##### FOREWORD

*This report, submitted pursuant to the Inspector General Act of 1978,
as amended, summarizes the activities of the Office of Inspector General
(OIG) for the 6-month reporting period that ended*

*March 31, 1998.*

*During this reporting period, we continued our emphasis on conducting
broad-based reviews of major GSA programs and operations. For example,
we reviewed GSA's progress in upgrading the security of Federal
buildings. This included looking at the control and installation status
of security equipment, security countermeasures, and the use of funds
allocated to make enhancements. This review led to the issuance of
several "alert reports" to surface significant concerns requiring
management's immediate attention. We also made recommendations to help
GSA with the conversion of computer systems to operate in the year 2000
and beyond. In addition, we reviewed the accuracy of GSA's rent billing
data, the increased use of credit cards to pay for needed supplies and
services, and the adequacy of procurement personnel qualifications.*

*We identified over \$32 million in financial recommendations on how
funds could be put to better use and in other program savings. In
addition, 242 referrals were made for criminal prosecution, civil
litigation, and administrative action. Criminal cases originating from
OIG referrals resulted in*

*7 successful prosecutions. The OIG also reviewed 236 legislative and
regulatory matters and received 1,384 Hotline calls and letters. Savings
achieved this period from management decisions on audit financial
recommendations, civil settlements, and investigative recoveries totaled
over \$45 million.*

*The OIG also continued its efforts to work closely with GSA management
to identify and implement sound business management and operational
improvements and find ways to increase the efficiency and effectiveness
of the Agency's programs and operations. We enhanced our offerings of
consulting and other value-added services. We have received a steadily
increasing number of requests for these non-traditional services,
reflecting management's acceptance of them as constructive tools helping
them to make sound business decisions. We also continued to provide our
more traditional services to protect the integrity of GSA programs.*

*I want to take this opportunity to thank the GSA Administrator, GSA's
senior managers, and the Congress for their support. I also want to
commend the OIG's employees for their continued professionalism,
dedication, and willingness to accept new challenges in an environment
of ever-increasing demand for both traditional and non-traditional work
products.*

WILLIAM R. BARTON

Inspector General

April 30, 1998

#### 

# TABLE OF CONTENTS

#### 

Page

SUMMARY OF OIG
PERFORMANCE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....v

EXECUTIVE
SUMMARY\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...vi

OIG
PROFILE\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...1

PROCUREMENT
ACTIVITIES\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....3

PARTNERING WITH GSA
MANAGEMENT\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...7

REVIEWS OF GSA
PROGRAMS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...11

EMERGING ISSUES AND
CONCERNS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....28

PREVENTION
ACTIVITIES\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....29

REVIEW OF LEGISLATION AND
REGULATIONS\...\...\...\...\...\...\...\...\...\...\...\...\.....32

STATISTICAL SUMMARY OF OIG
ACCOMPLISHMENTS\...\...\...\...\...\...\...\...\...34

APPENDICES

APPENDIX I - SIGNIFICANT AUDITS FROM PRIOR

REPORTS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...43

APPENDIX II - AUDIT REPORT
REGISTER\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....47

APPENDIX III - AUDIT REPORTS OVER 12 MONTHS

OLD WITH FINAL ACTION
PENDING\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....61

APPENDIX IV - DELINQUENT
DEBTS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...69

APPENDIX V - REPORTING
REQUIREMENTS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....71

# SUMMARY OF OIG PERFORMANCE

**OIG ACCOMPLISHMENTS -- OCTOBER 1, 1997 -- MARCH 31, 1998**

Total financial
recommendations\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
\$32,271,075

These include:

\- Recommendations that funds be put to better
use\...\...\...\...\...\...\...\...\...\...\...\...\.... \$16,383,263

\- Questioned
costs\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
\$15,887,812

Audit reports
issued\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
107

Referrals for criminal prosecution, civil litigation, and

administrative
action\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
242

**RESULTS ATTAINED**

Management decisions agreeing with audit recommendations,

civil settlements, and court-ordered and investigative

recoveries\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
\$45,323,106

Indictments and informations on criminal
referrals\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
8

Cases accepted for criminal
prosecution\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....12

Cases accepted for civil
action\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
8

Successful criminal
prosecutions\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....7

Civil
settlements\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....4

Contractors
suspended/debarred\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....50

Employee actions taken on administrative referrals

involving GSA
employees\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....7

> **EXECUTIVE SUMMARY**
>
> During this period, we expanded our efforts to provide professional
> assistance through enhanced consulting services, and the use of alert
> reports designed to quickly inform management of potentially serious
> deficiencies or other concerns prior to completion of all analytical
> work and formal report issuance. These services have been added while
> we continue to offer our more traditional services, including program
> evaluations, contract and financial auditing, internal controls
> reviews, investigative coverage, and litigation support in contract
> claims, civil fraud and enforcement actions, and criminal
> prosecutions.

####### Program/Operational Reviews

The OIG continued its efforts to conduct large-scale reviews of major
programs and operations throughout GSA's various components. During this
period, we continued our review of GSA's efforts to upgrade security at
Federal facilities. Based on concerns raised in our audit work, we
issued three alert reports and a separate audit report to management.
These reports addressed inaccuracies in installation status reporting on
security equipment and the misuse of security enhancement funding. One
alert report disclosed that almost \$2 million of security equipment
purchased for GSA's enhanced security program was on hand with no
immediate plans for installation (page 12). Another report revealed that
security at many of one region's Federal facilities had not been
upgraded to minimally acceptable standards. Also, the database did not
accurately represent the status of the upgrade effort (page 14). The
third alert report covering three other regions stressed the need for
GSA to ensure that security countermeasures at all Federal buildings are
accurately reported and completed (page 15). Furthermore, a review of
the use of funds disclosed that GSA expended approximately \$375,000
allocated to security enhancements for other purposes. Consequently, we
recommended that the funds be restored to the security-upgrading project
(page 15). Management has taken positive steps in response to these
reports and is initiating corrective action. We are continuing our
review and will be monitoring the Agency's efforts in this critically
important area (page 17).

Other program reviews reported on: findings that a project to ready
office space in connection with the 1997 Presidential Inaugural was
inadequately managed and that project costs exceeded the prospectus
threshold requirements in contravention of the Public Buildings and
Antideficiency Acts (page 17); determining which computer systems are
critical and need to be prioritized for conversion to operate in the
year 2000; and enhancing the monitoring of GSA's progress for planned
system conversions (page 19). In addition, we made recommendations to
improve the accuracy of GSA's rent billing data (page 21). Furthermore,
we reviewed systems used by hotels and car rental companies to directly
bill GSA for employee travel expenditures. We found that controls are
adequate to ensure that GSA only pays direct-billed charges for lodging
and car rentals. However, we did recommend control improvements to
ensure that charges for legitimate business travel, taxes, and rates are
correct, that vendors are not paid twice, and that travelers are not
reimbursed for direct-billed charges (page 24). In another review, we
found that the Agency needs to ensure that the training and experience
requirements for procurement personnel are met (page 25), and needs to
include performance standards as part of the contract administration
function (page 26). We also reported in a review of a regional Customer
Supply Center that GSA was satisfactorily meeting customer needs for
popular supply items and did so with adequate controls to protect assets
(page 27).

We also evaluated the administration and operation of a regional
commercial facilities management contract, and recommended improvements
in the administration of the contract which would improve services to
client agencies and at the same time lower costs (page 4). In addition,
we made recommendations to improve the management of guard contract
services by improving controls over the award process and ensuring that
required training is completed before new guards are allowed to work
(page 5).

We completed three significant internal audits at the request of
management. In one report on contract workload management, we reported
that while some improvements to workload management had been made,
further improvements were needed to automate key activities of
scheduling and performance assessment (page 9). The second report
involved a review of a major customer's shipment discrepancy reports. We
found that the GSA customer's receiving and processing procedures
contributed to the numerous adjustment requests (page 9). Our third
report supported GSA's plans to consolidate the Federal Protective
Service's various regional security control center functions into four
megacenters, which would allow them to support their dispatch functions.
We did, however, recommend a continuation of the regional dispatch
capability to address natural disasters, and pointed out that many alarm
systems still need to be upgraded (page 9).

> **Consulting Services**
>
> At the request of Agency management, we continued to provide our
> consulting services to cover a range of GSA activities cutting across
> all GSA components. We suggested ways to improve shipping information
> provided to vendors (page 7); surveyed realty specialists and client
> agencies to determine their satisfaction with a new lease acquisition
> program (page 7); analyzed procurement practices and sales data for
> special order procurements (page 7); and evaluated a performance
> indicator and its validity for allocating costs (page 8). In addition,
> we analyzed financial reports of prospective vendors seeking award of
> an electric power contract (page 8); assessed the accuracy of data
> within a management information system (page 8); and examined a GSA
> payment process to determine whether vendor payments are being made in
> a timely manner (page 8).

####### Procurement Integrity

An important part of our work effort is to provide support to the
Agency's contracting officers and to protect the integrity of GSA's
procurement programs and operations by detecting and preventing fraud,
waste, and abuse. This period, based on our audit and investigative
work, several private sector contractors agreed to pay a total of over
\$4 million to resolve potential civil liability under the False Claims
Act (page 3). These contractors provided a wide array of products and
services, such as water treatment chemicals for heating and cooling
systems, office systems furniture, hospital-grade disinfectants, and
computer hardware and software. The settlements involved allegations
that they had misrepresented their commercial discount practices in
seeking and performing under GSA contracts, in violation of the False
Claims Act and other statutory and contractual provisions.

####### 

####### Summary of Results

The OIG made over \$32 million in financial recommendations to better
use Government funds, and in other program costs savings; made 242
referrals for criminal prosecution, civil litigation, and administrative
actions; reviewed 236 legislative and regulatory actions; and received

1,384 Hotline calls and letters. This period, we achieved savings from
management decisions on financial recommendations, civil settlements,
and investigative recoveries totaling

\$45 million. See page v for a summary of this period\'s performance.

####### Emerging Issues and Concerns

We continue our practice of highlighting emerging issues and matters of
particular concern.

One previously reported matter remains of continuing concern: an issue
relating to the Agency's authority to compromise debt, particularly as
it relates to the ability of the Inspectors General to seek
authoritative and binding resolutions of legal disputes with their
Agencies (page 28).

