INTERNAL 

CONTROLS

Corrective Actions 

Under Way to 

Address Control 

Deficiencies at the 

Morris K. Udall and 

Stewart L. Udall 

Foundation

Report to Congressional Requesters

December 2013

GAO-14-95

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-95, a report to 

congressional requesters

December 2013

INTERNAL CONTROLS

Corrective Actions Under Way to Address Control 

Deficiencies at the Morris K. Udall and Stewart L. 

Udall Foundation

Why GAO Did This Study

The Foundation was established as an 

executive branch agency to provide 

educational opportunities related to 

environmental policy and Native 

American health care and tribal policy, 

and also to assist in resolving 

environmental disputes that involve 

federal agencies. In December 2012, a 

DOI OIG audit of the Foundation 

identified significant issues primarily 

related to the Foundation’s failure to 

appropriately monitor and assess the 

effectiveness of its internal controls as 

required by FMFIA and the absence of 

key internal controls over its personnel 

and contracting practices. GAO was 

asked to review whether the 

Foundation has sufficient internal 

controls to ensure that it is complying 

with applicable laws and regulations 

regarding financial management and 

contracting. The objective of this report 

is to describe the Foundation’s actions 

to improve its internal control 

assessment process and its controls 

over personnel and contracting, and 

determine the extent to which the 

design of the Foundation’s actions that 

have been sufficiently documented is 

consistent with internal control 

standards and applicable laws and 

regulations. 

To address this objective, GAO 

reviewed relevant documents, 

interviewed Foundation management, 

and assessed the Foundation’s actions 

against relevant standards and 

guidance. 

In commenting on a draft of this report, 

the Foundation accepted GAO’s 

results in full. The Foundation also 

provided a summary of the changes it 

has made in its operations and 

structure since the DOI OIG report.

What GAO Found

Officials at the Morris K. Udall and Stewart L. Udall Foundation (Foundation) 

developed a Corrective Action Plan to address the findings in the Department of 

the Interior (DOI) Office of Inspector General’s (OIG) December 2012 audit 

report. The Corrective Action Plan included steps to address deficiencies in the 

Foundation’s (1) internal control monitoring and assessment process, (2) internal 

control related to personnel issues, and (3) internal control related to contracting. 

For those actions that were sufficiently documented at the time of its review, 

GAO found that their design was consistent with internal control standards and 

applicable laws and regulations. 

To address identified deficiencies in its internal control monitoring and 

assessment processes under 31 U.S.C. § 3512(c), (d), commonly known as the 

Federal Managers’ Financial Integrity Act (FMFIA), and implementing guidance, 

the Foundation contracted with an external consultant to perform an internal 

control review with an overall goal of achieving compliance with the Office of 

Management and Budget (OMB) Circular No. A-123, Management’s 

Responsibility for Internal Control and Standards for Internal Control in the 

Federal Government. GAO determined that the design of this action to contract 

for the performance of a thorough internal control review is consistent with 

internal control standards related to monitoring operations and internal controls 

and with FMFIA requirements to monitor and assess the effectiveness of internal 

controls. 

To address deficiencies in its internal control related to personnel issues, the 

Foundation developed policies and procedures to address specific DOI OIG 

findings in the areas of outside employment and termination of employees. The 

procedures were still in draft form, and it was too soon for GAO to assess the 

design of the changes. 

To address the DOI OIG’s findings related to its contracting practices, the 

Foundation entered into a 5-year interagency agreement with the DOI Interior 

Business Center (IBC), under which IBC agreed to assist the Foundation on 

contracts related to the Foundation’s environmental conflict resolution activities, 

including mediation, facilitation, and assessment services. GAO determined that 

the design of this action is consistent with internal control standards and 

applicable guidance for federal executive agencies. For example, the 

Foundation’s interagency agreement with IBC for managing environmental 

conflict resolution contracts is generally consistent with OMB’s Office of Federal 

Procurement Policy guidance on management and use of interagency 

acquisitions. For other contracts, the Foundation planned to issue a policy and 

guidance on internal contracting processes, but it was not finalized at the time of 

GAO’s review.

