U.S. OFFICE OF PERSONNEL MANAGEMENT 

OFFIC E OF THE I	 'SPECTOR GENERAL 

OFFICE OF AUDITS 

Final Audit Report 

Subject: 

AUDIT OF THE 2007 AND 2008
 

COMBINED FEDERAL CAMPAIGNS
 

OF ISLAND COUNTY
 

OAK HARBOR, WASHINGTON
 

Report No. 3A-CF-OO-IO-037 

Date: Marc h 4, 2011 

--CA TTON-­

T his audit report has been distributed to Federal officials who a re r esponsible for the administration of the audited program. This a udit 

report may contain proprletary da ta whic h is protected by Federal law (I S V.S.c. 1905). Therefore, while this audit report is ava ilab le 

under the Freedom of Informatinn Act and mad e available to the public on the DIG webpage, caution needs to be exerci sed before 

releasing the report to the general public as it ma y contain proprietary infor mation that was redacted fro m the publicly dist ributed copy. 
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
 

Washington. DC 20415
 

Office of the 

Inspector General 

AUDIT REPORT 

AUDIT OF THE 2007 A..ND 2008
 

COl\1BINED FEDERAL CAl\1PAIGNS
 

OF ISLAND COUNTY
 

OAK HARBOR, \VASHINGTON
 

Report No. 3A-CF-OO-IO-037 Date: March 4, 2011 

~~~dMichael R. ~~

Esser 

Assistant Inspector General 

for Audits 

www www.usajobs.gov .o pm .g ov 
UNITED STATES OFFICE OF PERSO NNEL MANAGEM ENT
 

Washi ngton , DC 20415
 

Office of the 

Inspector General 

EXECUTIVE SUMMARY
 

AUDIT OF THE 2007 AND 2008
 

COIVIBINED FE DERAL CAMPAIGNS
 

OF ISL AND COU NTY
 

OAK HARBOR, WASHINGTON
 

Report No. 3A-CF-00- l 0-037 Date: Ma rch 4 r 2011 

The Office of the Inspector General has completed an audit of the 2007 and 2008 Combined 

f ederal Campaigns (CFC) of Island County. The United Way of Island County, loca ted in Oak 

Harbor, Washington, served as the Princ ipal Combined Fund Organization (PCFO) during both 

camp aigns. Our main objective was to determ ine if the CFC of Island County 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 aud it identified eight 

instances of non-compl iance with the regulations (5 CFR 950) goveming the CFC. 

The following findings represent the results of our aud it work as ofthe dat e ofthis report. 

AUDIT GUIDE REVIE\V 

• Agreed-U pon Proc edu res Not in Co mpliance with the Audit Guide Proc edural 

The Independent Public Accountant did not complete all ofthe agreed-upo n procedures in
 

accordance with the Audit Guide.
 

• 

w ww .o pm ww w.usaj obs .gov .gov 
BUDGET AND CAl\t1PAIGN EXPENSES 

• LFCC Approv al of Campaign Expense Reimbursement Procedural 

The PCFO did not submit its expenses related to the 2008 campaign to the LFCC for 

approval prior to reimbursement. 

• Unallowable Expense Charged to the 2008 Campaign 

The PCFO charged an unallowable expense, totaling 5955, to the 2008 campaign. 

• Insufficient and Undocumented Allocation Methods Procedural 

The allocation methods used by the PCFO to allocate costs to the 2008 campaign were 

insufficient and were not supported by adequate documentation. Additionally, we identified 

a number oftransactions which used incorrect allocation percentages or which the PCFO 

could not reconcile to the amount recorded in the general ledger. 

• Campaign Expenses Charged to the Wrong Campaign Year $13,420 

The PCFO did not properly match its expenses to campaign receipts and charged the 2008 

campaign 513,420 for expenses related to the 2006 and 2007 campaigns. 

• PCFO Application Missing Required Language Procedural 

The United Way ofIsland County's application to serve as PCFO did not include all ofthe 

specific language required by the regulations. 

CAMPAIGN RECEIPTS AND DISBURSEMENTS 

• Pledge Card Errors Procedural 

The PCFO incorrectly input 13 pledge cards causing it to not follow the CFC donor's wishes. 

• LFCC Approval of One-Time Disbursements Procedural 

The PCFO made one-time disbursements for the 2008 campaign before obtaining approval 

from the LFCC. 

ELIGIBILITY 

Our review ofthe campaign's eligibility processes showed that it complied with the applicable 

provisions of 5 CFR 950. 

11 
PCFO AS A FEDERATION
 

Our review ofthe PCFO 's activities as a federation showed that it complied with the applicable 

provisions of 5 CFR 950. 

111
 
CONTENTS
 

PAGE
 

EXECUTIVE SUMMARY	 i
 

I. INTRODUCTION AND BACKGROUND	 1
 

II. OBJECTIVES, SCOPE, AND METHODOLOGY	 2
 

III. AUDIT FINDINGS AND RECOMMENDATIONS	 6
 

A. AUDIT GUIDE REVIEW	 6
 

1. Agreed-Upon Procedures Not in Compliance with the Audit Guide 6
 

B. BUDGET AND CAMPAIGN EXPENSES	 9
 

1. LFCC Approval of Campaign Expense Reimbursement	 9
 

2. Unallowable Expense Charged to the 2008 Campaign	 10
 

3. Insufficient and Undocumented Allocation Methods	 11
 

4. Campaign Expenses Charged to the Wrong Campaign Year	 13
 

5. PCFO Application Missing Required Language	 14
 

C. CAMPAIGN RECEIPTS AND DISBURSEMENTS	 15
 

1. Pledge Card Errors	 15
 

2. LFCC Approval of One-Time Disbursements	 18
 

D. ELIGIBILITY	 18
 

E. PCFO AS A FEDERATION	 19
 

IV. MAJOR CONTRIBUTORS TO THIS REPORT	 20
 

APPENDIX	 (The PCFO responses, dated October 6, 2010, and January 6,2011, to 

the draft audit report.) 
I. INTRODUCTION AND BACKGROUND
 

INTRODUCTION 

This report details the findings and conclusions resulting from our audit of the Combined Federal 

Campaigns (CFC) of Island County for 2007 and 2008. The audit was performed by the Office 

of Personnel Management's (OPM) Office ofthe 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. In 2008, it consisted of 242 separate local campaign organizations located throughout 

the United States, including Puerto Rico, the Virgin Islands, and foreign assignments. The 

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

of the CFC. This include s publishing regulations, memoranda, and other forms of guidance to 

Federal offices and private organizations to ensure that all campaign objectives are achieved. 

The CFCs 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, determin ing the eligibility of local voluntary organizations, selecting 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 CFe. The PCFO is respons ible 

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 (IPA) in accordance with generally 

accepted auditing standards; cooperating fully with the 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 of OPM; and, consulting with federated groups on the 

operation ofthe local campaign. 

Executive Orders No. 12353 and No. 12404 established a system for administering an annual 

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