**OIG PROFILE**

#### 

*The GSA OIG was established on October 1, 1978 as one of the original
12 OIGs created by the Inspector General Act of 1978. The OIG\'s five
components work together to perform the missions mandated by the
Congress.*

**ORGANIZATION**

The OIG provides nationwide coverage of GSA programs and activities. It
consists of:

-   The **Office of Audits**, an evaluative unit staffed with auditors
    and analysts who provide comprehensive audit coverage of GSA
    operations through program performance reviews, internal controls
    assessments, and financial and mandated compliance audits. It also
    conducts external reviews to support GSA contracting officials to
    ensure fair contract prices and adherence to contract terms and
    conditions. To increase its ability to meet customer needs, the
    office has added advisory and consulting services to its service
    offerings.

-   The **Office of Investigations**, an investigative unit that manages
    a nationwide program to prevent and detect illegal and/or improper
    activities involving GSA programs, operations, and personnel.

-   The **Office of Counsel to the Inspector General**, an in-house
    legal staff that provides legal advice and assistance to all OIG
    components, represents the OIG in litigation arising out of or
    affecting OIG operations, and manages the OIG legislative/regulatory
    review functions.

-   The **Internal Evaluation Staff,** an in-house staff that plans and
    directs field office appraisals and conducts internal affairs
    reviews and investigations.

-   The **Office of Administration,** an in-house staff that provides
    information systems, budgetary, administrative, personnel, and
    communications services.

    **OFFICE LOCATIONS**

The OIG is headquartered in Washington, D.C., at GSA\'s Central Office
building. Field audit and investigations offices are maintained in
Boston, New York, Philadelphia, Atlanta, Chicago, Kansas City, Fort
Worth, San Francisco, and Washington, D.C. Sub-offices are also
maintained in Auburn, Cleveland, and Los Angeles.

**STAFFING AND BUDGET**

The OIG started Fiscal Year (FY) 1998 with a total on-board strength of
289 employees. As of March 31, 1998, our on-board strength was 280
employees, with recruitment actions underway to bring us to a level of
304.

The OIG's FY 1998 budget was approximately \$33.8 million.

**PROCUREMENT ACTIVITIES**

*GSA is responsible for providing working space for almost 1 million
Federal employees. GSA, therefore, acquires buildings and sites,
constructs facilities, and leases space, and also contracts for repairs,
alterations, maintenance, and protection of Government-controlled space.
GSA also operates a Governmentwide service and supply system. To meet
the needs of customer agencies, GSA contracts for billions of dollars
worth of equipment, supplies, materials, and services each year. We
review these procurements both on a preaward and postaward basis to
ensure that the taxpayers\' interests are protected.*

**SIGNIFICANT OIG ACCOMPLISHMENTS**

**Over \$4 Million in Civil Recoveries**

During this period, the Government entered into 4 settlement agreements
in which companies agreed to pay a total of over \$4 million to resolve
their potential civil liabilities under the False Claims Act. These
agreements, negotiated by representatives of the Department of Justice
and the GSA OIG, reflect the ongoing efforts of the OIG to pursue cases
involving procurement fraud and other practices which threaten the
integrity of the Government\'s procurement process.

Many of these cases involved procurements under GSA\'s Multiple Award
Schedule (MAS) program. Under this program, GSA negotiates contracts
with a number of vendors who may then sell covered products to Federal
agencies at established contract prices. Consistent with the provisions
of the Truth in Negotiations Act and the Competition in Contracting Act,
the process is based on the principles of full and open disclosure and
fair negotiations. Vendors must provide current, accurate, and complete
pricing information\--including information about discounts granted
their most favored commercial customers\--during contract negotiations.
Relying on this information, GSA contracting personnel then seek to
obtain the best possible prices for the Government. In cases where
vendors fail to provide current, accurate, or complete information, the
Government may pay artificially inflated prices for products and
services purchased. Highlights of these cases follow.

-   A company that supplies water treatment chemicals for heating and
    cooling systems and boiler fuel oil additives to Federal customers
    under an ongoing MAS contract agreed to pay \$1,798,274 to resolve
    its potential civil False Claims Act liability. The Government
    alleged that the company failed to accurately disclose its
    commercial discounting policies to GSA negotiators, and, as a
    result, Federal customers have been paying too much for the
    company's products since the inception of the contract. The OIG
    audit found that despite disclosures claiming virtually no regular
    discounts were offered to any of its commercial customers, except
    minimal discounts to its most favored customer, the company actually
    had

> offered numerous high regular discounts to many of its customers. The
> audit also found numerous examples of price reduction violations\--the
> failure to pass along to the Government, as required by the contract,
> reductions in prices granted to specified customers during the
> contract period\--as well as minor overbillings.

-   A company that manufactures office systems furniture agreed to pay
    \$1,250,000 to settle its potential civil False Claims Act
    liability. The Government alleged that during negotiations for its
    MAS contract, the company failed to fully and accurately disclose to
    GSA negotiators its discounting and pricing practices with its
    commercial customers, as required by the contract. The OIG audit
    revealed that, both prior to and during the Federal contract, the
    company granted numerous discounts to its commercial customers which
    were significantly higher than those disclosed to GSA. The
    settlement was reached after a mediation before an independent
    arbitrator.

-   A company that provides hospital-grade disinfectants agreed to pay
    \$989,314 to settle the Government's claims that it failed to
    provide accurate data to GSA when it negotiated its MAS contract,
    overcharged Federal customers, and failed to pass along to the
    Government price reductions granted to commercial customers, as
    required by the contract. The OIG audit and investigation revealed
    that the company had in place, both prior to and during the course
    of the Government's contract, an undisclosed, extensive free goods
    and credit program which resulted in significantly higher effective
    discounts for many of its commercial customers than had been
    disclosed to GSA negotiators.

-   A reseller of information technology hardware and software agreed to
    pay \$400,000 to settle an action brought pursuant to the *qui tam*
    provisions of the False Claims Act. These provisions allow
    individuals to bring suit, on behalf of themselves and the Federal
    Government, against contractors who submit false claims to the
    Government. In this case, the private party who originally brought
    the action on behalf of the Government alleged that the company had
    failed to fully disclose the nature and extent of the discounts and
    rebates it received from its suppliers. The OIG audit and
    investigation confirmed the allegations and found that the failure
    to fully disclose resulted in the Government paying more than it
    should have for the company's products. The private party received
    \$68,000 out of the total \$400,000 paid by the company, as is
    allowed under the False Claims Act.

# Commercial Facilities Management Contract

In one region, GSA assumed responsibility for a 1.6 million square foot
building on October 1, 1995, and engaged a contractor to manage the
facility. According to a customer satisfaction survey, there has been an
overall improvement in client satisfaction with the building's
operation. However, based on our evaluation, we found that GSA has an
opportunity to further improve services and lower costs.

Our examination of the administration and operation of the regional
Commercial Facilities Management (CFM) contract, that provides
management services in this building, pointed out that the contractor
did not furnish all of the equipment maintenance and janitorial services
at the frequencies and quality level required by the contract. The
contractor had no effective quality assurance program in place.
Moreover, it was necessary for GSA personnel to manage some of the
day-to-day operations of the building and perform quality assurance
inspections, which were contractual duties of the contractor. Improved
administration of the contract would have resulted in the expenditure of
fewer GSA resources and enhanced services to the client agencies.

During our review, we found that the heating, ventilation, and air
conditioning equipment, and the lighting in the building were
unnecessarily operating around the clock all year long. We issued an
Alert Report to the Regional Administrator on October 6, 1997 to bring
to his immediate attention the opportunity to save over \$700,000 in
reduced electricity costs, and to recover a portion of the \$2 million
of overtime services costs.

The March 11, 1998 audit report recommended that the Regional
Administrator:

-   Enforce the terms of the contract.

-   Develop an hourly overtime usage rate and charge tenant agencies for
    additional services requested.

-   Implement a conservation program for the building immediately.

Regional management agreed with our recommendations. The audit is still
in the resolution process.

**Guard Services Contract**

The use of contract guards is one of the strategies employed by GSA to
accomplish its mission to develop and economically implement security
programs for property controlled by the Agency.

Our evaluation of guard service procurements in one region revealed that
GSA needs to increase management controls over the award process. The
contract files do not meet the minimum documentation requirements
established by the Federal Acquisition Regulation (FAR), and do not,
therefore, adequately support price reasonableness and award
determinations. Additionally, new guards are often allowed to work
before completing required training, potentially exposing Government
personnel and property and the public to undue risk.

The March 12, 1998 audit report recommended that the Assistant Regional
Administrator:

-   Ensure that the documentation standards mandated in the FAR are met.

-   Assure that contractors meet the pre-employment training provisions
    of the guard services contract.

Regional management agreed with our recommendations. The audit is still
in the resolution process.

**Theft of Government Property**

On December 2, 1997, a member of a volunteer rescue squad was sentenced
in U.S. District Court to 5 years probation and ordered to pay
restitution of \$10,538 after pleading guilty to conversion of public
property.

The conviction resulted from a joint OIG and Defense Criminal
Investigative Service investigation that was initiated when it was
alleged the rescue squad was acquiring Federal surplus property for the
personal use of its members. The investigation revealed that one of the
members of the squad converted for his own benefit Federal surplus
property obtained from a State agency. During the investigation, this
member returned property with a fair market value of \$44,442 to that
agency.

**PARTNERING WITH GSA MANAGEMENT**

# Value-Added Assistance Services

During this period, the OIG continued to provide value-added
professional assistance to GSA through consulting services and standard
audit reports. Our expanded services provide timely and specific
information sought by managers for improving decision-making, program
outputs, and mission accomplishment. These efforts not only help the
Agency become more efficient and effective, but provide management with
a faster response through innovative methods to develop and deliver
results. The following highlight the nature and breadth of some of our
customer-oriented services.

**Consulting Services**. These efforts epitomize a partnering
relationship with management. They are initiated by requests from
management, not by the OIG; management defines and limits the scope of
the project. Information objectively developed by the OIG is provided
within a 60-day turnaround response time frame for the interpretation
and discretionary use of the requesting official, and the final product
is distributed to the requesting official only. Our reports contain no
formal recommendations, only observations and alternatives for
consideration. Consulting projects completed this period include:

-   Frustrated Freight - The Agency requested that we assist in
    identifying why a substantial number of shipments destined for
    Department of Defense activities overseas were arriving at
    consolidation points with no clear indication of the ultimate
    consignee. We determined that the cause of this freight problem was
    vendors shipping materials with incomplete address information. In
    our October 3, 1997 report, we suggested ways to improve shipping
    instruction information provided to the vendors. This should not
    present major difficulties for GSA, and yet would ensure that
    shipments can be delivered to the ultimate consignee.

