AUDIT RESULTS

Details

the project. We believe this action meets the intent of our
recommendation.

In response to our fifth recommendation, ATF stated that all identified
COTRs have received both the basic and any appropriate refresher
training. The Acquisition and Property Management Division is
continually training its contracting personnel, with 14 of 24 having had
all of the Department of the Treasury required training courses for their
grade levels. Each of the remaining 10 contracting personnel are
scheduled to complete at least one required training course this fiscal
year. Also, ATF will discuss the OIG report during the next Acquisition
Branch meeting and the next COTR Refresher training.

We believe the above actions meet the intent of our recommendations
and should help to improve the acquisition process and monitoring of
contractors. Regarding the first recommendation, ATF should provide
us a copy of the Policy and Procedure Memorandum when it is issued.
Regarding the third recommendation, ATF should provide us a document
that describes the methods ATF will use to periodically verify that
employees approving receiving reports and invoices have authority to do
so. Regarding the fourth recommendation, we believe that ATF should
require an approval for payment from both the program office and
COTR, in cases where the COTR is not from the program office that had
requested the product or service. The dual approval would ensure that
the program office is an active participant in the acquisition process and
is satisfied with progress of delivery and the quality of the product or
service.

ATF employees did not always follow required procedures in acquiring
goods and services, and in monitoring contractors’ work. For 15 of 20
procurement actions that we reviewed, employees did not follow
procedures in at least one of the contracting phases of:

(1) pre-solicitation and award, (2) contract modifications, (3) contract
monitoring, and (4) inspection and acceptance of goods and services.
The 15 procurement actions were valued at $4,837,952. Employees
did not comply with requirements because they either ignored or
were unfamiliar with requirements. Also, contracting officer and
other supervisory reviews were insufficient to detect or prevent the
discrepancies. These discrepancies increase the risk that ATF will
either not obtain goods and services at the optimum cost, or will not

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 13
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2
Page 6 of 10

MANAGEMENT RESPONSE

-6-

Assistant Inspector General for Audit

Acquisition Branch meeting and the next COTR Refresher
Training. Relevant information from the final version of
the report will be provided to all ATF contracting
officers, procurement analysts, and contracting officers’
technical representatives.

FINDING 3: ATF NEEDS TO RESOLVE INVENTORY DISCREPANCIES AND
MAINTAIN ACCURATE PROPERTY RECORDS.

RECOMMENDATION: Resolve inventory discrepancies and have
Office of Inspection investigate, if appropriate.

We concur with the intent of the recommendation. The
Management Directorate will work with the Offices of
Science and Technology (OST) and Inspection to address a
corrective action for the remaining property.

RECOMMENDATION: Funding is provided for the Financial
Resources Desktop system, “FReD” to complete enhancements
of the Property System.

We concur with the recommendation. The FReD system has a
fully functional receiving report that meets the
requirements of the applicable JFMIP Federal financial
system standards. Since payment of vendor invoices
requires the existence of a receiving report in FReD, ATF
is assured that receiving reports will be filed before a
payment is made. ATF standard business procedures are
being promulgated which require that the identity of the
person taking receipt of the goods or services be annotated
in the description field of the receiving report. The FReD
system permits the electronic attachment of notes and
documents to the receiving report which then becomes a
permanent part of the financial transaction. Where
applicable, detailed documentation as to performance and/or
condition of goods and services can be attached to the
referenced transaction. Adequate funding will be made
available to develop enhanced reports for Property and Fleet
Management review purposes.

RECOMMENDATION: Complete enhancements to the Property
System to allow property custodians to access property
information to generate property receipts; ensure manual
system is followed until system enhancements are completed.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 34
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2
Page 2 of 10

MANAGEMENT RESPONSE

-2-

Assistant Inspector General for Audit

FINDING 1: CONTROLS OVER YCGII FUNDS NEED ENHANCEMENT.

RECOMMENDATION: YCGII Director (a) receives formal
authority to review and approve uses of funds and
(b) develops spending plans and expenditure reports.

We concur with the recommendation. A memorandum
establishing the responsibilities of the Director, ¥CGII
has been prepared and a draft is attached. In fiscal year
2000, the YCGII Director and his staff have worked closely
with the Budget Office to establish spending plans and
allocation levels for each directorate. These allocations
have been fully reviewed by the Bureau’s Resource
Management Steering Committee and appropriate expectations
have been set for utilization and accounting for these
Congressionally earmarked funds. The YCGII spending plans
are fully reflected in the Budget Office’s allocation of
funds to each directorate.

The FReD system has the capability to generate program-
specific executive summary reports, providing an on-line
summary of key financial and performance data. Once this
feature is fully implemented, expenditures of these funds
will be reviewed on a monthly basis by the Bureau's
Strategic Leadership Team. For the interim, we have used
the practice of implementing Bureau-wide coordinating
efforts and review of earmarked funding.

RECOMMENDATION: Unliquidated obligations outstanding over
one year are properly reviewed.

We concur with the recommendation and review of all open
obligations pertinent to YCGII funding and ensure
appropriate deobligations where necessary. The $292,270 in
open obligations identified by the OIG as requiring further
review will be validated, deobligated where appropriate and
documentation will be forwarded to the OIG as requested.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 30
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 3
MAJOR CONTRIBUTORS TO THIS REPORT

Roberta N. Rickey Director
Robert K. Bronstrup Audit Manager
Aldon Hedman Auditor
Annette Dunn Auditor
Kathleen Hyland Auditor
Claire Schmidt Auditor
OIG-00-087 —_ Review of the Bureau of Alcohol, Tobacco and Firearms Page 39

Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Activity Total Funds Obligated

Printing of an Illegal Firearms

Trafficking Guide $114,650
Computer Server and related items 96,389
Academic Research 74,000
Computer Software 6,336
Miscellaneous investigative equipment 895
Total $292.270

In an OIG report on ATF’s unliquidated obligations (OIG-00-012,
November 3, 1999), the OIG found that ATF had established policies
and procedures for conducting semiannual reviews of unliquidated
obligations. ATF, however, did not properly identify all amounts
that should have been deobligated during its latest review. In its
response to the audit, ATF explained that a new financial system,
FReD, will further enhance the controls over the unliquidated
obligations review. FReD will place the responsibility of
deobligations with each program office, which will perform monthly
reviews.

At our exit conference and in subsequent discussions, ATF officials
provided us with comments on actions that they are taking to ensure
that the unliquidated obligations are valid. We believe these actions
will help to ensure YCGII achieves its objectives. For obligations
which are no longer valid, officials should ensure that the appropriate
amounts are deobligated. They should then determine whether these
amounts can be used again for other YCGII activities.

e Projectors Not Distributed Timely
In October 1998, ATF purchased 29 projectors at a cost of $136,909
for instructors to use to teach agents how to identify guns for tracing.
We located the unused projectors in a closet in May 1999, during our
inventory of equipment that had been purchased with YCGII funds.
Employees explained that the projectors could not be used until a

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 7
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

time to perform all of the COTRs duties because of their
responsibilities to manage these projects. As a result, ATF has less
assurance that it received and paid only for the services required by
the contract.

= Performance Reporting

For two of four ATF issued contracts, COTRs ignored or overlooked
the requirement to provide quarterly performance reports to
contracting officers. For example, on a $15 million contract, the
COTRs did not submit quarterly performance reports for over a year.
Furthermore, the COTR did not provide the quarterly reports even
though the contracting officer sent a follow-up letter to the COTR
during the audit. When the COTR does not provide the contracting
officer with performance reports, the contracting officer is not able to
monitor the project as effectively. For example, the contracting
officer on this contract advised us that he was unsure of the actual
work performed on one $185,000 delivery order.

The Division Chief stated that, during the audit, ATF began
implementing the National Institutes of Health Contractor
Performance System to provide more extensive information and
annual reports on contractor performance. ATF will require COTRs
to prepare annual performance reports for contracts over $100,000.
This action should help strengthen contract monitoring.

= Approving Payments to Contractors

Parts I and IV of the COTR Handbook require the COTR to review
the contractor’s invoices for accuracy and to certify acceptance of the
contractor’s work. Contrary to this requirement, COTRs did not
review and approve invoices for payment on two contracts. For one
contract, the COTR did not approve 15 invoices totaling $118,000.
In this instance, the project leader approved the invoices but did not
keep a detailed record of the hours worked by the contractor to help
verify the accuracy of the invoices. In another instance, neither the
COTR nor the project leader approved a $35,572 invoice. Asa
result, ATF had less assurance that the work was accurately billed
and the work is satisfactory.

