Federal Bureau of Investigation: Weak Controls over Trilogy Project Led to Payment of Questionable Contractor Costs and Missing Assets
Published: 2006-02-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Trilogy project--initiated in 2001--is the Federal Bureau of Investigation's (FBI) largest information technology (IT) upgrade to date. While ultimately successful in providing updated IT infrastructure and systems, Trilogy was not a success with regard to upgrading FBI's investigative applications. Further, the project was plagued with missed milestones and escalating costs, which eventually totaled nearly $537 million. In light of these events, Congress asked GAO to determine whether (1) internal controls provided reasonable assurance that improper payment of unallowable contractor costs would not be made or would be detected in the normal course of business, (2) payments to contractors were properly supported as a valid use of government funds, and (3) FBI maintained proper accountability for assets purchased with Trilogy project funds.
section_title: What GAO Found
paragraphs: FBI's review and approval process for Trilogy contractor invoices, which included a review role for the General Services Administration (GSA) as contracting agency, did not provide an adequate basis to verify that goods and services billed were actually received and that the amounts billed were appropriate, leaving FBI highly vulnerable to payments of unallowable costs. This vulnerability is demonstrated by FBI's payment of about $10.1 million in questionable contractor costs we identified using data mining, document analysis, and other forensic auditing techniques. These costs included first-class travel and other excessive airfare costs, incorrect charges for overtime hours, potentially overcharged labor rates, and charges for which the contractors could not provide adequate supporting documentation to substantiate the costs purportedly incurred. FBI also failed to establish controls to maintain accountability over equipment purchased for the Trilogy project. These control lapses resulted in more than 1,200 missing pieces of equipment valued at approximately $7.6 million that GAO identified as part of its review. In addition, in its own inventory counts, FBI identified 37 pieces of Trilogy equipment valued at approximately $167,000 that had been lost or stolen.

section_title: Letter
paragraphs: For several years Congress recognized that the Federal Bureau of  Investigation’s (FBI) information technology (IT) systems were archaic and  inadequate for efficiently and effectively investigating criminal cases. FBI  recognized the need to modernize its IT systems before the September 11,  2001, terrorist attacks, but those events underscored FBI’s need to improve  its ability to effectively retrieve, analyze, and share investigative  information necessary to carry out its mission. Initiated in mid-2001,  Trilogy—FBI’s largest IT upgrade to date—was intended to modernize  FBI’s IT infrastructure and systems and provide needed applications to  help FBI agents, analysts, and others do their jobs.
The Trilogy project consisted of two primary efforts: an IT infrastructure  update and an upgrade of FBI’s investigative applications. While ultimately  successful in providing the infrastructure update, the project was not a  success with regard to upgrading the investigative applications. Further,  the project experienced numerous schedule delays and cost increases.  Project costs, which were originally estimated at approximately $380  million, eventually escalated to approximately $537 million. Although the  scheduled completion date for the overall Trilogy project was June 2004,  after September 11, 2001, FBI required an accelerated deployment plan and  moved up the expected completion dates. The completion date for the  portion of Trilogy related to upgrading FBI’s IT infrastructure was  accelerated from May 2004 to July 2002. After several delays, the upgrade  was completed in April 2004, a month before the original due date. While  the overall scheduled completion date for the investigative application  upgrades, which became known as the Virtual Case File (VCF), was  originally June 2004, the due date for the first VCF deliverable was  accelerated to December 2003. However, in July 2004 the VCF portion of  the Trilogy project was scaled back after the completion of the project was  determined to be infeasible and cost prohibitive as originally envisioned.
The Department of Justice (DOJ) Office of Inspector General (OIG) has  reported numerous issues that contributed to the cost increases and  delays, including poorly defined and slowly evolving design requirements,  contracting weaknesses, unrealistic task scheduling, and lack of  management continuity and oversight for tracking and overseeing costs  effectively. GAO also reported on weaknesses in FBI’s IT systems  development and management capabilities, including contractor oversight.
Because of these issues, you asked us to audit the costs of the Trilogy  project, the majority of which represented the purchase of goods and  services from contractors. Our objectives were to determine whether   (1) FBI’s internal controls provided reasonable assurance that payment of  unallowable contractor costs would not be made or would be detected in  the normal course of business, (2) FBI’s payments to contractors were  properly supported as a valid use of government funds, and (3) FBI  maintained proper accountability for assets purchased with Trilogy project  funds.
To address these objectives, we used various internal control standards and  guidance as a basis to assess FBI’s internal controls over the payments  made with Trilogy funds.  We also reviewed FBI policy and procedure  manuals; applicable federal regulations, including the Federal Acquisition  Regulation (FAR), Federal Travel Regulation, and Joint Travel  Regulations (JTR); prior GAO and DOJ OIG reports on Trilogy issues;  Trilogy contract documents and interagency agreements; contractor  invoices; and other documentation supporting goods provided and services  rendered.  We performed data mining and forensic auditing techniques to  select transactions to determine whether payments to contractors were  properly supported as a valid use of government funds. We tested  accountable property to determine whether assets were entered in FBI’s  property system and conducted a physical observation of selected assets to  validate their existence. In addition, we conducted interviews with officials  from FBI, General Services Administration’s (GSA) Federal Systems  Integration and Management Center (FEDSIM), Department of the Interior  (DOI), and Trilogy contractors. We also performed walkthroughs to gain an  understanding of the processes used to review and approve invoices and  account for property.  While we identified some payments for questionable  contractor costs, our work was not designed to identify all questionable  payments or to estimate their extent.
We provided FBI a draft of this report and GSA a draft of applicable  sections of this report for review and comment. FBI and GSA provided  written comments, which are reprinted in appendixes III and IV,  respectively. FBI and GSA also provided technical comments, which we  have incorporated as appropriate. We also discussed with Trilogy  contractors any findings that related to them. We performed our work in  accordance with generally accepted government auditing standards in  Washington D.C. and at two FBI field sites and various other GSA and  contractor locations in Virginia from May 2004 through December 2005.  Our scope and methodology are discussed in greater detail in appendix II.
subsections: section_title: Background
paragraphs: Recognizing the need to modernize its IT systems, FBI proposed a major  technology upgrade plan to Congress in September 2000. FBI’s Information  Technology Upgrade Project, which FBI subsequently renamed Trilogy,  was FBI’s largest automated information systems initiative to date.  Trilogy  consisted of three parts: (1) the Information Presentation Component  (IPC) to upgrade FBI’s computer hardware and software, (2) the  Transportation Network Component (TNC) to upgrade FBI’s  communication network, and (3) the User Application Component (UAC)  to upgrade and consolidate FBI’s five most important investigative  applications.
To expedite the contracting process, FBI entered into an interagency  agreement with GSA to support FBI’s use of the FEDSIM Millennia  governmentwide acquisition contract for the implementation of Trilogy’s  three functional components, IPC, TNC, and UAC. FEDSIM, serving as  contracting agency, was to provide all contract administrative services  necessary to support the task orders. Because the Trilogy project was so  large, DOJ required FBI to use two contractors for the three Trilogy  components. FBI combined the IPC and TNC portions of Trilogy into one  task order because both components involved physical infrastructure  enhancements. IPC provided for new desktop computers, servers, and  commercial-off-the-shelf automation software, including Web-browser and  e-mail to enhance usability by the agents. TNC upgraded the complete  communication infrastructure, including high-capacity wide-area and local- area networks, authorization security, and encryption of data transmission  and storage. The IPC/TNC task order was awarded in May 2001 to DynCorp  (now Computer Sciences Corporation (CSC)). The IPC/TNC upgrades  would provide the physical infrastructure needed to run the applications  developed under UAC, the third Trilogy component.
The third component of Trilogy—the UAC task order—was awarded in  June 2001 to Science Applications International Corporation (SAIC). The  goal of UAC was to replace FBI’s paper case files with electronic files and  improve efficiency.  The heart of the UAC portion became the development  of the VCF system to replace the obsolete Automated Case Support system,  FBI’s primary investigative application that uploads and stores case files  electronically.
The above two Trilogy contracts were awarded on a cost-plus-award fee  basis for labor charges, meaning that the contractor’s costs incurred are  reimbursed and fees may be awarded to the contractor based on  performance. The FAR states that cost-reimbursement type contracts may  only be used if appropriate government surveillance during performance  will provide reasonable assurance that efficient methods and effective cost  controls are used.  The aspects of these contracts related to the purchase of  equipment were based on fixed-price arrangements, meaning that a set  price for the equipment is agreed to up front.
In addition to the two primary contracts discussed above, FBI awarded two  additional contracts to assist with the technical oversight, monitoring, and  integration of the two primary Trilogy contracts described above.  The first  of the two additional contracts was awarded in February 2001, also through  GSA FEDSIM, to Mitretek for Systems Engineering and Technical  Assistance (SETA) services. Under the SETA contract, Mitretek was  required to assist FBI with a wide array of tasks, including program and  contract management, fiscal and budgetary oversight, cost estimating, and  several other technical aspects of the Trilogy project. The second of the  two additional contracts was awarded to SAIC for the integration of the  three Trilogy components.
In July 2004, the VCF was scaled back to the Initial Operating Capability  and the remaining deliverables were cancelled after the (1) initial  deliverable was rejected by FBI and (2) VCF was determined to be  infeasible and cost prohibitive to implement as originally envisioned.  After  a 90-day limited pilot that ended in March 2005, VCF offline and the pilot  results were then to be analyzed by FBI for requirements development of  its new electronic information management system initiative. In August  2005, FBI released a solicitation for proposals to develop FBI’s new  electronic information management system, referred to as Sentinel.  The  solicitation was sent to more than 40 eligible companies under a National  Institutes of Health governmentwide acquisition contract. Similar to VCF,  the goal of Sentinel is to replace FBI’s legacy case management capabilities  with an integrated, paperless file management and workflow system.
subsections: section_title: FBI’s Asset Accountability Procedures
paragraphs: According to FBI policy, assets valued at $1,000 or more, as well as certain  sensitive items, such as firearms, laptop computers, and central processing  units, are considered to be “accountable” assets, regardless of cost, and  must be accounted for individually in FBI’s Property Management  Application (PMA).  PMA is an automated management system that allows  FBI to track the cost, location, and history of its accountable assets.  PMA  includes a variety of data fields to identify each item, including the  acquisition date, received date, acquisition cost, last inventory date, bar  code number, serial number, cost center for the office where the item is  located, description of the item, and other information.
