Corporation for National and Community Service: Preliminary Observations on the National Service Trust and AmeriCorps
Published: 2003-04-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In November 2002, the Corporation for National and Community Service suspended enrollments in the AmeriCorps program due to concern that the National Service Trust may not contain enough funds to meet the education award obligations resulting from AmeriCorps enrollments. This testimony reflects GAO's preliminary review of the factors that contributed to the need to suspend enrollments and GAO's preliminary assessment of the Corporation's proposed changes.
section_title: What GAO Found
paragraphs: The number of participants enrolled in AmeriCorps increased by about 20,000 from program year 1998 to program year 2001. However, the number of AmeriCorps participants was not reconciled with the number of education awards that the National Service Trust could support. GAO identified several factors that led the Corporation to suspend enrollments. The factors included inappropriate obligation practices, little or no communication among key Corporation executives, too much flexibility given to grantees regarding enrollments, and unreliable data on the number of AmeriCorps participants. The Corporation has established new policies that may improve the overall management of the National Service Trust if the policies are fully implemented. However, the Corporation has not made policy changes to correct a key factor--how it obligates funds for education awards.

section_title: Letter
paragraphs: We are pleased to have the opportunity to comment on the preliminary  findings from our ongoing study of the Corporation for National and  Community Service’s (the Corporation) management and oversight of the  National Service Trust (the Trust). The National Service Trust is a  dedicated fund within the Corporation that is to maintain sufficient funds  to pay national service educational awards to participants in the  Corporation’s AmeriCorps program. In November 2002, AmeriCorps  suspended enrollment of program participants. This statement will identify  some of the factors that contributed to this suspension and related policy  changes the Corporation has made since then.
These comments are primarily based on our preliminary analysis of  documents and information obtained through interviews with Corporation  staff. In addition, this statement reflects the April 9, 2003, opinion we  provided the Committee concluding that the Corporation incurs an  obligation for education benefits when it enters into a grant agreement for  the approved number of new participants and therefore it must record the  obligation against the budget authority available in the Trust. See appendix  I for the opinion. In summary, the factors we identified, to date, that led  the Corporation to suspend enrollments include inappropriate practices  for obligating funds, little or no communication among key Corporation  executives, and too much flexibility given to grantees—they were allowed  to adjust authorized positions and were not required to provide timely  information about the number of participants. While the Corporation has  established new policies that may improve the overall management of  AmeriCorps if the policies are fully implemented, the Corporation has not  made policy changes to correct a key factor—how it obligates funds.
subsections: section_title: Background
paragraphs: The Corporation for National and Community Service was created to help  meet community needs in education, the environment, and public safety  and to expand educational opportunity by rewarding individuals who  participate in national service. The Corporation is part of 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 receives appropriations to fund program  operations and the National Service Trust. The Corporation makes grants  from its program appropriations to help grant recipients carry out national  service programs.
AmeriCorps is one of three national service programs the Corporation  oversees. Most of the grant funding from the Corporation for AmeriCorps  programs goes to state service commissions, which award subgrants to  nonprofit groups and agencies that enroll the AmeriCorps’ participants.  Participants in the AmeriCorps program can receive a stipend as well as  health benefits and childcare coverage. For example, about one-half of  AmeriCorps’ participants received an annual living allowance of $9,300  and health benefits. Those participants who successfully complete a  required term of service earn an education award that can be used to pay  for undergraduate school, or graduate school, 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.  Participants have up to 7 years from the date of completion of service to  use the education award. AmeriCorps also enrolls participants on a part- time basis and as “education awards only” participants. Part-time  participants who serve 900 or fewer hours annually earn education awards  proportional to those earned by full-time participants. Under the  “education awards only” program, AmeriCorps does not pay the  participant a living allowance or other benefits, but provides grant funding  for administrative purposes only, about $400 per full-time participant  annually. However, each participant receives an education award  equivalent to that earned by a paid AmeriCorps participant. The number of  AmeriCorps participants increased by nearly 20,000 from 1998 to 2001. The  program year 2002 data indicate the number of positions awarded will  decrease by about 8,000. (See figure 1.)
