OFFICE OF THE 

SECRETARY

Monitoring of Obligation 

Balances Needs 

Strengthening 

FINAL REPORT NO. OIG-13-026-A

JUNE 18, 2013

U.S. Department of Commerce

Office of Inspector General

Office of Audit and Evaluation

FOR PUBLIC RELEASE

OFFICE OF THE SECRETARY 

Monitoring of Obligation Balances Needs Strengthening 

OIG-13-026-A 

WHAT WE FOUND 

The Department’s accounting records contain amounts that can be deobligated. We examined 

a sample of obligations with balances as of December 31, 2011, and identified 49 

obligation balances, totaling $18.4 million, that could have been deobligated. Specifically, 

we found: 

 Original obligation balances could not be verified. We could not confirm the existence 

of, or verify the accurate recording for, 12 original obligations.

 Accounting records did not accurately reflect Department obligations. The Department’s 

accounting records did not always correctly reflect actual obligations because the 

obligations were entered into the accounting system before they were properly 

approved. 

 Bureaus did not know the status of obligation balances. We identified 39 contracts, 111 

grants, and 27 other obligations for which monitoring reports either did not reflect 

any status of their respective obligations or reflected an inaccurate obligation status.

 Obligation balances as of December 31, 2011, could not be verified. Quarterly balances 

for 60 obligations we tested could not be verified from bureau records. 

 Bureaus improperly liquidated contract obligations. Seven contract obligations had been 

improperly liquidated against incorrect fiscal year funding sources. 

Our findings include monetary benefits to the Department—in the form of estimated 

obligations that needed to have been deobligated by December 31, 2011—in the 

amount of $159 million. 

WHAT WE RECOMMEND 

We recommend that the Senior Advisor to the Deputy Secretary Performing 

the Non-Exclusive Duties of the Chief Financial Officer and Assistant Secretary for 

Administration: 

1. Develop a Department-wide initiative related to the timely liquidation, deobligation, 

and closure of unneeded open obligations. 

2. Enhance policies and procedures to include specific, comprehensive guidance for 

the consistent monitoring and deobligation of unliquidated obligation balances, as 

well as ongoing departmental oversight. 

3. Develop guidance and training on the quarterly verification of open obligations. 

4. Investigate each specific instance noted in this report where contract obligations 

may have been liquidated against an incorrect fiscal year funding source or charged 

to the wrong account. 

5. Provide training on the proper methodology for funding invoices of multiple-year 

contracts. 

Report In Brief 

 JUNE 18, 2013

Background 

An obligation is the amount of an 

order placed, contract awarded, 

or service purchased during an 

accounting period, which requires future payment. 

An unliquidated obligation is an 

amount of money that has been 

designated for a specific purpose 

but has not been disbursed. 

Obligations must be liquidated 

within certain time limits. If unobligated funds are not used for 

their original purpose within 

these time frames, the agency is 

required to release the funds for 

other allowable purposes, or, 

depending on restrictions placed 

by Congress, return the money 

to the U.S. Treasury. 

Why We Did This Review 

As of December 31, 2011, the 

Department’s unliquidated obligations exceeded $9.9 billion. Of 

this amount, $147 million in obligations were recorded in fiscal 

year 2006 or earlier. This is particularly important because susceptibility for misuse increases as 

the obligation ages. 

Seventy percent of the Department’s unliquidated obligations 

were incurred by the National 

Oceanic and Atmospheric Administration and National Telecommunications and Information 

Administration. Sixty-two percent of the unliquidated obligations were for grant funding. 

