Civil Rights Commission official proposes deep cuts

The staff director of the U.S. Commission on Civil Rights proposed drastic measures to address the agency's budget shortfalls Friday, two days after the Government Accountability Office gave the commission a scathing review of its financial management.

Kenneth Marcus, who became staff director in December, suggested closing two of the commission's offices early in fiscal 2006, eliminating the positions of four employees, and forcing employees to take unpaid leave to make up for the remainder of the shortfall, which he estimated to be around $265,000 for fiscal 2005.

"The solutions will necessarily be painful ones," he said in a public meeting at the commission.

Last week, GAO reported that the commission lacked internal controls, failed to follow required contracting procedures, and didn't demonstrate how its spending supports its mission.

"This weak control environment increases the risk of abuse of the commission's financial resources," said the report (GAO-05-68R), the latest in a series on the commission's management problems.

The agency, which has operated on about $9 million a year since 1995. Tabetha Mueller, spokeswoman for the House Government Reform Subcommittee on Government Efficiency and Financial Management, said despite the commission's small budget relative to larger federal agencies, proper financial controls still are essential.

"The number amounts are all tiny compared to big agencies, but if you can put a system in place that stops even little amounts from leaking out of the system, you can make big savings," she said. She added that even small changes, such as creating a manual on travel procedures, can go a long way in addressing control weaknesses.

Because of the commission's small size, the Office of Management and Budget had exempted it from submitting audited financial statements until last year.

Sarah Hawkins, a spokeswoman for OMB, said that the agency is granting fewer exemptions to small agencies. "The commission is expected to prepare and issue audited financial statements in a timely manner," she said, adding that OMB is working with the commission on its financial reporting practices.

The commission has yet to turn in its audited financial statements for fiscal 2004, which were due in November. Marcus said he does not expect the commission to receive a clean audit for the current fiscal year because it is "already too late," and that he is focusing on getting a clean audit in fiscal 2006.

Mueller said the commission's problems are typical for agencies going through their first audit. She noted that the panel is taking the problems seriously and that she expects the situation to improve.

"There has definitely been some movement since our close-out discussions with them and after we provided them with a draft," said Steven Sebastian, a director of GAO's financial management and assurance team. He also noted that as the new staff director, Marcus is implementing new procedures, "but prior to that, there was an overall weak internal control environment."

The situation became so dire in 2003 that the Treasury Department's Bureau of the Public Debt decided to stop providing accounting services to the commission because of poor management control and oversight, according to GAO.

At the public meeting, some of the commissioners, who are appointed by the president and Congress to serve six-year terms, expressed concern that budget cuts would interfere with their mission, which is to report on and investigate civil rights issues. But Gerald Reynolds, chairman of the commission, emphasized the importance of financial management.

"We can't fulfill our mission if the back office issues… aren't dealt with," he said.

According to the GAO report, those issues are plentiful. The report found that 18 percent of the commission's $4.9 million in non-payroll related spending, including procurement and travel expenses, may not have been valid in fiscal 2003. GAO found contracts without proper documentation, a lack of evidence that the commission held required competition for contracts, and missing travel vouchers and airline ticket receipts.

Sebastian said that in some contracts, his team found no evidence that the commission had held a competition or compared prices between contractors.

"A lack of these basic, well-established management controls makes the commission vulnerable to resource losses due to waste or abuse," the report said. It included 39 recommendations, including an evaluation of the commission's programs in conjunction with OMB.

In a letter released with the report, Marcus agreed with its findings. "The report's findings are serious, detailed, and alarming. They will serve as a useful guide as we begin to reform our financial management and internal controls," he wrote.

On Friday, he said the commission needs to spend about $100,000 on better accounting services in order to get a clean audit in fiscal 2006.

OMB, Congress, and GAO have been focusing on internal controls lately as they consider whether or not to change federal financial management rules in response to the 2002 Sarbanes-Oxley Act, which increased auditing requirements for private sector companies. OMB strengthened auditing requirements for federal agencies earlier this year.