Federal Reports

What We Looked AtWe performed a quality control review (QCR) on the single audit that Anton Collins Mitchell LLP (ACM) performed for the City of Riverton's (City) fiscal year that ended June 30, 2017. During this period, the City expended approximately $1.9 million from the U.S. Department of Transportation's (DOT) grant programs. ACM determined that DOT's major programs were the Airport Improvement Program and the Small Community Air Service Development Program.Our QCR objectives were to determine whether (1) the audit work complied with the Single Audit Act of 1984, as amended, the Office of Management and Budget's Uniform Guidance, and the extent to which we could rely on the auditors' work on DOT's major programs; and (2) the City's reporting package complied with the reporting requirements of the Uniform Guidance.What We FoundACM's audit work did not comply with the requirements of the Single Audit Act, the Uniform Guidance, and DOT's major programs. We found that ACM's audit documentation contained audit quality deficiencies that affected the reliability of the audit results applicable to both of DOT's major programs. These audit quality deficiencies required correction for the City's fiscal year 2017 single audit. We also identified a deficiency in the City's reporting package that required correction and resubmission.

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual (CCR) program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned <br> $25 million contract.In our opinion, the company's cost proposal was overstated. Specifically, we found:The company's proposed costs for a Cumberland Fossil Plant (CUF) project included overstated (1) material costs, (2) bond costs, (3) equipment costs, and (4) labor burden rates. In addition, the company included a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP).</li>The company's proposed rate attachments included (1) incorrect labor billing rates, (2) noncraft wage ranges that did not reflect the company's current wage ranges, and <br> (3) fee on cost reimbursable work that exceeded the maximum allowable fee in TVA's RFP. In addition, the company's proposed methodology for recovering overhead and general and administrative (G&A) costs differed from the RFP's draft contract terms.</li>We estimated TVA could avoid $1.96 million on the planned $25 million contract by (1) negotiating appropriate reductions to material costs, bond costs, equipment costs, and labor burden rates; and (2) limiting the company's fee rate to the RFP's maximum allowable rates. In addition, we suggest TVA (1) negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and costs, (2) negotiate a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP, and (3) modify the contract terms to reflect the company's intended methodology for recovering overhead and G&A costs.(Summary Only)

This is a publication by GAO's Office of Inspector General (OIG) that concerns internal GAO operations. The report addresses the extent to which GAO maintained effective contract closeout controls for reducing financial, operational, and compliance risks through fiscal year 2017. OIG found that steps taken by GAO to improve its contract closeout process had a positive effect on ensuring its compliance with federal and agency requirements. Contract closeout involves a number of tasks, such as verifying that goods or services were provided, making final payment to the contractor, and deobligating excess funds. As of September 2015, GAO identified over 1,800 of contracts awaiting closeout, worth more than half a billion dollars, which we attributed to weak controls in our 2016 contract management audit report. Following our 2016 report, GAO reduced its backlog of contracts awaiting closeout, and as of June 2017, had a closeout backlog of 390 contracts with a total obligated amount of $330.8 million. GAO’s success was due, in large part, to (1) the addition of staff assigned specifically to complete backlogged closeouts, and (2) management oversight and monitoring through periodic backlog contract closeout status reports. In addition, GAO developed and implemented a checklist to document the closeout of those contracts with award dates in or after fiscal year 2015. However, we identified areas where additional actions were needed to further strengthen GAO’s contract closeout controls and reduce contract risk consistent with the Federal Acquisition Regulation (FAR) and GAO policy. These actions pertain to three areas: records retention, accuracy of contract type information in GAO’s procurement system, and risks that GAO’s new contract closeout checklist does not fully cover key closeout requirements. In addition, we found that while GAO migrated to a new shared service provider and financial management/procurement system in fiscal year 2018, it has not fully updated its acquisition policies and procedures to reflect its processes and controls within the new system. OIG made five recommendations intended to further strengthen GAO’s closeout processes, controls, and related documentation to help ensure GAO’s compliance with federal and agency requirements. Specifically, we recommended that GAO develop, document, and implement processes to ensure that records are maintained in accordance with GAO and Acquisition Management record retention policy; contract type is clearly identified and accurately recorded; and flexibly-priced contracts are closely monitored. In addition, we recommended GAO to update its closeout checklist to ensure that required monitoring of flexibly-priced contracts is performed prior to closeout, and complete the update of its Standard Operating Procedures to fully reflect GAO’s migration to its new shared service provider and system. GAO agreed with our recommendations and described actions taken in response to our report.

The VA Office of Inspector General (OIG) substantiated allegations received in January and February 2016 alleging the Veterans Health Administration (VHA) was overpaying for prosthetic items because it incorrectly used Not Otherwise Classified (NOC) codes to classify the items for payment to vendors. Incorrectly using an NOC code can result in an overpayment because the payments are not based on pre-established reimbursement rates. For example, the Touch Bionics I-Limb, when classified with the correct code, costs VHA about $27,000. However, VHA paid vendors as much as $61,702 for the same item when classified using an NOC code. The OIG found that VHA overpaid vendors about $7.7 million from October 2014 through July 2017. The OIG found prosthetists incorrectly used NOC codes to classify prosthetic items when existing codes adequately described the items. Prosthetists incorrectly used NOC codes because they were either unaware of the existing codes or because they allowed vendors to classify the items with NOC codes. The incorrect use of NOC codes to classify some prosthetic items was not detected because the Prosthetic and Sensory Aids Service lacked a process to monitor the use of NOC codes. Because prosthetists incorrectly used NOC codes to classify prosthetic items for reimbursement, VHA paid more for the items. The OIG made five recommendations including determining which codes are appropriate to classify prosthetic items for reimbursement and issuing revised guidance, establishing an oversight and reporting structure that defines the roles and authorities to approve recommendations for the use of codes to classify specific prosthetic components, developing processes to monitor the use of NOC codes, and implementing processes to establish pricing guidance that ensures VA pays a fair price for items classified using an NOC code.________________________________________

Our objective was to evaluate the U.S. Postal Service’s identity verification internal controls for its Change of Address (COA) service.