We reviewed the Department’s 

unliquidated obligation balances 

as of December 31, 2011, to 

assess whether the Department 

and bureaus have adequate controls over the management and 

closeout of unliquidated obligations. 
FINAL REPORT NO. OIG-13-026-A 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Contents 

Introduction ....................................................................................................................................................... 1

Objectives, Findings, and Recommendations ............................................................................................. 2

1. The Department’s Accounting Records Contain Amounts That Can Be Deobligated ........... 2

II. Original Obligation Balances Could Not Be Verified ....................................................................... 4

III. Accounting Records Did Not Accurately Reflect Obligations of the Department ................. 5

IV. Bureaus Did Not Know the Status of Obligation Balances .......................................................... 5

V. Obligation Balances as of December 31, 2011, Could Not Be Verified ..................................... 6

VI. Bureaus Improperly Liquidated Contract Obligations ................................................................... 7

Other Matters ............................................................................................................................................... 9

The Department Could Not Use the Acquisition System to Monitor Obligations .................. 9

Acquisition Personnel Are Not Closing Contracts .......................................................................... 9

Summary of Agency Response and OIG Comments ............................................................................. 11

Appendix A: Objectives, Scope, and Methodology ................................................................................ 12

Appendix B: Monetary Benefits .................................................................................................................. 14

Appendix C: Agency Response ................................................................................................................... 15

COVER: Detail of fisheries pediment,

U.S. Department of Commerce headquarters,

by sculptor James Earle Fraser, 1934
FINAL REPORT NO. OIG-13-026-A 1 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

An obligation is the amount of

an order placed, contract

awarded, or service purchased

during an accounting period,

which requires future

payment.

An unliquidated obligation is

an amount of money that has

been designated for a specific

purpose but has not been

disbursed.

Introduction 

As of December 31, 2011, the Department of 

Commerce’s unliquidated obligations exceeded 

$9.9 billion (see table 1). Of this amount, $147 

million in obligations were recorded in fiscal year 

2006 or earlier. This is particularly important 

because susceptibility for misuse increases as 

obligations age. 

Seventy percent of the Department’s unliquidated 

obligations were attributable to the National 

Oceanic and Atmospheric Administration (NOAA) 

and National Telecommunications and Information 

Administration (NTIA). Sixty-two percent of the 

unliquidated obligations were for grant funding. 

Obligations must be liquidated within certain time limits. If obligated funds are not used for 

their original purpose within these time frames, the agency is required to release the funds for 

other allowable purposes or, depending on restrictions placed by Congress, return the money 

to the U.S. Treasury. 

In January 2012, we began this audit of unliquidated obligations that remained open as of 

December 31, 2011. We selected 282 unliquidated obligations for testing, ensuring that at least 

one contract, grant, or other1

 obligation from all bureaus was included in the sample. 

Table 1. Department of Commerce Unliquidated Obligations 

 as of December 31, 2011 (in thousands) 

Bureau

Grant

Balance

Contract

Balance

Other

Balance Total

% of

Total

National Telecommunications and

Information Administration   $3,096,467 $       4,992 $    431,372 $3,532,831 35

National Oceanic and Atmospheric

Administration   1,387,176 913,179 1,214,856 3,515,211 35

Economic Development

Administration   1,175,120 2,262 1,969 1,179,351 12

National Institute of Standards and

Technology   484,672 269,345 33,104 787,121 8

Census 0 306,440 135,239 441,679 4

U.S. Patent and Trademark Office   0 211,353 43,575 254,928 3

Other   12,996 35,419 198,534 246,949 3

   Total   $6,156,431 $1,742,990 $2,058,649 $9,958,070   100

                                                            

1

 The Office of Inspector General’s category of other obligations includes Working Capital Fund and interagency 

and intra-agency agreement obligations. 
FINAL REPORT NO. OIG-13-026-A 2 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Based on our estimate,

approximately 2 percent

of the Department's

December 31, 2011,

open obligations could

be deobligated.

Objectives, Findings, and Recommendations 

We reviewed the Department’s unliquidated obligation balances as of December 31, 2011, to 

assess whether the Department and bureaus have adequate controls over the management and 

closeout of unliquidated obligations. 