Ongoing deficiencies in FBI’s management of property have been identified  by DOJ’s OIG and FBI’s independent financial statement auditor.  In August  2002, the DOJ OIG issued a report that revealed significant problems with  FBI’s management of laptop computers, including findings that FBI did not  reconcile its property management data with purchase data from its  accounting system, did not have an inventory record for accountable assets  not in PMA that were lost or stolen, and could not verify whether the  number of items purchased agreed with the number of items recorded in  PMA. Additionally, in September 2004, the DOJ OIG reported on  weaknesses in FBI’s controls over nonaccountable property at FBI’s  Baltimore field office after an employee pleaded guilty to the theft and sale  of FBI photography equipment. Annually, since fiscal year 1999, FBI’s  independent financial statement auditors have identified internal control  weaknesses in the area of property management.  They specifically  reported that FBI needed to improve its procedures related to the timely  and accurate recording, reconciling, and reporting of property and  equipment in PMA.
section_title: Internal Control
paragraphs: Internal control is a major part of managing any organization. As required  by 31 U.S.C. 3512(c),(d), commonly referred to as the Federal Managers’  Financial Integrity Act of 1982, the Comptroller General issues standards  for internal control in the federal government.  These standards provide  the overall framework for establishing and maintaining internal control and  for identifying and addressing major performance and management  challenges and areas at greatest risk of fraud, waste, abuse, and  mismanagement. According to these standards, internal control comprises  the plans, methods, and procedures used to meet missions, goals, and  objectives. Internal control is the first line of defense in safeguarding assets  and preventing and detecting fraud and errors. Internal control, which is  synonymous with management control, helps government program  managers achieve desired results through effective stewardship of public  resources.
Control activities are the policies, procedures, techniques, and mechanisms  that enforce management’s directives and help ensure that actions are  taken to address risks. Control activities are an integral part of an entity’s  planning, implementing, reviewing, and accountability for stewardship of  government resources and achieving effective results. They include a wide  range of diverse activities. Some examples of control activities include   (1) establishing physical controls over vulnerable assets to reduce the risk  of loss or unauthorized use and periodically counting and comparing such  assets to control records; (2) ensuring that documentation and records are  properly managed and maintained and that transactions are appropriately  documented and readily available for examination; (3) assigning  accountability for the custody and use of resources and records to help  reduce the risk of errors, fraud, misuse, or unauthorized alteration; and   (4) implementing management level reviews at the functional level to  ensure that appropriate control activities are being employed, such as  reconciliations of summary information to supporting detail.
section_title: Insufficient Invoice Review and Approval Process Increased FBI’s Vulnerability to Payment of Unallowable Contractor Costs
paragraphs: FBI’s review and approval process for Trilogy contractor invoices, which  was carried out by a review team consisting of officials from FBI, GSA, and  Mitretek, did not provide an adequate basis to verify that goods and  services billed were actually received by FBI or that payments were for  allowable costs. This occurred in part because responsibility for the review  and approval of invoices was not clearly defined in the Mitretek contract  and in the interagency agreements related to Trilogy project oversight.  In  addition, contactor invoices frequently lacked detailed information  required by the contracts and other additional information that would be  needed to facilitate an adequate invoice review process.  Despite this,  invoices were paid without requests for additional supporting  documentation necessary to determine the validity of the charges.  These  weaknesses in FBI’s review and approval process made the agency highly  vulnerable to payment of unallowable or questionable contractor costs.
subsections: section_title: Invoices Were Approved for Payment without Validation that Goods and Services Were Received
paragraphs: While the review and approval process differed for each contractor and  type of invoice charge, in general the process carried out by the review  team lacked key procedures to reasonably ensure that goods and services  billed were actually received by FBI or that the amounts billed and paid  were for allowable costs. Internal control guidance requires agencies to  establish controls that reasonably ensure, among other things, that funds,  property, and other assets are safeguarded against waste, loss,  unauthorized use, or misappropriation.
Contractor invoices included costs for labor, including related overhead  costs; travel; other direct costs (ODC); subcontractor labor; and purchased  equipment. Table 1 provides a summary of total payments made to Trilogy  contractors for these categories, as well as total Trilogy costs in each  category.
Each member of the review team—which included personnel from FBI;  GSA, the contracting agency; and Mitretek—was to perform some level of  review of the invoices submitted by the contractors for payment.  During  the project, each of the review team members, at times, worked on-site  with the contractors. As is discussed later, the specific roles of each party  were not clearly defined, which limited the effectiveness of the invoice  review and approval process. Figure 1 illustrates this invoice review and  approval process.
Our review disclosed serious gaps in the review process for each of the  major categories of contractor costs, as follows.
Labor—According to GSA, it typically reviewed labor charges by looking  for unusual or excessive hours worked or rates charged and recalculating  some amounts to ensure mathematical accuracy. GSA also stated that its  personnel generally compared average fully burdened labor rates (labor,  overhead, fringe benefits, and general and administration costs) charged to  ceiling rates (maximums) established in the Trilogy contracts. However,  GSA was not able to provide us with an explanation for or evidence of how  they resolved clearly questionable labor charges we identified, including  hours billed far in excess of a normal pay period. For example, we  identified one individual who charged 371 hours for one 4-week period (an  average of 93 hours per week) and 359 in the following 5-week period (an  average of 70 hours per week). There was no evidence that GSA had  questioned whether these seemingly excessive hours were valid. GSA  stated that these types of issues were usually resolved on the telephone and  therefore they usually did not maintain any documentation of their  inquiries.
On-site members of the review team indicated that they generally knew the  contractor employees working on the project and reviewed the hours billed  for reasonableness. However, the review team did not have a systematic  process in place to help ensure that individuals listed on invoices had  actually worked on Trilogy the number of hours being billed or that the job  classifications and related billing rates were appropriate. In addition, there  was no documented assessment of whether the overall hours being billed  for a particular activity were in line with expectations.
Subcontractor Labor—The review team paid contractor invoices for  subcontractor labor without any attempt to assess the validity of the  charges. The GSA official responsible for paying the invoices stated that  the review team relied on the contractors to properly bill for the costs  related to their subcontractors and to validate the subcontractor invoices.  However, the review team had no process in place to assess whether or not  the contractors were properly validating their subcontractor labor charges  or to assess the allowability of those charges. In addition, we found that  CSC, which billed the bulk (i.e., about $116 million) of the subcontractor  labor costs, did not always have sufficient documentation of  subcontractor charges to enable CSC, or anyone else, to perform any  assessment of the allowability of those costs. For example, the only  supporting documentation CSC could provide us for about $2 million in  subcontractor labor charges we selected for review were subcontractor  invoices that lacked some of the basic information needed to assess the  labor costs, such as the names of the subcontractor employees, hours  billed, or individual labor rates.
Travel—These charges were reviewed differently by the review team for  SAIC and CSC invoices.  For SAIC travel, GSA told us they compared  invoiced amounts to travel authorizations and verified the per diem and  lodging rates in the authorizations to those prescribed under the Federal  Travel Regulation.  However, travel authorizations were not always  submitted and approved before travel occurred and in some cases were  based on actual amounts. The review team told us that they reviewed SAIC  travel vouchers or receipts in a few instances over 4 years when amounts  billed were higher than expected to verify the amounts charged on the  travel invoices. However, there was no systematic process to review travel  costs billed to the Trilogy project. For CSC travel, because CSC’s travel  authorizations did not include details by employee or the estimated cost for  each trip and frequently covered several trips, the GSA official who paid  the invoices told us she relied on members of the review team that worked  on-site to review the travel invoices. These on-site review team officials  indicated that their review process was based on their general  understanding of who was traveling. However, we determined that no one  on the review team obtained travel vouchers or receipts to verify that  amounts billed by CSC were a necessary and proper charge to the Trilogy  project and were reasonable based on the location and length of travel  required.
Other Direct Costs (ODC)—These charges were paid without validation  of the actual amounts included in the invoices. The review team relied on  contractors to obtain purchase orders for ODC charges. For SAIC ODC  invoices, the review team generally tracked actual charges billed on  invoices compared to purchase order amounts. However, there was no  review of receipts or other documentation to validate the actual charges on  invoices. CSC ODC invoices were paid without matching the charges to a  purchase order or documentation of the actual cost incurred. Therefore,  the review team had no basis for confidence that CSC ODC charges were  approved ahead of time or appropriately billed. CSC ODC charges also  included subcontractor ODC. We asked CSC for supporting documentation  for selected subcontractor ODC and found that CSC’s only support was  subcontractor invoices that included only a brief description of the nature  of the charge and the amount. No supporting receipts or other  documentation necessary to verify the charges was provided. For example,  CSC billed FBI for ODC of $456,211 on an invoice submitted in November  2003. The only description on the invoice for these charges was “other  direct costs.” We requested from CSC any documentation they had in their  files to support this charge from its subcontractor, CACI Inc. - Federal  (CACI). CSC was able to provide an invoice with one line entitled  “facilities/materials” and a spreadsheet with a general summary of the  charges. Further, the e-mail exchange presented in figure 2 shows that CSC  recognized that they did not have enough detail to review the ODC charge,  but approved the invoice anyway. As noted below, the final entry in the  exchange is, “It’s not what we asked for but at this point it doesn’t really  matter. Approve it.”
Equipment—Charges for equipment purchased by contractors and billed  to FBI were reviewed merely by tracking the total cost of equipment  invoices to ensure that the total amount did not exceed the approved  amount on purchase orders. However, neither GSA, FBI, nor Mitretek  performed procedures to ensure that individual equipment items billed by  the contractors were actually received before payment.  Discussions with  the contractors revealed that this was a high-risk area because some of the  invoices they submitted were for equipment that had not yet been delivered  to FBI.  The review team approved and paid these invoices without  question.  In addition, FBI purchased some IPC/TNC equipment directly  from vendors and delivered the equipment to contractor locations, but did  not have a mechanism in place to physically verify receipt of that  equipment at FBI sites before paying the related invoices. There was also  no subsequent verification by the review team that all equipment  purchased through contractors and vendors was ultimately received by  FBI.
section_title: Invoice Review Responsibilities Were Not Clearly Defined
paragraphs: The insufficient invoice review and approval process was at least in part  the result of a lack of clarity in the interagency agreement between FBI and  GSA FEDSIM, as well as in FBI’s oversight contract with Mitretek. We have  identified the management of interagency contracting as a high-risk area, in  part because it is not always clear with whom the responsibility lies for  critical management functions in the interagency contracting process,  including contract oversight.