In our review of invoices we also found that the Financial
Management Division (FMD) lacked a list of COTRs authorized to

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 17
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2
Page 7 of 10

MANAGEMENT RESPONSE

-7-

Assistant Inspector General for Audit

We concur with the recommendation. The Materiel Management
Branch (MMB) developed a utility program using Microsoft
Access that downloads property records from Property Plus
(PPLUS) and creates property issue receipt cards. The
Property and Fleet Management Section (PFMS) has installed
this utility program at the ATF Academy, Louisville,
Nashville, the Acquisition and Property Management

Di ion, Headquarters divisions in the Office of Training
and Professional Development, and Investigations Division.
As MMB continues to make field visits the utility will
continue to be installed.

We have implemented a professional certification program
for the Bureau’s property management professionals. A
total of 15 employees from the Acquisition and Property
Management Division participated in a four-day training
seminar resulting in 14 of 15 employees being recognized at
one of three professional property certification levels.
ATF was recognized by the Department’s Director of Asset
Management for this initiative, and is one of a very small
number of Federal agencies with a certification program of
this nature.

Another aspect of this training emphasis is a program of
semiannual meetings with Headquarters (HQ) custodial
officers. In this new program, HQ custodial officers
receive training on different aspects of their
responsibilities during these meetings.

RECOMMENDATION: Complete actions to address Office of
Inspection (OI) recommendations to improve controls over
property.

ATF’s OI conducted follow-up inspection during the week of
May 24, 1999. OI found that the recommendations to improve
property controls had been instituted and assurance of this
was provided to the Director by the attached OI memorandum.

The OI memorandum is excluded because of its length. It indicated that the OI
recommendations (listed on page 24 of the OIG report) were fully implemented.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 35
Expenditures For The Youth Crime Gun Interdiction Initiative


EXECUTIVE DIGEST

Audit Results

To accomplish our review we evaluated expenditure, contracting and
property procedures, and other records pertinent to YCGII. We
discussed YCGII activities with ATF officials responsible for
administering YCGII and we interviewed officials from the Treasury
Executive Office for Asset Forfeiture (EOAF). We also performed a
limited inventory of equipment purchased for YCGII. The scope of this
review covered all funds received for the YCGII program since its
inception through FY 1998.

ATF's finance files showed no material error in the recording of the
amount of payments made for YCGII from inception through FY 1998.
However, certain obligations and expenditures were not used efficiently
and may not have supported YCGII activities. Consequently, not all
YCGII funds were used to their maximum benefit. In part, these
conditions occurred because (1) certain accounting procedures were not
followed, and (2) a YCGII Director had not been appointed prior to FY
1999. In FY 1999, ATF appointed a YCGII Director who initiated steps
to help ensure appropriated funds are used to maximum benefit.
Providing the YCGII Director with formal authority to review and
approve all proposed YCGII expenditures would further enhance the
YCGII Director’s role.

Procurement of goods and services for YCGII and monitoring of
contractor activities, were not always in accordance with either Treasury
or Federal Acquisition Regulations (FAR) requirements. This occurred
because employees ignored or were not familiar with these requirements
for acquiring goods and service from contractors. Further, supervisory
reviews of employees’ procurement activities were not always adequate.
As a result, there is an increased risk that ATF will not (a) obtain goods
and services in the most cost effective manner, or (b) meet its program
need in a timely manner.

Property purchased with YCGII funds totaling $119,977, could not be
located at ATF offices during our audit because property records were
incomplete or inaccurate. Consequently, there is a great risk that
property could be misplaced, lost, stolen, or used for purposes other than
for YCGII. Additionally, management has less assurance that it has
accurate financial management information to help make informed
decisions about future funding and oversight of YCGII activities. ATF

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms _ Page ii
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 1

ABBREVIATIONS __ _
ATF Bureau of Alcohol, Tobacco and Firearms
CFO Chief Financial Officer

COTR Contracting Officers Technical Representative
DIA Defense Intelligence Agency

EOAF Executive Office for Asset Forfeiture

FAR Federal Acquisition Regulations

FReD Financial Resources Desktop System

FFL Federal Firearms Licensee

FMD Financial Management Division

FTS Firearms Tracing System

FY Fiscal Year

ISD Information Services Division

IT Information Technology

NTC National Tracing Center

Ol Office of Inspection

OIG Office of Inspector General

OST Office of Science and Technology

PFMS Property and Fleet Management Section
PPMS Personal Property Management System

TFF Treasury Forfeiture Fund

YCGII Youth Crime Gun Interdiction Initiative
OIG-00-087 — Review of the Bureau of Alcohol, Tobacco and Firearms Page 28

Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

fully and timely meet its program needs. The following sections
summarize the discrepancies for each of these phases.

Pre-Solicitation and Award

During this phase, contracting employees (1) perform acquisition
planning, (2) prepare requirements documents, (3) solicit proposals or
offers, and (4) award contracts. As described below, in five
procurements, contracting employees did not comply with either the
FAR or Treasury’s COTR Handbook for these activities.

= Undocumented Allegation

In one instance, a COTR and contracting officer noted in the contract
file that a contractor was not selected in part because the contractor
had allegedly falsified timesheets in a prior project

This contractor had also submitted the
lowest offer, However, the COTR did not
obtain supporting documentation or the name of the individual who
made the accusation. Wo fficials advised us that they had no
record of this contractor falsifying timesheets.

ATF awarded the contract to another contractor for $435,900. The
Chief of ATF Acquisition and Property Management Division
(Division Chief) stated that this contractor was selected because of
greater experience with database administration than the contractor
submitting the lowest offer and not because of the allegation. Our
review of the contract file confirmed that the contractor awarded the
contract had more experience. The file, however, contained an
evaluation of contractors, and a letter to the contractor submitting the
lowest bid, that showed the allegation was a factor in nonselection.
The Division Chief agreed that the COTR did not document the
contract file adequately on the allegation. ATF needs to ensure all
factors used in the selection process are adequately supported. When
a contractor’s offer is excluded without adequate supporting
documentation, it may give the appearance that Treasury is not acting
in good faith.

= Work Started Before ATF Issued Delivery Orders

In five instances, COTRs or other ATF employees allowed contractors to
start work before a contracting officer issued the appropriate delivery order.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 14
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

coms are senses

selected from the program offices would provide greater assurance that
both the program office and ISD will jointly monitor the projects. It
would also provide greater assurance that the projects will fully meet the
needs of the program office for which the project is intended.

Corrective Actions By ATF

The Division Chief discussed the issues in this finding during a
September 1999 meeting with Contract Specialists and Procurement
Analysts. The Chief will also discuss our final report with contracting
officers, Procurement Analysts, and COTRs. It will also be used in the
next COTR Refresher Training. We believe this intended action is
appropriate and ATF should ensure this training is completed.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 20
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

officers must make all contract modifications in writing, including
modifications that extend the time for the contractor to complete work at
no additional cost.

A contract modification was not issued for the redirected work because
the COTR and project leader did not notify the contracting officer that
the contractor had been directed to perform other work. The COTR had
relied on the project leader to monitor the contractor, and did not know
that the project leader directed the contractor to work on the FTS.
Without a modification, the Government lacks assurance that the
contractor’s work on FTS was worth the same amount as work described
in the contract’s original statement of work.

For the procurement actions which involved time extensions, at least one
contracting officer, one project leader, and one COTR believed contract
modifications were not necessary, unless the cost of the work increased.
Without modifications, however, the government may lack recourse if
the contractor’s work is unsatisfactory. The Division Chief later advised
us that on August 13, 1999, ATF amended one of the two contracts to
extend the date for the contractor to complete the work.

Contract Monitoring

In monitoring contracts, the COTR Handbook, Parts I and IV, provides
that COTRs are responsible for (1) monitoring contractor activities,

(2) submitting performance reports to the contracting officer, and

(3) approving payments to the contractors. In four procurements, the
COTRs had not complied with Treasury guidance for at least one of
these three activities.

