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American Society of Military Comptrollers

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Title: Exit Brief for XO FISC SI-BAHRAIN Author: Alvin Lowe Last modified by: elizabeth.talbert Created Date: 2/12/2003 8:00:10 PM Document presentation format – PowerPoint PPT presentation

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Title: American Society of Military Comptrollers


1
American Society of Military Comptrollers PDI
2008
SECNAV Acquisition Checks and Balances
Initiative

28 MAY 2008
2
Agenda
  • Naval Audit Service
  • SECNAV Acquistion Checks and Balances Initiative
  • SECNAV Task Force Review and Process
  • Potential Oversight Mechanisms
  • Potential Checks and Balances
  • Whats Supposedly Working
  • Vulnerabilities
  • Recommendations
  • NAVAUDSVC (Preliminary) Audit Results
  • NAVAUDSVC Audit (Phase I)
  • Questions/Comments

3
NAVAUDSVC
  • Internal Audit Organization for DoN
  • Headquartered at the Washington Navy Yard
  • 2 Field Offices (Norfolk, VA San Diego, CA)
  • About 300-350 Auditors
  • SECNAVINST 7510.7F, DoN Internal Audit
  • Establishes DoN audit policy and our function
  • Identifies Auditor General of the Navy/Naval
    Audit Service as Senior DoN Advisor to SECNAV and
    UNSECNAV on audit-related matters

4
NAVAUDSVC
  • SECNAVINST 7510.7F, DoN Internal Audit
  • Establishes DoN audit policy and our function
  • Identifies Auditor General of the Navy/Naval
    Audit Service as Senior DoN Advisor to SECNAV and
    UNSECNAV on audit-related matters

5
NAVAUDSVC Management Structure
Aug 07
6
SECNAV Initiative
  • Background
  • Recent instances of fraud and corruption in joint
    expeditionary contracting operations in Iraq,
    Afghanistan and Kuwait (e.g., various audit
    reports, Gansler Report, etc.)
  • 2007 Team of Flag Officers and SES personnel
    conducted review of statutes, regulations,
    policies and audit reports on acquisition and
    contract administration checks and balances and
    internal controls
  • October 2007 DON Acquisition Task Force visited
    NSA Bahrain and Dubai to identify vulnerabilities
    to fraud, waste, and abuse
  • November 2007 Task Force briefed SECNAV on
    preliminary issues
  • SECNAV requested an audit of OCONUS acquisition
    (contracting)

7
Purpose of SECNAV Initiative
  • Identify the DONs acquisition checks and
    balances intended to detect, deter, and prevent
    fraud, waste, and abuse
  • Identify vulnerabilities to fraud, waste, and
    abuse
  • Develop recommendations to ensure checks and
    balances are in place and working as intended

8
Acquisition Review Project
  • Phase I
  • OCONUS Acquisition
  • Phase II
  • Echelon 3 4 Acquisition
  • Remote Site Acquisition

9
FY06 OCONUSDON Contract Actions
  • Marine Corps .7M
  • MSC 17.0M
  • NAVFAC 780.0M
  • NAVSEA 51.0M
  • NAVSUP 581.0M
  • TOTAL 1,429.7M

10
Review Process
  • Reviewed Statutes, Regulations and Policies
  • Obtained for Analysis
  • NAVAUDSVC Audit Reports
  • GAO and DODIG Reports
  • NCIS Criminal Investigations
  • Gansler Report
  • Procurement Performance Management Assessment
  • Program (PPMAP) Reports and Performance
    Management
  • and Assistant Program (PMAP) Reports
  • Collected Data on OCONUS Acquisition Activity
  • Task Force visited Bahrain, Dubai, Jebel Ali,
    Naples
  • Djibouti

11
Potential Oversight Mechanisms
  • Acquisition strategies for non-Program services
    (MOPAS)
  • PPMAP
  • FedBizOps (Public Notice of Requirement/Strategy)
  • Small and Disadvantaged Business Utilization
    (SADBU) Reviews
  • Competition Advocate
  • Internal Audits and investigations
  • Legal Review
  • Protests
  • Acquisition Certification, Ethics Training,
    Post-Government
  • Employment Restrictions, etc.
  • Independence of Contracting Officer and Counsel

12
PotenUallPotential Checks Balances
  • Over 50 FAR, DFARS, NMCARS NMCAG Sections
  • 14 DoD Policies, Instructions Memoranda
  • Numerous DoN, Command and Activity Instructions
  • PPMAPS/PMAPS
  • Managers Internal control Plans
  • NAVAUDSVC Audits
  • IG Reviews
  • Technology (e.g., Standard Procurement System
    (SPS), etc.)

