Lot of firsts occurred during the pandemic. Among them: the first time the Federal Emergency Management Agency used its Disaster Relief Fund to respond to a nationwide public health emergency. FEMA used the funds to cover the costs of vaccinations and testing sites, among other things. Government Accountability Office has found FEMA may have underestimated just how much would be required. For more, Federal News Network’s Eric White spoke to the GAO’s director of homeland security and justice issues, Chris Currie.

Interview transcript: 

Chris Currie  The COVID-19 pandemic, surprising in a number of ways. I think most people are surprised to even know that FEMA was involved in the response because they think of hurricanes and natural disasters, but FEMA has a large fund of money that’s very flexible to use in the case of emergencies. And, so, it was definitely tapped into in the COVID-19 pandemic. So, one of the things that the appropriations committees wanted us to look at is just seeing how large the costs were getting out of the pandemic for FEMA. They wanted us to look at the effect on the disaster relief fund long term, and also just how good of a job FEMA was doing in anticipating some of these costs. And, as you set up, they they blew well past their initial estimates. Initial estimates right out of the bat, which understandably, were, you know, there wasn’t as much information, were around 20 billion, and FEMA now estimates it’s going to spend about $171 billion by the end of fiscal year 2026.

Eric White  It was just crazy time for all of us. Was that lack of knowledge just due to the fact that nothing had ever happened like this before, A, and, B, FEMA had never had to deal with anything like this before.

Chris Currie  It is true. I mean, it’s impossible to see the future and no one had a crystal ball in 2020 to see how big of a problem this is going to be and how much it was going to cost. But I think that there were a number of places, as the pandemic wore on, where estimates probably could have been a little bit more realistic and accurate. FEMA sort of re-baselined their estimates at different stages, and at each point, they underestimated what it was going to cost. For example, in 2021, the President authorized basically FEMA to cover 100% of costs. Usually, with its programs, they cover 75%, the state or the local governments covered 25%. It went to 100%. So, at that point, I think it was reasonable to expect that states were going to start sending in a lot more projects and requests just given that we’re going to be 100% federally funded. And so all along, they just continue to underestimate the cost.

Eric White  Yeah, is this sort of thing a, you know, it’s never used this for a public health emergency, but has it used the DRF funds for other matter or other disasters where certain things were required, you know, such as, you know, personal protective gear and things of that nature, or, you know, even just setting up sites? You know, it’s all very similar to what FEMA does for other disasters, right?

Chris Currie  You’re right, you make a good point, because a lot of what FEMA was doing is providing equipment, and logistical capability to get equipment to different places, and to get things where they needed to be, which is what FEMA does in a disaster. So, while the pandemic, the scale of it was unprecedented, you know, 59 individual disaster declarations, the operation was not unforeseen or unprecedented. And this is a really important point we were trying to get across to FEMA and they didn’t really agree with us on, but, you know, their response to our findings and our recommendation was that they don’t expect to have to respond to a pandemic like this again, and they don’t expect to be asked to do something like this again, which, that could be true. None of us know. But what the point we were making is there are a number of different scenarios, whether it’s a cyber attack, whether it’s a wide scale, multi-state disaster, whether it’s multiple concurrent disasters in different states across the whole country. There’s a number of scenarios where they are going to have to manage a huge response and recovery operation that potentially is going to be very, very difficult to estimate. So, that’s the reason we actually recommended that they do a better job of trying to develop these estimates, rather than just trying to forget the pandemic and move on with business as usual.

Eric White  We’re speaking with Chris Currie. He is the director of homeland security and justice issues with the Government Accountability Office. Yes, so what’s at stake here of not getting those estimates right? Where does the DRF currently stand, because FEMA is still obligated to spend some, mostly, unfortunately, funeral funds towards this disaster declaration? You know, what is going to happen if these estimates aren’t as accurate as they could be?

Chris Currie  It’s a big problem. Right now, today, FEMA estimates there’s going to be a $6 billion shortfall in the disaster relief fund by the end of September. And, remember, that is also with almost a $35 billion appropriation earlier this year for this fiscal year 24 appropriations bill. So, the DRF was replenished and that quickly it’s back going to be in the red, and they’re likely to get another annual appropriation, which will help a little bit, but what the COVID-19 pandemic has done to FEMA is it’s essentially put it in a position where it’s going to be behind all the time with the DRF. And, of course, it’s going to need supplemental appropriations from here on out. Now, that’s just with what we know today. I mean, just, if we have another 2017, for example, where we have three huge concurrent disasters and wildfires, that’s only going to exacerbate the problem and going to require that much more in supplemental appropriations. Also, remember, this fund is used for recovery projects for disaster, it’s going back 20 years. Hurricane Katrina is still an open disaster. There’s still obligating dollars for infrastructure projects. So, if there’s no money in disaster relief funding, those past recoveries are sort of paused. That’s what FEMA did last year. And they do that so they can respond to things happening immediately, but it’s not sustainable for the long term.

Eric White  Yeah, long term, I mean, is there maybe an over reliance on the fact that they’re always going to get that supplemental funding because there is nothing more direct of government services to citizens than disaster response? So, it is always something that gets front and center as soon as something happens. Do you sense there’s there may be an over reliance on that factor, rather than planning for long term when it comes to disaster relief spending?