View GAO-14-95. For more information, 

contact J. Lawrence Malenich at (202) 512-

9399 or malenichj@gao.gov.
Page i GAO-14-95 Udall Foundation

Letter 1

Scope and Methodology 2

Background 3

The Foundation Is Taking Actions to Improve Its Internal Controls 

to Comply with Internal Control Standards and Laws and 

Regulations 6

Concluding Observations 13

Agency Comments 13

Appendix I Comments from the Morris K. Udall and Stewart L. Udall Foundation 16

Appendix II GAO Contact and Staff Acknowledgments 19

Abbreviations 

ADR Alternative Dispute Resolution

DOI Department of the Interior

COR contracting officer’s representative

FAR Federal Acquisition Regulation

FMFIA Federal Managers’ Financial Integrity Act

IBC Interior Business Center

OFPP Office of Federal Procurement Policy

OIG Office of Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management

Contents

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-14-95 Udall Foundation

441 G St. N.W.

Washington, DC 20548

December 6, 2013

Congressional Requesters

The Morris K. Udall and Stewart L. Udall Foundation (Foundation) was 

established as an executive branch agency to provide educational 

opportunities related to environmental policy and Native American health 

care and tribal policy, and also to assist in resolving environmental 

disputes that involve federal agencies.1 In December 2012,2 a 

Department of the Interior (DOI) Office of Inspector General (OIG) audit of 

the Foundation identified significant issues primarily related to the 

Foundation’s failure to appropriately monitor and assess the effectiveness 

of its internal controls as required,3 and the absence of key internal 

controls over its personnel and contracting practices. The DOI OIG audit 

was performed after the Foundation’s Board of Trustees (Board) became 

aware of some questionable actions by Foundation employees relating to 

these areas. Since the Foundation does not have an internal audit 

function, at the suggestion of the Deputy Secretary of the Interior—who 

serves as a Board trustee—the Board’s Chair and Vice Chair requested a 

review by the DOI OIG under an Economy Act agreement.4

 1

See the Foundation’s authorizing legislation, which is classified, as amended, at 20 

U.S.C. chapter 66.

2

The DOI OIG audit report, Stewardship of the Morris K. Udall and Stewart L. Udall 

Foundation, was released in December 2012 to the Foundation’s Board of Trustees and 

the Foundation’s Acting Executive Director. The report was not made available to the 

public. 

3

Under 31 U.S.C. 3512 (c), (d), commonly known as the Federal Managers’ Financial 

Integrity Act (FMFIA), and implementing guidance, federal executive agencies must

establish internal control and financial systems that provide reasonable assurance of 

achieving the following three objectives of internal control: effectiveness and efficiency of 

operations, compliance with regulations and applicable laws, and reliability of financial 

reporting. FMFIA also requires the agency head to provide an annual statement of 

assurance on whether the agency has met these requirements.

4

The Economy Act, codified, as amended, in part, at 31 U.S.C. § 1535, authorizes federal 

agencies to acquire services from other federal agencies and to pay for those services. A 

federal agency may make such an acquisition under the Economy Act if these 

requirements are met: (1) amounts to pay for the services are available to the acquiring 

agency, (2) the acquisition is in the best interests of the United States, (3) the servicing 

agency is able to provide them or get them by contract, and (4) the services cannot be 

provided by contract as conveniently or as cheaply by a commercial enterprise.
Page 2 GAO-14-95 Udall Foundation

Since the release of the DOI OIG audit report, the Foundation’s controls 

have been in a significant state of transition and continued to be so during 

the time of our audit because of new management’s efforts to develop 

and implement changes to improve internal controls over financial 

management, including personnel and contracting.5 You asked us to 

review whether the Foundation has sufficient internal controls to ensure 

that it is complying with applicable laws and regulations regarding 

financial management and contracting. Our objective is to describe the 

Foundation’s actions to improve its internal control assessment process 

and its controls over personnel and contracting, and determine the extent 

to which the design of the Foundation’s actions that have been sufficiently 

documented is consistent with internal control standards and applicable 

laws and regulations.

