., U.S. General Services Administration Administrator's Semiannual Management Report to the Congress Report No. 53 April 1, 2015 to September 30, 2015 U.S. General Services Administration Denise Turner Roth Administrator Office of Administrative Services Cynthia A. Metzler Chief Administrative Services Officer GAO/IG Audit Response Division Leroy Ford Director October 2015 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 Administrative Services, GAO/IG Audit Response Division, Administrator's Semiannual Management Report to the Congress, No. 53, Washington, DC 20405. To obtain copies of this report, Write to: U.S. General Services Administration, Office of Administrative Services, GAO/IG Audit Response Division, 1800 F Street, NW Washington, DC 20405 E-mail your request to: leroy.ford@gsa.gov Call in your request: (202) 501-4786 Obtain a copy of this report on the Agency's Web site at: Semiannual Report to the Congress Contents Synopsis of Audit Activity 4 Overview 5 Organization of Audit Follow-up Program 6 Agency Audit Follow-up Program 6 Agency Audit Follow-up Official 6 The Chief Administrative Services Officer 6 Heads of Services and Staff Offices and Regional Administrators 6 Audits with Disallowed Costs 7 Audits with Better Use Funds 8 Internal Audits 9 Audits under Appeal/Litigation 10 Contract Audits 11 Glossary of Terms 18 Appendix 20 Synopsis of Audit Activity In accordance with the Inspector General Act of 1988, as amended, the Administrator is required to report directly to the Congress on management decisions and final actions taken on audit recommendations made by the Office of Inspector General (OIG) of the General Services Administration (GSA). This report covers the semiannual management reporting period of April 1, 2015, through September 30, 2015. The report provides a summary of: - Cases where final action has not been taken on audits one year after the date of the management decision. - Implementation of the recommendations by GSA management contained in audit reports issued by the OIG. At the commencement of this semiannual management reporting period, there were audit reports with disallowed costs, audits with better use funds, and audits with both disallowed cost and better use funds. At the beginning of the reporting period, a total of 195 audit reports were pending final action containing financial recommendations totaling $3,219,926,440. There were 168 contract audits with financial recommendations totaling $3,219,739,546 and 27 internal audits with financial recommendations totaling $186,894. During the reporting period, management decisions were made on 44 audit reports concerning nationwide GSA programs and operations. Of the 44 audits, 32 of these audits found $17,022,355 in pre-award, post-award contracts and internal program spending that was incorrectly charged to the Government (known as disallowed costs). Of the 44 audits, 30 audits recommended that $1,033,291,001 could be used more efficiently (known as funds to be put to better use) if management took action to implement and complete the OIG recommendations. This information is disclosed in Appendix A of this report. During the six-month period, GSA was able to successfully take final action on a total of 90 audits. These audits represent the recovery of $41,343,226 in Government funds and the identification of $1,125,246,707 in potential future savings. As of September 30, 2015, 145 audit reports remained open. There are several audits involving claims under appeal or litigation during this reporting period. 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 GSA for the period beginning April 1, 2015, through September 30, 2015. This is the agency's 53rd 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 which results in better use of Taxpayer's dollars. 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, GSA houses the Office of Government-wide Policy, the Office of Citizen Services and Innovative Technologies, and a number of Staff Offices that provide support to the other GSA organizations. There are 11 regions in the GSA structure. The Administrator of GSA directs the execution of all GSA functions. 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. They are also responsible for execution of programs and services within their service, region or staff office, under the leadership of the Administrator. Organization of Audit Follow-Up Program GSA has effective systems in place for keeping track of audit recommendations. In addition, GSA senior management is committed to ensuring that appropriate corrective action is taken. Agency managers have the responsibility to act upon the auditor's recommendations, with the audit resolution process being supervised by the agency audit follow-up official. A description of the responsibilities of GSA officials involved in the audit follow-up process is set forth below: Agency Audit Follow-up Official The Deputy Administrator is the Agency Audit Follow-up Official responsible for audit follow-up activity. As such, she/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. She/he also makes final decisions to resolve differences between agency management and the OIG. The Chief Administrative Services Officer (CASO) The CASO provides direction and oversight to the officials in the Office of Administrative Services (OAS) who manage the GSA's Audit Resolution and Follow-up System. Their