This final report is intended solely for the information and use of the U.S. Department of Labor, Bureau of International Labor Affairs and Catholic Relief Services and is not intended to be distributed to or used by anyone other than these specified parties. Submitted By Williams, Adley and Company, LLP


EXECUTIVE SUMMARY We conducted an independent examination of the Catholic Relief Services’ Education Initiative project in Benin under cooperative agreement E-9-K-3-0062 for the period August 2003 to March 2005. 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 Catholic Relief Services’ 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. Administrative Procedures Fraud Risk Assessment Cash Management Budget Plans and Revisions Compliance Requirements Performance Data, Measures and Goals Disbursements Inventory Management

We traveled to Borgou and Zou Regions of Benin to observe, inquire about and assess program attributes, challenges and results. We visited program field offices and staff in Parakou and Abomey, and visited 6 government schools and 2 vocational training programs to meet with students, parent committees, government school officials and project staff to gather information on and determine the impact of the program and project status. We conducted a debriefing with the U.S. Ambassador to Benin prior to our departure. We conducted tests to express an opinion on management’s assertions that Catholic Relief Services (CRS) complied with the terms and conditions of its Education Initiative project in Benin under cooperative agreement E-9-K-3-0062 and 29 CFR, Part 95 and that financial reports and reported performance data are accurate and reliable during the period August 20, 2003 through March 31, 2005. According to the grantee, a total of 2,805 children were enrolled in education programs as a result of USDOL funded education initiative programs since the project start date in August 2003 through March 31, 2005. Seven hundred sixty-five of these children were classified as recovered victims while the remaining 2,040 were classified as at-risk children. We noted that CRS maintained a robust organizational structure and administrative capability. We also did not note any material weaknesses in its ability to provide the required services or report on the program activities and, we did not note any findings related to its cash management. We assessed the fraud risk related to the organizational structure, accounting systems and administrative capability as low. Examination of Cooperative Agreement E-9-K-3-0062 Williams, Adley & Company, LLP 8/30/06 i

Our audit did disclose eight 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 and procedural compliance. One finding related to the coding of a disbursement transaction that was included in the draft examination report was removed from this final report based on management’s explanation for the entry. The findings, questioned costs and recommendations are highlighted in this executive summary along with a brief description of our overall assessment. In our opinion, CRS complies, in all material respects, with the aforementioned requirements for the period August 20, 2003 to March 31, 2005, except for finding 1 related to budgetary planning and monitoring. SUMMARY OF FINDINGS Budget Plans and Revisions Finding 1 - Budget to actual expenditures comparison reports (SIGNIFICANT) We noted the following discrepancies related to the budgetary process: Although CRS submitted a budget revision that was approved in July 2005, the revision reduced slightly the amount authorized for equipment and the equipment expenditures line item through February 2005 indicated that equipment expenditures exceeded the total budgeted amount by $102,338. A revised budget versus actual report for the quarterly period ended February 28, 2005, prepared in May 2005, corrected the equipment figures but incorrectly showed a cumulative expenditure for contract costs that was $21,452 more than the total budget amount. In a subsequent report, dated September 30, 2005, for the period ended August 2005, CRS reduced contractual expenditures by $203,522 and reported cumulative expenditures of $27,131 for this budget line item. The ratio of fringe benefits to personnel salaries in the budget is significantly understated when compared to the actual figures. As such, these changing conditions imply that the budget review process is flawed and that the budget to actual reports cannot be relied upon for program evaluation purposes or for properly reporting deviations from budgetary and programmatic plans as required. Compliance Requirements Finding 2 - Partner organizations We noted that World Education (WE) and Terre des Hommes (TDH) were identified as partners in the project proposal submitted by CRS, but at the time the cooperative agreement was finalized, USDOL did not require that partners sign the cooperative

