U.S. General Services Administration Administrator’s Semiannual Management Report to Congress Report No. 41 April 1, 2009 to September 30, 2009 U.S. General Services Administration Paul F. Prouty Acting Administrator Office of the Chief Financial Officer Kathleen M. Turco Chief Financial Officer Office of the Controller Faye C. Basden Controller Internal Control and Audit Division Ralph L. Boldt Director November 2009 This report is in the public domain. Authorization to reproduce it in whole or in part is granted. While permission to reprint this publication is not necessary, the citation should be: U.S. General Services Administration, Office of the Chief Financial Officer, Office of the Controller, Internal Control and Audit Division, Administrator’s Semiannual Management Report to Congress, No. 41, Washington, DC 20405. To obtain copies of this report, Write to: U.S. General Services Administration, Office of the Chief Financial Officer, Office of the Controller, Internal Control and Audit Division (BEI), 1800 F St., N.W., Washington, DC 20405-0001; Fax your request to: (202) 208-7378; E-mail your request to: Travis.Lewis@gsa.gov; Call in your request: (202) 219-3078; or Obtain a copy of this report on the Agency’s Web site at: http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_BASIC&co ntentId=22877&noc=T In accordance with the Inspector General Act of 1978, as amended, the Administrator of the U.S. General Services Administration submits this report to Congress on final actions regarding audit recommendations. The report covers the period from April 1, 2009 through September 30, 2009. The Act requires the Administrator to report directly to the Congress on management decisions and final actions taken on audit recommendations. The report must also explain as to why final action on any audit has not been taken one year after the date of the management decision. This report statistically summarizes management's implementation of the recommendations contained in audit reports issued by GSA’s Office of Inspector General. During the reporting period, management decisions were issued on 58 audit reports. Of this total, 45 audit reports represented $8,242,177 in disallowed costs and $303,929,970 in funds to be put to better use. The latter category includes $302,443,220 in estimated and actual cost avoidance determined to have no impact on the agency’s budget and $1,486,750 in actual cost avoidance determined to have potential impact on the budget. During the six-month period, final action was achieved for 30 audits with management decisions identifying disallowed costs or funds to be put to better use. These audits represent the recovery of $71,229 and the implementation of $4,353,088 of actual cost avoidance determined to have no impact on the agency's budget. No cost avoidance determined to have a potential impact on the budget was implemented during the period. As of September 30, 2009, 47 audit reports remained open without final action one year after the management decision. Of this total, five were under formal administrative or judicial appeal. Explanations of the reasons why final actions have not been taken with respect to the remaining 42 audits are provided in the report. Page Introduction Overview 1 U.S. General Services Administration Organization 1 Agency Audit Follow-up Process 2 Organization Chart 3 Progress of Audit Closure 4 Audits with Disallowed Costs 5 Audits with Better Use Funds 6 American Recovery and Reinvestment Act (ARRA) Audits 7 Internal Audits 9 Audits under Appeal/Litigation 11 Contract Audits 12 Glossary of Terms 16 Overview This report, submitted pursuant to the Inspector General Act of 1978, as amended, presents management's perspective on audit resolution and follow-up activity at the General Services Administration (GSA) for the period beginning April 1, 2009 through September 30, 2009. This is the agency's 41st report to the Congress since the implementation of the Act (Public Law 100-504). The data in the report indicates that GSA's audit follow-up efforts continue to play a significant role in the effective management of the agency's operations and the accomplishment of its mission. U.S. General Services Administration Organization GSA is