= COTR Monitoring

In three procurement actions for computer systems, the COTR relied
on the project leader to determine whether the contractor delivered
supplies or performed services required by the contract. The COTR
Handbook requires the COTR to determine that contractor services
conform to technical requirements and to ensure the Government
pays only for the services, materials, and travel authorized and
delivered under the contract. The COTRs explained that they did not
perform all of these activities because (1) the project leader had the
expertise with computerized systems, or (2) the COTR had too many
projects to monitor. Project leaders, however, are unlikely to have

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 16
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2

Page
MANAGEMENT RESPONSE

1 of 10

DEPARTMENT OF THE TREASURY
BUREAU OF ALCOHOL, TOBACCO AND FIREARMS
WASHINGTON, DC 20226

DIRECTOR HAR 3 0 2009

3317

MEMORANDUM FOR: Assistant Inspector General for Audit
FROM: Director

SUBJECT: Draft Audit Report on ATF Expenditures for
the Youth Crime Gun Interdiction Initiative
(¥CGII)

This memorandum is in response to your draft audit report
dated February 1, 2000, concerning expenditures made for
the Bureau of Alcohol, Tobacco and Firearms’ (ATF) Youth
Crime Gun Interdiction Initiative (YCGII). I wish to
compliment you and your staff for the thorough and
professional manner in which this audit was conducted. we
always welcome this type of review that results in
constructive recommendations for improvement in the
services we provide to the public and efficiencies in our
use of the tax dollar.

The report is generally accurate and reflective of the
comments that were made to the Office of Inspector General
(OIG) audit team. Your report provides 3 findings with 11
recommendations. ATF‘’s responses are provided below,
addressed in the order in which the draft presented them.
Generally, we agree with and will implement all
recommendations.

WWW.ATF-TREAS.GOV

903000: TPA

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms
Expenditures For The Youth Crime Gun Interdiction Initiative

Page 29



AUDIT RESULTS

Finding 2. Acquisition Process And Monitoring Of Contractors
Could Be Strengthened

Procurement of goods and services for YCGII and monitoring of contractor
activities were not always in accordance with either Treasury or FAR
requirements. This occurred because employees ignored or were not
familiar with these requirements for acquiring goods and service from
contractors. Further, supervisory reviews of employees’ procurement
activities were not always adequate. As a result, there is an increased risk
that ATF will not (a) obtain goods and services in the most cost effective
manner, or (b) meet its program needs in a timely manner.

Recommendations

We recommended the ATF Director ensure that:

1.

The Acquisitions Division institutes periodic reviews to determine
that (a) contract files contain adequate documentation to support
selection of contractors and contract modifications and (b) employees
adequately monitor procurements.

Program offices are held accountable for submitting requisition
requests within the timeframes required by the Chief Financial
Officer (CFO).

The Financial Management Division ensures (a) FReD provides
information so officials can verify that Contracting Officer's
Technical Representatives (COTR) have approved payments to
contractors and that the delivered items were satisfactory, and (b) the
Finance Branch periodically checks that employees who sign
receiving reports and invoices have authority to do so.

ATF issues and implements formal instructions that COTRs

(a) are selected from the program office receiving the product or
service, and (b) have the experience and technical knowledge for
projects assigned to them.

Acquisitions Division officials complete training to COTRs and
contracting officers to strengthen their adherence with the FAR and
the COTR Handbook.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 11
Expenditures For The Youth Crime Gun Interdiction Initiative


OBJECTIVES, SCOPE AND METHODOLOGY

The Office of Inspector General (OIG) included this review in its Office
of Audit, Annual Plan for FY 1999 because reducing violent crime
committed by young people with firearms has been a priority to the
Administration and Congress. This review is one of three OIG reviews
on ATF activities that are associated with YCGII. The other two
reviews cover ATF’s efforts to (a) redesign its FTS and (b) work with
other Federal, State, and local law enforcement agencies to develop and
implement investigative and prosecutive strategies that target illegal gun
traffickers.

The overall objective of this review was to evaluate ATF’s procedures
and controls over YCGII funds and expenditures. Our specific
objectives were to determine whether ATF:

e accounted for funds received and expended, and that expenditures
were efficiently spent and supported YCGII,

e adhered to Federal and ATF requirements for awarding contracts
and monitoring contractors who provided goods and services for
YCGII; and

e established and maintained accountability over equipment purchased
with YCGII funds.

To accomplish our review, we conducted work at ATF Headquarters
where we interviewed officials and other employees in the (1) Office of
Firearms, Explosives and Arson; (2) Office of Management; (3) Office
of Science and Technology (OST); and (4) Office of Inspection (OI).
We reviewed policies, procedures and records relating to the (a) receipt
and expenditure of funds; (b) acquisition of goods and services; and

(c) controls over property. We judgmentally sampled expenditure
records to determine if expenditures were properly recorded in ATF’s
finance files and that they supported YCGII. To determine the location
of property and its use we performed a limited inventory of YCGII
property at the NTC and at ATF Headquarters. We also obtained
pertinent EOAF reports and discussed YCGII expenditures with EOAF
officials.

Audit work was performed from November 1998 through August 1999.
Our review generally covered YCGII expenditures since the inception of

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 3
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

As a result, of these deficiencies, there is an increased risk that property
has been and will continue to be exposed unnecessarily to waste, fraud,
abuse, and mismanagement. It also means that senior officials have less
assurance that they have accurate financial management information to
help make informed decisions about future funding and oversight of the
YCGII. Additionally, without a financial system capable of maintaining
property accountability on an ongoing basis, accounting for the
acquisition of property requires more costly and time-consuming manual
processes. Because manual processes are inherently prone to error,
strong internal controls are needed to ensure accurate accounting.

Corrective Actions Initiated By ATF

During our fieldwork ATF initiated corrective actions to improve
controls over property. These actions include:

e Development of the PPMS which is an automated property receipt
program. PPMS will allow field property custodians to access
property information and to create computer generated property
receipts. Property custodians will also have the capability of
recording the assignment of property to employees.

e Development of a training course for property custodians that will
cover topics such as property receiving reports, transfer documents,
and property receipts. The first class for property custodians was
held in September 1999. ATF’s goal is to provide the course to all
property custodians over the next 2 years. In addition, 15 employees
in PFMS have recently completed professional certification with the
National Association of Property Managers.

e Issuance of standard operating procedures, in August 1999, to all
supervisors and property custodians for transferring computer
equipment between ATF offices. Additionally, ATF’s Assistant
Director (Management)/CFO issued a memorandum to all
supervisors emphasizing the importance of maintaining property
receipts and submitting receiving reports.

e Development of additional electronic reports in FreD, that will
provide information to PFMS on accountable property that has been
requisitioned and received. Property officials will use these reports

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 26
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

locate 54 items valued at $119,977. Table 2 summarizes the inventory
results and ATF’s status in locating equipment that we could not find.

Table 2
Summary of OIG Physical Property Inventory
Number of _ Cumulative

Description _ Items __|__ Dollar Value
Equipment selected for 274 $1,221,278
inventory by the OIG in May
1999
Equipment not located during 81 $ 260,053
the OIG inventory and
referred to OST for resolution
Equipment not located as of 54 $ 119,977
September 1999

The equipment could not be located because ATF’s property inventory
system and other property records were either incomplete or inaccurate.
The following two sections discuss these issues in more detail.

Data In ATF’s Property Inventory System Was Incomplete

Employees did not record all property purchased with YCGII funds on
ATF’s property inventory system. Since the inception of YCGII, ATF’s
finance system records showed that ATF purchased approximately $1.8
million of property, primarily computer equipment, for YCGII. Table 3
summarizes the discrepancies between the finance records of property
purchased and the property that employees recorded on the property
inventory system.