Federal Regulations Part 950 (5 CFR 950), the regulations governing CFC operations, sets forth 

ground rules under which charitable organizations receive Federa l employee donations. 

Complianc e with these regulations is the responsib ility ofthe PCFO and the LFCe. 

Management of the PCFO is also responsible for establishing and maintaining a system of 

internal controls. 

This represents our first audit ofthe CFC of Island County. The initial results of our audit were 

discussed with PCFO and LFCC officials during an exit conference held on June 3, 2010. A 

draft report was provided to the PCFO and the LFCC on September 7, 2010 , for review and 

comment. The PCFO's responses to the draft report were considered in preparation ofthis final 

report and are included as an Appendix. 
II. OBJECTIVES, SCOPE, AND METHODOLOGY
 

OBJECTIVES 

The primary purpose of our audit was to determine if the CFC ofIsland County was in 

compliance with 5 CFR 950, including the activities of both the PCFO and the LFCC. Our audit 

objective for the 2007 campaign was: 

Audit Guide Review 

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

CFC Audit Guide (For Campaigns with Pledges between $150,000 and $999,999). 

Additionall y, our specific audit objectives for the 2008 campaign were as follows: 

Budget and Campaign Expenses 

•	 To determine if the PCFO solicitation, application, campaign plan, and budget were in 

accordance with the regulations. 

•	 To determine ifthe expenses charged to the campaign were actual, reasonable, allocated 

properly, approved by the LFCC, and did not exceed 110 percent ofthe approved budget. 

Campaign Receipts and Disbursements 

•	 To determine ifthe pledge card format was correct and ifthe pledge card report agrees 

with the actual pledge cards. 

•	 To determine if incoming pledge monies were allocated to the proper campaign year and 

that the net funds (less expenses) were properly distributed to member agencies and 

federations. 

•	 To determine if the member agencies and federations were properl y notified of the 

amounts pledged to them and that donor personal information was only released for those 

who requested the release of information. 

Eligibilitv 

•	 To determine if the charity list (CFC brochure) was properly formatted and contained the 

required information; if the charitable organization application process was open for the 

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

approved; ifthe applicants were notified of the eligibility decisions timely; and ifthe 

appeals process for denied applications was followed. 

PCFO as a Federation 

•	 To determine if the amounts received by the PCFO as a federation reconciled to those 

disbursed by the CFC; if the PCFO properly distributed funds to its federation members; 

if expenses charged by the PCFO (to its federation members) were documented properly; 

and if the disbursements made to the federation members were accurate. 

2
 
SCOPE AND METHODOLOGY 

We conducted this performance audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform 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. 

The audit covered campaign years 2007 and 2008. The United Way of Island County, located in 

Oak Harbor, Washington, served as the PCFO during both campaigns. The audit fieldwork was 

conducted at the offices ofthe PCFO from May 28 through June 3, 2010. Additional audit work 

was completed at our Washington, D.C. office. 

The CFC of Island County received campaign pledges, collected campaign receipts, and incurred 

campaign administrative expenses for the 2007 and 2008 campaigns as shown below: 

Campaign 

Year 

Total 

Pledges 

Total 

Receipts 

Administrative 

Expenses 

2007 $318,648 $291,713 $59,038 

2008 $284,081 $242,887 $61,387 

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 of campaign contributions and related bank statements, verified that the computergenerated data used in conducting the audit was reliable. Nothing came to our attention during 

our review of the data to cause us to doubt its reliab ility. 

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

gained an understanding of the management 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 tests of accounting records and such other auditing 

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

Memorandums. 

To accomplish our objective for the Audit Guide Review, we reviewed the CFC Audit Guide (for 

campaigns with pledges between $150,000 and $999,999) and completed the AUP checklist to 

verify that the IPA completed and documented the AUP steps. 

In regard to our objectives concerning the 2008 campaign's budget and campaign expenses, we 

accomplished the following: 

•	 Reviewed the PCFO's application to verify if it was complete. 

•	 Reviewed a copy of the public notice to prospective PCFOs and the LFCC meeting 

minutes to verify that the PCFO was selected timely. 

3
 
•	 Traced and reconciled amounts on the PCFO's Schedule of Actual Expenses to the 

PCFO's general ledger. 

•	 Reviewed the PCFO 's budgeted expenses, the LFCC's approval ofthe budget, and 

matched a sample of actual expenses to supporting documentation. We judgmentally 

selected a sample of 44 expense transactions, totaling $18,475, for review from a 

universe 01'215 expense transactions, totaling $62,1361

• Specifically, we judgmentally 

selected 20 allocated expenses (totaling $4,391), 2 IPA audit related expenses (totaling 

$5,775) and 22 direct expense transactions (totaling $8,309). 

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

reimbursement of campaign expense s. 

•	 Compared the budgeted expenses to actual expenses and determined if actual expenses 

exceeded 11 0 percent of the approved budget. 

To determine if the 2008 campaign's receipts and disbursements were handled in accordance 

with CFC regulations, we reviewe d the following : 

•	 A judgmental sample of 45 pledge cards (totaling $38,387 , from a universe of 1,633 

pledge cards, totaling $284,081) from the 2008 PCFO 's Donor Pledge Campaign Report 

and compared the pledge information from the report to the actual pledge cards. 

Specifically, we judgmentally selected the top 10 pledge cards with the highest amounts 

pledged (totaling $21,902); every 25th pledge card, by card numbe r, for a total of 25 

pledge cards (totaling $6,871); the top 4 cash donation pledge cards (totaling $4,714); 

and 6 pledge cards of interest based on prior CFC audit experience (totaling $4,900). 

