2(CAAR) Branch. Accordingly, we ask that no action be taken concerning the report'sfindings without first consulting with CAAR at (703) 292-8244.We thank your staff for the assistance that was extended to our auditors during thisaudit. If you have any questions about this report, please contact me at (703) 2924985 or Jannifer Jenkins at (703) 292-4996.Attachmentcc: Mr. Norman Fortenberry, Division Director (Acting), EHR/DUE
CITY COLLEGE OF SAN FRANCISCO33 Gough StreetSan Francisco, CA 94103National Science Foundation Award NumberDUE-9850325Financial SchedulesandI ndependent Auditors' ReportsFor the Period September 1, 1998 to September 30, 2001CONRAD AND ASSOCIATES, L.L.P.Certified Public Accountants1100 Main Street, Suite CI rvine, California 92614
FINDINGS AND RECOMMENDATIONS'
National Science FoundationOffice of Inspector General(Continued)funding by NSF; or (ii) in entities whose financial interests would reasonably appear to be affected byactivities. The term "investigator" means the principal investigator, co-principal investigators, and any other Pat the institution who is responsible for the design, conduct, or reporting of research or educational actfunded or proposed for funding by NSF."City College of San Francisco has a conflict of interest policy in place, however; only certain members ccollege are required to complete a financial disclosure statement. The principal investigator for award 19850325 was not one of those required to complete a disclosure form, because they were unaware crequirement.As a result of the College's failure to require its principal investigator to complete a financial disclosure statesCity College of San Francisco did not determine whether any financial interests of the investigators wouldaffected by the research or educational activities funded or proposed for funding by NSF. Similarly, thewas unable to determine if the principal investigator had any financial interests in entities whose financialwould reasonably appear to be affected by such activities to the extent that it could directly and significantly;the design, conduct, or reporting of NSF-funded research or education activities.Recommendation No. I - Conflict of Interest Policy - We recommend that NSF's Division DirectorsDivision of Acquisition and Costs Support (DACS) and the Division of Grants and Agreements (DGA)City College of San Francisco revise and implement its conflict-of-interest policy and procedures to ensure theprincipal investigators complete the required financial disclosure statements.Awardee CommentsCity College of San Francisco does have a financial disclosure statement from the Chief Financial Officesigns the contracts with consultants and subcontractors. The District concurs with the finding that the Investwas not required to file a financial disclosure agreement. The District will move to implement the currentrecommendation by requiring the Investigator to file a financial disclosure agreement.Auditors' ResponseThe awardee's comments are responsive to the recommendation.Finding No. 2 - Travel Policy Enforcement - City College of San Francisco did not comply with its travelOMB Circular A-21, Section J, Subsection 48.A 'Travel Costs' states in part that travel costs may be chargedbasis that ".results in a reasonable charge, and is in accordance with the institution's travel policy and prayconsistently applied to all institutional travel activities." Furthermore, applicable OMB Circular A-21, SectSubsection 48.B 'Lodging and Subsistence' states: "Costs incurred by employees and officers for travel, indthe costs of lodging, other subsistence, and incidental expenses, shall be considered reasonable and allyonly to the extent such costs do not exceed charges normally allowed by the institution in lets regular operatica result of an institutional policy and the amounts claimed under sponsored agreements represent reasonableallocable costs."City College of San Francisco, on several occasions, reimbursed employees for lodging costs, whichthe allowable amount per the College's travel policy. The College's policy indicates that lodging costs,taxes, will be reimbursed subject to the maximum limit established by the Federal Per Diem Rate Guidelinei n practice, the Chief Financial Officer could approve costs over the Federal per diem, although thatreflected in the policy.9
