January 2, 2003
SUBJECT:
FINAL DETERMINATION
REFERENCES:
PROTEUS, INC.
Audit Report No.: 21-02-003-03-365
Grant Number:
AC-10750-00-55
Audit
Period: July 1, 2000 through June 30, 2001
Auditors'
Questioned Costs: $215,792
Amount
Allowed: $194,942
Amount
Tentatively Disallowed: $20,850
Acceptance
of Stand-in Costs: $20,850
Number
of Administrative Findings: one
Number
of Uncorrected Administrative Findings:
none
Introduction: This is
the Grant Officer's FINAL DETERMINATION (FD) on the findings and
recommendations contained in the above referenced Office of Inspector General
(OIG) financial and performance audit on Proteus Inc. for the period ending
June 30, 2001.
The OIG contracted with
Harper Rains, Stokes & Knight, P.A. to perform the audit. The audit was performed in accordance with
generally accepted auditing standards and Government Auditing Standards issued
by the Comptroller General of the United States. The audit included tests of
the accounting records and other accounting procedures, as the OIG considered
necessary in the circumstances.
On April 23, 2001, ETA’s
Division of Seasonal Farmworker Programs (DSFP) issued a monitoring report that
detailed the results of a site visit conducted in October 2000. The report contained several findings
related to eligibility of participants.
During this monitoring visit, DSFP discovered sixty-nine ineligible
participants. As a result of this
report, Proteus terminated those participants.
In addition to the above
69 ineligible participants, the auditors discovered another 10 ineligible
participants during their audit.
The audit report contains
questioned costs relating to the 79 ineligible participants along with performance,
and administrative issues relating to eligibility.
On
August 5, 2002, the Grant Officer issued an Initial Determination (ID) that
disallowed all of the auditors’ questioned costs and the one administrative
deficiency was identified as uncorrected.
On
August 26, the grantee’s attorney, Steven Cundra sent the Grant Officer a
written request for an additional 60-days to respond to the ID. The Grant Officer approved the request on
August 27.
On
October 31, the Grant Officer and the audit resolution specialist assigned to
the audit held a meeting with the grantee’s attorney regarding the issues
contained in the ID. At this informal
resolution meeting, the attorney outline documentation that would be submitted
in response to the ID.
On
November 8 and 13, the Grant Officer received extensive documentation from the
attorney regarding the issues contained in the ID.
At
the Grant Officer’s request, the attorney provided additional information on
December 13 and 24. In addition, the
attorney provided proposed stand-in costs for consideration. This information
was considered in preparation of the FD.
A.
ADMINISTRATIVE
FINDING
Incorrect Job Placements Reported to ETA
(Pages 13-14)
The auditor’s review of
the 15 sampled participants found that 8 participants were reported as having
entered unsubsidized employment. The
auditors stated that 2 of the 8 were verified as having entered unsubsidized
employment and six were ineligible refugees whose reported farm work took place
overseas and was unverifiable. These
six ineligible refugees participated only in Proteus’ ESL program. These six participants were ineligible for
the program and should not have been reported as program participants or
entered unsubsidized employment.
The auditors further
stated that three of the six were employed when they entered the program and
maintained the same job throughout their English as Second Language (ESL)
training.
As a result of the
auditors’ discussion with ETA, and since there is no specific guidance on how
to report these individuals, ETA believed that they should not be reported as
placements in unsubsidized employment.
Since these participants only attended ESL training, they should have
been reported, if eligible, as Employment Enhancement Only participants.
Grantee’s Response to
the ID: Proteus acknowledged that one of its case managers had
erroneously reported three placements.
The outcomes were corrected in the MIS computer tracking system and
changed to Employability Enhancement outcomes rather than indirect placements.
Since the initial DSFP
Monitoring Visit in October 2000, Proteus has held training sessions for its
NFJP staff. On each occasion,
eligibility and documentation issues were covered: June 2001, March 2002, and June 2002. There has not been any specific written guidance to staff
concerning the reporting of employment placements, beyond what is in the
manual, using DOL WIA definitions.
Since the discovery of
eligibility problems associated with the Monitoring Visit and the OIG Audit,
Proteus management personnel has been carefully reviewing all of the MIS
paperwork to assure compliance with the eligibility of NFJP participants as
well as with outcome reporting. Since
we have been submitting reports to DSFP as conditions of our funding, we can
assure DOL that all the placements are indeed verified and legitimate
placements as reported.
Grant Officers
Determination: Based on the corrective actions indicated
above, this finding is corrected. However,
the Program Office will monitor the corrective actions taken by Proteus to
ensure effective implementation.
B. QUESTIONED COSTS
Ineligible
Participants $215,792
(Pages
8-12)
FINDING NO. 1:The
auditors reviewed the files of the 69 ineligible participants to determine
whether they agreed with DSFP’s determination of their eligibility.
The DSFP gave the
following reasons for the refugee’s ineligibility: (1) none had worked in agricultural employment in the United
States, (2) many had jobs that appeared to be self- employment or agricultural
retailing, (3) for many the employment information was not verifiable, (4)
self-attestation, which is limited to emergency assistance, was used for
related assistance services, and (5) the NFJP guidance issued July 1, 2000 does
not recognize occupations outside of North America.