organized around two major business functions represented by the Federal Acquisition Service and the Public Buildings Service. In addition, there are 11 Regions and a number of Staff Offices that provide support to the other GSA organizations. The Administrator of GSA directs the execution of all functions pertaining to the agency. Members of his office, as well as Regional Administrators and Heads of Services and Staff Offices, advise and make recommendations on policy or operational issues of national scope. Each Service is lead by a Commissioner located in the Central Office in Washington, DC. The Commissioners are responsible in their respective functional areas for policy development, program direction, funding, and interfacing with Congressional staffs, clients and other constituents regarding issues of policy of national scope. Each Region has a Regional Administrator who reports directly to the Administrator and is responsible for managing the Regional functions. GSA's structure requires a matrixed approach to management where communication between the Region and Central Office organizations is critical to the effective management of the agency. Agency Audit Follow-up Process GSA has effective systems in place for keeping track of audit recommendations. It also has senior management commitment to ensure that appropriate corrective action is taken and agency managers have an unambiguous responsibility to act on the audit recommendations. The following provides a description of the responsibilities of GSA officials involved in the audit follow-up process. Senior Agency Official The Deputy Administrator is the Senior Agency Official responsible for audit follow-up in the agency. As such, he has overall responsibility for ensuring the adequacy of the agency's follow-up system, monitoring the resolution of audit recommendations, and ensuring the prompt implementation of corrective actions. He is also responsible for final resolution of any differences between agency management and the Office of Inspector General. The Chief Financial Officer The Chief Financial Officer provides administrative direction to the officials in the Office of the Chief Financial Officer who manage GSA’s Audit Resolution and Follow-up System. Their responsibilities include: * Acting as the liaison with the U.S. Government Accountability Office (GAO) for the coordination of GAO audits in progress within GSA and for preparation of responses and reports for the signature of the Administrator on GAO recommendations as required by law; * Ensuring timely resolution and implementation of internal and external audit recommendations made by the Office of Inspector General as well as GAO; * Overseeing the collection, and proper accounting of amounts determined due to the Government as the result of audit-related claims; * Maintaining an automated report control system for both internal and external audits that provides an accurate means for tracking and documenting actions taken in implementing audit recommendations. Heads of Services and Staff Offices and Regional Administrators Heads of Services and Staff Offices and Regional Administrators to whom audit recommendations pertain, have primary responsibility for resolving and implementing recommendations promptly. Their responsibilities include: * Ensuring controls are implemented to provide timely, accurate, and complete responses to audit reports; * Developing, advocating, and documenting agency positions on audit recommendations; * Preparing responses to draft and final GAO reports in coordination with the Office of the Chief Financial Officer; and * Providing comments on audit decision papers prepared by the Office of Inspector General to ensure that management's position on unresolved audit recommendations is properly stated. Organization Chart Services Regions Staff Offices Under the Office of the Administrator FOR THE SIX-MONTH PERIOD ENDING SEPTEMBER 30, 2009 Timely closing of open audits remains a priority for the U.S. General Services Administration. In keeping with that focus, the Office of the Chief Financial Officer (OCFO) staff worked with contracting officers and audit liaisons in obtaining supporting documentation to close out numerous internal and