Corporation For National And Community Service: Better Internal Control and Revised Practices Would Improve the Management of AmeriCorps and the National Service Trust
Published: 2004-01-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Corporation for National and Community Service (the Corporation) was created to help meet community needs and expand educational opportunity by providing education awards to participants. The Corporation oversees and funds the AmeriCorps program as well as the National Service Trust (the Trust), which pays the education awards. From November 2002 to March 2003 the Corporation suspended AmeriCorps enrollments because there would not have been sufficient funds in the Trust to pay education awards. GAO was asked to determine (1) if all AmeriCorps enrollments were accurately recorded, (2) how the Corporation estimated its funding needs, and (3) if the Corporation made changes to prevent another enrollment suspension and to address requirements established in the Strengthen AmeriCorps Program Act. GAO analyzed laws, reviewed documents, interviewed officials, assessed the reliability of the Trust database, examined the model used to estimate funding needs, and surveyed Americorps grantees.
section_title: What GAO Found
paragraphs: Discrepancies between information in the Trust database and participant documentation indicate that not all AmeriCorps participant information was accurately reflected in the Trust database. An estimated 5 percent (8,300) of about 158,000 enrollments from program years 2000 to 2002 have discrepancies, and about 3 percent (4,400) have discrepancies that could affect estimates of future probable expenditures of the Trust. Further, the users' manual for the Trust database system had not been updated. In 2003 the Corporation began using a new model with conservative assumptions of participant behavior to develop its funding estimates. Corporation officials explained that they used conservative assumptions because the AmeriCorps program does not have a long history from which to extrapolate participant behavior, and the Corporation wanted to regain credibility after the enrollment suspension in 2002. Using the new model may be prudent until the Corporation gains more experience. However, because the new model increased the Trust's funding estimates, the Corporation will need to monitor actual experience compared with the model's assumptions and may need to deobligate unused Trust funds. Further, the new model does not incorporate external factors, such as downturns in the economy, which may affect funding estimates or the Trust's balances. The Corporation recently formed a team to assess the costs and benefits of adding external factors in its model. The Corporation has made some changes to its operations that minimize the likelihood it will need to suspend enrollments in the future. Corporation officials have been obligating Trust funds when positions are approved since June 2003, and the communication and coordination among officials have greatly improved. Changes have also been implemented and planned to address the Strengthen AmeriCorps Program Act requirements. However, changes to improve oversight of grantees have not been fully implemented, and policies related to refilling vacated positions and converting unfilled positions may limit enrollments, hinder service delivery, and contribute to the accumulation of a larger Trust balance.

section_title: Letter
paragraphs: The Corporation for National and Community Service (the Corporation)  was created in 1993 to help meet community needs in education, the  environment, and public safety through activities such as tutoring and  mentoring youth, building affordable housing, cleaning parks and streams,  and helping communities respond to disasters. The Corporation also helps  to expand educational opportunity by providing national service  participants who complete a term of service with funds—$4,725 for a full- time participant in 2002—to help pay for their education. AmeriCorps is  one of three national service programs the Corporation oversees. The  Corporation receives appropriations to fund program operations and the  National Service Trust (the Trust), which provides money to pay education  awards. In fiscal year 2003 the Corporation was appropriated about $400  million to support AmeriCorps—about $300 million to support program  operations and $100 million for the Trust.
From November 2002 to March 2003, the Corporation suspended  enrollments in AmeriCorps because it concluded that there would not be  sufficient funds in the Trust to pay the education awards for all of the 2002  program positions. In April of 2003 we provided a statement for the record  to the Subcommittee on Veterans Affairs, Housing and Urban  Development, and Independent Agencies of the Senate Committee on  Appropriations describing our preliminary observations regarding the  causes for the enrollment suspension and the proposed policy changes. In  that statement, we emphasized that had the Corporation appropriately  recorded and tracked its obligations for education awards to program  participants, the Corporation likely would not have needed to suspend  enrollments. In July 2003, Congress passed the Strengthen AmeriCorps  Program Act (Pub. L.No. 108-45). This act requires the Corporation to  obligate funds in the Trust at the time AmeriCorps positions are approved  and to estimate the value of the education awards based on a formula that  considers historical rates of enrollment in the program and for the earning  and use of education awards. The act also established several other  requirements for the Corporation.
Because of concerns about the Corporation’s management of AmeriCorps  and the Trust, you asked us to answer the following questions: (1) Has all  AmeriCorps participant information been accurately recorded in the Trust  database? (2) How does the Corporation estimate the funding needed to  provide education awards through the Trust? (3) Has the Corporation  made management and operational changes that ensure enrollments will  not be suspended in the future and that address the Strengthen  AmeriCorps Program Act requirements?
To answer these questions we used a multifaceted methodology. We  performed a detailed reliability assessment of the Trust database by  comparing information in the database with original enrollment and exit  forms. We obtained enough documentation to compare key information on  363 of 400 cases in our sample, or an estimated 157,045 of the 172,434  enrollments in the 2000 to 2002 program years. We examined the model  used by the Trust to estimate its funding requirements and reviewed  reports of auditors and contractors related to the model. We surveyed all  148 AmeriCorps grantees for their views on the Corporation’s new  enrollment and oversight policies as well as the training and technical  support provided by the Corporation, and obtained a response rate of 71  percent. We also reviewed applicable laws, analyzed Corporation data,  reviewed relevant documents and reports from the Corporation’s  Inspector General, and interviewed knowledgeable officials. We  conducted our work between March and December 2003 in accordance  with generally accepted government auditing standards. For more details  about our scope and methodology, see appendix I.
subsections: section_title: Background
paragraphs: The Corporation is part of the USA Freedom Corps, a White House  initiative to foster a culture of citizenship, service, and responsibility, and  help all Americans answer the President’s Call to Service. The  Corporation maintains administrative field offices in almost every state.  AmeriCorps was created in 1993 and is one of three national service  programs the Corporation oversees: the Senior Corps, AmeriCorps, and  Learn and Serve America. AmeriCorps consists of three programs:  AmeriCorps State and National (state and national), AmeriCorps VISTA  (Volunteers in Service to America), and AmeriCorps NCCC (National  Civilian Community Corps). AmeriCorps programs for tribes and  territories are included in state and national programs.
The Corporation makes grants from its program appropriations to help  grant recipients carry out national service programs. These include  programs that tutor and mentor youth, build affordable housing, teach  computer skills, clean parks and streams, run after-school activities, help  communities respond to disasters, and those that are related to homeland  security. About 60 percent of the Corporation’s fiscal year 2003 grant funds  for AmeriCorps programs went to state service commissions, tribes, and  national direct grantees for AmeriCorps State and National programs,  which award subgrants to nonprofit groups, which then enroll the  AmeriCorps participants. The remaining grant  and administrative funding  paid for VISTA and NCCC participants—about 32 percent and 8 percent  respectively, in 2003. AmeriCorps is open to U.S. citizens and nationals or  lawful permanent resident aliens age 17 and older. Participants in the  AmeriCorps program can receive stipends as well as health benefits and  child care coverage. For example, about one-half of AmeriCorps  participants received a $9,300 living allowance and health benefits in  program year 2002. Those participants who successfully complete a  required term of service earn a national service education award that can  be used to pay tuition, fees, and expenses for undergraduate school,  graduate school, or an approved school-to-work program, or to pay back  qualified student loans. In exchange for a term of service, full-time  AmeriCorps participants earned an education award of $4,725 in program  year 2002. VISTA participants can elect to receive a cash stipend instead of  an education award. About one-third of VISTA participants chose to take  the stipend rather than the education award in 2002. Figure 1 illustrates  the flow of the funds and information for the AmeriCorps program.
