DOT’s Working Capital Fund Oversight and Management Are Insufficient To Achieve Cost Recovery for IT Services

What We Looked At The Department of Transportation’s (DOT) Office of the Secretary of Transportation (OST) provides technical and administrative services, including information technology (IT) services, to DOT components through the Working Capital Fund (WCF). The Office of the Chief Information Officer (OCIO) and the Office of Financial Management (OFM) administer the WCF, which is designed to be self-sustaining and to achieve full cost recovery. Our prior audit work identified inconsistencies in OCIO’s WCF billing procedures. Given those findings and that DOT’s fiscal year 2023 budget estimates represented significant estimated expenditures—$271.4 million for IT services—we initiated this audit. Our objective was to assess whether OCIO’s WCF billing-rate methodologies for IT services achieve cost recovery, to include evaluating how OFM determines the operating and capital reserves and assesses whether excess funds or advances exist in the WCF. What We Found DOT lacks effective controls and processes to determine whether its WCF billing-rate methodologies achieve cost recovery for IT services. Specifically, OCIO could not provide sufficient documentation for the billing rates to validate 26 of the 36 transactions in our sample. Without adequate documentation, we cannot confirm if OCIO’s rates recover the costs to provide these services, totaling over $194 million. We also identified internal control weaknesses that hinder OCIO’s ability to confirm cost recovery, including inadequate oversight to validate charges, inaccurate accounting of IT services, and noncompliant agreements between OCIO and WCF customers. OFM also lacks written policies and procedures to demonstrate how it governs reserves, identifies surplus advances and excess funds, and evaluates if the WCF is breaking even. As a result, we cannot determine if the WCF is appropriately managed or achieves cost recovery.  Our Recommendations We made nine recommendations to improve the WCF’s ability to achieve cost recovery for IT services. OST concurs with recommendation 1–3, 6, and 8–9, which we consider resolved but open pending completion of planned actions. OST partially concurs with recommendations 4 and 5, and non-concurs with recommendation 7. We consider 4 and 7 open and unresolved and 5 resolved and closed.