•	 Cancelled distribution checks to verify that the appropriate amount 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 of outstanding 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 by the date required in the regulations. 

•	 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. 

•	 CFC receipts and distributions from the PCFO's campaign bank statements, campaign 

receipts, and agency disbursements and campaign expense support to verify whether the 

PCFO accurate ly recorded and disbursed all 2008 campaign receipts and disbursements. 

•	 All bank statements used by the PCFO to verify that the PCFO was properly accounting 

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 disbursements were accurate and 

proportionate to the PCFO ' s allocation rates. 

I The expense unive rse tota l is greater than the actua l expenses charged due to adjustments made by the PCFO 

following its reimbursement. 

4
 
To determine if the LFCC and PCFO were in compliance with CFC regulations in regards to 

eligibility for the 2008 campaign, we reviewed the following: 

•	 The 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 they were properly sent by the LFCC. 

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

Finally, to determine if the PCFO was in compliance with the CFC regulations as a federation 

(United Way of Island County) for the 2008 campaign, we reviewed the following: 

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

whether receipts were properly recorded. 

•	 The CFC Distribution Schedule to ensure that United Way ofIsland County did not 

disburse any funds to member agencies not participating in the CFC. 

•	 The United Way ofIsland County's agreements with its member agencies to determine if 

the fees were reasonable and supported. 

The samples mentioned above , that were selected and reviewed in perform ing the audit, 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
 
III. AUDIT FINDINGS AND RECOMMENDATIONS
 

A. AUDIT GUIDE REVIEW
 

1. AUPs Not in Compliance with the Audit Guide	 Procedural 

The IPA utilized by the PCFO and the LFCC to complete the AUP audit, required by 

the OPM CFCO, did not properly comp lete 8 ofthe 20 steps/procedures for the 2007 

campaign in accordance with the Audit Guide. Additionally, the IPA incorrectly used 

the Audit Guide steps for the 2006 campaign (included in the 2008 Audit Guide ) 

instead of those for the 2007 campaign (included in the 2009 Audit Guide) to perform 

and document its review. 

Chapter III of the Audit Guide , prepared by the CFCO, "contains specific procedures 

for four requisite elements to be followed during the examination by the IPA." 

We reviewed the IPA's working papers to ensure that it properly completed and 

documented its review ofthe PCFO's operations of the 2007 campai gn. During our 

review we determined that the IPA copied the "Chapter III IPA Agreed-Upon 

Procedures" from the Audit Guide and used that as its audit program. Upon review of 

these procedures, however, it was determined that the IPA incorrectly used the 

previous year 's Audit Guide and steps as its audit program. Alth ough close 

inspection ofthe audit steps included in the 2008 and 2009 Audit Guides did not 

identify material differences, the correct Audit Guide shou ld have been used to 

conduct the audit. 

Additionally, we identified 8 out of the 20 audit steps/procedures where the IPA did 

not properl y complete the audit step . Specificall y, we found that the IPA did not 

complete: 

•	 Pledge F orm Tracking System Ste p 1: The step required the IPA to select a 

repre sentative samp le of 25 pledge forms (cards) from the 2007 campaign. 

The pledge forms selected should have represented all types of donations, 

including cash, designated funds and undesignated funds. Fifteen should have 

been selected from the pledge tracking system and traced to the pledge forms. 

Ten should have been selected from the pledge forms and traced to the pledge 

tracking system. \Ve found that the IPA only included 10 samples from the 

pledge tracking system and no pledge cards as support. As a result we could 

not verify if the IPA performed this review appropriately. Furthermore, the lO 

sampl es included in the work papers did not include any that represented 

undesignated funds donations. As a result, the IPA did not select the sample 

per the instru ctions of the Audit Guide's AUP. 

•	 Pledge Form Tracking System Step 2: The step required the IPA to "Trace 

and determine that the following information from each pledge form agrees to 

the PCFO's automated system or pledge records." The specific information to 

6 
be traced included donor name, each charity code number and amount donated , 

total amount donated, and the donor's choice to release information. We found 

that for 9 of the 10 samples included in the IPA's working papers there was no 

indication that any ofthis information was traced as required . As a result, we 

could not determine if the IPA properly completed this step. 

•	 Pledge Form Tracking System Step 3: The step required the IPA to review 

the PCFO's spreadsheet used to track and analyze payroll office receipts to 

determine if it included the followin g: 

1.	 The amount of payroll deductions by payroll office; 

2.	 The estimated amount due from each payroll office by pay period; 

3.	 A comparison ofthe estimated amount due from each payroll office to 

the actua l amount received; and 

4.	 An identification of instances where actual amounts received from a 

payroll office exceeded the estimated amount. 

The IPA determined that the PCFO's "campaign software does not track the 

estimated receipts by pay center, so the PCFO does not compare the actual 

amounts received to the estimated receipts." The Audit Guide directed the IPA 

to report as a finding all instances where the PCFO 's spreadsheet did not 

calculate the estimated amounts from the payroll offices or compare the 

estimated amounts due to the actual amount received . However, no finding 

was reported by the IPA, although it clearly indicated that this was not done by 

the PCFO . 

•	 PCFO Budget and Administrative Expenses Step 1: The step required the 

IPA to obtain a copy ofthe PCFO' s 2007 application and review it for signed 

statements required by the Federal regulations. Our review found that the IPA 

obtained and reviewed the PCFO's 2008 application, not the 2007 application. 

Additionally , the 2008 application reviewed included an incomplete statement. 

Specifically, regulation 5 CFR 950.105 (c)(2)(iii) requires the PCFO to state 

