFC was to detennine compliance 

with 5 CFR 950. Our specific audit objectives for the 2006 campaign were as follows: 

Eligibility 

• 	 To detennine if the charitable organization application process was open for the 

required 30 day period; if applications were appropriately reviewed, evaluated, 

and approved; and if the appeals process for rejected applicants was followed. 

Budget and Campaign Expenses 

• 	 To detennine jfthe PCFO's budget was in accordance with the regulations. 

• 	 to detennine ifexpenses charged to the campaign were actual, reasonable, did 

not exceed 110 percent of the approved budget, and were properly allocated. 

Campaign Receipts and Disbursements 

• 	 To detemline if the total amount offunds received for the campaign, plus interest 

income and less expenses, was properly distributed to the designated 

organizations. 

• 	 To determine if the total amount of un designated funds was properly allocated 

and distributed to the various CFC participants. 

PCFO as a Federation 

• 	 To detennine ifthe PCFO distributed funds only to member agencies. 

• 	 To determine ifthe PCFO charged its member agencies for expenses in a 

reasonable maImer. 

Additionally, our audit objective for the 2005 campaign was: 

Audit Guide Review 

• 	 To determine if the IPA completed the Agreed-Upon Procedures (AUP) as 

outlined in the February 2007 CFC Audit Guide (For Campaigns with Pledges $1 

Million and Greater) [CFC Audit Guide] for the 2005 campaign. 

SCOPE AND METHODOLOGY 

We conducted this performance audit in accordance with generally accepted govennnent 

auditing standards. Those standards require that we plan and perfOlID the audit to obtain 

sufficient and appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on the audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on the audit objectives. 

3 
The audit covered campaign years 2005 and 2006. The audit fieldwork was conducted in 

Tacoma, Washington, from May 19 through 23, 2008. Additional audit work was completed at 

our Washington, D.C. office. 

The South Puget Sound CFC received campaign pledges, collected campaign receipts, and 

incurred campaign administrative expenses for the 2005 and 2006 campaigns as shown below: 

Campaign Total Total Administrative 


Year Pledges Receipts Expenses 


2005 	 $1,122,453 $1,097,861 $131,770 


2006 	 $1,140,364 $1,115,185 $130,2] 4 


In conducting the audit we relied to varying degrees on computer-generated data. Our review of 

a sample of campaign expenses and supporting data, a sample of pledge card entries, and the 

distribution ofcampaign contributions and related bank statements, verified that the computergenerated data used in conducting the audit was reliable. Nothing else came to our attention 

during our audit testing utilizing the computer-generated data to cause us to doubt its reliability. 

We considered the campaign's intemal control structure in planning the audit procedures. We 

gained an understanding ofmanagement procedures and controls to the extent necessary to 

achieve our audit objectives. We relied primarily on substantive testing rather than tests of 

internal controls. The audit included such tests of the accounting records and such other auditing 

procedures as we considered necessary to detennine compliance with 5 CFR 950 and CFC 

Memorandums. 

In order to determine whether the LFCC and PCFO were in compliance with CFC regulations in 

regards to eligibility, we reviewed the following: 

-.. -)'he public notice to prospective charitable organizations to determine ifthe LFCC 

accepted applications from organizations for at least 30 days. 

• 	 The process and procedures for the application evaluation process. 

• 	 Sample eligibility letters to verify that they were properly sent by the LFCC. 

• 	 The LFCC's processes and procedures for responding to appeals from organizations. 

In order to address our objectives concerning the budget and campaign expenses, we 

accomplished the following: 

• 	 Reviewed the PCFO application and completed the PCFO application checklist. 

• 	 Reviewed a copy ofthe public notice to prospective PCFO's, and LFCC meeting minutes 

related to the selection ofthe PCFO. 

• 	 Traced and reconciled amounts on the PCFO's Schedule of Actual Expenses to the 

PCFO's general ledger. 

• 	 Reviewed supp01ting docwnentation for ajudgmental sample of 17 actual expenses from 

23 expense accounts. We selected.14 general ledger transactions greater than $600 and 

3 credit transactions. 

4 

• 	 Reviewed the LFCC meeting minutes and verified that the LFCC authorized the PCFO's 

reimbursement of campaign expenses. 

• 	 Compared the budgeted expenses to actual expenses and detennined whether actual 

expenses exceeded 110 percent of the approved budget. 

To determine whether the campaign receipts and disbursements were handled in accordance with 

CFC regulations, we reviewed the following: 

• 	 A judgmental sample of 25 out of8,686 pledge cards and compared them to the Pledge 

Card Report and actual pledge cards from the PCFO. 

