The second Collins Report and the GAO Report identified questionable activities regarding each of the national anti-poverty organizations. It should also be noted that, in developing information for its report, the House Manpower and Housing Subcommittee had been assured by the various organizations that each would make its records available to the Subcommittee. The NCCA and CAT voluntarily provided their records, but NCAAEDA, NACD, and the Trust Fund did not. The Subcommittee then subpoenaed the records of the professional associations and the Trust Fund. These groups did not comply with the original due dates and did not contact the Manpower and Housing Subcommittee to offer an explanation for failure to comply.

The following is a brief summary of the problems identified in the second Collins Report and the GAO Report.

NCAAEDA

A total of $31,000 was spent on NCAAEDA related travel and entertainment by the past association president in two separate time periods of approximately one year each. Between October 1975 and January 1977, the past president was in travel status for NCAAEDA 43 percent of available work days while he was the full-time executive director of a local community action agency. He attended various events on behalf of NCAAEDA in several resort areas and traveled to a regional CAA directors' meeting in Hawaii which had been canceled prior to his departure. (He remained in Hawaii six days.)

The past president's expense vouchers were not always adequately documented in the opinion of the Association's treasurer, and were sometimes challenged by the treasurer. The past president sought and received a board resolution directing the treasurer to pay all presidential travel expenditures as submitted. The past president's travel schedule was apparently not approved by or reported to the Association board.

The Association apparently paid fees totaling $37,000 to a singleperson consulting firm to coordinate the 1976 national conference of the Association (the Association has a membership of about 500 directors). The consultant contract was apparently not competitively bid.

The Association and CSA had no mechanism for evaluating the benefit of Association conferences and conventions to the training and professional development of participants.

The past president established a separate Association bank account. which, contrary to Association by-laws, did not require the treasurer's signature.

Since these problems have been identified, the past NCAAEDA board instituted a process to insure that NCAAEDA's records would be in order and accessible to appropriate parties and to assure that payment of travel, consultant fees, and expenses would be subject to audit by a recognized national firm. The Association moved to correct the recent history of problems by voting to hold a referendum on a special election of officers at its November 1977 annual meeting. The full membership expressed its support for a special election and subsequently elected a new slate of officers.

NACD

In the first four months of 1977, the past NACD president spent $10,451 in NACD funds on his travel and expenses. During the same period, he was in travel status 54% of the available work days while he was a full-time executive director of a local community action. agency. There were instances of high accommodation and hospitality charges, insufficient documentation of expenses, and at least one apparent overpayment of travel expenses to the past NACD president.

The NACD had three separate bank accounts simultaneously, and payroll was drawn against all three. There were eight instances in which NACD employees apparently received multiple paychecks for the same period from two separate bank accounts.

NACD committees and the board kept extensive meeting schedules, and on numerous occasions these meetings were scheduled in high cost or resort areas. The past president was questioned on this practice by CSA, the Manpower and Housing Subcommittee, and his own NACD board. His response was that he was trying to expose antipoverty workers to places and experiences they would not normally

encounter.

The NACD could not be considered broadly representative of the various constituencies of community action, with a small group of large agencies (including, particularly, the past president/executive director's former CAA) dominating membership and conference attendance. In 1975, five CAA's accounted for 28 percent of all conference registration fees.

The NACD election and balloting process was plagued with difficulties every year and at least one NACD regional affiliate charged that this was a strategy on the part of incumbents to maintain their positions. This same regional affiliate also charged that the nominating process is a closed one controlled by incumbents. In 1977, the only active candidate opposing the incumbent president ran as a "write-in" candidate.

The Community Services Administration charged that in 1975 the past president/executive director used $3,500 of his former CAA's anti-poverty funds to purchase 700 NACD memberships prior to the election in that year. He was elected by fewer than 100 votes.

NCATF

The GAO determined in at least one instance that Federal antipoverty funds from a state community action association were sent to NCATF, a lobbying organization.

There were several instances in which the NCATF's former national coordinator apparently wrote large checks payable to cash, endorsed them herself, and received multiple biweekly paychecks. The NCATF's officers and attorney were unable to locate the former national coordinator after the last of these transactions occurred.

The NACD (whose funds come partially from fees paid by local community action agencies with Federal anti-poverty funds) made a loan of $5,000 to NCATF for lobbying purposes, which has apparently only partially been repaid.

In the first sixteen months of operation the NCATF disbursements amounted to approximately $41,000. It appeared from information submitted in response to the House Manpower and Housing Subcommittee subpoena that the only benefits NCATF provided to contributors during that period were six "action alerts" which were mailed to most community action agencies. The alerts essentially paraphrased legislative information generally available in other anti-poverty and human service association newsletters.

The NCATF did contract with CAT, the only national community action organization which conducted direct lobbying, but disbursements to CAT amounted to only $2,900 or 7 percent of the NCATF total.

NCATF funds came from voluntary contributions of low and moderately salaried local community action workers who had no direct elective control over the board of the NCATF and who apparently received little information about the activities of the NCATF or its staff.

NCCA

The NCCA received an annual grant of $500,000 for policy related research, training, and technical assistance. The NCCA periodically publishes a newsletter which reviews issues of interest for community action and conducts some regional training and technical assistance sessions which some participants have found to be of professional and programmatic benefit.