contract audits. During the reporting period of April 1, 2009, through September 30, 2009, OCFO staff successfully closed 20 percent, or 47 internal and contract audits out of 237 audits that were reported as open. The remaining 190 audits that could not be closed are due to litigation, negotiation, collections, and implementation of corrective actions. The decreased percentage of total closed audits from previous years is due to the increased number of contract audits issued by the OIG during the period relating to the Recovery Act. Final action for the six-month period Ending SEPTEMBER 30, 2009 A. Audit reports for which final action had not been taken by the commencement of the reporting period. Number of Audit Reports 17 Disallowed Costs $16,604,861 B. Audit reports on which management decisions were made during the reporting period. Number of Audit Reports 15 Disallowed Costs $8,242,177 C. Audit reports on which final action was taken during the reporting period. (i) the dollar value of disallowed costs that were recovered by management through: - collections… $71,229 - offset… $70,500 - property in lieu of cash… $0 - other… $0 (ii) the dollar value of disallowed costs that were written off by management. 3 $2,834,784 $141,729 $2,763,555 D. Audit reports for which no final action has been taken by the end of the reporting period. 29 $22,012,254 AUDITS WITH BETTER USE FUNDS Number of No Budget Final action for the six-month Audit Impact – Actual Budget period ending SEPTEMBER 30, Reports and Estimated Impact 2009 A. Audit reports for which final 74 $539,573,467 $109,092 action had not been taken by the commencement of the reporting period. B. Audit reports on which 30 $302,443,220 $1,486,750 management decisions were made during the reporting period. C. Audit reports for which final 27 $191,322,659 $0 action was taken during the reporting period. (i) the actual dollar value of $4,353,088 $0 recommendations that were actually completed. (ii) the actual dollar value of $11,212,053 $0 recommendations that management has subsequently concluded should not or could not be implemented or completed. (iii) the actual dollar value of $2,655,936 $0 recommendations that management has subsequently concluded should not or could not be determined (calculated). (iv) the estimated dollar value of “funds $173,101,582 N/A to be put to better use” as agreed to by GSA management and the OIG. D. Audit reports for which no final action had been taken by the end of the reporting period. 77 $650,694,028 $1,595,842 AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) AUDITS The American Recovery and Reinvestment Act of 2009 (Recovery Act) authorized the General Services Administration’s (GSA) Public Buildings Service (PBS) to invest $5.5 billion in Federal public building projects. This includes $4.5 billion to transform Federal facilities into exemplary high- performance green buildings, $750 million to renovate and construct new Federal offices and courthouses, and $300 million to construct and renovate border stations. Due to this increased agency spending, GSA is developing and implementing risk assessments and control methodologies to ensure Recovery funds are awarded and distributed in a prompt, fair, and reasonable manner, recipients and uses of all Recovery funds are transparent to the public, and public benefits of these funds are reported clearly, accurately, and in a timely manner. To assist in the implementation of these goals, all Recovery Act monies are being tracked and reported. As of September 30, 2009, there are 29 GSA ARRA-related audits, totalling $111,494,253 in dollars audited. A summary of these audits in are summarized in the chart on the following page. American Recovery and Reinvestment Act (ARRA) Audits Audit # Total Dollars Questioned Amt Funds Put to Better Use Reviewed Total Unsupp. Total Unsupp. A090214P9X09083 $ 1,974,984.00 $0.00 $0.00 $92,869.00 $0.00 A090199P9X09080 $ 4,942,327.00 $0.00 $0.00 $70,762.00 $0.00 A090242PCX09106 $ 1,994,671.00 $0.00 $0.00 $100,894.00 $0.00 A090201P9X09079 $ 1,680,117.00 $0.00 $0.00 $395,337.00 $0.00 A090254PCX09097 $ 5,841,031.00 $0.00 $0.00 $118,000.00 $0.00 A090232PCX09101 $ 863,859.00 $0.00 $0.00 $11,762.00 $0.00 A090228PCX09094 $ 