Gateway Community Action Partnership Claimed Unallowable Costs, Did Not Comply with Federal Regulations on Construction and Major Renovations, and Did Not Accurately Account for Grant Funds

Submitting OIG:

Department of Health & Human Services OIG

Report Description:

As part of its oversight activities, OIG is conducting a series of audits of recipients of multiple HHS grants. We selected Gateway Community Action Partnership (Gateway) for this audit because it received multiple HHS Administration for Children and Families (ACF) grants, including Hurricane Sandy Disaster Relief Act grants totaling $19.7 million, and grants to operate childcare programs at more than 50 locations.Our objective was to determine whether Gateway claimed and accounted for HHS grant funds in accordance with Federal requirements.

Date Issued:

Thursday, May 27, 2021

Agency Reviewed / Investigated:

Department of Health & Human Services

Submitting OIG-Specific Report Number:

A-02-18-02011

Component, if applicable:

Administration for Children and Families

Type of Report:

Audit

Questioned Costs:

$932,907

Funds for Better Use:

Number of Recommendations:

Recommendation Number	Recommendation Status	Significant Recommendation
270663	Open	No
We recommend that Gateway refund $932,607 claimed in unallowable costs related to: (1) indirect costs ($356,121), (2) credits received from vendors ($338,363), (3) equipment that was not purchased in accordance with Federal open competition procurement regulations ($208,600), and (4) use of company vehicles ($29,523). Specifically, Gateway did not adjust its indirect costs claimed based on its provisional rate to reflect its final rate. As a result, Gateway claimed an excess of $356,121 applicable to our audit period. In addition, Gateway received reimbursement checks related to the FCC's E-Rate; however, it did not credit its Head Start grant through cost reductions or cash refunds. Instead, Gateway treated the reimbursements as additional Head Start revenue. As a result, Gateway received $338,363 of funds in excess of its approved Federal awards. Further, in June 2015, Gateway solicited bids for the installation of playground equipment previously purchased with Federal funds. In May 2017, Gateway paid Contractor A $233,600 for the installation and purchase of new playground equipment. This violated the Federal procurement open competition requirement because the June 2015 solicitation did not include supplying new equipmentâ€” therefore, the purchase of $208,600 in new playground was not solicited for bids in open competition. Lastly, Gateway included lease payments, gas, and insurance costs related to the use of two company vehicles in its indirect cost pool. However, Gateway did not maintain an adequate level of supporting documentation (e.g., mileage logs) to document that the vehicles were used only for business purposes. As a result, Gateway claimed $29,523 of unallowable costs.
270664	Open	No
We recommend Gateway update and follow its procedures to ensure compliance with all Federal requirements and the accuracy of cost information, including cost proposals, submitted to ACF. Gateway did not comply with Federal requirements related to new construction and major renovations of its Head Start facilities. Gateway inappropriately used Disaster Relief Act funds, did not establish that it had a lack of suitable facilities, and submitted an unreliable cost comparison for the construction of a $22 million facility. In addition, Gateway requested and received funds for major renovations based on a cost estimate that was neither accurate nor prepared by an architect or engineer, as required by Federal regulations. Lastly, Gateway did not adhere to Federal regulations and ACF requirements related to filing Federal interest and annual real property status reports.
270665	Open	No
We recommend that Gateway ensure that costs are allocated to Federal awards in accordance with the relative benefits received.
270666	Open	No
We recommend that the Administration for Children and Families ensure that Gateway complies with Federal requirements and verify information submitted by Gateway to support Gateway's grant award applications, including requesting Gateway to obtain independent analyses of cost comparisons for Head Start facility construction and major renovations.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

270663

Open

We recommend that Gateway refund $932,607 claimed in unallowable costs related to: (1) indirect costs ($356,121), (2) credits received from vendors ($338,363), (3) equipment that was not purchased in accordance with Federal open competition procurement regulations ($208,600), and (4) use of company vehicles ($29,523). Specifically, Gateway did not adjust its indirect costs claimed based on its provisional rate to reflect its final rate. As a result, Gateway claimed an excess of $356,121 applicable to our audit period. In addition, Gateway received reimbursement checks related to the FCC's E-Rate; however, it did not credit its Head Start grant through cost reductions or cash refunds. Instead, Gateway treated the reimbursements as additional Head Start revenue. As a result, Gateway received $338,363 of funds in excess of its approved Federal awards. Further, in June 2015, Gateway solicited bids for the installation of playground equipment previously purchased with Federal funds. In May 2017, Gateway paid Contractor A $233,600 for the installation and purchase of new playground equipment. This violated the Federal procurement open competition requirement because the June 2015 solicitation did not include supplying new equipmentâ€” therefore, the purchase of $208,600 in new playground was not solicited for bids in open competition. Lastly, Gateway included lease payments, gas, and insurance costs related to the use of two company vehicles in its indirect cost pool. However, Gateway did not maintain an adequate level of supporting documentation (e.g., mileage logs) to document that the vehicles were used only for business purposes. As a result, Gateway claimed $29,523 of unallowable costs.

270664

Open

We recommend Gateway update and follow its procedures to ensure compliance with all Federal requirements and the accuracy of cost information, including cost proposals, submitted to ACF. Gateway did not comply with Federal requirements related to new construction and major renovations of its Head Start facilities. Gateway inappropriately used Disaster Relief Act funds, did not establish that it had a lack of suitable facilities, and submitted an unreliable cost comparison for the construction of a $22 million facility. In addition, Gateway requested and received funds for major renovations based on a cost estimate that was neither accurate nor prepared by an architect or engineer, as required by Federal regulations. Lastly, Gateway did not adhere to Federal regulations and ACF requirements related to filing Federal interest and annual real property status reports.

270665

Open