that it is subject to the "decisions and supervision ofthe LFCC and/or 

Director." The PCFO 's application reviewed by the IPA, and included in its 

working papers, did not include the language "and/or Director". Since the IPA 

did not report this as a finding in its report, the PCFO and OPM were not made 

aware of this error. 

•	 PCFO Budget and Administrative Expenses Step 2: The step required the 

IPA to "report all instances where the LFCC did not select the PCFO and 

approve the PCFO's campaign plan and budgeted expense s, on or before 

March 15" (2007). The IPA obtained and reviewed a copy of the LFCC 

meeting minutes from February 19, 2008, where the LFCC selected the PCFO 

for the 2008 campaign, not the 2007 campaign. Additionally, the minutes only 

indicated that the LFCC selected the PCFO, but did not clearly indicate that it 

7
 
had approved the PCFO's campaign plan or budgeted expenses. The IPA did 

not report the lack of this clear approval in its report. 

•	 PCFO Budget and Administrative Expenses Step 6: The step required the 

IPA to report as a finding all instances where the PCFO is not properly 

matching campaign receipts and expenses. The IPA, in completing this step, 

obtained a statement from the PCFO that said "The PCFO will cover all 

campaign costs at the start ofthe campaign and then recover their cost from the 

gross receipts of the same campaign." However, the actual expense listing 

included in the IPA's working papers clearly shows that the PCFO's charged 

expenses to the 2007 campaign were incurred from January 2007 through 

December 2007. This is incorrect because the 2007 campaign does not begin 

before the PCFO is officially selected by the LFCC. The deadline for this 

selection in 2007 was March 15, 2007. Therefore, any costs incurred before 

that date do not belong to the 2007 campaign. Consequently, the PCFO was 

not properly matching campaign receipts and expenses. The IPA did not report 

a finding in this area and, as a result, OPM and the PCFO were not made aware 

ofthis issue. 

•	 PCFO Budget and Administrative Expenses Step 7: The step required the 

IPA to report as a finding all instances where the PCFO's allocated expenses 

were not "allocated in a fair or reasonable method ... based on actual 

expenses ". The IPA relied upon an allocation spreadsheet provided by the 

PCFO as support for the allocation percentages applied to the expenses 

charged to the 2007 campaign. Based on our conversations with the PCFO, 

these allocation percentages were not based on actual expenses as required by 

the step. Additionally, the allocation percentages were not adequately 

documented or supported. However, the IPA did not report this as a finding in 

its report As a result, OPM and the PCFO were not made aware of this error. 

•	 Receipt and Disbursement of Funds Step 3: The step required the IPA to 

report as a finding all instances where the PCFO did not disburse all receipts, 

less administrative expenses by the end of the campaign. The IPA noted in its 

review that the ending balance was "not zero, due to the distribution of prior 

year designations". The IPA should distinguish between campaign years and 

determine that all 2007 campaign year receipts were properly distributed. The 

audit step clearly states that the campaign's "ending balance should equal $0", 

and ifthis is not the case, it should be reported as a finding. As a result of not 

reporting this finding, the PCFO and OPM were not made aware of this error. 

As a result of not completing the AUPs properly , the IPA inadvertently misled both 

OPM and the PCFO to believe that the PCFO was in compliance with and had 

effective controls over compliance with 5 CFR Part 950 and OPM guidance. 

8
 
PCFO Comments: 

The PCFO agrees with the finding and stated that in the future it will ensure that the 

IPA follows the OPM Audit Guide and when clarification is necessary will advise the 

IPA to contact OPM. 

Recommendation 1 

We recommend that the CFCO work with the LFCC and PCFO to ensure that the IPA 

fully understands the reviews required of it by the AUP steps and that the IPA, if it 

has questions, contacts OPM to obtain clarification. 

B. BUDGET A1~D CAMPAIGN EXPENSES 

1. LFCC Approval of Campaign Expense Reimbursement Procedural 

The PCFO did not submit to the LFCC, nor did the LFCC approve, the 

reimbursement of the 2008 campaign expenses to the PCFO. 

5 CFR 950.104 (b)(17) states that it is the responsibility ofthe LFCC to authorize "to 

the PCFO reimbursement of only those campaign expenses that are legitimate CFC 

costs and are adequately documented". Additionally, 5 CFR 950.106 (a) states that 

the PCFO shall recover campaign expenses, approved by the LFCC, which reflect the 

actual costs of administering the campaign. 

Our review of the LFCC meeting minutes did not identify where the LFCC discussed, 

reviewed, or approved the reimbursement of the 2008 campaign expenses to the 

PCFO. Additionally, discussion with the PCFO determined that both parties were 

unaware oftheir responsibilities regarding reimbursement of CFC expenses. The 

PCFO stated that as a resu lt of our questions related to this subject, it became aware 

ofthis issue, and that it has instituted a policy to ensure that this request is made and 

approval obtained from the LFCC in the future (effective with the 2009 campaign 

year). We informed both the LFCC and the PCFO that prior to reimbursement of 

expenses, the LFCC must give authorization to the PCFO to do so. 

As a result of not reviewing and approving the reimbursement of the 2008 campaign 

expenses, the LFCC ran the risk of unrelated expenses being charged to the agencies 

and federations of the campaign, thus reducing the monies due to them. Additionally, 

by not submitting its expenses for approval before their reimbursement, the PCFO 's 

reimbursement was not authorized as required by the regulations. 

PCFO Comments: 

The PCFO agrees with the finding and stated that it confirmed that the campaign 

expense reimbursement approval is reflected in the LFCC minutes and has since been 

corrected. 

9 
OIG Comments: 

The PCFO's response did not clearly state its corrective action. During our on-site 

review, the PCFO stated that it would institute a policy to submit its expenses for 

approval to the LFCC prior to the actual reimbursement being made. We request that 

the CFCO ensure that the PCFO's corrective action is acceptable. 

Recommendation 2 