In November 2002, the Corporation suspended enrollments in AmeriCorps  because total enrollments were potentially higher than the Corporation  had expected. No new funds had been requested by and appropriated to  the Trust for fiscal year 2002, and under the continuing resolution at the  start of fiscal year 2003, no new funds would be deposited into the Trust  until the Corporation’s fiscal year 2003 appropriations were enacted. The  Corporation concluded that if its grantees and subgrantees were to fully  enroll new participants up to the maximum number of enrollments the  Corporation had approved in its grants, the Trust would not have a  sufficient amount to provide the educational awards to those participants.  Enrollments in AmeriCorps were frozen from November 2002 through  March 2003.
section_title: Three Factors Contributed to the Need to Suspend AmeriCorps Enrollments
paragraphs: Three factors contributed to the Corporation’s need to suspend  enrollments in AmeriCorps. Although the Corporation specified the  maximum number of new participants in the grants it awarded, the  Corporation did not recognize its obligation to fund participant education  awards until it actually paid the benefits. Had the Corporation properly  tracked and recorded its obligations in the Trust at the time of grant award  when it approved new enrollments, it likely would not have needed to  suspend enrollments. In addition, there was little, if any, communication  among the AmeriCorps program office, the grants management office, and  the Trust about the number of positions that the Trust could support.  Furthermore, by allowing grantees various flexibilities and not requiring  them to provide timely enrollment information, the Corporation and  AmeriCorps managers could not be certain about the number of  participants.
subsections: section_title: Inappropriate Obligation Practices
paragraphs: The Corporation did not appropriately record or track its obligations for  education awards to program participants. Generally, an agency incurs an  obligation for the amount of the grant award with the execution of a grant  agreement. The Corporation enters into grant agreements with state  service commissions in which it specifies the budget and project period of  the award, the total number of positions approved, the total amount  awarded for program costs for the approved positions, and the terms of  acceptance. The award for the program costs is used to pay participants’  stipends and health and child care coverage. The Corporation incurs an  obligation for these program costs at the time of grant award. While the  costs of education awards for the new participants are not specified in the  grants, in the grant agreements the Corporation commits to funding  education awards for all of the qualified positions initially approved in a  grant if the subgrantee enrolls all of the participants before the  Corporation modifies the terms or conditions of the grant. In other words,  upon award of the grant, the Corporation, at a minimum, has accepted “  legal duty … which could mature into a legal liability by virtue of actions  on the part of the other party beyond the control of the United States.”  However, the Corporation has concluded that it is not necessary to  obligate funds until an individual actually enrolls in AmeriCorps.  Therefore, the Corporation recorded education award obligations on an  outlay basis. That is, obligations were recorded at the time of the quarterly  drawdown of amounts for education awards from the Trust.
By failing to recognize and record its obligations at the time of grant  award, the Corporation had no assurance that the number of positions  approved in grant awards did not exceed the amount of educational  awards the Trust could support. Proper recording of obligations serves to  protect the government by ensuring that it has adequate budget authority  to cover all of its commitments and prevent agencies from over-obligating  its budget authority.
section_title: Lack of Communication
paragraphs: Corporation executives we interviewed said that there was little if any  coordination between the AmeriCorps program office and officials  responsible for the management of the Trust about the number of  positions that the Trust could support. The AmeriCorps director said that  she considered the grant budget independent from the Trust and she  neither consulted with nor received direction from the Trust director  when making decisions about the grants. In addition, in recent years,  AmeriCorps has tried to increase the number of participants by enrolling  them in the “education awards only” program. Under this program, which  was an effort to lower the per participant program cost, AmeriCorps  provides funding to grantees for administrative purposes only, currently  about $400 per full-time participant annually. Increasing the number of  participants in this way is at a low cost to the AmeriCorps program  appropriation, but at full cost to the Trust, which funds the education  awards, because each participant receives an education award equivalent  to that earned by a paid AmeriCorps participant. Consequently, the  number of positions funded by AmeriCorps grants was not reconciled with  the number supportable by the Trust. According to Corporation officials  we spoke with, the Trust’s funding needs were based on an expected  enrollment of 50,000, while the AmeriCorps program office approved  grants for about 75,000 participants.
