The Tucson-based Udall Foundation is rebuilding after an audit found “significant issues” with the federal agency’s internal controls for financial management, personnel and contracting.

The Udall Foundation is an executive-branch agency that provides scholarships and internships for top students in environmental policy and tribal policy. It also operates two institutes, the U.S. Institute for Environmental Conflict Resolution and the Native Nations Institute for Leadership, Management and Policy. The foundation employed 38 full-time-equivalent workers in fiscal year 2012, an annual report said.

A December 2012 audit by the Department of the Interior’s Office of the Inspector General found the agency wasn’t meeting federal requirements to monitor and assess its spending and lacked key procedures to check for efficiency and guard against fraud or mistakes in personnel and contracting.

The report was issued to the Udall Foundation’s board members, nine of whom are presidential appointees — but it wasn’t made public. The Star has requested it under the Freedom of Information Act, but federal officials said it won’t be available for at least a month.

The board requested the audit after it “became aware of some questionable actions by foundation employees,” according to a report from the Government Accountability Office.

The GAO was asked to review the foundation’s efforts to solve the problems and issued a report on its findings last month.

Under new management, the Udall Foundation has been trying to correct the problems “and related financial management weaknesses,” the report says.

The foundation’s new executive director, Philip Lemanski, declined an interview request. 

“The Foundation continues to implement necessary improvements to its internal controls and will not have further comment until after the IG and GAO have completed their review of that work and published their final report,” he said in an emailed statement.

In the Udall Foundation’s most recent annual report, board chairman Eric Eberhard said the changes being made now “will ultimately result in greater accountability and improved performance across the foundation’s programs.” 

The Udall Foundation so far has spent $780,000 on the audits, consultants and legal counselors, the GAO report said. 

Among the changes it already has made, the foundation developed a new strategic plan and hired new employees for six upper-level manager jobs.

The foundation also has made significant cuts to its educational programs, citing decreased revenue. It no longer awards dissertation fellowships and it slashed its spending on scholarships by 40 percent.

details limited

The GAO report issued last month includes some of the first public information about the audit, but details still are limited.

According to the report, auditors found possible violations of several federal regulations:

  • The Federal Managers’ Financial Integrity Act, which requires federal agencies to use internal controls to monitor the effectiveness and efficiency of operations, compliance with regulations and laws, and reliability of financial reporting.
  • The Dual Compensation Act, which prohibits a government employee from working two 40-hour-a-week jobs in one week.
  • The Anti-deficiency Act, which prohibits government employees from spending more money than their appropriation allows.
  • The Ethics in Government Act of 1978, which prohibits conflict-of-interest scenarios such as awarding contracts to a family member or hiring a contractor as an employee before the contract ends.
  • The Federal Acquisition Regulation, which bans sole-source contracts.

They also found “questionable actions” taken by Udall Foundation management “to encourage employees to either voluntarily, or involuntarily, leave their foundation employment.”

The GAO reviewed the foundation’s new practices in a performance audit from May to December 2013 and issued a report that says the foundation is taking appropriate steps to solve the problems. The foundation hired a consultant to help improve its internal controls processes. The consultant “made recommendations to strengthen the control environment in the areas of ethical values, management philosophy, authority and responsibility, and human resources practices and oversight,” the GAO report said.

The organization also outsourced most of its contracting work to the DOI’s Interior Business Center. Last year the foundation awarded $2.7 million in environmental conflict resolution contracts, which now will be awarded by the Interior Business Center. 

It still needs to finalize new policies for outside employment and termination of personnel and new policies on internal contracting, the GAO said.

The Udall Foundation also wants Congress to change its appropriation law to give the Interior Department’s Inspector General oversight powers and the ability to conduct annual audits, the GAO said.

“The Board of Trustees and senior management of the foundation recognize that there is still work to do to ensure that all internal controls are adequate and that they are being followed,” board chairman Eberhard said in a letter to the GAO. “We are committed to doing so on a continuous basis.”

Contact reporter Becky Pallack at or 573-4251. On Twitter: @BeckyPallack