U.S. Department of Labor
Office of Inspector General

Audit Report

Financial and Compliance Audit
of the
Talking Leaves Job Corps Center

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This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.

Report Title: Financial and Compliance Audit of the Talking Leaves Job
Corps Center

Report Number: 06-99-010-03-370

Issue Date: September 22, 1999

The U.S. Department of Labor (DOL), Office of Inspector General (OIG) conducted a financial and compliance audit of the Talking Leaves Job Corps Center (TLJCC) operated by the Cherokee Nation of Oklahoma (Nation) for the last 3 years of the 5-year contract -- July 1, 1995, through June 30, 1998.

We questioned $1,052,574 paid to the Nation for operating the TLJCC for the 5-year contract period as follows:

$1,014,321 for the recovery of indirect costs for services for which the Job Corps program was already paying directly or for services which did not benefit the Job Corps program.

$10,733 in direct and indirect costs for duplicate payments resulting from internal control weaknesses. These unallowable costs have already been recovered through contractor-adjusted expenditure reports.

$27,520 for missing inventory items. Because TLJCC did not follow DOL property management procedures to safeguard and account for TLJCC assets: 71 inventory items of equipment selected from the Contract Management Property System (CPMS) were missing; several items of furniture and equipment purchased during the audit period could not be traced to the CPMS or TLJCC's inventory; and the CPMS inventory was inaccurate, incomplete, and outdated.

We also determined that the TLJCC's monthly and year-end expenditure reports were not accurate or current. While we were able to reconcile amounts recorded in the general ledger to the final total costs that TLJCC reported for the 3-year period ending June 30, 1998, monthly and year-end expenditure reports were often late and contained material errors and inconsistencies that prevented their use as effective management tools. We could not reconcile the PY 97 financial reports until April 1999, almost 10 months after the contract terminated, when TLJCC submitted its final (revised) cost report for June 1998.

Finally, TLJCC's financial management system for controlling and reporting of Job Corps funds was deficient in its ability to maintain accountability for Job Corps funds including; (1) no written policies and procedures, other than the Job Corps Policy Requirements Handbook; (2) no Center Operating Plan; and (3) no approved operating budget during PY 96.

We recommended that the Assistant Secretary for Employment and Training disallow $1,041,841. Furthermore, we recommended that the Assistant Secretary:

require the Nation to treat TLJCC as a separate cost objective with its own indirect cost pool and rate approved by the DOL Office of Cost Determination;

notify the cognizant Federal agency that special operating factors affecting TLJCC's contract with DOL necessitate special indirect cost rates;

provide technical assistance and guidance to TLJCC to ensure that the center's financial reports and budgets are accurate, supported, and timely;

require the Nation and TLJCC to correct the long-standing inadequacies of its accounting and financial management systems related to TLJCC:

• ensure that center financial staff receive training related to Job Corps budget and report preparation and applicable cost principles;

• maintain sufficient, auditable, and otherwise adequate records to support the expenditure of all Job Corps funds; and

• develop and implement internal controls adequate to safeguard and account for Job Corps funds and property.

The Nation, for the most part, disagreed with our finding regarding indirect costs and concurred with the other findings.

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