responsibilities include: - Acting as the liaison with the 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 GAO and the OIG; - Overseeing the collection and proper accounting of monetary amounts determined due to the Government as the result of audit-related claims; - Analyzing GSA's programs, upon request from the Administrator, particularly as related to past or present audit recommendations; and, - 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 for GAO draft reports and transmittals for final GAO reports in coordination with OAS; - Providing comments on audit decision papers prepared by the OIG to ensure that management's position on unresolved audit recommendations is properly stated. Audits with Disallowed Costs Final action for the six-month period Ending SEPTEMBER 30, 2015 A. Audit reports for which final action had not been taken by the commencement of the reporting period. B. Audit reports on which GSA/OIG management decisions were made during the reporting period. Number of Audit Reports 195 44 Disallowed Costs $145,227,274 $17,022,355 C. Audit reports on which final action was taken during the reporting period. (i) ) the dollar value of disallowed costs - collections $11,150,318 - offset $19,967,177 - property in lieu of cash ................................... $0 - surplus $3,817,606 - other ......................... $35,187 (ii) the dollar value of disallowed costs that were written off by management. 90 $41,343,226 $34,970,288 $6,372,938 D. Audit reports for which no final action has been taken by the end of the reporting period. 145 $120,906,403 Audits with Better Use Funds Final action for the six-month Ending SEPTEMBER 30, 2015 A. Audit reports for which final action had not been taken by the commencement of the reporting period. B. Audit reports on which management decisions were made during the reporting period. Number of Audit Reports 195 30 No budget Impact (Actual and Estimated) $3,074,699,166 $1,033,291,001 Budget Impact $0 $0 C. Audit reports on which final 90 $1,125,246,707 $0 action was taken during the reporting period. (i) the actual dollar value of 25,990,638 $0 recommendations that were actually completed. (ii) the actual dollar value of 0 $0 recommendations that management has subsequently concluded should not or could not be implemented or completed. (iii) the actual dollar value of 6,225,926 $0 recommendations that management has subsequently concluded should not or could not be determined (calculated). (iv) the estimated dollar value of 1,105,481,995 $0 ''funds to be put to better use'' as agreed to by GSA management and the OIG. D. Audit reports for which no final 145 $2,196,421,133 $0 action has been taken by the end of the reporting period. Internal Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER TITLE OF REPORT DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION PROJECTED COMPLETION DATE Disallowed Costs Better Use Funds A110100Q9P12009 Audit of Management Controls Within the Network Services Division Pacific Rim Region, Federal Acquisition Service 05/30/2012 $0 $0 Audit is in the implementation stage. 11/30/2015 A120001PFR13007 Audit of GSA's Controls over the National Capital Region's Reimbursable Work Authorizations 09/11/2013 $0 $0 Audit is in the Implementation Stage. 02/26/2016 A110217PRR14004 Procurement Errors, Financial Losses, and Deficient Contract Administration Demonstrate Ineffective Management of the Ronald Reagan Building and International Trade Center 06/17/2014 $186,894 $0 Audit is in the Implementation Stage. 11/30/2015 Audits under Appeal/Litigation REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS Disallowed Costs Better Use Funds A130034P4X13032 Caddell Construction Co., Inc. 03/28/2013 $0 $5,001,544 A130093P4X14045 Amthor Steel, Inc. 06/26/2014 $0 $2,065,356 A130094P5X14060 Clayton B. Obersheimer, Inc. 09/16/2014 $0 $3,417,748 A130092P4X14065 Mascaro Construction Company, L.P. 09/30/2014 $0 $8,443,064 A140144P4X15033 Integrity Management Consulting, Inc. 04/30/2015 $ 30,958 $0 Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A100075Q7X11022 Cort Business Services Corporation 01/27/2011 $0 $1,575,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110063QAX11053 IntelliDyne, LLC 05/16/2011 $3,948,160 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A100140Q5X11070 Veterans Imaging Products, Inc. 07/07/2011 $3,893 $496,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110088Q3X11079 Global Protection USA, Inc. 07/28/2011 $29,337 $0 In the Process of Collection - GSA is in the process of collecting funds owed the government from the contractor A100119Q6X11081 Noble Sales Co., Inc. 08/03/2011 $0 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110180P9X11084 RTKL Associates, Inc. 08/15/2011 $0 $412,057 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A110067Q2X11092 Clifton Gunderson, LLP 09/09/2011 $1,374 $1,196,561 Price/Settlement Negotiated - Negotiations have been completed between Contracting Officer and contractor A110174Q4X11097 Protective Products Enterprises 09/15/2011 $63,992 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110176Q4X12010 Fontaine Trailer Company, Incorporated 12/07/2011 $0 $4,648,519 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110186Q7X12018 BRSI, L.P. 01/23/2012 $0 $7,425,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120021Q3X12023 Presidio Networked Solutions, Inc. 03/02/2012 $31,878 $2,427,935 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110169Q3X12048 Oce' North America, Inc. 06/29/2012 $225,180 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120136P4X12053 Lenex Steel Company 07/17/2012 $0 $834,067 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A110209Q6X12057 Propper International Sales, Inc. 08/15/2012 $2,063,375 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120083P9X12059 M.A. Mortenson Company 08/21/2012 $0 $2,814,148 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120148P9X13003 Siemens Industries, Inc. 10/17/2012 $0 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A090140Q6X10081 Systems Research and Applications Corporation 08/24/2010 $392,685 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120071Q2X13002 ICF Z-Tech, Inc. 10/16/2012 $14,580 $166,639 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120155Q3X13007 Avion Solutions, Inc. 11/21/2012 $0 $4,523,340 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A110147Q6X13010 Xerox Corporation 12/06/2012 $0 $8,511,087 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A120165P4X13019 Skanska USA Building, Inc. 01/30/2013 $0 $82,475 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120150Q3X13018 Grant Thornton LLP 01/24/2013 $3,848 $8,200,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120147Q2X13028 Harris Corporation, RF Communications Division 03/20/2013 $33,486 $30,946,880 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120178Q3X13026 VT Aepco, Inc. 03/05/2013 $76,352 $38,059,421 Unresolved - Agreement has not been reached between OIG and Contracting Officer on the Decision Record A120109Q7X13030 ICF Macro, Inc. 03/21/2013 $0 $11,456,930 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120095Q7X13024 Military Personnel Services Corporation 02/28/2013 $87,379 $16,083,715 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120127Q4X13033 General Dynamics Information Technology, Inc. 03/29/2013 $147,371 $48,528,780 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A120162Q5X13036 Kforce Government Solutions, Inc. 04/17/2013 $147,666 $11,000,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130034P4X13032 Caddell Construction Co., Inc. 03/28/2013 $0 $5,001,544 Litigation in Process - The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process A130047P4X13040 Skanska USA Building, Inc. 05/13/2013 $0 $1,189,218 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A100160Q7X13042 i2, Incorporated 05/28/2013 $2,064,798 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120113Q2X13046 MSC Industrial Direct Co. 06/03/2013 $2,278 $55,064,975 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120175Q3X13041 STG Inc. 05/22/2013 $0 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A130069Q7X13051 L-3 Communications Vertex Aerospace, LLC 06/28/2013 $248,423 $24,112,597 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120152Q6X13054 Herman Miller, Inc. 07/11/2013 $175,056 $20,574,360 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A120134Q6X13059 International Business Machines Corporation 07/31/2013 $0 $482,854,052 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130099P4X14011 HCBeck, Ltd. 03/24/2014 $0 $1,689,965 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130071Q5X14018 Industries for the Blind, Inc. 01/31/2014 $306,596 $6,900,000 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130085Q3X13063 Bart & Associates, Inc. 09/06/2013 $130,030 $48,373,190 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130048Q6X14023 Intirion Corporation 03/12/2014 $569,834 $0 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor Contract Audits Audits with Management Decisions made prior to October 1, 2014, but with Final Action not taken as of September 30, 2015 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A140106P4X14022 Skanska USA Building, Inc. 03/06/2014 $0 $1,499,696 In Negotiation - Negotiations are proceeding between Contracting Officer and contractor A130093P4X14045 Amthor Steel, Inc. 06/26/2014 $0 $2,065,356 Litigation in Process - The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process A130094P5X14060 Clayton B. Obersheimer, Inc. 09/16/2014 $0 $3,417,748 Litigation in Process - The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process A130092P4X14065 Mascaro Construction Company, L.P. 09/30/2014 $0 $8,443,064 Litigation in Process - The contractor has appealed the Contracting Officer's decision and the audit is now in the litigation process Glossary of Terms The following definitions, based on the Inspector General Act Amendment of 1988, 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; • 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; • 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 and concurrence by the OIG concerning its response to such findings and recommendations, including planned corrective actions to remedy weaknesses identified in the report. Final Action. The completions of all actions that GSA management concluded in i ts 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 and the OIG. Prior to April 1990, no funds were identified by the OIG specifically as "funds to be put to better use," and no management decisions were issued based on the consideration of "better use" of funds. • 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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