The auditors review showed
that the ineligible determinations for these participants were indeed
accurate. Fifty-one of the 69
terminated participants were refugees with foreign farmwork. The remaining 10 were dependents of
farmworkers rather than farmworkers or had performed farmwork for their
immediate family.
To determine how effective
Proteus was in selecting eligible participants, the auditors excluded the 69
participants terminated by Proteus from their universe, and selected a sample
of 30 participants. As a result, the
auditors found that 10 of the 30 (33%) participant files selected contained
ineligible participants.
The auditors stated that
many of the participants enrolled in these programs were refugees with
unverifiable foreign farmwork, or participants who either could not show an
employer/employee relationship or had not been primarily employed in farmwork.
The auditors stated that
according to Proteus management and the results of the sample items reviewed,
almost all of the 102 participant enrolled in the ESL program were refugees and
therefore ineligible. Further, the
auditors stated that the continuation of this program should be evaluated based
on the needs of the eligible population.
The costs questioned for
the ESL ineligible participants include direct participant allowances, support
services, and overhead costs for the classroom training provided by
Proteus. The in-house training provided
by Proteus was ESL and some related work culture classes. The average cost per participant was
determined by reviewing the costs of the ESL program along with enrollment
data. The auditors prorated these costs
along with other allowances to determine a reasonable program year 2000 cost
amount, as summarized in the following table:
|
|
Number of
|
Direct
|
ESL
|
|
|
|
Participants
|
Support
|
Costs
|
Total
|
|
Refugees with foreign Farmworker
|
65
|
$70,195
|
$141,757
|
$211,952
|
Dependents of farmers
Family farmwork
|
12
|
20,058
|
-
|
20,058
|
Other ineligible
Participants
|
2
|
1,978
|
-
|
1,978
|
|
|
79
|
$92,231
|
$141,757
|
$233,988
|
Grantee’s Response to
the ID: In the November 8 correspondence, the attorney provided a lengthy
response in regard to the reasons why the disallowances for the ineligible
participants in each of the three categories should be dismissed.
The following outlines the attorney’s
justifications for the dismissal of the disallowances:
Refugees with Foreign Farmwork
- The disallowances in the audit were based on
proposed post-enrollment changes to the National Farmworker Jobs Program
(NFJP) participant eligibility policy guidance issued by the Division of
Seasonal Farmworker Programs.
Whereas, Proteus’ eligibility determinations for Program Year 2000
were based on guidelines set forth in NFJP Bulletin No. 00-02, dated July
1, 2000. The established
guidelines state that “primarily employed in agricultural labor” means the
farmworker, during the 12-month eligibility determination period, depended
primarily on farmwork for his/her support by... .” Whereas the proposed
bulletins added that the farmwork must be performed within the United
States and Puerto Rico. The established (NFJP Bulletin No. 00-02)
guidelines do not place any limitations on where qualifying farmwork must
be performed.
In
support of this argument, the attorney provided five subsequent draft NFJP
Bulletin Participant Eligibility Policy Guidance along with a comparison of
these draft policy guidance with the existing eligibility definition and
guidance. These subsequent draft policy
guidance bulletins have never been approved by the Office of National Programs
or issued to the grantee community.
In
addition, the audit field notes that were taken by Terry Meeks, Director of
Proteus, were provided as evidence as to the reason why Proteus believes that
the draft policy guidance was used as a basis for the disallowances. The notes states that Ken Miller, of the audit
firm Harper Rains Stokes & Knight advised Proteus at a October 26, 2001
meeting that it will use the may 14, 2001 “Draft” Policy Guidance as ETA
eligibility determination.
- Proteus’ approved (by DOL) Grant Plan for PYs
1999-2000 stated that it would serve refugees that performed their qualifying
farmwork outside of the United States.
- The auditors’ disallowance violates the
anti-discrimination provisions of the WIA. WIA specially prohibits any discrimination against refugees
and other non-citizens that are expressly made eligible for services
funded by the MSFW program.
Neither the Act, the implementing regulations, nor the issued and
authorized July 1, 2000 NFJP Policy Guidance deny eligibility to refugees
or limit qualifying farmwork to work performed in the United States and
Puerto Rico. The efforts of the
Division of Seasonal Farmworker Programs and the auditors to exclude
refugees with qualifying foreign farmworker clearly violates the cited
non-discrimination provisions of WIA and, therefore, are void as a matter
of law.
- The current effort to exclude applicants with
qualifying foreign farmworker also contravenes DOL’s prior advice and
assistance to MSFW grantees.
Proteus was advised that refugees with qualifying foreign farmwork
were eligible for participation in the MSFW program from Dan Cox, its
federal representative in the early 1980’s. At that time, Mr. Cox informed Proteus that many farmworkers
were qualified by other grantees based on the farmwork they performed in
Mexico and South America. During
this time, Proteus explained to their federal representatives that
documentation of the work performed by the refugees were nearly impossible
to obtain, and Mr. Cox suggested the use of an affidavit to verify these
dividuals’ work histories and income.