National Science FoundationOffice of Inspector General(Continued)The College's failure to comply with its travel policy as required by OMB Circular A-21 reduces the College's abilityto ensure that travel costs charged to NSF are allocable, allowable, and reasonable, in accordance with the awardterms and conditions. As a result, we have questioned 1,241 of lodging costs that exceeded the College'sadopted policy. (See Schedule of Questioned Costs, Schedule B, Note B-1).Recommendation No. 2 - Travel Policy Enforcement - We recommend that NSF's Division Directors of DACSand DGA ensure that City College of San Francisco revise and implement its written policies and proceduresensuring that charges for travel costs are in compliance with its travel policy and OMB Circular A-21.Awardee CommentsThe Chief Financial Officer can approve travel order reimbursements above the Federal per diem rates for highcost areas provided that receipts clearly evidence the expenditure and the amounts are reasonable and allocable.I n every case, a receipt did accompany travel reimbursements by City College of San Francisco employees.The District will ensure that its current written policies include the following statement:I n situations where the lodging cost is quoted as being greater than the "Maximum lodging amount" listed in theCity College Official Lodging and Per Diem Manual then an exception to that specific rate must be requested andapproved by the Chief Financial Officer, on a case by case basis, in order to be reimbursed for the greater lodgingamount.Auditors' ResponseThe awardee's comments are responsive to the recommendation.I NTERNAL CONTROL OVER FINANCIAL REPORTINGThe management of City College of San Francisco is responsible for establishing and maintaining internal control.I n fulfilling this responsibility, estimates and judgments by management are required to assess the expectedbenefits and related costs of internal control policies and procedures. The objectives of internal control are toprovide management with reasonable, but not absolute assurance that assets are safeguarded against loss fromunauthorized use or disposition, and that transactions are executed in accordance with management'sauthorization and recorded properly to permit the preparation of financial schedules in accordance with accountingprinciples prescribed by the National Science Foundation. Because of inherent limitations in any internal control,errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation to futureperiods is subject to the risk that procedures may become inadequate because of changes in conditions or thatthe effectiveness of the design and operation of policies and procedures may deteriorate.I n planning and performing our audit of Schedule A for the period September 1, 1998 to September 30, 2001, weobtained an understanding of the City College of San Francisco's internal control over financial reporting. Withrespect to internal control over financial reporting, we obtained an understanding of the design of relevant policiesand procedures and whether the procedures have been placed in operation. Furthermore, we assessed controlrisk in order to determine our auditing procedures for the purpose of expressing our opinion on the financialschedules and not to provide an opinion on internal control. Accordingly, we do not express such an opinion.Our consideration of internal control over financial reporting would not necessarily disclose all matters related toi nternal control over financial reporting that might be reportable conditions under standards established by theAmerican Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attentionrelating to significant deficiencies in the design or operation of the internal control over financial reporting that, inour judgment, could adversely affect the entity's ability to record, process, summarize and report financial data in amanner that is consistent with the assertions of management in the financial schedule.10
National Science FoundationOffice of Inspector General(Continued)A material weakness is a reportable condition in which the design or operation of one or more of internal controlelements does not reduce to a relatively low level the risk that misstatements in amounts that would be material inrelation to the financial schedules being audited may occur and not be detected within a timely period byemployees in the normal course of performing their assigned functions. Because of inherent limitations, in internalcontrol, misstatements due to error or fraud may nevertheless occur and not be detected.We noted the following matters involving San Francisco's internal control over financial reporting and its operationthat we consider to be reportable conditions under the standards established by the American Institute of CertifiedPublic Accountants. However, we do not believe any of the reportable conditions are material weaknesses.Finding No. 3 - Consultants - City College of San Francisco entered in several service agreements withconsultants and failed to perform a cost/price analysis for the services rendered and did not have policies orprocedures regarding the selection of consultants.OMB Circular A-110, Subpart C, § .45 'Cost and Price Analysis', requires; "Some form of costs or price analysisshall be made and documented in the procurement files in connection with every procurement action. Priceanalysis may be accomplished in various ways, including the comparison of price quotations submitted, marketprices and similar indicia, together with discounts. Cost analysis is the review and evaluation of each element ofcost to determine reasonableness, allocability, and