To address our objective, we (1) obtained and reviewed the DOI OIG 

audit report and supporting workpapers; (2) interviewed Foundation 

management and selected staff members to determine the extent to 

which its actions to improve internal controls and the Federal Managers’ 

Financial Integrity Act (FMFIA) assessment process have been 

sufficiently documented (i.e., whether such changes have been issued in 

final form or whether draft policies of planned changes have been 

reviewed by senior management and the in-house General Counsel);

(3) obtained and reviewed documentation related to the Foundation’s 

actions to improve internal controls and its FMFIA assessment process;

and (4) assessed the Foundation’s actions against the criteria established 

under Standards for Internal Control in the Federal Government,

6

 5

On August 27, 2013, the Board unanimously voted to appoint the Acting Executive 

Director as Executive Director of the Foundation. The Executive Director previously 

served as the Foundation’s Deputy Executive Director for Finance and Education. In 

addition, a new General Counsel was hired on July 1, 2013.

Office 

of Management and Budget (OMB) Circular No. A-123, Management’s

Responsibility for Internal Control (December 21, 2004) (OMB Circular 

6

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

Scope and

Methodology
Page 3 GAO-14-95 Udall Foundation

No. A-123),7

We conducted this performance audit from May 2013 to December 2013 

in accordance with generally accepted government auditing standards. 

Those standards required 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 objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

other OMB guidance concerning contracting, and the 

Federal Acquisition Regulation (FAR). The scope of our work did not 

include performing procedures to validate the findings included in the DOI 

OIG audit report. We discussed with DOI OIG officials responsible for 

conducting the audit at the Foundation the audit procedures they 

performed and reviewed supporting DOI OIG workpapers. We also met 

with Foundation management responsible for responding to the DOI OIG 

audit report and developing corrective action plans. These procedures 

allowed us to gain an understanding of the DOI OIG’s work performed, 

the conclusions drawn, and management’s response to the DOI OIG 

audit report.

The Foundation was established as an independent executive branch 

agency in 1992 to honor Morris K. Udall’s 30 years of service in the U.S. 

House of Representatives as a leader on issues related to the 

environment and Native Americans. In 2009, its authorizing legislation 

was amended to also honor Stewart L. Udall’s public service legacy. The 

Foundation is committed to educating a new generation of Americans to 

preserve and protect their national heritage through scholarship, 

fellowship, and internship programs focused on environmental and Native 

American issues. The Foundation consists of the Morris K. Udall and 

Stewart L. Udall Trust Fund, which is used to operate the Foundation’s 

education programs, and the Environmental Dispute Resolution Fund. 

The latter fund is available to the Foundation to operate the U.S. Institute 

for Environmental Conflict Resolution, which was established by the 

 7

OMB Circular No. A-123, Management’s Responsibility for Internal Control, (Dec. 21, 

2004). This circular provides guidance to federal managers on improving the 

accountability and effectiveness of federal programs and operations by establishing, 

assessing, correcting, and reporting on internal control. The circular provides internal 

control standards and specific requirements for conducting management’s assessment of 

the effectiveness of internal control over financial reporting.

Background
Page 4 GAO-14-95 Udall Foundation

Environmental Policy and Conflict Resolution Act of 1998 to promote the 

principles and practices of environmental conflict resolution and to assist 

in resolving conflict over environmental issues involving federal agencies. 

The Foundation depends on federal appropriations for the majority of its 

operations and received no-year appropriations of roughly $6.0 million in 

fiscal years 2012 and 2013.

Under its authorizing legislation, the Foundation is subject to the 

supervision and direction of the Board, which is to consist of 13 trustees, 

11 of whom are to be voting members of the Board.8 The authorizing 

legislation charges the Board with appointing the Executive Director and 

setting his or her compensation. Further, the Foundation’s operating 

procedures provide that it is the Board’s role and duty to appoint senior 

management staff members and set their compensation; approve the 

organizational structure for the staff of the Foundation; approve the 

Foundation’s budget and arrange for an annual financial audit; set 

policies, including internal controls, for the conduct and management of 

the agency’s finances, personnel, and programs to be implemented by its 

staff; and approve the strategic direction and priorities for the Foundation.

The DOI OIG’s December 2012 audit report of the Foundation concluded 

that—despite signed statements of assurance by the former Executive 

Director claiming otherwise—the Foundation had not appropriately 

assessed the effectiveness of its internal controls for at least 6 fiscal 

years from 2006 through 2011 and was thus not in compliance with 

FMFIA. Under FMFIA and implementing guidance, federal executive 

agencies must establish internal control and financial systems that 

provide reasonable assurance of achieving the following three objectives 

of internal control: effectiveness and efficiency of operations, compliance 

with regulations and applicable laws, and reliability of financial reporting.