OIG-00-087 — Review of the Bureau of Alcohol, Tobacco and Firearms Page 23
Expenditures For The Youth Crime Gun Interdiction Initiative


TABLE OF CONTENTS

EXECUTIVE DIGEST .............0ccccccccsccccececcceeeeeceeceeeeceeeeseseeeeenensnseseeeaaneees i
BACKGROUND. ..........000ccccccceceeeesetee eee e acne cece sees seeeeseeeaeneeeetesesennrinneeeese we 1
OBJECTIVES, SCOPE AND METHODOLOGY ..................0.:sceceeeeeeessttseeeeeeee 3

AUDIT RESULTS
Finding 1 Controls Over YCGII Funds Needed Enhancement ..................2e0e 5
Finding 2 Acquisition Process And Monitoring Of Contractors
Could Be Strengthened ............00..c ccc eee eeeeeeeeeeees ee eeee 11

Finding 3. ATF Needs To Resolve Inventory Discrepancies and Maintain

Accurate Property Records .............cceccceesceeeeeececeeeeeeeeeaneeeeeee 21

APPENDICES
Appendix 1 Abbreviations..................cccccscceeces ee eeeeeeeeeeeesaeeeeeseeeeesaneees 28
Appendix 2 Management Response ................::cscseeeeeeeeeeeesuseeeseeeseeeneees 29
Appendix 3. Major Contributors To This Report ...............0.cc:scsseeeeeeeee eens 39
Appendix 4 Report Distribution ........0...... ccc eee ceeeeeeeeeeeeeeeaeeeeeeeeeeeenn ees 40

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms _ Page iv
Expenditures For The Youth Crime Gun Interdiction Initiative


EXECUTIVE DIGEST

procedures require employees to maintain accurate property records but
employees did not follow these procedures. An ATF internal review
also found that employees had not followed these procedures, but
officials had not timely completed actions to implement the review’s
recommendations.

Recommendations and Management Response

Our draft report, issued on February 1, 2000, made 11 recommendations
to enhance ATF’s controls over use of funds, contractors’ work, and
equipment that was purchased for the YCGII program. ATF generally
agreed with and will implement all recommendations. However, ATF
did not include specific information on the timeframes or methods to
complete certain actions. We are requesting ATF to provide us with
documentation on the timeframes and methods to complete the actions.

The details of ATF’s responses and actions initiated to address our
findings and recommendations are contained in the body of this report.
We believe that implementation of these recommendations will help
strengthen ATF’s procedures and controls over funds designated for
YCGII.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page iii
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Management Response and OIG Comments

ATF concurred with the first recommendation and has drafted a Policy
and Procedure Memorandum to address a review of solicitations,
amendments, contracts, and modifications, and associated files. The
directive will also specifically address post award reviews for contract
administration issues that will be accomplished on a sampling basis.

ATF concurred with our second recommendation and stated that
requisitions received after the established deadlines require further review
and approval of the appropriate Assistant Director before they will be
processed. Attention at this level helps ensure that managers can be
directed to improve the efficiency of their annual spending plans. As with
many circumstances involved in running a law enforcement operation,
changing events can often result in actions required outside of normal
timeframes, so a certain degree of flexibility is warranted.

ATF agreed to our third recommendation, and stated that ATF achieves
the approval of payments to contractors for goods or services through the
use of electronic receiving reports. In the FReD system, the program
office requesting the goods or services (in this case the COTR) must have
received, inspected and accepted the goods or services on behalf of the
Government. The COTR approves — through the funds control point — the
entry of an itemized receiving report into the FReD system designating
either full or partial receipt of the goods/services. In the response to
another recommendation, ATF explained that standard business
procedures are being promulgated which require that the identity of the
person taking receipt of the goods or service be annotated in the
description field of the receiving report. Where applicable, FReD permits
detailed documentation as to performance and/or condition of goods and
services to be attached to the referenced receiving report transaction.

In the response to our fourth recommendation ATF stated that while they
concurred with the intent of the recommendation, it would be addressed on
a case-by-case basis. ATF explained that it makes sense to implement
COTR selection changes where the requisite experience and technical
knowledge exist within the program office. However, the Assistant
Directors of Office of Science and Technology and Office of Firearms,
Explosives and Arson have agreed that individuals from either directorate
would be selected on the basis of experience and technical knowledge of

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 12
Expenditures For The Youth Crime Gun Interdiction Initiative


BACKGROUND

analysis of trace and multiple sale records that accounted for 37 percent
of firearms trafficking investigations.

Until FY 1999, start up funds to support YCGII came primarily from the
TFF. These funds were not available for funding full time permanent
employees. During the first two years ATF received about $12 million
from the TFF for YCGII and $1.25 million appropriated by Congress in
FY 1998. These funds were used to help initiate city-based
comprehensive crime gun tracing. Funds were also used to improve the
NTC systems for receiving, responding to, and analyzing trace
information. Additionally, ATF used the funding to obtain services of
independent academic experts. These experts assessed firearms
trafficking patterns and supported ATF efforts in providing accurate
information back to Federal, State, and local law enforcement agencies
about these patterns.

In FY 1999, Congress appropriated $27 million for YCGII. ATF was to
use approximately $16 million of this appropriation to add 162 ATF
agents to field offices to strengthen enforcement efforts of the firearms
laws. ATF was also to use another $11 million to support
comprehensive crime gun tracing. In FY 2000, Congress increased total
funding for YCGII to $51.3 million to expand YCGII to 37 cities. The
Administration's commitment is to expand YCGII to 75 cities within 4
years. An important development for ATF in the year ahead, YCGII
funding will provide ATF field offices with electronic access to Project
LEAD, ATF’s crime gun information system that uses trace data to
produce investigative leads. This step is to support a further increase in
collaboration with State and local law enforcement agencies in
conducting illegal firearm trafficking investigations.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 2
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

approve payments. FMD only had a list of positions authorized to
approve payments. Without a current list of COTRs authorized to
approve payments, unauthorized individuals could approve work or
products that were not ordered or which are unsatisfactory. The
ATF Deputy CFO stated that ATF intends to adjust FReD to help
ensure that employees have current authority to approve payments.

Inspections and Acceptance Responsibilities

The COTR Handbook, Part IV, states that a contracting officer’s final
acceptance of supplies or services concludes contractor performance. If
the contractor’s performance does not meet contract requirements, the
COTR must identify deficiencies and make recommendations to the
contracting officer so that timely remedial action can be taken.

For 11 of 14 procurement actions where final receiving reports were
appropriate, Acquisitions’ files lacked the final receiving report. This
condition occurred, in part, because not all COTRs were aware of the
requirement to send receiving reports to Acquisitions. Without a copy of
the receiving report, Acquisitions has less assurance that the contractor
provided the required goods or services, and that unsatisfactory work is
identified and corrected.

The Division Chief advised us that employees subsequently found 5 of
the 11 missing receiving reports. The Division Chief explained that
employees may not have filed these receiving reports when we made our
review. Further, the Division Chief explained that FReD would have a
receiving report module to help address this issue. In order for ATF to
pay a contractor, FReD will require employees to enter data from the
(1) contractual obligating document, (2) invoice, and (3) receiving
report.

When data from the receiving report is entered into FReD, it will be
considered a part of Acquisitions’ files. Acquisitions will no longer need
a copy of the receiving report because the contracting officer can have
access to FReD and verify data from the receiving report. ATF needs to
ensure FReD includes sufficient data to help Acquisitions employees
verify that COTRs approved contractor payments and that goods and
services are satisfactory. Our review of documentation on FReD did not

find that COTRs were required to enter data to show they approved
receiving reports and payments to contractors. Further the

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 18
Expenditures For The Youth Crime Gun Interdiction Initiative


FINAL AUDIT REPORT ON THE
BUREAU OF ALCOHOL, TOBACCO
AND FIREARMS’ EXPENDITURES
FOR THE YOUTH CRIME
GUN INTERDICTION INITIATIVE

OIG-00-087 May 30, 2000

This report has been reviewed for public dissemination by the Office of Counsel to
the Inspector General. Information requiring protection from public dissemination
has been redacted from this report in accordance with the Freedom of Information
Act, 5 U.S.C. section 552.

Office of Inspector General

ores

United States Department of the Treasury



AUDIT RESULTS

Finding 1.

Controls Over YCGII Funds Needed Enhancement

ATF's finance files showed no material error in the recording of the
amount of payments made for YCGII from FY 1996 through FY 1998.
However, certain obligations and expenditures were not used efficiently
and may not have supported YCGII activities. Consequently, not all
YCGII funds were used to their maximum benefit. In part, these
conditions occurred because (1) certain accounting procedures were not
followed and (2) a YCGII Director had not been appointed prior to FY
1999. In FY 1999, ATF appointed a YCGII Director who initiated steps
to help ensure funds are used to maximum benefit. Providing the YCGII
Director with formal authority to review and approve all proposed
YCGII expenditures would further enhance the Director’s role.