1. 	 Selected 10 pledge cards where the individual amounts pledged did not reconcile 

to the total amount pledged to the CFC; then 

2. 	 Selected 15 pledge cards by choosing every 550th pledge card. 

• 	 Cancelled distribution checks to verify that the appropriate amOlmt was distributed in a 

timely manner. 

• 	 One-time disbursements to verify that the PCFO properly calculated pledge loss and 

disbursed the funds in accordance with the ceiling amount established by the LFCC. 

• 	 The PCFO's most recent listing ofoutstanding checks to verify that the PCFO was 

following its policy for such checks. 

• 	 The Pledge Notification Letters to verify that the PCFO notified the CFC agencies of the 

designated and undesignated amounts due them before the March 15, 2006 deadline. 

• 	 The donor list letters sent by the PCFO to organizations to verify the letters properly 

notify the organization ofthe donors who wish to be recognized. 

• 	 Forms 1417 provided by the PCFO and the OCFCO to identify material differences. 

• 	 The PCFO Distribution Schedule to verify whether the monthly disbursements reconcile 

with the PCFO's Campaign Receipts and Disbursements Schedule. 

• 	 All bank statements used by the PCFO for the 2006 campaign to verify that the PCFO 

was properly accOlmting for and distributing funds. 

• 	 The PCFO's cutoff procedures and bank statements to verify that funds were allocated to 

the appropriate campaign year. 

• 	 The General Designation Options and Undesignated Funds Spreadsheet and the 

Allocations and Disbursements Spreadsheet to verify whether disbursements were 

accurate and proportionate to the PCFO's allocation rates. 

To detennine whether the PCFO was in compliance with the CFC regulations as a federation 

(United Way of Pierce County), we reviewed the following: 

• 	 Data reported on the CFC Receipts Schedule with supporting documentation to verify if 

the receipts were properly recorded. 

• 	 The CFC Distribution Schedule to determine if the United Way of Pierce County 


disbursed funds to member agencies not participating in the 2006 CFC. 


• 	 The United Way ofPierce County's contract with its member agencies to determine ifthe 

fees were reasonable and supported. 

The san1ples selected and reviewed above were not statistically based. Consequently, the results 

could not be projected to the universe since it is unlikely that the results are representative of the 

universe taken as a whole. 

5 
Finally, to accomplish our objective for the Audit Guide Review, we reviewed the 2007 CFC 

Audit Guide and detennined the type of audit required to be completed by the IP A for the 2005 

campaign. We also completed the AUP checklist to verify ifthe IPA completed and documented 

the A UP steps. 

6 

III. AUDIT FINDINGS AND RECOMMENDATIONS 


The PCFO and LFCC administered the 2005 and 2006 South Puget Sound CFCs in compliance 

with all applicable CFC regulations with the exception ofthe following areas. 

A. 	 AUDIT GUIDE REVIEW 

1. 	 Agreed-Upon Procedures Not in Compliance 

The PCFQ's IPA audit ofthe 2005 campaign did not fully comply with the 

requirementsofthe 2007 CFC Audit Guide. The Audit Guide includes AUPs that the 

IPA must perform in its alIDual audit of the campaign. 

We reviewed the IPA working papers to determine ifit complied with the requirements 

stated on the Audit Guide for the 2005 campaign. As discussed below, we identified 

two areas where the IPA did not fully comply with the requirements. 

• The IPA completed one step required by the Audit Guide incorrectly. 

o 	 PCFO Budget and Administrative Expenses step seven was not 

completed according to the requirements set forth in the Audit Guide. 

The Audit Guide required the IP A to select a representative sample of 10 

actual expenses incurred by and reimbursed to the PCFO for the Fall 

2005 campaign. The IP A selected a sample of 10 actual expenses; 

however, the expenses selected were from the Fall 2006 campaign and 

not the Fall 2005 campaign as required. 

• 	 The IPA did not maintain sufficient documentation for one step to determine 

whether the AUP step was completed correctly. 

o 	 Pledge Card Tracking System step three required the IPA to obtain 

support for tracking and analyzing the payroll office receipts from the 

PCFO. We could not determine if the IPA completed this step correctly 

because no documentation supporting its review was maintained in the 

working papers provided for review. 

Completion ofthe AUPs as provided in the Audit Guide is impm1ant because it helps 

the OCFCO and LFCC to more effectively monitor CFC campaign activities. 

PCFO's Comments: 

The PCFO agrees with this finding and states that it intends to establish procedures to 

ensure that the IPA's work complies with the CFC Audit Guide requirements for future 

CampaIgns. 