Our audit identified the following: 

 $18.4 million in funds that need to be deobligated 

 original obligation balances that could not be verified 

 obligations recorded in accounting records before 

becoming valid 

 ineffective bureau monitoring and obligation status reporting 

 active obligation balances that could not be verified 

 improperly liquidated contract obligations 

We concluded that the Department needs stronger internal controls and policies and 

procedures to ensure that bureau obligations are adequately monitored and deobligated when 

appropriate. Weaknesses include inconsistent bureau policies and processes and inadequate 

bureau monitoring activities. 

We performed this audit by obtaining detailed obligation data files from each of the 

Department’s 13 bureaus. This audit was conducted under the authority of the Inspector 

General Act of 1978, as amended, and Department Organization Order 10-13, dated August 

31, 2006. We conducted this audit in accordance with generally accepted government auditing 

standards. Details on the scope and methodology of our audit work are provided in appendix 

A. Appendix B contains monetary benefits that can be derived from this audit. 

1. The Department’s Accounting Records Contain Amounts That Can Be 

Deobligated 

As noted in table 2, we examined a sample of 282 obligations with balances as of December 

31, 2011, and identified 49 obligation balances, totaling $18.4 million, that should have been 

deobligated. Table 3 summarizes the testing results. Based on these results, we estimated 

that the Department’s obligation balance of $9.96 billion on December 31, 2011, included 

approximately $159 million in amounts that can be deobligated.2

 These amounts represent 

our estimate of open obligations that would not be spent for their originally intended 

purpose. As described below, obligations remained open because bureaus did not effectively 

monitor and verify the status of these amounts. As a result, these amounts could not be 

used for other allowable purposes or returned to the U.S. Treasury. 

                                                            

2

 $159 million is the lowest value in the estimated confidence interval (95 percent confidence). 
FINAL REPORT NO. OIG-13-026-A 3 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Table 2. Total Obligations Tested and Amounts That Can Be Deobligated 

 Total Obligations Tested Amounts That Need to Be

Deobligated

Obligation Type   No. of

Obligations

Amount

(in millions)

No. of

Obligations

Amount

(in millions)

Contracts   84 $ 92.3 28 $  8.9

Grants   140 238.7 5 1.1

Other   58 276.7 16 8.4

 Total 282 $607.7 49 $18.4

Table 3. Amounts That Can Be Deobligated 

Bureau Contract Grant Other Total

NIST $     86,617 $   593,217 $4,608,700 $   5,288,534

NOAA 2,241,863 ‐  375,173 2,617,036

USPTO 4,375,864  ‐  566,910 4,942,774

Census 1,453,702 ‐  239,250 1,692,952

EDA 117,606 321,410 272,921 711,937

ITA 218,517 ‐  676,954 895,471

MBDA 200,000  ‐  382,700 582,700

OS 237,317 177,899 1,066,596 1,481,812

BIS  ‐  ‐  181,229 181,229

NTIA ‐  ‐  47,987 47,987

Total $8,931,486 $1,092,526 $8,418,420 $18,442,432

As an example of an obligation that was not appropriately monitored, the U.S. Patent and 

Trademark Office (USPTO) identified one particular contract as having an unliquidated 

balance of $3.2 million on December 31, 2011, and a period of performance ending on 

September 30, 2006. According to USPTO, contract management issues caused delays in 

the closeout process, and deobligation did not occur until January 2012. However, the 

obligation balance outstanding at December 31, 2011, represents an invalid obligation in our 

test results because it was not liquidated within prescribed time frames. 

We identified similar problems with obligations associated with agreements between federal 

agencies. For example, the Office of the Secretary (OS) executed an interagency agreement 

with the U.S. General Services Administration (GSA) that was separated into tasks with 

different deliverables and periods of performance. GSA, however, applied the payments 

from OS against incorrect tasks. According to representatives from OS, the obligation 

balances cannot be liquidated from the accounting records until GSA reconciles the 

payments to the correct tasks and confirms that the obligation balance is no longer needed. 