The NCCA (partly at the direction of its board, which overlapped with those of other national anti-poverty organizations) involved itself in disputes concerning the NCAAEDA and the NCATF. The NCCA, contrary to the instructions of CSA, provided space, staff support, and resources to the NCAAEDA. The NCCA provided office space and resources to the NCATF, a lobbying organization. A CSA directive to NCCA requiring termination of these arrangements was initially resisted by the Center and was not totally complied with for seven months. A call to NCATF offices by the staff of the Employment, Poverty and Migratory Labor Subcommittee on October 12, 1977, determined that the lobbying organization had indeed relocated from the NCCA headquarters, but the staff of the NCATF indicated the move had only taken place the previous week. CSA had first directed that the co-location arrangements be immediately terminated in the first week of March 1977.

CAT

CAT voluntarily provided its records to the Manpower and Housing Subcommittee, but its records prior to April 1976 were in the possession of the U.S. Department of Justice and were not available for analysis by GAO or the Subcommittee on Manpower and Housing.

AGENCY RESPONSE TO DATE

The new leadership at CSA began to address these problems as soon as they were properly documented. In September, prior to completion of the GAO Report and the report of the Government Operations Committee, CSA Director Grace Olivarez wrote all community action

agency directors announcing a moratorium on the expenditure of CSA funds in support of the two professional associations until such time as the leadership of the organizations changed and the proper regulatory and audit safeguards were put in place. The Director's letter identified serious administrative and management problems in the local agencies of the presidents of the two professional associations. Regulations were published requiring prior CSA approval of agency travel to association functions and CSA approval of all professional associations which receive dues and conference fees from CSA local grant funds.

ADDITIONAL STAFF RECOMMENDATIONS

A need exists for strong, independent professional and advocacy associations which relate to the programs, employees, and supporters of the national anti-poverty program. However, the past proliferation of organizations, whose leadership and control had fallen to a few CAA directors, was detrimental to the anti-poverty program.

In previous years, NACD had gained a reputation as a viable national human service and community development organization whose issue papers on a variety of national program and policy issues were widely read and respected. NCAAEDA was a respected profes sional association with an emphasis on training and technical assistance for its membership and their agencies and a specific focus on the community action program. It is unfortunate that both organizations appear to have relinquished these important roles.

CSA has already taken strong action to correct identified problems and abuses. CSA must continue to be firm with the professional orga nizations until leadership and procedures are changed. However, CSA should be careful that it does not, through its remedial actions, prevent the possibility of viable, independent associations.

Staff make the following additional recommendations to the antipoverty organizations and CSA:

Board members of one national anti-poverty organization should not serve on the boards of other national anti-poverty organizations. This policy would be beneficial in the case of the two professional associations and is essential in the case of the board of the anti-poverty lobby. CSA has taken actions which should discourage excess travel and the ability of local directors to serve on more than one antipoverty organization board. CSA regulations now require that all grantee travel be identified in each grantee's annual work plan, which must be approved by the grantee board and by CSA. Travel out of the region now requires a separate line item in the annual budget with specific destinations and justifications.

It is common practice for small trade and professional associations to organize and coordinate their own conferences with their own staffs. Given the apparent $37,000 cost of a consultant to coordinate the conference of the 500 member NCAAEDA, this common practice of other trade associations makes good financial sense.

No board member of a national anti-poverty organization should be a paid employee of that organization. This is particularly true if the professional associations receive research, training, and technical

assistance grants from CSA, as was suggested above. Very high salaries for the employees of anti-poverty and professional organizations do not contribute to a positive image of those organizations.

The records of each of the national anti-poverty organizations should be kept in good order and should be audited annually by a reputable firm. These records should be open and available to appropriate parties. CSA travel policies should be used as internal guidelines by each organization. Separate accounts should be kept by the professional associations for receipts derived from private sources and those from Federal anti-poverty funds. Disbursements for necessary entertainment should be made from a non-public fund account.

PART III: THE HEADSTART ALLOCATION FORMULA

FUNDING

During the review of the Economic Opportunity Act (EOA) Amendments of 1977 by the House Education and Labor Economic Opportunity Subcommittee, concern developed regarding the HEW application of the statutory formula for distribution of Headstart funds to the States.

The Subcommittee requested a report from the Congressional Research Service concerning the effects of various formula options being considered by the Subcommittee in the 1977 EOA Amendments. CRS discovered, and GAO later confirmed in a legal opinion, that the Department had not followed the existing statutory formula in its planned allocations for fiscal year 1978. CRS found that HEW had misinterpreted the formula by applying the hold-harmless out of proper order and had projected cost-of-living increases for each State before applying the formula requirements to available funds.* This plannned allocation would have resulted in sixteen states receiving less than these states were minimally guaranteed under the formula.

House and Senate staff members conducted several hours of negotiating sessions with HEW's Administration for Children, Youth, and Families regarding the application of the statutory formula. HEW finally agreed to accept the Congressional interpretation of the formula, which CRS and GAO had correctly identified.

The agreement reached on the correct reading of the formula procedures is as follows:

(1) Up to 2 percent set aside for the territories;

(2) Up to 20 percent set aside for the Secretary's discretionary

reserve;

(3) Distribute 50 percent of the remaining funds among the States based on the relative number of public assistance recipients in each State compared to all States. Distribute the other 50 percent of the remainder among the States based on the relative number of related children living with families with incomes below the poverty line in each State as compared to all States; and

(4) If after completion of the above steps any State has less than the amount obligated for use by Headstart programs in the State for fiscal year 1975, such States should be increased to the fiscal year 1975 level. This hold-harmless provision could be ac

*The CRS Report and other Headstart documents may be found in Appendix H.