Corporation officials also said that prior to suspending enrollments in  AmeriCorps, the Trust was so well funded it did not warrant their  attention. They told us that early in the AmeriCorps program, a goal of  50,000 participants annually was used for Trust budgeting purposes.  However, it was found that fewer than that number of participants  enrolled, and not all of those who participated earned education awards.  Additionally, a Corporation budget official said that in the past those who  earned education awards were not using them as quickly as expected.  Even as the number of AmeriCorps participants grew, the Trust’s  accounting records showed an unobligated balance that was high enough  for Congress to rescind $111 million over fiscal years 2000 and 2001,  resulting in the deobligation of the Trust by this amount. Given this  history, Corporation managers did not see the need to reconcile the  number of positions created by grant funding with the number the Trust  could support. The Trust balance was not viewed as a constraining factor.  Because the number of positions approved in the grants was not  reconciled with the Trust before grants were awarded, there was the  potential for grantees to enroll more participants than the Trust could  support.
section_title: Grantees Allowed to Adjust Authorized Positions and Not Required to Provide Timely Participant Information
paragraphs: Two program management policies affected the number and type of  participants and, therefore, the use of Trust funds. One policy permitted  grantees to over enroll participants under certain circumstances with  approval from their AmeriCorps program officer. Specifically, the policy  allowed grantees to over enroll up to 20 percent. The program year 2002-03  data indicate that while only a few of the grantees increased their  enrollment, some increased theirs by more than 20 percent. Another policy  allowed grantees to convert positions from full-time to part-time as long as  the total number of full-time equivalents supported by the grant did not  change. While this practice did not affect the program funds, it did affect  the Trust. After the enrollments were suspended, Corporation officials  determined that part-time participants used their education awards at a  higher rate than full-time participants and therefore the number of part- time participants resulted in a relatively higher level of use for the  education award.
The Corporation did not have reliable data on the number of AmeriCorps  participants during the period leading up to the suspension. Enrollments  are recorded by grantees through the Corporation’s Web-Based Reporting  System (WBRS). While the enrollment information in WBRS was uploaded  into the Corporation’s database and used to track education award  obligations on a weekly basis, Corporation officials said that discrepancies  existed between the number of participants enrolled and the number the  Corporation was aware of, because of the length of time between when a  participant started to serve and when the grantee entered information into  WBRS. A Corporation official said that it was not unheard of for some  grantees to be 60 to 90 days late in entering an enrollment into WBRS.
By allowing grantees the flexibility to change the number and type of  participants coupled with delays in receiving information on enrollments,  the Corporation and AmeriCorps managers could not be certain about the  number of participants. Corporation officials said that this resulting lack  of confidence in the data was a contributing factor to the decision to  suspend enrollments.
section_title: New Policies Established, but Additional Changes May be Needed
paragraphs: In response to concerns that the AmeriCorps program may have enrolled  participants without adequately providing for their education awards, the  Corporation has developed several new policies. While the Corporation is  modifying its practice of when it records obligations, the Corporation  overlooks the legal duty it incurs at the time of grant award. Other policy  changes are directed to improving communication among key executives,  limiting grantees’ flexibilities and requiring more timely information on  participants. While these policies were only recently introduced, they  could, if implemented, help the Corporation keep track of the day-to-day  aspects of the AmeriCorps program and provide information needed to  monitor the use of the Trust in order to determine whether the  Corporation should make adjustments, such as deobligating excess funds.  However, data integration problems between WBRS and the program the  Corporation uses to track the education awards earned by AmeriCorps  participants may hamper the effectiveness of the new procedures.
subsections: section_title: New Policies for Obligating Funds
paragraphs: The Corporation is in the process of modifying its practices regarding  when it will record obligations. The Corporation’s General Counsel  explained that the Corporation will record obligations at the time of  enrollment, instead of on a quarterly drawdown basis and that the  obligations will be based on estimates of what these enrolled members  will draw down in the future. The Corporation is of the opinion that it does  not incur an obligation for an education award until the time of enrollment  because it may modify the terms and conditions of a grant, including a  reduction in the number of new participants the grantee may enroll, prior  to the enrollment of all positions initially approved in a grant, to prevent a  shortfall in the Trust. The General Counsel also said “…a binding  agreement between the Government and an AmeriCorps member   exists only upon the member’s  authorized  enrollment in the Trust.”