Chris Currie  Well, there absolutely, there is a reliance on supplemental spending. Congress caps the amount FEMA can get in the regular annual appropriation for the DRF. And, so, what that basically says is that if anything large happens in the country that year, you’re gonna need a supplemental. And, so, most of FEMA’s funding over the last 20 years has been in supplemental appropriations. It’s a massive amount. I mean, if you look back to 2017, they spent over $250 billion on disasters, which is just a huge amount. That’s, you know, six times DHS’s annual budget. So, what COVID did was it just it made this problem worse. And, so, it used to be where maybe they’d get behind toward the end of the fiscal year, and it would get replenished. Now, it seems like they’re behind multiple points of time in the fiscal year, which, you know, think about it. This requires Congress several times a year to try to add funding or attach funding to different bills, which requires those to get passed. And, that’s, you know, that can be difficult sometimes.

Eric White  So as you mentioned, nobody can tell the future. What can be done to actually get some long term planning in some fiscal solvency for the DRF?

Chris Currie  We just like to see more realistic estimates at different stages early on in the disaster, and a different way of doing this. And, so, in month one after disaster, it’s really difficult. All right, I mean, if you have a huge hurricane, maybe you don’t know if it’s going to cost you $10 billion, if it’s going to cost you $50 billion yet, but in month six, it the picture is starting to develop, you know what projects are going to, you know, come into play, you know how long it’s going to take. We want to see more accurate estimation quickly and that way Congress and the appropriations committees can then forecast out what they’re likely going to need to appropriate in the future.

Tom Temin  Chris Currie, director for homeland security and justice issues at the Government Accountability Office, speaking with Federal News Network’s Eric White. Find this interview along with a link to the report at federalnewsnetwork.com/federaldrive.

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Most of the purchases the government makes are small. For every aircraft carrier, agencies buy a million printers, desks, airplane tickets. Most of these fall under what’s known as the micro purchase threshold. That threshold stands at $10,000. Emily Murphy has made the case that raising it to $20,000 would save the government tens of millions of dollars, along with some other virtues. Joining the Federal Drive with Tom Temin is Murphy, co-author of an analysis from the Baroni Center for Government Contracting at George Mason University and former administrator of the General Services Administration.

Interview transcript: 

Tom Temin
Ms. Murphy, good to have you with us.

Emily Murphy
It’s wonderful to be here. Thanks for inviting me.

Tom Temin
And, of course, every little aspect of procurement in the FAR, from section one to section ump-tee-ump, you know, studied, why micro threshold purchases, of all things, small as they are?

Emily Murphy
So, there were two reasons I thought it was really interesting. First, the commercial platforms program that we implemented at GSA when I was there, and that has really taken off in the last few years. And I wanted to see what was happening there. But, also, the smart pay program, how the government purchased cards, because the government purchase cards have such an ability to return savings to the government, but they are mainly used on those micro purchases. And then as I was starting my study, Congress started talking about raising the simplified acquisition threshold, and usually the two are increased or moved in tandem. So, it was an ideal time to just really dive into some of that data, right?

Tom Temin
The simplified is what?

Emily Murphy
Currently it’s 250,000.

Tom Temin
Right. I remember back when it was 100,000 at one time.

Emily Murphy
Yes, back when the micro purchase used to be $2,000, $2,500. It’s increased over the years. And they’ve both gone up pretty much in tandem over time, as we’ve realized that having simplified procedures for smaller dollar value purchases adds a lot of efficiency to the government. But it also raises a lot of small business challenges. So, trying to study what efficiency gains are there, and how do you offset those small business challenges? Or how do you even at least understand what those challenges might be?

Tom Temin
Right. So, the model of this, then, is that typically an agency or a practitioner making a small micro purchase acquisition uses a government credit card for most of them.

Emily Murphy
Correct.

Tom Temin
And they would go to one of the commercial platforms.

Emily Murphy
They can go to commercial platforms. The majority of purchases aren’t made using the commercial platform. A lot of them are made using just the GSA schedule. Some are made just as point of sale purchases. So when you stop and buy, and you’re traveling, and you decide you need to pick up a notebook or you buy a candy bar at the convenience store, it counts is a micro purchase at that point in time, using your travel card. But there are a lot of small dollar value purchases that are made where the credit card itself, or the purchase card, acts as the contract vehicle as well, not just a method of payment, that the smart pay card can also be the just the method of payment for larger contracts. And the government gets a good rebate on those purchases. So, it goes back to the agencies themselves. And, so, it’s an efficient way of managing government dollars. And what is the small business challenge, then, in this context? So, when all of these thresholds were originally put into place, there was something called a small business reserve. And, at the time, it was a separate definition in the FAR. It’s now been unified to it’s the same as that simplified acquisition threshold. And it says that anything under that simplified acquisition threshold shall be reserved for small businesses. So, when you increase the micro purchase threshold, where it none of those small business rules apply, you’re taking something out of that small business reserve. But, if you’re also increasing the small supply acquisition threshold, and therefore the small business reserve at the same time, you’re probably increasing your small business dollars. And, so, one of things I wanted to figure out was what percentage of those micro purchases go to small business? What percentage of the simplified acquisition threshold dollars go to small businesses? And what would that change mean, because I’ve always been a huge small business fan, I spent many years working for the House small business committee, I worked for SBA. So, I want to be very cautious when I make a policy recommendation that’s going to save the government money if it’s going to do so at the expense of the industrial base, and at the expense of the small businesses. So, wanted to make sure we understood what those ramifications were going to be.

Tom Temin
And is that data available?

Emily Murphy
To an extent, it is. So, if you look at purchases that are made using the purchase cards, you’re looking at about a third of the dollars go under the micro purchase threshold, go to small businesses. GSA does a really good job of capturing that data, and they make it available. When you start looking at dollars outside of the purchase cards, it’s really, really hard to tell what’s happening there. When you start looking then at dollars in between that micro purchase threshold and a simplified acquisition threshold, if you take out task order purchases, because those aren’t usually covered, you find out even though 100% of the sellers are supposed to go small business, less than 50% do.