According to the Corporation’s Trust database, AmeriCorps enrollments  more than doubled between 1994 and 2000. Overall AmeriCorps  enrollments increased from about 25,000 in 1994 to about 42,000 in 1999,  to over 59,000 in 2001. Enrollments fell in 2002 because of the suspension  of enrollments and were legislatively limited to 50,000 in 2003. The  Corporation requested Trust funding to support 75,000 new enrollments  for 2004.
AmeriCorps enrolls participants on a full-time and a part-time basis. Part- time participants who serve 900 hours or less annually earn education  awards proportional to the hours served. During the first three years when  AmeriCorps programs enrolled participants, 60 percent or more of the  participants served in full-time positions. By 2000 less than 50 percent of  the participants were full-time, and Corporation officials stated that they  are planning for about a 50/50 full-time/part-time mix in 2004. Trends in  total enrollment from 1994 to 2002, and projected enrollment for 2003, and  the full-time and part-time mix of participants for each year are shown in  figure 2.
Additionally, AmeriCorps enrolls “education award only” participants.  AmeriCorps does not pay these participants a living allowance or other  benefits, but it provides funding to grantees for administrative purposes  only, about $400 annually per participant. However, each education award  participant receives an education award equivalent to that earned by a  paid AmeriCorps member. More than half of the AmeriCorps enrollment  growth has come from grants that provide participants no benefits other  than the education award. The Corporation reports there has been high  interest in these grants in recent years. Enrollments for these positions  increased from fewer than 6,500 in 1999 to almost 16,000 in 2001. All  participants—full-time, part-time, and education award—have up to 7  years after they successfully complete their service to use their education  awards.
AmeriCorps also distributes funds to high school students through  Presidential Freedom Scholarships. These scholarships are valued at $500  for each participant. For 2003 and 2004, the Corporation planned to award  about 7,000 Presidential Freedom Scholarships.
The Government Corporation Control Act requires the Corporation to  have an annual audit of its financial statements.  The Corporation  prepares its financial statements using generally accepted accounting  principles that are used by private sector corporations and federal  corporations. The Corporation plans to include a statement of net cost and  a statement of budgetary resources as supplemental information in its  annual Performance and Accountability Report by fiscal year 2005.
The Corporation’s financial statement auditor reported that in fiscal year  2002 the Corporation approved AmeriCorps national service positions in  excess of the number of positions that the Trust could support. In  November 2002 the Corporation suspended enrollments in AmeriCorps.  Several factors contributed to the need to suspend enrollments, including  a lack of communication among staff responsible for program and Trust  operations.  The Office of the Inspector General (OIG) reported in April  2003 that the AmeriCorps program approved grants for thousands of  positions more than were used in the Corporation’s model to estimate the  funding needs of the National Service Trust. On July 24, 2003, the OIG  reported the Corporation had enrolled more AmeriCorps participants than  the Corporation’s National Service Trust could support, and as a result,  beginning in 2000, the Trust’s liabilities exceeded the funds it had available  from appropriations and interest earnings. In that report, the OIG  concluded that the Corporation had violated the Antideficiency Act. The  Antideficiency Act prohibits an employee or officer of the United States  government from making or authorizing an expenditure or obligation  exceeding an amount available in an appropriation.  The Corporation  submitted an Antideficiency Act report to OMB, but as of December 2003,  the report, including the amount of the deficiency, had not been submitted  to the President and the Congress. For more information see appendix II.
section_title: Trust Database and Participant Documentation Discrepancies Could Affect Estimates of Probable Education Award Expenditures
paragraphs: Discrepancies between the information in the Trust database and  participant documentation indicate that not all AmeriCorps enrollment  and exit information has been accurately recorded in the Trust database.  Some of these discrepancies could affect the estimated probable  expenditures of the Trust because these data are used to estimate the  amount of education awards the Corporation will ultimately pay.  Furthermore, the Corporation does not have complete or current user  documentation for the Trust database. Without clear documentation  explaining the components of the database, the Corporation may be at risk  of not being able to properly interpret and analyze its participant data.
subsections: section_title: Trust Database and Participant Documentation Discrepancies Could Affect Estimates of How Much the Corporation Owes in Education Awards
paragraphs: Out of about 172,000 enrollments in program years 2000 to 2002, we  obtained sufficient documentation to estimate the extent of discrepancies  for about 158,000 enrollments. We estimate that about 5 percent (8,300  enrollments) have a discrepancy between the Trust database and  participant documentation. Of these, about 3 percent  (4,400 enrollments)  could affect estimates of future probable expenditures of the Trust.  Figure 3 illustrates these results.
Several of the discrepancies that could affect what is owed by the Trust  were similar in nature. One of the most frequently occurring discrepancies  pertained to cases in which the Trust database showed participants were  still serving while their documentation showed they had exited the  program without earning an award. For several other cases, the Trust data  showed VISTA participants were still serving while the documentation  showed they had elected to receive a cash stipend instead of an education  award. According to an AmeriCorps official, cash stipends are not paid  from funds in the Trust. In several other cases, the Trust data showed  participants were still serving while their documentation showed they had  signed up for a shorter term of service and should have exited the  program. The Corporation acknowledged it would need to take further  action to determine the actual status of these cases. The specific  discrepancies we found that could affect the amount owed by the Trust  are described in appendix III.
Nearly all the discrepancies that will not affect the amount owed by the  Trust were for cases without an enrollment date on the form, although an  enrollment date was in the database. These cases do not affect the  estimate of what the Trust owes because other information in the  documentation was consistent with the database, such as whether or not  the participant earned an award. Corporation officials told us an  enrollment date should be recorded on the forms and that they would  issue clarifying instructions to grantees.
According to Corporation officials, there are numerous processes  designed to help ensure the accuracy and validity of its data. However, the  results of our analysis raise questions about the effectiveness of some of  these processes. The Corporation has controls over who may enter or  change participant information in the Web-Based Reporting System  (WBRS), and several edit and data checks are in place to ensure data is  entered properly and completely. For example, only a grantee’s program  director can certify that participants have completed their service and  qualified for an award, and WBRS will not allow grantees to enroll more  participants than the number of slots they were awarded. Corporation  officials also stated that a number of data checks are performed when  WBRS data are transferred to the Trust database. For example, after each  weekly upload, an error report is generated showing such things as  participants who had not been officially enrolled in the Trust and duplicate  enrollments. Furthermore, the Corporation’s fiscal year 2001 Performance  and Accountability Report noted that the Corporation had instituted a  procedure to randomly sample and verify enrollment and exit data on an  annual basis. However, Corporation officials could not provide any reports  documenting the results of these reviews.
Our analysis of the Trust data also found that out of 186,000 participants  enrolled during program years 1999 to 2002, 313 participants had Social  Security numbers (SSNs) that were invalid or that the Social Security  Administration (SSA) had not issued, and 169 had SSNs for persons listed  in SSA’s death master file. In about 75 percent of these last cases, the  name and birthday of the individual in the SSA death file differed from the  information in the Trust database. In the remaining 25 percent of cases,  the name and birthday matched, but either the SSA records show the  individual had died more than 30 days before the service completion date  shown in the Trust database or no completion date was in the Trust  database, indicating these participants may be listed as still serving.