We recommend that the CFCO ensure that the LFCC knows and understands its 

responsibilities under the Federal regulations, especially in regards to the PCFO 's 

reimbursement of campaign expenses under 5 CFR 950.104 (b) (17). 

Recommendation 3 

We recommend that the CFCO ensure that the PCFO has instituted polices to submit 

its expense reimbursement requests to the LFCC for review and approval prior to 

making reimbursement of those expenses. 

2. Unallowable Expense Charged to the 2008 Campaign 

The PCFO charged the 2008 campaign for an expense that was not related to the 

CFC. As a result, the 2008 campaign was overcharged and the amounts disbursed to 

member agencies and federations were reduced by $955. 

5 CFR 950.106 (a) states that the "PCFO shall recover from the gross receipts ofthe 

campaign its expenses, approved by the LFCC, reflecting the actual costs of 

administering the local campaign. " 

Our review of the expenses charged to the 2008 campaign identified one charge to the 

campaign that was not related to the CFC. Specifically, we found one expense 

transaction, totaling $955, where the PCFO incorrectly charged the 2008 campaign 

for its membership dues to the United Way. This expense is not required by or 

related to the CFC. After discussion with the PCFO, it did not understand why the 

expense was charged to the campaign and agreed with our determination that the cost 

was unallowable to the CFC. 

As a result of charging unallowable expenses to the 2008 campaign, the member 

agencies and federation's disbursements were reduced by $955. 

PCFO Comments: 

The PCFO agrees with the finding and stated that the $955 has been properly 

distributed. Additionally, the PCFO stated that its policies and procedures have been 

amended to ensure that United Way dues are not charged to the CFC in the future. 

10
 
Recommendation 4 

We recommend that the CFCO verify that the PCFO redistributed the proportionate 

share of the $955 overcharged to the member agencies of the 2008 campaign. 

Rec ommendation 5 

We recommend that the CFCO ensure that the PCFO has implemented polices and 

procedures to ensure that unallowable expenses are not charged to the CFe. 

Recommendation 6 

We recommend that the CFCO ensure that the LFCC understands its role in the 

review and approval of all costs charged to the CFC so that unallowable expenses are 

not charged to future campaigns. 

3. Insufficient and Undocumented Allocation Methods Procedural 

The allocation methods used by the PCFO were insufficient and undocumented and, 

therefore, not a reliable basis for allocating costs to the CFe. Additionall y, we 

identified seven allocated expense transactions where the allocation percentage 

applied was incorrect and six allocated transactions that we and the PCFO could not 

reconcile to the amounts charged to the CFe. 

5 CFR 950.106 (a) states that the "PCFO shall recover from the gross receipts ofthe 

campaign its expenses, approved by the LFCC , reflecting the actual costs of 

administering the local campaign. " 

The CFCO 's Audit Guide states that the allocation methodology should be reasonable 

so that "the CFC incurs a fair share ofthe costs. In addition, the allocations must be 

based on actual amounts that can be traced and agreed to the general ledger." 

Our review of the PCFO 's expense transactions found that all 23 allocated expenses 

reviewed did not have documentation which supported the reasoning for the 

allocation meth od used. The PCFO pro vided spreadsheets that it uses to determine 

which allocation method to apply to a CFC expense transaction. However, there was 

no additional documentation to support the figures going into the allocation 

calculations. After discussion with the PCFO, it was determined that the methods in 

place had been used for a number of years and had not been updated recently. The 

Audit Guide requires the PCFO to use an allocation methodology that is reasonable 

so that the CFC incurs a fair share 0 f its related costs. It also requires that the 

allocations must be based on actual amounts that can be traced to the general ledge r. 

11
 
Additionally, we identified the following problems among the allocated expenses 

reviewed: 

•	 Seven allocated expense transactions where the percentage charged to the CFC 

did not match the allocation documentation provided by the PCFO; and 

•	 Six allocated expense transactions (salary related transactions totaling $2,454) 

where the OIG and the PCFO could not reconcile 10 the amount charged to the 

2008 campaign. 

As a result of these errors, the PCFO is running the risk of charging the CFC for 

expenses not actually incurred, which could negatively impact the amounts received 

by its member agencies and federations. 

PCFD Comments: 

The PCFO agreed with the finding and stated that allocation methods will be 

supported by adequate documentation in the future. Additionally, it provided specific 

percentages that expense categories would charge to the CFC for indirect expenses. 

DIG Comments: 

We accept the PCFO's response. Howe ver we would like to stress that the allocation 

methods used by the PCFO for the CFC should have a reasonable basis that is 

supported by verifiable documentation and regularly checked and updated. 

Additionally, in its response to the draft report the PCFO did not address 

recommendation number eight relating to a review ofthe allocation methods applied 

to its 2008 campaign expenses to ensure the accuracy ofthe percentages applied to 

indirect costs charged to the campaign. 

Recommendation 7 

We recommend that the CFCO ensure that the PCFO supports all allocations used to 

allocate CFC-related expenses with verifiable documentation, and that the allocations 

are reasonable and fairly share the expense cost with the CFC. 

Recommendation 8 

We recommend that the CFCO require the PCFO 10 review all allocated CFC 

expenses for the 2008 campaign to ensure that the correct allocation method was 

applied and that the charge to the 2008 campaign was correct. 

Recommendation 9 

We recommend that the CFCO ensures that the LFCC understands it responsibilities 

related to the review and approval of CFC campaign expenses. 

12
 
4. Campaign Expenses Charged to the Wrong Campaign Year $13,420 

The PCFO is not properly matching expenses with receipts of the same campaign 

year. As a result, $13,420 was incorrectly charged to the 2008 campaign year. 

5 CFR 950.106 (a) states, "The PCFO shall recover from the gross receipts ofthe 