Tom Temin
So, should one of the reforms then be that all micro purchases shall be on a government credit card, simply because it captures all of the data surrounding it?

Emily Murphy
Well, I think that anything you can do to increase data would be a definite win. I hate to have absolutes, because I don’t want to tell someone when they’re someplace where they’re not going to take a government credit card that they can’t buy what they need that moment to get the government’s mission done.

Tom Temin
Of course, it’s getting harder to find places that accept cash anymore.

Emily Murphy
But at some point in time, I know that GSA has been looking at how do you do app payments. So, they’re going to be continual reforms. And they’re going to hopefully be also advantageous to the government. But it saves the government about $70 in purchasing and transaction fees by using the payment card rather than actually using a contract vehicle.

Tom Temin
We’re speaking with Emily Murphy. She’s now senior fellow at the George Mason University Baroni Center for Government Contracting, and former administrator of the General Services Administration. I just had a detail question, as GSA launches these platforms that are Amazon-like. One of them is Amazon, but there’s other similar ones. I mean, you can’t classify a sale through Amazon as small business, but small businesses are passing through Amazon. So, how do you count those?

Emily Murphy
So, it’s actually one of the interesting challenges, and one that GAO has looked at, one that Congress has looked at, and when Congress passed the legislation, they said that purchases made from small businesses using one of these portals could be counted towards a small business goal, as long as the company was registered in SAM. The challenge is, most companies on these portals are not registered in SAM, and going in and registering in SAM is a lot more compliance.

Tom Temin
Well, that’ll send most people running away, screaming.

Emily Murphy
Correct. And that’s one of the reasons that one of my recommendations in the paper was that policymakers should be looking at a simplified certification for micro purchases, so that we get to the heart of whether or not someone is a small business without asking them to attest to every FAR clause. The exact reason we have the micro purchase threshold is to avoid having a lot of these clauses. So, we figure out what the absolute minimum number of attestations and certifications would need to be, and then make it easier, so that we capture more of those, not simply just to get credit for small business dollars, but to actually start figuring out where we may have more small business capability in our base, and then figuring out how to use that as a tool to expand and grow that industrial base. Because, Tom, as you know, one of the big challenges for the last 20 years has been the the drop in small businesses participating in that industrial base.

Tom Temin
Yeah, that’s the difficult trend. The dollars are there.

Emily Murphy
The dollars are there.

Tom Temin
But the number of participating companies, which means that the companies that are leftover, have to, by definition, keep growing, and will, you know, graduate.

Emily Murphy
And once they graduate, do we lose them to the industrial base? Do they succeed as a midsize business, when there isn’t technically a government term of midsize business? So, what happens to those companies? And where are we getting new companies to come in? Where are we getting innovative companies? Where are we? To the extent we can be doing more at the micro purchase level, the more we can afford to do smaller purchases, pilot something, try out a new technology, try out a new company, and then see what what comes from that.

Tom Temin
Maybe we need micro purchase thresholds for the OTA, Other Transaction Authority. We can really get complicated here.

Emily Murphy
We can get very complicated, although I’d hate to put more, the, I’m thinking through that idea now. If we had OTAs, with micro purchase thresholds, which set of rules would apply? Would it be the normal rules of the OTA or the micro purchase rules? I think that you might have just made my head explode a little bit.

Tom Temin
But you don’t want those bloodlines to cross necessarily, because both could get ruined.

Emily Murphy
Yes, the goal is to try and take away the burden that doesn’t actually benefit the government. And, in a lot of these very small dollar purchases, it’s just not worth the government, the juice isn’t worth the squeeze for some of the compliance we’re asking for.

Tom Temin
Well, getting back to the paper that you have co-authored, you’re recommending a $20,000 micro threshold purchase limit. What benefits would accrue from that, both for the government and maybe for small business?

Emily Murphy
I looked at raising the micro purchase threshold to $20,000, $30,000, $40,000, $50,000, to see what the savings would be. And by raising the micro purchase threshold to $20,000, we’d save about $30 million a year, which doesn’t sound like a lot, but it’s actually the bigger advantage is when you no longer need contracting officers to be making those awards, to using a purchase card can be done by anyone who’s gone through the training, and has the authority. It has a review process. We’re not just setting people wild with government dollars. But it means you can take those contract specialists and those contract officers and have them work on more substantive requirements. And frankly, given how long it’s taking to get the appropriations process done and the compressed buying cycle, if we can free those contract specialist and contracting officers up to do the contracts that require a warranted contracting officer, it lets the government save money on the bigger dollar purchases. And that’s not reflected because that’s very hard to quantify, but I think it’s one of the biggest advantages.

Tom Temin
It’s sort of a catalyzing type of effect.

Emily Murphy
Exactly.

Tom Temin
Any reception yet to that idea? That would require congressional lawmaking to raise that level.

Emily Murphy
When I’ve talked unofficially to staffers about it, their concern had always been that raising the micro purchase threshold could hurt small businesses. And so what we talked about was, well, if you’re doing it in conjunction with what now was proposed as a doubling of the simplified acquisition threshold from $250,000 to $500,000, that small business reserve is going to go from being a $10,000 to $250,000 to being a $20,000 to $500,000 range. So, it actually increases opportunities for small business on more meaningful contracts. So, that could be a really good thing for small businesses. So, hopefully, as they’re working through these issues, it’s one that they’ll consider. Because just frankly, taking a lot of that administrative burden away from both small businesses and contracting officers just makes sense.

Tom Temin
And, by the way, while we have you, since leaving the GSA, and it was a difficult circumstance at that time surrounding the last presidential transition, what have you been up to otherwise?

