Submitted By Williams, Adley and Company, LLP March 22, 2005



We conducted an independent examination of the Save the Children Canada’s Education Initiative project in Burkina Faso under cooperative agreement E-9-K-3-0064 for the period September 2003 to November 2004. Our examination was performed in accordance with Generally Accepted Government Auditing Standards (GAGAS) and requirements established under the Code of Federal Regulations (CFR), Title 29, Part 95 and, accordingly, included examining, on a test basis, evidence about Save the Children Canada’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Our test work was divided into several broad areas for examination purposes. These areas included the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. Administrative Procedures Fraud Risk Assessment Performance Data, Measures and Goals Construction Costs Cash Management Budget Plans and Revisions Compliance Requirements Disbursements Inventory Management

We traveled over 1,700 miles throughout northern, western and southwestern Burkina Faso to observe, inquire about and assess program attributes, challenges and results. We visited several school sites, met with students, parents and parent committees, teachers, government building technicians/inspectors and school administrators and contractors to gather information on and determine the programs’ impact and project status. We met with the United States Ambassador upon our arrival in Burkina Faso to brief him on our objectives, the overall scope of work and timeframe for completion of our fieldwork. We conducted a debriefing with the Ambassador prior to our departure and acknowledged his support in obtaining further project assistance from the Burkina Faso government. We conducted tests to express an opinion on management’s assertions that Save the Children Canada (STCC) complied with the terms and conditions of its Education Initiative project in Burkina Faso under cooperative agreement E-9-K-3-0064 and 29 CFR, Part 95 and that financial reports and reported performance data are accurate and reliable during the period September 1, 2003 through November 30, 2004. During our visit, we found that school construction at the sites visited was well coordinated and substantially completed, teachers had been recruited and assigned to the schools, both male and female student recruitment was a success and support from the community genuine and enthusiastic.

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We noted that construction was no less than 90 percent completed for all the sites visited and 100 percent completed for three of the seven locations. All the schools visited were conducting classes either in the completed structures or in adjacent facilities pending completion of the finish work (painting, clean-up, etc.) on the schools. Classes began on November 2, 2004 for six of the schools visited and November 10th for the seventh school. We also noted, however, a number of findings that management must address in order to ensure the project’s continued success. The findings are based on our assessment of the risk to the project, use of funds, reporting accuracy, timeliness and support and, procedural compliance. Findings, questioned costs and recommendations are hi-lighted in this executive summary along with a brief description of our overall assessment. In our opinion, STCC complies, in all material respects, with the aforementioned requirements for the period September 1, 2003 to November 30, 2004, except for conditions 3, 5 and 9 related to construction of ancillary facilities at the schools, cash advances and financial reports that we considered significant and, payroll related questioned costs that we identified in findings 10 and 14. SUMMARY OF FINDINGS Performance findings: 1. Performance data collection related to the daily attendance record keeping was not consistent. 2. Teachers were not trained to use the educational workbooks provided and both teachers and students lacked essential supplies. Construction Cost findings: 3. Construction of wells, latrines and canteens (Significant): None of the seven (7) schools visited met the Ministry of Basic Education (MEBA) requirement for the construction of wells, latrines or canteens. 4. In one instance the contractor was paid 90% of the contract prior to completion of the facilities in violation of the contract terms. Cash Management findings: 5. Cash advances in excess of need (Significant): Cash balances exceeded STCC immediate needs resulting in a cash balance of $367,006 in excess advances. 6. The grantee loaned funds from the project to its regional office that were not allowed by the cooperative agreement or Department of Labor regulations. 7. The petty cash fund established for the project exceeded the petty cash limit that was set by the field office. Budget Plan findings: 8. Project obligations are in excess of the USDOL approved budget for construction ($32,000), salaries ($12,843) and benefits ($10,570) over the three-year project period.

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Compliance Requirements findings: 9. Inaccurate financial status reports, SF-269 (Significant): Financial Status Reports, SF-269 for the past three quarters contained errors that were not discovered by management until after the reports were submitted to the Department of Labor. 10. Unsupported labor hours (Questioned cost): The grantee does not use timesheets at the regional and field office levels resulting in questioned costs of $4,671 for hours charged to the project. 11. SAVE Canada/Project TREAT does not have a system to track, monitor and report government and community in-kind contributions. 12. The grantee does not have written standards relating to procurement or contract administration to include USDOL certifications on lobbying and debarment/ suspension. Disbursement findings: 13. The financial reporting was not prepared using the correct currency exchange rates. 14. Salaries did not agree with supporting documents (Questioned cost): The personnel files for 3 employees do not reflect the salaries being paid. The amount of unsupported costs is $1,417. 15. Disbursements related to the construction did not have supporting documentation attached. Inventory management findings: 16. Inventory records for 12 of 36 inventory items tested (33.3%) lacked correct unit cost information, inventory records for 7 of 36 items tested (19.4%) did not have an acquisition date or had an incorrect location description, and for 29 of 36 items tested (80.6%) the description lacked an appropriate identification number as required. We made a number of recommendations to address the findings as presented in summary form below. We recommend that: Performance recommendations: 1. Management ensures the daily recording of attendance in the official attendance books with follow-up by field agents. 2. The teachers receive the appropriate training to use the instructor educational materials in order to enhance the educational experience for the students, and that books and supplies are provided for each student. Construction Cost recommendations: 3. The school construction is completed as soon as possible and the wells, latrines and canteens are provided for the children to ensure the viability of the schools and student retention and, that the project revisit the teacher quarter latrine and wash area designs to provide roofing and privacy for the occupants. 4. The contractors are paid in accordance with the contract terms.

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Cash Management recommendations: 5. Excess advance funds are returned to the U.S. Treasury until needed and draw down calculations are modified to comply with USDOL regulations. 6. The project maintain only one bank account for the disbursal of funds in Burkina Faso, that the bank account be located in Bobo Dioulasso and that STCC disallow any future loans of project funds to any individuals, entities, programs. 7. The petty cash fund limit be maintained at the agreed upon level. Budget Plan recommendations: 8. We recommend that STCC immediately submit a budget revision based on actual contractual obligations to USDOL for review and approval and discontinue the practice of executing obligations that exceed approved funding amounts. Compliance recommendations: 9. Management ensures the use and approval of timesheets for accurately reporting the time spent by each individual charged to the project. 10. STCC institute a more effective financial reporting process with the appropriate levels of review and correct the previous financial reporting using the appropriate average monthly exchange rates. 11. STCC prepare written standards and procedures for procurement and contract administration to include requirements/certification for USDOL funded contracts. 12. STCC determine, report, and provide documentation of the in-kind contributions received in year one and the first three months of year two and institute a system of tracking, reporting, and documenting the in-kind contributions received going forward. Disbursement recommendations: 13. The SF-269 reports submitted to USDOL should be revised to reflect the appropriate currency exchange rates. 14. The employee’s personnel files should reflect the salaries paid to the employees and employees should be paid in accordance with their contracts as support for the validity of the disbursements made. 15. SAVE the Children Canada’s field office institute a policy that requires that a copy of the government inspection report be given to the accountant to support the construction payments made. Inventory management recommendations: 16. The inventory records be updated to accurately include all the required information and that written procedures provide the proper guidance and instructions for compliance with the federal requirements for inventory record keeping and property safeguarding. We wish to acknowledge the exceptional assistance and extensive cooperation provided by the STCC and project staff in performing the fieldwork, coordinating logistics and acquiring translation services. The work could not have been completed without their full participation and support. Examination of Cooperative Agreement E-9-K-3-0064 Williams, Adley & Company LLP 3/22/05 iv