Corporation officials told us that some of these cases could be the result  of data entry errors. They also said that, on occasion, grantee officials  create records for nonexistent individuals, including mock SSNs, to test  how the data entry system works. However, these erroneous data are not  routinely cleared from the database, according to Corporation officials.  Since these cases are in the database, they are considered as enrolled  participants. Such records for nonexistent individuals will cause the  Corporation to overstate the estimated amount owed by the Trust for  education awards. In November, 2001, the Corporation entered into an  agreement with SSA to test the validity of the SSNs of newly enrolled  participants. Corporation officials provided information showing that they  completed a SSN match under this agreement in May 2002 and found that  2,910 participants out of about 58,000 that did not match SSAs records.  Corporation officials stated that they were undertaking an internal review  to resolve these discrepancies. The Corporation has not done any  subsequent matches, but officials told us that because of our findings, they  would reconsider this. Corporation officials also said that while the  database could be improved, there are safeguards to prevent an  unauthorized person from claiming an award. For example, the  postsecondary institution the participant is attending must verify that he  or she is a student there, and the award funds are sent directly to the  institution. Nonetheless, since there are tens of thousands of different  individuals joining AmeriCorps every year and given the concerns about  how SSNs are used and protected, particularly in light of the rise in  identify theft, it may be in the Corporation’s best interest to regularly  verify the accuracy of the SSNs.  Without valid SSNs in the Trust  database on its participants, the Corporation cannot be certain that it has  accurate information on its participants and that all participants meet the  eligibility criteria.
section_title: The Corporation Has Not Updated Its Users’ Manual for the Trust Database
paragraphs: We found the system documentation for the Trust database was difficult to  use and, in some instances, out of date.  As a result, we had to rely on oral  testimony and e-mails provided by Corporation officials and the WBRS  support contractor for information about the system. The users’ manual  for the database was prepared in 1995. However, Trust database managers  told us that this manual does not reflect all system changes since that  time. The Corporation has a data definition dictionary for the Trust  database intended to describe the data fields used in the database and  what information they represent. However, the document we obtained  does not provide definitions or labels for the data fields. Without this  information, we were not able to identify what the data fields represented,  nor would any new users of the system be able to identify the data fields.  In commenting on a draft of this report, Corporation officials stated that  the system documentation, including the data definition dictionary, was  formatted to facilitate use by system developers rather than laypersons.  We were also only able to obtain a partial written inventory of edit and  data checks used for the database. We had to rely on two Corporation  employees knowledgeable about the system's components to explain the  type of information in each of the data fields, identify the data fields used  in determining education awards, and determine what related data and  edit checks were used.
Documenting how data systems are to be used is a common, and required,  management practice. Without clear or up-to-date system documentation  explaining the data elements in the Trust database, and procedures for  validating the data, the Corporation may be at risk of using incorrect data  for its estimates of future probable expenditures. Also, the Corporation  would be dependent upon a few employees who are familiar with the  system to produce reports or prepare analyses of the data. Documenting  systems is an important internal control that helps organizations ensure  that data are reliably collected and properly used and helps ensure  organizations are positioned to continue operations in the event of a  disaster or an emergency.
section_title: The New Model Increased Funding Estimates and Does Not Consider External Factors
paragraphs: In 2003, the Corporation began using a new model to estimate the funding  needed to provide future education awards through the Trust. This new  model used conservative values that increased the Trust’s funding  estimates as compared with the previous model. Corporation officials  believe the historical data they possess provide a sound basis for Trust  funding estimates. However, they chose to use more conservative values  because the AmeriCorps program does not have a long history and they  wanted to regain credibility after having had to suspend enrollments in  2002. In addition, the Trust fund now includes a reserve account required  by the Strengthen AmeriCorps Program Act. The Corporation’s model also  does not include a way to consider the possible effects that external  factors could have on its estimates. If the Corporation does not ensure its  funding estimates for future education awards are as reasonable and  complete as possible, millions of federal dollars may accumulate in the  Trust and not be available to help support this or other programs.
subsections: section_title: The New Model Increased the Estimated Funding Needed for the Trust
paragraphs: The Corporation used one model, the SAL model, to estimate both the  probable expenditures of the Trust for past and current participants and  the funding needed to provide education awards for future participants.  According to Corporation officials, the SAL model was used from 1996 to  2003. In 2003, the Corporation developed a new model and revised its  method for developing the Trust’s future funding estimates.
The SAL model is still used to estimate probable education award  expenditures for past and current participants. The reliability and  supportability of the estimates produced by earlier versions of the SAL  model have been examined by outside auditors on two separate  occasions. The auditors asked to review and assess the Trust model  determined that the model produced reliable estimates for the period  examined. However, they suggested functional enhancements and  provided model documentation to the Corporation. Other auditors also  reviewed the model as part of the annual audits of the Corporation’s  financial statements. These auditors advised the Corporation that  controls and checks on the model’s data should be strengthened. They  also recommended that automated techniques be periodically used to  systematically review the model’s database and that the Corporation  should consider several minor changes to the model to enhance the  reasonableness of its estimates. We also reviewed the SAL model and  found that the key factors and assumptions used to develop the  accounting estimates were generally reasonable. Furthermore, neither the  Corporation’s IG nor our assessment found that the SAL model was a key  factor that contributed to the suspension of enrollments in 2002. For  information on the structure and content of the SAL model, see Appendix  IV.
In the new model, the Corporation used more conservative values for the  rates at which education awards are earned and used. The Strengthen  AmeriCorps Program Act states that the Corporation shall use a formula  for estimating Trust obligations that takes into consideration historical  rates of relevant participant behavior. In considering historical rates, the  Corporation officials commented that they believe the historical data they  possess provides a sound basis for Trust funding estimates and having  extra funds available in the Trust—as compared with those estimated by  the SAL model—might be prudent, particularly since the AmeriCorps  program does not have a long history from which to extrapolate trends in  participant behavior—only one cycle has been completed. The officials  also noted that the new model’s assumptions do not differ significantly  from the historical averages. For example, the rate at which participants  earn awards in the former model is about 75 percent, while the new model  uses a rate of 80 percent. Further, the officials said they chose to use more  conservative values because they wanted to regain credibility after having  had to suspend enrollments in 2002. These officials said that they wanted  to ensure that the Corporation would have adequate funds in the Trust and  avoid any possible need to suspend enrollments again. It may be  appropriate to gain some experience with the new model and current  participant behavior before adjusting the assumptions used.
The Strengthen AmeriCorps Program Act also required the Corporation to  consult with the Congressional Budget Office (CBO) on its model formula.  CBO focused its analysis on the Corporation’s discount rate and reported  that the Corporation used a discount rate that is more conservative than  the one it uses when calculating the costs related to proposed legislation.