Emily Murphy
So, in addition to my work with the Baroni Center, which I absolutely love, they love to do research in all sorts of government contracting areas where I just get to go and be a complete nerd. It’s great. I’ve got my own consulting company. It’s called Government Procurement Strategies, and I help companies who are looking for sort of bespoke approaches to how they want to navigate federal procurement. Work with a lot of SBIR companies. Really enjoy being able to dive into some problems with some smaller businesses.

Tom Temin
Emily Murphy is a senior fellow at the George Mason University Baroni center for government contracting, and former GSA administrator. Thanks so much for joining me.

Emily Murphy
Thank you, Tom.

Tom Temin
And we’ll post this interview along with the link to the micro threshold paper at federalnewsnetwork.com/federaldrive. Hear the Federal Drive on demand, subscribe wherever you get your podcasts.

The post Maybe the micro purchase threshold is a little too micro first appeared on Federal News Network.

New tools and better data are putting the CFO community in a stronger position to do more to reduce improper payments and fraud in federal programs.

The Joint Financial Management Improvement Program (JFMIP) recognized this opportunity in its new three-year plan that it hopes can spur even more progress to ensure agencies are paying the right amount to the right people in a timely manner.

David Lebryk, the fiscal assistant secretary at the Treasury Department, said the JFMIP three-year strategy outlines three pillars of effort that will give agencies tools, best practices and guidance to do more to prevent fraud and improper payments.

“It’s focusing on prevention. It’s promoting best practices, and it’s strengthening the partnerships. The Treasury piece that I think is very much important here is focusing on that prevention. What tools can Treasury bring to the payment process that can actually really help reduce and prevent process fraud from happening?” Lebryk said on Ask the CIO. “The second pillar, which is promoting best practices, was about working with agencies. The Office of Management and Budget has done some good work with this, as well as when a new program has stood up. Do you put controls in place up front that help reduce the potential for improper payments? There are really a number of things you can do like doing risk assessment in your program and you can talk about different data that you need from recipients that you can get from them.”

As part of the focus on prevention, Lebryk said his office has launched several programs where Treasury followed many of the steps outlined in the JFMIP strategy to prevent and reduce fraud in large programs.

In helping local communities recover from the Deep Horizon oil spill back in 2010, Lebryk said ahead of implementing the Resources and Ecosystems Sustainability, Tourist Opportunities, and Revived Economies of the Gulf Coast States Act (RESTORE Act), Treasury designed the program to make sure recipients understood the requirements to apply for funding as well as controls to make sure the money went to the right people.

“We’ve had no fraud in that program that we’re aware of because we’ve really focused on those controls in the design of the program up front. We haven’t had an issue about slowing payment down. It does prove there’s opportunity, both to be quick, but also careful in the issuance of money,” he said. “In the third pillar, which was strengthening partnerships, it comes down to doing more with the states, the inspector general community and other government agencies to really strengthen those partnerships. I think we’re very confident that it’s going to have a real major impact and there’s a real commitment across the different entities to make sure it works.”

Increased focus on improper payments

The JFMIP strategy outlines strategies and objectives for each pillar based on the work by Treasury, OMB, the Government Accountability Office and others.

Both Congress and the Biden administration have increased focus on preventing fraud and improper payments as well as recovering lost money due to bad actors. The Government Accountability Office estimated that agencies spent $236 billion improperly in fiscal 2023, which was down about $11 billion, as compared to 2022.

On Capitol Hill, lawmakers have introduced at least eight bills since February 2023 focused on improper payments and fraud. A recent one from Sen. Gary Peters (D-Mich.), chairman of the Homeland Security and Governmental Affairs Committee, called the Fraud Prevention and Recovery Act, would, among other things, give resources to agency IGs to investigate people who committed pandemic fraud and recover the taxpayer dollars and create a new fund to help agencies prevent fraud and identity theft through a new early warning system for detecting fraud.

The Justice Department’s COVID-19 Fraud Enforcement Task Force (CFETF), for example, reported in April that it “charged more than 3,500 defendants, seized or forfeited over $1.4 billion in stolen COVID-19 relief funds, and filed more than 400 civil lawsuits resulting in court judgements and settlements” since it launched in 2021.

Another administration priority is the rewrite of Circular A-123 internal controls for overseeing and administering programs. OMB’s last major rewrite was in 2016 when it added risk management to its updated internal control processes.

Making A-123 less compliance-based

Lebryk said one of the goals of the A-123 rewrite is to reduce the compliance requirements and make the circular more usable.

“We want to make it less of a compliance exercise and more of a real actual set of practices that will help agencies. Some agencies have been further along in terms of setting up internal programs to actually adhere to the spirit of A-123 and here to the spirit of really trying to reduce the improper payments,” he said. “But again, it’s less so about paperwork and reporting, and more so about how do you make sure you actually make an impact in this area. I think the CFO community can be very helpful in this regard. The CFO community plays a very unique role in that we’re supposed to speak the truth. We have an obligation to raise our hand and say, ‘hey, something isn’t necessarily looking right on the financials.’ We want to make sure that we have integrity and stewardship of government resources, so I think that we can do a better job in a financial community of saying to program agencies, ‘hey, the one way to create problems for you not to be able to meet your program’s mission, is if you do have things like fraud because it means that the right people aren’t getting the money.’”

Treasury already has several tools on new and existing platforms and databases to help agencies move from being reactive to proactive in stopping fraudulent payments. One tool uses machine learning to look for anomalies on paper checks. So far, Treasury has run about 40 million checks through the ML application.

Lebryk said Treasury is the co-chairman of a CFO Council working group, which is determining the impediments for agencies to use these and other fraud prevention tools.