2,652,206.00 $0.00 $0.00 $53,000.00 $0.00 A090230PCX09103 $ 21,022,391.00 $0.00 $0.00 $124,032.00 $0.00 A090234PCX09102 $ 13,541,780.00 $0.00 $0.00 $809,387.00 $192,400.0 0 A090238PCX09105 $ 2,313,490.00 $0.00 $0.00 $0.00 $0.00 A090233PCX09109 $ 2,258,920.00 $0.00 $0.00 $45,178.00 $0.00 A090239PCX09108 $ 1,269,754.00 $0.00 $0.00 $90,385.00 $12,500.00 A090237PCX09111 $ 1,789,942.00 $0.00 $0.00 $310,194.00 $0.00 A090236PCX09112 $ 1,021,306.00 $0.00 $0.00 $0.00 $0.00 A090231PCX09114 $ 2,399,864.00 $0.00 $0.00 $45,134.00 $0.00 A090253PCX09115 $ 1,925,000.00 $0.00 $0.00 $606,342.00 $0.00 A090246PCX09113 $1,020,274.00 $0.00 $0.00 $30,608.00 $0.00 A090252PCX09116 $ 886,509.00 $0.00 $0.00 $88,996.00 $0.00 A090193P9X09078 $ 12,406,242.00 $0.00 $0.00 $313,462.00 $0.00 A090245PCX09118 $2,853,806.00 $0.00 $0.00 $93,612.00 $0.00 A090247PCX09120 $ 788,848.00 $0.00 $0.00 $28,621.00 $0.00 A090250PCX09122 $ 887,966.00 $0.00 $0.00 $49,601.00 $0.00 A090241PCX09121 $ 8,706,741.00 $0.00 $0.00 $222,987.00 $0.00 A090251PCX09125 $ 931,012.00 $0.00 $0.00 $32,710.00 $0.00 A090244PCX09124 $ 1,760,528.00 $0.00 $0.00 $254,455.00 $21,763.00 A090235PCX09127 $ 1,439,293.00 $0.00 $0.00 $24,739.00 $0.00 A090243PCX09126 $ 5,433,000.00 $0.00 $0.00 $295,245.00 $0.00 A090248PCX09129 $ 719,353.00 $0.00 $0.00 $278,256.00 $206,450.0 0 A090229PCX09117 $ 6,169,039.00 $0.00 $0.00 $192,302.00 $0.00 Totals $ 111,494,253.00 $0.00 $0.00 $4,778,870.00 $433,113.0 0 AUDITS WITH MANAGEMENT DECISIONS MADE PRIOR TO SEPTEMBER 30, 2008, BUT WITH FINAL ACTION NOT TAKEN AS OF SEPTEMBER 30, 2009 REPORT NUMBER TITLE OF REPORT DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION PROJECTED COMPLETION DATE Dis- allowed Costs Better Use Funds A020161F3V03003 03/18/2003 $0 $0 Action plan is currently being implemented. 02/15/2010 Consolidation of Distribution Center Operations A060149QTP07002 Electronic Contract Proposal/ Modification system 03/06/2007 $0 $0 Action plan is currently being implemented. 01/15/2010 A070067F9V07003 Unused Airline Tickets 05/17/2007 $0 $0 Action plan is currently being implemented. 01/15/2010 A060190Q6P07004 MAS Contract Workload 07/31/2007 $0 $0 Action plan is currently being implemented. 10/15/2010 A060170PWR07005 09/13/2007 $0 $0 Action plan due dates have been significantly revised. Delays are caused by the decision to implement corrective actions through a new 1/15/2010 Heating Operation and Transmission District's Operations and Finance OCFO financial systems initiative. A070164QAP08004 Inventory Management Software 03/21/2008 $0 $0 Action plan is currently being implemented. 10/15/2010 A060228OTF08007 Improvements to the GSA Privacy Act to Protect PII 03/31/2008 $0 $0 Action plan is currently being implemented. 01/15/2010 A070094BTF08009 Fully Integrated Pegasys 06/23/2008 $0 $0 Action plan is currently being implemented. 10/15/2010 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS Disallowed Costs Better Use Funds A030140FWX03056 Science Applications Int'l Corp. 03/25/2003 $0 $1,028,099 A050138P3X05082 Nason and Cullen, Inc. 07/08/2005 $0 $770,701 A050147F5X06018 Herman Miller, Inc. 11/30/2005 $50,410 $0 A070141P6X07090 Logicvision, Inc. 08/27/2007 $0 $616,112 A080084P7X08061 Kenmor Electrical Company, LP 04/29/2008 $0 $312,148 AUDITS WITH MANAGEMENT DECISIONS MADE PRIOR TO SEPTEMBER 30, 2008, BUT WITH FINAL ACTION NOT TAKEN AS OF SEPTEMBER 30, 2009 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A000971P5X00107 Midwest Curtainwalls Inc. 06/01/2000 $0 $488,953 The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process. A010127P6X01079 DKW Construction, Inc. 04/30/2001 $303,193 $0 GSA is in the process of collecting funds owed the government from the contractor. A63630FWX02004 The Presidio Corporation 10/18/2001 $273,000 $0 GSA in process of collecting funds owed the Government from the contractor. A030140FWX03056 Science Applications Int'l Corp. 03/25/2003 $0 $1,028,099 The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process. A030186F5X04054 NOVA Solutions 03/09/2004 $46,805 $0 GSA is process of collecting funds owed the government from the contractor. A040162F5X04053 NOVA Solutions, Inc. 03/09/2004 $0 $17,000 GSA in process of collecting funds owed the government from the contractor (collections are being tracked through OIG audit A030186). A040085F7X04085 OnBoard Software, Inc. 06/28/2004 $348,158 $0 GSA is in the process of collecting funds owed the government from the contractor. A050112F7X05068 Entrust Inc. 05/10/2005 $0 $3,300,000 Negotiations are proceeding between contracting officer and contractor. A050138P3X05082 Nason and Cullen, Inc. 07/08/2005 $0 $770,701 Audit case is pending with GSA Civilian Board of Contract Appeals. A050105F6X06006 BCOP Federal, Inc. 10/12/2005 $0 $29,550,000 Negotiations are proceeding between contracting officer and contractor. A050147F5X06018 Herman Miller, Inc. 11/30/2005 $50,410 $0 Audit case is pending an outcome from litigation brought by the Air Force. A050248T9X06056 Information Systems Support, Inc. 03/30/2006 $3,138,873 $0 Negotiations are proceeding between contracting officer and contractor. A050122F6X06059 Fasternal Company 04/18/2006 $35,274 $0 Negotiations are proceeding between contracting officer and contractor. A060181F7X06100 Haverstick Government Solutions, Inc. 09/07/2006 $0 $765,634 Negotiations are proceeding between contracting officer and contractor. A060148F6X07007 Kimball International, Inc. 10/24/2006 $0 $33,731,457 Negotiations are proceeding between contracting officer and contractor. A060206T9X07012 Information Systems Support, Inc. 10/31/2006 $4,026,287 $0 Negotiations are proceeding between contracting officer and contractor. A060115F2X07025 WFI Government Services, Inc. 12/08/2006 $0 $771,178 Negotiations are proceeding between Contracting Officer and contractor. A070107P5X07060 Linear Electric Company 04/20/2007 $0 $204,334 Negotiations are proceeding between Contracting Officer and contractor. A060245F6X07065 Comstor, Division of Westcon group N.A., Inc. 04/30/2007 $0 $0 Negotiations are proceeding between Contracting Officer and contractor. A070183P9X07088 Perkins + Will 08/23/2007 $0 $108,380 Negotiations are proceeding between Contracting Officer and contractor. A070141P6X07090 LogicVision, Inc. 08/27/2007 $0 $616,112 The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process. A060196P9X07091 Tigard Electric, Inc. 08/28/2007 $0 $988,088 Negotiations are proceeding between Contracting Officer and contractor. A060239F2X07101 Emtec Federal, Inc. 09/27/2007 $0 $0 Negotiations are proceeding between Contracting Officer and contractor. A070144Q2X08004 Aquilent, Inc. 10/04/2007 $0 $0 Negotiations are proceeding between Contracting Officer and contractor. A070176Q9X08032 T-Mobile USA, Inc. 12/18/2007 $0 $2,456,420 Negotiations are proceeding between Contracting Officer and contractor. A070202P9X08047 Dick Corporation/Matt Construction Company, a Joint Venture 03/07/2008 $0 $2,591,204 Negotiations are proceeding between Contracting Officer and contractor. A080080Q9X08054 Science Applications Int'l Corp. 03/31/2008 $2,210,597 $0 Negotiations are proceeding between Contracting Officer and contractor. A070168Q6X08057 MSC Industrial Direct Company, Inc. 04/10/2008 $0 $22,294,058 Negotiations are proceeding between Contracting Officer and contractor. A080083P5X08056 H.J. Martin & Son, Inc., subcontractor to Mid Canada Millwork, Ltd. 04/10/2008 $0 $2,024,061 Negotiations are proceeding between Contracting Officer and contractor. A080084P7X08061 Kenmor Electrical Company, LP 04/29/2008 $0 $312,148 The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process. A070219Q4X08062 Navarro Research & Engineering, Inc. 05/05/2008 $0 $2,535,432 Negotiations are proceeding between Contracting Officer and contractor. A080107Q3X08063 05/05/2008 $0 $811,315 Agreement has been reached between OIG and Contracting Officer. Negotiations are proceeding. Superior Protection Service, Inc. A070218Q7X08067 05/20/2008 $0 $0 Negotiations are proceeding between Contracting Officer and contractor. KPMG, LLP A070229Q4X08068 05/22/2008 $0 $7,376,859 Negotiations are proceeding between Contracting Officer and contractor. Citrix Systems, Inc. A080115Q6X08074 06/06/2008 $0 $0 Negotiations are proceeding between Contracting Officer and contractor. Home Depot U.S.A., Inc. A080088P9X08076 06/10/2008 $0 $2,869,291 Negotiations are proceeding between Contracting Officer and contractor. Control Air Conditioning Corporation A040224F3X08077 