-   Customer Satisfaction with the Advanced Acquisition Program (AAP) -
    The OIG was asked to survey realty specialists and client agencies
    in one region to determine their satisfaction with AAP, a relatively
    new program initiated to expedite the acquisition of leased space
    under 10,000 square feet. This program\'s objective is to fulfill
    client space needs promptly by using pre-evaluated and
    pre-negotiated inventory of space ready for occupancy. Our survey
    results presented to management on October 27, 1997 reported that
    both realty specialists and customer agencies are generally pleased
    with the program, particularly the timeliness of the leasing actions
    and the quality of the buildings offered under the program.

-   Procurement Practices for Non-Stock Items - Management officials in
    one region asked the OIG to determine if the procurement process
    could be enhanced for high priced or frequently requisitioned items,
    which are not held as normal inventory supply stock and are
    purchased by special ordering procedures. In addition, management
    needed to know what portion of sales were made to the Department of
    Defense compared to civilian agencies, and what portion of sales
    were made to overseas and to domestic customers respectively. An
    extensive analysis of the Purchase Order Procurement Information
    Database enabled us to provide the information management requested
    in our report dated November 24, 1997.

-   Performance Indicator of Operating Costs - The OIG was asked to
    evaluate and determine in one region if the performance indicator -
    operating cost per \$100 of sales value - could be used as a
    reasonable basis to allocate identifiable operating costs to the
    division\'s two primary branches. Our December 5, 1997 study
    concluded that, with some minor modifications, the metric indicator
    reflects a reasonable basis for allocation of costs. After
    completion of this project, we continued to work with regional
    management, at their request, to develop specifications for database
    queries.

-   Financial-Related Data for Purchase of Electric Power - The OIG was
    requested by a contracting officer in one region to determine
    whether companies bidding for an electric power contract
    demonstrated any material weaknesses that might adversely impact
    their financial responsiveness in performing the requirements of the
    contract. The Agency\'s retail purchase of electricity results from
    ongoing deregulation of electric utilities nationwide. Our January
    20, 1998 report provided an analysis of numerous financial reports
    to reveal some issues that could have future impact on fulfillment
    of the contract terms and conditions.

-   Accuracy of Management Information System - Management officials in
    one region requested that the OIG assess the accuracy of data within
    a recently implemented management information system. Additionally,
    management needed to know if the system is adequately safeguarded.
    Our March 25, 1998 report concluded that some data inaccuracies do
    exist in the system and that the data security could be
    strengthened. Because our analysis enabled us to determine the
    reasons for the inaccuracies, we were able to suggest actions to
    alleviate the problem. We also concluded that management must
    determine the level of system security necessary.

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-   Timely Payment to Vendors - The OIG was requested by one region's
    management to examine and document a payment process and determine
    whether payments are being made timely. The payment process involved
    invoice authorization, certification and payment procedures flowing
    between GSA Finance, an external data entry facility, and fleet
    maintenance vendors. Our March 30, 1998 report concluded that
    untimely payments were occurring primarily when vendors delayed
    submission of invoices for payment. Upon receipt of timely and valid
    invoices, GSA is promptly paying the vendors within 30 days of
    receipt of an invoice, approximately 95 percent of the time.
    Although our analysis showed the payment process to be effective, we
    did observe that some potential procedural enhancements to the
    overall process could be made to further streamline document and
    information handling to result in time and cost savings.

**Management Requests**. In response to requests from GSA managers for
reviews, we performed audits of specific activities of particular
concern. During this period, we issued three standard audit reports that
had been initiated at management's request:

# Contract Workload Management - The OIG was requested by GSA management to follow up on a workload management review performed by our office in 1992. Since then, a number of organizational changes have been made within the Agency. In our July 1992 audit, we reported that several procurement personnel assigned to the Agency's MAS contracting program were overwhelmed by their workloads. Moreover, management had little information available to assess workloads, measure individual productivity, or more effectively schedule resources and monitor progress of work assignments. We also reported that contracting officers did not have adequate training and procurement reference material to help in performing their duties. 

# In our follow-up audit, we determined that while some improvements have been made, workload measure insufficiencies we previously identified still exist. We did note, however, that guidance, reference material, and training for the contract officials has improved. 

# 

# Our March 30, 1998 audit report recommended that the Commissioner, Federal Supply Service:

# 

# Ensure that the planned automation contains sufficient data to manage the contracting process.

# 

# Establish goals in order to assess acceptable levels of performance.

# The Commissioner agreed with the recommendations in the report. The audit is still in the resolution process. 

# GSA Customer Shipments - Management officials in one region were concerned that a major customer had filed a large number of shipment discrepancy reports and requested the OIG to determine why this was happening, and how it could be controlled. We determined that the customer's receiving and processing procedures contributed to the numerous adjustment requests. We also established that a large number of the discrepancy reports submitted were duplicate or unsupported. The customer has revised its receiving and processing procedures, which should eliminate invalid discrepancy reports. Therefore, our November 25, 1997 report made no recommendations.

# 

# Megacenter Dispatch Services - The primary functions of regional control centers are to dispatch Federal Protective Officers in response to emergency situations in and around GSA-controlled facilities, and to monitor and respond to various types of property security alarms. 

> Due to concerns that the control centers' performance levels had
> degraded over time because of budgetary and personnel constraints, the
> Agency initiated an assessment of the function. The March 1993
> consultant's report on GSA\'s control center program concluded that
> GSA was operating the control centers in a manner placing GSA at
> significant risk because of personnel shortages, conflicting guidance,
> inadequate facility maintenance, and outdated hardware/software
> systems. The report suggested that GSA consolidate control center
> responsibilities to achieve appropriate economies of scale,
> introducing the megacenter concept.

GSA plans to consolidate most control center functions into four
megacenters, situated in strategic locations throughout the country.
Because the functions to remain at the regional dispatch sites are
generally incidental in nature, these sites will not have to be
continuously staffed and may be closed at a later date.

> Our review, performed at the request of one Regional Administrator,
> determined that the megacenters will have the capability to
> effectively perform the dispatch functions of the various control
> centers, thereby obviating the need for regional dispatch sites.

The January 30, 1998 report recommended that the Commissioner, Public
Buildings Service:

-   Have regions develop appropriate contingency plans to continue the
    dispatch function during natural disasters.

-   Ensure that technological upgrades to alarm systems required for
    megacenter compatibility are identified and accomplished as soon as
    possible.

Management concurred with the recommendations. The audit is still in the
resolution process.

**REVIEWS OF GSA PROGRAMS**

*GSA is a central management agency that sets Federal policy in such
areas as Federal procurement, real property management, and
telecommunications. GSA also manages diversified Government operations
involving buildings management, supply facilities, real and personal
property disposal and sales, data processing, and motor vehicle and
travel management. In addition, GSA manages 197 accounting funds and
provides cross-servicing support for client agencies. Our audits examine
the efficiency, effectiveness, and integrity of GSA programs and
operations and result in reports to management. Our internal audits
program is designed to facilitate management\'s evaluation and
improvement of control systems by identifying areas of vulnerability and
providing informational and advisory services.*

**SIGNIFICANT OIG ACCOMPLISHMENTS**

# Security Enhancements in Federal Buildings

On April 19, 1995, the Alfred P. Murrah Federal Office Building in
Oklahoma City was destroyed by a bomb. This terrorist act resulted in
the death of 168 Federal employees and visitors, and significant
injuries to hundreds of individuals. The next day, President Clinton
directed the Department of Justice (DOJ) to assess the vulnerability of
Federal office buildings in the United States, particularly to acts of
terrorism and other forms of violence. The United States Marshals
Service (USMS) coordinated the study based on its expertise in court
security.

The USMS assembled Standards and Profile Committees. The Standards
Committee divided Federal holdings into five security levels and then
determined the minimum standards that could be applied to each level.
The levels were established based on criteria of tenant population,
public contact volume, facility size, and agency sensitivity. The
Profile Committee was tasked with surveying existing security conditions
at Federal facilities and identifying future security enhancements and
related costs. USMS deputies and GSA physical security specialists
conducted the survey.

On June 28, 1995, DOJ issued the Vulnerability Assessment of Federal
Facilities report. DOJ's principal conclusion was that the typical
Federal facility, at each security level, lacked some of the elements
required to meet the new minimum standards. DOJ's principal
recommendation was that, where feasible, each Federal facility should be
brought up to the minimum standards. Depending on the security level and
feasibility of installation, security upgrade countermeasures could
include: x-ray screening of all mail and packages, closed circuit
television, perimeter lighting, contract guards, and magnetometer or
x-ray screening at public entrances. DOJ further recommended that
Building Security Committees (BSCs) be established as a formal mechanism

for addressing security concerns at each facility. The BSCs consist of
representatives from all Federal agencies occupying a building, with
assistance provided by a GSA physical security specialist.

In FY 1997, Congress authorized GSA to fund \$240 million of Federal
building security enhancements. GSA allocated these funds to its regions
based on specific BSC-requested countermeasures, as documented by each
region in the Building Security Committee System (BSCS). Therefore, if a
countermeasure was recommended by a BSC, approved in the region and put
into the BSCS, the region received funding for the countermeasure from
Central Office.

In FY 1997, the OIG started a review of GSA's upgrading of security at
Federal facilities. During this review, we noted several items of
significant concern which we felt warranted immediate reporting to
management. Three "alert reports" and a separate audit report were
provided to management in this semiannual reporting period. The reports
addressed idle security enhancement equipment, inaccurate installation
reporting status data, and the misuse of enhancement funding. Each is
discussed below.