“They’re also doing some important work about creating a fraud catalog that collects trends and fraud, which I think is also very important. But one of these really important workstreams is for us to say, ‘hey, is there something that Treasury can do to make it easier for you to access these tools?’” he said. “Having looked at the government environment over a number of years, one of the real challenges that you have is asking someone to make a systems change. It is a very lengthy, long process because, quite frankly, oftentimes system changes aren’t funded. They can be difficult. So what we’re really looking at is whether there is opportunity for technology to help in this, in terms of things like interfaces with existing systems, which can make it easier to interact. Are there just organizational issues within the agencies that would be helpful if the agency was organized slightly differently or had the information going in one place versus another place, that would mean that you could take action?”

Lebryk added the committee will make a series of recommendations that would lead to improvements with a goal by the end of the year identifying a set of tools that agencies can take more advantage of to prevent fraud and improper payments.

The post New strategy, A-123 update to help reduce improper payments first appeared on Federal News Network.

The Grants Quality Service Management Office over the last year helped several micro agencies buy award management services.

This pilot was part of how the QSMO is crawling before it tries to walk or run with larger agencies.

Andrea Sampanis, the acting director of the Grants Quality Service Management Office in the Department of Health and Human Services, said the procurement pilots with AmeriCorps, the Inter-American Foundation and the Northern Border Regional Commission opened the door to bigger possibilities to modernize federal grant services.

“We worked with them to explore the vendors on our Catalog of Market Research, making sure they were ready to meet their needs and helping to support them through the procurement process,” Sampanis said on Ask the CIO. “IAF and NBRC are live, on target and on budget, which is not an easy thing to do. AmeriCorps is expected to go live this fall. Huge kudos to these three agencies, as they were prepared to be good customers, willing to accept the system as-is and supported by great leaders in their chief information officer and chief procurement offices.  Their grants teams came together to support a great vendor product from our Catalog of Market Research.”

While the AmeriCorps, the Inter-American Foundation and the Northern Border Regional Commission are considered micro agencies, the amount of money each of them awards through grants is anything but small. Sampanis said the AmeriCorps is more like a medium-sized agency when looking at the amount of money it awards through grants. In fiscal 2024, for example, the agency expects to award $577 million in grants.

The Inter-American Foundation and NBRC are much smaller with IAF, awarding about $145 million and about $50 million in grants, respectively.

Grants QSMO aims to speed acquisition

While these three agencies don’t reach the billions HHS or the Education Department or the NASA hand out, Sampanis said demonstrating how the procurement assistance pilot works opens the door to improve and expand the QSMO’s efforts.

The QSMO marketplace current has approved seven grants management system providers and is in the middle of conducting market research to expand its services.

“We have one quote that says having access to Grants QSMO market research puts you 1,000 steps ahead in your procurement. It’s our goal to speed up the acquisition process and give agencies more buying confidence as they are pursuing a vendor on our catalog.  The vendors on our catalog are selected to support meeting grants standards and align to 2CFR 200 requirements,” Sampanis said. “It just lets them really focus their attention on a fewer number of providers to really say, ‘Hey, this solution is purpose built for grants. It’s an award management solution that is software-as-a-service and very configurable.’ It should feel easy. They don’t have to go and renegotiate a contract.”

The QSMO also works with the agency’s CIO and security leadership, helps develop performance work statements and serves as advisors during the entire acquisition phase.

“I always encourage agencies to meet with all the vendors on our Catalog of Market Research to understand what’s out there and share their specific needs. I think they learn a lot about themselves by talking to the vendors,” Sampanis said. “I helped them all the way through the pilot because I’m learning a lot. Every time I hear a contracting officer ask a new question, I think, ‘hey, that’s something I need in my catalog because that’s true.’ I always say our goal is to speed up an agency’s acquisition and give them buying confidence.”

HHS has led the Grants QSMO since January 2021 and has been building its services over the last few years.

With the Office of Management and Budget finalizing the update to the governmentwide grants guidance under 2 CFR earlier this year, standardizing certain key areas like notices of funding opportunities and overall trying to expand access to more than $1.2 trillion in grants and cooperative assistance agencies pay out each year, Sampanis said the QSMO is ready to expand its services and offerings.

Two common drivers of grants modernization

Having that baseline understanding and confidence in the marketplace is a key factor in success, said Wagish Bhartiya, the chief growth officer for REI Systems, which helps agencies modernize their grant systems.

Bhartiya said there are two basic drivers of grant modernization. The first is budget and second is technology.

“There has been a greater focus on budget and how much of our budget goes towards grant funding and how that funding is being deployed? How much of that is serving management processes, some of the overhead aspects of grant management, which will exist inherently, versus how much should be deployed into the community? That analysis, I think, is getting more acute,” he said. “The technology itself has evolved and shipped in a way that, I think, is much more possible now to be thoughtful about performance and mission. The technology is enabling some of this some of these questions to be asked because we now have the potential and the power to look at it for the first time.”

These two big trends are part of how grants providers are shifting their mindsets away from being so compliance focused to spending more time and money on measuring and ensuring outcomes.

“There’s all these dollars flowing through our grant programs so we need to start to think just as much about the downside, protecting from a compliance and a risk mitigation perspective, as the upside into the mission impact in terms of what are the tangible and successful outcomes,” Bhartiya said. “The other big theme is customer experience and user experience, and now the grantee experience.”

He said this updated point of view is part of why many grant providers are more willing to change today than ever before. He said this means the singularity of the way grants management worked over the last few decades is going away.

“Every grant program thinks they’re a snowflake and they think they’re special or unique and actually bespoke. But when you zoom out, you see that actually 85% of what a grant making agency does is essentially the same in the core lifecycle design,” he said. “Convincing them that they don’t need to make everything bespoke and tailored to the Nth degree because they can leverage best practices, use what’s worked for other agencies because there’s a chance to reduce the burden on their staff and on the recipient community is part of the challenge.”