06/11/2008 $1,846,647 $0 Negotiations are proceeding between Contracting Officer and contractor. ADT Security Services, Inc. A070217Q5X08084 07/23/2008 $0 $11,000,000 Negotiations are proceeding between Contracting Officer and contractor. Compuware Corporation A080092Q9X08088 08/08/2008 $0 $73,378,534 Negotiations have been completed between Contracting Officer and contractor. Agilent Technologies, Inc. The following definitions, based on the Inspector General Act of 1978, as amended, apply to terms used in this Semiannual Management Report: Questioned Costs. Costs questioned by the OIG as a result of: * an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of funds; * a finding that, at the time of an audit, such cost is not supported by adequate documentation; or * a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable. Disallowed Cost. Questioned costs that GSA management in a management decision sustained or agreed should not be charged to the Government. Recommendation that Funds be Put to Better Use. A recommendation by the OIG that funds could be used more efficiently if management took action to implement and complete the recommendations, including: * reductions in outlays; * de-obligation of funds from programs or operations; * withdrawal of interest subsidy costs on loans or loan guarantees, insurance or bonds; * costs not incurred by implementing recommended improvements related to the operations of the establishment, a contractor or grantee; * avoidance of unnecessary expenditures noted in pre-award reviews of contract or grant agreements; or * any other savings that are identified specifically. Management Decision. The evaluation by management of the findings and recommendations included in an audit report and the issuance of a final decision by management concerning its response to such findings and recommendations, including planned corrective actions to remedy weaknesses identified in the report. Final Action. The completion of all actions that GSA management concluded in its management decision were necessary with respect to the findings and recommendations included in the audit report. In the event that GSA management concluded no action was necessary, final action occurred when the management decision was made. Management Actions – Questioned Costs. The following is a list of the different management actions used by GSA management to resolve questioned costs in an audit report. * Audit reports on which management decisions were made during the period: Data pertaining to the number of audit reports on which management decisions were made during the period and the associated amount of disallowed costs was furnished by the OIG. * Write-offs: For the purposes of this report, write-offs are interpreted to represent the difference between the disallowed cost and the amount successfully recovered. Management Actions – Better Use Funds. The following is a list of the different management actions used by GSA management to resolve the “better use” of funds in an audit report. * Better Use Funds: The figure represents amounts cited as “cost avoidance” and “funds to be put to “better use,” as agreed to by GSA management by the OIG. * Budget Impact Funds: Funds identified as “budget impact” involve the obligation process. Audit-related savings of these funds, depending on the particular fund involved, may be available for reprogramming. * No Budget Impact Funds: Funds identified as “no budget impact” are composed of estimated and actual amounts, and do not involve obligated monies, and, therefore, cannot be construed as having a material effect on GSA’s appropriated funds. * Audit reports on which management decisions were made during the period: Data pertaining to the number of audit reports on which management decisions were made during the period and the associated dollar amounts agreed to by management were furnished by the OIG. * Value of recommendations that management concluded should not or could not be calculable: Management was unable to determine the award amounts and “better use funds” implemented since the amount is included in the overall award to the prime contractor and savings could not be determined. 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