SECNAV Acquisition Checks
description
Transcript of SECNAV Acquisition Checks
American Society of Military Comptrollers – PDI
2008
28 MAY 2008
SECNAV Acquisition Checks and Balances Initiative
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Agenda Naval Audit Service SECNAV Acquistion Checks and Balances Initiative
SECNAV Task Force Review and Process Potential Oversight Mechanisms Potential Checks and Balances What’s Supposedly Working Vulnerabilities Recommendations
NAVAUDSVC (Preliminary) Audit Results
NAVAUDSVC Audit (Phase I) Questions/Comments
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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
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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
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NAVAUDSVC Management Structure
Au
g 0
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S am u el C h asonA sst A u d itor G en eral
P lan s , P o licy , & R esou rces
Joan H u gh esA sst A u d itor G en eral
R esearch , D evelop m en t,A cq u is ition, & L og istics A u d its
R on B oothA sst A u d itor G en eral
In sta lla tion s &E n viron m en t A u d its
Jon K lein w ak sA sst A u d itor G en eral
M an p ow er &R eserve A ffa irs A u d its
L u th er B raggA sst A u d itor G en eral
F in an cia l M an agem en t &C om p tro ller A u d its
G reg S in clitic oA sst A u d itor G en eral
In tern a l C on tro l &C om m an d S up p ort A u d its
R ich ard L eachA u d itor G en era l
R an d a ll E x leyD ep u ty A u d itor G en era l
S ecretary o f th e N avyU n d er S ecretary o f th e N avy
CNO/CMC Audit Interfaces
N2, N4, N6/N7, N091
Systems Commands
CFFC
DCMC (Aviation, PPO, I&L)
CG-MCCDC
Dir. C4
Dir. Intelligence
Other Audit Interfaces
NCIS (CI)
AIO
CNO/CMC Audit Interfaces
N3/N5, N4, N6F
CFFC
CNI
DCMC (PPO, I&L)
Safety Division
NAVFAC
CNO/CMC Audit Interfaces
N1, N093, N095
DCCMC (M&RA, PPO)
Med Officer, Med Svcs
CG-Recruiting Command
MARRESFOR
BUPERS
NETC
CNO/CMC Audit Interfaces
N8
DCMC (P&R)
N6
Other Audit Interfaces
DONCIO
CNO/CMC Audit Interfaces
Major Claimants
CFFC
COMPACFLT
COMLANTFLT
MARFORLANT
MARFORPAC
DCNC (I&L)
Other Audit Interfaces
NCIS
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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)
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Purpose of SECNAV Initiative
Identify the DON’s 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
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Acquisition Review Project Phase I
OCONUS Acquisition
Phase II Echelon 3 & 4 Acquisition Remote Site Acquisition
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FY06 OCONUSDON Contract Actions Marine Corps $ .7M MSC 17.0M NAVFAC 780.0M NAVSEA 51.0M NAVSUP 581.0M
TOTAL $1,429.7M
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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
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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
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PotenUall
Potential 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.)
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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.)
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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
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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
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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
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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
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Preliminary Recommendations DASN (A&LM) 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
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Diverse Review Team Reps OGC, Navy Acquisition Integrity
Office (co-lead) AGC (RD&A) (co-lead) NAVAUDSVC ASN (RD&A) NAVINSGEN NCIS
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Gansler Report Recommendations
Increase Stature, Quantity and Career Development on Acquisition Workforce
Restructure Organization Provide Training and Tools Obtain Legislative, Regulatory and
Policy Assistance
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Next Steps
Integrated NAVSUP/NAVFAC Djibouti PPMAP Review Team Provided Oversight and
Assessment
NAVAUDSVC Control Testing Bahrain Dubai Djibouti Naples Western Pacific AFRICOM
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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.
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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]
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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
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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
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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 (FY06–FY07)
Type of goods or services procured
Sample [for Selected Activities] 39 contract actions, $28M
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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
RequirementsChecks 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
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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
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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
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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.)
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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
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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 req’d by FAR 4.803(b) and 43.204(a)
[Selected Activity], 24 contract actions, $20M [Selected Activity], 14 contract actions, $4M
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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 official’s name “typed” on funding document does not match name of official who signed document
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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
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DocumentsRequested and Not Provided Missing Invoices IGEs Acquisition Planning Documents SOWs Modifications QASPs Funding Documents Delegation Memorandums Ratification Document RFP/RFQ
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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)
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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
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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
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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
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Reporting Suspected Fraud
Naval Inspector General Hotline Phone: 1-800-522-3451 Email: [email protected]
DoD Inspector General Hotline Phone: 1-800-424-9098 Email: [email protected] Website:
http://www.dodig.osd.mil/hotline