Bhartiya added that the benefits of an end-to-end system, that’s in the cloud are becoming more clear to agencies.

The post Grants procurement pilots demonstrate speed to modernization first appeared on Federal News Network.

The Marine Corps celebrated a much sought after milestone in February: obtaining an unmodified audit opinion for fiscal 2023.

This two-year effort proved that the corps’ 2023 financial statements “present a true and fair reflection of the Marine Corps’ financial information,” which is about $46 billion in total assets.

While audits say there still are seven areas where the Marines still need to improve, Greg Koval, the assistant deputy commandant for resources for the Marine Corps, said this historic feat means, for maybe the first time ever, they can provide accountability, transparency and validity for their spending.

“It gives us transparencies into the cost of production, and in the future, it means the tracking of the cost of maintenance for many of our weapons system platforms,” Koval said on the discussion Marine Corps Milestone: Unqualified Audit Insight. “What it does over time is allow us to really plan, program, budget, execute better and identify those programs, where maybe they cost a little bit more, a little bit less, get those funds to the right place more timely so that we’re better able to execute and give the warfighter what they need to execute the mission. Ultimately on the financial side, we’re here to support them, help them and give them everything they need. So when they deploy, they’ve got the best solution, the best weapons systems they can have at that point in time.”

Like most of the Defense Department, the Marine Corps has been under pressure from Capitol Hill for decades to achieve a clean audit and has been putting more significant resources and focus on the challenges since 2017.

Marines new general ledger system

The Marines came close previously to a clean audit before the 2023 opinion. For example in 2012, the Marines thought it had achieved a “favorable opinion,” only for the DoD inspector general to reverse that decision in 2015.

DoD, as a whole, is targeting fiscal 2028 to achieve a clean financial opinion.

The Marines success demonstrates that it is possible for the largest organizations in DoD to successfully align their data, systems and processes to achieve this goal.

“At the beginning of this journey, we moved to a new general ledger. We had what we called SABRS, which was known and loved across the Marine Corps for over three decades. We took everybody off of that accounting system and moved into this new modern enterprise resources planning (ERP) system, which had its set of challenges. We basically adopted a system that smaller DoD components used, and some of our business processes were new to the system, new to the process, so there was a huge learning curve there,” Koval said. “That learning curve didn’t just impact the financial folks, but they impacted supply and procurement. There were times where we were working hard to pay vendors on time because the system wasn’t working as our old system did. But I think it really brought some additional discipline and internal controls to the financial processes that ultimately helped us understand some of our procurement and logistic processes a little bit better. It really kind of opened our aperture on some of the costs that we were incurring, who we were paying, and it gave us that additional transparency and visibility into the data.”

That major shift in the way the Corps did business, Koval said, really kicked the entire effort into gear by providing the financial team with the agility needed to understand and improve its data.

For any agency or large organization, the big data challenge can be daunting, said Joe Nave, principal federal finance transformation lead for KPMG, which helped the Marines achieve the clean audit opinion.

Analyze and assess risks

“You had to sift through the business processes across the board for geographically dispersed organizations such as the Marine Corps. You look at all of the integration across the rest of the DoD and the different partners outside of the spectrum that the Marine Corps has operational control over, and you start to look at how complex and complicated those processes can really be. From our perspective, it was helping them analyze, assess risk, boil down a couple of them and get the activities that we really needed to accomplish down to a finite list, where we could really focus our efforts and help them move some of these big rocks associated with the material weaknesses and audit deficiencies,” Nave said. “I think over time, you look at the way that the workforce is structured and having to do 100% of the day job, and then you add in some of these audit priorities and you add in some of the samples, we’ve really had to look at ways to modernize and automate those processes to help facilitate quicker reviews, quick requests, quality control ease, and make sure that we’re set up for success and able to respond efficiently and effectively to the audit.”

Nave said moving to the new ERP accounting system played a significant role in helping the Corps adapt processes and procedures as the needs change during the modernization process.

“I like dash boarding as a way to make sure that our clients have the insight that they need to see in real-time where progress is being made, and where progress is being made against those discrete buckets [of goals],” he said. “Then usually, we like tiger teams to assess progress against that. These small, mobile, tactical units, if you will, are going out and solving these problems with brute force, and then focusing on the sustainment of that. That really gets us to our end goal of a modified opinion and being able to continue that modified opinion, year in and year out, layering in that automation and modernization to those tiger team efforts.”

Auditors say the Marines still had seven material weaknesses to resolve.

Koval said a lot of those were on the property side and the need to better integrate data from disparate systems.

“What the audit did for us was really bring those organizations closer together. It broke down a lot of the walls and communications in the way that we work with each other,” he said. “Now, supply, logistics, procurement and accounting all have a better understanding of what we do, how we impact each other and what needs to change to make the organization more efficient, effective and to save costs, frankly, going forward.”

Going forward, among the Marines’ goals are to continue to build upon the previous two-year effort to further integrate processes and systems to make them a more efficient organization.

Nave said the Marine Corps now are set up for long term sustainment because of the process and procedural changes they’ve made and for audit response overall.

The key lessons learned from the Marines’ experience that other military services and organizations can heed, Nave said, is adaptability, being comfortable with the plan, and understanding that plans will change over time.

“We really want systems working for us, not against us. We want to make sure that our IT environment is squared away. We want to make sure that all of the interfaces or feeder systems that we have are clearly laid out. And we’ve looked at the complexity of those different processes and made sure that those all make sense,” he said. “So it is really just a rationalization of your portfolio and trying to make the sandbox smaller. First make sure everything’s in the sandbox, and then what can you do to make it smaller? Then I think leadership must set the tone from the top, cascading that information down and emphasizing the importance. Whether it’s an audit or any other objective you’re trying to accomplish, having that buy-in and tone from the top has been critical.”