Recommendations

We recommended the ATF Director ensure that:

1. The YCGII Director (a) receives formal authority to review and
approve all proposed uses of YCGII funds and (b) develops spending
plans and expenditure reports for YCGII.

2. Obligations using YCGII funds that the OIG identified as outstanding
for over | year, are reviewed by ATF in accordance with ATF’s new
policy to review unliquidated obligations.

Management Response and OIG Comments

ATF agreed with our first recommendation. The ATF Director stated in
a memorandum dated March 30, 2000, that the YCGII Director, has the
full authority to respond to crosscutting issues relating to YCGII
throughout the bureau. The YCGII Director will propose resource
allocations, initiate long range planning, develop annual program plans,
and perform financial reviews. The YCGII Director will provide
recommendations to the Executive Staff on the most effective use of
YCGII resources, including program planning and field implementation.
Financial reviews will be made using program specific executive
summary reports of key financial and performance data that the Financial
Resources Desktop (FReD) system will generate, once this feature is
fully implemented.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 5
Expenditures For The Youth Crime Gun Interdiction Initiative


OBJECTIVES, SCOPE AND METHODOLOGY

the program in FY1996 through FY 1998. Our audit was conducted in
accordance with Government Auditing Standards issued by the
Comptroller General of the United States, and included such audit tests
that were deemed necessary.

OIG-00-087 _ Review of the Bureau of Alcohol, Tobacco and Firearms Page 4
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2

Page 9 of 10
MANAGEMENT RESPONSE

a — oe

py DEPARTMENT OF THE TREASURY

a, BUREAU OF ALCOHOL, TOBACCO AND FIREARMS

—-_ WASHINGTON, D.c. 20226
pineeror MAR 3 0 2000
903000:HIK

3000

MEMORANDUM TO: Executive Staff
FROM: Director

SUBJECT: Youth Crime Gun Interdiction Initiative
(YCGII) Director Responsibilities

As you are aware, the YCGII is one of the Bureau’s most
visible activities and as such generates strong
interest in the Congress, Administration and press.

The public’s concern for the level of firearms violence
and loss of life among our youth resulted in the
creation of the project. The main focus and goals of
YCGII are:

1. Working with U.S. attorneys and State/local
prosecutors to intensify ATF and local police
efforts to investigate and incarcerate individuals
who illegally traffic in firearms to young people
and ensure that those arrested are prosecuted;

2. In partnership with ATF, ensuring that local police
departments trace all crime guns recovered, and in
Particular, those firearms taken from youths and
juveniles; and

3. Combining the efforts of ATF special agents, local
police, and academic researchers to develop new
methods of mapping illegal firearms trafficking
patterns and practices, especially as these relate
to the illegal trafficking of firearms to youths
and juveniles.

Our efforts have been recognized by the Administration
and Congress, resulting in additional resources
supporting 38 YCGII sites. This equates to just under
10% of the total agency budget for FY-2000. Support

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 37
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Other Property Records Were Not Current

In addition to the errors in the property inventory system, other property
records were inadequate because they did not show the individual
currently in possession of the property. ATF property procedures
require that property issued to employees be accounted for by having the
employee receiving the property sign a property receipt. The property
custodians for each office are to maintain the property receipts. When
property receipts are not kept or not kept current, there is inadequate
control over the property.

An ATF official said that property could not be located because
employees did not follow required procedures. This issue along with
other inventory issues had been disclosed in a April 1998 report by OI.
The OI report found that ISD had not:

= conducted a complete inventory of all accountable property;

= reconciled the Master Property Inventory Report with ISD records;
= designated property custodians; and

"prepared many property receipts completely.

The OI report stated that property receipts lacked information such as the
(1) date the property was issued, (2) condition of the property,

(3) signature of the employee receiving the property, and (4) serial
number of the equipment. These deficiencies contributed to the
difficulties in locating property during our inventory.

To correct these deficiencies, OI’s report recommended that (a) a
complete Master Property Reconciliation be conducted shortly after the
reinspection of ISD in December 1998, (b) property custodians be
designated for each office, and (c) property receipts be properly
completed. At the time we completed our fieldwork, ISD had not fully
implemented all of OI’s recommendations. Specifically, ISD had not
performed a complete property inventory.

In response to the OI report, ISD explained it had prepared property
receipts for each ISD employee. However, as noted above, the
difficulties encountered in locating computers during our inventory
indicates that property receipts within ATF remain deficient.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 25
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Table 3
Summary of Property Inventory System Discrepancies
Number of Cumulative

Description Ttems Dollar Value
Property purchased through 1-5-99 INA* $1,831,474
Property not recorded on ATF’s 119 $ 541,261
property inventory system as of
3-25-99 |
Property recorded on ATF’s property 365** $1,235,968**
inventory system as of 3-25-99

*Information Not Available. Financial records did not always show the number of items purchased.
**Items valued at less than $500 are not required to be on ATF’s inventory and are not included in this amount.

For example, the following computer equipment requisitioned by ISD
employees was not listed on the property inventory system:

© 81 of 82 desktop computers ordered on September 30, 1997.
Receiving reports were signed by ISD employees on December 29,
1997, and January 21, 1998. The 81 computers were valued at
$146,448.

e A server costing $326,897. The server was ordered on
September 24, 1997, and the manufacturer’s invoice shows the date
of arrival at ATF as October 3, 1997. The individual, however, who
received the server is unknown because there is no signed receiving
report in the finance file.

ATF property directives require that when offices receive property, they
send a copy of a receiving report to the PFMS so that inventory records
can be updated. The discrepancies occurred when employees or offices
receiving property did not submit receiving reports to PFMS in
accordance with the directives. Employees did not always forward the
reports to PFMS because they believed the final receiving office or the
user of the property should forward the receiving reports. However, the
receiving office also did not notify PFMS upon receipt of the property.
ATF relied on this process because the financial system at the time of
our audit could not electronically alert property officials of property that
had been received.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 24
Expenditures For The Youth Crime Gun Interdiction Initiative


BACKGROUND :

In July 1996, at the direction of the President, ATF initiated YCGTI as
an initiative to strengthen enforcement efforts against crime gun
traffickers who supply firearms to juveniles. At the time YCGII began,
homicides committed by young people with firearms had nearly tripled
since 1985, and other types of gun related violence were on the rise.
The illegal sources of firearms to juveniles to commit these crimes had
come from intrastate and interstate trafficking, stolen firearms
trafficking, and thefts from Federal Firearms Licensees (FFL).

Upon implementation, YCGII became a focused component of ATF’s
Illegal Firearms Trafficking Project which seeks to identify the most
prolific illegal traffickers of firearms to violent criminals as well as
youths and juveniles. Initially, YCGII was implemented in 17 pilot cities
and was expanded to 27 cities by February 1999. In order to identify
and stop the illegal sources of firearms to juveniles and youths in these
cities, YCGII has the following primary goals:

e To ensure that every recovered crime-gun in each city is traced
through ATF’s National Tracing Center (NTC).

e To conduct analysis on the resulting crime gun information to
determine the community-wide patterns relating to recovered
firearms.

e To produce a publication of crime gun analysis for use by Federal,
State, and local law enforcement at YCGII cities to develop
collaborative strategies and enforcement activities against illegal
sources of crime guns.

To help achieve these goals, ATF’s NTC works with law enforcement
agencies, firearms manufacturers, and FFLs to trace and determine the
manufacturing and initial sale history of firearms recovered by Federal,
State, and local law enforcement agencies. The trace information
developed by the NTC, provides ATF and the other law enforcement
agencies with crucial leads against gun traffickers. In its first YCGII
Trace Report, ATF reported that 37,000 crime guns from 17 cities were
analyzed. In its second YCGII Trace Report, ATF analyzed 76,000
crime gun traces from the 27 participating cities. A related Performance
Report on the YCGII program shows that the most important factor
leading to trafficking investigations, involving juveniles and youth, was

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 1
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

In one instance, work began on October 1, 1997, but the contracting officer
did not issue a $185,000 delivery order for this work until March 18, 1998.
In the other four instances, delivery orders were issued from 1 to 2 months
after the contractor began work. The COTR Handbook, Part I, provides that
employees are prohibited from directing a contractor to begin work prior to
the contract award date. Commitments made by employees other than
contracting officers allowing a contractor to begin work before a delivery
order is issued can result in appeals or disputes over work and possible
monetary loss to the firm involved.

