GAO REPORT TO CONGRESS ON AUDITOR FINDINGS - FGMSD 79-3, OCTOBER 25, 1978

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-00142R000100030001-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: July 23, 2001
• Sequence Number: 1
• Publication Date: December 12, 1978
• Content Type: MF

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1 2 DEC 1978,
MEMORA illUL1 FOR: Chief, Audit Staff
FROM: James H. IvMcfonald
Director of Logistics
SUBJECT: GAO Report to Congress on Auditor Findings -
FGMSD 79-3, October 25, 1978
REFERENCE: (a) Ltr to Admiral Turner, dtd Oct 25, 1978,
fm Elmer Staats
(b) Ltr to Elmer Staats, dtd 9 Nov 78, fm
DDCI
1. Action Re uested: None. This is in reply to an oral
TATINTL request from r. of the IG Audit Staff.
STATINTL 2. Background:
During the week of 27 November 1978 Mr.
of your Audit Staff met with 14r. Chiefs STATIN
Procurement Management Staff, Office of L , iscuss
the subject report. Said report, now published by GAO, includes
data on unresolved costs on CIA industrial contracts for the
period 1 January 1974 through 21 March 1977. Data on other
Federal Government agencies is also included.
Data in the report was solicited from the Chief,
Commercial Systems and Audit Division, Office of Finance, and
provided to GAO under cover of a memorandum signed by John
Waller, Inspector General, apparently in late July or early
August. Although the unresolved costs are on CIA industrial
contracts for which the Director of Logistics has primary
responsibility, we are unaware of any coordination with our
office prior to release of data.
Reference (a) transmitted a copy of the subject
report to CIA and requested comments. It also cited'Section
236 of the Legislative Reorganization Act of 1970 which requires
the head of a Federal agency to submit a written statement
on actions taken on GAO recommendations within 60 days.
Mr. Carlucci, in reference (b) has provided the required reply.
OL 8 5529
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SUBJECT: GAO Report to Congress on Auditor Findings -
FGMSD 79-3, October 25, 1978
The subject report includes six specific recommen-
dations (Attachment) for action.
3. Staff Position:
While the Office of Logistics does not believe that
information released to GAO on unresolved costs on CIA contracts,
in this instance, has been damaging, we note that it has been
Agency policy in the past not to release either specific or
general information on our industrial contracts except to over-
sight committees or through cognizant committees in the Congress.
While we are aware of GAO authorities, we believe that future
releases of data on any aspect of the CIA contracting process
or the resulting contracts should be coordinated with the
Director of Logistics.
Mr. has indicated that concern now exists
regarding the adequacy of Mr. Carlucci's reference (b) letter
to GAO. We suggest that no further reply be made unless GAO
indicates that Mr. Carlucci's reply is unsatisfactory and comes
back to CIA for further information.
With regard to our position on the six specific recom-
mendations, we have listed the recommendations on Attachment
along with our comments.
4. Recommendation: We have included specific comments on
Attachment for eac of the GAO recommendations. Other more
general recommendations are: (1) that future releases of infor-
mation on CIA contracting processes or contracts be coordinated
with the Director of Logistics; (2) that the reference (b)
letter from Mr. Carlucci be continued as CIA's official response
to reference (a), and (3) that any 0MB bulletin resulting from STATINT
the GAO recommendation include the Director of Logistics for
comment.
Attachment
cc: DDA
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Attachment
RECOMMENDATIONS
GAO recommends to each of the agencies having audit staffs that
the following system for resolving audit findings be established:
1. Agency auditors be required to keep accurate records
of all findings until a final disposition has been made--where
recovery of funds is involved this means until the funds are
recovered, the debt forgiven, or the finding determined to be
in error.
Comment None; this is an Office of Finance matter.
2. Program administrators be given 6 months to reach
decisions on what amount, if any, is due from grantees or con-
tractors as the result of audit findings. Written decisions
signed by the program administrator be required to justify not
seeking collection of any amounts shown to be due by the auditors'
report. Such decisions should also be reviewed for legality and
endorsed by the legal official who performs the review.
Comment GAO has used the term program admin-
istrator w thout definition which is apparently an
attempt to cover the operation of both grants and
contracts. In our system the price decision would
be made by the contracting officer. Such decisions
are routinely subjected to legal review. The 6-month
limit is probably okay on questions involving costs on
final audits. This procedure cannot apply for interim
audit questions.
3. An official independent of the program administrator
and the auditor be responsible for deciding whether to make
recoveries on findings not decided on within the 6-month time
frame specified above. Any decisions not to recover should be
justified by the offical and reviewed for legality as previously
mentioned. GAO believes this official, who should be at a high
level in the organization, could also handle resolution of audit
findings not involving grantees or contractors that are not
resolved within a 6-month period.
Comment While not a formal written procedure or
regulii decisions not to recover costs or other
cost questions which cannot be resolved by our con-
tracting officers are already referred to the Director
of Logistics or his designee, Chief, Procurement Manage-
ment staff for resolution. Written findings, concurred
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in by legal, accompany such decisions. While the
Director of Logistics accepts responsibility for
resolution of cost questions or other problems
regarding contractors or grantees, we do not
believe he should handle resolution of audit
findings not involving grantees or contractors.
Those latter types of questions are better
resolved by the Office of the Inspector General.
4. Such officials be required to issue quarterly reports
to the agency head on the status of all findings which they
are responsible for resolving, including the age and amounts of
unresolved findings and results of findings they closed during
the period.
Comment; We believe that our total problem of
unresolved costs ($279,386 over a period of almost
3 years) is small and does not warrant quarterly
reporting to the DCI. We would suggest that such
data be maintained by the Director of Logistics
and included in his regular annual report to the
DDA on procurement activities.
5. To insure aggressive recovery efforts, GAO reconunends
that accounting and collection controls be established for any
amounts due the Government as a result of audit findings.
Comment: We nonconcur with this recommendation
as written. Audit findings are advisory only, with
the final determination on contract price being made
by the contracting officer or, as stated in recommen-
dation 3 above, by the Director of Logistics, or his
designee, Chief, Procurement Management Staff. Lack-
ing erroneous payments or overpayments, there can be
no amount due until the final price decision is made.
Also with regard to this recommendation, primary
responsibility for determination and collection of
a contract debt is on the contracting officer except
that disbursing officers have such responsibility when
erroneous payments or overpayments are made by the
disbursing office in excess of amounts due the con-
tractor under the terms of the contract at the time
of payment.
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6. If the agency decides against collection for any
reason, then it should take action to resolve the underlying
causes which resulted in the debt. These can include providing
technical assistance to help grantees improve operation of the
program or changing ambiguous or conflicting regulations which
impede accomplishing program objectives.
Comments: Concur.
Unnumbered: GAO also recommends that 0MB make appropriate
changes to its management circular to establish the requirements
recommended above.
Comment: 0MB circulars are routinely routed
for comment prior to issuance. Office of Logistics
should be granted an opportunity to comment on any
such issuance.
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