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StateDept.alert

StateDept.alert

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United States Department State
and the Broadcasting Board Governors
Office Inspector General
March 20, 2014
UNCLASSIFIED
M-Patrick Kennedy
TO:
A-Joyce Barr
FROM:
OIG/AUD-Norman Brow
OIG/INV-Anna Gershma
OIG/ISP-Robert Peterso
SUBJECT:
Management Alert (Contract File Management Deficiencies)
The Office Inspector General (OIG), recent audits, investigations, and inspections,
has identified significant vulnerabilities the management contract file
documentation that could expose the Department substantial financial losses.
Specifically, over the past years, OIG has identified Department State (Department)
contracts with total value more than billion which contract files were
incomplete could not located all. The failure maintain contract files
adequately creates significant financial risk and demonstrates lack internal control
over the Departments contract actions.
This Management Alert intended alert senior Department management the serious
nature the issue and provides recommendations assist eliminating mitigating
those vulnerabilities.
Pertinent Authority:
The Federal Acquisition Regulation (FAR) requires that contract files placed
organized filing systems and properly stored, handled, and disposed. FAR 1.602-2
(d) provides for contracting officers (CO) designate and authorize, writing,
contracting officers representative (COR) execute certain duties. The Foreign Affairs
Manual (FAM) FAM 213 provides that the FAR and the Department State
Acquisition Regulations (DOSAR), which implements and supplements the FAR, govern
Department acquisitions. DOSAR 604.802 requires that the heads the contracting
FAR Subparts 4.801General,4.802 Contract Files, 4.803 Contents Contract Files, 4.804 Closeout
Contract Files, and 4.805 Storage, Handling, and Disposal Contract Files address the filing system.
Address correspondence to:
U.S. Department State, Office Inspector General, Washington, D.C. 20522-0308
UNCLASSIFIED
activities maintain standard procedures conform toFAR 4.802 for file location and
maintenance. Additionally, DOSAR 4.80 3-70 states that: the Departments policy that all contracts, regardless dollar value,
properly documented provide complete record of: pre -solicitation
activities; the solicitation, evaluation, and award process; and, [sic] the
administration the contract through closeout.
Representatives within the Bureau Administrations Office the Procurement
Executive (A/OPE) also have responsibility for monitoring the Departments
procurement activities. According 1FAM 212.2, A/OPE [e]stablishes system for
measuring the performance contracting activities and offices ensure the quality
procurement actions... and, [c]onducts training and staff assistance visits contracting
offices domestically and abroad promote quality the acquisition process.
Findings and Analysis:
OIG audits, investigations, and inspections,
well audits Department contract
management conducted other oversight organizations, have found repeated examples poor contract file administration. Therefore, OIG has designated contract management one the Departments major management challenges for the past several years.
The Departments Agency Financial Report references additional contract management
deficiencies identified OIG.
Set out below are examples contract file deficiencies found audits, investigations,
and inspections:
Audits. recent OIG audit the closeout process for contracts supporting the
U.S. Mission Iraq revealed that contracting officials were unable provide 33of 115
contract files requested accordance with the audit sampling plan.3 The value the
contracts the 33missing files totaled $2.1 billion. Forty-eight the contract files
received did not contain all the documentation required FAR 4.8. The value the
contracts the incomplete files totaled additional $2.1 billion. ongoing OIG
audit Bureau African Affairs contracts revealed that CORs were unable provide
complete contract administration files for any the eight contracts that were reviewed.
The value these contracts totaled 34.8 million.
The Inspector Generals Assessment the Departments Management and Performance Challenges contained
the United States Department State Fiscal Year 2013 Agency Financial Report, pages 122-129.
Audit the Contract Closeout Process for Contracts Supporting the U.S. Mission Iraq (AUD-MER0-14-06,
December 2013). Audit Selected Contracts and Grants within the Bureau African Affairs, Audit Job Number 13AUD086,
announced July 16, 2013.
UNCLASSIFIED
Deficiencies contract file management have also been identified joint audit reports
issued this office, the Department Defense OIG (DoD OIG) and the Special
Inspector General for Iraq Reconstruction (SIGIR). Specifically, two joint audits
conducted with DoD OIG, found that, for two task orders valued excess
billion, the Bureau International Narcotics and Law Enforcement Affairs had neither
ensured that the COR for the Civilian Police contract Afghanistan established
maintained contracting files that were complete and easily accessible, nor finalized and
fully implemented standard operating procedures for maintaining COR files. Also,
joint audit with SIGIR, reviewed four task orders from the Worldwide Personal
Protective Services contract, with estimated total cost billion May 29,
2008, and found that COR files maintained both Washington, DC, and Baghdad, Iraq,
were not accessible, complete, maintained accordance with Department policy. sum, over the past years, our audit work has uncovered significant contract file
management deficiencies Department contracts/task orders with total value more
than billion.