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agreement and accept responsibility for achieving the performance indicators and complying with USDOL regulations and the provisions of the cooperative agreement. Finding 3 - Financial reports We noted that: Five of the 9 reports reviewed were submitted late based on the indicated submission date and two of the 9 reports were prepared in error. The indirect rate calculation was not shown on the SF-269A form as required on 8 of the 9 reports reviewed. Reports were submitted in error for overlapping periods (one for January to March 2004, FSR #2 and one for January to February 2004, FSR#3). Performance Measures, Data and Goals Finding 4 - Performance data validation We found that CRS did not institute a formal process for validating the data submitted by the field monitors, although it certified that the information was correct. Finding 5 - Child monitoring procedures Monitoring of victims in the Zou Region needs improvement. For example, 2 out of 15 at-risk children in the test sample were no longer at the schools shown in CRS records. One at-risk student had stopped attending school for over six weeks, unbeknownst to the field monitor. Disbursements Finding 6 - Timesheets (QUESTIONED COST) Timesheets were not available for 2 out of 10 employees selected for testing. One individual did not submit a timesheet for 3 out of the 4 periods tested and 1 individual did not have a timesheet for 1 out of the 4 periods tested. The total salary related to the missing timesheets is a questioned cost of approximately $1,867. Inventory Management Finding 7 - Use of USDOL vehicle A vehicle purchased with USDOL funds was not dedicated to the project. We found that a USDOL purchased Toyota SUV was placed in CRS’ motor pool, and used for various activities other than for the Education First Project (EFP) resulting in a chargeable cost for the proportional use of the vehicle for non-project related activities that encumbered its use for project related activities. Finding 8 - Motorcycle purchased with USDOL funds (QUESTIONED COST) Equipment purchased with USDOL/EFP funds was not marked as project assets. For instance, none of the 3 motorbikes located were labeled/marked as EFP assets and one motorcycle was missing, resulting in a questioned cost of $2,432. Examination of Cooperative Agreement E-9-K-3-0062 Williams, Adley & Company, LLP 8/30/06 iii

We made a number of recommendations to address the findings as presented in summary form below. Budget Plans and Revisions Finding 1 – Budget and expenditures comparison reports: We recommend that: The grantee institute monthly budget versus actual line item review processes that include analysis of verified costs to ensure that actual and projected expenditure levels are accurate and do not exceed the approved budgetary limits. The grantee provide training to individuals responsible for preparing expenditure reports so that the reported information is accurate and reliable. The grantee prepare and submit Form 424-A to USDOL on a quarterly basis to allow the Department to monitor improvements in CRS’ budget monitoring and expenditure reporting and provide technical assistance to the grantee in a timely manner. Compliance Requirements Finding 2 – Partner Organizations We recommend that USDOL negotiate with CRS in an effort to secure World Education and TDH as signatory partners to the agreement, accepting responsibility for achieving the purpose of the award and complying with all applicable regulations and cooperative agreement provisions. Alternatively, CRS must ensure that its sub-agreements contain all the elements that are definitive of subcontracts and the partner organizations are, in fact, subcontractors. Finding 3 – Financial reports We recommend that the grantee ensure that future financial status reports are accurately and fully completed, verified, and submitted on time and that a process is instituted to ensure compliance. Performance Measures, Data and Goals Finding 4 – Performance data validation We recommend that the grantee implement a verification and validation process such as spot checks and periodic audits to ensure the accuracy of performance data submitted by field monitors. Finding 5 – Child monitoring procedures We recommend that the grantee improve its supervision of the field monitoring staff assigned to the Zou Region and develop written procedures for the field monitoring staff to follow.

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Disbursements Finding 6 - Timesheets The grantee should not pay employees without an approved timesheet to confirm the hours worked. We recommend that the grantee research the questioned costs and discrepancies in disbursement amounts and provide appropriate support for them. The grantee should reimburse USDOL for any unallowable expenses. Inventory Management Finding 7 – Use of USDOL vehicle We recommend that the grantee remove USDOL purchased vehicles from the general use motor pool and assign all such vehicles to the USDOL project. Any use of a USDOL-purchased vehicle to support other grantee projects should require written authorization by the Project Director after ensuring that the proposed use will not conflict with the needs of the USDOL project. We also recommend that the grantee submit motor pool logs indicating the times and purpose for which the vehicle was used and reimburse USDOL for the pro-rata cost of the vehicle used in the motor pool during those times it was needed but not available for project use. Finding 8 – Motorcycle purchased with USDOL funds We recommend that the grantee properly label all equipment purchased with USDOL funds, take a physical inventory to properly identify and record the location of appropriate inventory items, and institute a perpetual inventory system to track the movement of assets and their disposition on a real-time basis. The grantee should reimburse USDOL for the cost of the missing motorcycle in the amount of $2,432 if not found. We wish to acknowledge the exceptional assistance and extensive cooperation provided by CRS and project staff in coordinating site visits and assisting with translations as needed. The work could not have been completed without their full participation and support.

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