allowability."OMB Circular A-110, Subpart C, § .46 'Procurement Records' states; "Procurement records and files forpurchases in excess of the small purchase threshold shall include the following at a minimum: (a) basis forcontractor selection, (b) justification for lack of competition when competitive bids or offers are not obtained, and(c) basis for award cost or price.City College of San Francisco's procurement records did not document the selection process taken by the Collegei n retaining consulting services. College personnel have indicated that consultants were selected based onreputation and past performance. No formal bid process was taken to screen and select consultants.As a result of City College of San Francisco's failure to document the selection process of consultants, it wasunable to show that a fair and unbiased search for consultant was performed, thus reducing the College's ability toensure that it was getting the best price for services purchased with NSF funds. No costs were questionedbecause additional documentation and discussions with grantee personnel supported the costs charged to thegrant.I n addition, City College of San Francisco entered into several agreements with consultants to perform certainservices for a fixed fee. These agreements stipulate lump sum payments to be paid for the services, but thei nvoices did not provide cost detail related to the payment amount. We noted over 238,000 of costs, which werenot properly supported with invoices detailing the time spent for services rendered. Without a detailed invoice wewere unable to determine if the College was in compliance with NSF regulations limiting the amount paid toconsultants on a daily basis. However, no costs were questioned, because we were able to substantiate, throughcorroborating inquiries, that services were rendered and allowable. (See Schedule B, Note B-2.)Recommendation No. 3 - Consultants - We recommend that NSF's Division Directors of DACS and DGAensure that City College of San Francisco develop and implement written policies and procedures ensuring that(a) the selection process for consultant services is properly documented, (b) the price paid for consultant servicesi s reasonable, and (c) the rates reimbursed to consultants are within the maximum daily rates allowable underFederal law.11
National Science FoundationOffice of Inspector General( Continued)Awardee CommentsThe District maintains competitive bidding as follows (excluding personal services contracts, see Section 53060 ofthe California Code of Regulations): Any purchase or contract over 58,900 must be competitively bid viapublication in the public record for 2 weeks, as per Section 20651, Public Contract Code. Purchases between 2,000 and 49,999 are i nformally bid, as per City College of San Francisco policy. The lowest responsiblebidder receives the order. Public works contracts over 15,000 are awarded competitively, as per Public ContractCode Section 20661.The City College of San Francisco's Board of Trustees must approve exclusive contracts over 10,000 Contracts under 10,000 require the signature of the Vice Chancellor of Finance & Administration and/or hisdesignees.The District's current procurement process is initiated when an individual completes either a paper form requestfor Supplies, Materials, Equipment or Services or an electronic requisition and submits it to the PurchasingDepartment. The Purchasing Department will review the request and make a determination for required and/orneeded comparison price analysis prior to approving the purchase request and forwarding the order to a vendor.While in the case of each informal order documentation may not be specifically maintained in the file, thePurchasing Department always completes some form of price analysis whether it be comparing prices viacatalogs; existing open contracts for supplies, materials and equipment; a telephone call to a couple of vendors; oraccessing information through the Internet.The District concurs with the portion of this finding regarding Special Services and Advice Agreements withconsultants. The District will be developing and implementing a policy change with respect to the bidding of servicecontracts in order to comply with the requirements of OMB Circular A-110 § .46.However, the 238,000 of questionable service agreements are for the Co-PI, who assisted in writing the originalgrant and who was accepted as Deputy Director of Bio-Link by NSF from the onset. The other questionableagreement is for the evaluator for the grant, who was suggested and approved by NSF. Both of these key personsprovided experience and training that uniquely prepared them for their positions. Because each person's skillswere unique, there was no basis for a competitive bid process.Auditors' ResponseThe auditee's comments are responsive to the recommendation relating to the development and implementationof a policy change with respect to the bidding of service contracts for consulting services as required of