Investigations. the case work undertaken OIGs Office Investigations,
one investigation revealed that contract file did not contain documentation reflecting
that modifications and task orders were awarded the company owned the spouse contractor employee performing Contract Specialist for the 9ontract. This contract
was valued $52 million. another investigation, OIG found that falsified Government technical review
information and provided the contractor with contract pricing information. The related
contract file was not properly maintained and for period time was hidden the CO.
This contract was valued $100 million. third investigation, OIG found that COR
allowed the payment $792, 782 contractor even though the contract file did not
contain documents support the payment. Furthermore, additional OIG investigation
revealed that the contract file was missing COR appointment letter required FAR
1.602-2 (d).
Inspections. number recent OIG inspections, OIG identified contract file
management deficiencies. For example, COR files for $2.5 million contract lacked
status reports and tally the funds expended and remaining the contract. OIG
discovered other instances which contract files lacked contract performance
DOD Obligations and Expenditures Funds Provided the Department State for the Training and Mentoring the Afghan National Police (MERO-A-10-06, February 2010); and DOD and DOS Need Better Procedures
Monitor and Expend DOD Funds for the Afghan National Police Training Program (AUD/CG-11-30, July 2011). Joint Audit Blackwater Contract and Task Orders for Worldwide Personal Protective Services Iraq
AUD/IQ0-09-16, June 2009).
Inspection the Bureau Information Resource Management, Office Information Assurance (ISP-1-13-38,
July 2013).
UNCLASSIFIED
documentation and COR appointment and training certification;8 CORs failed maintain
technical information and performance records needed monitor contractor
performance;9 and COR filing systems were disorganized.10
Conclusion:
The Department should take additional action correct its inadequate enforcement the
FARs provisions, and its own procedures, that govern the maintenance contract files.
The failure enforce those requirements exposes the Department significant financial
risk and makes OIG oversight more difficult. creates conditions conducive fraud,
corrupt individuals may attempt conceal evidence illicit behavior omitting key
documents from the contract file. impairs the ability the Department take
effective and timely action protect its interests,11 and, tum, those taxpayers.
Finally, limits the ability the Government punish and deter criminal behavior.
Recommendations: its Audit the Contract Closeout Process for Contracts Supporting the U.S. Mission Iraq (AUD-MER0-14-06), OIG recommended that A/OPE establish centralized
system for maintaining, tracking, and retaining contract files. OIG making the
following additional recommendations: OIG recommends that A/OPE develop and implement process randomly
sample and verify the completeness contract files, including contract files
maintained contracting officers representatives and other supporting
personnel.
(2) OIG recommends that A/OPE provide the results its reviews set forth
recommendation one the appropriate bureaus and offices ensure that
contracting officers, contracting officers representatives, well
their
supervisors and other supporting personnel who not adequately maintain
contract files are held accountable and are required update contract files
accordance with Federal and Department policies.
Inspection Embassy Vilnius, Lithuania (ISP-l-13-41A, September 2013).
Inspection the Bureau International Information Programs (ISP-1-13-28, May 2013); Inspection the
Bureau Information Resource Management, Office Information Assurance (ISP-1-13-38, July 2013). Inspection the Bureau International Information Programs (ISP-1-13-28, May 2013); Inspection the
Bureau Information Resource Management, Office Information Assurance (ISP-1-13-38, July 2013); Inspection the Bureau Information Resource Management, Systems and Integration Office (ISP-1-12-30, June 2012).
Lessons Learned.from U.S. Agencies Management Iraqi Funds for Relief and Reconstruction (SIGIR 13-004,
January 22, 2013); Final Forensic Audit Report Iraq Reconstruction Funds (SIGIR 12-017, July 13, 2012); and
Analysis Recommendations Concerning Contracting Afghanistan, Mandated Section 1219 the Fiscal
Year 2011 NDAA (SIGAR Audit 11-1 SP, June 22, 2011)
UNCLASSIFIED
(3) OIG recommends that the Under Secretary for Management ensure that
contracting officers and their supporting personnel, and A/OPE specialists
conducting oversight visits, have resources sufficient maintain adequate
contract files accordance with relevant regulations and policies.
OIG would appreciate written response this alert and information actions taken
planned for the alerts three recommendations. The response should indicate agreement disagreement with each recommendation.
Comments received within calendar days the date this Management Alert will
reprinted appendix the alert. addition the hard-copy response, please
provide electronic copy Norman Brown, Assistant Inspector General for Audits, brownnp2@state.gov. This Management Alert may posted the OIG Internet and
Intranet Web Sites. you have any questions, please feel free contact Norman Brown (703) 284-2692.
cc:
INL
William Brownfield
United States Department State
Assistant Secretary State
for Administration.
Washington, D.C. 20520
March 28, 2014
UNCLASSIFIED
TO:
OIG/AUD-Norman Brown
OIG/INV-Anna Gershman
OIG/ISP-Robert Peterson
FROM: Joyce Barr
SUBJECT:
Management Alert (Contract File Management Deficiencies) Dated March 20,
2014
The Office the Inspector General (OIG) subject Management Alert identified vulnerabilities
the management contract file documentation that the OIG indicated could expose the
Department potential financial losses. The Bureau Administration agrees that this
vulnerability must addressed. The point contact for this Management Alert the Office
the Procurement Executive (OPE), Eric Moore, who may reached 703-875-4079.