However, the unliquidated obligation balances associated with this agreement were still not 

liquidated timely. 
FINAL REPORT NO. OIG-13-026-A 4 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

We could not confirm

the existence of, or

verify the accurate

recording for, 12

original obligations.  

The existing Commerce guidance3 on monitoring obligations is not sufficient to ensure the 

successful closeout of funds available for deobligation. We identified the following key 

deficiencies in this guidance: 

 no identification of management, staff, and business functions responsible for 

monitoring obligations 

 no required time frames and accountability for deobligating balances once identified 

 no clear definition and criteria for the terms review or verification

 no guidance on performing reviews or verifications—or on ensuring accuracy and 

independence 

 no oversight at the departmental level to ensure that the desired outcomes of 

monitoring are achieved 

II. Original Obligation Balances Could Not Be Verified 

Appropriations law requires obligation balances to be adequately documented before an 

obligation is recorded in the financial accounting system.4

 The requirements vary, depending 

on the type of obligation that is recorded. However, at a minimum, the documentation 

must clearly identify the obligation, so that the proper amount can be initially recorded and 

subsequently monitored. 

We identified 12 obligations where the original obligation balance could not be verified. This 

occurred primarily because the bureaus either could not locate or did not provide adequate 

documentation to support them. USPTO and OS could not locate documentation related 

to three contracts. The National Oceanic and Atmospheric 

Administration (NOAA), the Bureau of Industry and Security (BIS), 

and OS did not provide proper purchasing documents for nine of 

their other obligations. For example, NOAA did not provide an 

obligating document to support one initial obligation, and 

documentation BIS provided for another did not support the 

recorded amount. Proper obligating documents, including purchase 

orders and approved requisitions, establish the initial date and amount of an obligation. 

Obligation balances cannot be tracked and monitored if the initial obligation is not approved 

properly and recorded accurately. 

                                                            

3

 U.S. Department of Commerce Office of Financial Management, Accounting Principles and Standards Handbook. 

http://www.osec.doc.gov/ofm/Accounting/cover.html (accessed June 6, 2013). 

4

 31 U.S.C. § 1501, Documentary evidence requirement for Government obligations. 
FINAL REPORT NO. OIG-13-026-A 5 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Twenty‐one obligations

we tested were recorded  

in accounting records

before being created.

Obligation monitoring

reports are inaccurate

and are not being

updated.

III. Accounting Records Did Not Accurately Reflect Obligations 

of the Department 

Appropriations law5 requires all obligations to be evidenced with the proper support before 

being recorded. Contract obligations must be supported by a binding agreement in writing6

made by an authorized official.7

 Grant obligations must be supported by a grant award or 

amendment that is signed by the bureau’s grant officer.8 

We noted that Commerce’s accounting records did not always 

correctly reflect actual obligations, because the obligations 

were entered into the accounting system before they were 

properly approved. We identified 21 such obligations, 

comprised of: 

 7 contracts (4 at NOAA and 3 at Census) recorded before the contracting officer 

signed the contract 

 10 interagency agreements (9 at NOAA and 1 at the Office of the Secretary) 

recorded before properly signed and approved

 4 grants (1 at NIST and 3 at the Economic Development Administration, or EDA) 

recorded before the grant officers properly signed the award documents 

Properly approving obligations before they are entered into the accounting system ensures 

that the accounting records only reflect actual obligations of the federal government. 

Because contract obligations cannot be legally recorded until they are evidenced by a 

binding agreement, recording early overstates undelivered orders in these instances. 

Further, recording after all approvals are made represents a fraud control, ensuring that 

recorders are only entering valid obligations. 