While it may be true that the Corporation has no binding agreement with a  participant until the participant enrolls in AmeriCorps, this is not the  controlling consideration for fund control purposes. In our opinion, this  view overlooks the legal duty the Corporation incurs at the time of grant  award when it commits to funding a specified number of participants and  the constraint imposed on the Corporation by the National and  Community Service Act. Specifically, the act says “…he Corporation  may not approve positions as national service positions…for a fiscal year  in excess of the number of positions for which the Corporation has  sufficient available funds in the National Service Trust for that fiscal  year…”. The Corporation, by its own admission, may modify the number  of approved participants only if it amends the grant agreement to reduce  the number of enrolled positions prior to enrollment. When a grant is  awarded, the number of new participants approved in the grant establishes  a legal duty that can mature into a legal liability for education awards by  virtue of actions of the grantee, unless the Corporation modifies the grant  prior to participant enrollment. While the Corporation may unilaterally  reduce the number of authorized positions awarded to a grantee prior to  participant enrollment, from the time of grant award until the Corporation  acts to reduce the approved number of positions, the grantee and its  subgrantee, not the Corporation, will control the number of participants  who may enroll, up to the maximum number of participants the  Corporation has approved in the grant agreement.
It is also significant to note that the grantee and subgrantee, by their  actions in enrolling participants, not the Corporation, control the amount,  ultimately, of the Corporation’s liability. If the amount of liability to the  government is under the control of the grantee, not the Corporation, the  government should obligate funds to cover the maximum amount of the  liability. As more information is known, the Corporation should adjust the  obligation—deobligate funds or increase the obligation level—as needed.
The Corporation also said that at the time a member enrolls it would  record its “…best estimate of the Government’s ultimate liability of  education awards provided to members  enrolled in the  National Service Trust.” According to the Corporation’s General Counsel,  the Corporation’s estimates of the amount that enrolled members   will draw down is based on historical information, such as  attrition rate and actual usage by participants who complete a term of  service and earn an education award. It appears to us that the Corporation  is confusing its accounting liability—projections booked in its accounting  systems for financial statement purposes, with its legal liability—amounts  to be recorded in its obligational accounting systems and tracked in order  to ensure compliance with fiscal laws. One of the federal financial  accounting standards states that a liability for proprietary accounting  purposes is a probable and measurable future outflow or other sacrifice of  resources as a result of past transactions or events. Traditionally,  projections of accounting liability consider the same factors, such as  historical trends, that are considered in the Corporation’s model. To track  its obligations, the Corporation should be recording its unmatured legal  liability for the education awards, which is the total cost associated with  the enrollment of all approved positions. The Corporation’s obligation  should be recorded as it is incurred and should be calculated by  multiplying the number of approved positions in a grant by the total cost  of a national service educational award.
section_title: More Communication Planned among Key Corporation Managers
paragraphs: Policy changes at Corporation headquarters are designed to improve  communication between several key offices and officials. A major change  is that the Trust balance is to be a limiting factor on grant awards and,  therefore, enrollment levels. In addition, beginning with the 2003 grant  cycle, one new policy calls for the AmeriCorps director to work with the  grants director, the Chief Financial Officer (CFO), and the Trust director  to compare projections of positions to be approved in grants with those  supported by actual appropriations, and the Chief Executive Officer  (CEO) will only approve the number of positions the Trust can support.  Additionally, the CEO will approve all AmeriCorps grants after  consultation with the CFO on the number of education awards that can be  supported by the Trust. Also, the policy states that the CEO, CFO, the  Trust director, and the AmeriCorps director will meet at least monthly to  review and reconcile enrollment data and Trust data. Through bi-weekly  reports, the AmeriCorps director and the Trust director are to keep the  CEO and CFO informed of the number of approved and filled positions.  The Trust director is to monitor factors relevant to forecasting Trust  liabilities and report regularly to the CFO, highlighting deviations from  assumptions in the model. Each month the CFO is to use actual enrollment  data to re-evaluate the model for forecasting Trust liabilities. If the  revision results in a need to change enrollment targets, the CFO will notify  the CEO and AmeriCorps director immediately. The CEO will take  appropriate action and report any such action to Congress, the  Corporation’s Board, and the Office of Management and Budget.