7 
DIG Comments: 

The PCFO's response does not consider the portion of the finding regarding lack of 

documentation. We suggest that the PCFO also include guidelines for its IPA to 

maintain documentation sufficient for a third party to ensure that all steps ofthe AUPs 

have been completed satisfactorily in the future. 

Recommendation 1 

We recommend that the OeFCO verify that the procedures put in place by the LFCC 

and PCFO are sufficient to ensure that the AUPs are fully and accurately completed and 

the work appropriately supported in the AUP work papers. 

Recommendation 2 

We recommend that the OCFCO ensure that the LFCC and PCFO work with their IPA 

to make certain that the AUPs completed are verifiable with sufficient supporting 

documentation. 

B. BUDGET AND CAMPAIGN EXPENSES 

1. Campaign Expenses 

The PCFO did not maintain sufficient documentation for CFC campaign expenses and 

inappropriately charged the 2006 campaign for costs related to a prior campaign. 

5 CFR 950.105 (d) (7) states that the PCFO is responsible for ensuring that the actual 

expenses related and charged to the CFC are supported with sufficient documentation. 

-Additionally, 5 CFR 950.106 (a) and (b) state that the PCFO may only recover 

campaign expenses reflecting the actual cost of administering the local campaign from 

the receipts of that campaign year. 

We judgmentally selected a sample of 17 actual expenses charged to the CFC from the 

PCFO's general ledger to determine if the costs were actual CFC expenses, if they were 

supported by sufficient documentation, and if the expenses were related to the 

campaign year it was charged to. As a result of our review, we identified two expense 

transactions that did not meet these criteria. Specifically we found the following errors: 

Auditing Fees: 

We identified an invoice charging the 2006 erc $6,000 that was not related to 

the 2006 campaign year. The invoice, dated April 28,2006, was related to the 

required audit of the CFC financial statements and AUPs performed by the 

PCFO's ]PA. However, the expense was incurred early on in the 2006 campaign 

year (prior to solicitation of donations, receipt of any funds, or distribution of 

8 
funds to charities) and was not related to the 2006 campaign. IPA audits of the 

2006 campaign would have to occur after the end and closeout of the campaign, 

which would be sometime in 2008. As a result, the PCFO charged the 2006 

campaign for costs related to a previous campaign. 

Temporary Salaries: 

We identified an invoice charging the 2006 CFC $617 for temporary salaries that 

was not identifiable as an actual CFC cost. Specifically, the invoice was 

addressed directly to the United Way ofPierce County (UWPC) and not to the 

CFC Additionally, there was nothing on the invoice, or the supporting time 

cards, that identified the costs as relating or belonging to the CFC. As a result, we 

could not detennine if the costs were actual CFC expenses. 

PCFO's Comments: 

The PCFO does not agree with this audit finding and states that the OIG has too 

broadly defined the requirement to maintain detailed information because the regulation 

requires that itemized receipts be maintained "to the extent possible." It also states that 

the OCFCO has not spelled out any requirements that are more specific than those 

outlined in the regulations. It feels it has met the requirements of the regulation 

because it has maintained copies ofthe invoices; kept the costs and documentation 

separate from non-CFC information; the costs were included in the budget approved by 

the LFCC, and the individual expenses were approved by the CFC Director prior to 

payment. In regards to the specific items questioned, the PCFO stated the following: 

Auditing Fees: 

The PCFO stated that setting aside CFC dollars to pay for future costs would 

require it to be in violation of GAAP which looks at expenditures in an audit 

cycle, not a campaign cycle. 

Temporary Salaries: 

The PCpO states that because the invoice was coded as a CFC expense (to 

account 5-7006-99), the time cards were signed and approved by the UWPC, and 

the costs conectIy correspond to the budget submitted by the PCFO (and. 

approved by the LFCC) that these cost are sufficiently documented as CFC costs. 

OIG Comments: 

We disagree with the PCFO's assertion that the OIG has placed too broad a definition 

on the documentation required to determine costs allowable to the CFC. The LFCC is 

required by the Federal regulations to review and approve the reimbursement of the 

PCFO for "only those campaign expenses that are legitimate CFC costs and are 

adequately documented." As a result, it is the inherent responsibility ofthe PCFO 10 

9 
maintain documentation sufficient for the LFCC, and other auditors, to determine if the 

expenses are "legitimate" CFC costs even though the specifics ofthe requirement are 

not spelled out in the regulations. Our comments in regards to the specific items 

questioned are below: 

Auditing Fees: 

The PCFO is incorrect in its interpretation of the regulation, as well as its GAAP 

requirements, and is in violation ofthe Federal regulations by not properly 

matching expenses to the period (campaign year) in which they are related to. 