OMBCircular A-110 § .46. However, we believe the auditee's response regarding the 238,000 fixed fee serviceagreement has not properly addressed the internal control finding. Consultants were contracted for a fixed fee toperform certain agreed-upon services. However, the auditee was paying the consultants a negotiated pricewithout obtaining detailed invoices to indicate the type of services actually performed or time spent on the project.Without a detailed invoice, we were unable to determine if the College was in compliance with NSF regulationsli miting the amount paid to consultants on a daily basis. Therefore, we will continue to recommend that CityCollege of San Francisco develop and implement written policies and procedures to ensure that rates reimbursedto consultants are within the maximum daily rate allowed by Federal Law.Finding No. 4 -ActivityReporting - City College of San Francisco did not require all employees to completeactivity reports to indicate effort expended on the award.OMB Circular A-21, Section J, Subsection 8.C, Paragraph (2) states in part: ".salaries and wages by thei nstitution will be supported by activity reports as prescribed below. (a) Activity reports will reflect the distribution ofactivity expended by employees covered by the system. (b) These reports will reflect an after-the-fact reporting12
National Science FoundationOffice of Inspector General( Continued)of the percentage distribution of activity of employees. Charges may be made initially on the basis of estimatesmade before the services are performed, provided such charges are promptly adjusted if significant differencesare indicated by activity reports. (c) Reports will reasonably reflect the activities for which employees arecompensated by the institution. To confirm that a distribution of activity represents a reasonable estimate of thework performed by the employee during the period, the reports will be signed by the employee, principali nvestigator, and/or responsible official(s) using suitable means of verification that the work was performed. (d)The system will reflect activity applicable to each sponsored agreement and to each category needed to identifyF&A [Facilities and Administrative] costs and functions to which they are allocable. (e) For professorial andprofessional staff, the reports will be prepared each academic term, but no less frequently than every six months.For other employees, unless alternate arrangements are agreed to, the reports will be prepared no less frequentlythan monthly and will coincide with one or more pay periods."City College of San Francisco did not require salaried employees to complete activity reports to indicate effortexpended on the NSF grant. Employee's salary is charged to the grant based on the percentage of time assignedto the grant. Employees are assumed to have worked 40 hours a week unless indicated with absence formsand/or vacation requests. Employees are, however, required to complete timesheets for time spent in excess of40 hours a week.Claimed costs for salaries, wages and fringe benefits represent nearly 30% of total claimed costs. City of SanFrancisco's failure to maintain time keeping records as required by OMB Circular A-21 reduces the College'sability to provide assurance that salary and wages charged to NSF are allocable, allowable, and reasonable, inaccordance with award terms and conditions. No costs were questioned because discussions with severaldifferent personnel corroborated the amounts charged to the grant. Effective July 1, 2001, the College hasi mplemented new written policies and procedures requiring employees to complete activity reports indicatingactual effort expended on NSF activities. We have reviewed the time sheets subsequent to July 1, 2001 andnoted the College had properly complied with OMB Circular A-21.Recommendation No. 4 - Activity Reporting - We recommend that NSF's Division Directors of DACS and theDGA ensure that City College of San Francisco continue to adhere to its current policies and procedures andensure that charges for salaries and wages are adequately supported with detailed activity reports as required byOMB Circular A-21.Awardee CommentsAs noted in the finding, the District has implemented time sheet reporting for all grant related payroll expenditureseffective July 1, 2001.Auditors' ResponseThe awardee's comments are responsive to the recommendation.Finding No. 5 - Subcontract Monitoring - City College of San Francisco did not require subcontractors tosubmit supporting documentation along with the reimbursement form and therefore did not adequately monitor thesubcontractor's activities.OMB Circular A-110, Subpart C, § .51(a) Monitoring and reporting program performance requires that:"Recipients are responsible for managing and monitoring each project, program, subcontract, function or activitysupported by the award."13