The lack of clarity in roles and responsibilities was evident in our  interviews with the review team, where each party indicated that they  believed another party was responsible for a more detailed review. While  contract management and oversight teams were identified in the  interagency agreements, key roles and responsibilities for the review and  approval of invoices were not clearly defined. For example, the terms and  conditions of the interagency agreement with GSA only vaguely described  GSA’s role in contract administration. However, the agreement did not  specify the invoice review and approval steps to be performed. Likewise,  the Mitretek contract provided a general description of its oversight duties,  but did not specifically mention its responsibilities related to the invoice  review and approval process. We did note, however, that FBI did not  approve an invoice for payment until after it was notified by Mitretek that it  had reviewed the invoice. Based on our discussions with the review team,  Mitretek would review its own invoices before sending them forward to  FBI for payment approval.
section_title: Invoices Did Not Provide Adequate Support for All Charges
paragraphs: The failure to establish an effective review process was compounded by  the fact that not all invoices provided detailed information required by the  contracts and other information that would be needed to perform adequate  reviews. Trilogy contractors were required to comply with various  invoicing provisions of the FAR and the Trilogy contracts, including  requirements to provide labor and various overhead rates, travel costs by  trip, transaction detail for ODC, and purchase orders for equipment  purchases. However, we found that the contractors, particularly CSC, often  did not meet these requirements. For example:  CSC labor invoices did not include information related to individual  labor rates or indicate which overhead rates were applicable to each  employee—information needed to verify mathematical accuracy and to  determine that the components of the labor charges were valid.
CSC invoices provided a summary of travel charges by category (airfare,  lodging, etc.), but did not provide required information related to an  individual traveler’s trip costs. The travel invoices also did not provide  cost detail by travel authorization number. Therefore, there was no way  to determine that the trips billed were approved in advance or that costs  incurred were proper and reasonable based on the location and length  of travel.
CSC and SAIC invoices for ODC provided a summary of charges by  category (shipping, office supplies, etc.); however, CSC did not provide  required cost detail by transaction. In some cases, the category of  charges was not even identified. For example, as shown in figure 3,  within the ODC invoice, a subcategory entitled “other direct costs” made  up $1.907 million of the $1.951 million invoice current billing total. No  additional information was provided in the invoice to explain what  made up these “other direct costs.”
For purchased equipment, CSC invoices included a summary sheet— indicating the total price billed, a brief description of items purchased,  and the quantity of each item purchased—and a copy of the related “Bill  of Material” (BOM). However, they did not individually identify each  asset being billed by bar code, serial number, or some other method that  would allow verification of assets billed to assets received. SAIC  invoices also lacked the detailed information necessary to individually  identify assets.  This severely impeded FBI’s ability to determine  whether it had actually received the assets included on invoices and to  subsequently track individual accountable assets on an item-by-item  basis.
We also found that Mitretek, a member of FBI’s review team, submitted  invoices that did not include detailed information needed to perform  adequate reviews. For example, Mitretek’s invoices did not include  individual labor rates needed to verify rates charged with salary  information or overhead rates needed to recalculate labor costs. As  previously noted, Mitretek reviewed its own invoices before sending them  forward to FBI for payment approval.
Even though contractor invoices, particularly those from CSC, frequently  lacked key information needed to review charges, we found through  inquiries with the review team and the contractors that invoices were  generally paid without requesting additional supporting documentation.
section_title: Some Payments Made to Contractors Were for Questionable Costs
paragraphs: Because of the lack of fundamental internal controls over the process used  to pay Trilogy invoices, FBI was highly vulnerable to payment of  unallowable contractor charges. In an attempt to determine the validity of  FBI’s payments, we used forensic auditing techniques, including data  mining and document analysis, to select certain contractor costs and  requested supporting documentation from the contractors. We identified  about $10.1 million of questionable contractor costs paid by FBI. These  included payments for first-class travel and other excessive airfare costs,  incorrect billings for overtime hours, potentially excessive labor rates, and  other questionable subcontractor costs.
The following sections provide additional information on the payments for  questionable costs we found. Given FBI’s poor control environment and the  fact that we only reviewed selected FBI payments to Trilogy contractors  that we identified with data mining and other forensic auditing techniques,  other payments for questionable costs may have been made that have not  been identified.
subsections: section_title: First-Class Travel and Other Excessive Airfare Costs
paragraphs: During our review of CSC’s supporting documentation for selected travel  charges we found 19 first-class airline tickets purchased costing a total of  $20,025, many of which exceeded the basic coach-class fares by significant  margins. For example, in one case a traveler flew first class round trip  between Providence, Rhode Island and San Francisco, California for  $2,159. We estimated that a coach-class ticket for this same trip would have  cost $1,119. In addition, 1 day after returning to Providence, this traveler  flew back to San Francisco.  The documentation provided by CSC did not  explain or justify this first-class travel or unusual travel itinerary.  The CSC  contract called for airfare to be reimbursed to the extent allowable  pursuant to the Joint Travel Regulations (JTR), which state that travelers  must use basic economy or coach class unless the use of first-class travel is  properly authorized and justified. Because the documentation provided  by CSC for the 19 first-class tickets costing $20,025 that we identified did  not contain authorizations or justifications, the cost of this travel in excess  of a coach-class ticket is potentially unallowable. Table 2 provides specific  examples of these potentially unallowable first-class travel costs.
During our review of FBI’s payments for travel costs, we also identified 75  unusually expensive coach-class tickets that were purchased by the  contractors for $100,847, which exceeded basic coach-class fares by  approximately $49,848. Upon further inquiry with several airlines, we  determined that most of these tickets were for “full fare” coach-class  tickets.  We noted that the airlines used most often by the contractors  indicated that it is possible to obtain a free upgrade to first class with the  purchase of the more expensive full-fare coach ticket. We found that in  some instances, the current price of a full-fare coach ticket was higher than  the current price of a first-class ticket. As discussed above, the JTR  requires travelers to use basic economy or coach class unless the use of  first-class travel is properly authorized and justified. The JTR defines  economy class as basic accommodations that include a service level  available to all passengers regardless of fare paid. Since full-fare coach  tickets allow a traveler to upgrade to first class at no additional cost, full- fare coach class does not appear to be basic accommodations available to  all passengers regardless of fare paid. As such, the purchase of full-fare  coach-class tickets is a questionable cost. While the contracts incorporated  the JTR, we determined that the JTR applies to civilian employees of the  Department of Defense and is not considered appropriate “travel  regulations” for contractors. The FAR, which would be appropriate for  contractors, requires the use of the lowest customary standard, coach, or  equivalent airfare and indicates that costs in excess of the lowest  standard, coach, or equivalent airfare are unallowable. Had these  provisions of the FAR been applied, the excessive cost of these tickets  would have been potentially unallowable.
We noted 62 full-fare coach tickets billed by CSC for $85,336, compared to  an estimated cost of $41,978 for the basic fully refundable coach-class  fares.  We also identified 6 full-fare coach tickets billed by SAIC. In addition,  we noted 5 trips billed by SAIC for subcontractor travel with excessive  airfare costs for which the airfare class was not included in the supporting  documentation provided by SAIC. Therefore, we could not determine  whether these 5 trips were first class, full-fare coach, or some other class of  travel that exceeded basic coach-class fares. These 11 tickets cost $11,610,  compared to an estimated cost of $7,897 for the basic fully refundable  coach-class fare.  We further found 2 excessive airfare coach tickets billed  by Mitretek that were upgraded to first class. These 2 tickets cost $3,901,  compared to an estimated cost of $1,123 for the basic restricted coach- class fares. In total, the additional cost of $49,848 for the full-fare coach  tickets and other excessive airfare are considered questionable. Table 3  provides examples of the excessive airfare travel costs of CSC, SAIC, and  Mitretek.
section_title: Excess Overtime Charges
paragraphs: During our review of labor charged by SAIC, we found that SAIC billed the  Trilogy project for overtime hours worked by employees that exceeded the  hours that would have been charged if SAIC followed the overtime policy  informally agreed to by SAIC and FBI. Our calculations indicate that FBI  may have overpaid an estimated $400,000 for these excess overtime  charges.
SAIC’s task order, awarded in June 2001, stated that if work beyond the  standard 40-hour work week was necessary to support the requirements of  the task order, the government would not object to SAIC employees  working an extended work week (EWW) (hours in excess of 40 per week).  For designated EWW periods, exempt staff (professional staff normally not  eligible for overtime compensation) would be paid a pro rata share  (straight time) of their weekly salary based on the extended hours worked.  EWW periods required SAIC management approval and were used when  exempt staff were required to work extended hours for short periods of  time due to special circumstances, such as accelerated project schedules  or circumstances where employees could not dictate their work schedule.
The first EWW period started August 31, 2002, and throughout the Trilogy  project SAIC management approved 11 EWW periods for employees  working on various Trilogy tasks. In March 2003, after the fourth EWW  period started, SAIC implemented an EWW policy, agreed to with FBI,  which decreased the amount of hours that would be billed to FBI. This  policy stated that exempt staff would be compensated for hours worked  that were greater than 90 hours in a 2-week pay period on an hour-for-hour  basis. That meant that the first 10 hours of overtime would be  uncompensated. In addition, a ceiling of 120 hours was established,  meaning that employees would not be compensated for hours worked in  excess of 120 in a pay period. SAIC agreed that it would not bill FBI for this  uncompensated overtime.
During our review of employee labor billings for the Trilogy project, we  found that SAIC employees who charged EWW time after the March 2003  policy frequently charged for all hours worked beyond 80 in a pay period  and that the cost of these hours was billed to and paid by FBI. We also  noted some instances where employees charged EWW beyond the 120-hour  ceiling per pay period, which were also billed. We discussed this issue with  SAIC management and they agreed that their billing of EWW costs was not  consistent with the policy that was established in March 2003 and indicated  that they would research the issue further to determine whether  corrections are necessary.