When the new model’s assumptions are used, the Corporation’s Trust  funding estimates were greater for the same number of participants than if  the values in the SAL model were used. We calculated that the cost to  provide education awards for up to 75,000 AmeriCorps participants and  7,000 Presidential Freedom scholarship recipients using SAL model  assumptions was about $116 million. Using the assumptions in the new  model, the Corporation’s funding estimate was about $133 million for the  same number of participants and scholarship recipients. The total amount  in the Trust also may be higher because the act required the Corporation  to include a reserve account. Corporation officials told us the reserve  account value of 10 percent of the funding estimate was a value reached  through discussions with congressional staff, and this value could change  in subsequent years.
section_title: The New Model Assumptions May Increase Balances in the Trust
paragraphs: Our analysis indicates that by using the assumptions in the new model, the  Trust may accumulate more funds than have been needed to pay estimated  education awards in the past. For instance, the Corporation’s data show  the Trust funding estimates are $13 million and $17 million more,  respectively, when 50,000 and 75,000 participants are assumed, and the  new award levels and the award earning and usage rates are used than  those used in the SAL model. Not only are the assumptions in the new  model greater than those used in the SAL model, but the SAL model  assumptions are higher than the actual rates in most years. For example,  the percentage of AmeriCorps participants who earned education awards  has fluctuated since the beginning of the program. The rate decreased  from a high of about 75 percent in 1994 to 68 percent in 1998, and then  increased to 73 percent in 2001. The rate used in the SAL model for earned  awards was about 75 percent—the highest average percentage rate  achieved in the history of the program. Figure 4 compares the actual  rates at which education awards were earned with the rate used in the SAL  model and the rate used in the new model. If future participant behavior  reflects the behavior of most past participants, the Trust fund balance may  increase more using the new model assumptions than it would using the  estimates produced by the SAL model. It may be appropriate for the  Corporation to gain some experience with the new model and current  participant behavior before adjusting the assumptions used.
The Corporation acknowledges that the new model may create Trust  balances that are greater than if historical rates were used if future  participant behavior mirrors historical behavior. The Corporation chief  financial officer said that there are opportunities to periodically deobligate  funds during the program cycle. Funds could be deobligated from the  Trust if (1) the positions created in the grant awards are less than the full- time-equivalent number of the positions approved, (2) all positions are not  filled, (3) participants drop out before earning an education award, and (4)  participants who earn awards do not use them. Figure 5 illustrates the  points when the Corporation can deobligate funds.
Corporation officials said any deobligated funds would become available  for other enrollments. They also said these funds would be used to fund  other awards in current and future program years, and would be  considered as reductions in subsequent budget requests. Furthermore,  Corporation officials stated that the annual financial audit will address  whether the size of the reserve account and the assumptions used are  prudent.
As of December 2003, the Corporation had two studies under way  examining AmeriCorps participants’ attrition rates and their utilization of  earned awards. These studies focus on the frequency with which awards  are earned and used. Corporation officials said that these studies have  provided information that aids them in understanding AmeriCorps  attrition and award usage, but they have not resulted in recommendations  for policy changes that could affect the assumptions used in the model.
section_title: External Factors Not Considered in Developing Estimates
paragraphs: Although Corporation reports indicate that external factors have affected  program participation levels, these factors are not included in either  model, nor have the Corporation officials taken them into account when  they submit their funding request for the Trust. Estimating models should  account for factors external to the business or entity that can affect the  reasonableness of the estimates. Several factors can affect the  assumptions used by the Corporation to estimate its budget needs. These  factors include the state of the economy, the cost of postsecondary  education and the availability of financial aid, and the levels of interest in  volunteerism. Neither of the Corporation’s models takes into account any  external factors that could change future trends when it creates its  assumptions or calculates its final budget estimates. Corporation officials  stated that the models are not sophisticated enough to account for all of  these factors. However, the Corporation has formed a Management  Improvement Team to examine the potential costs and benefits of  upgrading the model to account for some external factors.
External factors could affect the number of AmeriCorps participants, as  well as the attrition rate and use of awards once enrolled. For example, if  unemployment rates are high, more participants may be willing to enroll,  since they could receive a stipend as well as future education awards.  Additionally, if postsecondary education costs increase, more participants  may be likely to ensure they earn, and afterward use, their education  awards. The Corporation has acknowledged that external factors have  prevented it from achieving program goals. In its fiscal year 1999 and 2000  Performance Reports, the Corporation said it believed the strong economy  was partly to blame for the Corporation’s not achieving its program year  1998 and 1999 enrollment goals. In its fiscal year 2002 Performance and  Accountability Report, the Corporation said the high level of interest in  volunteerism following September 11, 2001, and the President’s Call to  Service contributed to higher levels of AmeriCorps enrollments than were  anticipated.
section_title: Operational Changes Should Reduce the Risk of Enrollment Suspensions, but Two New Policies May Hinder Service Delivery and May Contribute to Higher Balances in the Trust
paragraphs: The Corporation has implemented and planned substantive changes that  should minimize the risk of an enrollment suspension in the future, and it  has met or plans to meet the requirements established by the Strengthen  AmeriCorps Program Act. Our previous statement and testimony from the  Corporation’s Inspector General identified several factors that contributed  to the conditions surrounding the November 2002 suspension in  enrollments. The Corporation has made changes to address these factors.  However, grantees raised concerns about two new policies because they  may limit enrollments and hinder service delivery. If these policies reduce  enrollments, balances in the Trust may be further increased.
subsections: section_title: The Corporation Has Improved Aspects of Its Operations
paragraphs: The Corporation has made changes to address the three conditions that  we reported contributed to the need to suspend enrollments in  AmeriCorps. The Corporation had not recognized its obligation to fund  participant education awards. There was a lack of communication among  program, grants management, and Trust officials with regard to the  number of AmeriCorps positions the Trust could support. Finally, because  they did not require grantees to provide timely enrollment information,  Corporation and AmeriCorps managers could not be certain about the  number of AmeriCorps participants and their effect on the Trust.
The Corporation’s obligation practices comply with the Strengthen  AmeriCorps Program Act. In accordance with this act, the Corporation  began obligating Trust funds when it approved positions in AmeriCorps  grants beginning in June 2003. As of September 2003, the Corporation had  obligated fiscal year 2003 appropriated Trust funds for about 46,000 of the  50,000 AmeriCorps positions.
Greater emphasis has been placed on monitoring the availability of funds  in the Trust, and the communication and coordination between officials  responsible for managing the Trust and officials responsible for creating  positions have greatly improved. Since March of 2003, the Corporation has  been tracking AmeriCorps enrollments on a biweekly basis, investigating  discrepancies in counts between its enrollment system and the Trust  database, and monitoring the enrollments against the capacity of the Trust.  These results are made available to high-ranking program and financial  management officials of the Corporation, who meet monthly to discuss the  results of these exercises.
The Corporation has also tightened the controls and eliminated much of  the flexibility it previously gave grantees. Grantees are now prohibited  from enrolling more participants than specified in their grant awards, and  the Corporation modified WBRS to prevent grantees from enrolling more  participants than the number of positions contained in the grant award. To  better monitor progress toward its enrollment goals and their effect on the  Trust, the Corporation now requires grantees to report certain data about  potential participants to the Corporation prior to their actual enrollment. If  a potential participant does not enroll within 45 days of the expected start  date, the file on the potential participant is deleted. If the individual enrolls  as scheduled, the grantee must complete the enrollment process within 30  days of the participant beginning work. The Corporation added a tool to  WBRS that allows managers to monitor the average number of days  between a participant’s start date and enrollment. According to the  Corporation, 60 percent of program year 2002-2003 grantees have  improved the average time between participants’ start dates and the  reporting of their enrollment compared to their performance in program  year 2001-2002. However, less than 50 percent of the program year 2002- 2003 grantees reported an average time from start date to enrollment of 30  days, or less.