This topic has been covered by the OCFCOin its CFC Regional Workshops 

('Accounting for the CFC' breakout sessions) on a yearly basis. Additionally, the 

OCFCO has also recently updated its guidance to clarify the issue and further 

support our position. It states that because IP A audit expense is "paid after the 

close of the campaign, the amount should be accrued and withheld from the last 

distribution. We encourage campaigns to negotiate a fixed cost agreement with 

the Independent Public Accountant (lP A) so that the actual amount can be known 

prior to the close of the campaign. If campaigns are unable to negotiate a fixed 

cost agreement, an estimated amount should be withheld based on prior 

experience and discussions with the auditor." According to discussions with the 

OCFCO, although the memorandum was issued (CFC Memorandum 2008-09, 

dated November 14,2008) after the date ofour audit, this has been the opinion of 

the OCFCO since the inception of the CFC Audit Guide. 

Temporary Salaries: 

We disagree with the PCFO's opinion that the charges to the campaign were 

sufficiently documented. We do recognize that the use of temporary employees 

(especially for the data entry ofpledge cards) is a typical practice ofPCFO's; 

therefore, we are not questioning the charges. 

However, the manner in which the PCFO maintains documentation for these costs 

should be improved. The invoice provided for review did not, in any readily 

identifiable way, indicate that it was related to the CFC or that the temporary 

employees worked on CFC related items. 

The PCFO's stance, that coding the invoice to a CFC account identified it as a 

CFC expense, is not sufficient support that the work was related to the CFC. 

Coding the invoice merely shows that it should be charged to the CFC. The fact 

that the invoice corresponds to the approved budget shows that this type of 

expense was expected, not that this invoice is an allowable cost to the CFC. 

Last1y, the fact that the time cards were signed/approved by a UWPC employee 

shows that the work was approved for payment and not that it was related to the 

CFC. None of these arguments can show that the temporary employees worked 

on CFC related items or that all of their time was spent on the CFC. 

10 

We suggest that the PCFO require the temporary employees working on CFC 

related items to indicate that their work was for the CFC on their time card; ifthey 

work on other non-CFC areas that should be noted as well. Cost should then be 

anocated to the CFC based on the ratio of hours worked on the CFC and all ofthis 

information should be maintained with the invoices. 

Recommendation 3 

We recommend that the OCFCO direct the PCFO to follow the guidelines set forth in 

CFC Memorandum 2008-09 in regards to CFC Audit Expense Reimbursement for 

future campaigns. 

Recommendation 4 

We recommend that the OCFCO direct the PCFO to institute procedures that ensure all 

CFC expenses are sufficiently documented so that they can be easily identifiable as 

actual CFC costs for future campaigns. 

2. Notification Letters Not Maintained 

The PCFO did not maintain documentation to SUppOlt that pledge notification letters 

and donor lists were sent to its member agencies and federations as required by the 

Federal regulations. 

5 CFR 950.601 (c) states that "It is the responsibility ofthe PCFO to fOIWard the 

contributor information for those who have indicated that they wish this infonnation 

released to the recipient organization directly, ifthe organization is independent, and to 

the organization's federation ifthe organization is a member of a federation." 

5 CFR 950.901 (i) (1) states that "The PCFO shall notify the federations, national and 

international organizations, and local organizations as soon as practicable after the 

completion ofthe campaign, but in no case later than a date to be determined by OPM, 

ofthe amounts, if any, designated to them and their member agencies and ofthe 

amounts of the undesignated funds, if any, anocated to them." 

As prot of our audit process we requested that the PCFO provide copies ofthe pledge 

notification and donor letters sent to the agencies and federations as required by the 

Federal regulations. The PCFO stated that the reports were sent out via e-mail by a 

previous CFC Director. However, the e-mail files assodated with that former Director 

were not maintained. Therefore, the PCFO was unable to provide supp0l1 to show that 

the pledge notification letters were sent. 

As a result ofthe PCFO not maintaining documentation to support the remittance ofthe 

pledge notification and donor list letters to the agencies and federations, we were 

unable to determine if or when the notifications were sent. 

11 

PCFO's Comments: 

The PCFO agrees with the finding and states that it has implemented procedures to 

maintain both copies ofpledge and donor reports sent via E-mail in its E-mail system 

and electronic versions to a computer hard drive. Additionally, it will maintain hard 

copies of the reports and e-mails to show when and to whom the reports were sent. 

Recommendation 5 

We recommend that the OCFCO verify that the PCFO has put procedures in place that. 

ensure that it maintains documentation to support that it has sent pledge notification 

letters and donor lists to the appropriate agencies and federations as required by the 

Federal regulations. 

3. PCFO Application Not in Compliance 

For the Fall 2006 campaign year, the LFCC approved a PCFO application that was not 

in fun compliance with all mandatory statements and regulation references in 5 CFR 

950.105 (c). 