Based on our review of the labor charges, it appears that FBI may have  overpaid for more than 4,000 hours of EWW labor charges. Using average  fully burdened labor rates for employees incorrectly billing EWW, we  estimated that FBI may have overpaid EWW costs by approximately  $400,000.
section_title: Questionable Labor Rates
paragraphs: During our review of labor charged by CSC/DynCorp, we found that  DynCorp Information Systems (DynIS), a subsidiary of DynCorp that billed  about $42 million or 94 percent of DynCorp’s direct labor, charged actual  labor rates that may have exceeded rates that GSA asserts were established  ceiling rates pursuant to the task order.  CSC asserts that ceiling rates were  never established. If ceiling rates were established, we estimated that FBI  overpaid CSC by approximately $2.1 million.
When DynCorp entered into the GSA FEDSIM Millennia contract, it agreed  to ceiling rates that would be charged for its various labor categories, such  as clerical and senior technician. The Millennia contract also stated that  ceiling rates applicable to subcontractors would be negotiated separately  for each task order awarded under the Millennia contract. After entering  into the Millennia contract, DynCorp acquired a company that was  renamed DynIS. Because DynIS’ labor rates were not considered when  DynCorp’s ceiling rates were established under Millennia, DynCorp’s  proposal for the Trilogy task order listed DynIS as a subcontractor.
In May 2001, GSA issued a Trilogy task order award document to DynCorp  that had a section entitled “Ceiling Rates Applicable to DynIS” that  included the following statement: “Ceilings are placed on all labor category  and indirect rates used to establish the total cost for this task order…These  ceiling rates are subject to negotiation pending the results of [Defense  Contract Audit Agency] DCAA’s audit.”
GSA officials told us they believed that DynIS labor category hourly rates in  DynCorp’s Trilogy proposal represented established labor category ceiling  rates. GSA officials stated that they negotiated DynIS labor category ceiling  rates with DynCorp. However, CSC stated that labor category ceiling rates  were never established because they were never negotiated with GSA.
In March 2003, CSC/DynCorp submitted and GSA approved a modification  to the task order that, according to GSA, increased labor rates for several  categories. However, CSC claims that this modification did not affect the  ceiling rates because the ceilings were never established.
Based on our review of DynCorp’s labor invoices, we noted that several of  DynIS’ rates charged exceeded the labor rates that GSA contended were  ceiling rates. For example, DynIS billed over 14,000 hours for work  performed during 2001 for senior IT analysts working on the Trilogy project  based on an average hourly rate of $106.14. However, if ceiling rates were  established, the DynCorp proposal indicated that the Trilogy project would  be charged a maximum of $68.73 per hour for a senior IT analyst working in  the field or $96.24 per hour for a senior IT analyst working at headquarters.  If ceiling rates were established, we estimated that FBI overpaid  CSC/DynCorp by approximately $2.1 million for DynIS labor costs.
section_title: Other Questionable Costs
paragraphs: We identified certain other payments to contractors that were for  questionable costs. These costs were not supported by sufficient  documentation to enable an objective third party to determine if each  payment was a valid use of government funds. We further identified costs  that were questionable as to whether they were necessary. Table 4  summarizes these questionable costs, which totaled about $7.5 million.
A discussion of each of these questionable costs is provided below.
CSC did not provide us adequate supporting documentation for almost $2  million of about $3.3 million of subcontractor labor charges we selected to  review. The only documentation CSC could provide us for these charges  were subcontractor invoices that lacked some of the basic information  needed to assess the labor charges, such as the names of the subcontractor  employees, hours billed, or individual labor rates. Therefore, CSC could not  fully substantiate that the costs for services provided by the subcontractors  that were charged to FBI’s Trilogy project were appropriate.
CSC hired a subcontractor, CACI, to schedule and conduct training related  to the Trilogy project. CACI billed more than $17 million ($13 million for  labor and $4 million for facilities, equipment rentals, and other direct costs)  to provide FBI agents and employees basic, intermediate, and advanced  training in Microsoft Office applications, including Word, Excel,  PowerPoint, and Outlook. FBI officials stated that FBI decided to conduct  off-site, hands-on training for employees (instead of internal or CD-based  training) because of the number of employees who had limited experience  using computers and because FBI had insufficient space to set up training  labs at their existing facilities.
During our review of CSC ODC, we selected $4.7 million of these training  charges from CACI and found that CSC was unable to provide us with  adequate support for these charges. Subsequently, we requested supporting  documentation from CACI for selected charges totaling about $3.5 million  of these training costs.  Our examination identified the following issues:  CACI could not adequately support almost $3 million that it paid to one  event planning company. Since FBI decided to conduct their training off- site, CACI hired an event planner, which it paid almost $3.2 million to  reserve hotel conference rooms, rent computer equipment for training  sessions, and set up the conference rooms for the training. The bulk of  the $3.2 million related to one purchase order for training at 72 sites  over 3 months, which stated that costs could not exceed $2,992,526. This  purchase order provided for payment of 50 percent of this amount to the  event planner at the time the purchase order was issued (to cover costs  that include prepayments for obtaining training facilities) and four equal  monthly payments for the remaining balance. CACI provided us with the  purchase order, which included a description of the services to be  performed by the event planner. They also provided us copies of  invoices from the event planner that included general descriptions of  the services billed. CACI could not provide any further evidence of the  actual costs of goods or services that were provided by the event  planner, such as hotel invoices for the rental of conference rooms.   CACI stated that documentation supporting actual costs of the event  planner was not applicable because its agreement with the event  planner was “fixed priced.” CACI stated that the payment terms in the  purchase order required only that CACI pay the event planner a series of  payments in fixed amounts. However, CACI’s assertion that supporting  documentation of actual costs was not applicable was not supported by  the terms of the purchase order, which included a related statement of  work that specifically required documentation to support costs claimed  by the event planner. According to the statement of work, the event  planner was required to (1) provide data on actual costs incurred twice  a month, (2) make every attempt to obtain the best pricing with respect  to all costs, and (3) charge CACI only for services rendered, allowing for any cost savings from advance payments to be returned to CACI upon  request.
CACI purchased about 30,000 ink pens and 30,000 highlighters for  training sessions, at a cost of $19,705 and $32,314, respectively. The pens  were custom made for the Trilogy training program. While there was  supporting documentation for these costs and FBI officials stated that  they preapproved the purchases as part of their acceptance of the  Trilogy Pre-Training Education Plan, we question whether these  purchases were necessary.
Example 3—Other Direct Costs/Equipment Disposal CSC was unable to provide us adequate supporting documentation for  $762,262 in equipment disposal costs billed by two subcontractors. The  documentation provided consisted of a spreadsheet that summarized costs  of the subcontractors, but did not include receipts or other support to  prove that these costs were actually incurred.
Example 4—Subcontractor Labor Invoice–Duplicate Payment Our review of SAIC’s subcontractor labor charges found that FBI was billed  twice for the same subcontractor invoice totaling $26,335. SAIC officials  agreed that they double billed and stated that they would make a  correction.
section_title: Major Lapses in Accountability Resulted in Millions of Dollars of Missing Trilogy Equipment
paragraphs: FBI did not adequately maintain accountability for computer equipment  purchased for the Trilogy project.  FBI relied extensively on contractors to  account for Trilogy assets while they were being purchased, warehoused,  and installed. However, FBI did not establish controls to verify the  accuracy and completeness of contractor records it was relying on, to  ensure that only the items approved for purchase were acquired by the  contractors, and to ensure that it received all those items acquired through  its contractors.  Moreover, once FBI took possession of the Trilogy  equipment, it did not establish adequate physical control over the assets.  Consequently, we found that FBI could not locate over 1,200 assets  purchased with Trilogy funds, which we valued at approximately $7.6  million.  In addition, during its physical inventory counts for fiscal years  2003 through 2005, FBI identified over 30 pieces of Trilogy equipment  valued at about $167,000 that it reported as having been lost or stolen. Due  to the significant weaknesses we identified in FBI’s property controls, the  actual amount of lost or stolen equipment could be even higher.
subsections: section_title: FBI’s Overreliance on Contractors Diminished Its Ability to Properly Account for Trilogy Assets
paragraphs: FBI relied on contractors to maintain records related to the purchasing,  warehousing, and installation of about 62 percent of the equipment  purchased for the Trilogy project. FBI’s primary contractor responsible  for delivering computer equipment to FBI sites was CSC. FBI officials told  us they met regularly with CSC and its subcontractors to discuss FBI’s  equipment needs and a deployment strategy for the delivery of equipment.  Based on these meetings, CSC instructed its subcontractors to purchase  equipment, which was subsequently shipped to and put under the control  of the subcontractors. Once equipment arrived at the subcontractors’  warehouses, they were responsible for affixing bar codes on accountable  items—all items valued above $1,000 and certain others considered  sensitive that are required by FBI policy to be tracked individually.  In  addition, FBI directly purchased about $19.1 million of equipment for the  Trilogy project that was shipped directly to CSC or its subcontractors.
When equipment was shipped from subcontractor warehouses to FBI sites,  the shipment included two CSC subcontractor-prepared reports. The first  report, similar to a bill of lading, included all items shipped, including  nonaccountable items such as cables. However, there was no requirement  for FBI officials receiving the items to verify that the items included on this  report were actually received. The second report listed accountable assets  that were delivered such as desktop computers, scanners, printers, and  network equipment that were available for installation at that location.   This report was then used by the subcontractor during the installation of  equipment at each FBI location to prepare the “Site Acceptance Listing”  documenting equipment that had been accepted and installed at the site. At  the completion of the site installation, both FBI and subcontractor officials  were required to sign this Site Acceptance Listing.  According to FBI  headquarters officials, verification of the subcontractor-prepared Site  Acceptance Listings represented a key control over Trilogy equipment,  providing assurance that FBI received what it should have. However, based  on our inquiries at two field offices we visited, we found that FBI officials  who received equipment and signed the Site Acceptance Listing, may not  have always verified the accuracy and completeness of these lists.
An official from the Baltimore field office acknowledged that he signed  these lists without verifying that the items included had actually been  delivered and installed at his site. In addition, officials from the Newark  field office said they felt comfortable that they had received all the items  they were supposed to because of their close working relationship with the  subcontractor who performed the installation; however, they  acknowledged that they did not independently verify equipment included  on the contractor lists that they had signed. FBI did not prepare its own  independent lists of ordered, purchased, or paid-for assets, and therefore, it  had no choice but to rely solely on the contractor lists to account for its  Trilogy assets.