campaign its expenses, approved by the LFCC, reflecting the actual costs of 

administering the local campaign." 5 CFR 950.106 (b) states, "The PCFO may only 

recover campaign expenses from receipts collected for that campaign year." 

Additionally, the CFC Calendar of Events, published by the CFCO, for the 2007/2008 

campaign years states that the deadline for LFCC's to select a PCFO was March 17, 

2008. 

Furthermore, CFC Memorandum 2008-09 states that actual campaign expenses are 

not known at the time of the first disbursement to agencies (for the 2008 campaign 

year, by April 1, 2009). Therefore, the CFCO encourages LFCCs to authorize 

estimated expenses with that first disbursement. The estimated expense should be 

made up of the actual expenses up to that point, plus any estimated future expenses. 

Then the expenses charged should be reconciled to actual expenses, making any 

necessary adjustments, prior to the last campaign disbursement (for the 2008 

campaign year, by March 31, 2010). 

Our review of the expenses charged to the 2008 campaign found that the PCFO's 

standard practice is to charge each campaign for expenses on a calendar year basis. 

This is not in adherence with the regulations and CFC Memorandum 2008-09. Our 

review found that the PCFO charged the 2008 CFC campaign for 33 expense 

transactions, totaling $7,645, incurred before the start of the 2008 campa ign (for our 

purposes, we are using March 1, 2008 as the start date of the 2008 campaign). 

Additionally, we identified two IPA audit expense transactions, totaling $5,775, that 

although incurred in April and July 01'2008, were related to the AUP audit of the 

2006 campaign. The PCFO stated that it did not fully understand the regulations and 

other guidance for properly matching expenses with campaign receipts. 

As a result of not properly matching expenses with campaign receipts, the PCFO 

inadvertently charged the 2008 campaign $13,420 for expenses related to the 2006 

and 2007 campaigns. Continuation ofthis practice will impair future campaigns as 

well. 

PCFO Comments: 

The PCFO agrees with this finding and stated that the issue was due to the budget 

being set on a calendar year instead of a campaign year basis. To correct for this 

error in the future, the PCFO stated that it will establish its annual budget based on a 

13
 
campaign year (March through February) basis, and that the budget will include an 

accrual for costs estimated for the IPA audit of the campaign. 

OIG Comments: 

The PCFO's corrective action will not completely correct the problem identified by 

our finding. CFC Memorandum 2008-09 clearly describes the campaign period to be 

a two year period (approximately) and not 12 calendar months, which the PCFO's 

corrective action will entail. We request that the CFCO ensure that the PCFO's 

revised corrective action contain procedures which will allow it to account for all 

expenses related to a campaign (from inception to last agency disbursement). 

Recom mendation 10 

We recommend that the CFCO ensure that the PCFO understands its responsibilities 

related to campaign expenses and properly matching them to the proper campaign 

year. 

Recommendation 11 

We recommend that the CFCO direct the PCFO to properly account for the CFCs 

expenses so that they are recovered from the receipts of the campaign year to which 

they are related. 

5. PCFO Application Missing Required Language Procedural 

The PCFO application accepted by the LFCC did not include all of the statements 

required in the Federal regulations. 

5 CFR 950.105 (c) states that any "federation, charitable organ ization or 

combinations thereof wishing to be selected for the PCFO must submit a timel y 

application in acco rdance with the deadline set by the LFCC." 5 CFR 950.105 (c) (2) 

requires the application to include statements pledging to: 

"(i) administer the CFC fairly and equitably, 

(ii) conduct campaign operations, such as training, kick-off and other events, and 

fiscal operations, such as banki ng, auditing, reporting and distribution separate 

from the applicant' s non-CFC operations, and; 

(iii) abide by the direction s, decisions. and supervision ofthe LFCC and/or 

Director." 

Specifically, we reviewed the PCFO application to determine if each ofthe 

statements required by the Federal regulations was included. Our review found that 

the PCFO did not include the words "and/or Director" in the statement that the PCFO 

would "be subject to the decisions and supervision ofthe LFCC and/or Director." 

The PCFO stated that it did not understand or know that this statement should have 

been included in the application. 

14
 
By accepting an application that did not include all ofthe required statements in the 

application letter, the LFCC approved a PCFO which did not state that it will abide by 

all ofthose things required of it by the Federal regulations. 

PCFD Comments: 

The PCFO agrees with the finding and stated that the missing language will be 

included in future PCFO app lications. 

DIG Comments: 

We accept the PCFO's response. However, it did not provide a response to 

recommendation number 13. We recommend that the CFCO follow-up with the 

PCFO to ensure that the application covering the 2008 campaign (and future 

campaigns) is properly revised. 

Recommendation 12 

We recommend that the CFCO ensure that the LFCC understands the language 

requirements ofthe PCFO application and that it makes sure that the required 

language is included by all applicants considered for the position of PCFO in the 

future. 

Recommenda tion 13 

We recommend that the LFCC require the PCFO to submit a revised application for 

the agreement covering the 2008 cam paign. 

C. CAMPAIGN RECEIPTS AND DISBURSEMENTS 

1. Pledge Card E rrors Procedural 

Our pledge card review identified 13 pledge cards that were not entered into the 

pledge system correctly, which resulted in these donor's wishes not being adhered to. 

5 CFR 950.105 (d) states that the "specific responsibilities ofthe PCFO include but 

are not limited to: 

(1) Honoring employee designations.... 

(3) Training agency loaned executives, coordinators, and keyworkers in the 

methods of non-coercive solicitation. This training must be completely separate 

from training given for other types of charitable campaign drives. Additionally, 

keyworkers should be trained to check to ensure the pledge form is legible on 

each copy, verify arithmetical calculations, and ensure the block on the pledge 