Office of Science and Technology (OST) officials explained that the
contract for the $185,000 delivery order was for work on a computer
system that continued from 1 year to the next and could not be
interrupted. However, in these types of contracts the Division Chief
said that requisition requests must be received more timely (e.g.
April/May) so that recurring contracts for the next fiscal year can be
prepared timely. The Division Chief re-emphasized that when
requisitions and related contracts are delayed, affected contractors have
the right to stop work. In the past, contractors have threatened to
cancel or close a contract because contracts had not been issued timely.

In a February 25, 1999 memorandum, the Assistant Director
(Management)/CFO requested that ATF offices submit requisitions
by certain dates to ensure timely processing. As of October 8, 1999,
however, the Division Chief stated that ATF had 617 procurements
for FY 2000 that lacked contracts because ATF offices had not
submitted requisitions timely. These procurements involved
continual services such as antenna or other maintenance services.
Accordingly, ATF needs to ensure offices submit requisitions on
time.

Contract Modifications

In three procurement actions, contract modifications were not prepared
when the contractor was either assigned work different than that stated in
contract documents, or the date to complete the work was extended.
Most significantly, a contractor was awarded a contract valued at
$435,900 to work on a computer system that supports ATF’s
administration of alcohol permits. After ATF awarded the contract, an
Information Services Division (ISD) official directed the contractor not
to work on this system but instead to work on the Financial Tracing
System (FTS). The COTR Handbook, Part IV, provides that contracting

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 15
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2
Page 4 of 10

MANAGEMENT RESPONSE

-4-

Assistant Inspector General for Audit

Regulation (DTAR) are returned for decommitment and
redirection of funding.

As to requisitions for recurring services as described by
the OIG, ATF is encumbered by financial and procurement
system issues which have hampered the timely completion of
delivery orders at the beginning of each fiscal year.
ATF’s interfaced financial and procurement systems enforce
the provisions of Federal appropriations law as it regards
availability of funds as to time. In the absence of a
valid appropriation in the financial system, we are unable
to process requisitions for supplies or services through
the financial system in advance of the fiscal year in which
they are required. We are continuing to work with the OIG
to determine a suitable method for entering “anticipated -
budget authority” into the financial system to permit the
early processing of recurring service requisitions.

RECOMMENDATION: Financial Management Division (FMD) ensures
accounting system provides information to verify
Contracting Officers’ Technical Representatives (COTR) have
approved payments and the Finance Branch periodically
verifies COTR signature authority.

We concur with the recommendation that the Financial
Resources Desktop (FReD) system should enforce proper
verification of the receipt of goods or services. ATF
achieves the approval of payments to contractors for goods
or services through the use of electronic receiving
reports.

In the FReD system, three events must occur before a
payment can be released to a vendor:

1. A valid itemized purchase order must have been issued
by the Acquisition and Property Management Division and
the resulting obligation must be recorded in FReD;

2. A valid itemized invoice must have been received by the
Finance Branch and recorded in FReD; and

3. The program office requesting the goods or services (in
this case the COTR) must have received, inspected and
accepted the goods or services on behalf of the
government. The COTR approves—through the funds

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 32
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2
Page 6 of 10

MANAGEMENT RESPONSE

~5-

Assistant Inspector General for Audit

control point—the entry of an itemized receiving
report into the FReD system designating either full or
partial receipt of the goods/services. A payment will
not and cannot be issued from FReD until all three of
events are recorded in FReD.

The responsibility for maintaining proper supporting
documentation of the receipt of goods or services remains
with the program office/COTR. The responsibility for
causing a receiving report to be entered rests with the
program office/COTR.

RECOMMENDATION: COTR’s are selected from the office
receiving the product and have experience and technical
knowledge.

While we concur with the intent of the recommendation, this
will be addressed on a case-by-case basis. It makes sense
to implement COTR selection changes where the requisite
experience and technical knowledge exist within the program
office. The Assistant Directors of the Office of Science
and Technology and the Office of Firearms, Explosives and
Arson have agreed that, exclusive of the place of
employment, individuals from either directorate would be
selected on the basis of experience and technical knowledge
of the project. The Bureau’s CFO supports this approach,
as well.

RECOMMENDATIO) COTR training must be completed and
contract officers strengthen adherence to the FAR and COTR
Handbooks.

We concur with the recommendation. All identified COTR’s
have had both the basic and any appropriate refresher
training. The Acquisition and Property Management Division
is continually training its contracting personnel, with 14
of 24 having had all of the Department of the Treasury
required training courses for their grade levels. Each of
the remaining 10 contracting personnel have been scheduled
to complete at least one required training course this
fiscal year. When the final version of the report is
released, it will become the training portion of the next

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 33
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Finding 3.

ATF Needs To Resolve Inventory Discrepancies And
Maintain Accurate Property Records

Property purchased with YCGII funds totaling $119,977 could not be
located at ATF offices during our audit because property records were
incomplete or inaccurate. Consequently, there is a great risk that
property could be misplaced, lost, stolen, or used for purposes other than
for YCGII. Additionally, management has less assurance that it has
accurate financial management information to help make informed
decisions about future funding and oversight of YCGII’s activities. ATF
procedures require employees to maintain accurate property records but
employees did not follow these procedures. An ATF internal review
also found that employees had not followed these procedures, but
officials had not timely completed actions to implement the report’s
recommendations.

Recommendations

We recommended the ATF Director ensure that officials:

1. Resolve inventory discrepancies found by the OIG, during its review,
and update the property inventory system and Property Issue Receipts
(property receipts). If significant discrepancies exist, Office of
Inspection (OI) should perform an investigation.

2. Ensure that funding is provided to complete enhancements to FReD
so it provides receiving reports and other information to the Property
and Fleet Management Section (PFMS) as well as to finance officials.

3. Complete enhancements to the Personal Property Management
System (PPMS), which will allow property custodians to access
property information to generate property receipts. ATF officials
should ensure that the manual system for property receipts is
followed until the enhancements to the PPMS are completed.

4. Complete actions to address recommendations contained in the OI
report concerning controls over property.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 21
Expenditures For The Youth Crime Gun Interdiction Initiative


EXECUTIVE DIGEST

Overview

In July 1996, the Bureau of Alcohol, Tobacco and Firearms (ATF), at
the direction of the President, initiated the Youth Crime Gun Interdiction
Initiative (YCGID) to strengthen enforcement efforts against gun
traffickers who supply firearms to juveniles. At the time YCGII began,
homicides committed by young people with firearms had nearly tripled
since 1985. Seventeen cities were initially included in the initiative that
uses ATF’s Firearms Tracing System (FTS) to trace every gun recovered
inacrime. This trace information provides ATF and other law
enforcement agencies with crucial investigative leads. ATF and the
agencies are to work jointly using these leads to develop investigative
and prosecutive strategies that target gun traffickers supplying firearms
to juveniles.

Initial funding for YCGII came from the Treasury Forfeiture Fund
(TFF). For Fiscal Year (FY) 1999, Congress appropriated $27 million
for YCGII. For FY 2000, Congress increased total funding for YCGII
to $51,320,000. Accordingly, effective use and control over funds
appropriated for YCGII is important to help ensure YCGII achieves
maximum benefits.

The Office of Inspector General (OIG) included a review of YCGII in its
Office of Audit, Annual Plan for FY 1999 because the Administration and
Congress have placed a high priority on reducing violent crime
committed by young people with firearms. This report is one of three
reports on ATF activities that are associated with YCGII and it discusses
ATF procedures and controls over YCGII funds and expenditures. A
second report discusses ATF’s efforts to redesign its FTS. A third
report will address the results that YCGII has achieved.

