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OIG ISSUES AUDIT OF UNITED STATES VETERANS INITIATIVE

WASHINGTON (September 10, 2007) – The Office of Inspector General, Corporation for National and Community Service, today issued an audit report that found major  financial and operational problems involving the AmeriCorps program of United States Veterans Initiative (USVI), a Southern California-based nonprofit that serves homeless veterans at multiple locations nationwide.

The audit also revealed a number of less-than-arms-length transactions involving USVI and Cantwell-Anderson Inc. (CAI), its for-profit joint venture partner headed by developer Thomas F. Cantwell, a founder and former executive director of USVI.

The OIG audit focuses on a single Corporation AmeriCorps grant of $6.8 million to USVI for the period September 1, 2003, to August 31, 2006, for programs at multiple service sites.  Of that amount, USVI drew down $5.36 million.  The auditors questioned more than $500,000 of the grant as improperly charged and almost $250,000 in Corporation education awards as improperly given to USVI’s AmeriCorps members.

As a result of the OIG’s findings, the Corporation on May 8, 2007, deferred action on further funding for USVI’s AmeriCorps program, which was operated at USVI service sites in California, Hawaii, Texas, Nevada, Arizona and Washington, DC.

From 1996 to 2005, USVI received in excess of $79 million in Federal taxpayer grant dollars from the Corporation and the U.S. Departments of Veterans Affairs, Housing and Urban Development, and Labor.

The OIG’s Audit Report 07-21, along with USVI’s response and the OIG’s comments, is available online at www.cncsoig.gov under “Audits” and “Reports.”

“There can be no better use of Federal funds than for helping our veterans in need.  But that good purpose is no excuse for misusing such funds and thus depriving veterans of money allocated to benefit them,” said Inspector General Gerald Walpin.  “Congress created the OIG to scrutinize the spending of taxpayers’ money in order to prevent fraud, waste and abuse.  This audit spotlights substantial amounts improperly charged to a Federal grant, as well as substantial amounts not spent for veterans’ services, the purpose of the grant.  This office will continue its scrutiny to ensure proper use of Federal funds and the return of money improperly taken from the government.’’

The auditors cited 10 internal control and compliance findings, including four material weaknesses, most of which resulted from USVI’s widespread lack of documentation of its grant costs and expenditures.

Questioned costs included a number of personal items, including home cable TV service, that were charged to the Federal grant by Stephani Hardy, who recently announced her resignation as USVI’s chief executive officer.

An OIG analysis of USVI’s joint venture agreements and business services agreement with Cantwell, his development company and its subsidiaries, found a number of questionable transactions.  For example, the joint venture agreement between Cantwell and USVI at the Westside Residence Hall in Inglewood, CA, which was essentially copied and used at other USVI sites, called for the partners to evenly split all income.

From 1994-2005, Westside Residence Hall, owned and headed by Cantwell, generated $20 million of revenue, but Cantwell determined that USVI  received only $900,000, or less than 5 percent of the total.  USVI officials said that they never reviewed Cantwell’s computations and could not explain significant expenses Cantwell charged, which resulted in USVI’s less than 5 percent share.  In fact, USVI never received the $900,000, which was said to be applied to reduce its loans from Cantwell’s companies.  The agreement also required USVI’s share to be paid directly into a trust account in USVI’s name, to be opened by USVI.  The account was never opened.

The audit cites other examples of USVI’s less-than-arms-length relationship with Cantwell and his companies.  Cantwell has represented USVI in testimony before Congress on numerous occasions, the most recent in 2006.  USVI and Cantwell’s companies share the same office location in Inglewood and Internet web site, and minutes of USVI’s board of director meetings reflect Cantwell’s dominant role over USVI.

Also, Cantwell and Hardy have had a long personal relationship and are romantically involved and engaged to be married.

Moreover, the business services agreement signed by Cantwell’s CAI and USVI in 1998, without competitive bidding, together with the joint venture agreement, gives CAI control over USVI’s contracting and financial planning.

Inspector General Walpin thanked Carol Bates, Assistant Inspector General for Audit, Stuart Axenfeld, OIG Audit Manager, and the California audit firm of Mayer Hoffman McCann P.C.for their excellent work resulting in this audit report.

To Read the full Report Click Here!