IV. Bureaus Did Not Know the Status of Obligation Balances 

The Department’s Accounting Principles and Standards Handbook contains requirements for 

monitoring unliquidated balances and deobligating unneeded funds. While they are 

insufficiently prescriptive, the requirements mandate that 

“accounting organizations will periodically review obligations” to 

ensure they are recorded.9

 It also requires that undelivered 

orders “be reviewed and verified at least quarterly.”10

                                                            

5

 31 U.S.C. § 1501, Documentary evidence requirement for Government obligations. 

6

 31 U.S.C. § 1501, Documentary evidence requirement for Government obligations. 

7

 GAO Office of the General Counsel, Principles of Federal Appropriations Law, chapter 7, section B.1.a. 

8

 Commerce Office of Acquisition Management, Department of Commerce Grants and Cooperative Agreements 

Manual, chapter 8, section I. 

9

 Commerce Office of Financial Management, Accounting Principles and Standards Handbook, chapter 7, section 

11.06(d). 
FINAL REPORT NO. OIG-13-026-A 6 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Quarterly balances for 60

obligations we tested

could not be verified from

bureau records.  

We identified 39 contracts, 111 grants, and 27 other obligations for which monitoring 

reports either did not reflect any status of their respective obligations or reflected an 

inaccurate obligation status. This occurred because the bureaus are not adequately 

monitoring and reviewing obligations throughout their periods of performance. Of the 13 

departmental bureaus, only the Bureau of Economic Analysis, the Economics and Statistics 

Administration, the National Telecommunications and Information Administration, and the 

National Technical Information Service had adequately monitored and reviewed their 

respective obligations that we tested. When obligations are not routinely monitored, 

undelivered orders may result in ongoing overstatement of obligations in bureau accounting 

records. 

We identified several deficiencies related to obligation monitoring. First, some bureaus had 

an obligation monitoring process in place that was not applied to all obligations. For 

example, NOAA had a centralized monitoring process, but it only applied to obligations 

that were inactive for 2 or more years. 

Second, bureaus are not complying with the Department’s requirement to verify 

undelivered orders quarterly. For example, NIST was found to have conducted a formal 

verification only twice per year while BIS only conducted a formal verification annually. 

Third, some monitoring reports from other bureaus showed no evidence of review or did 

not contain information that sufficiently or accurately reflected the obligation status. In one 

example, when we reviewed the monitoring reports for 50 of the EDA grants we tested, 

we did not identify any comments or responses related to the status of the related 

obligations. In another example, USPTO could not locate the file for a contract for $10.5 

million that ended in fiscal year 2007. When we reviewed the obligation on the related 

monitoring report, the status was simply reported as “contract has not been closed out 

yet.” While the contract was in fact not closed out, the statement did not fully reflect the 

fact that the file was missing or the status of related undelivered orders. Monitoring 

obligation balances enables bureaus to know whether the balances recorded in the 

accounting system are accurate and whether they still need to either remain obligated or be 

liquidated. 

V. Obligation Balances as of December 31, 2011, 

Could Not Be Verified 

Bureaus must review and verify undelivered orders at least 

quarterly.11 To meet this requirement, bureaus need to ensure that adequate 

documentation is prepared and maintained in files. 

We noted that several December 31, 2011, obligation balances could not be verified. This 

occurred because some files did not contain sufficient information to confirm the status of 

the related obligations. NOAA, the Minority Business Development Agency, BIS, and EDA 

                                                                                                                                                                                                10 Commerce Office of Financial Management, Accounting Principles and Standards Handbook, chapter 9, section 4.0. 

11 Commerce Office of Financial Management, Accounting Principles and Standards Handbook, chapter 9, section 4.0. 
FINAL REPORT NO. OIG-13-026-A 7 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

files had a total of three contracts, 50 grants, and two other obligation balances that lacked 

the necessary information. As a result, balances reported in the accounting system could 

not be verified. 

We also tested five OS and NIST working capital fund obligations, but those bureaus could 

not provide documentation that verified the December 31, 2011 balances. For example, we 

reviewed $4.6 million in obligation balances that NIST recorded during fiscal year 2007. 