FMFIA also requires the agency head to provide an annual statement of 

assurance on whether the agency has met these requirements. OMB 

Circular No. A-123 defines management’s responsibility for internal 

control in federal executive agencies, including maintaining the 

 8

The President appoints nine members of the Board, with the advice and consent of the 

U.S. Senate. The other four members serve by virtue of their positions within government 

and include the Secretary of the Interior or the Secretary’s designee, the Secretary of 

Education or the Secretary’s designee, the President of the University of Arizona, and the 

chairperson of the President’s Council on Environmental Quality. 

DOI OIG Audit Report
Page 5 GAO-14-95 Udall Foundation

appropriate level of documentation and continuously monitoring the 

effectiveness of internal control during the normal course of business. In 

relation to internal control over financial reporting, this includes 

documenting both the controls in place and the assessment process and 

methodology that management used to support its assertion as to the 

effectiveness of internal control, and performing monitoring activities that 

include direct testing of the controls as part of the assessment process.9

The DOI OIG’s audit report also found that the Foundation was missing 

key internal controls over its personnel and contracting practices. The 

DOI OIG December 2012 audit report stated that the office does not have 

the authority to make formal recommendations to the Foundation to 

improve its internal controls. However, the DOI OIG audit report did 

include several suggestions for corrective actions for the Foundation’s 

consideration.

 9

These internal control activities would be generally consistent with the requirements in 

OMB Circular No. A-123’s Appendix A, Internal Control Over Financial Reporting, which 

contains additional guidance related to the process for separately assessing and 

documenting internal control over financial reporting. While Appendix A only applies 

directly to the 24 Chief Financial Officers Act agencies, which do not include the 

Foundation, this does not preclude the Foundation’s management from voluntarily 

adopting this guidance as a best practice. 
Page 6 GAO-14-95 Udall Foundation

The Foundation developed a Corrective Action Plan during fiscal year 

2013 to address the findings identified in the DOI OIG audit report and 

related financial management weaknesses to improve internal controls 

over its key financial management processes. Major elements of the 

Corrective Action Plan include performing a complete assessment of the 

Foundation’s current internal control structure to identify adequate, 

inadequate, and missing controls, and developing (or contracting to have 

developed) policies and procedures to implement appropriate internal 

controls in all areas where inadequate or missing controls are identified.10

The Corrective Action Plan included steps to address deficiencies in the 

Foundation’s (1) FMFIA internal control monitoring and assessment 

process, (2) internal control related to its personnel processes, and 

(3) internal control related to its contracting processes. For those actions 

that were sufficiently documented at the time of our review, we found that 

their design was consistent with internal control standards and applicable 

laws and regulations, as discussed in the following sections.

Since the release of the DOI OIG audit report, the Foundation has 

experienced significant turnover in its senior management ranks, and new 

management has acknowledged that the Foundation did not (1) maintain 

adequate documentation of the controls in place, (2) perform monitoring 

activities that included direct testing of the controls as part of the internal 

control assessment process required under FMFIA, (3) document the 

assessment process and methodology that management used to support 

its assertion as to the effectiveness of internal control over financial 

reporting, and (4) include appropriate representations from officials and 

personnel responsible for monitoring, improving, and assessing internal 

controls. In addition, new management at the Foundation acknowledged 

that the Foundation’s failure to comply with FMFIA requirements and 

 10The Foundation is also seeking changes to its appropriations language that will assign 

the DOI OIG responsibility for providing future oversight for the Foundation. In this regard, 

the House and Senate Committees on Appropriations, Subcommittees on Financial 

Services and General Government, have each approved the Financial Services and 

General Government Appropriations bills for fiscal year 2014 (H.R. 2786 and S. 1371). 

S.1371, as noted in its companion Senate Report No. 113-80, includes an earmark 

providing for the DOI OIG to conduct annual audits and investigations of the Foundation in 

order to ensure that the Foundation’s spending, management, and other activities are 

subject to regular oversight and review. However, the Continuing Appropriations Act, 

2014, Pub. L. No. 113-46, 127 Stat. 558 (Oct. 17, 2013), which is effective through 

January 15, 2014, did not include a provision providing funding for Foundation 

investigations and audits by the DOI OIG.

