Grant audit of Partnership for Productivity International, Inc.

Audit report covers FY"s 1978-1982 and is based on a review of three independent audits (appended) issued by the Defense Contract Audit Agency. Because PFPI has not utilized standard methods for recording direct costs, $77,619 of $3,860,199 in total costs have been questioned. Specifically: (1) PFPI has classified local activity costs as direct costs only when the local business has not been incorporated, resulting in a difference of $89,145 between actual and claimed overhead costs; (2) costs exceeded grant ceilings by $12,090; (3) actual costs exceeded provisional costs by $2,431; (4) $18,848 in direct costs were reclassified; (5) allowable costs totaling $10,416 were not billed; and (6) $8,079 costs were not supported. In addition, $282,628 in costs incurred under two separate grant agreements in Burkina Faso (FY 1982) were not segregated by PFPI and have been suspended. The Office of Contract Management (CM/SOD/OSC) should ensure settlement of these suspended and questioned costs. Some local activity costs in one of the grants for Liberia were used as matching costs but were not included in the overhead allocation base, as required. CS/SOD/OSC should negotiate a Memorandum of Understanding with PFPI that specifies in detail how overhead will be computed and what costs will be included in the base. In regard to the grantee"s financial viability, a review of PFPI"s audited financial statement as of March 31, 1983 shows that liabilities exceed assets by $26,745 if the figures are adjusted to reflect the $109,969 in questioned costs.