Report 2004-138 Summary - April 2005
Department of Parks and Recreation:
It Needs to Improve Its Monitoring of Local Grants and Better Justify Its Administrative Charges
Our review of the Department of Parks and Recreation's (Parks) administration of local grants revealed the following:
- Parks principally relies on certifications by recipients that they complied with grant requirements and expended grant funds for allowable purposes.
- Parks has not consistently followed its procedures for monitoring recipients' progress on projects, and such monitoring is inconsistently documented.
- Parks could not always demonstrate that specific project objectives for grants were met.
- The expected results from the use of General Fund grants are at times not specifically defined in legislation and are subject to Parks' interpretation.
- Parks does not separately track its actual costs of administering local grants, creating the risk that bond funds have subsidized the costs of administering General Fund grants.
RESULTS IN BRIEF
The Department of Parks and Recreation (Parks) is charged with providing local grants to cities, counties, and other entities. Between July 1996 and mid-October 2004, its Office of Grants and Local Services (grants office) disbursed more than $476 million to fund a variety of local grants for purposes that included acquiring land for community parks and building new facilities, such as swimming pools and baseball fields. With the passage of the Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection Bond Act of 2000 (Proposition 12) and the California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 (Proposition 40), California voters provided 68 percent of the total amount disbursed for these grants. The State's General Fund provided another 22 percent.
Although Parks' process for identifying eligible recipients and determining the amounts awarded was reasonable, it needs to improve its monitoring of local grants. The grants office principally relies on certifications by recipients that they comply with grant requirements and spent funds for allowable purposes. For example, the grants office requires each recipient to submit a resolution from its governing body certifying that it understands grant requirements. Once a recipient completes a project, the recipient must certify that it spent all grant funds as required. Parks' audits office reviews a sample of completed projects to ensure that costs claimed by recipients were allowable.
However, the grants office could strengthen its monitoring of recipients' progress on ongoing projects. Recipients are allowed either five or eight years to complete their projects, depending on the type of funding. Given its reliance on certifications by recipients and the potential length of time until projects are complete, we expected the grants office to periodically assess whether recipients are complying with grant requirements. The grants office has a policy of conducting annual reviews to verify project information and status. Additionally, staff at the grants office may contact recipients at other times to discuss the status of their projects. However, such reviews and discussions are not consistently conducted or documented. For example, it took the grants office more than two years to inquire about the status of one project for which a nonprofit organization received more than $220,000 in advance payments to build a museum at a school. It subsequently came to Parks' attention that the portable classroom that was to function as the museum had been used for storing items belonging to the school rather than its intended purpose.
In an attempt to strengthen its monitoring process, the grants office has recently made some improvements. For instance, effective December 2004, the grants office implemented a six-month reporting requirement that directs recipients to describe the work performed and disclose, among other items, the amount of funds spent to date. The grants office could further strengthen this control by requiring recipients to submit substantiating evidence, such as copies of developed plans or other evidence of project progress.
Once a recipient certifies that its project is complete, the grants office's general policy is to approve final payment after conducting a final inspection to assess whether the recipient successfully met all the project's objectives. Such a review involves ensuring that the recipient used the grant funds for the agreed purpose, such as building a new community pool or baseball field. However, our review of a sample of project files revealed that the grants office could not always demonstrate that it performed final inspections or that it ensured that specific project objectives were met during inspections that were performed. Without ensuring that recipients successfully met the objectives and without identifying what was actually acquired or developed with the funds, the grants office cannot demonstrate how the public benefited from these awards. As of January 2005 the grants office began requiring its staff to use a standardized form to ensure greater consistency when conducting final inspections and to provide documentation that project objectives were satisfied.
Sometimes the results expected from the use of grants are not specifically defined in legislation. For example, the Legislature appropriated many General Fund grants that only specified the recipient, project name, and amount of the award. In the absence of specific guidance on the use of the funds, the grants office may interpret what is to be accomplished. However, it does not always clearly establish in the grant contract what the scope of the project is to be and what type of deliverable it expects to see before it makes final payment. Given recent concerns regarding the use of General Fund grants, Parks plans to ask for further statutory direction from the Legislature when the intent of the award is not clearly stated.
Propositions 12 and 40 require that the actual costs of administering bond fund programs be paid from the bond funds. However, our review of costs incurred by the grants office revealed that it does not separately track its actual costs of administering Proposition 12, Proposition 40, and General Fund grants. Rather, it uses a cost allocation methodology to record administrative costs for various funding sources. We question Parks' methodology because it does not periodically compare the results of its cost allocation process to its actual costs of administering these programs. As a result, one of the risks that exists is that bond funds may be subsidizing the grants office's administration of General Fund grants, since Parks' charges to these funds are capped at 1.5 percent and no such limit exists for bond funds.
Parks should continue its efforts to more consistently monitor recipients' use of grant funds, including its recent efforts to implement a six-month reporting process. Parks should also strengthen this requirement by requiring recipients to submit evidence of project progress. Additionally, Parks should ensure that reviews and discussions with recipients regarding project status are consistently and sufficiently documented.
Parks should ensure that final inspections are conducted and sufficiently documented, ensuring that it demonstrates specific project objectives are met.
Parks should clearly document in its contracts its expectations as to what is to be accomplished with grant funds.
Further, should it choose to appropriate General Fund grants in the future, the Legislature should specifically define what is to be accomplished with the funds. In cases where Parks is unclear as to the expected results or deliverables from grant funds appropriated by the Legislature, Parks should continue with its new policy of seeking further statutory language clarifying the intended use of these funds.
Finally, to ensure that it is reasonably charging administrative costs to the appropriate funding sources, Parks should perform quarterly comparisons of its actual costs to the costs it recorded and adjust its methodology and recorded costs as necessary.
Parks agrees with our recommendations and outlines its approach for implementing them.