The Foundation Is 

Taking Actions to 

Improve Its Internal 

Controls to Comply 

with Internal Control 

Standards and Laws 

and Regulations

Foundation Actions to 

Improve FMFIA Internal 

Control Monitoring and the

Assessment Process
Page 7 GAO-14-95 Udall Foundation

implementing OMB Circular No. A-123 guidance contributed to the 

financial management weaknesses identified in the DOI OIG audit report.

The Foundation has taken action to comprehensively assess its internal 

controls and plans to make changes based on the results of that 

assessment. Specifically, the Foundation contracted with an external 

consultant to perform an internal control review with an overall goal of 

achieving compliance with OMB Circular No. A-123 and Standards for 

Internal Control in the Federal Government. We determined that the 

design of this action to contract for the performance of a thorough internal 

control review is consistent with internal control standards related to 

monitoring operations and internal controls and with FMFIA requirements 

to monitor and assess the effectiveness of its internal controls.

The scope of work for this review included performing an assessment of 

the Foundation’s current internal control structure to identify adequate, 

inadequate, and missing controls; recommending improvements to 

controls and the control environment;11 recommending procedures for 

annual monitoring and testing of controls; recommending a format for the 

annual statement of assurance; and reviewing and recommending 

improvements for communication of control responsibilities to its staff. 

The Foundation exercised its option to order additional services from the 

external consultant to perform an assessment of the implementation of 

the recommendations in its report, which was issued in late September 

2013.12 This assessment is expected to be performed from December 

2013 to February 2014.

 11The control environment sets the tone of an organization, influencing the control 

consciousness of its people. It is the foundation for all other components of internal 

control, providing discipline and structure. Control environment factors include the 

integrity, ethical values, and competence of the entity’s people; management’s philosophy 

and operating style; the way management assigns authority and responsibility and 

organizes and develops its people; and the attention and direction provided by the board 

of directors. 

12The external consultant’s internal control review made recommendations to strengthen 

the control environment in the areas of ethical values, management philosophy, authority 

and responsibility, and human resources practices and oversight. 
Page 8 GAO-14-95 Udall Foundation

The Foundation acknowledged that it did not have internal controls 

related to personnel in the areas of outside employment and termination 

of employees. Potential violations of applicable laws and regulations were 

detected by the DOI OIG as a result of these deficiencies. The 

Foundation’s Corrective Action Plan contained planned changes to 

address the two key areas that were cited in the DOI OIG’s audit report.

• Outside employment. The DOI OIG concluded that the Foundation 

did not comply with the Dual Compensation Act when approving 

outside employment activities for employees.13

• Termination of employees. The DOI OIG audit report cited a lack of 

internal controls as the basis for questionable actions that were taken 

by Foundation management to encourage employees to either 

voluntarily, or involuntarily, leave their Foundation employment. The 

Foundation was taking steps to improve its internal controls relating to 

termination of staff members’ employment. Specifically, as of 

November 2013, the Foundation was updating its personnel policies 

to direct that all personnel actions taken must comply with applicable 

law and implementing OPM regulations and guidance, and that any 

deviation from such regulations and guidance must be documented 

and justified in writing. According to Foundation officials, the policy is 

expected to be finalized in early 2014.

As of November 2013, 

the Foundation was taking steps to improve its internal controls 

related to employees’ outside employment. Specifically, the 

Foundation prepared a draft Outside Employment Policy, which 

requires Foundation employees to obtain management approval prior 

to engaging in any outside employment. As of November 2013, the 

draft Outside Employment Policy was in the process of being 

reviewed by the Foundation’s General Counsel for compliance with 

applicable law and implementing Office of Personnel Management 

(OPM) regulations and guidance. According to Foundation officials, 

the policy is expected to be finalized in early 2014.

Because the Foundation’s planned actions to improve its internal controls 

related to employees’ outside employment and termination of 

employment were not finalized, it was too soon for us to assess the 

 13The Dual Compensation Act, codified, as amended, in part at 5 U.S.C. § 5533, imposes 

limitations on dual compensation for most federal government employees. The act states 

that unless an express exception applies, an individual is not entitled to receive basic pay 

from more than one position for more than an aggregate of 40 hours of work in 1 calendar 

week (Sunday through Saturday). The act authorizes the Office of Personnel Management 

to prescribe regulations under which exceptions to this general prohibition may be made.

