2001 - Audit Report

U.S. Department of Labor
Office of Inspector General
Office of Audit

Role Models America, Inc., - Costs Claimed For Reimbursement For the Period June 5, 2000 Through March 31, 2001

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MARGIN: $262,258 Questioned For "Role Models America" Grantee

Under the Workforce Investment Act, ETA awarded a 2-year, $10 million grant to Role Models America, Inc. (RMA), for the purpose of providing education, training and other services, in a Job Corps setting, to out-of-school youth facing serious barriers to employment. The RMA curriculum, which serves a diverse group of young men and women from all over the nation, includes vocational training and secondary school course work leading to a high school diploma and possibly on to higher education. Mentors, academic tutors, and counselors serve as role models for the students.

The OIG performed a financial and compliance audit of the direct costs claimed by RMA from June 2000 (grant commencement) through March 2001. For the audited period, RMA reported $6.65 million in grant costs to ETA, however RMA's general ledger supported costs of only $4.6 million, which we audited.

In addition to questioning $262,258 of RMA's incurred costs, we determined indirect costs charged to the grant were not appropriate because RMA had only one Federal grant. Of $333,197 RMA charged to the grant as indirect costs, we questioned $183,959 because the charges were either personal expenses of RMA's President and CEO, were for services that did not benefit the grant, or lacked supporting documentation. Types of questioned costs include mortgage payments, salary expenses, repayment of loans, rental payments, furniture and others. We also questioned $77,912 charged as direct costs because RMA was unable to provide us with documentation to support the costs, and a nominal amount of travel expenses.

We also determined that serious internal control problems exist in RMA's accounting system. RMA posted a significant number of transactions to the wrong accounts, and had not recorded drawdowns, non-cash disbursements, and payroll and fund-raising entries in its general ledger. It also maintained excessive cash balances and had not reconciled its bank statements. Additionally, RMA could not provide supporting documentation for more than $2 million in accruals it reported to ETA for the period ending March 2001.

RMA did not agree with the majority of the OIG findings. We recommended ETA recover the improper expenditures to the grant, seek documentation from RMA to support the unsupported questioned costs, and take steps to ensure the viability of RMA's accounting system.

(Audit Report No. 21-01-200-03-390; issued Sept. 27, 2001)

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