13
What Appeared to be Working
  • Tone at the Top
  • OCONUS Navy Customers Seem Satisfied
  • Records Available for Audit
  • OCONUS Personnel Engaged
  • Self-Assessments Positive
  • Overarching Husbanding Contracts Provide Global
    Support
  • Automated Contract Writing Tool lncorporates
    Checks and Balances (e.g., Standard Procurement
    System, etc.)

14
Vulnerabilities
  • People
  • Procurement Actions Up Staffing Down
  • Oversight Function Reduced
  • Recruiting for OCONUS
  • Applicant Quality
  • Time to fill positions 6 to 9 months on average
  • Unaccompanied Tours
  • Lack of Civilian Incentive
  • Inadequate Training
  • DAU Priority System challenging for Foreign
    National (FN) employees
  • Length of Tours
  • Constant Churn or Repetitive Extensions
  • Leads to Instability or go to FN Staff

15
Vulnerabilities (continued)
  • People (continued)
  • Reliance on Local Nationals and Third Country
    Nationals (TCNs)
  • Provide corporate Knowledge
  • Salary Differentials
  • TCNs cost activity roughly one-third of U.S.
    Citizen
  • Lack of Training Opportunities
  • Questionable Ethics Requirements
  • Inconsistent Security Checks
  • Uncertain Loyalties
  • Language Issues
  • SOFA Requirements
  • Application of Individual Augmentation Policies
  • Inadequate Legal Support
  • Time to Fill Positions 14 months in Bahrain
  • May Not Be in Best Geographic Location

16
Vulnerabilities (continued)
  • Mission Priority Trumps Acquisition Controls
  • Must Support War Effort
  • Acquisition Process Undervalued
  • Acquisition Community Focused on Contract Award
    not Contract Administration
  • Distant Oversight
  • Infrequent Oversight visits
  • No Surprise Visits
  • Logistical Issues
  • Time Zone Differentials
  • Commercial Bill Paying--Limited External
    Assessment
  • Naples Disbursing Officer -- 65M at Personal
    Risk
  • Bahrain Disbursing Officer -- 1OM at Personal
    Risk
  • Djibouti Disbursing Officer -- 2M at Personal
    Risk
  • Inadequate Technology
  • E-initiatives not Always Working
  • People Avoid Using Technology May Be Training
    Issue

17
Vulnerabilities (continued)
  • Reporting Process
  • FN Staff Reliant on Supervisor for Job
  • Business Culture Against Critical Self-Reporting
  • Multiple Unstaffed Hotlines
  • Africa
  • Immature System
  • Short Tours Tyranny of Turnover
  • No continuing corporate Memory
  • Most Lack Sufficient Experience
  • Cash Transactions
  • Unmonitored Transferring of Responsibilities
  • Paying Agent vs Field Ordering Officer duties
  • Infrequent Oversight
  • Logistical Issues
  • NAVEUR African Partnership Station initiative in
    Gulf of Guinea

18
Preliminary Recommendations
  • DASN (ALM) Conduct Staff Analysis to Determine
    Proper Staffing Requirements
  • Numbers
  • Appropriate Mix of Civilians/Military
  • Reassess Reliance on Local and Third Country
    Nationals
  • Proactively Assign Qualified Acquisition
    Professionals in
  • Emerging Mission Areas
  • Develop Acquisition Workforce for OCONUS
  • Succession Planning
  • Finding Proper Skillset
  • Revise Individual Augmentation Practices
  • Work with DAU for FN/TCN Training
  • Review Technology Needs and Capabilities

19
Diverse Review Team Reps
  • OGC, Navy Acquisition Integrity Office (co-lead)
  • AGC (RDA) (co-lead)
  • NAVAUDSVC
  • ASN (RDA)
  • NAVINSGEN
  • NCIS

20
Gansler Report Recommendations
  • Increase Stature, Quantity and Career Development
    on Acquisition Workforce
  • Restructure Organization
  • Provide Training and Tools
  • Obtain Legislative, Regulatory and Policy
    Assistance

21
Next Steps
  • Integrated NAVSUP/NAVFAC Djibouti PPMAP
  • Review Team Provided Oversight and Assessment
  • NAVAUDSVC Control Testing
  • Bahrain
  • Dubai
  • Djibouti
  • Naples
  • Western Pacific
  • AFRICOM

22
Audit Objective
  • Verify that DON checks and balances for
    acquisitions (contracting) by selected activities
    are in place to detect, deter and prevent fraud,
    waste and abuse, IAW Federal, DoD and DON
    acquisition requirements.