NIST accountants told us that the amounts had actually been liquidated as of December 31, 

2011, but they could not provide adequate documentation to explain why the amounts still 

existed in the accounting records. 

VI. Bureaus Improperly Liquidated Contract Obligations 

OIG identified seven contract obligations at NOAA, Census, the International Trade 

Administration (ITA), and USPTO that were liquidated against incorrect fiscal year funding 

sources. In each instance, bureaus used prior-year funding to pay for contractor services 

continuing under exercised option years. These services should have been paid with fiscal 

year funds associated with the exercised option. Title 31 of the United States Code, section 

1502(a), states that a fixed appropriation account12 may only be used to pay for obligations 

incurred during that period of availability. If the obligation is charged to no-year 

appropriations or the period of obligational authority has not expired, bureaus may 

deobligate funding from one option year and reobligate it into a subsequent option year. 

However, the charging of invoices to prior-year appropriations that are no longer available 

for obligation could potentially lead to an Antideficiency Act (ADA) violation.13 At the very 

least, the instances below describe control issues associated with existing accounting 

practices. 

The seven instances where we noted improper liquidation against incorrect funding sources 

are as follows: 

 One NOAA contract had three open obligations totaling $953,355. During January 

2012, NOAA received a contract invoice totaling $50,135 for activities performed in 

November 2011, a period attributable to option year 4 of the contract. A notation on 

the invoice also indicated that the costs should have been charged to a specific project 

code in option year 4. Accounting records provided during the audit indicated that the 

option year 4 project only had a remaining balance of $30,961 when the invoice was 

received. Because sufficient funds were not available under option year 4, NOAA 

charged the difference of $19,174 to the unliquidated balance still remaining from 

option year 1. We noted that NOAA also paid additional option year 4 invoices by 

using option year 1 and 2 unliquidated balances. 

                                                            

12In a fixed appropriation account, appropriations are available for obligation for a definite period. A fixed 

appropriation account can receive appropriations available for obligation for 1 year (an annual account) or for a 

specified number of years (a multiyear account). U.S. Government Accountability Office, September 2005. A 

Glossary of Terms Used in the Federal Budget Process. http://www.gao.gov/new.items/d05734sp.pdf. 

13 See 31 U.S.C. § 1341(a). 
FINAL REPORT NO. OIG-13-026-A 8 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

 NOAA awarded another contract with a base year and one option year. When we 

reviewed a $15,071 invoice for option year 1 services that NOAA received between 

October 1, 2011, and October 31, 2011, we discovered that NOAA paid this invoice 

on November 22, 2011, by using unliquidated obligations related to the base period. 

NOAA should only have used option year 1 funds to pay the invoice. 

 NOAA awarded another contract with a base period and 4 option years. Only option 

year 3 and option year 4 had unliquidated obligation balances remaining as of 

December 31, 2011. When OIG reviewed an invoice for services received during 

option year 4, we discovered that NOAA used part of the option year 3 unliquidated 

obligations to pay the invoice. 

 Census awarded a contract with a base period and 4 option years. As of December 

31, 2011, the bureau’s accounting records had no obligations remaining for the base 

year and option year 1, $60,355 remaining from option year 2, and $61,969 from 

option year 3. Our review of invoices charged against each option year found that 

Census incorrectly liquidated obligations with invoices applicable to subsequent option 

periods. Specifically, invoices charged to the base year totaling $27,994 were 

applicable to option year 1. In addition, invoices totaling $22,688 and $17, 089 were 

incorrectly charged to option year 1 and 2, respectively. 

 ITA awarded a contract with one option year, separately obligating funding for each 

year. When we reviewed invoices to verify the December 31, 2011, balance, we 

identified invoices totaling $60,762 which ITA appeared to have incurred during the 

period of performance for the option year but paid using base-year funds. As a result, 

fiscal year funding constraints appear to have been compromised, while base-year and 

option-year balances are understated and overstated by $60,762, respectively. 