National Science FoundationOffice of Inspector General(Continued)City College of San Francisco does not require subcontractors to submit supporting documentation along with thereimbursement forms. City College of San Francisco reimburses the subcontractor based on the submittedreimbursement forms and relies on the subcontractor to maintain the supporting documentation.As a result of the College's failure to obtain and review the documentation supporting the reimbursement forms,City College of San Francisco's ability to efficiently and effectively manage and monitor expenditures and activitiesby the subcontractor, which are supported with NSF funds, is compromised.From the total amount of 1.077,998 of subcontractor costs claimed (42% of total costs claimed), we selected asample of 655,939 (61% of total subcontractor costs claimed) for review. Reimbursement forms properlysupported the amounts selected for review. We then selected a sub-sample from the reimbursement forms forfurther review and requested that documentation supporting the amounts be submitted from the subcontractor forBased on our review, we questioned a total ofour review, since they were not available from the College. 50,601 of subcontractor costs because they were unsupported. (See Schedule of Questioned Costs. Schedule B.Note B-3). These questionable subcontractor billings could have been detected by the College and prevented itfrom improperly charging NSF, had it properly reviewed supporting documentation.Recommendation No. 5 -Subcontract Monitoring - We recommend that NSF's Division Directors of DACSand DGA ensure that City College of San Francisco develop and implement policies and procedures to ensureappropriate managing and monitoring of subcontractor's costs, including obtaining and reviewing documentationsupporting reimbursement forms in accordance with OMB Circular A-110.Awardee CommentsThe District reviews the Audited Financial Reports for each of the subcontract colleges and looks specifically formaterial control weaknesses that would require greater subcontract review. Subcontractors provide a narrativewith reimbursement requests. Each of them keeps supporting documentation at their respective colleges. The P1does travel to the subcontract sites and does monitor their effort expended. The District will be developing andi mplementing a policy change with respect to the requirements for subcontractors to submit supportingdocumentation along with reimbursement forms in order to comply with the requirements of OMB Circular A-110§ .51.Auditors' ResponseThe awardee's comments are responsive to the recommendation.We considered these internal control weaknesses in forming our opinion on whether Schedule A presented fairlyi n all material respects, in conformity with National Science Foundation policies and procedures, and determinedthis report does not affect our report dated April 3, 2002 on the financial schedule.This report is intended solely for the information and use of the College's management, the National ScienceFoundation, the Office of Management and Budget, and the Congress of the United States and is not intended tobe and should not be used by anyone other than these specified parties.I rvine, CaliforniaApril 3, 200214
FINANCIAL SCHEDULES ANDSUPPLEMENTAL INFORMATION
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SCHEDULE BCITY COLLEGE OF SAN FRANCISCONational Science Foundation Award Number DUE - 9850325Schedule of Questioned CostsFrom September 1, 1998 to September 30, 2001( Continued)Note B-1Travel Expense, (Continued)Awardee Response, (Continued)Fund 121192 activity included a shared room at the BIO 2000 conference where the PI was both aspeaker and an exhibitor. The travel request clearly stated that the room was shared (includingthe name of the individual). The cost for the PI was actually half of the calculated rate, whichresulted in a cost far less than the allowable rate.Original receipts supporting the request for reimbursement evidenced the amounts "over" theallowable rate and the amounts are reasonable and allocable for the location and event.Fund 121193 activities included the NISOD in 2000. The PI was a speaker and stayed at aconference hotel because there were none available at a lower cost that did not require additionaltransportation such as a car rental and parking costs.Auditors' ResponseWe concur with the auditee's statement that original receipts accompanied each reimbursementrequest. However, when there was a case, which the rate incurred exceeded the allowableamount, there was no evidence the higher rate was approved by the Chief Financial Officer of theCollege. Therefore, the questioned costs of 1,241 remains as stated.Note B-2Consulting CostsDuring our review of consulting costs, we noted numerous situations where the College enteredi nto fixed fee contracts with several different consultants. In each case, the consultant did notsubmit an invoice detailing out the days worked and/or services rendered. Each consultant waspaid the agreed upon fixed fee and the only supporting documentation was the signed contract.Through discussions with College personnel, we were able to determine that the services wererendered. However, without a detailed invoice, we are unable to determine the daily rate paid toeach consultant.National Science Foundation, Grant Policy Manual, Section 616.1 (c), regarding OutsideConsultants states in part: ".payment for consultant's services may not exceed the dailyequivalent of the then current maximum rate paid to an Executive Schedule Level IV FederalEmployee."17
