«SEMIANNUAL REPORT TO THE CONGRESS October 1, 2013 to March 31, 2014 SUMMARY OF OIG ACCOMPLISHMENTS Financial Results Questioned costs Issued during ...»
• OIG’s inspection of the Bureau of Conflict and Stabilization Operations identified weaknesses in contractor management and found that the bureau’s mission was unclear to many in the Department and to interagency partners.
INVESTIGATIONSDuring this reporting period, OIG conducted numerous investigations involving procurement fraud, which continues to be the Office of Investigation’s primary focus.
These were the most significant:
• A joint investigation involved allegations of inflated cost and pricing data on a Department task order for a contract executed in Iraq. The investigation determined that the Department significantly overpaid on the task order as a result of overbilling by the contractor. The contractor agreed to reimburse the Department $64,347,239 for the amount of the overpayment.
• Another joint investigation involved allegations of double billing by a Department grant recipient in Afghanistan. A financial audit determined that $861,426 in costs between the various grant amendments was deemed unallowable. On November 27, 2013, the Department grants specialist issued a letter to the grantee advising that $861,426 in costs would be unallowable and that the Department intended to take measures to recover the costs.
• A joint investigation involved a Department-funded contract in Afghanistan.
The investigation determined that the owner of the contract company was provided bid information by a government employee. The government terminated the contract for default, thereby incurring a cost savings of $1,714,269.
• An investigation involving allegations of theft of $49,130 in grant funds by a grantee in Afghanistan determined that the grantee received the funds but did not produce the product required by the terms of the grant. The case was referred to the local Afghan Attorney General’s office. The Department debarred the grantee and her company for a period of 3 years.
INTERNATIONAL BROADCASTINGDuring this reporting period, OIG released three reports on BBG operations and programs. OIG contracted an independent auditor to perform an audit of the BBG information-security program’s compliance with Federal laws, regulations, and standards. The contractor found that BBG had implemented an information-security program, but it identified control weaknesses that significantly affect the program. In a separate audit of BBG’s 2013 financial statements, an independent external auditor found material weaknesses and a significant deficiency in internal control over financial reporting. OIG released a management letter related to the audit of BBG’s 2013 financial statements, recommending that BBG take corrective action.
78DEPARTMENT OF STATEOIG MANAGEMENT ALERTS
In November 2013, OIG released its first management alert—a new oversight product meant to promptly inform management officials of systemic risks or deficiencies that require urgent attention. In the first alert, OIG addressed longstanding deficiencies in the Department’s system for managing sensitive information. In a second alert, issued in March 2014, OIG summarized the 6 years of OIG findings identifying failures to maintain contract files for more than $6 billion in contracts. OIG publishes these alerts on its website at oig.state.gov, along with management responses and subsequent actions taken to resolve outstanding issues.
Management Alert: OIG Findings of Significant and Recurring Weaknesses in the Department of State Information System Security Program (MA-A-0001) OIG issued this management alert in November 2013 to elevate to the Department’s Management Control Steering Committee the significant and recurring weaknesses reported by OIG in its last three annual reports (FY 2011–FY 2013) on the Department’s compliance with the Federal Information Security Management Act (FISMA). Because these recurring weaknesses continue to put at significant risk the integrity of the Department’s overall information-security program, OIG has designated the collective weaknesses as a significant deficiency, requiring immediate corrective action, as defined by Office of Management and Budget. Pursuant to the Federal Managers Financial Integrity Act (FMFIA), OIG recommended that the Department externally report the deficiency as a material weakness and include the finding in the Department’s FMFIA annual statement of assurance. OIG also recommended that the Bureau of Information Resource Management develop a comprehensive corrective action plan, including independent penetration testing to further evaluate the program and outline a range of technical and procedural countermeasures to reduce risk.
The Department concurred in part. During its FY 2014 FISMA audit, OIG will be conducting penetration testing of the Department’s IT enterprise systems.
Management Alert: Contract File Management Deficiencies (MA-A-0002) As a result of collaborative efforts between the Offices of Audits, Inspections, and Investigations, OIG issued a management alert that identified more than $6 billion in Department contracts over a 6-year period for which contract files were incomplete or could not be located. OIG determined that this failure to adequately maintain contract files created significant financial risk and demonstrated a lack of internal control over the Department’s contracting actions. OIG recommended that the Department’s Bureau of Administration, Office of the Procurement Executive, develop
OFFICE OF AUDITS
AUDIT COMPLIANCECompliance Follow-up Audit of Bureau of Oceans and International Environmental and Scientific Affairs Administration and Oversight of Funds Dedicated To Address Global Climate Change (AUD-ACF-14-16) OIG performed a compliance follow-up audit of its Audit of Bureau of Oceans and International Environmental and Scientific Affairs Administration and Oversight of Funds Dedicated To Address Global Climate Change (AUD/CG-12-40, July 2012) to evaluate the corrective actions taken by the Department in response to its original report. Overall, OIG found that the Department was making progress in addressing the deficiencies identified and in implementing the corrective actions recommended in AUD/CG-12-40. With the issuance of this follow-up report, OIG closed the remaining open recommendations from the original report. This follow-up report contains eight reissued or modified recommendations and one new recommendation for actions necessary to meet the intent of the original report.