 USPTO entered into an interagency agreement that provided $50,000 in funding for 5 

years, each with a specific period of performance. Our review found that USPTO 

charged costs against this agreement based on available obligation funding (regardless 

of period of performance), rather than aligning the invoice activity to a specific funding 

year. As a result, obligation balances associated with the second funding year were 

liquidated with costs attributable to the third and fourth funding years. 

 In another NOAA contract, NOAA charged an obligation totaling $58,519 to an 

incorrect account. When questioned by our office, NOAA indicated it would correct 

this but did not provide further explanation. We could not determine the cause of the 

incorrect charging of this obligation. 

Some contracting personnel informed us that as a standard business practice, they 

processed invoices against available funding, regardless of the funding period, period of 

performance, or appropriation account. This is consistent with what we noted in our audit. 

Also, when contracting personnel obligated funds using no-year appropriations, bureaus did 

not provide evidence that they deobligated and reobligated funds, as required. In 

accordance with Departmental requirements, we provided the Department with details of 

the testing described above in order for the Department to assess bureau accounting 

practices and determine whether an ADA violation may have occurred. 
FINAL REPORT NO. OIG-13-026-A 9 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Other Matters 

The Department Could Not Use the Acquisition System to Monitor Obligations 

At the time of our audit, the Department and bureaus, except for USPTO, used the 

Commerce Acquisition Standard Reporting System (CSTARS) to award and close out 

contracts. However, OIG review of data contained in CSTARS indicates the system was not 

consistently populated with key fields such as contract end date and, as a result, CSTARS 

could not be used to monitor obligation balances. If CSTARS users were required to record 

and update key fields, CSTARS could have been used as an obligation monitoring tool. 

However, CSTARS information was recorded by system owners at Census, NOAA, and 

NIST, not centrally by the Department’s Acquisition Office. Failure to mandate the fields 

populated in CSTARS has reduced the effectiveness of the system as an obligation 

monitoring tool. 

The Department has informed OIG that it has since replaced CSTARS with a new system, 

C.Suite, which it states now requires the completion of key fields before contracting officers 

can finalize contract actions. 

Acquisition Personnel Are Not Closing Contracts 

Our review of CSTARS further identified a significant number of contracts that have not 

been closed, although deobligation of funding may have occurred. According to bureau 

acquisition personnel, insufficient staffing resources—coupled with the Department’s 

emphasis on issuing rather than closing contract awards—has resulted in contract closeouts 

being processed as time and staffing permits rather than in compliance with closeout 

requirements in the Federal Acquisition Regulation (FAR). Failure to conduct contract 

closeout procedures in accordance with the FAR may result in obligations not being 

liquidated in a timely manner. 

Recommendations 

We recommend that the Senior Advisor to the Deputy Secretary Performing the NonExclusive Duties of the Chief Financial Officer and Assistant Secretary for Administration: 

1. Develop a Department-wide initiative related to the timely liquidation, deobligation, and 

closure of unneeded open obligations. 

2. Enhance policies and procedures to include specific, comprehensive guidance for the 

consistent monitoring and deobligation of unliquidated obligation balances, as well as 

ongoing departmental oversight. 

3. Develop guidance and training on the quarterly verification of open obligations. 
FINAL REPORT NO. OIG-13-026-A 10 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

4. Investigate each specific instance noted in this report where contract obligations may 

have been liquidated against an incorrect fiscal year funding source or charged to the 

wrong account. 

5. Provide training on the proper methodology for funding invoices of multiple-year 

contracts. 
FINAL REPORT NO. OIG-13-026-A 11 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Summary of Agency Response and 

OIG Comments 

OIG received the Department’s comments on the draft report, which we include as appendix 

C of this final report. Overall, the Department concurs with the findings and recommendations 

in the report. The Department will develop corrective action plans and ensure timely 

implementation to address the recommendations. 