In addition, the Corporation provided training and technical support to  assist grantees with the system changes and new enrollment requirements.  Most of the AmeriCorps grantees who responded to our survey said the  training was adequate to meet the new requirements. Of the AmeriCorps  grantees who responded, 80 percent said that the Corporation provided  enough training and technical support to help them meet these new  requirements. However, in written responses some grantees said they  would like to receive training more frequently and believed it would be  beneficial if the Corporation could provide training directly to  subgrantees, rather than just to grantees. Additionally, about 7 percent of  the responding grantees said that as a result of the new requirements, they  or their subgrantees would have to perform additional tasks in their  enrollment procedures. One of the responding grantees said that because  it had over 150 part-time positions, and only limited staff, the requirement  to enter data on participants twice imposed a significant burden.
section_title: Some Changes Have Not Been Fully Implemented
paragraphs: Corporation officials stated that they are planning to improve oversight of  grantees’ performance. The Corporation plans to create consolidated  reports in WBRS to facilitate oversight of the performance of its grantees,  such as the state commissions and national direct grantees. This will allow  them to identify programs having enrollment reporting problems more  quickly and allow them to focus their oversight on those most in need of  attention. Additionally, the Corporation plans to strengthen grantee  oversight requirements to ensure that grantees are overseeing their  subgrantees’ compliance with enrollment procedures and time frames. The  Corporation updated the administrative standards for the state  commissions’ process for monitoring their subgrantees’ compliance with  the enrollment procedures. These standards also include the expectation  that state commissions will consider a subgrantee’s compliance with the  enrollment procedures and time frames in their funding decisions. The  Corporation issued this guidance to the commissions in November 2003. In  commenting on the draft report, Corporation officials said that the revised  standards will be piloted in spring 2004 and then submitted to OMB for  review in early fiscal year 2005. The Corporation also plans to establish a  schedule for its staff to review grantees’ enrollment cycle times and  provide additional training and technical assistance to grantees.
There are two provisions in the Strengthen AmeriCorps Program Act that  increase the oversight of Trust operations. The first provision requires that  the Corporation’s chief executive officer (CEO) certify annually in a report  to Congress that the Corporation is in compliance with other sections of  the act. The second provision requires an annual audit of the accounts and  records supporting the national service positions, and the National Service  Trust estimate to fund those positions—referred to in the act as the  Corporation’s trust obligations. The act requires the CEO to include this  annual audit with the CEO certification report forwarded to Congress.  Although the audit has been completed, the Corporation has not yet  provided its report to Congress. The auditor found, after accounting for  the model’s assumptions and reserve account, the Trust still had about $10  million of its fiscal year 2003 appropriation available for awards as of  September 30, 2003. The acting CEO certified the Corporation’s  compliance with the act in the management representation letter provided  to the Corporation's Inspector General on November 13, 2003. Corporation  officials said they also plan to include the CEO certification and the audit  of the estimated obligations in its 2003 Performance and Accountability  report to Congress.
section_title: Two Policy Changes May Limit Enrollments and Contribute to Balances in the Trust
paragraphs: Prior to the suspension in enrollments, the Corporation allowed grantees  to replace a participant who left AmeriCorps before earning a full award  and to convert an unfilled position to a different number of positions with  an equivalent value of education awards. For example, if a grantee had a  difficult time recruiting full-time participants, it could convert the full-time  position into two half-time positions. In an effort to help ensure the Trust  would not incur education award expenditures greater than its funds, the  Corporation established policies that prohibit grantees from replacing  participants and converting full-time positions. With these policies, if a  participant enrolls in a program but then leaves after 1 week, the grantee  cannot replace that person, and if a grantee has one full-time position but  can only find people willing to work part-time, the grantee cannot convert  that position to two half-time positions but instead can only fill it with one  part-time person. The Corporation established these policies because it  estimated that the Trust could only support a finite number of 2002  positions. Subsequently, Congress placed a 50,000 limit on the number of  total AmeriCorps enrollments that could be filled with the 2003 Trust  appropriations. However, as of November 2003, Congress has not included  an enrollment limit in the proposed 2004 Trust appropriations.
The policies prohibiting grantees from refilling vacated positions and  converting unfilled positions helped the Corporation officials to control  enrollments and helped them to comply with the legislatively imposed  limit, which in turn helped ensure the solvency of the Trust. However,  grantees who responded to our survey said that these policies may hinder  their ability to provide services. Additionally, these policies may lead to  fewer enrollments and coupled with the Corporation’s obligation practices  and the model assumptions may contribute to a higher balance of funds in  the Trust.
Our subgrantees must now rethink their member enrollment and termination policies. In  the past, programs could “take a chance” on enrolling a potential member who showed  promise but who may have also had potential risk factors. They were able to do this  because they could refill the slot if the member did not work out. In relation to terminating  members, subgrantees will now be somewhat hesitant to release a member who is not  performing as expected, because they will not be able to refill the slot.
Similarly, most of the respondents reported that the policy on converting  unfilled positions will affect program operations and service delivery.  About 75 percent of respondents reported that this restriction will  negatively affect their operations and require them to change their  operations. Seventy-five percent reported that it will hinder service  delivery, and 60 percent reported that it will cause changes in services  provided. Respondents commented that the authority to convert positions  allowed them to respond positively to changing circumstances and better  address community needs. One respondent noted that without being able  to convert positions, applicants will not be accommodated if their  availability does not conform to the slots provided in the grant. Positions,  therefore, could go unfilled.
Furthermore, if these policies result in fewer enrollments, the balance in  the Trust may grow. As previously mentioned, since the passage of the  Strengthen AmeriCorps Program Act, the Corporation obligates funds for  all AmeriCorps positions when the grants are approved and prior to  participants actually enrolling. Also, the new model the Corporation uses  for developing funding estimates assumes 100 percent enrollment for all  positions created. If enrollments do not reach the approved levels, and if  Corporation officials do not regularly and diligently monitor enrollments  and periodically deobligate funds, the funds in the Trust may accumulate.
section_title: Internal Control Weaknesses Remain
paragraphs: Financial statement auditors have reported several internal control  weaknesses or conditions at the Corporation and whether the Corporation  has improved those previously identified. For example, the auditors  reported that the grant approval policies and procedures were a serious  weakness in fiscal years 1999 and 2000.  The reports for 2001 and 2002  show that the Corporation improved in this area and the auditors did not  list this as a concern in the 2003 report.
However, the Corporation continues to have some internal control  problems. The fiscal year 2003 audit reported a continuing internal control  problem regarding the Corporation’s monitoring of grantee activities.  This  problem was also cited in the audit reports for fiscal years 2001 and 2002.  Additionally, as previously stated, we found that the Corporation has not  fully implemented its efforts to improve oversight of grantees’  performance, its procedures do not ensure accurate data in the Trust  database, and the Corporation’s ability to fully use the data on its  participants may be limited because the users’ manual for the database has  not been kept current.