5 CFR 950.105 (c) (3) states that the PCFO application should include a "statement 

signed by the applicant's local director or equivalent acknowledging the applicant is 

subject to the provisions of [5 CFR] 950.403 and 950.603." 

We reviewed the PCFO application approved by the LFCC to detennine if it was in 

compliance with the regulation. During our review, we determined that the application 

did not include a signed statement stating that it is subject to the provisions of 5 CFR 

950.403 and 5 CFR 950.603. The application included incorrect references to 5 CFR 

950.202 and 5 CFR 950.203. 

As a result of accepting an application that did not fully comply with CFC regulations, 

the PCFO is not fully acknowledging its obligations under the Federal regulations. 

PCFO's Comments: 

The PCFO stated that this error was identified by its IPA and that it notified the LFCC 

of this and instituted a corrective action plan to amend the contract with the LFCC for 

the correct regulation references on July 29,2008. Furthermore, it notified the OCFCO 

ofthis error with a corrective action plan on September 10,2008 which was approved 

on September 11,2008 by the OCFCO. Therefore, the PCFO feels that it has already 

instituted procedures to resolve this finding. 

DIG Comments: 

We agree with the PCFO that the corrective action plan implemented should prevent a 

reOCCUlTence ofthis finding in the future. However, since the corrective action plan 

12 
was submitted to OPM after the OIG audit exit conference (May 22,2008) and draft 

audit report (dated August 26, 2008) where this finding was mentioned and included, 

the finding remains in the report. 

Recommendation 6 

We recommend that OCFeO ensures that the PCFO amends its current contract with 

the LFCC to correct the references required by the regulations and ensure that it 

references those correct regulations in future PCFO applications submitted. 

C. CASH RECEIPTS AND DISBURSEMENTS 

1. Campaign Receipts Not Disbursed Properly $1.016 

The PCFO did not disburse $1,016 in CFC receipts received for the 2006 campaign and 

did not disburse all CFC funds in the CFC account at each disbursement period in 

accordance with the Federal regulations. 

5 CFR 950.901 (i) (2) states that the PCFO is responsible for the accuracy ofthe 

disbursements it transmits to member agencies and federations. It also states that the 

PCFO shall distribute all CFC receipts at least quarterly beginning April 1 and that the 

CFC account balance shall be zero at the end of each disbursement period. 

During our review we documented, using CFC bank statements, all CFC receipts and 

disbursements for the 2006 campaign to determine if all CFC funds were disbursed to 

agencies participating in the CFC and ifthe account balance was zeroed out at the end 

of each disbursement period. Our review found that CFC receipts (cash donations and 

payroll deposits, plus interest, less bank fees) for the period totaled $1,115,185 and that 

the CFC disbursed (agency and federation payments plus PCFO reimbursement) a total 

of$I,114,169. The resulting variance of$1,016 was not properly disbursed to the 

member agencies and federations ofthe 2006 CFC campaign. 

We also noted that when disbursements were made by the PCFO, it did not disburse a11 

CFC funds in the CFC account to bring the account to zero as required by the Federal 

regulations. Our review noted balances of $69,364, $37,457, $12,703 and the 

outstanding $1,016 as remaining in the account after each disbursement. 

As a result of these eHors the member agencies and federations of the 2006 campaign 

did not receive proper payments throughout the campaign period and are due $1 ,OJ 6. 

PCFO's Comments: 

The PCFO does not agree with this audit finding and states that the $1,016 was not 

disbursed due to minimum balance requirements for the bank account used to maintain 

campaign receipts. 

13 
OIG Comments: 

Minimum balance requirements do not excuse the peFO from adhering to the 

regulations governing the eFe. The reasoning that monies had to be withheld from 

pm1icipating charities is invalid, because at the time of the final disbursement to 

agencies ofthe 2006 campaign (February 2008) the PCFO had already teceived cash 

donations and Federal payroll withholding deposits related to the 2007 campaign which 

would exceed the $1,000 minimum balance requirement. 

The PCFO did not consider the fact that it did not disburse all eFe funds in the CFC 

account to bring the account to zero at the end ofeach disbursement period. A possible 

method to address this would be for the PCFO to use the prior month's ending balance 

as the amount to disburse (i.e., April payment should use March's ending balance) for 

the first three quarterly disbursements. This should allow the PCFO to also maintain 

the minimum balance in the account, although consideration could also be given to 

changing to an account without a minimum balance requirement. 

Recommendation 7 

We recommend that the DCFCO direct the PCFO to distribute $1,016 in eFe receipts 

retained to members ofthe 2006 eFC. 