# Inventory of Uninstalled Security Equipment

> Almost \$2 million of security equipment, purchased for GSA's enhanced
> security program, was in inventory with no immediate plans for
> installation. This has occurred due to a lack of coordination among
> GSA security personnel, customer agency officials, and commercial
> property representatives.
>
> In July 1997, while performing audit fieldwork for our review of GSA's
> Security Enhancement program, we found that one region had significant
> amounts of security enhancement equipment, including x-ray screening
> devices, walk-through magnetometers, and cameras, stored in two
> separate rooms in a Federal building in Washington, D.C. Most of the
> items were still sealed in the original packaging. On a September 23,
> 1997 follow-up visit, we found the inventory virtually intact.
>
> GSA personnel responsible for this stored equipment did not maintain
> an accurate, current, or complete inventory record. In response to our
> request, we were provided with an undated record titled "Inventory,"
> which identified quantities, model numbers, a brief item description,
> and an incomplete list of unit prices. GSA's listing only included
> some camera equipment; the other equipment found in the rooms was not
> documented.
>
> The regional office did not always consult with customer agencies
> prior to purchasing security equipment. As a result, the inventory
> includes items which are technically unsuitable or do not meet
> customer agency needs. Due to the lack of accountability over the
> equipment, the region had no current plan to install the items in
> either the originally intended buildings, or other buildings with
> compatible security needs.
>
> The absence of an appropriate plan is exacerbated by other factors.
> The storage conditions were less than desirable. The rooms were
> extremely hot and dusty. Although original packaging was still in
> place, the facility was clearly not meant to store equipment of this
> nature. Also, the warranties on several equipment items have either
> already expired or will expire in the near future.
>
> The DOJ study anticipated that specific security needs would
> inevitably vary, even among those facilities at the same security
> level, due to local conditions and changing circumstances. DOJ
> recognized that it might not be possible to bring certain facilities
> up to the minimum standards in all areas because of the nature of an
> existing lease, the unwillingness of landlords to modify a lease, or a
> major structural problem. That is why BSCs were established as a
> crucial component of the security enhancement process. Each BSC was
> directed to determine which of the minimum standards and optional
> measures need to be implemented at its facility. In addition, BSCs
> were required to address the feasibility of implementation before
> forwarding enhancement requests and cost estimates to GSA for
> assessment. Therefore, equipment purchases should not have been made
> without input from the BSCs.
>
> GSA surveyed regional offices as to whether they anticipated having a
> surplus or a deficit in capital cost funds dedicated to completing
> BSC-approved countermeasures. Any reported surplus would be
> redistributed to regions with projected deficits. This regional GSA
> office reported that an additional \$6 million would be required to
> complete the security enhancements. The accuracy of this assessment is
> questionable.
>
> The regional GSA office has advised us that the 25 x-ray units sitting
> in storage are now reserved for eventual installation at loading dock
> bays at a new Federal office building complex; however, they did not
> provide any supporting documentation. In addition, the database for
> the security enhancement project does not reflect these
> countermeasures and GSA officials have not approved the intended
> course of action.
>
> In view of the Agency's goal, the limited funding resources, expiring
> warranties, undesirable storage conditions, and the fact that more
> purchasing is continuing, we suggested that the region fully account
> for the inventory and develop a formal implementation plan, in
> conjunction with Central Office, to assure that the equipment is used
> as intended. Unneeded equipment could then be made available to meet
> the immediate needs of other regional offices.
>
> Our October 1, 1997 report was intended to alert management to a
> serious problem requiring immediate attention. We advised the
> Assistant Commissioner, Federal Protective Service that the subject
> matter discussed in this report will be addressed further in the audit
> report on the Security Upgrade program. Notwithstanding, we invited
> management to provide comments or information regarding our audit
> concerns.
>
> Since our report was issued, we have been verbally informed that GSA
> has earmarked the equipment in storage and stopped purchasing
> additional items in an effort to use the inventory. Some equipment may
> also be available for use by other regional offices.

# Uncompleted Security Countermeasures

> In the same region in which we found the stored security equipment, we
> determined that the regional GSA office is not meeting its
> DOJ-mandated responsibility to enhance security in GSA-controlled
> facilities. The office has been misreporting the status of security
> enhancement countermeasures to senior management officials. Security
> equipment projects reported as complete and operational were actually
> missing, uninstalled, or in storage. This situation has occurred
> because of a lack of coordination among GSA security personnel,
> customer agency officials, and commercial property representatives, as
> well as non-adherence to established policy concerning the enhancement
> effort. As a result, security at several Government facilities had not
> been upgraded to minimally acceptable standards.
>
> In a memorandum dated August 27, 1996, the Commissioner, Public
> Buildings Service reaffirmed that "a countermeasure can be counted as
> completed only when it is fully operational." The Commissioner's memo
> clearly indicated that equipment does not represent a completed
> countermeasure just because it is physically present at the site; it
> must be installed and operational.
>
> Consequently, the situation in the region cannot be attributed to a
> misinterpretation of guidance. The regional program manager did not
> ensure that the Commissioner's established policy concerning the
> enhancement effort was followed. Frequently, staff entered
> countermeasures as complete when equipment was delivered to the site.
>
> The BSCS is the official database used by management to track the
> progress of the security enhancement effort. During our review of
> security upgrades, we noted significant database discrepancies. We
> compared BSCS status reports to the actual conditions in 52 buildings
> in the region and found differences in 32 locations. At these
> locations, equipment was missing, uninstalled, or in storage, and in
> many instances, was incorrectly identified in the database as having
> been completed. In addition, we located extra equipment not identified
> in the BSCS.
>
> On December 11, 1997, we issued an "alert report" to the Assistant
> Commissioner, Federal Protective Service stating that security at many
> regional Federal facilities had not been upgraded to minimally
> acceptable standards. In addition, the BSCS database is not accurately
> representing the status of the regional security upgrade effort.
>
> Subsequent to our report being issued, regional management has taken
> positive steps to ensure the accuracy of the reported countermeasures.
> Agency management has set up inspection teams to verify our reported
> concerns and further review the countermeasure status in buildings
> that were not part of our sample. We have been told that the teams
> identified more discrepancies in the additional buildings reviewed,
> and that the database has been revised to reflect those
> countermeasures that are incomplete.

**Review Expanded to Additional Regions**

> Based on our findings in the region discussed above, we expanded our
> review to include protective security offices in three other regions.
> At 33 out of 69 buildings reviewed, some of the security equipment
> identified in the security database as complete and operational was
> actually missing, uninstalled, or non-operational. We also observed
> instances of unreported security equipment at Federal facilities. As a
> result, additional Federal facilities have not been completely
> upgraded to minimally acceptable standards and the project database is
> inaccurate.
>
> Based on our analysis and discussions with regional GSA officials,
> certain countermeasures should have been deleted from the database to
> reflect revised BSC needs or alternative measures taken by GSA. The
> regional officials indicated that they encountered problems in making
> corrections or adjustments during the early stages of the enhancement
> project and therefore elected to enter a completed status for canceled
> countermeasures. They were remiss in not going back and subsequently
> correcting these completion entries. According to a GSA Central Office
> official, the database always included the capability to make
> adjustments.
>
> Our review represents a judgmental, rather than statistical sample of
> countermeasures. Therefore, we cannot project the results against the
> countermeasure universe for these three regions. In our February 11,
> 1998 "alert report," we stressed the need for regional GSA security
> offices and Central Office to take immediate action to ensure that
> countermeasures at all Federal buildings are accurately reported and
> completed.

### Inappropriate Use of Security Enhancement Funds

> A regional GSA office expended approximately \$375,000 of funds,
> allocated to the security enhancement of GSA-owned and leased
> buildings, on a project that did not involve BSC-recommended
> countermeasures. In so doing, GSA violated 31 U.S.C.
>
> § 1301. The region initiated this project to construct a regional
> control center without BSC input or approval from GSA Central Office.
>
> As discussed previously, Congress had authorized \$240 million to GSA
> for Federal building security enhancements. These funds were based on
> specific BSC-requested countermeasures.
>
> The initial FY 1997 GSA funding allowance documents issued to the
> regions stressed that funds identified for BSC countermeasures were
> "fenced," that is set aside for that purpose only. On May 5, 1997, the
> Chief Financial Officer issued a memorandum to the Public Buildings
> Service (PBS) Assistant Regional Administrators, which further set
> forth the PBS Commissioner's policy that regional funding allowances
> for countermeasures were "fenced," without any exceptions.
>
> In December 1996, the region awarded a contract for the construction
> of a new regional security control center, uniformed supervisor
> offices, and locker room facilities. GSA initially planned to relocate
> their old control center from another building under a project that
> was first initiated in FY 1991, but was delayed due to a lack of
> funding.
>
> At the time of award, the contract was funded under the region-wide
> repair and alteration allowance. On April 15, 1997, the contracting
> officer issued a modification, which administratively changed the
> contract's accounting and appropriation data. As a result of this
> change, the contract was now charged against the accounting
> classification reserved for costs associated with BSC recommended
> security countermeasures.
>
> A regional manager made the decision to charge the project against BSC
> funds, stating that without an operational control center all security
> enhancement initiatives would have been negated. However, there was no
> BSC countermeasure covering the control center project. In addition,
> the GSA physical security specialist's facility evaluation assessment
> of the building made no mention of the control center and the BSC
> chairperson was unaware of the project.
>
> The June 1995 DOJ report established the BSCs as a crucial component
> of the security enhancement process. Each BSC was directed to
> determine which of the minimum standards and optional measures needed
> to be implemented at its facility. The BSCs also had to address the
> feasibility of implementation before forwarding security enhancement
> requests and cost estimates to GSA for assessment. Therefore, no
> security enhancement effort should have been initiated without BSC
> input. In addition to bypassing the BSC, the region did not obtain
> Central Office's concurrence, which security enhancement program
> guidelines require when a building's cumulative security-related
> capital costs exceed \$100,000. Since no countermeasure was
> established, Central Office officials were not afforded the
> opportunity to review the project.
>
> The region's use of BSC funds to construct a control center
> constitutes a violation of the provisions of 31 U.S.C. § 1301. This
> statute states that public funds may be used only for the purpose for
> which they were appropriated. In this case, the control center project
> was not a recommended BSC countermeasure, bypassed the entire BSC
> process, and consequently was not actually allocated any BSC funds.
> Thus the region clearly should not have used BSC funds for the non-BSC
> related purposes.
>
> The entire security enhancement effort has reached a point where
> remaining resources are extremely limited. GSA Central Office has
> surveyed regional offices as to whether they anticipate having a
> surplus or a deficit in capital cost funds dedicated to completing BSC
>
> approved countermeasures. Any reported surplus would be redistributed
> to regions with projected deficits, since GSA does not anticipate
> receiving additional allocations for BSC security measures in future
> years.
>
> In view of the statute violation and limited funding resources, we
> recommended in our March 24, 1998 report that the Assistant
> Commissioner, Federal Protective Service

## request that the region restore the \$374,267 of funds to the security enhancement project for redistribution to other regions, as necessary. 

> The Assistant Commissioner agreed with our recommendation. The report
> is still in the resolution process.