form concerning the release ofthe employee's name and contact information is 

completed fully." 

15
 
We reviewed a sample of 45 pledge cards to determine whether they were entered 

into the PCFO ' s pledge card database correctly. Specifically, we compared the actual 

pledge card to the database to determine if the following items were entered correctl y: 

donor name, charity code(s) and amounts donated, total amount donated, and the 

donor's choice to release personally identifiable information. Our review identified 

13 pledge cards with errors. Specifically, we found: 

•	 Nine pledge cards where the donor chose to release their name and E-mail 

address. However, the PCFO incorrectly entered this information into the 

database. For each ofthese pledge cards, the PCFa correctly entered the 

E-mail address but incorrectly indicated that the donor chose to release their 

home address rather than their E-mail address. As a result, these donors did 

not have their desired information released. Upon further review with the 

PCFO, it appears as ifthis error was universal for the 2008 campaign. 

However, we determined that the error was corrected for the 2009 campaign 

based on our review of several pledge cards. 

•	 Three pledge cards where the donor incorrectly entered the amount per pay 

period into the annual amount area for the designated charity. For example, a 

civilian donor (26 pay periods) chooses to donate $10 per pay period with a 

total donation amount of $260, but enters $10 in the annual amount area ofthe 

one charity code designated to. This error is twofold. First, the Key Worker 

did not identify and have the donor correct the pledge card prior to it being 

sent to the PCFO. Second , rather than contact the Key Worker to correct the 

obvious ly incorrect pledge card, the PCFO chose to treat the differ ence 

between the total amount donated and individual annual amounts as 

undesignated pledges. This, although adhering to the regulation , does not 

follow the overall spirit ofthe regulation's guidance to honor the donor's 

wishes . 

•	 One pledge card which had two distinct errors. First, the PCFO altered the 

amounts donated for no apparent reason. The per pay period amount times the 

number of pay periods equaled the total amount donated, and the total of the 

annual amounts reconci led to the total amount donated. Therefore, there was 

no reason to adjust the pledge card. Additionally, the donor indicated that he 

wished to release his E-mail address, however, the PCFa failed to 

acknowledge this request by not entering this information into its pledge card 

database. 

As a result ofthese errors, the donor' s wishes on these 13 pledge cards were not 

honored according to the Federal regulations. 

PCFO Comments: 

The PCFO agrees with the finding and stated that ifit identifies a mathematical or 

agency code error on a pledge card, that it will first contact the Unit Coordinator or 

Key Worker so they might make the correction through the donor. In all other cases 

16
 
where the PCFO is unable to resolve the error the PCFO will follow the procedures 

outlined in its response. Additionally, the PCFO stated that its Key Workers 

understand the importance of the accuracy of the pledge cards as a result ofthe 

training that they receive. 

DIG Comments: 

We accept the PCFO' s response in regards to the correction of mathematical or 

agency code errors. However, the PCFO did not provide an explan ation ofthe 

procedures put in place to ensure that all donor pledge card information is properly 

entered into the pledge card database (recomme ndation number 14). Additionally, 

the PCFO's statement that the Key Workers understand their responsibilities as a 

result oftraining received lacks support. It is our understanding that the Key Workers 

utilized during the 2008 campaign were trained . However, the errors identified in our 

review occurred in spite of the training provided. We suggest that the training 

provided be modi fied or enhanced to ensure that these types of errors are identified 

and corrected by the Key Workers before the pledge cards are sent to the PCFO. 

Finally, the PCFO 's response did not touch on recommendation number 17 which 

recommended procedures for supervisory approval of pledge card changes made by 

the PCFO. 

Recommendation 14 

We recommend that the CFCO ensure that the PCFO has procedures in place to 

ensure that all information requested for release by the donor is properly entered into 

its pledge card database and that the information is released as requested. 

Recommendation 15 

We recommend that the PCFO ensure that all Key Workers understand that they are 

to verify the accuracy of all pledge cards before they are returned to the PCFO, and 

that errors identifi ed are to be corrected by the donor before the pledge card is 

forwarded. 

Recommendation 16 

We recommend that the CFCO direct the PCFO to institute procedures to have the 

Key Worker contact the donor when obvious and easily correctable errors are 

identified on a pledge card. 

Recommendation 17 

We recommend that the CFCO direct the PCFO to institute procedures requiring 

supervisory approval of all pledge card changes prior to their entry in the pledge card 

database. 

17 
2. LFCC Approval of One-Time Disbursements Procedural 

The PCFO made one-time disbursements to agencies with gross designations of $500 

and below before receiving approval from the LFCC. 

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

organizations receiving minimal donations from Federal employees. The LFCC must 

determine and authorize the amount of these one-time disbursements." 

Our review found that the PCFO disbursed one-time payments to all agencies with 

gross designations of $500 or less on March 31,2009. However, according to the 

LFCC meeting minutes, the one-time disbursement ofthese funds was actually 

approved on April 8, 2009. Per discussion with the PCFO, this error in timing 

occurred because the PCFO was away at a CFC workshop when the initial payments 

for 2008 went out and approval was sought after their return. According to the 

PCFO, this was not typical, and they normally obtained approval in advance. 

Even though the approval of one-time disbursements has been a regular occurrence in 

the past, the approval should have been obtained before the payments were made. 

PCFD Comments: 

The PCFO agrees with the finding and stated that this procedure has been corrected 

and reflected in the LFCC minutes. The PCFO also stated that this procedure is 