Furthermore, when FBI received shipments from contractors, it did not  compare purchasing and billing documentation to receiving documentation  to verify that all items purchased were received as required by FBI’s  accountable asset manual. According to FBI policy, when shipments are  received, a designated property custodian is responsible for ensuring that  the items received are the same as those that were ordered and for  determining whether a complete or partial shipment was received.  However, FBI did not require that these procedures be followed for the  Trilogy project because purchasing and billing documentation for the  project was not site specific; instead, the program office instructed FBI  staff to only verify the number of boxes received and not to open the boxes  to verify the assets received until the deployment team arrived.  In addition,  FBI did not perform an overall reconciliation of total assets ordered and  paid for to those received.   Such a reconciliation would have been made  difficult by the fact that invoices FBI received from CSC did not include  item-specific information—such as bar codes, serial numbers, or shipping  location.  However, failure to perform such a reconciliation left FBI with no  assurance that it had received all of the assets it paid for.
section_title: FBI Lacked Adequate Physical Control over Trilogy Assets
paragraphs: Assets that were delivered to FBI sites by contractors were not entered into  FBI’s Property Management Application (PMA) in a timely manner,  increasing the risk that assets could be lost or stolen without detection. FBI  policy requires property management personnel to identify accountable  items and enter them into PMA within 30 days of receipt. However, FBI  officials acknowledged that Trilogy equipment had not been entered into  PMA within 30 days, as required. We compared installation dates recorded  in CSC’s database of assets deployed to dates assets were recorded in  PMA.  As shown in table 5, we found that 71.6 percent of the CSC items that  were recorded in PMA, representing 84 percent of the dollar value, were  entered more than 30 days after receipt, contrary to FBI policy.  In addition,  16.9 percent of the assets, representing 37 percent of the dollar value, were  entered more than a year after receipt.  When an asset is not recorded in  the property system, there is no systematic means of identifying where it is  located or when it is moved, transferred, or disposed of and no record of its  existence when physical inventories are performed.  This severely limits  the effectiveness of the physical inventory in detecting missing assets.
In an effort to identify the assets that should have been entered into PMA,  FBI attempted to create, in 2005, an after-the-fact inventory listing of  accountable and nonaccountable assets deployed.  Because FBI had not  prepared its own independent inventory listing of Trilogy assets ordered  and paid for, it used the CSC-prepared list of equipment deployed as its  basis to determine accountable assets. According to FBI, this list was  supposed to include all CSC-deployed equipment that had been affixed  with a bar code. However, FBI’s ability to accurately identify accountable  assets was hampered by its loss of control over bar codes. FBI policy  identifies the use of bar codes as “the key control” for maintaining  individual asset accountability and requires that bar codes be affixed to all  accountable assets. Despite the importance of maintaining a reliable bar  code system, FBI relied on contractors to affix the bar codes, but then did  not track the bar code numbers given to contractors, the bar code numbers  they used, or the bar code numbers returned. Moreover, FBI provided  incorrect instructions to contractors, initially directing them to bar code  certain types of nonaccountable computer pieces.
An FBI official stated that when creating its after-the-fact listing of  accountable and nonaccountable assets from the CSC listing, FBI tried to  identify and list as nonaccountable those items that had been mistakenly  bar coded. However, we found that FBI’s accountable asset listing still  included some nonaccountable assets that had been bar coded in error.  Further, we noted that FBI’s listing of nonaccountable assets incorrectly  included some accountable items such as uninterruptible power supplies  and network switches. As a result, FBI could not reliably determine the  complete universe of Trilogy assets that should have been bar coded and  designated as accountable property to be tracked separately by PMA.
We also compared FBI’s after-the-fact listing of accountable assets  identified from the CSC-prepared listing to the asset records in FBI’s PMA.  We found that FBI’s listing and or PMA included several errors and  omissions in the listings, including:  accountable assets for which there was no listed bar code or serial   incorrect bar codes (for example, text bar codes or bar codes with too   items for which locations were listed as “unknown”;  assets with the same bar code with different serial numbers and/or   incomplete and inaccurate asset descriptions;  items that matched to PMA by bar code but not by serial number; and  items that matched to PMA by serial number but not by bar code.
The FBI official who prepared the accountable asset listing said he gave  this listing to each site with instructions to ensure that all of the assets had  been entered into PMA in preparation for a 2005 physical inventory count.   However, FBI did not follow up to determine whether all of the records in  the inventory listing were actually entered into PMA.  For site officials  using the listing, the lack of complete and accurate information included in  the inventory listing may have limited their ability to track some of the  assets and ensure they were accounted for in PMA.
FBI policy requires complete physical inventories of all accountable assets  at least once every 2 years.  Annually, a complete physical inventory of all  accountable assets that are also capitalized assets (i.e., those with an  acquisition cost of $25,000 or more) and “sensitive” property (e.g., laptop  computers and weapons which are susceptible to theft) is performed.   FBI’s most recent biennial inventory of accountable assets occurred in the  spring of 2005.  To complete its inventory, FBI used scanner technology,  directing employees responsible for performing the inventory to scan all  items found at FBI locations that contained a bar code.  PMA was updated  to reflect the items that were located and scanned during the inventory and  generated reports to identify new accountable assets that were not  previously entered in the system.  However, FBI did not compare the  results of its inventory to its listing of accountable assets purchased under  Trilogy to ensure that all of these assets were actually located during the  inventory.  Failing to perform this elemental step undermines the  fundamental purpose of conducting physical inventories.
section_title: FBI Is Unable to Locate Millions of Dollars of Trilogy Assets
paragraphs: Given that FBI did not ensure that all accountable Trilogy assets that  should have been in its possession (i.e., those it paid for) were located  during the physical inventory, we undertook several procedures in an  attempt to do so. To perform this test work, we used FBI’s inventory listing  of CSC-purchased accountable equipment as well as similar FBI listings of  assets FBI purchased directly (government furnished equipment or GFE)  and that were purchased by SAIC. Although FBI’s inventory listing of CSC- purchased accountable equipment included inaccurate and incomplete  information, as previously discussed, we were able to reconcile the total  number of items for selected types of equipment from its listing of  accountable CSC-purchased equipment to the number of these assets  invoiced by CSC. This provided some assurance that the listing of  accountable CSC-deployed equipment purchased by both CSC and FBI for  those asset types includes all accountable assets FBI paid for and that  should be in FBI’s possession. This was done for selected CSC-purchased  accountable assets, which represented approximately 76 percent of the  total number of CSC-purchased equipment, and all SAIC-purchased assets.  Therefore, we used these asset listings to determine whether accountable  assets were located during FBI’s most recent physical inventory.
We obtained several iterations of PMA listings and inventory reports from  FBI and attempted to trace the assets to these reports. Collectively, these  listings and reports should have included all accountable Trilogy assets in  FBI’s possession at the time of its 2005 inventory.  Based on this  comparison, we identified 1,205 accountable Trilogy assets, with an  estimated value of approximately $7.6 million that FBI has been unable to  locate or otherwise account for.  We estimated this value using the lowest  per-unit-cost based on the Trilogy equipment-pricing sheets that were  prepared by FBI and used in recording the cost of the same types of assets  in PMA.  If we could not identify a price for a certain type of accountable  asset in FBI’s equipment-pricing sheets, we identified the lowest price on  the accountable and capitalized assets spreadsheet prepared by FBI’s  finance division.  When the cost was not available on either of these  documents, or when the item was unknown, we did not attempt to estimate  the asset’s value.  As a result, our estimated value of lost or stolen  equipment does not include 103 of the 926 CSC-purchased items we  identified, such as Paradyne frame savers and Optical HBA drivers, and  therefore is understated.  Table 6 provides a description and estimated  value for the assets for which we could identify unit cost.
As of November 30, 2005, FBI was unable to sufficiently explain why these  items were not accounted for in PMA and/or could not provide adequate  documentation that the assets had been located.  An FBI official stated that  some of the assets included in the listing of CSC-purchased equipment  would not be expected to be in PMA because some were replaced.  For  example, according to the official, some of the CSC-purchased switches  were replaced due to a heating malfunction.  However, FBI did not provide  us with documentation related to replaced items, and therefore we could  not determine which units if any were replaced and/or which units should  still be on hand.
The FBI official also told us that, even though he attempted to remove all  nonaccountable items from the listing of CSC-purchased equipment, some  nonaccountable items may still have been included.  For example, FBI told  us some purchased components that were a part of an accountable asset  unit may have been bar coded even though the item by itself was not an  accountable item.  Using FBI guidance on accountable property, we  determined that 103, or about 11.1 percent, of the missing 926 CSC- purchased assets may represent nonaccountable units. Because FBI was  unable to provide us with location information for these items, we could  not definitively determine whether they represent nonaccountable  components or are separate accountable assets that were not in PMA and  could not be located.  FBI had no further explanation for why it could not  locate the missing assets we identified or whether the missing assets we  identified may expose confidential and sensitive information and data to  unauthorized users.
In addition to the missing items discussed above, FBI could not initially  locate another 25 purchased assets—highly-sensitive encryption  equipment—in its PMA system.  Subsequently, FBI officials were able to  provide the bar codes, locate the encryption equipment, and provide  evidence that all of the items were now in its PMA system.  The officials  stated the equipment was not originally required to be bar coded or tracked  in PMA, but that it was tracked several different ways by serial number.   The officials also explained that the problem resulted mostly from FBI  modifications to the equipment that required revisions to the serial  numbers listed in the invoices.  Regardless of the fact that the equipment  was subsequently located after research and inquiries, such highly sensitive  equipment needs to be properly and timely accounted for to ensure the  precise location of the equipment can be immediately determined at all  times.