**Review of Security Program Continues**

> We are continuing our work in one more region. However, in the four
> regions completed, we have shown that controls for ensuring program
> implementation are ineffective, large numbers of inaccurate data
> entries have rendered the information system unreliable, and most
> importantly, actual implementation of enhanced security
> countermeasures is well short of what has been reported.
>
> We believe that because the original implementation process has been
> shown to be deficient, GSA must develop another approach, which
> includes more effective control mechanisms to ensure that the 4,000
> individual security enhancement projects are properly implemented.
>
> We have offered to share our available information and insights with
> management to aid them in their corrective efforts. After allowing
> sufficient time for the Agency to implement corrective actions, we
> will follow up to assess how the corrective actions are proceeding.

## Prospectus Level Repair and Alteration Work 

GSA efforts to ready office space in a Government building in time for
the 1997 Presidential Inaugural were inadequately reviewed and managed.
Costs on the repair and alteration project were incurred in excess of
the prospectus threshold in contravention of the Public Buildings and
Antideficiency Acts. The OIG had initiated the review based on
allegations of improper funding for work performed on the project.

The Agency is authorized to provide direct assistance and perform
special services for the Inaugural Committee in connection with
presidential inaugural operations and functions. This includes providing
space for personnel and parking, furniture and equipment, and other
incidental services. In past inaugurals, the committees and affiliated
support staff were housed in

Government-owned space located at GSA\'s Southeast Federal Center.
However, anticipating major construction at this center, GSA chose to
use a Federal building located in Suitland, Maryland.

A significant amount of work was necessary to restore the building to
operational status and to ready it for temporary occupancy. Work
included:

-   repairing and improving utility systems;

-   bringing the building up to fire and safety codes;

-   restoring restrooms and adding shower facilities;

-   renovating with new ceiling tiles, lighting, partitioning, painting,
    carpeting and/or floor covering;

-   altering office space, windows and the cafeteria;

-   paving;

-   making roof repairs; and

-   adding outdoor canopies and security devices.

    To begin work, the region authorized \$1.25 million for repairs and
    alterations, and an additional \$1.5 million in building operations
    funds to pay for ongoing expenses and support costs. We found that
    total costs exceeded \$5.6 million, of which over \$3.3 million are
    attributable to repair and alterations activities. Under the Public
    Buildings Act, GSA must file a prospectus and receive Congressional
    approval for any building's repair project whose costs exceed stated
    threshold amounts, which at the time were \$1.67 million. Our report
    concluded that, at the point when the project exceeded the
    prospectus threshold, Congress should have been informed and
    requested to approve GSA's spending of additional funds. By
    continuing to incur costs against the building without informing
    Congress and obtaining funding approval, GSA did not comply with
    both the prospectus requirements of the Public Buildings Act and the
    Antideficiency Act.

    In addition, on-site officials did not follow prescribed procurement
    procedures in acquiring the supplies and services deemed necessary
    for the renovation. Moreover, they did not properly inform regional
    management of their procurement actions. Project officials had been
    given wide latitude, and focused on readying the building. Had more
    senior management been timely notified, some renovation work might
    not have been approved. Furthermore, because several procurement
    actions were processed through inappropriate channels, we are
    uncertain that funds used in procuring goods and services for this
    building were reasonably protected against fraud or waste.

    Unclear assignments of personnel, poor financial management
    oversight, and imprudent authority delegations all contributed to
    loss of control over this project. Through a series of events that
    occurred during the renovation project, costs were charged to
    different budgetary accounts that obscured the overall cost of the
    project and thus the need to get approval once the prospectus
    threshold was reached. The responsible funds manager had effectively
    relinquished direct control of funding for the building to the
    contracting officer.

    In our November 6, 1997 report, we recommended that the Regional
    Administrator:

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-   Report the prospectus level project and the Antideficiency violation
    to the Administrator so that he can take the appropriate actions
    required by the Public Buildings and Antideficiency Acts.

-   Take the necessary actions to properly reclassify the associated
    building costs in GSA's financial system.

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-   Report all project renovation costs to the Administrator so that he
    can include them in GSA's after-action report for the inaugural
    event.

-   Establish, with the Chief Financial Officer\'s assistance, a
    methodology for properly capturing GSA\'s costs associated with
    future inaugurals.

-   For future special events impacting the region, initiate a more
    effective monitoring system that will timely alert management to
    significant variances in projected versus actual project costs, and
    ensure that established procurement procedures are followed.

    The Regional Administrator did not concur with the first
    recommendation, nor did the response adequately address the second
    and final recommendation. The report is still in the resolution
    process.

    Because this report raised issues of possible noncompliance with
    laws, we suggested the matters be reported in the Administrator's
    Federal Managers' Financial Integrity Act (FMFIA) report. The
    Administrator's 1997 FMFIA report includes a statement indicating
    these matters are under review by the Agency.

    **Year 2000 Computer Systems Conversion**

With the year 2000 fast approaching, computer experts, Government
officials, and private-industry managers are becoming increasingly
concerned over whether computer systems will operate correctly with the
new century date. Many computer systems developed years ago assume all
dates are in the 1900s and only use the last two digits of the year to
make important date and time calculations such as retirement benefits
computations, loan payment schedules, and sales projections. When the
calendar changes to the year 2000, these calculations may be inaccurate,
or systems may not understand the new date and be unable to process
transactions.

Over the last 2 years, the President, the Congress, the Office of
Management and Budget (OMB), and the General Accounting Office (GAO)
have become increasingly concerned about year 2000 computer risks and
Federal agencies' analysis and conversion efforts. The President issued
an Executive Order on February 4, 1998 which called for the Government
to meet the critical challenge to convert its systems by the year 2000.
Congress has held several hearings to assess the status of agencies'
year 2000 conversion efforts, and GAO has issued several reports on
agencies' progress. GAO has designated the year 2000 problem as a
high-risk area, and in July 1997 concluded that agencies need to
significantly accelerate their conversion efforts if widespread system
problems are to be avoided as the year 2000 approaches. In May 1997, OMB
began requiring Federal agencies to report quarterly on their year 2000
computer conversion progress.

In September 1996, our office completed an audit of GSA's planning
actions to address year 2000 computer conversion, and found that
planning was inadequate to ensure that all systems are analyzed and
converted in time. During this period we completed another review to
assess what progress has been made.

Since our September 1996 audit, the Chief Information Officer has
established a Year 2000 Focus Group and taken a number of additional
actions. Also, Agency Services and Staff Offices have made some progress
in analyzing and converting systems. Congress has noted that GSA has
made more progress than some other Federal agencies.

Much work remains. GSA's Services and Staff Offices are still assessing:
(1) which systems are critical to GSA operations and should be
prioritized for conversion; (2) how systems should be repaired,
replaced, or retired; and (3) what contingency plans are needed. In
addition, the Offices have identified systems as operable in the year
2000 without adequately testing the systems. Assessment activities need
to be completed to ensure that systems have been adequately analyzed and
prioritized, realistic schedules developed, and resources efficiently
allocated so that priority systems can be converted in time.

Completion of a comprehensive assessment phase is critical to
determining the potential impact of system failures on the Agency's core
business areas and processes, and for prioritizing conversion efforts.
GSA reported that it completed the assessment phase for its
mission-critical systems in June 1997 and has since begun the renovation
phase. As of the end of our review, the Agency reported that it has 58
mission-critical systems.

Unless GSA completes analyses and conversion of its systems in time, it
runs the risk of failing to provide important services to customers due
to system malfunctions. Some systems are already experiencing problems,
and others may malfunction in the near future if they are not modified
or replaced. GSA's Services and Staff Offices have made some progress,
but are still in the early stages of analysis and conversion.
Furthermore, conversion schedules have not been adequately developed and
analyzed. With time running out and staff resources declining, critical
management decisions are needed now on how to prioritize and convert
systems, and assess time frames and resources needed to complete
analysis and conversion in time.

Other year 2000 problems still need to be analyzed, such as interfaces
between systems, computerized building systems (such as security or
access systems, fire alarm systems, and

elevator systems), telecommunication systems, and personal computers.
The Services and Staff Offices have just begun addressing these areas
and centralized management and coordination is needed.

In order to avoid system malfunctions, GSA needs to plan all conversion
efforts, analyze systems code, convert all faulty dates, perform
testing, and correct any errors found, no later than March 1999, which
is OMB's revised deadline for Federal agencies to implement converted
and replacement systems. This will allow systems to run for 9 months
before

January 1, 2000 to ensure that the systems are operating correctly and
all bugs have been fixed. Performing this large amount of work within
this narrow time frame will be difficult, particularly with limited
staff.

Our March 31, 1998 report recommended that the Office of the Chief
Information Officer take the following actions:

-   In conjunction with the Services and Staff Offices, determine
    systems that are critical and need to be prioritized for conversion
    to operate in the year 2000; evaluate and determine the methods,
    schedules, and resources needed for conversion, and develop
    contingency plans for critical systems that may not be converted in
    time. This evaluation should include:

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-   Detailed analysis and conversion schedules for individual systems;

-   Specific conversion or replacement methods to be used; and

-   Time frames and resources required for each system.

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-   Closely monitor Services and Staff Offices' year 2000 progress
    against the above plans and schedules to ensure time frames are
    being met, computer staff is efficiently allocated, and additional
    resources are obtained as appropriate.

-   Take steps to manage, coordinate, and accelerate year 2000 computer
    analysis and conversion for interfaces between systems, computerized
    building and telecommunication systems, and personal computers.

The Chief Information Officer agreed with the recommendations in the
report. The report is still in the resolution process.

**Accuracy of Rent Billing Data**

The Federal Buildings Fund was established in 1975 to fund the
management of the Agency's owned and leased buildings. GSA receives
revenue from user agency charges for occupying space; these charges are
set at commercially comparable rates. In FY 1997, GSA billed Federal
agencies approximately \$5.1 billion for almost 300 million square feet
of space.

GSA prepares rent bills quarterly. Each bill identifies the building in
which space is assigned, the square footage by space classification,
associated joint use space (such as cafeteria and health rooms), annual
rent rates, total amount charged for the quarter, and any credits or
other adjustments from prior periods. The rent billing information used
to prepare bills and to perform other analyses comes from a 20-year-old
computer system. The Agency expects a new system to be operational this
fiscal year.

Because of a widely-held belief in the Public Buildings Service (PBS)
that the data in the information system were inaccurate but the degree
of inaccuracy was not known, we partnered with PBS in a statistically
valid review to assist the Agency in reaching decisions in transitioning
to its new information system. This topic was introduced in the Emerging
Issues and Concerns section of our last semiannual report.