SCHEDULE BCITY COLLEGE OF SAN FRANCISCONational Science Foundation Award Number DUE - 9850325Schedule of Questioned CostsFrom September 1, 1998 to September 30, 2001( Continued)Note B-2 ConsultingCosts, (continued)I n addition, the College entered into several agreements with consultants to perform certainservices for a fixed fee. Since we were able to determine that services were rendered and relatedto NSF activities, no costs were questioned. However, we recommended that the City College ofSan Francisco develop and implement written procedures to ensure that rates reimbursed toconsultants are within the maximum daily rate allowed by Federal Law. See the IndependentAuditors' Report on Compliance with Laws and Regulations and Internal Controls for a fulldiscussion of internal control weaknesses concerning consultant costs in Section II.Awardee CommentConsultant expenses over 238,000 were indeed supported with proper invoices based on thecontracts with the consultants. Both the Co-PI and the evaluator do not work on the basis ofbillable hours. They receive a fixed fee for services rendered.The selection of consultants was done with full approval of the National Science Foundation. TheCo-PI assisted in writing the original grant proposal and was included in the original grant as theCo-PI while the evaluator was approved by the National Science Foundation as the CenterEvaluator.Auditors' ResponseNotwithstanding the auditee's response, the auditee should negotiate the fixed price agreementwith documentation showing that the price was based on rates below the maximum daily rate ofpay, or the individuals in question should be submitting invoices sufficient in detail to ensurecompliance with NSF's Grant Policy Manual, Section 616.1.Note B-3Subcontract CostsDuring our of review of subcontract costs, we noted that City College of San Francisco did notrequire subcontractors to submit supporting documentation along with the reimbursement forms.From the general ledger, we used our judgment to select a nonstatistical sample of subcontractorcosts claimed and requested that the supporting documentation be provided by thesubcontractors for our review. Over a period of a month, numerous requests were made to thesubcontractors to provide the proper documentation to support the amounts claimed on thereimbursement forms. Based on the documentation ultimately provided, we noted the followingconditions:a)b)c)d)e)Documentation provided was often insufficient to determine allowability and reasonableness.Duplication of costs.Missing time sheets.Lodging rates exceeding College's Adopted Travel Policy.Supporting documentation was not always provided.18
SCHEDULE BCITY COLLEGE OF SAN FRANCISCONational Science Foundation Award Number DUE - 9850325Schedule of Questioned CostsFrom September 1, 1998 to September 30, 2001(Continued)Note B-3Subcontract Costs, (continued)OMB Circular A-110, Subpart C, § .51 (a) Monitoring and reporting program performance requiresthat: "Recipients are responsible for managing and monitoring each project, program,subcontract, function or activity supported by the award. Recipients shall monitor subcontracts toensure subrecipients have met the audit requirements as delineated in § .26."OMB Circular A-110, Subpart C, § .53 (b) states: "Financial records, supporting documents,statistical records, and other records pertinent to an award shall be retained for period of threeyears from the date of submission of the final expenditure report."National Science Foundation, Grant Policy Manual, Section 350 (a), Records Retention and Auditstates: "Financial records, supporting documents, statistical records and other records pertinent toa grant will be retained by the grantee for a period of three years from submission of the FinalProject Report."OMB Circular A-21, Section J, Subsection 8.C, Paragraph (2) 'After-the-Fact Activity Records'states in part: ".salaries and wages by the institution will be supported by activity reports asprescribed below. (a) Activity reports will reflect the distribution of activity expended by employeescovered by the system. (b) These reports will reflect an after-the-fact reporting of the percentagedistribution of activity of employees. Charges m
the costs of lodging, other subsistence, and incidental expenses, shall be considered reasonable and ally only to the extent such costs do not exceed charges normally allowed by the institution in lets regular operatic a result of an institutional policy and the amounts claimed under sponsored agreements represent reasonable allocable costs."