covered in the LFCC Training held in January. 

DI G Comments: 

The PCFO did not provide any specific procedures in its corrective action plan. We 

ask that the CFCO follow-up with the PCFO, obtain the specific procedures to 

address the issue, and advise the PCFO as to the adequacy of the procedures. 

Recommendation 18 

We recommend that the CFCO ensure that the PCFO understands that the LFCC must 

determine and authorize the amount of one-time disbursements before the payments 

are actually made. 

D. ELIGIBILITY 

Our review of the campaign' s eligibility processes showed that the Island County CFC 

complied with the applicable provisions of 5 CFR 950. 

18
 
E. PCFO AS A FEDERATION 

Our review of the PCFO ' s activities as a federation showed that it complied with the 

applicable provisions of 5 CFR 950. 

19
 
IV. MAJOR CONTRmUTORS TO THIS REPORT 

Special Audits Group 

Senior Team Leader 

Auditor 

Group Chief, 

20
 
APPENDIX
 

2007 and 2008
 

COJ\ilBINED FEDERAL CAMPAIGNS
 

OF ISLA1~D COUNTY
 

OAK, HARBOR, WASHINGTON
 

Report no. 3A-CF-00-10-037 Response Date: October 6, 2010 

Revised: January 6,2011 

Response from United Way of Island County serving as the Principal Combined Fund 

Organization (PCFO) 

AUDIT GUID E REVIE\V 

• Agreed-Upon Procedures Not In Compliance with the Audit Guide 

The Independent Public Acco untant did not complete all the agreed - upon procedures in 

accordance with the Audit Guide. 

PCFO Response: We are in the process of reviewing all the agreed-upon procedures in 

accordance 'with the Audit Guide that were not completed by the Independent Public 

Accountant. We will in the future insure that those procedures are corrected and that the 

IPA follows OPM Aud it Gu idelines. We will also advise IPA to contact OPM to obtain 

clarification, when necessary. 

BUDGET AND CAMPAGN EXP ENSES 

• LFCC Approval of Ca m paign Expense Reimbursement 

The PCFO did not submit its expenses related to the 2008 campaign to the LFCC for 

approval prior to reimbursement. 

PCFO Response: We agree with the finding. 

Corrective Action Plan: 

We have since confinned that the campaign expense reim bursement approval is 

reflected in the LFCC minutes and has since been corrected. 

• Unallowa ble Expenses Cha rged to the 2008 Campaign 

The PCFO charged an unallowable expe nse, tota ling $955, to the 2008 campaign . 

PCFO Re sponse: We agree with the finding. 
Corrective Action Plan: 

$954.72 was reimbursed to the CFC and disbursement to member agencies ofthe 

2008 campaign were made 1-7-2011. CFe Policy and Procedures for the e FC notes 

that no membership dues to United Way of America will be charged to the CFC. 

• Insufficient and Undocumented Allocation Methods 

The allocation methods used by the peFO to allocate cost to the 2008 campaign were 

insufficient and were not supported by adequate documentation. Additiona l we identifi ed 

a number oftransactions wh ich used incorrect allocation percentages or where the OIG 

and the PCFO could not reconcile the amount charged to the gene ral ledger. 

PCFO Resp onse: We agree with the findin g. 

Corrective Action Plan: 

We have insured that allocation methods will be supported by ade quate 

documentation. CFC Policy and Procedures state that direct costs are allocated at 

100%. Rent, utilities, office supplies. postage, equipment maintenance, insurance and 

technical support are allocated at 35% to CFC, 65% allocated United Way ofIsland 

Coun ty. Sa laries and benefits are charged at 38% to CFC, 62% alloca ted to United 

Way. 

• Campaign Expenses Charged to the Wrong Campaign Year 

The PCFO did not properly match its expenses to campa ign rece ipts charged the 2008 

campaign expenses related to the 2006 and 2007 campaigns. 

PCFO Response: We agree with this finding. 

Corrective Action Plan: 

This issue was due to the budget being set based on a calendar year, January through 

December instead ofthe campaign year, March to February. The PCFO shall 

estab lish an annual budget for the period of March 1 through February 28. The annu al 

budget shall contain estimated costs to be accrued for the Independent Pub ic 

Acco untant (IPA ) audit for that campaign. 

• PCFO Applications Missing Required Language 

The United Way of Island County's application to serve as peOF did not included all of 

the specific language required by the regulations. 

PCFO Respon se: We agree with the finding. 

2 
Corrective Action Plan: 

The missing language will be included in future applications. Future PCFO 

applications will included the words "and/or Director" in the statement that the PCFO 

would be "subject to the decisions and supervision of the LFCC and/or Director." 

CAMPAIGN RECEIPTS AND DISBURSEMENTS 

•	 Pledge Card Errors 

The PCFO_incorrectly input 13 pledge cards causing it to not follow the CFC Donor's 

wishes. 

PCFO Response: We agree with the finding. 

Corrective Action Plan: 

If PCFO finds any mathematical or agency code errors, the PCFO shall notify the 

Unit Coordinator or Key Worker requesting they contact the person making the 

pledge to request they correct the error. 

If PCFO is unable to resolve the error on the pledge form, the follow ing actions will 

occur: 

•	 Tf the error is a mathematical error resulting in the entire pledge amount NOT 

being assigned to a charity, the remaining amount will be assigned as 

Undesignated Funds. 

•	 If the error is a mathematical error resulting in the sum of the pledge(s) exceeding 

the total amount pledged, the amount pledge to each charity will be reduced 

proportionally so the sum is equal to the total amount pledged. 

•	 If the error is an incorrect agency code , the funds will be assigned as 

Undesignated Funds. 

Recommendation 15: This was due to clerical error by previous administrative 

assistant. 

Recommendation 16: This procedure is covered in Unit Coordinator/Key Worker 

Training attended by the federal emp loyees that volunteer for the CFC. 

Recommendation 17: This is covered in the Corrective Action Plan above. 

•	 LFCC Approval of One-Time Disbursements 

The PCFO made one-time disbursements for the 2008 campaign before obtaining 

approval from the LFCC. 

PCFO Response: We agree with the finding. 

3 
Corrective Action Plan: 

This procedure has since been corrected and reflected in the LFCC minutes. This 

procedure is covered in the LFCC Training held in January . 

Submitted by:

United Way of Island Co unty
 

PO Box 798
 

Oak Harbor, WA 98277
 

4