In light of these internal control weaknesses and the concerns related to  the problems that lead to the suspension in enrollments, having an auditor  review internal control would provide a measure of assurance over the  Corporation’s accountability and internal control. Auditor opinions on  internal control are a critical component of monitoring the effectiveness of  an entity’s risk management and accountability systems. When an auditor  renders an opinion on internal control, the auditor is providing reasonable  assurance that the entity has maintained effective internal control over  financial reporting (including safeguarding of assests) and compliance  such that material misstatements, losses, or noncompliance that are  material to the financial statements would be detected in a timely fashion.   The auditor also reports on any significant deficiencies or material  weaknesses in the internal control over financial reporting. An opinion on  internal control is appropriate and necessary for major government  entities and in other cases where an opinion on internal control would add  value and mitigate risk.
section_title: Conclusion
paragraphs: The suspension of AmeriCorps enrollments had a serious impact on the  Corporation’s operations, resulting in both internal and external scrutiny.  This scrutiny revealed many shortcomings with the Corporation’s  management of the AmeriCorps program and the Trust. Since the  suspension in enrollments, the Corporation has made significant changes  to some of its operating procedures and internal controls. Most notably,  the Corporation began obligating Trust funds when AmeriCorps positions  were created, and key Corporation officials have been much more focused  on ensuring adequate funds are in the Trust.
However, weaknesses still existing in the Corporation’s procedures and  internal control could negatively affect the Trust or hinder the  Corporation’s ability to fulfill its management responsibilities. For  instance, discrepancies between the Trust database and the participant  data indicate that the Corporation does not have adequate internal control  procedures to ensure the accuracy of its data. Accurate and complete  participant information in the Trust database is critical. This information  plays a significant role in estimating the education awards owed by the  Corporation and ensuring they are awarded properly. Inadequate system  documentation is an internal control weakness that could limit the  Corporation’s ability to maximize its use and understanding of the data it  possesses. Without valid SSNs in the Trust database on its participants, the  Corporation cannot be certain that it has accurate information on its  participants and could indicate that not everyone participating in the  program meets the eligibility criteria.
In addition, other changes are needed to enhance the Corporation’s efforts  to be good stewards of public funds while fulfilling its mission. Given the  Corporation’s relatively short history, and fluctuation in its program data,  it may be prudent for the Corporation to use factors and value in its model  that provide some additional funds in the Trust. Nonetheless, future  funding estimates for the Trust should be as reasonable and complete as  possible to minimize the accumulation of large balances in the Trust. The  Corporation needs to balance its efforts to ensure the Trust does not  assume future probable expenditures in excess of its funds with the  mission and goals of the grantees and subgrantees that enroll AmeriCorps  participants to help meet community needs. Policies that do not balance  these goals may also contribute to the accumulation of balances in the  Trust. If the Corporation does not ensure its funding estimates are as  reasonable and complete as possible and does not regularly and diligently  monitor enrollments and periodically deobligate funds, millions of federal  dollars may accumulate in the Trust and not be available to help support  other federal programs.  Finally, obtaining an auditor’s opinion on internal  control over financial reporting as part of its annual financial statement  audits would provide additional accountability and assurance.
section_title: Recommendations
paragraphs: To improve the management of AmeriCorps and the National Service  Trust, we recommend that the chief executive officer of the Corporation  take the following nine actions:  To ensure the Trust receives accurate data for use in its model estimates  and Trust database,  implement a strategy to correct discrepancies between the Trust database  and the enrollment and exit forms, review and document the effectiveness of its data assurance processes, regularly verify the accuracy of the SSNs of its participants.
To better ensure that the Corporation has data that are readily available  and is positioned to continue operations in the event of a disaster,  emergency, or employee turnover, and    update the users’ manual for the Trust database and develop an inventory  of edit and data checks used for the database.
To provide additional assurance over internal control and to minimize the  related risks,    obtain an auditor’s opinion on the adequacy of the internal control over  financial reporting as part of the annual financial statement audit.
To enhance the accuracy of Trust budget estimates and ensure the Trust  does not accumulate large balances,     create a means to take into account the possible impact that external  factors may have on participant behavior in its funding estimates and  budget requests,    establish and execute a periodic deobligation schedule for unused Trust  review the assumptions being used in the new funding model after the  Corporation gains more experience with the new model and current  participant behavior.
To ensure its policies support its mission and grantees’ efforts to deliver  services while also providing adequate management controls,     evaluate the enrollment policies regarding refilling and converting  positions.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments from the chief executive officer for the  Corporation for National and Community Service. These comments are  reprinted in appendix V. The chief executive officer agreed with eight of  the nine recommendations and identified the actions planned to address  them. As for the other recommendation—to obtain an auditor’s opinion on  the adequacy of the Corporation’s internal control over financial reporting  as part of the annual financial statement audit—the chief executive officer  stated that he would refer it to the Corporation’s Office of Inspector  General, since that office contracts for the annual financial audit.
Additionally, the chief executive officer identified several areas that  needed further clarification. He pointed out that the system  documentation for the Trust module of eSPAN was not outdated, as we  said in our draft, and informed us that the documentation is up to date but  neither it nor the data dictionary is maintained in a laypersons’ format. We  modified the report to better reflect this information. The chief executive  officer stated that the Corporation believes that the historical data  currently used to estimate Trust funding provides a sound basis for the  estimates. We modified the language in the report to reflect the  Corporation’s views. Further responding to the chief executive officer’s  comments, we (1) deleted the statement that the Corporation planned to  begin using Generally Accepted Accounting Principles for federal  government entities, (2) added program year information to better  describe the comparison of the average time between participants’ start  dates and reporting of their enrollment, (3) made it clear that the  Corporation’s oversight efforts will focus on its grantees—the state  commissions and national direct grantees, (4) updated the status of the  Corporation’s revised administrative standards, and (5) changed the date  when the CEO certification was provided.
Further, the chief executive officer expressed the view that our discussion  of the Antideficiency Act violation focused on the amount of the  deficiency at a specific time in the past and does not calculate the amounts  deobligated over time. He also states that it is the Corporation’s view that  the deficiency is the amount needed at this time to liquidate obligations.  We disagree and we revised this section of the report to explain that the  Antideficiency Act requires an agency to report the amount of the violation  at the time the violation occurred. The chief executive officer also stated  that the $64 million deficiency appropriation should be sufficient.  The  report does not reflect nor did we calculate the amount the Corporation  needs to liquidate its obligations.
As we agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the issuance date. We will then send copies to the Chief Executive  Officer of the Corporation for National and Community Service and make  copies available to others who request them. At that time, the report will  also be made available at no charge on GAO’s Web site at  http://www.gao.gov.
If you have any questions about this report, please call me on (202)   512-8403 or Carolyn Taylor on (202) 512-2974. Other contacts and staff  acknowledgments are listed in appendix VI.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine if the activities of AmeriCorps participants were accurately  recorded in the Trust database, we performed a data reliability test  comparing information in the Trust database with information from  original enrollment and exit forms completed by the participants and their  AmeriCorps program managers. We obtained data files from the Web- Based Reporting System (WBRS) and the System for Programs,  Agreements, and National Service Participants (SPAN). SPAN is the  database used by the Trust. We performed general checks on these files to  look for invalid data such as Social Security numbers that are invalid or  have not been assigned. Because of a lack of documentation describing  the data fields in detail, particularly for SPAN, we held several discussions  with Corporation officials and contractor staff to resolve technical issues  associated with the data files and to identify data fields to use in our  reliability test. Based on these discussions, we developed a list of WBRS  data fields that would document participants’ enrollment, exit, and award  eligibility. At our request, Corporation staff provided a list of  corresponding SPAN data fields.