The post The team effort that led to the Marines’ clean audit triumph first appeared on Federal News Network.

The Federal Housing Finance Agency (FHFA) says it is working to strengthen its internal financial control practices. That is after a Government Accountability Office (GAO) audit found FHFA’s financial statements miscalculated the agencies obligations under the Federal Employee Compensation Act. And the way it happened might offer a cautionary tale for other small agencies. Anne Sit-Williams is a director for financial management and assurance at GAO. She talked about the findings with Federal News Network’s Jared Serbu on The Federal Drive with Tom Temin.

Interview Transcript: 

Tom Temin The Federal Housing Finance Agency says it’s working to strengthen its internal financial control practices. That’s after a Government Accountability Office audit found FHFA’s financial statements miscalculated the agency’s obligation under the Federal Employee Compensation Act. And the way it happened might offer a cautionary tale to other small agencies. Anne Sit-Williams is a director for financial management and assurance at GAO. She talked about the findings with Federal News Network’s Jared Serbu.

Jared Serbu Anne, thanks for doing this. And this is a little bit of a complicated story to try to tell on the radio, but I’m confident we can do it. Take us through, if you would, just at the outset here. What actually happened? Take us through the chain of how this misstatement was made, what this misstatement was, and how it was ultimately discovered.

Anne Sit-Williams GAO has been conducting this audit of FHFA’s financial statements and internal controls, every year since about 2008. Sometimes I lose people when I say those words: financial statements, internal controls. So, what are those? Ultimately, financial statements are reports that show how much money is coming into the agency and how that money is being spent. And the internal controls are really the processes that make sure that the information in those financial statements are authorized and properly recorded. So in this scenario with FHFA, it is a little complicated because there are several players involved. One being FHFA, they have consolidated financial statements that include their IG. That’s common to have the IG included. However, in this scenario, the IG makes up a pretty substantial portion of the consolidated financial statements, about 14%, which is bigger than probably other agencies. And they also use what’s called a service provider. So, Treasury is involved in preparing some of the information and also pulling together the financial statements for FHFA. So, in this case, there was an error in the calculation for what’s called the FICA, or worker’s compensation liability. And it was a simple miscalculation that wasn’t caught in the review from the IG, making sure that those amounts were correct. And then at the financial statement level, FHFA, when they reviewed the financial statements, didn’t catch that error, either. There wasn’t caught until EAO was doing their testing and reperforming that calculation notice there, and in discussions with FHFA, did determine that it was a calculation error.

Jared Serbu And so this amounted to a $1.3 million misstatement that you ultimately characterize as a significant deficiency in auditor terms. First of all, you want to just take us through what are the elements of a significant deficiency? What does that mean to a layperson, and, sort of an unfair two part question — first, define significant deficiency, and then tell us, you know, what is the deficiency? Is it this $1.3 million in and of itself, or is it more that, oh, this is a red flag, that there may not be controls in place to prevent this kind of thing?

Anne Sit-Williams That is a good question, because a lot of people do get caught up in ‘well, what is the control deficiency?’ And there are different levels of control deficiency. When we’re testing internal controls, it could be the first level is control deficiency. The second level is a significant deficiency, meaning that it’s something that we want to alert management to. It is a bigger deal than obviously a control deficiency, but not to the level of what we would say is a material weakness, which means that it’s pretty reasonable. If it was a material weakness, that means it’s reasonable that there’s a material misstatement in the financials. We weren’t at that level yet. We were in this middle bucket, meaning, ‘hey, management, you need to pay attention to this and take it seriously.’ And they really have. The second part to your question is, was it just about the dollar amount? And it might seem that the dollar amount, 1.3 million is not a huge amount, but we do have to remember, A, that we have to scale it to the agency that we’re looking at. So for example, if Bill Gates had a $1 million misstatement in his bank account, it probably not matter to him as much as it does to me. $1 million would be a big deal in my bank account. So this 1.3 million might not seem like a big deal. If it was a bigger agency, it probably wouldn’t be. But FHFA’s a smaller agency. They are the agency that oversees the regulators for the home loan banks, and Freddie and Fannie. So they need to make sure that their records and controls are functioning properly as well.

Jared Serbu And as part of the same audit, you also identified some IT access control issues that you kind of characterize separately, apart from the significant deficiency that we were just talking about. One, why did you bin those separately, I think is an important question? And then, kind of describe the issues that you found on the IT front.

Anne Sit-Williams Sure. Those IT access issues, we always think about what line items do those impact. And when we’re doing the audit and trying to group these together. And these were at that lower level that I was talking about, control deficiencies. One was related to their payroll system, and the other one was related to just taking away access once people were separated from the agency. So, obviously, payroll system, we’re very conscientious of that. And just making sure that because payroll is FHFA’s big expense, we always pay particular attention to those. In this scenario, there was missing documentation to really make sure that, were these people authorized to have access to the system? And we weren’t able to get documentation for that. Ultimately, we were able to have discussions with the agency and make sure that people had appropriate access. Some of them had what’s called elevated access, meaning that they had people describe it as the, you know, keys to the kingdom, and they have access that’s probably — if you think about separation of duty — like, you don’t want your cashier to also be the person who’s making the bank deposit at the end of the day. So in this case, these people had elevated access, and they rightfully did, because they were supposed to be monitoring some of the operations that were happening. But we just need to make sure that FHFA has a process to make sure that the people who have elevated access are also being monitored. And with the other one, was also kind of that lower level controlled efficiency, is for separated employees when they leave, just making sure they take access away for all of their systems that they had access to when they were employed, which, in the old days, making sure keys and badges were taken away was easier because that was a physical thing. But now, in the remote environment, making sure that that access is taken away is important.

