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Audit Report No. 228
February 1, 1996
We audited eleven selected Commission interagency agreements. We made four recommendations to the Office of Administrative and Personnel Management (OAPM) to improve controls. They are: obtain proper documentation to support obligations of funds for the Health Unit and Employee Assistance Program; remind COTRs that they should notify the Procurement and & Contracts Branch upon satisfactory completion of small purchases; distribute guidance to ensure that purchases under the Economy Act are properly closed out; and use 18 U.S.C. 4124 as authority for contracting with Federal Prison Industries.
Generally, OAPM agreed with our recommendations. Its comments are attached.
OBJECTIVES AND SCOPE
The audit objective was to determine if controls over interagency agreements were effective and if the agreements were cost effective in procuring goods and services. We reviewed eleven Commission interagency agreements totaling $1.14 million in FY 1995 obligations. The agreements reviewed represented all open interagency agreements processed by the Procurement and Contracts (P&C) Branch of the Office of Administrative and Personnel Management (OAPM), except for four contracts reviewed in connection with a prior audit, and contracts awarded under Section 8(a) of the Small Business Act (15 U.S.C. 637(a)).
We reviewed records, laws and regulations concerning these agreements. Also, we spoke with staff in OAPM, the Office of the Comptroller, Commission regional and district offices, the U.S. Public Health Service, and certain private companies. In addition, we tested controls that ensure interagency agreements are processed and administered according to applicable laws and regulations. The audit was conducted between March and August 1995, in accordance with generally accepted government auditing standards.
The Economy Act (31 U.S.C. 1535) provides general authority for agencies to obtain goods and services from other government agencies. To place orders under this authority, the requesting agency must have funding available for the procurement; the order should be in the best interest of the government; the agency from which the goods and services are requested must be able to provide the goods or services, either directly or by contract; and the requesting agency must determine that a commercial enterprise cannot provide the goods and services as conveniently or cheaply. Some services purchased by the Commission under this authority include access to the Departments of the Treasury and Justice's automated systems and health and employee assistance services provided by the Public Health Service (PHS).
Other statutes also authorize interagency procurement. For example, the Federal Property and Administrative Services Act (40 U.S.C. 481) authorizes procurement from the General Services Administration (GSA). Another such statute is 18 U.S.C. 4124, which authorizes procurement from Federal Prison Industries (UNICOR).
The P&C Branch of OAPM administers most of the agency interagency agreements. However, the Personnel Management function in OAPM administers the agreements with the Public Health Service for Health Unit and EAP services.
Controls to ensure compliance with certain provisions of the Economy Act needed improvement in five of the eleven agreements reviewed. The agreements reviewed were determined by the requestors to be cost effective in procuring goods and services for the Commission.
Support Obligations for Health Unit and Employee Assistance Program Services With Proper Documentation
The PHS has organized a consortium in each of its regions to provide health unit and EAP services under an umbrella contract. PHS bills each Commission location a portion of the region's cost for their health unit and EAP services, based on population estimates submitted by the Commission. Therefore, each location should have had two separate agreements, one each for their health unit and EAP services.
We attempted to locate documentation of interagency agreements for health unit and EAP services at nine of the Commission's thirteen headquarters, regional, and district locations (See Appendix).
Documentation was inadequate to support current obligations of funds for health unit and Employee Assistance Program services. For example, documentation was missing for a number of locations. Seven of the nine locations were missing agreements for Health Unit services. Three of the nine locations were missing agreements for EAP services.
Other problems included outdated, unsigned, and incomplete agreements. Four agreements for EAP services were signed in FY 1990. Another agreement, for services to be provided in FY 1995, was signed in FY 1994. One agreement for health unit services was signed in FY 1974. The other agreement for health unit services was signed in FY 1994, for services to be provided in FY 1995. One agreement for EAP services was not signed. The FY 1990 agreements were made under the authority of the Economy Act, and are renewed by the Commission each year. The FY 1974 agreement did not cite any authority. In addition, five of the six signed agreements for EAP services did not include an interagency agreement number. This number is used by PHS to match billing information with the agreement for the applicable Commission location.
As a result of these deficiencies in documentation, we estimate that $599,000 in obligations for FY 1994 and 1995 health unit and EAP services were not adequately supported.
31 U.S.C. 1501 provides that an obligation will be recorded only when supported by documentation of a binding agreement. The agreement should be executed before the end of the period of availability of the appropriation used.
The agreements were maintained by the Employee Relations Branch of OAPM. The Employee Relations Branch is not responsible for ensuring the adequacy of contract documentation. On the other hand, the P&C Branch of OAPM is responsible for maintaining contract documentation. However, the P&C Branch was not involved in maintaining these agreements.
The Employee Relations Branch maintained the contract documentation and coordinated with the Office of the Comptroller, which used miscellaneous obligation documents (MODs) for obligation of funding for these services. As a result, the P&C Branch was not involved in processing these agreements in order to issue purchase orders.
The P&C Branch of OAPM should maintain the documentation for interagency agreements for health unit and EAP services. OAPM should coordinate with PHS to obtain current agreements for each Commission location receiving the services. These agreements should include the original signatures and the interagency agreement number.
Provide Additional Guidance to COTRs and P&C Branch Staff Regarding Closeouts
Four of the eleven FY 1995 interagency agreements had obligated funding totaling $24,000 outstanding from FY 1994. These obligated funds were outstanding as of August 1995. The authority for each of these agreements was the Economy Act.
Funding obligated for interagency agreements under the Economy Act must be deobligated at the end of the appropriation charged to the extent the servicing agency has not performed or incurred obligations itself to provide the services. The Commission currently funds these obligations annually. Unused funding should be deobligated at the end of the fiscal year.
Regulations and internal instructions provide guidance for contract closeouts. Contract specialists and purchasing agents use Federal Acquisition Regulation Subpart 4.804, "Closeout of Contract Files," as guidance in performing contract closeouts. Also, the P&C Branch developed Procurement and P&C Branch Operating Instruction 87-1A, dated February 25, 1994 (Instruction). This instruction provides Contracting Officers' Technical Representatives (COTRs) with guidance in assisting the P&C Branch in closing out contracts. The instruction includes a requirement that COTRs notify the contract specialist in writing upon completion of the contract and certification of the final invoice. A copy of this instruction is provided to COTRs to include in files for contracts over $50,000. Further, the branch has developed a draft policy for oversight of service contracting that includes a requirement to deobligate excess funds remaining at the end of the contractor's performance.
However, Instruction 87-1A is not provided to COTRs for contracts under $50,000. The P&C Branch determined it would not be efficient to give COTRs a copy of the instruction for each small purchase. However, COTRs should be reminded that the P&C Branch must also be notified upon satisfactory completion of small purchases. The P&C branch could then deobligate the unused funding associated with small purchases, making the funding available for other purposes. Also, the instruction does not address closeout of Economy Act obligations.
The P&C Branch should remind COTRs that they should also notify the P&C Branch upon satisfactory completion of small purchases.
The P&C Branch should distribute guidance to ensure that purchases under the Economy Act are properly closed out.
Cite Correct Authority for Contract With Federal Prison
The Commission currently has an interagency agreement with Federal Prison Industries (UNICOR) for data entry services. The determinations document included in the contract file stated that the legal authority for this agreement was the Economy Act. The P&C Branch uses the Economy Act as general authority for interagency agreements. However, the Economy Act specifically states it does not authorize orders to be placed for goods or services to be provided by convict labor. On the other hand, agreements with Federal Prison Industries are specifically authorized by 18 U.S.C. 4124.
The P&C Branch should change the UNICOR agreement to include the correct authority.