In addition to the items we found missing, FBI’s property management  division reported 37 CSC-purchased Trilogy assets, totaling approximately  $167,000, that were determined to be lost or stolen during its physical  inventory counts for fiscal years 2003  through 2005.  The assets reported  as lost or stolen included computers and servers, which may have  contained sensitive and confidential information. According to FBI policy,  for items in PMA that cannot be located during the inventory, a “Report of  Lost or Stolen Property” must be submitted to FBI headquarters.  Due to  security concerns, FBI did not provide us copies of these reports for the  property items that were not located during the 2003, 2004, and 2005  inventories. Therefore, it is unclear what type of security risk if any these  lost/stolen assets represent.
section_title: Conclusions
paragraphs: FBI’s Trilogy IT project spanned 4 years and the reported costs exceeded  $500 million.  Our review disclosed that there were serious internal control  weaknesses over the process used by FBI and GSA to approve contractor  charges related to Trilogy, which made up the vast majority of the total  reported project cost. While our review focused specifically on the Trilogy  program, the significance of the issues identified during our review may be  indicative of more systemic contract and financial management problems  at FBI and GSA, in particular when using cost-reimbursable type contracts  and interagency contracting vehicles.  These weaknesses resulted in the  payment of millions of dollars of questionable contractor costs, which may  have unnecessarily increased the overall cost of the project.  Unless FBI  strengthens its controls over contractor payments, its ability to properly  control the costs of future projects involving contractors, including its new  Sentinel project, will be seriously compromised.  Additionally, to the extent  that GSA enters into similar interagency agreements, it will continue to be  exposed to oversight lapses until it reassesses its procedures. Further,  weaknesses in FBI’s controls over the equipment acquired for Trilogy  resulted in millions of dollars in missing equipment, and call into question  FBI’s ability to adequately safeguard its equipment, as well as confidential  and sensitive information that could be accessed through that equipment  from unauthorized use.
section_title: Recommendations for Executive Action
paragraphs: We are making the following 27 recommendations to the Director of FBI  and the Administrator of General Services to (1) facilitate the effective  management of interagency contracting, (2) mitigate the risks of paying  unallowable costs in connection with cost-reimbursement type contracts,  and (3) improve FBI’s accountability for and safeguarding of its computer  equipment.
To improve FBI’s controls over its review and approval process for cost- reimbursement type contract invoices, we recommend that the Director of  FBI instruct the Chief Financial Officer to establish policies and  procedures so that:  Future interagency agreements establish clear and well-defined roles  and responsibilities for all parties included in the contract  administration process, including those involved in the invoice review  process, such as contracting officers, technical point of contacts,  contracting officer’s technical representatives, and contractor personnel  with oversight and administrative roles.
Appropriate steps are taken during the invoice review and approval  process for every invoice cost category (i.e., labor, travel, other direct  costs, equipment, etc.) to verify that the (1) invoices provide the  information required in the contract to support the charges, (2) goods  and services billed on invoices have been received, and (3) amounts are  appropriate and in accordance with contract terms.
The resolution of any questionable or unsupported charges on  contractor invoices identified during the review process is properly  documented.
Labor rates, ceiling limits, treatment of overtime hours, and other key  terms for cost determination are clearly specified and documented for  all contracts, task orders, and related agreements.
Future contracts clearly reflect the appropriate Federal Acquisition  Regulation travel cost requirements, including the purchase of the  lowest standard, coach, or equivalent airfare.
An appropriate process is in place to assess the adequacy of contractor’s  review and documentation of submitted subcontractor charges before  such charges are paid by FBI.
In light of the findings in this report, we recommend that the Administrator  of General Services instruct the director of FEDSIM to reassess its  procedures in connection with (1) interagency contracts and (2) delegated  contract administration responsibilities, including the following:  Clearly defining the roles and responsibilities of each party in  interagency agreements, and particularly those related to reviewing and  approving invoices.
Assessing the adequacy of its invoice review and approval polices,  including specific steps to be performed by each party so that   (1) invoices provide the information required in the contract to support  the charges, (2) goods and services billed on invoices have been  received, (3) amounts are appropriate and in accordance with contract  terms, and (4) the resolution of any questionable or unsupported  charges on contractor invoices identified during the review process is  clearly documented.
Clearly documenting labor rates, ceiling limits, treatment of overtime  hours, and other key terms for cost determination for all contracts, task  orders, and related agreements.
Clearly reflecting in future contracts the appropriate Federal  Acquisition Regulation travel cost requirements, including the purchase  of the lowest standard, coach, or equivalent airfare.
Confirming that contractors properly review and support submitted  subcontractor charges.
To address issues on the Trilogy project that could represent opportunities  for recovery of costs, we recommend that the Administrator of General  Services, in coordination with the Director of FBI:  Confirm SAIC’s informal Extended Work Week policy and work with  SAIC to determine and resolve any overpaid amounts.
Further investigate whether DynIS’ labor rates exceeded ceiling rates  and pursue recovery of any amounts determined to have been overpaid.
Determine whether other contractor costs identified as questionable in  this report should be reimbursed to FBI by contractors.
Consider engaging an independent third party to conduct follow-up  audit work on contractor billings, particularly areas of vulnerability  identified in this report.
To improve FBI’s accountability for purchased assets, we recommend that  the Director of FBI instruct the Chief Financial Officer to:  Establish policies and procedures so that (1) purchase orders are  sufficiently detailed so that they can be used to verify receipt of  equipment at FBI sites, and (2) contractor invoices are formatted to tie  directly to purchase orders and facilitate easy identification of  equipment received at each FBI site.
Reinforce existing policies and procedures so that when assets are  delivered to FBI sites, they are verified against purchase orders and  receiving reports.  Copies of these documents should be forwarded to  FBI officials responsible for reviewing invoices as support for payment.
Establish policies and procedures so that invoices are paid only after all  verified purchase order and receipt documentation has been received by  FBI payment officials and reconciled to the invoice package.
Establish a policy to require that, upon receipt of property at FBI sites,  FBI personnel immediately identify all accountable assets and affix bar  codes to them.
Revise FBI’s policies and procedures to require that all bar codes are  centrally issued and tracked through periodic reconciliation of bar  codes issued to those used and remaining available. Assigned bar codes  should also be noted on a copy of the receiving report and forwarded to  FBI’s Property Management Unit.
Revise FBI policies and procedures to require that accountable assets  be entered into PMA immediately upon receipt rather than within the  current 30-day time frame.
Require officials inputting data into PMA to enter (1) the actual  purchase order number related to each accountable equipment item  bought, (2) asset descriptions that are consistent with the purchase  order description, and (3) the physical location of the property.
Establish policies and procedures related to the documentation of  rejected or returned equipment so that the (1) equipment that is rejected  immediately upon delivery is notated on the receiving report that is  forwarded to FBI officials responsible for invoice payment; and (2)  equipment that is returned after being accepted at an FBI site (e.g.,  items returned due to defect), is annotated in PMA, including the serial  number and location of any replacement equipment, under the  appropriate purchase order number.
Reassess overall physical inventory procedures so that all accountable  assets are properly inventoried and captured in the PMA system and  that all unlocated assets are promptly investigated.
Expand the next planned physical inventory to include steps to verify  the accuracy of asset identification information included in PMA.
Establish an internal review mechanism to periodically spot check  whether the steps listed above—including verifications of purchase  orders and receiving reports against received equipment, immediate  identification and bar coding of accountable assets, maintenance of  accurate asset listings, prompt entry of assets into PMA, documentation  of rejected and returned equipment, and improved bar coding and  inventory procedures—are being carried out.
Investigate all missing, lost, and stolen assets identified in this report to  (1) determine whether any confidential or sensitive information and  data may be exposed to unauthorized users; and (2) identify any  patterns related to the equipment (e.g., by location, property custodian,  etc.) that necessitates a change in FBI policies and procedures, such as  assignment of new property custodians or additional training.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments reprinted in appendix III, FBI stated that it concurred  with our recommendations and that it has made and continues to make  significant structural and procedural changes to address our  recommendations, taking critical steps to strengthen internal controls.  FBI  also provided additional information related to Trilogy assets we identified  as missing. In written comments reprinted in appendix IV, GSA stated that  it accepted our recommendations, did not believe that 1 of them was  needed, and described some of the improvements to its internal controls  and other business process changes already implemented. GSA also  expressed concern with some of our observations and conclusions related  to the invoice review and approval process and our analysis of airfare  costs. FBI and GSA also provided technical comments, which we have  incorporated as appropriate.
In its comments, FBI stated that executive management at FBI has directed  a sustained effort to address and correct weaknesses identified in our  report and other Trilogy reviews. FBI further stated that attention is being  focused on four areas: (1) audit capability, (2) property management,   (3) contracting services, and (4) IT investments.  If properly implemented,  the activities outlined in FBI’s letter should help improve FBI  accountability for future IT acquisitions and other contract services.  In this  regard, vigilant oversight will be needed to ensure controls are correctly  designed and operating effectively to protect assets and prevent improper  payments.
Further, in its comments, FBI stated that more than 44,000 pieces of  accountable property were successfully deployed and tracked in the FBI’s  PMA during the Trilogy project. FBI also stated that the 1,404 items we  initially reported as missing or improperly documented represented  approximately 3 percent of the accountable assets.  We question both of  these statements.  Because of the control weaknesses discussed in our  report, FBI does not have a reliable basis to know the number of Trilogy  assets it purchased or how many should have been tracked as accountable  assets. Further, since we did not test all the assets purchased, more may be  missing.
FBI also stated that as of January 2006, it had accounted for more than  1,000 of the 1,404 items we reported as missing or improperly documented.   During our agency comment period, FBI indicated that it found 237 items  we previously identified as missing and provided evidence, not made  available during our audit, to sufficiently account for 199 of these items.
We adjusted the missing assets listing in our report to reflect 1,205 (1,404 –  199) assets as still missing.  In February 2006, FBI informed us that the  approximately 800 remaining items noted in its official agency response  included (1) accountable assets not in PMA because they were either  incorrectly identified as nonaccountable assets or mistakenly omitted,   (2) defective accountable assets that were never recorded in PMA and  subsequently replaced, and (3) nonaccountable assets or components of  accountable assets that were incorrectly bar coded.
We considered these same issues during our audit and attempted to  determine their impact.  For example, as stated in our report, FBI told us  that components of some nonaccountable assets that were part of a larger  accountable item may have been mistakenly bar coded.  Using FBI  guidance on accountable property, we determined that 103 or about 11  percent of the 926 missing assets purchased by CSC may have represented  nonaccountable components.  Because FBI could not provide us with the  location information, we could not definitively determine whether the  items were accountable assets or not.  During the course of our audit, FBI  was not able to provide us with any evidence to support their other  statements regarding the reasons the assets could not be located.  While we  are encouraged by FBI’s current efforts to account for these assets, its  ability to definitively determine their existence has been compromised by  the numerous control weaknesses identified in our report.  Further, the fact  that assets have not been properly accounted for to date means that they  have been at risk of loss or misappropriation without detection since being  delivered to FBI—in some cases for several years.