Regular meetings and attention to the enrollment data should help the  Corporation keep track of the day-to-day aspects of the AmeriCorps  program. Such updated information is an important step in monitoring the  use of the Trust in order to determine whether the Corporation should  make adjustments. For example, if the Corporation obligated the full cost  for each of the positions approved at the time of grant award, and later  determined that many of the positions will not be filled, it could reduce the  number of approved positions and deobligate some of the funds. The  policy changes and new procedures were announced in January. We will  continue to monitor the implementation of these policy changes.
section_title: Grantees No Longer Permitted to Change Authorized Positions
paragraphs: The Corporation has changed policies regarding its grantees ability to over  enroll participants, replace participants who leave with new enrollees and  change positions from full-time to part-time. In a January 22, 2003,  memorandum, the director of AmeriCorps cancelled the policy that  allowed grantees to over enroll members by up to 20 percent over the  ceiling established in the grant award in order to take account of attrition.  Furthermore, an official said AmeriCorps now considers a position to be  filled for the term of the grant once the grantee enrolls a participant, even  if the participant later drops out of the program, whether or not an  education award was earned. The official said that in the past, grantees  could enroll a new member to serve out the balance of the term if grant  funds were available. A Corporation official also said that there is a new  policy that restricts grantees from converting full-time positions to part- time positions. Grantees must now request and receive approval from the  Corporation before such changes can be made.
Since grantees will not be permitted to modify the number and type of  authorized positions, the Corporation’s ability to manage the AmeriCorps  program should improve. Most 2003 grant positions have not yet been  awarded; therefore, it is too early to tell whether these new policies will be  effective. We will monitor these policies and assess the extent to which  they have been implemented as we complete our work.
section_title: Grantees Will Be Required to Report Participant Information within 30 days, but Data Reconciliation Problems May Need To Be Addressed
paragraphs: In January 2003 the Corporation informed all grantees that AmeriCorps  will require timely reporting of participant information to ensure that the  Trust database receives current information on the number of participants  eligible for an education award. Grantees will be required to keep  AmeriCorps informed of the number of participants offered positions and  the number who accept and enroll and to document enrollment through  WBRS no later than 30 days after participants start working. The  memorandum warns grantees that failure to comply with this requirement  could result in reductions in the number of positions or termination of the  grant. Additionally, the memorandum directs state commissions and other  AmeriCorps grantees—the organizations responsible for the oversight of  subgrantees—to implement procedures to ensure that timely notification  of participant commitments and enrollments is part of their review and  oversight functions.
Furthermore, the Corporation has made changes to WBRS, which is used  to track participant, grant, and budget information. First, controls have  been put in place to limit the number of positions listed in WBRS to no  more than the number of approved positions. The Corporation’s Biweekly  Trust Enrollment Summary, as of March 2003, shows that award totals are  being tracked and compared with the data estimates in the Trust.  However, officials told us that there are some data reconciliation problems  between WBRS and the program used by the Corporation to track the  education awards earned by AmeriCorps participants. Corporation staff  have had to make manual adjustments to reconcile the data.
Accurate and timely information about enrollments should help the  Corporation and AmeriCorps manage the program. As grants are awarded,  we will be able to assess whether the policies have been fully  implemented.
section_title: Conclusion
paragraphs: The Corporation’s new policies, if fully implemented, should help the  Corporation manage the AmeriCorps program by providing better  information on day-to-day operations. However, without obligating the full  amount associated with all of the positions authorized in the grants, the  Corporation remains at risk of having the actual number of enrollments  exceed the estimated number the Trust can support. We will monitor the  implementation of the Corporation’s new policies as we continue our  review.
section_title: GAO Contact and Acknowledgments
paragraphs: For further information regarding this statement, please call Cornelia M.  Ashby at (202) 512-8403 or Susan A. Poling at 202-512-5644. Individuals  making key contributions to this testimony included Carolyn M. Taylor,  Tom Armstrong, Anthony DeFrank, Joel Marus, and Hannah Laufe.
section_title: Appendix I: Obligational Practices of the Corporation for National and Community Service
paragraphs: Appendix I: Obligational Practices of the  Corporation for National and Community  Service  This  is  a  work  of  the  U.S.  government  and  is  not  subject  to  copyright  protection  in  the  United  States.  It  may  be  reproduced  and  distributed  in  its  entirety  without  further  permission  from  GAO.  However,  because  this  work  may  contain  copyrighted  images  or  other  material,  permission  from  the  copyright  holder  may  be  necessary  if  you  wish  to  reproduce this material separately.