As such, Proteus followed Mr. Cox’s instructions and obtained such
affidavits from participants with foreign farmwork.
In
1991, a weeklong monitoring visit of Proteus program was conducted, which
included its participant activities and eligibility procedures and files. Nothing in the 1991 Monitoring Report ever
suggested that enrollment of refugees with foreign farmwork was in any way
improper. A copy of the monitoring
report along with Proteus’ response was provided as documentation.
The response stated that
there is no basis in law or fact for disallowing service costs of eligible
refugees who performed their qualifying farmwork in a foreign country. If the DSFP intends to change established
participant eligibility guidelines, it may only do so prospectively, not
retroactivity. The audit disallowances
for participants with qualifying foreign farmwork is unsupported, contrary to
law, and, therefore, must be dismissed.
Dependents of Farmers/Family Farmwork
The Initial determination
disallowed these 10 participants on the grounds that “they were dependents of
farmworkers” rather than farmworkers or had performed farmwork for their
immediate family. The attorney’s response further stated that these
disallowances are also based on proposed changes in the participant eligibility
criteria that have never been approved or officially promulgated.
In support of this claim,
the attorney again used the argument that the auditors used the proposed
changes to the Participant Eligibility Guidance that would exclude children of
nonfarmworker families (including children of farmers) from qualifying for
participation in their own right, as their bases for disallowing the costs for
these 10 participants.
The response also stated
that Proteus has been enrolling dependents of small economically disadvantaged
farmers for 17 years with DOL approval and monitoring. Not once in all this time had this practice
ever been questioned or disparaged.
Proteus’ Response to DSFP Monitoring Report, dated June 1, 20001 were
provided as documentation.
While the work performed
by these participants does correspond with their school breaks, the majority of
hired seasonal farmwork in Iowa falls between late April through the summer
months and into the early fall, i.e., the same time that students are normally
not in school. Thus, even a farmworker
in Iowa who was not a student would show the same periodic work history as the
students. Moreover, schools in Iowa
take a break during this time period purposely to coincide with the region’s
main growing season so that youth can assist their families and neighbors in
crop-related farmwork.
While the auditors
questioned the documentation for these participants, the work history of these
dependent participants was taken from the parent farmworker—this is how Proteus
determined that the family met the definition of “disadvantaged“ with JTPA/WIA.
Other Ineligibility Participants (2)
As stated by the auditors,
“one participant was discovered and terminated by Proteus during a verification
review, because it found inadequate documentation to support the participant’s
eligibility.” When Proteus requested
more documentation for the file the family refused to provide the
information.
The disallowance for the
other participant was based on the auditors’ conclusion that the participant’s
work was primarily non-farmwork. The
auditors’ reasoning is as follows:
Although
he was just able to meet the 50 percent of days in farmwork requirement, the
majority of this participant’s income came from non-farmwork. In meeting this 50 percent threshold,
however, days were counted as both farmwork and non-farmwork due to concurrent
employment.
Proteus properly qualified
this individual as eligible for participation as he spent at least 50 percent
of his total work time in farmwork. In making
their calculation for days of concurrent employment, as noted by the auditors,
Proteus counted one day of farmwork and one day of non-farmwork, which is
strictly in accordance with the Eligibility Policy Guidance.
Grant Officer’s
Comments: First
and foremost, The NFJP was established by Congress to assist the labor force
employed in the U.S. agricultural industry whose workers persistently endure
low wages and unemployment due to factors such as labor and crop instability
and weather related crop disasters. The
language of JTPA Sec. 402(a)(1) acknowledges that the “Nation’s rural
employment problems’ are the direct result of the chronic seasonal unemployment
and underemployment in the agricultural industry within the United States. Congress authorized JTPA Sec. 402 and
subsequently WIA Sec. 167 as remedy to conditions existing in America’s rural
communities.
In response to Proteus’
field notes from the October 26, 2001 meeting with Terry Meek that states that
“they will use the May 14, 2001 “Draft” Policy Guidance as ETA eligibility
interpretation”, the following information was offered: In a November 17, 2002 letter the auditor,
Ken Miller provided the Office of Inspector General his comments regarding the
use of the “Draft” guidance. In this letter,
the auditor stated that they did not use the “Draft” guidance as their basis
for questioning costs. He further
stated that the “Draft” was used as ETA management’s interpretation of the
eligibility rules. The “Draft” guidance
was written after ETA prepared a monitoring report dated April 23, 2001. The auditor stated that the statement made
in this meeting was only meant to infer that the auditors agreed with the logic
used by ETA in their report. In
addition, the auditor stated that they reviewed the ETA report and concurred
with the eligibility determination made by ETA, primarily to the lack of
verifiable farmwork and the use of self-attestations.
In fact, no place in the
audit report refers to this “Draft” guidance as a basis for questioning costs.
The following provides the
Grant Officer’s comments in each of the three categories at issue:
