U.S. General ServicesAdministration Administrator�s Semiannual Management Report to Congress Report No. 39 April 1, 2008 to September 30, 2008 U.S. General Services Administration James A. Williams 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 2008 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. 39, 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., NW, Washington, DC 20405-0001; Call in your request: (202) 501-2117; or Obtain a copy of this report on GSA�s Website at: http://www.gsa.gov, under �About GSA.� In accordance with the Inspector General Act of 1987, as amended, the Acting Administrator of the U.S. General Services Administration (GSA) submits this report to Congress on final actions regarding audit recommendations. The report covers the period from April 1, 2008, through September 30, 2008. 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 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, GSA issued management decisions on 57 audit reports. These included management decisions on 31 audit reports that identified a total of $4,309,621 in disallowed costs and $322,624,905 in funds that could be put to better use. The latter category is comprised of estimated and actual cost avoidance determined to have no impact on the agency's budget. The other 26 management decisions did not identify any disallowed costs or funds to be put to better use. There were no management decisions this period that involved actual cost avoidance determined to have a potential impact on the budget. During the six-month period, final action was taken on 28 audits with management decisions identifying disallowed costs or funds to be put to better use. These actions resulted in the recovery of $230,508 and the implementation of $6,100,702 of actual cost avoidance that has 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, 2008, 50 internal and contract audit reports remained open without final action one year after the management decision. Of this total, 16 were under formal administrative or judicial appeal. Explanations as to why final actions that have not been taken on the remaining 34 audits are provided in the report. Page Introduction Overview� 1 U.S. General Services Administration Organization� 1 Agency Audit Follow-up Process. 2-3 Organization Chart� 3 Progress of Audit Closure 4 Audits with Disallowed Costs 5 Audits with Better Use Funds 6 Internal Audits 7 Audits under Appeal/Litigation 8-9 Contract Audits 10-15 Glossary of Terms 16-17 Overview This report, submitted pursuant to the Inspector General Act of 1987, as amended, presents management's perspective on audit resolution and follow-up activity at the U.S. General Services Administration (GSA) for the period beginning April 1, 2008, through September 30, 2008. This is the agency's 39th 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�s 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 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 and GAO; * Overseeing the collection, and proper accounting of amounts determined due to the Government as the result of audit-related claims; 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 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 FOR THE SIX-MONTH PERIOD ENDING SEPTEMBER 30, 2008 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, 2008, through September 30, 2008, OCFO staff successfully closed 26 percent, or 53 internal and contract audits out of 204 audits that were reported as open. The remaining 151 audits that could not be closed are due to litigation, negotiations, collections, and implementation of corrective actions. Final action for the six-month period ending September 30, 2008 A. Audit reports for which final action had not been taken by the commencement of the reporting period. Number of Audit Reports 15 Disallowed Costs $14,014,011 B. Audit reports on which management decisions were made during the reporting period. Number of Audit Reports 3 Disallowed Costs $4,309,621 C. Audit reports on which final action was taken during the reporting period. 4 - $1,511,488 (i) $230,508 the dollar value of disallowed costs that were recovered by management through: - collections� $230,508 - offset� $0 - property in lieu of cash� $0 - other� $0 (ii) the dollar value of disallowed costs that were written off by management.* $1,280,980 D. Audit reports for which no final action had been taken by the end of the reporting period. 14 $16,812,144 * For the purposes of this report, write-offs are interpreted to represent the difference between the amount successfully recovered and the disallowed cost, which is a questioned cost that GSA management in a management decision sustained or agreed should not be charged to the Government. However, during negotiations management might have agreed to a smaller amount in order to settle the case with the contractor. AUDITS WITH BETTER USE FUNDS Final action for the six-month period ending September 30, 2008 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 68 28 No Budget Impact � Actual and Estimated $456,765,857 $322,624,905 Budget Impact $0 $0 C. Audit reports for which final 24 $209,830,374 $0 action was taken during the reporting period. (i) the actual dollar value of $6,100,702 $0 recommendations that were actually completed. (ii) the actual dollar value of $534,766 $0 recommendations that management has subsequently concluded should not or could not be implemented or completed. (iii) the actual dollar value of $89,562 $0 recommendations that management has subsequently concluded should not or could not be determined (calculated). (iv) the estimated dollar value of �funds $203,105,344 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. 72 $569,560,388 $0 INTERNAL AUDITS AUDITS WITH MANAGEMENT DECISIONS MADE PRIOR TO SEPTEMBER 30, 2007, BUT WITH FINAL ACTION NOT TAKEN AS OF SEPTEMBER 30, 2008 REPORT NUMBER TITLE OF REPORT DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION PROJECT COMPLETE DATE Disallowed Costs Better Use Funds A020161F3V03003 Distribution Center Operations 03/18/2003 $0 $0 Awaiting transportation option selection. 04/15/2009 A050263PRR07002 Occupancy Agreements 12/28/2006 $0 $0 Steps are underway to ensure customer service issues related to Occupancy Agreements billing are addressed. 12/15/2008 A060149QTP07002 Electronic Contract Proposal/ Modification System 03/06/2007 $0 $0 Implementation is on schedule for 12/15/2008. 12/15/2008 A070067F9V07003 Unused Airline Tickets 05/17/2007 $0 $0 Implementation is on schedule for 01/15/2009. 01/15/2009 A060153F7V07004 Travel and Transportation 05/21/2007 $0 $0 Implementation is on schedule for 03/15/2009. 03/15/2009 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS Disallowed Costs Better Use Funds A82441P9X98100 Morse Diesel International, Inc. 06/17/1998 $0 $1,230,088 A995128P6X99558 Sachs Electric Company 03/24/1999 $0 $0 A000971P5X00107 Midwest Curtainwalls, Inc. 06/01/2000 $0 $488,953 A010281P9X02028 Lawson Mechanical Contractors 01/11/2002 $0 $2,052,477 A020124P9X02051 Res-com Insulation, Inc. 05/29/2002 $0 $420,630 A020097P9X02063 Artisans G & H Fixtures, Inc. 06/12/2002 $0 $1,071,076 A020086P9X02076 Raymond Interior Systems North 07/30/2002 $0 $960,982 A010279P9X03015 Morse Diesel International, Inc. 11/20/2002 $0 $10,387,248 A020133P9X03055 Cosco Fire Protection, Inc. 03/21/2003 $0 $754,153 A030140FWX03056 Science Applications International Corporation 03/25/2003 $0 $1,028,099 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS Disallowed Costs Better Use Funds A030106P9X03061 George Foss Company 05/02/2003 $0 $434,057 A020230P9X03068 C.E. Toland & Son 05/29/2003 $0 $732,958 A040085F7X04085 Onboard Software, Inc. 06/28/2004 $348,158 $0 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 AUDITS WITH MANAGEMENT DECISIONS MADE PRIOR TO SEPTEMBER 30, 2007, BUT WITH FINAL ACTION NOT TAKEN AS OF SEPTEMBER 30, 2008 REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A73617PWX97197 Committee For Purchase 08/05/1997 $2,703,694 $0 Awaiting PNM and settlement documents. A82441P9X98100 Morse Diesel International, Inc. 06/17/1998 $0 $1,230,088 Contracting officer's final decision pending legal review. A995128P6X99558 Sachs Electric Company 03/24/1999 $0 $0 Audit case is pending with GSA Civilian Board of Contract Appeals. 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 is in the process of collecting funds owed the Government from the contractor. REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A010281P9X02028 Lawson Mechanical Contractors 01/11/2002 $0 $2,052,477 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A020124P9X02051 Res-Com Insulation, Inc. 05/29/2002 $0 $420,630 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A020097P9X02063 Artisans G & H Fixtures, Inc. 06/12/2002 $0 $1,071,076 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A020086P9X02076 Raymond Interior Systems North 07/30/2002 $0 $960,982 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A010279P9X03015 Morse Diesel International, Inc. 11/20/2002 $0 $10,387,248 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A020248P5X03036 Doan/Lake Erie LLC 01/30/2003 $0 $2,988,179 The contracting officer is in the process of negotiating with the contractor for possible settlement. A020133P9X03055 Cosco Fire Protection, Inc. 03/21/2003 $0 $754,153 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A030140FWX03056 Science Applications International Corporation 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. A030106P9X03061 George Foss Company 05/02/2003 $0 $434,057 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A020230P9X03068 C.E. Toland & Son 05/29/2003 $0 $732,958 AMEC/Morse Diesel St. Louis and Sacramento Courthouse projects case. AMEC/Morse Diesel claim forfeited. Audit case is pending U.S. Court of Appeals determination. A040098P5X04038 Gonzales Hasbrouck, Inc. 01/12/2004 $0 $80,010 Awaiting Price Negotiation Memorandum and award documents. A040119P5X04044 Julie Snow Architects, Inc. 02/03/2004 $0 $76,575 Awaiting Price Negotiation Memorandum and award documents. REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A030186F5X04054 NOVA Solutions, Inc. 03/09/2004 $46,805 $0 GSA is in the process of collecting funds owed the Government from the contractor. A040162F5X04053 NOVA Solutions, Inc. 03/09/2004 $0 $17,000 GSA is in the 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 Audit case is pending with GSA Civilian Board of Contract Appeals. A040211F6X05011 Allsteel, Inc. 10/29/2004 $0 $16,500,000 Negotiations are proceeding between contracting officer and contractor. A050112F7X05068 Entrust, Inc. 05/10/2005 $0 $3,300,000 Still attempting to get usable data that will allow auditors to provide an opinion. No new documents issued. 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 10/12/2005 $0 $29,550,000 Awaiting Price Negotiation Memorandum and award documents. A050147F5X06018 Herman Miller, Inc. 11/30/2005 $50,410 $0 Audit case is pending an outcome from litigation brought by the Air Force. A050176F6X06030 E.F. Johnson Company 12/30/2005 $0 $2,700,000 Negotiations are proceeding between contracting officer and contractor. A050247T1X06031 Lockheed Martin Information Technology 01/05/2006 $0 $682,278 Negotiations are proceeding between contracting officer and contractor. REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds 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. A050180F3X06069 Office Depot, Inc. 05/09/2006 $0 $36,000,000 Negotiations are proceeding between contracting officer and contractor. A060127F4X06096 W.B. Brawley Company 08/15/2006 $0 $1,267,845 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. A060231P5X06102 Teng & Associates, Inc. 09/13/2006 $0 $191,524 Contract has been awarded. The contracting officer is in the process of finalizing the Price Negotiation Memorandum. A060148F6X07007 Kimball International 10/24/2006 $0 $33,731,457 Negotiations are proceeding between contracting officer and contractor. A060206T9X07012 Information System Support Incorporated 10/31/2006 $4,026,287 $0 Negotiations are proceeding between contracting officer and contractor. A060230F5X07021 General Security Corporation 11/30/2006 $0 $864,000 Negotiations are proceeding between the contracting officer and contractor for possible award or settlement. A060115F2X07025 WFI Government Services, Inc. 12/08/2006 $0 $771,178 Negotiations are proceeding between contracting officer and contractor. REPORT NUMBER NAME OF CONTRACTOR DATE OF REPORT MANAGEMENT DECISION AMOUNTS REASON FOR NO FINAL ACTION Disallowed Costs Better Use Funds A060212F5X07042 Information Management Consultants, Inc. 02/20/2007 $0 $15,400,000 Negotiations are proceeding between the contracting officer and contractor for possible award. A070107P5X07060 Linear Electric Company 04/20/2007 $0 $204,334 Negotiations are proceeding between the contracting officer and contractor for possible award or settlement. A070114F9X07062 Scott Technologies, Inc. 04/26/2007 $0 $417,725 Negotiations have been completed between contracting officer and contractor. A060177F3X07066 Logistics Management Institute 05/03/2007 $0 $0 Negotiations are proceeding between contracting officer and contractor. A070036F7X07069 ASAP Software Express, Inc. 05/03/2007 $0 $29,425,000 Negotiations are proceeding between contracting officer and contractor. A070047F5X07070 Draeger Safety, Inc. 05/14/2007 $60,590 $0 GSA is in the process of collecting funds owed the Government from the contractor. A070183P9X07088 Perkins & Will 08/23/2007 $0 $108,380 Negotiations are proceeding between contracting officer and contractor. 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; 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 and 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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