To jointly perform this review, by agreement, GSA was responsible for
awarding contracts for the physical verification of space (measuring and
classifying space) and providing real estate staff to participate in the
verification process, including the reconciliation of information back
to the information system. The OIG was to plan, supervise, review, and
report on the evaluation. We focused on: accuracy of information system
data elements, impact on the rent income for each building where
discrepancies were found, and the effect on the overall GSA rent revenue
position.

Our review found that:

-   Space measurements and classifications were inaccurate in
    approximately half the tenancies reviewed, which comprised 28
    percent of the total square footage examined.

-   Inaccuracies represented a small percentage of the tenants' charges,
    and overcharges to one tenant generally were offset by undercharges
    to another.

-   Inaccuracies totaled approximately \$3 million in net underbillings
    when projected to the second quarter billing universe. Although not
    considered material for financial statement reporting purposes,
    these do represent a potential source of additional revenue for the
    Federal Buildings Fund.

-   GSA arrangements with some client agencies to bill space differently
    from the way it was occupied accounted for another \$1 million in
    underbillings for the sample.

-   Rent rates were reasonably accurate and we noted only minor problems
    with tenant identification. Rent rates for the buildings reviewed
    were supported by appraisals, and escalations were reasonably
    accurate.

Space discrepancies usually arose from inaccurate reporting of actual
square footage either through its mismeasurement or misclassification.
Comparing system information to the actual space measurements disclosed
that more than half the tenancies reviewed contained total area
variances of more than five percent. A variety of reasons also
contributed to the data

inaccuracies: (1) lack of database updates to reflect changes in space,
(2) misapplication of space classification standards, and (3)
information system problems. We believe this stemmed from not
effectively updating information in the system.

Our report noted that management must determine the amount of resources
appropriate for detecting inaccuracies and correcting them. Since the
financial impact of the data reviewed was small, the cost effectiveness
of any data correction efforts must be considered. Management should
also review the special arrangements entered into by realty specialists
and provide guidance in those areas that do not seem to make good
business sense. We also cautioned that the data elements reviewed may
represent only some of many data fields deemed critical to GSA's
operations and that these additional data fields may also require
corrective efforts.

In our February 11, 1998 report, we recommended that the Commissioner,
Public Buildings Service:

-   Correct revenue-related data, giving full consideration to cost
    effectiveness.

-   Consider reassessing to whom overall accountability for building and
    tenant data accuracy should be assigned, and linking the maintenance
    of accurate data as a means of assessing results through employee
    evaluations and/or the Government Performance and Results Act
    processes.

-   Adopt a reconciliation process that minimizes the chance that errors
    or outdated information will continue undetected.

The Commissioner generally agreed with the recommendations in the
report. The report is still in the resolution process.

######## IMPAC Credit Card Program 

Property Management Centers (PMCs) are increasingly using credit cards
as a means of paying for supplies and services needed in the management
of GSA properties. About 1,200 PMC staff have been issued International
Merchant Purchase Authorization Cards (IMPAC) as part of an effort to
streamline operations in a time of decreasing resources. In FY 1997, the
61,000 credit card transactions totaled over \$25 million. Management
has indicated that the use of IMPAC cards will continue to grow.

The card program has empowered many employees, who previously could not
procure goods and services themselves, with authority to buy items
needed to do their jobs, and quickly satisfy customer needs. However,
given the fact that procurement authority by credit card use has been
granted to a wide range of PMC employees, a degree of control over
procurements has been lost. To maintain overall control, IMPAC
guidelines require all employee card transactions be reviewed by persons
designated as "Approving Officials."

The OIG conducted a survey of procurements made by PMCs around the
country. Based on our survey results, we focused this review on controls
over the use of the IMPAC for "micropurchases" (up to \$2,500 for
supplies, \$2,000 for construction services), the single order limit for
most cardholders.

We concluded that, as implemented, current controls do not provide
reasonable assurance that purchases are for valid program needs, are
reasonably priced, and are made following prescribed procurement
regulations. Credit card procurements are deficient in four basic areas:

\(1\) separation of duties -- the same person is responsible for
authorizing, processing, recording, and paying for procurements; (2)
supervision - Approving Officials did not sign off on monthly cardholder
statements as having reviewed and approved transactions, as required, or
signed off on monthly statements without adequate documentation to
ascertain whether transactions were valid; (3) purchase documentation -
cardholders did not adequately document key decisions in the procurement
process; and (4) transaction recording -- data errors were not corrected
timely, resulting in inaccurate accounting data.

This condition occurred as a result of efforts to streamline purchase
procedures in field offices, in a competitive environment, with GSA
trying to satisfy its customers' needs. We found that, to an extent,
some controls that were in place were rendered ineffective by program
demands, while others were simply inadequate. As a result, the Agency is
vulnerable to procurement fraud, waste, or mismanagement.

Our January 23, 1998 audit report recommended that the Commissioner,
Public Buildings Service:

-   Make the goal of improving management controls a clearly stated
    priority, identifying minimal controls that can be presented in a
    clear, constructive light.

-   Develop a periodic review program of IMPAC card practices and
    transactions, by an entity independent of those being reviewed, to
    test compliance and effectiveness of the controls established.

-   Provide training to increase the awareness of cardholders, Approving
    Officials, and other supervisory persons, clearly outlining what
    their duties and responsibilities are.

The Assistant Commissioner, Office of Business Performance, generally
agreed with the recommendations in the report. The report is still in
the resolution process.

# Direct Bill Lodging and Car Rentals

GSA initiated the Direct Bill program in 1995 to simplify employees\'
travel vouchers and save travel funds by avoiding state and local taxes.
Under the program, participating hotels and car rental companies bill
GSA rather than the employees for charges incurred during official
travel. GSA travelers are not required to participate in this program,
but those who have participated generally like it.

The most tangible intended benefit of the program is the tax savings
that accrue to GSA. Because the travel charges incurred under this
program are paid directly by the Federal Government, they usually are
not taxable by State and local governments. The savings, however, are
partially offset by the additional processing efforts required by the
Office of Finance and the fund managers throughout GSA. Also, GSA does
not earn rebates offered by the travel charge card contractor since
direct-billed charges are not posted to the card. Overall, costs for the
Direct Bill program exceed its benefits.

While controls are adequate to ensure that GSA only pays direct-billed
charges for GSA employees, they do not ensure that charges are for
legitimate business travel, taxes and rates are correct, vendors are not
paid twice, and travelers are not reimbursed for direct-billed charges.

The purpose of our review was to provide management officials with
information they can use when considering the future of the program.
Therefore, the report dated February 17, 1998 contains no formal
recommendations.

#### Procurement Personnel Qualifications

GSA strives to be recognized as the Government\'s leading provider of
quality goods and services to Federal agencies. To do so, it must ensure
that its procurement staff is well trained to carry out its mission. The
importance of training and experience requirements was reflected in a
provision of the Clinger-Cohen Act which established mandatory minimum
education standards for procurement personnel.

GSA established the Contracting Officer Warrant program (COWP) on
December 18, 1979 and, in accordance with the Federal Acquisition
Regulation and the General Services Administration Acquisition
Regulation, established Agency-wide standards for selection,
appointment, and termination of contracting officers. Under COWP,
procurement personnel receive various levels of formal training in
different aspects of the contracting process. They are expected to
complete a specified number of courses and have a certain level of
experience before being appointed as interim or permanent contracting
officers. In response to recommendations contained in a September 1993
audit report issued by our office, GSA issued detailed training and
experience requirements for the various levels and types of contracting
officer appointments.

We reviewed how COWP was working in one region. The Regional Acquisition
Council implemented a Memorandum of Understanding (MOU), effective
January 18, 1996, that decentralized control of that region\'s COWP and
reduced some training requirements, significantly deviating from the
established Agency governing policy.

Our review concluded that regional contracting officer appointees were
not meeting the training and experience requirements of the governing
policy. In fact, they were not even meeting the reduced standard that
had been established in the MOU. Additionally, insufficient file
documentation was being maintained to support the appointments made.

The January 22, 1998 report recommended that the Regional Administrator
take action to ensure that:

-   All current and future contracting officer appointees complete
    necessary training to comply with current GSA policies.

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-   Procedures are designed and implemented to fully document
    contracting officer selections, appointments, training, and
    terminations.

Responsive management action plans were provided for implementing the
report recommendations.

######## Service Contracting

An audit of service contracts was performed during this period, in
response to Office of Federal Procurement Policy (OFPP) Letter 93-1 that
encourages the OIG to conduct vulnerability assessments of service
contracting. We reviewed management control procedures over service
contracting in one of GSA's services to determine if the controls over
contract award and administration are adequate to prevent abuses and
ensure that contractor performance meets contract requirements and
performance standards.

Our review did not identify any significant risk areas in management
controls over the award procedures for competitively awarded contracts
and task orders under both negotiated and Multiple Award Schedule
contracts. However, we found that GSA is not in total compliance with
OFPP Policy Letter 93-1 with regard to inclusion of defined performance
standards as part of the contract administration function. Even though
formal performance measures have not been developed, the Agency has
certain processes in place for tracking contractor actions to ensure
that customers receive quality services. GSA contracting officials are
aware of the need for further evaluations, and informed us of their
current efforts in researching relevant criteria to assess the
performance of specific types of services.

We concluded that the existing quality assurance measures mitigate the
potential risk of GSA not having the means to evaluate and ensure that
contractor performance meets the user's needs. Accordingly, our February
4, 1998 report did not contain formal recommendations.

**Regional Customer Supply Center**

We reviewed a regional Customer Supply Center (CSC) to determine if it
meets its goal of promptly supplying customer requirements of common
use, high demand items while exercising adequate management controls to
protect its assets.

The CSCs nationwide are a part of GSA's Stock program. Over 18,000 high
demand items are available for freight shipment to large customers (the
wholesale segment of the Stock program) or express delivery of smaller
quantities to customers (the retail portion of the Stock program). The
CSCs are shifting from being a separate supply program, distinct from
the wholesale stock program, to being a customer-oriented ordering
system for all 18,000 items the program stocks and distributes.

We found that the regional CSC was satisfactorily meeting customer needs
for popular supply items, and did so with adequate management controls
to protect its assets. The CSC had sales of \$15.3 million and stocked
over 2,300 items as of the end of FY 1997. While we noted some inventory
discrepancies in our review, differences were not significant and
inventory adjustments resulting from the last two physical inventories
were within acceptable limits.

The January 14, 1998 report did not contain formal recommendations.