Recommendation 8 

We recommend that the OeFeO ensure that the PCFO understands its responsibility to 

distribute a11 CFC funds on hand at the end of each disbursement period and that it puts 

procedures in place to distribute funds in accordance with the regulations. 

2. Pledge Card Error 

The PCFO did not identify an improperly completed pledge card and allowed funds to 

be allotted to agencies not designated by the donor. 

The 2006 CFC Brochure states that the donor may designate to the agency of their 

choice in the spaces provided; however, additional designations must be made on a 

second pledge card. 

5 eFR 950.402 (d) states that "In the event the PCFO receives a pledge form that has 

designations that add up to less than the amount pledged, the PCFO must honor the 

total amount pledged and treat the excess amount as undesignated funds." 

We reviewed 25 pledge cards to detennine if the following areas were cOlTectly input 

into the pledge system by the PCFO: a) donor name, b) mhount donated, c) agency 

codes donated to, d) total amount donated, and e) donor's choice ofreleasing personal 

infonnation to agencies. Our review identified one pledge card that was not completed 

properly by the donor and not properly accounted for by the PCFO. Specifically, the 

14 
donor completed a pledge card with no charity codes listed, but with a total gift of 

$1,998 and a note that stated "see attachment." The attachment listed 27 chruity codes 

with another note indicating a donation of $74 to each. In accounting for the donor's 

wishes, the PCFO designated $74 to the first five charity codes listed and accounted for 

the remaining $1,628 as tmdesignated funds. 

This donor's pledge was mishandled on various levels. First, if properly trained, the 

Key Worker should have identified the pledge card as improperly completed and 

returned it to the donor letting them know that additional pledge cards would need to be 

completed to donate to 27 charity codes. Secondly, if not identified by the Key 

Worker, the PCFO should have identified the pledge card as improperly completed 

when inputting the information into the pledge card system. The PCFO should have 

either sent the pledge card back to the Key Worker to obtain clarification from the 

donor, or, iftime was not available to wait for a response from the Key Worker, the 

PCFO should have treated the entire pledge as undesignated funds considering that the 

card itself did not designate any specific charities. 

Failure to identify incorrectly completedpledge cards may lead to the PCFO not 

ensuring that the designations of Federal employees are honored. 

PCFO's Comments: 

The PCFO agrees with the finding and states that it has amended the Key Worker 

Resource Guide and Loaned Executive training to stress that separate pledge cards must 

be used. 

Recommendation 9 

We recommend that the OCFCO and LFCC verifY that the PCFO has amended its Key 

Worker training so that improperly completed pledge cards are caught and cOITeeted 

. prior to being sent to the PCFO for processing. 

3. Pledge Loss Calculated Incorrectly on One-Time Disbursements 

The PCFO calculated pledge loss incorrectly on those agencies and federations 

receiving one-time disbursements in the 2006 campaign year. As a result of this error, 

disbursements to those agencies and federations were reduced by $778. 

5 CFR 950.901(i) (3) states that the PCFO can make one-time disbursements to 

organizations receiving minimal donations. The regulations also provide that the PCFO 

may deduct the propOltionate amount of each agency's and federation's share of the 

campaign's administrative cost plus the average of the last three year's pledge Joss from 

the one-time disbursement. 

The LFCC approved one-time disbursements to organizations with total anticipated 

receipts (total designations less administrative costs and pledge loss) of $1 ,500 or less 

15 
for the campaign. Using the pledge loss from the prior three years, we calculated the 

average pledge loss percentage (6.84 percent) for those years and compared that 

perc"entage to the percentage applied to one-time disbursements by the PCFO (7.88 

percent). Our review found that the PCFO applied an incorrect pledge loss percentage 

which resulted in the disbursements to those agencies being reduced by a total of $778. 

PCFO's Comments: 

The PCFO agrees with the finding. 

Recommendation 10 

We recommend that the OCFCO and the LFCC ensure that the PCFO understands the 

pledge loss calculation and applies the appropriate percentage to one-time 

disbursements in future campaigns. 

16 

IV. MAJOR CONTRIBUTORS TO THIS REPORT 

Special Audits Group 

Auditor-In -Charge 

Auditor 

Group Chief 

Senior Team Leader 

17 

Appendix 

20 October 2008 

TO: United States Office ofPer sonne] Management - Office of the Inspector General -

Attn: 

FROM: 	Director CFC South Puget Sound (0925), Sean Annentrout, per the United Way of 


Pierce County (PCFO) 


SUBJECT: 	Response from United Way ofPierce County (PCFO) - 2008 OPM Audit Draft 

Report 

The PCFO, United Way of Pierce County (hereafter referred to as UWPC), provides the 

foHowing response to the findings and recommendations of the 26 August 2008 Draft Audit 

Report. The signatures of the UWPC"s ChiefFinancial Officer and the LFCC Finance 

Committee Chair are also provided. 