Management Alert Recommendations:
(1) OIG recommends that A/OPE develop and implement process randomly
sample and verify the completeness contract ides, including contract files
maintained contracting officers representatives and other supporting personnel.
RESPONSE: Concur with this recommendation. A/OPE intends the following ensure
that files are complete: The Head the Contracting Activity (HCA) the individual who has overall
responsibility for managing the contracting activity within given unit. The Director
Acquisitions Management (AILM/AQM) the HCA for AQM and the Regional
Procurement Support Offices (RPSOs). Regional Bureau Post Management Officers are
the HCAs for post procurement. A/OPE will issue Procurement Information Bulletin
(PIB) establishing contract file audit requirement for HCAs. Because their size and
responsibilitjes, AILM/AQM will directed provide formal contract file audit plan
for A/OPE approval.
A/OPE will review the results the A/LM/AQM contract file review and the system for
corrective action. Additional quality assurance, such review the completeness
files time award and the determination exercise option must considered part the plan build quality during the process, rather than auditing after the
fact. A/OPE will issue memorandum all warranted contracting officers, Federal
Acquisition Certification-Contracting (FAC-C) and Federal Acquisition Certification
Contracting Officer Representative (FAC-COR) personnel advising them their basic
responsibility maintain adequate contract documentation. The memorandum will
advise that failure meet this basic responsibility may consideration maintaining
future contracting contracting officer representative authority. A/OPE will review random sample contract files overseas posts element
Staff Assistance Visits (SAVs). anticipated that this review may require additional
time post and may necessitate additional travel funds beyond current travel caps
effective. A/OPE will expand the number and scope post reviews feasible based
the availability additional travel and additional personnel resources. A/OPE proposes multi-level response the review contracting officers
representative files. The initial responsibility for contracting officer representative
compliance lies with the contracting officer appointing the COR their representative.
A/OPE will add requirement for contracting officers verify the establishment COR
contract files programs under their cognizance that exceed $IM. Contracting officers programs exceeding $10M will advised verify that the COR has adequate file
within six months contract initiation and annually thereafter. CORs will, turn,
required certify the contracting officer that files are being maintained. The transition contracting officer contracting officers representative duties will include
requirement verify the status the files being transitioned. Bureaus with significant number contracting officer representatives will advised engaged COR file reviews. A/OPE will work with these offices institute
Bureau review COR files important level oversight. A/OPE will review the
results these bureau reviews well select additional files for review. A/OPE will conduct additional random review contract and contracting officer
representative files based the availability resources.
-2-
(2) OIG recommends that A/OPE provide the results its reviews set forth
recommendation one the appropriate bureaus and offices ensure that
contracting officers, contracting officers representatives, well their
supervisors and other supporting personnel who not adequately maintain
contract files are held accountable and are required update the contract files
accordance with Federal and Department policies.
RESPONSE: Concur with this recommendation. A/OPE intends the followjog ensure
that contracting personnel are held accountable for adequately maintaining contract files: A/OPE will issue memorandum all warranted contracting officers, Federal
Acquisition Certification-Contracting (FAC-C) and Federal Acquisition Certification
Contracting Officer Representative (FAC-COR) personnel advising them that one
the basic responsibilities maintain adequate contract documentation. A/OPE will issue written report the General Services Officer (GSO) and the
Management Officer (MO) after all overseas Staff Assistance Visits (SAVs) advising
the post the conditi contract files reviewed during the visit. A/OPE will issue written report the Bureau and/or Office Head providing the
results reviews. A/OPE will require report from bureau and post file review audits conducted
HCAs and bureau COR oversight organizations. A/OPE will pursue the addition requirement that Post and Bureau Annual
Management Control Assurance Statements include verification internal controls
over contract files. ensure that individuals are held accountable, A/OPE would appreciate from OIG list
those responsible for the contract file deficiencies referenced the Management Alert. future
audits would beneficial OIG can provide A/OPE with any information accountable
individuals whether element the report through separate communication.
(3) OIG recommends that the Under Secretary for Management ensure that
contracting officers and their supporting personnel, and
A/OPE specialists
conducting oversight visits, have resources sufficient maintain adequate contract
files accordance with relevant regulations and policies.
RESPONSE: Concur with the need for adequate resources fulfill the internal control
responsibilities the Department.
A/LM/AQM Contracting Officers are funded through the Working Capital Fund and review staffing needs part the process maintaining this fund. The need for additional
A/OPE travel and personnel oversight resources will separately examined light other
Department priorities.
Additionally, resourcing contracting officers representatives (CORs) individual
bureau responsibility. Bureau Contracting Officers work closely with all bureau program
offices identify and detennine the particular technical expertise that required, the
preferred level COR training and certification, well the appropriate number CORs
assigned each contract. office will advocate for bureau, office and post increased
resources where reviews identify file deficiencies.
cc:
M-Patrick Kennedy
Steve Linick
-4-



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