**EMERGING ISSUES AND CONCERNS**

**The Ability of Inspectors General to Resolve Legal Disputes with their
Agencies**

We have had an issue of great concern that has been developing over the
last year relating to the ability of Inspectors General to seek
authoritative resolution by the Department of Justice's Office of Legal
Counsel (OLC) of disputes with their agencies regarding the
interpretation and construction of laws and authorities affecting the
operations of the agencies. We believe that this issue has implications
for agencies and their Inspectors General across the Executive Branch,
and that it also raises concerns of frustrating Congressional intent in
establishing in the executive agencies independent Offices of Inspector
General charged with identifying and reporting on such issues. Early
last year, after GSA itself declined to do so, we sought an opinion from
OLC regarding the respective authorities of the Department of Justice
and the GSA Administrator to compromise debts of a value exceeding
\$100,000. OLC declined to provide an opinion on the grounds that it was
not that office's practice to resolve such "intra-agency" disputes
unless asked to do so by the head of the agency.

We then asked for an advisory opinion from the General Accounting Office
(GAO). Subsequent to that request, the Office of Management and Budget
(OMB) undertook a review of this issue and, on May 19, 1997, the Office
of General Counsel of OMB issued an opinion which supported the Agency's
authority to compromise debt. On December 15, 1997, GAO issued an
opinion (B-276550) supporting our position that the Agency lacked the
authority to compromise debt and recommending that the Agency seek a
legal opinion from the Department of Justice if it intended to persist
in its interpretation of its debt compromise authority. We understand
that the Agency, based on the OMB opinion, considers this matter closed.

Faced with conflicting legal opinions from GAO and OMB and because we
believe that OLC is the only entity which is available outside an
affected agency to render authoritative and binding decisions on such
legal questions affecting the Executive Branch, we have asked the
Attorney General to review this matter. We particularly expressed our
concern that the declination by OLC to consider requests for legal
opinions from Inspectors General has put this Office, as well as other
Offices of Inspector General, in a potentially untenable position in
attempting to fulfill our statutory responsibilities of independently
reviewing and evaluating the programs and operations of the agencies. To
date, this matter is still under review by the Attorney General.

**PREVENTION ACTIVITIES**

*In addition to detecting problems in GSA operations, the OIG is
responsible for initiating actions to prevent fraud, waste, and abuse
and to promote economy and efficiency.*

**SIGNIFICANT PREAWARD AND OTHER AUDITS**

> The OIG's preaward audit program provides information to contracting
> officers for use in negotiating contracts. The pre-decisional,
> advisory nature of preaward audits distinguishes them from other
> audits. This program provides vital and current information to
> contracting officers, enabling them to significantly improve the
> Government\'s negotiating position and to realize millions of dollars
> in savings on negotiated contracts. This period, the OIG performed
> preaward audits of 37 contracts with an estimated value of \$70
> million. The audit reports contained over \$16 million in financial
> recommendations.
>
> This period, we audited several claims for increased costs allegedly
> caused by the Government during the construction and renovation of
> Federal buildings. Four of the more significant audits contained
> proposed prices totaling \$3.8 million, and recommended adjustments of
> \$2.6 million. In an audit of a claim for increased costs due to
> alleged Government caused delays, we advised the contracting officer
> that the contractor claimed amounts which were not reasonable,
> allocable, and allowable under the terms of the contract and were not
> supported by appropriate accounting records. In an audit of another
> claim, we advised the contracting officer that a subcontractor
> inflated its regular and overtime shop rates, and was unable to
> support its proposed costs for shop supervisor and project management
> labor. In an audit of a claim for increased costs due to alleged
> design defects, we advised the contracting officer that a
> subcontractor overstated its claimed costs and was unable to provide
> sufficient documentation for other costs. Finally**,** in an audit of
> a claim for increased costs due to alleged Government caused delays
> during a renovation project, we advised the contracting officer that
> the contractor's claim should be adjusted for duplicate costs, costs
> not allowed by Federal guidelines, and unsupported costs.

**FEDERAL MANAGERS' FINANCIAL INTEGRITY ACT REVIEWS**

The Federal Managers' Financial Integrity Act (FMFIA), Section 2,
requires GSA management to provide assurance to the President and the
Congress that Agency resources are protected from fraud, waste,
mismanagement, and misappropriation.

Each year, we review the Agency's FMFIA process to assess its
completeness in reporting known weaknesses and deficiencies. This year,
we advised management that the Administrator\'s assurance statement
should have reported the updated status of the issue regarding GSA\'s
legal authority to restructure (compromise) debt for the sale of the
Boston Custom House. In 1997, both the Office of Management and Budget
(OMB) and the General Accounting Office (GAO) issued advisory legal
opinions on the matter, OMB agreeing with the Agency\'s position and the
GAO finding that GSA did not have the authority to compromise such
debts. We believe that the Agency should have acknowledged the differing
opinions and indicated that GSA plans no further action on this matter.
This issue was first reported in our Semiannual Report to the Congress
of April 1, 1996 - September 30, 1996.

We also reviewed GSA's efforts in carrying out Section 4 of the Act by
evaluating the

FY 1997 assurance statement concerning financial management systems. We
advised management that the statement was complete and adequate.

**INTEGRITY AWARENESS**

The OIG presents Integrity Awareness Briefings nationwide to educate GSA
employees on their responsibilities for the prevention of fraud and
abuse, and to reinforce employees\' roles in helping to ensure the
integrity of Agency operations.

This period we presented 12 briefings attended by 126 regional
employees. These briefings explain the statutory mission of the OIG and
the methods available for reporting suspected instances of wrongdoing.
In addition, through case studies and slides, the briefings make GSA
employees aware of actual instances of fraud in GSA and other Federal
agencies and thus help to prevent their recurrence. The briefings have
in fact led to OIG investigations based on reports by GSA employees of
suspected wrongdoing.

**HOTLINE**

The OIG Hotline provides an avenue for concerned employees and other
concerned citizens to report suspected wrongdoing. Hotline posters
located in GSA-controlled buildings, as well as brochures, encourage
employees to use the Hotline.

During this reporting period, we received 1,384 Hotline calls and
letters. Of these,

75 complaints warranted further GSA action, 13 warranted other Agency
action, and 1,296 did not warrant action.

**IMPLEMENTATION REVIEWS**

The OIG performs, on a selected basis, independent reviews of
implementation actions to ensure that management\'s corrective actions
in response to OIG recommendations are being accomplished according to
established milestones. This period, the OIG performed one
implementation review and found that all of the recommendations had been
implemented.

**FINANCIAL STATEMENTS AUDIT**

The Chief Financial Officers Act of 1990 requires the OIG to conduct or
arrange for an annual audit of the GSA consolidated financial
statements. The Act also requires a report on the GSA system of internal
accounting controls and compliance with laws and regulations. An
independent public accounting firm performed this audit for FY 1997 and
FY 1996, with oversight and guidance from the OIG. In the audit report
dated February 26, 1998, GSA received unqualified opinions on its
financial statements and on its system of internal accounting controls.
The report on the internal control structure over financial reporting
for the consolidated financial statements described one instance of
noncompliance with laws and regulations and reported an update to the
status of a 1996 non-compliance issue. Several conditions affecting
other programs or operations were identified where steps should be taken
to strengthen internal controls. None of these was considered material.

The OIG completed limited reviews of the internal controls for two
program performance measures, assessing reasonableness of the control
structure to generate reliable performance information as required by
the Office of Management and Budget Bulletin 93-06. We assessed a
\"low\" level of risk over the existence and completeness of the data
supporting one of the performance measures. The internal control
processes used by GSA were not adequate to ensure that the data and
systems supporting the other performance measure existed and were
complete. As a result, the Agency decided not to include the measure in
GSA\'s FY 1997 Annual Report.

**REVIEW OF LEGISLATION AND REGULATIONS**

*The Inspector General Act of 1978 requires the OIG to review existing
and proposed legislation and regulations to determine their effect on
the economy and efficiency of the Agency\'s programs and operations and
on the prevention and detection of fraud and mismanagement.*

During this period, the OIG reviewed 192 legislative matters and 44
proposed regulations and directives. The OIG provided significant
comments on the following legislative items:

######### Government Performance and Results Act Technical Amendments of 1997. We provided comments to the President's Council on Integrity and Efficiency (PCIE) on H.R. 2883, the Government Performance and Results Act Technical Amendments of 1997. As set forth in the version the PCIE reviewed, the bill would have required agencies to submit periodic strategic and program performance plans and would mandate that Offices of Inspector General (OIGs) provide independent assessments and audits of these plans. We generally supported the bill because we believe it would be beneficial in ensuring agencies' accountability for meeting strategic and program goals. We recommended that several clarifications be made regarding the obligations of the OIGs. First, we suggested that it be made clear that the OIGs are to evaluate the systems that agencies themselves use to assess their compliance with their stated goals, rather than the systems used to formulate strategic goals in the first instance. Second, we asked that language be added to explain the scope and schedule of the audits to be performed by the OIGs. We also pointed out that the bill assigns significant new obligations to the OIGs that will require an extensive commitment of resources. We understand that our concerns, together with concerns raised by other OIGs, were forwarded by the PCIE to the House Government Reform and Oversight Committee and were considered in a revised version of the bill.

######### The Fair Competition Act of 1998 and The Competition in Commercial Activities Act. These bills are revised versions of the Freedom from Government Competition Act, H.R. 716 and S. 314, upon which we commented in the past. They would require that Government agencies conduct competitions among private and Government-sector sources for all activities classified as commercial. We agree that functions currently performed by the Government should be transferred to the private sector when it makes both policy and economic sense to do so. Our concerns with these bills are three-fold. First, we are not convinced that they give sufficient consideration to the costs, such as the disruption to agency operations, caused by contracting out. Second, in their current form, the bills do not allow for the possibility that some activities that are currently contracted out may actually be performed more efficiently or inexpensively by a Government source. Third, we expressed our concern about the methodology proposed to be used to assess the direct and indirect costs of an agency's performance of a given activity.

In addition, the OIG provided comments on the following regulatory item:

-   *Draft Regulation -- Public Availability of Agency Records and
    Informational Materials.* We commented on GSA's proposed amendment
    to its Freedom of Information Act regulation to incorporate the
    requirements of the Electronic Freedom of Information Act Amendments
    of 1996. We identified several areas where we believe the proposed
    regulation did not conform with the requirements of the statute and
    suggested language to bring it into compliance. We also noted that
    the proposed regulation did not provide for multitrack processing of
    requests and suggested that this requirement be incorporated into
    the new regulation.

