Date Reply to General Administration Washington, DC 20405 August 23, 1978 Special Counsel (AI) Subject: FY 1979 Supplemental Appropriation for Office of Inspector General To Ray Fontaine Director, Office of Budget and Management Systems (BB) As requested by Anne Hammill, I am forwarding our FY 1979 supplemental request for the new Inspector General's office in advance of our FY 1980 budget request. However, to fully understand the need for these additional resources, they must be considered in light of our anticipated FY 1979 appropriation and our imminent FY 1980 submission. Our currently anticipated FY 1979 appropriation, consisting of our original Our FY 1979 supplemental requests an additional 144 positions (and Although it will be necessary to allow the IG some flexibility to shift resources as priorities develop, our current estimates of FY 1979 EOY staffing are as follows: 2 Detailed justifications for this requested increase in resources is attached to our individual submissions, but it may be helpful for you to have an overview of the basis for our need. We have long been aware that our resources in Audits and Investigations were inadequate to perform the monitoring function adequately. Recent developments have quantified for the first time the actual size of the problem. Preliminary statistics developed within the last month indicate that fraud potential at GSA may exist in nine major areas and amount to almost $100 million. Estimates of excessive operating expenses developed by GSA Audit and GAO involve 17 areas and as much as $165 million (see Exhibit A). Obviously, a potential of this magnitude is going to require a massive assault. Even the requested 427 positions in FY 1979 will not be sufficient to overcome all our deficiencies and to properly audit and investigate all the areas that require attention. For this reason, our FY 1980 submission will request an additional 176 positions for OIG. However, we believe that the expansion of 194 planned for FY 1979 is all we can efficiently and effectively absorb in that time frame. (To that end, we are proceeding with personnel commitments at this time.) The cost of our FY 1979 expansion and related costs will be approximately $5.5 million on an annualized basis. However, we are firmly convinced that our short and long-term return on this investment will exceed many times that amount. Attached are the breakdowns and individual justifications which Anne requested. I will be glad to discuss these with you after you have had an opportunity to review them. VINCENT R. ALTO Attachments ает ENCLOSURE 5 Bullet Statement of PBS CONTRACT ASSURANCE TASK FORCE AND OTHER RECENT PROCUREMENT ACTIVITIES An internal PBS system of checks and balances providing assurancetype inspection for the receipt of goods and services -- independent from contracting or issuing office. CATF functions include: interruption of payment to contractor if receipt of goods or services is not substantiated - operation of a PBS procurement analysis procedure - establishment of a two-signature inspection process - establishment of a two-signature process for certified invoice and Imprest Fund purchases CATF established by Commissioner on July 3, 1978, as a result of an extensive 30-day study of alternatives. Became operational on August 1 throughout all PBS Regions. Since August 1, CATF has conducted assurance inspections and endorsed payment on over 8,000 PBS procurements worth in excess of $73 million. 155 procurement actions have been turned over to GSA investigators for further action. 30 PBS employees have been disciplined, including three employees who have resigned as a result of these actions. Other recent related procurement activities. - The whole concept and use of term contracts is being reevaluated (see Section VI, Tab ) Alteration of leased space will be done by competitive bidding. Procurement policy and practice are being modified, clarified and improved. - PBS personnel are being provided with specialized procurement Attachment EXAMPLES OF REASONS CATF INSPECTIONS Contract work may have been performed by GSA employees. (Region 3: One instance - $5,000) Inspection of $1.6 million R&A contract revealed over 50 change orders ($238,000) in a two-month period, including "price-to-bedetermined-later" change orders ($93,000) in one day. Entire number handled by one construction engineer whose change order authority was $10,000. (Region 2) Inspection unable to determine whether GSA paid for electrical wiring and other work in leased space which was responsibility of lessor. (Region 4: One instance - $13,000) Work paid for but not performed; and work performed and paid for not in accordance with specifications. (Region 3: One instance each - $13,000) Field Office (Buildings Manager exceeded authority; work performed different from specifications; some purchases cannot be verified). (Region 3: One instance each - $1,806,000) Improper sole source procurement by building foreman in excess of authority. (Region 9: Two instances - $4,000) Investigation of telephone complaint that GSA employee was using Federal funds to pay contractor for privately performed work. (Region 4: One instance - $8,000) |