While GSA said it accepted all of our recommendations, it expressed  reservations regarding our recommendation that GSA should clearly reflect  appropriate FAR travel cost requirements in future contracts. GSA stated in  its comment letter that it believed that the requirements outlined in the  applicable FAR section 31.205-46 and stipulated in the task orders were  more than adequate. In a subsequent conversation, we asked the GSA  contracting officer why the language in the CSC and SAIC task orders and  the Mitretek contract, which stated that long-distance travel would be  reimbursed to the extent allowable pursuant to the JTR, was considered  appropriate by GSA. The GSA contracting officer stated that, while not  specified in the contract language, the reference to the JTR related only to  per diem rates and allowances when determining the reasonableness of the  travel costs, such as lodging and mileage reimbursements. She further  stated that the FAR would apply to all other travel reimbursement  determinations.
We do not agree that our recommendation is unnecessary. In our view, the  references to the JTR create ambiguity. The FAR cost allowability clause  52.216-7 states that when determining allowability, in addition to FAR cost  principles, the terms of the contract also apply. Therefore, the reference to  the allowability under the JTR could have caused confusion with the  contractors regarding what long-distance travel costs were allowed,  including airfare costs. We continue to believe that the task orders should  have more clearly described the applicable travel requirements.
Regarding the invoice review and approval process, GSA stated that each  member of the review team—FBI, GSA, and Mitretek—played a unique and  mutually understood role.  In particular, GSA stated that Mitretek’s role in  the invoice review and approval process was significant and that it was  reasonable for GSA to have relied on input from FBI, via Mitretek, in  approving invoices for payment. GSA also referred to procedures to  preapprove ODC and equipment purchases. Further, GSA stated that it  believed that the procedures to process invoices were generally sound and  that contractors are required to maintain records to adequately  demonstrate that costs claimed have been incurred, and are reasonable,  allowable, and allocable. GSA also stated that it will have DCAA audit the  contract costs to determine if any costs are unallowable, unreasonable, or  unallocable and will use the audit results as a basis to pursue remedies to  recoup funds and assess penalties as may be applicable.
We disagree with GSA regarding review team roles and the review process.  Based on discussions with members of the review team, our review of  supporting documentation, and our assessment of the outcomes of the  review process, it is clear that the invoice review and approval process was  inadequate. The roles and responsibilities of the review team members  were not clearly defined or documented and this led to confusion among  the review team members about each member’s role. Regarding Mitretek’s  role, Mitretek officials stated that they performed a limited review of only  labor invoices. Before relying on others, GSA should have verified its  understanding of each member’s roles and responsibilities and confirmed  that the appropriate functions were being performed. In addition, while  there were procedures to preapprove ODC and equipment purchases, the  review team did not effectively link the preapproval and the invoice review  and approval processes, especially in relation to CSC, in part because CSC  invoices lacked detailed information needed to verify that charges billed  were in fact preapproved.
Further, while contractors are required to maintain records to adequately  support costs, we found that the review team generally did not request  additional documentation such as travel vouchers or subcontractor  invoices to support amounts billed. If the review team had a systematic  process in place to review costs, it may have questioned some of the  excessive airfare we identified and found, as we did, that CSC lacked  documentation to adequately support subcontractor charges. It is a  management function and sound business practice to have a process in  place to ensure that contractors have such documentation. Having such  processes and questioning amounts billed would also allow for corrective  measures to be implemented as, and if, problems were found. In addition,  while we agree that a DCAA audit of contract costs can provide a detective  control to help determine whether contractor costs were proper, reliance  on an after-the-fact audit is not an acceptable replacement for the type of  real-time monitoring and oversight of contractor costs—preventative  controls—we recommend in this report. Further, a DCAA audit of civilian  contractor costs is not automatic and would require an additional cost to  the government to procure. The review team largely operated in an  environment of trust without an adequate basis for knowing whether the  contractor billings were reasonable and costs claimed were allowable.  Effective internal control calls for a sound, on-going invoice review and  approval process as the first line of defense in preventing unallowable  costs.
Regarding our analysis of travel costs, GSA stated that our conclusions did  not account for the ever-changing travel schedules and itineraries  necessitated by changes in FBI requirements.  GSA also stated that a  hypothetical standard coach-class ticket does not provide a benchmark to  make a valid price comparison, even if adjusted for inflation, because the  airline travel industry has had significant changes with respect to pricing of  airline tickets. GSA also stated that they believe it is impossible at this date  to look back over 5 years and estimate what may have been a reasonable  airfare price.
We disagree. Our analysis and conclusions related to travel did take into  account the possible conditions that could justify airfare costs in excess of  the lowest customary coach-class fare. The FAR requires supporting  documentation for first-class and other excessive airfare costs of the  nature we identified to justify the higher airfare costs. No such  documentation was provided to us to justify the excessive costs we  identified. To estimate the cost of the coach-class tickets, we assumed that  tickets were purchased 3 days in advance (which was the average based on  the trips we reviewed) and did not include a Saturday night stay over.  Specifically, we (1) used the Web sites of the airlines used by each traveler,  (2) searched for standard fully-refundable coach-class tickets with the  same destinations, (3) calculated an average cost based on the lowest and  highest ticket prices available at the time of our search, and (4) adjusted  the average cost for inflation applicable to airfare. We believe that this  approach, which closely approximated what travelers were doing at that  time, resulted in reasonable estimates as to how much the travel should  have cost. We also believe that adjusting current fares for inflation  applicable to airfare results in a reasonable benchmark to compare to  historical prices, since it does take into account price changes as a result of  changes in the airline industry, including the effects of competition. Lastly,  we fully agree with GSA that the passage of time makes it difficult to  determine historical airfare costs, which is another reason that costs  should be reviewed real time instead of as part of an after-the-fact audit. An  after-the-fact analysis is no substitute for the contemporaneous monitoring  and oversight that we recommend in this report.
More specific discussions are provided following GSA’s comments, which  are reprinted in appendix IV.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  date. At that time, we will send copies of this report to the Director of the  FBI, the Acting Administrator of GSA, and interested congressional  committees. Copies will also be made available to others upon request. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-9508 or calboml@gao.gov. Contact points for our offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are acknowledged in  appendix V.
section_title: Key Trilogy Milestones
paragraphs: The Federal Bureau of Investigation’s (FBI) Trilogy project experienced  several delays, as shown in figure 4.
section_title: Scope and Methodology
paragraphs: To determine whether the Federal Bureau of Investigation’s (FBI) internal  controls provided reasonable assurance that improper payments to  contractors would not be made or would be detected in the normal course  of business, we used the Standards for Internal Control in the Federal  Government, Guide for Evaluating and Testing Controls Over Sensitive  Payments, and The Executive Guide on Strategies to Manage Improper  Payments: Learning from Public and Private Sector Organizations as a  basis for assessing FBI’s internal control structure over its Trilogy program.   We also reviewed our prior reports, as well as those by the Department of  Justice’s Office of Inspector General on Trilogy issues; Trilogy contracts  and interagency agreements; and contractor invoices and other  documentation supporting goods provided and services rendered.  In  addition, we conducted interviews with officials from FBI, the General  Services Administration, the Department of the Interior, and the  contractors, and performed walkthroughs to gain an understanding of the  processes used to review and approve invoices.
subsections: section_title: Validity of Payments
paragraphs: To determine whether FBI’s payments to contractors were properly  supported as a valid use of government funds, we performed data mining,  document analysis, and other forensic auditing techniques to select  transactions to test. We reviewed documentation maintained by the review  team, contractors, or subcontractors to assess the allowability of costs  based on Trilogy contract documents and applicable federal regulations,  such as the Federal Acquisition Regulation, Federal Travel Regulation,  and Joint Travel Regulations. While we identified some payments for  questionable costs, our work was not designed to identify all questionable  payments or to estimate their extent. The following provides more details  on our testing of payments to FBI’s contractors—Science Applications  International Corporation (SAIC), Computer Sciences Corporation (CSC),  and Mitretek—for labor, subcontractor labor, travel, and other direct costs  (ODC).
subsections: section_title: Payments to SAIC
paragraphs: To test payments for labor costs, we obtained from SAIC a database of  hours charged to the Trilogy project by employee and pay period. Using  this database and labor invoice detail, we selected 21 employees based  on either (1) a high number of hours worked, (2) a high dollar amount  billed, or (3) billing in more than one labor category. For these 21  employees, to test the labor rates billed, we compared rates billed to  salary information. In addition, for subsets of these 21 employees, we  compared the hours billed to hours reported in SAIC’s labor database  and tested the mathematical accuracy of the labor costs billed. To  determine the reasonableness of extended work week (EWW) hours  charged to the Trilogy project, using the database we analyzed the total,  EWW, and uncompensated hours charged by employee. We also  compared the average fully burdened labor rates charged to ceiling rates  to determine whether the rates were below the ceilings.
To test payments for subcontractor labor costs, we obtained from SAIC  a database of all subcontractor labor charges. In order to determine  whether the database was complete, we verified that the database  reconciled with SAIC’s subcontractor billings. We then selected  subcontractor invoices to review based on a high dollar amount billed or  unusual billing patterns. We analyzed supporting documentation such as  subcontractor invoices and time sheets from SAIC for about $17.2  million, or 37 percent, of payments for SAIC subcontractor labor.
To test payments for travel costs, using detail included in SAIC’s travel  invoices and copies of travel authorizations provided by SAIC, we  selected transactions to review based on (1) high airfare costs, (2)  actual costs that exceeded authorized amounts, and (3) unusual billing  patterns. We analyzed supporting documentation, such as travel  vouchers, receipts, and subcontractor invoices, from SAIC for about  $154,000, or 45 percent, of payments for SAIC travel costs.
To test payments for ODC, using detail included in SAIC’s ODC invoices,  we selected transactions with unusually large amounts within a  category or with an unusual category description. We analyzed  supporting documentation, such as invoices or other documentation,  from SAIC for about $307,000, or 61 percent, of payments for SAIC ODC.
section_title: Payments to CSC
paragraphs: Because CSC was unable to readily provide us transaction-level detail for  all labor, travel, and ODC charges, we selected 11 invoices based on the  amounts billed and the time periods covered. CSC was able to provide us  transaction-level detail for these 11 invoices, which represented $14.7  million or about 33 percent of labor costs; $3.1 million or about 33 percent  of travel costs; and $2.4 million or about 27 percent of ODC charges. Using  these 11 invoices as our data source we performed the following tests of  CSC labor, travel, and ODC.