The population we performed the reliability test for consisted of 172,434  state and national direct grant program and VISTA individual enrollments  that were in the SPAN database as of July 25, 2003, and enrolled during the  2000, 2001, and 2002 program years. Each individual enrollment consisted  of a discrete period of time a specific individual was an AmeriCorps  participant at a single grantee. We did not sample National Civilian  Conservation Corps (NCCC) participants because they constitute a small  percentage of AmeriCorps enrollments (less than 3 percent).
We drew a stratified random sample of 400 enrollments from this SPAN  database. The population was stratified into four groups on the basis of  program enrollment (i.e., state and national direct grant program or  VISTA) and exit status (i.e., had exited from the program or not). With this  statistically valid probability sample, each enrollment in the study  population had a nonzero probability of being included, and that  probability could be computed for any enrollment. Each sample element  was subsequently weighted in the analysis to reflect the sample design.  The weighting factors were computed as the ratio of the population to the  sample within each stratum. We express confidence in the precision of our  estimates as a 95 percent confidence interval.
Corporation regulations require that participant documentation be kept on  file for 3 years from the date a participant finishes his or her term of  service. Documentation for VISTA participants is maintained at the  Corporation’s state field offices and for state and national participants the  documentation is maintained at the grantee’s or subgrantee’s office. The  Corporation sent requests for the participant documentation to the  appropriate grantees for each enrollment in our sample. The grantees sent  the documents to the GAO headquarters in Washington, DC. We reviewed  the documentation to make sure all applicable forms were submitted.  Because of a larger than expected number of nonresponses and  incomplete document submissions, we made a second request to the  grantees that had not provided complete documentation. In total we  allowed program officials 6 weeks to provide the documents.
Not all grantees provided us with complete participant documentation for  the cases we randomly selected. We did not receive any of the  documentation needed to assess whether enrollment information was  accurately recorded for an estimated 14,055 of the 172,434 enrollments in  the 2000 to 2002 program years. Although we received incomplete  documents for an estimated 30,176 enrollments, we were able to compare  key information with the SPAN data. Corporation officials expressed  surprise that we did not receive all of the documents requested. Table 1  shows estimates of documentation availability for all enrollments during  program years 2000-2002.
Grantee officials are responsible for entering and updating all information  about participants. Participants complete enrollment and exit forms at the  start and completion, respectively, of their terms of service. Grantee  officials complete and sign other portions of these forms certifying the  participant’s enrollment and exit dates and whether or not the participant  earned an education award. The grantee officials enter the participant’s  information into WBRS. It is then transferred to the Trust database on a  weekly basis.
Since participant data from the Trust database were used to calculate the  Corporation’s future probable expenditures of the Trust for past and  current participants as well as develop its funding estimates for future  participants that it uses in its annual budget requests, we focused our  comparison on key fields that would affect the estimates. According to  Corporation officials, these include the enrollment date, the number of  hours the participant committed to serve, the number of hours actually  served, and the participant’s termination status—whether or not the  participant completed the term of service and earned an award. We  recorded as a discrepancy any case where the information for these fields  in the documentation did not match the information recorded in SPAN or  the information appeared to be inconsistent with enrollment period rules  such as participants still serving when other information indicates they  should have finished their term. We assessed whether the discrepancies  would affect what the Trust owed. We provided a list of the discrepancies  to Corporation officials for further investigation. In several cases, they  were able to explain why we found a discrepancy and document that the  case was accurately recorded in the Trust database. We did not include  these cases in our discrepancy count.
To answer the question of how the Corporation develops its funding  estimates for the Trust, we reviewed the models used by the Trust to  develop its funding estimates. We obtained electronic versions of the  models and input data to assess whether the models worked as described  by Corporation officials. We gained an understanding of the controls over  the preparation of the estimates and supporting data. We also learned  about the controls over the sources of data and external factors that could  affect the estimates. We verified the consistency of assumptions with  historical data and the reliability of historical data. We considered whether  changes in business or industry would cause other factors to become  significant, and questioned Corporation officials regarding the possible  impact of changes in Corporation operations on the factors. We also  performed a test of calculations in the model. We obtained and reviewed  revisions to the model recommended by auditors and contractors, and the  changes planned for future budget submissions. We discussed all these  issues with knowledgeable staff in the chief financial officer’s office and  conducted several hands-on sessions during which the Corporation staff  demonstrated how the model worked and was used. Additionally, we  obtained and reviewed financial statement reports from the Corporation’s  IG and assessed the sections of those reports that discussed the models  and the supporting data.
To determine if the management and operational changes to controls put  in place following the suspension in enrollments in November 2002 would  be effective, we reviewed Corporation memos and related data to check  the progress of and compliance with these reforms and we interviewed  knowledgeable staff. We also surveyed 148 AmeriCorps grantees—state  commissions, national direct parent organizations, education award  programs, tribes and territories—and asked their views on the new  enrollment and oversight policies as well as the adequacy of the training  and technical assistance provided by the Corporation. In developing the  questionnaire, we reviewed memos implementing the new policies and  met with Corporation officials to gain a better understanding of the new  policies. We also obtained comments from Corporation officials on a draft  of the questionnaire. We pretested the questionnaire in person or by  telephone with the four grantee groups—state commissions, national  direct grantees, education award programs, tribes and territories. Guided  by the pretest results and comments from the Corporation, we revised the  questionnaire to ensure that all questions were fair, relevant, and easy to  understand and answer. In addition, we tested the questionnaire to ensure  that completing it would not place too great a time burden on grantees.  Overall, we received responses from about 71 percent of the grantees (105  of the 148 surveyed). Response rates for each type of grantee were: state  commissions (81 percent), national direct (73 percent), education award  programs (60 percent), tribes and territories (54 percent).
To establish whether the Corporation obligated funds in excess of the  amount available in the Trust, we reviewed applicable statutes concerning  how federal funds should be obligated and the 1993 Corporation  legislation. We also reviewed reports related to the violation issued by the  Corporation’s OIG and its financial statement auditor. We clarified legal  issues through correspondence with legal counsel from the Corporation  and the Office of Management and Budget (OMB).
We reviewed the internal control processes related to various Corporation  activities using the Standards for Internal Control in the Federal  Government.
We conducted our work between March and December 2003 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: The Corporation’s Antideficiency Act Violation
paragraphs: In July 2003, the Corporation’s Office of the Inspector General (OIG)  reported that the Corporation had obligated funds in excess of the amount  available to it in the National Service Trust. In that report the OIG noted  that the Corporation had suspended participant enrollment on November  15, 2002, because it was concerned that the Trust would not have  sufficient funds to cover education awards. At the time, in November 2002,  Corporation did not record education award obligations in the Trust Fund  until it paid education awards to eligible participants, so it had no  assurance that adequate funds were available. The Corporation amended  AmeriCorps grants to suspend enrollments and did not permit any  additional enrollments until Congress appropriated additional funds to the  Trust in March 2003.