Foundation Actions to 

Address Internal Control 

Deficiencies Related to 

Personnel
Page 9 GAO-14-95 Udall Foundation

design of these actions and whether they are consistent with internal 

control standards and applicable laws, regulations, and guidance. The 

draft Outside Employment Policy and the personnel policies relating to 

termination of employees will not be finalized until the Foundation’s 

General Counsel and Executive Director and the Board have reviewed 

and approved the proposed changes. Once approved, the extent to which 

the new personnel-related internal controls and their implementation will 

help the Foundation to successfully improve its internal controls and 

comply with applicable laws and regulations will require the continued 

involvement and vigorous oversight of Foundation management and the 

Board.

The Foundation acknowledged the need for improvement in its internal 

controls related to contracting and was taking some steps to address 

these issues. The Foundation’s Corrective Action Plan contained planned 

changes to address the findings from the DOI OIG audit report that are 

listed below. According to the report, the Foundation 

• potentially violated the Antideficiency Act,14

• may have billed agencies in violation of the bona fide needs rule,

which provides that an 

employee of the U.S. government may not make or authorize an 

expenditure or obligation exceeding an amount available in an 

appropriation or fund;

15

• had conflict-of-interest issues that potentially violated the Ethics in 

Government Act of 1978,

which provides that an appropriation made for a definite period of time 

may be used only to fulfill a genuine, legitimate, and otherwise bona 

fide need arising during the period of availability of that appropriation;

16

 14Antideficiency Act, codified, as amended, in part at 31 U.S.C. § 1341(a).

as amended, and implementing 

regulations, including (1) a contract awarded to a company owned by 

a Foundation employee’s relative, (2) hiring a contractor as a 

Foundation employee prior to the expiration of an existing contract 

with that person, and (3) improperly awarding a contract to a former 

Foundation employee;

15The bona fide needs rule is based on the Time Statute (31 U.S.C. § 1502(a)). 

16See the Ethics in Government Act of 1978, which is codified, as amended, in 5 U.S.C. 

appendix §§ 401-408. The Director of the Office of Government Ethics has issued 

implementing regulations, which are codified, as amended, in 5 C.F.R. parts 2634-41.

Foundation Actions to 

Address Internal Control 

Deficiencies Related to 

Contracting
Page 10 GAO-14-95 Udall Foundation

• was not in compliance with the FAR when awarding sole source 

contracts.17 Most of the sole source contracts were justified using the 

Alternative Dispute Resolution (ADR) exception to full and open 

competition;18

• inappropriately modified some contracts to add additional funding, add 

work outside the scope of the contract, extend the period of 

performance beyond the original dates, or a combination of these; and

but the DOI OIG determined that the work being 

contracted did not meet the essential elements required for an ADR 

exception under FAR 6.302-3 (“acquire services of an expert or 

neutral person for any current or anticipated litigation or dispute”). 

Further, not all contracts had approved sole source justifications as 

required by the FAR, and some justifications contained inaccurate 

information;

• awarded what appear to be personal service contracts, which the FAR 

defines as contracts characterized by the employer-employee 

relationship it creates between the government and the contractor’s 

personnel. Obtaining personal services by contract, rather than by 

direct hire, circumvents the civil service laws unless Congress has 

specifically authorized acquisition of the services by contract.

The Foundation recognized that internal controls for contracting were 

deficient and had taken some action and was developing other changes 

to correct control deficiencies in this area. According to the Executive 

Director, after discussion and approval from the Chair and Vice Chair of 

the Board, the Foundation entered into a 5-year interagency agreement 

for assisted acquisitions on March 11, 2013, with the DOI Interior 

Business Center’s (IBC) Acquisition Services Directorate. IBC provides 

comprehensive acquisition services to federal agencies, managing the 

entire process from planning, soliciting, and evaluating offers to awarding 

and administering contracts through closeout.19

 17The FAR is the primary regulation for use by all federal executive agencies in their 

acquisition of supplies and services with appropriated funds.