The Department states that the issue we identified related to populating key fields in its 

contract writing system is resolved. The Department also notes that it recognizes the 

importance and the requirement of contract closeouts and will continue to improve internal 

controls to ensure that bureau obligations are adequately monitored and deobligated promptly. 

We look forward to receiving the Department’s action plans. 
FINAL REPORT NO. OIG-13-026-A 12 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix A: Objectives, Scope, and 

Methodology 

We reviewed the Department’s unliquidated obligations balances as of December 31, 2011, to 

assess whether the Department and bureaus have adequate controls over the management and 

closeout of unliquidated obligations. We conducted our review by obtaining detailed obligation 

data files from each of the Department’s 13 bureaus: Bureau of Economic Analysis, Bureau of 

Industry and Security, Census Bureau, Economic Development Administration, Economic 

Standards Administration, International Trade Administration, Minority Business Development 

Agency, National Institute of Standards and Technology, National Oceanic and Atmospheric 

Administration, National Technical Information Service, National Telecommunications and 

Information Administration, Office of the Secretary, and U.S. Patent and Trademark Office. 

We accomplished our objective by performing the following tasks: 

 We obtained an understanding of internal controls over management and closeout of 

unliquidated obligations by interviewing bureau accounting and acquisition staff 

involved in the recording, monitoring, management, and closeout of unliquidated 

obligations. 

 We chose a representative sample of unliquidated obligations by aggregating each 

bureau’s obligation data into three categories (contract, grant, and other) and 

restricted our sample to the universe of 5,371 unliquidated obligations valued at 

$100,000 or more. 

 We stratified the data across bureau and obligation type for a total of 32 strata. To 

reach a minimum confidence level of 90 percent and a 5 percent or smaller margin of 

error, we sampled 258 records and proportionately allocated the records across each 

stratum with a minimum of 1 obligation per stratum. We also oversampled strata 

where, based on previous audit work, we expected higher than typical variance, 

resulting in a final sample size of 282. The results were then estimated for the entire 

Department at a 95 percent confidence level. The estimate shown in the report 

represents the low end of the margin of error. 

 We tested the reliability of the obligation data provided from the bureaus’ systems by 

(1) reconciling each bureau’s unliquidated obligation balance to the general ledger and 

(2) analyzing the data for irregularities and logical inconsistencies such as duplicate 

records, missing data, and obvious calculation errors. We did not have access to the 

programming code of the systems. No discrepancies were noted; thus, we consider 

the data sufficiently reliable for use in our audit. 

 We reviewed the rules and regulations regarding management and closeout of 

unliquidated obligations by assessing the Department’s compliance with the 

Commerce Acquisition Manual, Grants Manual, Accounting Principles and Standards 

Handbook, the Federal Acquisition Regulation, and bureau policy and procedures, as 

applicable to our audit objective. 
FINAL REPORT NO. OIG-13-026-A 13 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

 We analyzed unliquidated obligation data reported as of December 31, 2011, in each 

bureau’s financial system, contract management system, and/or grants management 

system. 

 We reviewed evidence supporting the validity of each of the 282 sample items, such as 

contracts, grant agreements, purchase orders, and invoices. Based on the results of 

our test work, we made estimations about the unliquidated obligations population. 

The audit was conducted under the authority of the Inspector General Act of 1978, as 

amended, and Department Organization Order 10-13, dated August 31, 2006, at the 

Department’s offices in the Washington, D.C., metropolitan area. We conducted this 

performance audit in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, appropriate evidence 

to provide a reasonable basis for our findings and conclusions based on our audit objective. We 

believe that the evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objective. 
FINAL REPORT NO. OIG-13-026-A 14 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix B: Monetary Benefits 

Questioned Costs 

Funds Put 

to Better Use 

Estimated obligations 

that could have been 

deobligated by 

12/31/2011 0 $159 million 
FINAL REPORT NO. OIG-13-026-A 15 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix C: Agency Response 

011200000140