AI: Agreed Upon Procedures 

We concur that the selectlon of actual expenses from 2006 instead of2005 is an errOf. We 

recognize that human error is possible - and that it was not a systematic error of not pulling the 

correct kind of expenses Of quantity required. We concur with Recommendation 1 and wiJ] 

establish procedures to assure accurate work and documentation ofit. 

B 1 : Budget an9 Campaign Expenses: 

We DO NOT concur with the findings that the UWPC, as PCFO, did not maintain proper 

docwnentation of campaign expenses as purported in the draft findings as "either not identifiable 

. as Qenefiting the CFC or charged to the wrong campaign year." As a result, we also do not 

concur with the corresponding recommendations (2 and 3) in the report. 

a. 	 First, the actual language of 5 CFR 950.105(d) that spells out UWPC's actual 

responsibilities as a PCFO, at clause (7) provides "Maintaining a detailed schedule of 

its actual CFC administrative expenses with, to the extent possible, itemized receipts 

for the expenses." It goes on to state how the schedule must be able to relate back to 

the PCFO budget which the PCFO must maintain. The Auditor's have included a 

"broad documentation" definition that is not supported anywhere in the CFR 

regulations governing the campaign. In fact, there is not even a definitive 

requirement for an expenses to have the itemized receipt; rather it is an ~xtent 

possible requirement. Additiona])y, unlike the app1ication process, that has OPM 

Memorandum (2006-22) that spells out more specific documentation requirements, 

there are no such guidelines or requirements pertaining to the provision at 5 CFR 

950.I05(d)(7). 
b. 	 Each item in question - had documentation ofthe expense. Each was kept in a 

separate CFC ledger of expenses, as to ensure no improper comingling ofUWPC 

genera] expenses with those ofthe CFC. An were specifically annotated to the 

corresponding line item of the Budget submitted and approved by the LFCC. All were 

signed as authorized by either the Director of the CFC at the time (Joe O'Neil) or 

with time cards the person who managed their daily CFC duties. Therefore it meets 

the requirements of 5 CFR 950.105(c)(I) and 5 CFR 950.105(d)(7). The Findings' 

more broadly construed definition ofdocumentation is outside the bounds of any 

regulatory prescribed requirements. In fact, the Executive Summary ofthe CFC 

Audit Guide for 2006 stated that the purpose is to provide "OPM assurance that 

LFCCs and PCFOs are complying with the CFC regulations ... have adequate 

internal controls over their CFC related operations; and [to provide] CFC donors and 

other stakeholders assurance that all local campaigns meet their high expectations of 

accountabi lity." 

c. 	 We address each issue raised one-by-one below. Our documentation demonstrates we 

have internal controls and supports that the costs in question where CFC related and 

provide the LFCC and donors such assurance, thereby meeting the provided purpose 

as well as the regulatory requirements of 5 CFR 950. 

i. 	 Unallowable Expenses - Express Personnel Services - Temporary Support (Sample 

#4 Ledger Acct 5-7006-99) 

The auditor's comments challenge that they "need support to show these persons 

physically worked on the CFC." As a PCFO, the UWPC has a separate code of 5-7006­

99 for all temporary support attributed to the CFC campaign. The invoice was 

properly coded with this account number. The invoice itself corresponds with the budget 

and paperwork provided. Additionally, the person that supervises the CFC temporary 

data input workers, Maryann Callanan, signed the time cards. You can verify the 

evidence ofher signature on the time card. The manner in which the temporary 

employees were hired and records maintained is in compliance with standard business 

practices of the temporary empJoyment industry. These items correctly correspond to the 

]jne-item budget submitted to and approved by the LFCC and also provided to the 

auditors. The documentation meets tbe requirements of D(7). The documents in 

question are attached at Attachment 1. The auditor's annotation that it does not indicate it 

is related to the CFC fails to account that there is a code 01) top.right of 1

st page of 

document (ledger 5-7006-99) that identifies it as such, and is signed offby the person 

who oversaw their CFC related work. The auditors place a burden that is neither practical 

nor supported by CFR requirements or OPM memorandums. 

ii. 	Audit & Accounting Fees (Sample #5 Ledger Acct 5-8008-99) 

When auditors audit the CFC they are combining a comparison oftwo campaigns years, 

the campaign just completed and the payouts from the previous year campaign. The 
$6,000 was related to both years and would be impossible to separate between the two 

campaigns as both payouts ofthe prior year campaign are happening at the same time the 

new campaign begins. The LFCC approves our budget for each year and this was an 

approved line item. Additionally, Audits ofthe CFC have always transpired in the spring 

and the actual costs cannot be known until il actually occurs. If we do not wait we risk 

not having enough to cover the actual expenses; or on the other hand, ifless cost than 

budgeted, would create the need to issue some 2,000 checks for a nominal amount. Plus, 

this would put us in violation offedcral di sbursement requirements. 