Objectives, Scope and Methodology

The overall objective of this review was to evaluate ATF’s procedures and
controls over funds designated for YCGII. Our specific objectives were to
determine whether ATF: (1) accounted for funds expended and that
expenditures were efficiently spent and supported YCGII; (2) adhered to
Federal and Treasury requirements for awarding contracts and monitoring
contractors who provided goods and services for YCGII; and (3)
established and maintained accountability over equipment purchased with
YCGII funds.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page i
Expenditures For The Youth Crime Gun Interdiction Initiative


REPORT DISTRIBUTION

Appendix 4

U.S. Department of the Treasury

Office of the Under Secretary of the Treasury for Enforcement

Office of the Assistant Secretary of the Treasury for Management/

Chief Financial Officer

Office of Strategic Planning and Evaluations, Departmental Offices

Office of Accounting and Internal Control, Departmental Offices
Office of Budget, Departmental Offices

Bureau of Alcohol, Tobacco and Firearms

Director

Assistant Director, Office of Inspections

Assistant Director, Science & Technology/CIO

Assistant Director, Management/CFO

Assistant Director, Liaison & Public Information
Assistant Director, Alcohol & Tobacco

Assistant Director, Firearms, Explosives & Arson
Assistant Director, Field Operations

Assistant Director, Training & Professional Development
Chief, Acquisitions & Property Management Division
Deputy Chief, Financial Officer/Financial Management Division
YCGII Director

Office of Management and Budget

Treasury Bureau Chief

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms

Expenditures For The Youth Crime Gun Interdiction Initiative

Page 40


Appendix 2
Page 10 of 10

MANAGEMENT RESPONSE

-2-

Executive Staff

exists for the continued expansion of the program to 75
cities by FY-2003. A project of this scope must
involve all Bureau activities, not just the primary law
enforcement and regulatory mission, but technical,
training, and support functions.

The magnitude of the program requires a central point
of responsibility for project planning, management
review, and reporting. As a result, I previously
established the position of Director, YCGII. Although
this position is in the Office of Firearms, Explosives
and Arson, I intend that the Director, YCGII have the
full authority to respond to crosscutting issues
relating to YCGII throughout the Bureau. The Director,
YCGII will propose resource allocations, initiate long
range planning, develop annual program plans and
perform financial reviews. The Director, YCGII will
provide recommendations to the Executive Staff on the
most effective use of YCGII resources, including
program planning and field implementation.

If you need further information, or have additional

questions, contact Special Agent Terrence P. Austin,
Director, YCGII at (202) 927-8425.

ake, C foudke—

Bradley A. Buckles

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 38
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

contractor completed programming the software, which contains
firearms training material. ATF had also obligated $69,900 to pay
for this programming. Therefore, a total of $206,809 was associated
with the purchase of the projectors. After discussing this issue with
ATF officials, they distributed the projectors and software to the
YCGII field office coordinators at the National Conference for
YCGII Coordinators in November 1999.

e Procurement Practices Associated With 15 Purchase/Delivery Orders
As described in Finding 2, ATF employees had not always followed
required procedures in acquiring products and services and in
monitoring contractors’ work. For 15 of 20 procurement actions that
we reviewed, procedures were not followed in at least one of the
contracting phases of (1) pre-solicitation and award, (2) contract
modifications, (3) monitoring, and (4) inspection and acceptance of
products and services.

e Unaccounted For Equipment
As described in Finding 3, in our inventory of property conducted in

May 1999, we could not find 81 items valued at $260,053. At the
time we completed fieldwork, ATF had found 27 items but still could
not locate 54 items valued at $119,977. The equipment could not be
located because ATF’s inventory system and other property records
were either incomplete or inaccurate.

Federal guidance requires agencies to maintain an effective internal
control structure that will provide reasonable assurance that transactions,
including those related to obligations and costs, comply with applicable
laws and regulations. For example, the Chief Financial Officer’s Act
requires agencies to routinely produce sound cost and performance
information on agency activities. The Office of Management and Budget
has also issued related circulars, including A-11, which provides
guidance on the planning, budgeting and acquisition of capital assets.

The inefficient use of funds was also due to ATF not having a YCGII
Director prior to FY 1999. To address this issue, ATF appointed a
YCGII Director in FY 1999. The Director serves as the principal
advisor to the executive staff on all issues related to YCGII. In general,
the YCGII Director is responsible for organizing and directing YCGII
activities in participating communities nationwide to ensure consistency
in application and accurate evaluation of results.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 8
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Developing detailed expenditure reports and spending plans will further
ensure that the funds Congress specifically designated for YCGII are
spent on priority activities. For example, expenditure reports will better
illustrate to management the efforts and resources devoted to
“...implement a multifaceted regional enforcement strategy within the
Midwest region” as emphasized by Congress for FY 1999. The reports
will assist the YCGII Director in the capacity of principal advisor to the
executive staff on all issues relating to YCGII. Without such reports,
there is an increased risk that funds will not be used in the most effective
and efficient manner, thus reducing the benefits that can be achieved
under YCGII.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 10
Expenditures For The Youth Crime Gun Interdiction Initiative


Page 2

We appreciate the courtesies and cooperation provided to our
auditors during our review. If you wish to discuss this
report, you may contact me at (202) 927-5400, or a member of
your staff may contact Roberta N. Rickey, Director, Program
Audit at (312) 886-6300.

Attachment

cc: James E. Johnson, Under Secretary of the Treasury
for Enforcement

Richard Hankinson, Assistant Director
Office of Inspection


Appendix 2
Page 3 of 10

MANAGEMENT RESPONSE

-3-

Assistant Inspector General for Audit

FINDING 2: ACQUISITION PROCESS AND MONITORING OF
CONTRACTORS COULD BE STRENGTHENED.

RECOMMENDATION: Acquisition Division institutes reviews to
ensure that (a) contract files contain adequate
documentation and (b) employees monitor procurements.

We concur with the recommendation. The Acquisition and
Property Management Division has drafted a Policy and
Procedure Memorandum to address review of solicitations,
amendments, contracts and modifications, and associated
files. The directive will also specifically address post
award reviews for contract administration issues that will
be accomplished on a sampling basis.

RECOMMENDATION: Program offices are accountable for
submitting requisition requests adhering to Chief Financial
Officers’s (CFO) requisitioning time frames.

We concur with the recommendation. On an annual basis, the
CFO issues a memorandum outlining the requirements and
deadlines for submission of requisitions for supplies or
services. This memorandum sets forth time lines for
procurement actions to be completed in full compliance with
all regulations. Requisitions received after the
established deadlines require the further review and
approval of the appropriate Assistant Director before they
will be processed. Attention at this level helps ensure
that managers can be directed to improve the efficiency of
their annual spending plans. As with many circumstances
involved in running a law enforcement operation, changing
events can often result in actions required outside of the
normal time frames, so a certain degree of flexibility is
warranted. Many times, funding for potential exigent
situations must be held until late in the last quarter,
after which funds can be safely directed to other needs.
This helps avoid any over-obligation and ensures lapsing of
the smallest amount of funds possible. Ultimately,
requisitions which can not be processed within the
requirements established by the Federal Acquisition
Regulation (FAR) and Department of Treasury Acquisition

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 31
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

documentation showed that entering key information was optional, such
as (1) the name of the person who received the goods or services, and (2)
condition of the goods when they were received and inspected.

Contracting Officer and Supervisory Reviews Could Be Improved

The deficiencies described above, in part, were also caused by
inadequate post award reviews of contracting files by contracting
officers. Contracting Officers should periodically review the contract
files for deficiencies because they sign contracts and bear legal
responsibility for them. They also ensure competitive sources are
solicited, contract prices are fair and reasonable, and that contractors
meet quality standards. In implementing this process, Acquisitions’
supervisors should periodically check that Contracting Officers are
performing these reviews. Currently, the supervisors only review a
contract file when information is requested on a specific contract.

Selection of COTRs Could Be Enhanced

For two information technology (IT) projects, both the COTRs and
project leaders were from Information Services Division (ISD) and not
the program office for which ISD was developing the projects. The
COTRs and project leaders lacked direct accountability to the program
office for the results of the project. Further, for these two projects the
COTRs stated they relied on the project leader in ISD to monitor the
projects and to ensure the work was satisfactory. ATF officials
acknowledge that the ISD project leaders may lack knowledge of the
activities of the program office for which the project is intended. As a
result, the COTR and project leader when performing their
responsibilities may not be fully responsive to the program office needs.

COTRs and project leaders were selected from ISD because ATF does
not have a formal policy that requires IT projects to have the responsible
COTR assigned from the program office for which the project is
intended. Consequently, for some IT projects, the project leader and the
COTR are from ISD.