We recalculated the total labor charged for three labor categories in 7 of  the 11 invoices to verify that the invoice amounts were calculated  correctly. We also selected 11 employees based on either (1) high  number of hours worked, (2) a high dollar amount billed, or (3) billing in  more than one labor category. For these 11 employees, we compared the  hours billed to time sheets and verified hourly rates by reviewing each  employee’s salary history. In total, the 11 selected employees billed  around $850,000 on the 11 invoices we reviewed. We tested the  reliability of the detail provided by comparing the hours and amounts to  labor invoices. We compared the average fully burdened rates charged  to ceiling rates.
We selected travel charges that were high in amount or exhibited  unusual billing patterns. We reviewed travel vouchers for these selected  charges. Because we identified possible first-class and unusual coach- class travel in these selections, we obtained and reviewed additional  supporting documentation for CSC-purchased airline tickets beyond the  initial 11 invoices selected for review.
We selected ODC transactions with unusually large amounts within a  category or in an unusual category (such as computer hardware).  Because of anomalies we identified in our initial review, we selected  additional transactions to review beyond the initial 11 invoices. In total,  we analyzed supporting documentation for about $7.0 million, or about  80 percent, of payments for CSC ODC during the Trilogy project.
To test payments for subcontractor labor costs, we obtained from CSC  transaction-level detail for 12 of its subcontractors during the Trilogy  project. From the transaction-level detail, we selected charges to review  based on (1) high number of hours worked, (2) a high amount billed, and  (3) other unusual billing patterns. We obtained and analyzed supporting  documentation, such as subcontractor invoices, from CSC for about $3.3  million, or 4 percent, of the $75 million charged by CSC as subcontractor  labor costs during the Trilogy project.
section_title: Payments to Mitretek
paragraphs: To test payments for labor costs, we obtained transaction detail for  three labor invoices, which represented $1.5 million or 8 percent of the  payments for Mitretek labor.  We tested the mechanical accuracy of the  invoice calculation and selected one of the invoices and verified hours  billed compared to time cards and hourly rates charged compared to  salary histories.
To test payments for travel costs, we obtained and analyzed the  supporting documentation, such as travel vouchers, for all travel costs  on two invoices. These invoices represented $11,211 or about 13 percent  of payments to Mitretek for travel costs.
To test payments for ODC, we obtained and analyzed the supporting  documentation, such as invoices and receipts, for all ODC costs on two  invoices. These invoices represented $139,083 or about 8 percent of  payments to Mitretek for ODC.
section_title: FBI’s Asset Accountability
paragraphs: To determine whether FBI maintained proper accountability for assets  purchased with Trilogy project funds, we used our Standards for Internal  Control as a basis to assess FBI’s control structure over its Trilogy assets.  We interviewed FBI, contractor, and subcontractor staff to identify and  assess the controls in place over the ordering, purchasing, and receipt of  Trilogy equipment.  The following provides more details on our testing of  Trilogy equipment purchased for FBI by CSC and SAIC, or directly by FBI:   To determine whether FBI approved for purchase all assets acquired for  the Trilogy project, we obtained FBI consents to purchase, Bills of  Material, and invoices and compared the total assets approved to be  purchased to assets actually purchased.
To determine whether FBI Trilogy accountable assets listed in PMA  were recorded in a timely manner, we obtained documentation from FBI  and contractors for accountable assets purchased by CSC that identified  the bar codes assigned to accountable assets and the date the equipment  was received by FBI.  We did not perform this test for SAIC-purchased  assets because the assets represented only .8 percent of the total assets  purchased with Trilogy funds. We also did not perform this test for FBI  direct purchases since the supporting documentation did not provide  bar codes or serial numbers for individual assets.  We compared the bar  codes on the listings to FBI’s Property Management Application (PMA)  which included the date the asset was entered into PMA.
To assess the accuracy and completeness of the FBI-prepared listings of  CSC- and SAIC-purchased assets, we (1) analyzed the listings to identify  any irregularities such as duplicate bar codes or missing information; (2)  obtained the CSC equipment invoices and compared the total number of  pieces billed on the CSC invoices for four selected accountable asset  types that represented about 76 percent of the total CSC assets  purchased to FBI’s listing; and (3) obtained the SAIC listings of Trilogy  equipment returned to FBI, SAIC’s equipment invoices, and FBI’s listing  of VCF assets and compared for each item the amount of equipment per  the invoices to the SAIC listing and then to FBI’s VCF listing.
To determine whether FBI had in its possession all accountable assets  purchased for it by CSC and SAIC, we compared the complete listing of  bar codes from FBI’s VCF and CSC listings to PMA to identify any bar  codes not recorded in PMA.
To test the accuracy of the data included in the PMA accountable asset  records, we compared the data for each accountable asset, such as bar  code number, serial number, asset description, and asset location, to  FBI’s listing and followed up on any discrepancies.
To identify Trilogy assets that had been reported as lost or stolen by FBI,  we obtained a listing of all assets identified as lost or stolen by FBI  during its annual inventories for years 2003, 2004, and 2005.  We then  compared this listing, by bar code, to FBI’s CSC and VCF equipment  listings to determine which of these assets had been acquired for the  Trilogy project.
The scope of our review covered all assets purchased from the inception of  the Trilogy contracts (May 2001) through December 2004 and included  Trilogy assets that were either purchased directly by FBI or by one of the  two primary Trilogy contractors, CSC and SAIC.
We provided FBI a draft of this report and GSA a draft of applicable  sections of this report for review and comment. The FBI Finance Division  Acting Assistant Director and General Services Acting Administrator  provided written comments, which are reprinted in appendixes III and IV,  respectively. FBI and GSA also provided technical comments, which we  have incorporated as appropriate. We also discussed with Trilogy  contractors any findings that related to them. We performed our work in  accordance with generally accepted government auditing standards in  Washington, D.C. and at two FBI field sites and various other GSA and  contractor locations in Virginia from May 2004 through December 2005.
section_title: Comments from the Federal Bureau of Investigation
section_title: Comments from the General Services Administration
subsections: section_title: GAO Comments
paragraphs: 1. We referred to the Department of Justice Office of Inspector General  report only to provide background information related to previously  reported issues with the Trilogy project. 2. See “Agency Comments and Our Evaluation” section. 3. Processing invoices timely as envisioned by the Prompt Payment Act  does not lessen the government’s responsibility to verify costs billed by  contractors. It is conceivable that the essential validation work could  have been performed immediately after payment and any adjustments  to correct prior billing errors could have been made to future invoices.   4. No documentation of any such inquiries was provided to support the  General Services Administration’s (GSA) comment. Documenting such  inquiries allows a subsequent reviewer to draw similar conclusions and  would be beneficial to any subsequent audit, including by the Defense  Contract Audit Agency (DCAA). 5. Contrary to GSA’s comment, the review team—Federal Bureau of  Investigation (FBI), GSA, and Mitretek—approved CSC’s invoices that  lacked information required by its task order, including employee  billing rates and detail for subcontractor labor. We were not provided  documentation indicating that any Computer Sciences Corporation  (CSC) invoice had been rejected. 6. While the review team compared billed labor rates against Millennia  ceiling rates for certain labor costs, it did not evaluate labor rates  compared to ceiling rates for subcontractor labor, which represented  about $163 million of Trilogy costs. Had the review team reviewed labor  charges more thoroughly, it may have identified the potential  overcharging of labor rates discussed in this report related to DynCorp  Information Systems (DynIS).  7. According to the Federal Acquisition Regulation (FAR), it is the  contractor’s responsibility to maintain supporting documentation for  costs billed, including subcontractor labor costs.  8. Based on our discussion with on-site members of the review team, CSC  travel vouchers were not obtained to review amounts billed on travel  invoices. Had the vouchers been reviewed, the review team would have  had a basis for questioning the first-class and excessive airfare costs we  identified. 9. The travel administrator’s obligation to obtain the best fare does not  relieve the government of its responsibility to review travel costs. In  addition, we noted instances where the itinerary from the travel  administrator indicated that a full-fare ticket was obtained at the  traveler’s request, even though the ticket cost more than twice as much  as the lowest logical fare that was also noted on the itinerary.   10. The approval process discussed by GSA relates to the travel  authorization, which was the request to travel. We found that the  review team lacked an adequate process to review travel vouchers that  include the traveler’s receipts to confirm that the authorized trips were  taken and that the costs were in accordance with applicable travel  regulations. Also see comments 8 and 9. 11. The next sentence of the relevant section of the FAR cited by GSA  states, “However, in order for airfare costs in excess of the above  standard airfare to be allowable, the applicable condition(s) set forth  above must be documented and justified.” No such documentation was  provided to us for any of the first class or other excessive airfares we  identified. 12. Our report stated that other direct costs (ODC) were paid without  validation of the actual amounts included in the invoices and that the  review team relied on the contractors to obtain purchase orders for  ODC charges. It further stated that neither GSA, FBI, nor Mitretek  performed procedures to ensure that equipment billed by the  contractors was actually received before payment. 13. CSC ODC invoices lacked sufficient detail to validate amounts billed  compared to what was approved and we were not provided  documentation indicating that such information was requested by the  review team. Further, the CSC invoices did not include the detail  necessary for the review team to specifically identify the items  purchased. We also found that some assets were paid for before they  were received and that the FBI did not perform an overall  reconciliation of total assets ordered and paid for to those received.  14. A GSA contracting officer representative told us that he was aware of  the informal extended work week policy agreement, but could not  provide documentation of the policy.  15. Our report stated that DynIS charged labor rates that may have  exceeded rates that GSA asserts were established ceiling rates  pursuant to the task order.  16. Based on GSA’s acceptance of our recommendations on page 1 of its  comments, we assume that the intent was to state that “GSA accepts  each of GAO’s recommendations.”
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: Staff members who made key contributions to this report include Steven  Haughton (Assistant Director), Marie Ahearn, Brooks Bare, Ed Brown,  Marcia Carlsen, Richard Cambosos, Lisa Crye, Tyshawn Davis, Bonnie  Derby, Abe Dymond, Lori Ryza, Kara Scott, Brooke Whittaker, and Matt  Wood.