**STATISTICAL SUMMARY OF OIG ACCOMPLISHMENTS**

**Audit Reports Issued**

The OIG issued 107 audit reports. The 107 reports contained financial
recommendations totaling \$32,271,075, including \$16,383,263 in
recommendations that funds be put to better use and \$15,887,812 in
questioned costs. These dollar amounts include \$96,832 in financial
recommendations for a report issued to another agency. Due to GSA\'s
mission of negotiating contracts for Governmentwide supplies and
services, most of the recommended savings that funds be put to better
use would be applicable to other Federal agencies.

**Management Decisions on Audit Reports**

Table 1 summarizes the status of the universe of audits requiring
management decisions during this period, as well as the status of those
audits as of March 31, 1998. Fourteen reports more than 6-months old
were awaiting management decisions as of March 31, 1998; all of them
were preaward audits, issued before February 10, 1996, which are not
subject to the 6-month management decision requirement. Table 1 does not
include 5 reports issued to other agencies this period, and 23 reports
excluded from the management decision process because they pertain to
ongoing investigations.

**TABLE 1. MANAGEMENT DECISIONS ON OIG AUDITS**

+--------------------------+---------+---------------+---------------+
|                          | **No.   | **Reports     | **Total**     |
|                          | of**    | with**        |               |
|                          |         |               | **Financial** |
|                          | **Re    | **Financial** |               |
|                          | ports** |               | **Reco        |
|                          |         | **Reco        | mmendations** |
|                          |         | mmendations** |               |
+--------------------------+---------+---------------+---------------+
| For which no management  |         |               |               |
| decision had been made   |         |               |               |
| as of 10/1/97            |         |               |               |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| Less than 6 months old   | 44      | 32            | \$19,543,921  |
+--------------------------+---------+---------------+---------------+
| More than 6 months old   | 18      | 16            | 4,710,607     |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| Reports issued this      | [10     | [45           | [32,174,243   |
| period                   | 2]{.und | ]{.underline} | ]{.underline} |
|                          | erline} |               |               |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| **TOTAL**                | **164** | **93**        | **\           |
|                          |         |               | $56,428,771** |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| For which a management   |         |               |               |
| decision was made during |         |               |               |
| the reporting period     |         |               |               |
+--------------------------+---------+---------------+---------------+
| Issued prior periods     | 48      | 36            | \$21,563,019  |
+--------------------------+---------+---------------+---------------+
| Issued current period    | [7      | [28           | [23,225,268   |
|                          | 5]{.und | ]{.underline} | ]{.underline} |
|                          | erline} |               |               |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| **TOTAL**                | **123** | **64**        | **\           |
|                          |         |               | $44,788,287** |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| For which no management  |         |               |               |
| decision had been made   |         |               |               |
| as of 3/31/98            |         |               |               |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| Less than 6 months old   | 27      | 17            | \$ 8,948,975  |
+--------------------------+---------+---------------+---------------+
| More than 6 months old   | [1      | [12           | [2,691,509    |
|                          | 4]{.und | ]{.underline} | ]{.underline} |
|                          | erline} |               |               |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+
| **TOTAL**                | **41**  | **29**        | **\           |
|                          |         |               | $11,640,484** |
+--------------------------+---------+---------------+---------------+
|                          |         |               |               |
+--------------------------+---------+---------------+---------------+

####### Management Decisions on Audit Reports with Financial Recommendations

Tables 2 and 3 present the audits identified in Table 1 as containing
financial recommendations by category (funds to be put to better use or
questioned costs).

**TABLE 2. MANAGEMENT DECISIONS ON OIG AUDITS WITH**

**RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE**

+----------------------------+--------------------+--------------------+
|                            | **No. of**         | **Financial**      |
|                            |                    |                    |
|                            | **Reports**        | *                  |
|                            |                    | *Recommendations** |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| For which no management    |                    |                    |
| decision had been made as  |                    |                    |
| of 10/1/97                 |                    |                    |
+----------------------------+--------------------+--------------------+
| Less than 6 months old     | 27                 | \$13,650,936       |
+----------------------------+--------------------+--------------------+
| More than 6 months old     | 16                 | 4,710,607          |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| Reports issued this period | [30]{.underline}   | [16,28             |
|                            |                    | 6,431]{.underline} |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| **TOTAL**                  | **73**             | **\$34,647,974**   |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| For which a management     |                    |                    |
| decision was made during   |                    |                    |
| the reporting period       |                    |                    |
+----------------------------+--------------------+--------------------+
| Recommendations agreed to  |                    |                    |
|                            |                    |                    |
| by management based on     |                    |                    |
|                            |                    |                    |
| proposed                   |                    |                    |
+----------------------------+--------------------+--------------------+
| \- management action       | \-                 | \$27,108,551       |
+----------------------------+--------------------+--------------------+
| \- legislative action      | \-                 | \-                 |
+----------------------------+--------------------+--------------------+
| Recommendations not agreed | [-]{.underline}    | [85                |
|                            |                    | 4,130]{.underline} |
| to by management           |                    |                    |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| **TOTAL**                  | **49**             | **\$27,962,681**   |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| For which no management    |                    |                    |
| decision had been made as  |                    |                    |
| of 3/31/98                 |                    |                    |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| Less than 6 months old     | 12                 | \$ 3,993,784       |
+----------------------------+--------------------+--------------------+
| More than 6 months old     | [12]{.underline}   | [2,69              |
|                            |                    | 1,509]{.underline} |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+
| **TOTAL**                  | **24**             | **\$ 6,685,293**   |
+----------------------------+--------------------+--------------------+
|                            |                    |                    |
+----------------------------+--------------------+--------------------+

**TABLE 3. MANAGEMENT DECISIONS ON OIG**

**AUDITS WITH QUESTIONED COSTS**

+---------------------------+---------------------+--------------------+
|                           | **No. of**          | **Questioned**     |
|                           |                     |                    |
|                           | **Reports**         | **Costs**          |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| For which no management   |                     |                    |
|                           |                     |                    |
| Decision had been made    |                     |                    |
|                           |                     |                    |
| as of 10/1/97             |                     |                    |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| Less than 6 months old    | 5                   | \$ 5,892,985       |
+---------------------------+---------------------+--------------------+
| More than 6 months old    | 0                   | 0                  |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| Reports issued this       | [15]{.underline}    | [15,88             |
| period                    |                     | 7,812]{.underline} |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| **TOTAL**                 | **20**              | **\$21,780,797**   |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| For which a management    |                     |                    |
|                           |                     |                    |
| Decision was made during  |                     |                    |
|                           |                     |                    |
| the reporting period      |                     |                    |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| Disallowed costs          | \-                  | \$16,472,104\*     |
+---------------------------+---------------------+--------------------+
| Costs not disallowed      | [-]{.underline}     | [1,85              |
|                           |                     | 1,958]{.underline} |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| **TOTAL**                 | **15**              | **                 |
|                           |                     | \$18,324,062\*\*** |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| For which no management   |                     |                    |
|                           |                     |                    |
| Decision had been made    |                     |                    |
|                           |                     |                    |
| as of 3/31/98             |                     |                    |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| Less than 6 months old    | 5                   | \$ 4,955,191       |
+---------------------------+---------------------+--------------------+
| More than 6 months old    | [0]{.underline}     | [0]{.underline}    |
+---------------------------+---------------------+--------------------+
|                           |                     |                    |
+---------------------------+---------------------+--------------------+
| **TOTAL**                 | **5**               | **\$ 4,955,191**   |
+---------------------------+---------------------+--------------------+
| *\*\$4,437,588 of this    |                     |                    |
| amount was recovered in   |                     |                    |
| civil settlements, as     |                     |                    |
| reported in Table 5.*     |                     |                    |
|                           |                     |                    |
| *\*\*Includes \$1,498,456 |                     |                    |
| that management decided   |                     |                    |
| to seek that exceeded     |                     |                    |
| recommended amounts.*     |                     |                    |
+---------------------------+---------------------+--------------------+

**Investigative Workload**

The OIG opened 162 investigative cases and closed 157 cases during this
period. In addition, the OIG received and evaluated 70 complaints and
allegations from sources other than the Hotline that involved GSA
employees and programs. Based upon our analyses of these complaints and
allegations, OIG investigations were not warranted.

**Referrals**

The OIG makes criminal referrals to the Department of Justice or other
authorities for prosecutive consideration and civil referrals to the
Civil Division of the Department of Justice or U.S. Attorneys for
litigative consideration. The OIG also makes administrative referrals to
GSA officials on certain cases disclosing wrongdoing on the part of GSA
employees, contractors, or private individuals doing business with the
Government.

**TABLE 4. SUMMARY OF OIG REFERRALS**

  ----------------------- ----------------------- -----------------------
                                                  

  **Type of Referral**    **Cases**               **Subjects**

                                                  

  Criminal                24                      57

  Civil                   12                      18

  Administrative          [91]{.underline}        [167]{.underline}

                                                  

  **TOTAL**               **127**                 **242**

                                                  
  ----------------------- ----------------------- -----------------------

In addition, the OIG made 13 referrals to other Federal activities for
further investigation or other action and 31 referrals to GSA officials
for informational purposes only.

**Actions on OIG Referrals**

Based on these and prior referrals, 12 cases (24 subjects) were accepted
for criminal prosecution and 8 cases (13 subjects) were accepted for
civil litigation. Criminal cases originating from OIG referrals resulted
in 8 indictments/informations and 7 successful prosecutions. OIG civil
referrals resulted in 8 cases being accepted for civil action and 4 case
settlements. Based on OIG administrative referrals, management debarred
33 contractors, suspended

17 contractors, and took 7 personnel actions against employees.

**Monetary Results**

Table 5 presents the amounts of fines, penalties, settlements,
judgments, and restitutions payable to the U.S. Government as a result
of criminal and civil actions arising from OIG referrals.

In addition, the OIG identified \$1,398,188 for recovery during the
course of its investigations, predominately from seizure of diverted
Federal surplus property.

**TABLE 5. CRIMINAL AND CIVIL RECOVERIES**

  ------------------------------ -------------------- -------------------
                                                      

                                 **Criminal**         **Civil**

                                                      

  Fines and Penalties            \$344,263            \$ -

  Settlements and Judgments      \-                   4,437,588\*

  Restitutions                   [-]{.underline}      [-]{.underline}

                                                      

  **TOTAL**                      **\$344,263**        **\$4,437,588**

  *\*This amount is reportable                        
  pursuant to section 5(a)(8) of                      
  the Inspector General Act as                        
  management decisions to                             
  disallow costs. See Table 3.*                       
  ------------------------------ -------------------- -------------------