We determined that the 

18Federal agencies conducting procurements generally are required to obtain full and 

open competition through the use of competitive procedures unless a specific exception 

applies. One exception provided for in the FAR is when an agency is acquiring the 

services of a neutral person to facilitate an Alternative Dispute Resolution process for any 

current or anticipated litigation or dispute. See FAR, 48 C.F.R. subpart 6.3, “Other Than 

Full and Open Competition.”

19GAO discussed some of the services provided by IBC in GAO, Interagency Contracting: 

Improvements Needed in Setting Fee Rates for Selected Programs, GAO-11-784 

(Washington, D.C.: Sept. 9, 2011).
Page 11 GAO-14-95 Udall Foundation

design of this action is consistent with internal control standards and 

applicable guidance for federal executive agencies. Specifically, the 

Foundation’s interagency agreement with IBC for managing 

environmental conflict resolution contracts is generally consistent with 

OMB’s Office of Federal Procurement Policy (OFPP) 2008 policy 

guidance on management and use of interagency acquisitions.20

Pursuant to the terms of the interagency agreement, IBC has agreed to 

assist the Foundation on contracts related to environmental conflict 

resolution activities, including mediation, facilitation, and assessment 

services. An IBC official serves as the Contracting Officer for contracts 

that IBC awards to private service providers on the Foundation’s behalf.

The 

formal agreement generally follows OFPP’s model agreement for an 

assisted acquisition, including delineating the roles and responsibilities of 

both the requesting (Foundation) and servicing (IBC) agencies throughout 

the acquisition life cycle. The agreement is an appropriate strategy for 

addressing the findings identified by the DOI OIG in this area and meeting 

internal control standards for proper implementation and oversight of 

agency contracting activities.

21

IBC also will provide contracting officer’s representatives (COR) until such 

time that Foundation Program Managers become qualified to be 

authorized CORs by completing existing training requirements and 

receiving Federal Acquisition Institute certification as CORs.22

Further, per the agreement, the Foundation will provide IBC with 

information on project objectives, deliverables, and schedule milestones, 

and IBC will select an appropriate award type based on the nature of the 

Per the 

agreement, IBC will help the Foundation comply with the bona fide needs 

rule by managing funds according to the Foundation’s guidance,

recording transactions in a timely fashion, and implementing and 

exercising controls to ensure compliance with all applicable statutory and 

regulatory fiscal requirements.

 20Office of Federal Procurement Policy Memorandum, Improving the Management and 

Use of Interagency Acquisitions (June 6, 2008).

21A contracting officer is an individual with the authority to enter into, administer, and 

terminate contracts and make related determinations and findings. See FAR Parts 1.602 

and 2.101.

22A COR is an individual designated and authorized in writing by the contracting officer to 

perform specific technical or administrative functions. See FAR Part 2.101, “Definitions.”
Page 12 GAO-14-95 Udall Foundation

requirement and associated risk. IBC is responsible for ensuring that the 

environmental conflict resolution contracts comply with competition 

requirements, including seeking competition unless an exception is 

justified and approved at the appropriate level; requiring the Foundation 

to furnish supporting rationale and appropriate documentation to support 

an exception to competition; and reviewing the sufficiency of the 

Foundation’s justification and documentation before approving and 

proceeding with a noncompetitive action. The interagency agreement with 

IBC also defines the roles and responsibilities for evaluating proposed 

contract modifications. Per this agreement, the Foundation is to work with 

IBC to evaluate proposals for changes and, if requested by the IBC 

Contracting Officer, to participate in negotiation of changes, modifications, 

and claims. Further, the Foundation is responsible for ensuring that it is 

not authorizing work (making commitments or promises, issuing 

instructions to start or stop work, or directing changes), changing any 

contractual documents, modifying the scope of work (including the period 

of performance), authorizing accrual of costs, or otherwise providing 

direction to the contractor, except as expressly authorized in the COR 

appointment by IBC’s Contracting Officer. IBC is responsible for working 

with the Foundation to evaluate proposals for changes and ensuring that 

any modifications to the requirements or price of the award remain within 

the overall scope of the original award. The agreement should help in 

improving management and oversight on those environmental conflict 

resolution contracts being serviced by IBC. The total amount paid on 

these environmental conflict resolution contracts was approximately 

$2.7 million in fiscal year 2013.

The Foundation has retained responsibility for administrative contracts 

and leasing activities. According to the Foundation, in fiscal year 2013, it 

paid approximately $780,000 for administrative contracts managed by the 

Foundation. Most of the administrative contract costs were onetime 

expenditures to address DOI OIG audit findings, such as contracting for 

organizational development work, the internal control review, legal review 

and assistance, and the cost of the DOI OIG audit. Other administrative 

costs are recurring, such as payroll and financial services provided by the 

General Services Administration under memorandums of understanding,

and the cost of the annual financial statement audit. The Foundation also 

spent $361,000 on leased space at two locations.

The Foundation plans to draft guidance on internal contracting processes 

that will be reviewed by the Foundation’s General Counsel and Executive 

Director. According to the Foundation, it intends to have a policy 

approved and in place by December 15, 2013. The Foundation expects 
Page 13 GAO-14-95 Udall Foundation

the policy to state that the FAR guidance should be followed, including its 

contract documentation requirements and prohibitions related to personal 

services contracts. Because the Foundation’s planned actions to improve 

its internal controls related to its management of administrative contracts 

were not finalized, it was too soon for us to assess the design of these 

actions and whether they are consistent with internal control standards 

and applicable laws, regulations, and guidance. However, issuance of a 

new internal contracting policy that reinforces the requirements of the 

FAR for administrative contracts is a good step in emphasizing the need 

for following sound contracting practices.

The Foundation’s continuing implementation of its Corrective Action Plan 

and the efforts to make changes in internal controls appear to be moving 

the Foundation in the right direction to strengthen its internal controls, 

comply with applicable laws and regulations, and improve management’s 

ability to make informed decisions. Many of the Foundation’s actions to 

improve its internal controls will be in various stages of implementation 

over the next few months and possibly longer. Until implementation is 

complete, the extent to which these changes will help the Foundation 

monitor and improve the effectiveness of its internal controls and comply 

with applicable laws and regulations cannot be fully assessed.

We provided a draft of this report to the Foundation for comment. In its 

written comments, which are reprinted in appendix I, the Foundation 

stated that it accepted the results of our audit in full. The Foundation also 

provided a summary of the changes it has made in its operations and 

structure since the DOI OIG audit report. Further, the Foundation 

recognized that more needs to be done and stated that it was committed 

to ensuring that all internal controls are adequate and being followed on a 

continuous basis.

We are sending copies of this report to the Executive Director of the 

Morris K. Udall and Stewart L. Udall Foundation, the Deputy Inspector 

General of the Department of the Interior, and the appropriate 

congressional committees. In addition, the report is available at no charge 

on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact 

me at (202) 512-9399 or malenichj@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

Concluding 

Observations

Agency Comments
Page 14 GAO-14-95 Udall Foundation

the last page of this report. GAO staff members who made key 

contributions to this report are listed in appendix II.

J. Lawrence Malenich

Director

Financial Management and Assurance
Page 15 GAO-14-95 Udall Foundation

List of Requesters

The Honorable Barbara A. Mikulski

Chairwoman

Committee on Appropriations

United States Senate

The Honorable Mike Johanns

Ranking Member

Subcommittee on Financial Services and General Government

Committee on Appropriations

United States Senate

The Honorable Ander Crenshaw

Chairman

The Honorable José E. Serrano

Ranking Member

Subcommittee on Financial Services and General Government

Committee on Appropriations

House of Representatives
Appendix I: Comments from the Morris K. 

Udall and Stewart L. Udall Foundation

Page 16 GAO-14-95 Udall Foundation

Appendix I: Comments from the Morris K. 

Udall and Stewart L. Udall Foundation
Appendix I: Comments from the Morris K. 

Udall and Stewart L. Udall Foundation

Page 17 GAO-14-95 Udall Foundation
Appendix I: Comments from the Morris K. 

Udall and Stewart L. Udall Foundation

Page 18 GAO-14-95 Udall Foundation
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 19 GAO-14-95 Udall Foundation

J. Lawrence Malenich, (202) 512-9399 or malenichj@gao.gov

In addition to the contact named above, William Boutboul (Assistant 

Director), Lauren S. Fassler, Patrick Frey, Wilfred Holloway, Gail Luna, 

Vivian Ly, Cynthia Ma, Mary Quinlan, and William T. Woods made 

significant contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(196271)
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