CONTRACTS AND GRANTS
Audit of Department of State Selection and Positioning of Contracting Officer’s Representatives (AUD-CG-14-07) OIG initiated this audit to determine the extent to which the Department’s CORs and GTMs were selected and positioned to successfully perform their assigned contract administration and oversight responsibilities. OIG examined one contract judgmentally selected from each of four bureaus: the Bureau of African Affairs (AF), the Bureau of International Narcotics and Law Enforcement Affairs (INL), the Bureau of Near Eastern Affairs, and the Bureau of Overseas Buildings Operations.
OIG found that COR and GTM experience, positioning, and oversight were adequate for three of the four contracts reviewed. For the fourth contract, however, OIG found inadequate COR experience, positioning, and oversight within AF, which resulted in AF’s use of third-party contractors to perform inherently governmental functions. OIG also found significant COR related internal control weaknesses. Specifically, Department-wide COR workforce management and planning needed to be improved, and certain Department COR-related policies required implementation guidance to be effective.
13 OIG made recommendations to improve contract administration and oversight within AF, such as requiring prior contract oversight experience for individuals who would perform COR related duties and pursuing all opportunities to employ Government employees rather than contractors for COR duties. To improve COR workforce management and policies, OIG recommended specifying the types of information that should be documented in COR nomination memoranda; and to improve acquisition workforce planning efforts, that the Department request input from all bureaus for use in developing the annual Acquisition Human Capital Plan.
Independent Accountant’s Report on the Application of Agreed-Upon Procedures: Employee Benefits, Withholdings, Contributions, and Supplemental Semiannual Headcount Reporting Submitted to the Office of Personnel Management (AUD-FM-14-01) Under OIG’s direction, an independent external auditor performed agreed-upon procedures as required by an Office of Management and Budget Bulletin criterion.
These procedures were performed to assist the Office of Personnel Management in assessing the reasonableness of withholdings and contributions for retirement, health benefits, and life insurance, as well as enrollment information submitted via the Semiannual Headcount Report. The auditor performed additional procedures to assist the Office of Personnel Management in identifying and correcting errors relating to processing and distributing Combined Federal Campaign payroll deductions.
In general, the auditor identified no reportable differences as a result of applying the majority of the procedures. However, the auditor reported some differences as a result of applying procedures relating to life-insurance and health-benefit elections, contributions, and withholdings; the Semiannual Headcount Report; and accounting codes and the official duty stations of employees with Combined Federal Campaign deductions.
Independent Auditor’s Report on the U.S. Department of State 2013 and 2012 Closing Package Financial Statements (AUD-FM-14-09) An independent external auditor reviewed the Department’s closing-package financial statements as of the end of fiscal years 2012 and 2013. The auditor found that, in accordance with accounting principles generally accepted in the United States of America, the closing-package financial statements presented fairly, in all material respects, the financial position of the Department, its net costs and changes in net position, as the years ended on September 30. The auditor identified no material weaknesses in internal control over the financial reporting process for the closingpackage financial statements, and the auditor’s tests for compliance with Department of the Treasury requirements disclosed no instances of noncompliance that were required to be reported.
14 Independent Auditor’s Report on the U.S. Department of State 2013 and 2012 Financial Statements (AUD-FM-14-10) An independent external auditor reviewed the Department’s closing-package financial statements as of the end of fiscal years 2012 and 2013. The auditor found that, in accordance with accounting principles generally accepted in the United States of America, the closing-package financial statements presented fairly, in all material respects, the financial position of the Department, its net costs and changes in net position and budgetary resources, as the years ended on September 30.
The auditor found certain reportable deficiencies in internal control. Specifically, the auditor found significant deficiencies in the internal control over financial reporting, property and equipment, budgetary accounting, unliquidated obligations, Foreign Service Retirement and Disability Fund data, and information technology. The auditor also found instances of noncompliance with certain provisions of laws, regulations, contracts, and grant agreements, including instances in which the Department’s financial management systems did not substantially comply with the requirements of the Federal Financial Management Improvement Act.
Independent Auditor’s Report on the International Boundary and Water Commission, United States and Mexico, U.S. Section, 2013 and 2012 Financial Statements (AUD-FM-14-12) An independent external auditor reviewed the International Boundary and Water Commission, United States and Mexico, U.S. Section (USIBWC) consolidated financial statements as of the end of fiscal years 2012 and 2013. The auditor found that, in accordance with accounting principles generally accepted in the United States of America, the consolidated financial statements presented fairly, in all material respects, the financial position of the Department, its net costs and changes in net position and budgetary resources, as the years ended on September 30.
The auditor found certain reportable deficiencies in internal control over financial reporting. Specifically, the auditor found significant deficiencies in the internal control over information technology and property and equipment.
Management Letter Related to the Audit of the International Boundary and Water Commission, United States and Mexico, U.S. Section, FY 2013 Financial Statements (AUD-FM-14-13) During the audit of USIBWC’s 2013 financial statements, the independent external auditor identified internal control weaknesses relating to obligation validity and environmental liabilities. The external auditor recommended that USIBWC take appropriate action to address these weaknesses.
15 Audit of the Process to Request and Prioritize Physical Security-Related Activities at Overseas Posts (AUD-FM-14-17) The Secretary of State has responsibility for the protection of more than 86,000 U.S. Government employees from more than 30 agencies who work or live in Government-owned or long-term leased buildings in overseas locations. A fundamental component of protecting these employees is maintaining sufficient physical security at these locations. OIG contracted with an independent external auditor to
accomplish the following: