Saturday, October 3, 2015

Audit finds irregularities in Cuba program

Questioned costs redacted
A contractor for the Agency for International Development submitted $193,115 in questionable expenses in 2009 and 2010, according to an audit obtained under the Freedom of Information Act, or FOIA.
The contractor, International Relief & Development, or IRD, was running a program called "Hastening the Transition to Democracy in Cuba."
The audit found that IRD claimed $193,115 in costs that were either poorly documented or prohibited.
The audit said:
We also noticed an ineligible charge of [redacted] included in the travel costs to the subaward for alcoholic beverages which are specifically unallowable per 2 CFR 230: Appendix B, 3.
Cost breakdowns were redacted, so it's impossible to know how much was spent on alcohol and other items in the name of Cuban democracy.
I requested the audit under a FOIA request to the U.S. Agency for International Development on March 18, 2011.
USAID responded on Sept. 25. The agency has spent millions of dollars on audits of the Cuba programs over the past five years. (See "USAID: For our eyes only.") This is the first time I've gotten a peek at one auditor's findings.
Alcohol included in travel expenses
The DMP Group in Washington, D.C. carried out this audit, examining $1,765,495 in expenses that IRD reported from March 1, 2009, to March 31, 2010.

The audit found that nearly 11 percent of the expenses that the organization submitted were "ineligible" or "unsupported."
The DMP Group's 12-page report stated:
Ineligible questioned costs are outlays that are contrary to a provision of the law, regulation, agreement, or other documents governing the expenditure of funds. Unsupported questioned costs are outlays that are not supported by adequate documentation.
The audit found that IRD submitted:
  • Unsupported personnel costs. "There were months were certain personnel costs charged to the subaward did not get paid and other months where a labor activity report was missing. While some of the labor charges may be allowable, it is the recipient's responsibility to review all labor costs and charge them properly."
  • Unsupported fringe and other direct costs.
  • Unsupported and ineligible travel costs. The IRD didn't use the correct per diem rates for travel. The organization charged USAID for a full day's work on travel days. Travel days were supposed to be paid at 75 percent of the daily rate.
  • Unsupported outside services costs. "We noted that the subrecipient utilized a contractor to provide entrepreneur training services during the review period. The subrecipient did not obtain a contract for these services rendered. The contract is needed to support services rendered, ensure that the costs reported were in accordance with terms of the agreement and a fair and reasonable price was obtained for the procurement. The subrecipient did maintain a contract for interpreter services with the same contractor. Consequently, we questioned all charges to the subaward related to this contractor's services for entrepreneur training paid without a valid contract.
The audit found that IRD failed to properly monitor its subrecipient "to ensure costs charged to the program were allowable in accordance with applicable federal regulations and terms of the grant award."
In response to the finding, IRD stated:
IRD has continuously monitored its subrecipients. The record shows our many meetings and monitoring visits, including visits by subrecipient staff to IRD's headquarters in Washington, D.C. for training and capacity building. Upon discussions with DMP staff regarding their on-site review of subrecipient [redacted] IRD assigned [redacted] an IRD staff member with over 20 years experience with the expenditure and reporting thereon of federal funds, to make an assessment of and site visit to [redacted] accounting operations in Miami. The site visit took place August 16-18, 2010. 
As a result, IRD staff continues to work with [redacted] Cuba staff and consultants to analyze the expenses questioned in Notes One (1) through Four (4) of the DMP Review...
The DMP Group also said that IRD had failed to resolve concerns raised in a June 2009 financial compliance review.
The review had said that IRD lacked supporting documents for a subcontractor's rental of office space. In addition, the subcontractor "did not have written policies and procedures for authorizing and processing checks for transmitting funds to Cuba."
IRD failed to obtain from the subcontractor "a ledger of activity, copies of invoices and supporting documentation for expenditures." The organization said it didn't provide a ledger because it "did not believe that such information should be created retroactively."
The DMP Group replied:
The Grantee's response is not adequate. The supporting documentation to cure the questioned costs related to these findings has not been provided. When requested by the Reviewer, IRD did not provide a complete report of expenses incurred under the subaward to [redacted] and provide the related documentation to support the reasonableness, allowability, and allocability of costs incurred under the grant.
Tax records show that IRD received $2,232,909,062 in government contracts from 2009 to 2013.
The organization has been one of USAID's main partners for Cuba programs. And even after auditors questioned its handling of the "Hastening the Transition to Democracy" program in 2010, it received at least $3.5 million for Cuba projects from September 2011 to September 2014.
IRD is a non-governmental organization, but receives 99.99 percent of its funding from the government.
Arthur B. Keys Jr.
In April 2013, I reported that Arthur B. Keys Jr., then president and CEO of IRD, earned $676,916 in compensation from the IRD and related organizations.
His wife, Jasna Basarick-Keys, the company's program operations chief, reported compensation of $363,255. One of her relatives, Mladen Basarick, the IRD's director of global technology, had a salary of $193,121. And Keys family member Natasa Rukaa was raking in $88,009 in salary and benefits.
In December 2014, Robert Ervin took charge as president and CEO. The IRD website promised "new levels of transparency, oversight, and accountability."
I suggest that IRD voluntarily release all the audits of its Cuba programs so taxpayers can see how well the organization is "Hastening the Transition to Transparency."

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