The General Accounting Office's Standard for Internal Controls in the
Federal Government provides a specific standard for separation of duties.

It states that “...no one individual should control all key aspects of a
transaction or event.” A policy that would help ensure that COTRs are

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 19
Expenditures For The Youth Crime Gun Interdiction Initiative


DEPARTMENT OF THE TREASURY
WASHINGTON, D.c. 20220

May 30,- 2600

OFFICE OF
INSPECTOR GENERAL

MEMORANDUM FOR BRADLEY A. BUCKLES, DIRECTOR

OF COHOL, TOBACCO AND FIREARMS
FROM: a

benig ant Tnapector General for Audit

SUBJECT: Final Audit Report on the Bureau of Alcohol,
Tobacco and Firearms! Expenditures for the
Youth Crime Gun Interdiction Initiative

This memorandum transmits our final audit report on the
Bureau of Alcohol, Tobacco and Firearms' (ATF) Expenditures
for the Youth Crime Gun Interdiction Initiative (YCGII).

The overall objective of this audit was to determine whether
ATF properly managed, controlled, and used funds that were
received for YCGII. Although ATF finance files showed no
material error in the recording of the amount of payments
made for YCGII, ATF needed to:

e Strengthen controls which will ensure that YCGII funds
are spent in the most effective manner;

e Improve monitoring of procurement and contract oversight
procedures; and

e Resolve inventory discrepancies and maintain accurate
property records.

As a consequence of these conditions, there is an increased
risk that the YCGII will not operate in as effective manner
as possible and that funds appropriated for the program
could be diverted to other activities. Additionally,
without adequate property records there is a great risk that
property could be misplaced, lost, stolen or used for
purposes other than for YCGII. To illustrate, our inventory
of equipment purchased for YCGII and subsequent reviews by
ATF could not locate 54 computers, costing about $120,000.

Our draft report made 11 recommendations to strengthen ATF's
control over funds, procurements, contractors' work, and
equipment that was purchased for the YCGII program. In its
response, ATF generally agreed with our recommendations, and
has initiated and planned actions to address the
recommendations. We believe ATF should establish timeframes
for completing all actions and provide us with documentation
to support completion of actions. ATF's comments have been
incorporated into the report and are included in their
entirety as an appendix to the report.


AUDIT RESULTS

to monitor and follow up with program offices on all accountable
property on order.

Additionally, ISD officials advised us that certain issues identified in
OI’s April 1998 report had been addressed. Specifically, OST has

(1) appointed a property custodian who has been scheduled for training
regarding property controls, and (2) updated property receipts to reflect
all property assigned to employees.

Property officials advised us that enhancements to the PPMS and
continued training to property custodians would be subject to funding
availability. Actions to implement these enhancements and to implement
our recommendations are important to ensuring the proper control over
property. Accordingly, the Director should ensure that funding is
obtained to provide training to property custodians and complete the
enhancements to the PPMS.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 27
Expenditures For The Youth Crime Gun Interdiction Initiative


Appendix 2

Page 8 of 10
MANAGEMENT RESPONSE :
~8-

Assistant Inspector General for Audit

Again, I appreciate the opportunity to provide comment.
Should you need any further information concerning the
contents of this document, please contact Terrence Austin,
YCGII Director, at (202) 927-8425.

Aa fede

Bradley A. Buckles

Attachments

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 36
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Management Response and OIG Comments

Details

ATF concurred with the intent of our first recommendation. The
Management Directorate will work with the Offices of Science and
Technology and Inspection to address a corrective action for the
remaining property.

ATF concurred with our second recommendation. Adequate funding will
be made available to develop enhanced reports for Property and Fleet
Management review purposes.

ATF concurred with our third recommendation. The Materiel
Management Branch had developed a utility program that downloads
property records and creates property issue receipt cards. This utility
program was installed at the ATF Academy, Louisville, Nashville, the
Acquisition and Property Management Division, Office of Training and
Professional Development (Headquarters divisions), and Investigations
Division. As the Materiel Management Branch continues to make field
visits the utility will be installed.

In reply to our fourth recommendation, ATF explained that its Office of
Inspection had conducted a follow-up inspection in May 1999, and found
that recommendations to improve property controls had been instituted.

We believe these actions, when completed, will meet the intent of our
recommendations and should help improve control over property.
Regarding the first recommendation, ATF should establish a timeframe to
complete the corrective action and, upon completion, should provide us a
listing showing the corrective action taken to resolve the discrepancies.
Regarding the third recommendation, ATF should establish a timeframe
for providing the utility program to all ATF offices, and advise us of the
timeframe. Until this program is provided to all offices, ATF should
ensure the manual system for property receipts is followed.

In our inventory of 274 property items, conducted in May 1999, we
could not find 81 items valued at $260,053. All of the unlocated
property was computer equipment that was shipped to OST’s Information
Services Division or the NTC. We provided the inventory results to
ATF officials and they initiated efforts to locate the equipment. At the
time we completed fieldwork, ATF did find 27 items but still could not

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 22
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

Details

1s =

In response to our second recommendation, ATF stated that they
concurred with a review of all open obligations pertinent to YCGII
funding to ensure appropriate deobligations where necessary. The
$292,270 in open obligations that the OIG identified as requiring further
review will be validated and deobligated where appropriate. ATF will
forward documentation on the review results to the OIG.

We believe ATF’s response addresses the issues for both
recommendations. The ATF Director, however, should establish a
timeframe for ATF to provide the program specific reports in the FReD
system, and should advise us of the timeframe. The ATF Director should
also inform us of the timeframe for forwarding the documentation on the
resolution of the $292,270 in open unliquidated obligations.

YCGII obligations and expenditures were not always properly managed.
Table 1 summarizes the issues over the use of YCGII funds.

Table 1
Summary of Expenditure Issues

DESCRIPTION AMOUNT
Unliquidated Obligations Needed Review $292,270
Projectors Not Distributed Timely 206,809
Procurement Practices For 15 Delivery/Purchase 4,837,952
Orders Did Not Follow All Requirements |
Unaccounted For Equipment 119,977
Total $5,457,008

The expenditure issues shown in Table 1 are described in more detail
below.

e Unliquidated Obligations Needed Review
In January 1999, ATF had nine unliquidated obligations for various
YCGII-related expenditures that were a minimum of 14 months old.
ATF needed to review these obligations because of their age. The
obligations were for the following activities or purchases.

OIG-00-087

Review of the Bureau of Alcohol, Tobacco and Firearms Page 6
Expenditures For The Youth Crime Gun Interdiction Initiative


AUDIT RESULTS

The YCGII Director explained various actions to carry out these
responsibilities including the receipt, on an informal basis, of
requisitions on proposed expenditures of YCGII funds. This is a positive
action that should be extended to a formal review and approval authority
over funds earmarked for YCGII activities. Such authority would extend
to funds used by OST to enhance computer systems that support YCGII
because the YCGII Director explained he had authority over YCGII
expenditures for all ATF offices. Our analysis of financial records
showed that 29 percent of YCGII funds received through FY 1998 were
used by OST for software and hardware purchases.

As the YCGII Director activities evolve, preparation of a detailed annual
spending plan and expenditure reports needs to be included to show that
funds have been spent in accordance with the descriptions provided in
ATF’s budget. To illustrate, ATF’s budget documents for FY 1999
stated that funds received for YCGII would be used to support various
activities in the following categories:

e Comprehensive Crime Gun Tracing by State and Local Law
Enforcement;

e Rapid High Volume Crime Gun Tracing by the NTC;
e Enhancements to the NTC Hardware and Software;

e Preparation of Crime Gun Analysis Reports and establishment of
National Crime Gun Information Centers;

e Hiring of Special Agents to investigate traffickers providing firearms
to gangs and juveniles; and

e Training for ATF and State/Local Law Enforcement on Illegal
Firearms Trafficking Investigations.

The YCGII Director has initiated an expenditure report by category that
shows available funds remaining for YCGII. Data for this report is
compiled from accounting records but did not yet reflect reconciliation
actions by the offices allocated resources. ATF should also take action
to have the financial system generate the expenditure report. This action
would eliminate the need to separately compile the report data and would
provide the report more timely.

OIG-00-087 Review of the Bureau of Alcohol, Tobacco and Firearms Page 9
Expenditures For The Youth Crime Gun Interdiction Initiative