However, the suspension came too late. In February 2003, the  Corporation’s financial statement auditor reported that, in fiscal year 2002,  the Corporation had approved AmeriCorps national service positions in  excess of the number of positions that the Trust could support. The July  2003 OIG report stated that the Corporation had enrolled more  AmeriCorps participants than the Trust could support, and as a result, the  “rusts’ liabilities, based on appropriations and interest forbearance  expected to be paid, exceeded the Trust’s appropriations and interest  earnings beginning in 2000.” The report also stated that the Corporation  had violated the Antideficiency Act.
Additionally, the OIG report stated that the Corporation estimated that the  violations resulted in a Trust deficiency of approximately $64 million. This  $64 million was derived from a reconstruction of the Trust’s financial  status that the Corporation prepared at the Office of Management and  Budget’s (OMB) request. In its July 25, 2003, response to the OIG’s report,  the Corporation conceded that it had violated the Antideficiency Act but  disagreed with the amount of the violation reported by its OIG and stated  that the financial reconstruction was a draft that was prepared “while the  legal landscape was still unfolding.”
We suspect that the $64 million amount of the violation may be  understated. In two legal opinions, in April and June 2003, we explained  that the Corporation incurred, and was required to record, an obligation at  the time it awarded a grant approving a new participant slot. We  concluded that the Corporation, by waiting to record an obligation until it  paid an education award, was under recording its obligations. In addition,  we explained that the Corporation could not, without specific statutory  authority, record an obligation on the basis of estimates of what it would  have to pay when education awards are earned (its probable accounting  liability). We stated that the Corporation should record its maximum  potential liability. As our legal opinions established, the Corporation under  recorded its obligations by recording (1) obligations at the time of  drawdown rather than at grant award and (2) estimates of what it would  have to pay rather than the full potential costs of the education awards.
In 2002, OMB advised the Corporation that it should record obligations as  the grantees enrolled new participants. OMB also advised the Corporation  that it should record the amount of the obligation based on estimates of  what enrolled participants will draw down in the future, using historical  information, such as attrition rates and actual usage by participants who  complete a term of service and earn an education award. The Corporation  had already been developing these estimates for its budget request to the  Congress.
At the time of the enrollment suspension, while the Corporation had not  yet instituted the practice of recording obligations as the grantees enrolled  participants, it took into consideration the consequences of recording  obligations at the time of enrollment in its financial reconstruction for  OMB and concluded that if the Corporation had been recording  obligations at the time of enrollment, the deficiency would be $279 million.  We suspect that $279 million might also understate the amount of the  violation at the time the violation occurred because the Corporation still  would have recorded estimates, as opposed to the maximum potential  liability, and still would have failed to record obligations when incurred—- at time of grant award. The Corporation submitted an Antideficiency Act  report to OMB, but as of December 2003, the report, including the amount  of the deficiency, had not been submitted to the President and the  Congress.
In our June 6, 2003, legal opinion we noted that the Corporation could  seek legislation that would permit it to use an estimation model for  recording its obligations, and that this model could be similar to the  process that would be used to determine the Corporation’s probable  accounting liability.  On July 3, 2003, the Congress passed the Strengthen  AmeriCorps Program Act, permitting the Corporation to record  obligations based on estimates, as it had been doing without statutory  authority prior to the passage of the act. The act redefined what an  obligation is for purposes of the AmeriCorps program by authorizing the  Corporation to “record as an obligation an estimate of the net present  value of the national service educational award associated with the  position, based on a formula that takes into consideration historical rates  of enrollment in such a program, and of earning and using national service  educational awards for such a program.” With regard to when the  Corporation incurs a liability, the act requires the Corporation to change  its obligation practices by specifying that the Corporation obligate funds  from the Trust at the time it awards a grant approving a new participant  slot, rather than at time of enrollment.
Nevertheless, the Corporation must report the amount of its  Antideficiency Act violation based on the legal requirement in place at the  time the violation occurred. According to the report by the Corporation’s  OIG, and conceded by the Corporation, the Corporation’s violation  occurred beginning in fiscal year 2000, before the Corporation obtained  legal authority to alter its obligation practices. Had the Corporation  reported its violation at the time it occurred, the Antideficiency Act would  have required it to report a violation calculated in consideration of the  cost of new participant slots approved at the time the Corporation  awarded new grants, and not based on an estimate of what these  participants would cost the Corporation in the future. The Corporation  should calculate its Antideficiency Act violation for purposes of its report  to the President and Congress based on the requirement in place at the  time the Corporation incurred the overobligations.
The Antideficiency Act requires an agency to report all relevant facts and a  statement of actions taken. Accordingly, an agency, among other things,  must inform the President and Congress if a violation occurred and in  what amount, and request from the Congress, if needed, a deficiency  appropriation. Even though an agency may cure a violation, it is still  required to report the violation to the President and Congress. Because the  Corporation’s legal requirement for recording obligations differs today  from the requirement that was in place when this violation occurred, the  Corporation, in fact, may not need additional appropriations to cure the  violation. Regardless, the Corporation should report the actual amount of  the violation, but advise Congress of the changed circumstances. We have  not assessed and do not address whether the Corporation will need  additional funds to meet its current potential liabilities. To the extent that  the Corporation identifies a need for additional appropriations as a result  of its Antideficiency Act violation, the Corporation should include that  request in its Antideficiency Act report.
section_title: Appendix III: Discrepancies between Trust Data and Participant Documentation That Could Affect the Amount Owed by the Trust
paragraphs: Description of discrepancy (Trust data as of July 25,  2003)
Trust data show participant still serving. WBRS report  provided in lieu of exit form indicates member was to  complete service on 4-6-03.
Trust data show participant completed term and earned  full award. Award eligibility status was left blank on exit  form.
Trust data show participant still serving. Documentation  provided shows participant completed service and earned  award.
Trust data show participant still serving. Enrollment form  shows participant signed up for summer term on 8-15-02  with expected completion date of 8-14-03.
Trust data show participant still serving. Enrollment form  shows participant signed up for summer term on 8-15-01  with expected completion date of 8-14-02.
Trust data show participant still serving. Enrollment form  shows participant signed up for summer term on 8-15-02  with expected completion date of 8-14-03.
section_title: Appendix IV: The Service Award Liability Model
paragraphs: The Service Award Liability (SAL) model used SPAN data on the actual  behavior of past and current AmeriCorps participants as the basis for  assumptions of future participant behavior. These data included the  proportion of participants who earned awards, the percentage of earned  awards used, the period when awards were used, and the size of the  average award. Also included in the calculations were past and anticipated  appropriations, net of rescissions, as well as the actual and expected  interest earnings of the Trust balance in order to arrive at the estimates of  the funding needed for future participants. The model used the portfolio  of the Trust’s investments—the proportion held as short- and medium- term treasury securities—to calculate a discount rate, which in turn is  used to convert future funding needs into a net present value. Corporation  officials would then adjust the resulting estimate to account for any  accumulated funds in the Trust. Figure 5 shows how the SAL model  works.
section_title: Appendix V: Comments from the Corporation for National and Community Service
section_title: Appendix VI: GAO Contacts and Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to those named above, the following individuals made  important contributions to this report: Joel Marus, Susan Higgins,  Elizabeth Lessmann, Patrick diBattista, Hannah Laufe, Thomas Armstrong,  James Rebbe, Julie Phillips, LuAnne Moy, Bob Deroy, Jennifer Popovic,  and Avrum Ashery.