DELETED BY OIG 

NOT RELEVANT TO FINAL REPORT 
DELETED BY OIG 


NOT RELEVANT TO FINAL REPORT 


82: PCFO Application Not in Compliance: 

The PCFO submitted, via email, on 10 Sept 2008 a Corrective Action Plan (CAP) dated 29 July 

2008 that was accepted by the LFCC. This was submit1ed prior to the draft findings being 

released to ensure compliance with the 1 August deadline to have the LFCC review AUP 

findings. As part ofthis CAP, we 3lUlotated that we realize that the improper CFR references 

were stated (i.e. 950.202 and 203 rather than 950.403 and 950.603). We provided that we will 

ensure it is corrected in a11 future applications. Additionally, per the request of OPM (through 

Mary CapuJe), we agreed to amend the current contract on the record at the next LFCC meeting 

- which will occur in November 2008. As a result, we believe, we have already instituted a 

CAP to resolve this finding. Attached are the CAP and the email. 
B3: Pledge Notification Letters Not Maintained. 

The CFC ofSouth Puget Sound has sent out Pledge and Donor reports in accordance with 5 CFR 

950.601 (c) and 5 CFR 950.901 (i)(l). However, the finding was correct that paper copies of 

these records were not adequately maintained. As a result. when the Director moved.on and his 

Computer System (with email) was turned off, we lost the electronic copy ofthese records. I 

have reattached an email communication from Earthshare (one of charitable agencies requested) 

to demonstrate that we do send out the reports. We concur that additional filing procedures need 

to be in place. 

Beginning in March of 2008, we self-implemented a CAP to not only maintain the CFC 

Assistant generated reports in our email files (private folders), but we now save them to the harddrive. Additionally, we maintain a non-electronic file that contains the Email log ( a txt 

document) that shows when and to whom reports were sent. along with paper copies of 

kickback/error emailsand the follow-up taken to ensure they received their reports. This 

occWTed as part of the reporting for the 2007 campaign and will continue here on out. 

C1: Cash Receipts and Disbursements: 

We do not concur with the findings. There was a transfer from Anned Forces Bank to Key Bank 

in the amount of $1,015.78. In fall of 2007, there was a remaining balance for the 2006 campaign 

($ J,0] 5.78) due to minimum balance requirements at Armed Forces Bank. Jfyou note, the 

General Ledger description reflects this transfer. Anned Forces Bank is used dwing the 

campaign to deposit receipts. After the campaign money 1S transferred to Key Bank which is the 

disbursement account. 

DELETED BY OIG 

NOT RELEVANT TO FINAL REPORT 

C2: PJedge Loss Calculation: 

We concur with the recolIlIUendation. 

C3: Pledge Card Error: 
We concur that we had one incorrect pledge card and that there should have been mUltiple cards 

used rather than an attachment. We have already amended the Keyworker Resource guide to . 

STRESS that separate cards must be used. This part ofthe process has also been included in the 

Loaned Executive training as well to make sure this is not overlooked. Finally, the individual 

who processes the pledge cards for us has been infonned ofthe error and made aware to pull any 

such donor pledges so the donor can be.engaged via their keyworker/coordinator. 

DELETED BY OIG 

NOT RELEVANT TO FINAL REPORT 

Director, CFC of South Puget Sound 

c/o. United Way of Pierce County 

1$1 Endorsement 

Chief Financial Officer 

United Way of Pierce County 

2

nd Endorsement 

Deputy Garrison Commander, Ft lewis (Ret) 

lFCC Finance Committee Chair 

ATCHs 

1. PDF of charges in question Rcd from Auditor wi Auditor Notes - for Samples #4,5,6,7,9 and 10 

2.. Essential Software Development - Miscellaneous Professional fees (3pps) - i.e.n6 complete 

3. 2006 Progress Report Copy. dated 21 Nov 06, for Batch 270 (2 pps) 

4. 29 July 08 Corrective Action Plan submitted to OPM (3 pps) 

5. Email correspondence with Mary Capule (OPM) regarding PUO Contract and CAP 

6. Earthshare email and reports 

7. Mary Capule (OPM) email regarding EFT and verifications 

8. 51642 Order Invoice from Vendors tracking-system