Audit Report

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 Number:  18-99-011-03-360

Issue Date:     September 24, 1999

$2.8 Million in Costs Questioned and an Additional $900 K in Cost Avoidances Identified in National Council of Senior Citizen (NCSC) Program

We audited the costs that the NCSC/National Senior Citizens Education & Research Center, Inc. (NSCERC) claimed for reimbursement under its Senior Community Service Employment Program (SCSEP) grants for FY 1996. NCSC/NSCERC, as one of the national sponsors under the SCSEP, receives annual grants of over $62 million from DOL to provide subsidized part-time employment and training to about 9,000 individuals. NCSC/NSCERC enters into agreements with local government agencies and not-for-profit organizations who recruit and enroll eligible "low-income" elderly individuals and place them in subsidized positions at local government offices or not-for-profit organizations.

We question $2.8 million of the costs NCSC/NSCERC claimed for reimbursement in FY 1996. We also identified several areas in NCSC/NSCERC's administration of SCSEP where costs of about $900,000 can be avoided without adversely affecting program operations.

Many of the findings in this report are repeat findings to those contained in a prior audit (Report No. 18-99-006-07-735) in which we questioned over $6 million. The ETA Grant Officer, in his Revised Initial Determination dated July 27, 1999, agreed with our questioned costs.

Our major items of questioned costs are as follows:

INSURANCE PLAN REFUNDS - NCSC/NSCERC provided its senior aides with Hospital Indemnity Plan (HIP) insurance. The entire premium was charged to the DOL grant. At the end of each year, the plan underwriter provides NCSC/NSCERC with any refund due. For FY 1996, NCSC/NSCERC had a favorable claims experience, and earned substantial premium refunds. However, NCSC/NSCERC failed to credit these refunds to the DOL grant ($948,983).

INSURANCE PLAN ADMINISTRATIVE FEES - NCSC/NSCERC performed certain administrative functions for HIP. To compensate NCSC/NSCERC for its costs, the underwriter pays NCSC/NSCERC a percentage of earned premiums, which NCSC?NSCERC shares with the intermediary of the plan. NCSC/NSCERC credited the amount it received to its Membership Promotion Income account rather than applying these amounts as an offset credit to the DOL grant ($143,377).

• LIABILITY INSURANCE - NCSC/NSCERC purchased general liability insurance from an insurance company with which it shares management and executive personnel. In soliciting price quotations from prospective companies, NCSC/NSCERC failed to follow prescribed competitive procurement procedures. These premiums greatly exceeded the premiums paid by other National Sponsors with comparable insurance ($237,532).

• PENSION PLAN - NCSC/NSCERC made year-end cost adjustments to reduce excessive pension plan costs charged to various programs. However, NCSC/NSCERC failed to credit the DOL grant with its share of the excessive costs ($103,545).

 
• FRINGE BENEFITS - NCSC/NSCERC charges employee fringe benefits to DOL based on estimates and not on actual costs. At the end of FY 1996, the amounts charged exceeded actual fringe benefit costs ($108,872).

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