23
Criteria
  • SECNAVINST 7510.7F, Department of the Navy
    Internal Audit, dated 27 Dec 05
  • Generally Accepted Government Auditing Standards
    (GAGAS), dated Jul 07
  • Federal Acquisition Regulations (FAR)
  • Defense Federal Acquisition Regulations (DFARS)
  • Current Internal Operating Procedures at
    Selected and associated activities

24
Scope
  • Reviewed Validity of Requirements
  • Bona fide need/requirement for goods/services
  • Documented Acquisition Planning
  • Appropriate procurement approvals and
    authorizations
  • Verified Source Selection
  • Documented market research
  • Price reasonableness
  • Adequate competition
  • Goods/services procured most conveniently or
    economically

25
Scope (continued)
  • Verified Contract Admin/Mgmt
  • Monitored contractor performance
  • Received goods or services paid for
  • Maintained key contract documents
  • Used Proper type funding
  • Trained contracting personnel (DON and Foreign
    Nationals)
  • Reviewed Ethics Program
  • Policies
  • Program Design
  • Program established and working IAW Exec Order
    12674 and FAR 3.104

26
Methodology
  • Audit Universe
  • FY06-07 Contracts/Contract Actions
  • Two Selected Activities
  • Naval Audit Data Mining Division
  • 6,442 actions, 125M
  • Compared for material differences (e.g., total
    obligations/award amts, number of actions, etc.)
  • Sample Selection Criteria
  • High-dollar value obligations
  • Action/Order award dates (FY06FY07)
  • Type of goods or services procured
  • Sample for Selected Activities
  • 39 contract actions, 28M

27
Audit Results
  • Positive Findings
  • Contracting personnel received required training
    to perform assigned responsibilities
  • Selected Activities performed in-house
    acquisition training and continuously kept
    employees abreast on updates to policies and
    procedures related to the acquisition process
  • No Indications of fraud or other irregularities
  • Requirements
  • Checks and balances to ensure that funds are
    obligated for the particular service/products
    before the contracts were awarded needed
    improvements
  • Management oversight of products/services a ship
    orders and ultimately receives when visiting the
    port needs improvements
  • Selected Activity contracting office does not
    verify who, as supply officer, is authorized to
    order/certify on behalf of the ship

28
Audit Results (Continued)
  • Contract Admin/Mgmt
  • Source Selection
  • Improvement needed
  • Selected Activity1 2 contracts/actions, 210K
  • Selected Activity 2 6 contracts/actions,
    3.5M
  • Legal reviews not consistently performed for
    contracts/actions over 100K
  • Contracts/actions not consistently closed-out
    timely IAW FAR
  • As of FY07, 1,060 contracts/actions pending
    complete closeout
  • No documentary evidence to support performance
    for price reasonableness, market research and
    sole source justification

29
Audit Results (Continued)
  • Contract Officer (CO) exceeded CO authority.
  • Delegated CO authority to unwarranted and
    unqualified contract specialist
  • 3 contract actions, 1.6M
  • Proper procedures for unauthorized commitments
    not consistently followed, IAW DoD Regulations.
  • 1 contract, 13K

30
Audit Results (Continued)
  • Separation of Duties - Contract Specialist at
    Selected Activity
  • Office
  • Certified invoices for payment for Non-Navy
    Activity
  • No supporting documentation of receipt of
    service/product by user
  • Two Contracts - 21 of 46 invoices, 175K
  • One Contract - One of two invoices, 12K
  • Quality Assurance - 28 of 39 contract actions,
    19.4M
  • No QASP or documented evidence of monitoring
    contractor performance) (e.g., no ratings or
    evaluation methods, etc.)

31
Audit Results (Continued)
  • Data Integrity
  • FPDS-NG
  • Contract data not reliable
  • 4 contract actions, 742K
  • DUNS Numbers
  • Dummy/default DUNS/CAGE numbers used to bypass
    Central Contractor Register (CCR) database
    requirement for foreign contractors/vendors
  • Contractors/vendors P.O. Box and Bill to
    addresses defaulted to Crystal City, VA.
  • 7 contracts, 1M

32
Audit Results (Continued)
  • Selected Activity performed work outside scope
    of Command authority
  • Real Estate Leases 1 contract, 708K
  • Construction 1 contract, 95K
  • Missing Documents (not in contract files)
  • 38 of 39 contract actions/mods, as reqd by FAR
    4.803(b) and 43.204(a)
  • Selected Activity, 24 contract actions, 20M
  • Selected Activity, 14 contract actions, 4M

33
Audit Results (Continued)
  • Funding
  • 3 of 39 contract actions, 599K, missing
    documents
  • 2 of 39, 174k, funding document did not
    reconcile to contract award amount. No evidence
    funding was approved before contract awarded
  • 12 of 39, 14.3M, no mod in file to support
    deobligations (Procedures, Guidance and
    Information 243.171, Obligations or Deobligation
    of Funds)
  • 4 of 39, 2.3M, authorized officials name
    typed on funding document does not match name
    of official who signed document

34
Audit Results (Continued)
  • Ethics Program was in place at Selected
    Activities
  • Staff current on required ethics training
  • Management continuously expressed their views on
    ethical behavior
  • Bulletin board in-house
  • Email address to report any unethical and/or
    fraudulent behavior
  • Hotline number posted
  • Discrimination notice including in-house training
  • Foreign Nationals at Selected Activities
  • Met training requirements to perform assigned
    responsibilities
  • Clearances performed by NCIS FBI
  • DON adheres to Bahrain labor laws

35
DocumentsRequested and Not Provided
  • Missing Invoices
  • IGEs
  • Acquisition Planning Documents
  • SOWs
  • Modifications
  • QASPs
  • Funding Documents
  • Delegation Memorandums
  • Ratification Document
  • RFP/RFQ

36
Lessons Learned(Potential Recommendations)
  • Selected Activities Need to Establish and
    Implement Controls
  • Maintain complete contract files in accordance
    with FAR 4.801 (a) to ensure that all contract
    documents including delegation memorandums, are
    prepared, properly filed, and maintained (files
    should contain/tell a complete story)
  • Ensure contracts are closed out IAW FAR 4.804-2
    and FAR 4.804-5
  • Process unauthorized commitments per ratification
    authority (FAR 1.602 NAVSUPINST 4200.81E)
  • Ensure contracts are awarded by warranted
    contracting officers (FAR 1.6)

37
Lessons Learned(Potential Recs) (Continued)
  • Ensure contracts and mods have appropriate
    signatures (FAR 4.803)
  • Ensure COs do not exceed warranted authority
  • Comply with FAR 1.6, DFARS 201.6, DoD FMR,
    NAVSUPINST 4200.99, DON and DoD acquisition
    guidance for ratification of unauthorized
    commitment.
  • Develop acquisition plans IAW FAR 7.1 and Navy
    Command Instruction abcd.56D
  • Engage customers early in development of
    acquisition to allow sufficient advance notice of
    requirements to facilitate acquisition planning
  • Ensure legal reviews are consistently performed

38
Lessons Learned(Potential Recs) (Continued)
  • Contracting personnel receive proper oversight
    and necessary training to prevent potential
    Antideficiency Act violations (ADA) (DoD FMR Vol
    14, Chap 10, Par 100)
  • Appropriate procurement approvals and
    authorizations are obtained and documented (FAR
    42.2 DFARS 201.6)
  • Ensure signatures on funding documents are of
    authorized officials
  • Separation of Duties for initiating, authorizing,
    processing, recording, and reviewing transactions

39
Lessons Learned(Potential Recs) (Continued)
  • Appropriate procurement authority should exists
    before awarding contracts for construction or
    real property
  • Ensure data inputs in FPDS-NG are accurate and
    periodic reviews of data are conducted (FAR 4.6)
  • Monitor use of dummy/default DUNS numbers
  • Ensure information on ALL foreign vendors is
    entered in FPDS-NG and Central Contractor
    Registration

40
Reporting Suspected Fraud
  • Naval Inspector General Hotline
  • Phone 1-800-522-3451
  • Email NAVIGHotlines_at_navy.mil
  • DoD Inspector General Hotline
  • Phone 1-800-424-9098
  • Email Hotline_at_dodig.osd.mil
  • Website http//www.dodig.osd.mil/hotline

41
Wrap-up
  • Questions
  • Comments
  • Concerns
  • Alvin Lowe
  • 202-433-6270
  • alvin.lowe_at_navy.mil
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