Jared Serbu My sense is these issues are fairly common across federal agencies. Is that true? Do you have a good sense for whether this is kind of pervasive? I’m talking specifically about the IT access control issues, removing access for separated employees and controlling the levels of access.

Anne Sit-Williams It’s definitely an area we always tend to look at because they are the riskier areas, just in thinking about the agencies I’ve audited. A few of them have definitely had these type of issues. I think a lot of people do have employees separating, and they also grant elevated access and access without the appropriate documentation. So, I would agree that it’s not uncommon to see this.

Jared Serbu And the last thing I wanted to ask you, I think, Anne, is, are there any cautionary tales for other agencies who might have similar setups with shared services providers that handle their financial statements? I mean, this is a little bit of an unusual situation in that you have this chain of the OIG to the main agency, to a shared service provider. Any takeaways for other agencies that might use a similar setup?

Anne Sit-Williams Yeah, I think that in several cases there are agencies that use contractors or shared services, and they think that, well, because we’ve hired them, they have good internal controls, so we can rely on that. And you can, to an extent. But ultimately, at the end of the day, the agency is the one who’s responsible for all of this. They’re the ones who are signing the representation letters at the end of the day, saying that the internal controls and financial statements are fairly presented and operating, so they can’t fall asleep at the wheel and just rely on those external parties. And the same thing with even just thinking about what is the point of the review, not just signing a piece of paper at the end of the day. It’s really digging in and seeing did what was supposed to happen, happen? And I think that’s where we have a lot of errors and control deficiencies when we identify them.

Jared Serbu And you mentioned this briefly, but I just want to make sure we hit it, that it sounds like FHFA is really taking everything that you’ve given them on board, and they’re working to address everything that you recommended.

Anne Sit-Williams Yes. The director of FHFA and the Inspector General have taken these recommendations that we’ve made very seriously. They’re already, when we met with them a few months ago, have already started implementing some of the remediation efforts to correct the internal control findings. And we start the audit very soon for 2024. So, we’ll be able to follow up on those.

Tom Temin Anne Sit-Williams, director for financial management and assurance at the Government Accountability Office, speaking with Federal News Network’s Jared Serbu. We’ll post this interview along with a link to her report at federalnewsnetwork.com/federaldrive. Subscribe to the Federal Drive wherever you get your podcasts.

The post Internal financial control problems can afflict agencies large and small first appeared on Federal News Network.

• The Department of Veterans Affairs paid out $11 million in bonuses to career executives not eligible to receive them. Now a bipartisan group of lawmakers is seeking answers. House lawmakers are asking VA how long it will take to claw back those bonuses and what steps it will take to hold department leaders accountable. The lawmakers also want to know what steps VA will take to ensure future financial incentives are awarded responsibly.
  (Spanberger demands answers, accountability from VA over nearly $11 million misspent on executive bonuses - Rep. Abigail Spanberger (D-Va.))
• For the second time this week, a federal cybersecurity leader is heading out the door. Eric Goldstein, the executive assistant director for cybersecurity at the Cybersecurity and Infrastructure Security Agency, is leaving federal service after more than three years. CISA confirmed his last day will be in June, but didn't say exactly when. Goldstein's decision to leave government comes two days after Chris DeRusha, the federal chief information security officer, announced his decision to move on. CISA Director Jen Easterly praised Goldstein, saying through his leadership CISA pioneered new models of operational collaboration, reshaped its ability to detect and address cyber risks and shifted the balance toward building technology that is secure by design. A CISA spokesperson didn't say who would be acting in his place after Goldstein leaves.
  (Second senior cyber leader this week to exit federal service - Federal News Network)
• Transportation Security Administration employees are about to see major workforce changes. That is after TSA signed off on a new collective bargaining agreement with the American Federation of Government Employees. The seven-year contract offers more official time, sick leave, uniform allowances and much more. It also comes after TSA workers received a major pay bump last year. Altogether, it will have a massive positive impact, said TSA Administrator David Pekoske. “If we didn’t have this CBA, if we didn’t have this pay package, I would submit to you, we probably wouldn’t have a TSA in five or 10 years,” Pekoske said. Looking ahead, AFGE is now calling for the passage of a bill to further cement workforce rights at TSA.
  (TSA, AFGE see milestone contract as ‘pivot point’ for frontline workforce - Federal News Network)
• New legislation in the House calls for a crackdown on improper payments. Federal agencies made more than $230 billion in improper payments last year. A bipartisan bill seeks to rein in that wasteful spending. The Enhancing Improper Payment Accountability Act would subject federal spending programs to stricter reporting requirements if they pay out more than $100 million annually. It would also require agencies to report out their antifraud and risk management controls. Reps. Abigail Spanberger (D-Va.) and Blake Moore (R-Utah) are leading the bill.
  (Spanberger, Moore Introduce Bipartisan Legislation to Reduce Improper Payments, Strengthen Confidence in Federal Programs - Federal News Network)
• The White House wants agencies to consider social and behavioral science in policymaking. On Wednesday, the Biden administration released its Blueprint for the use of Social and Behavioral Science to Advance Evidence-Based Policymaking. Policymakers will have access to data used to measure the effectiveness of government services, and how they reach their intended targets, before developing programs. The blueprint provides a hundred examples of how social and behavioral science has been used to advance innovation and ensures that agencies will have the appropriate number of staff with the required expertise.
  (White House releases policymaking guide - Whitehouse.gov)
• The Technology Modernization Fund Board is making its first investment in generative artificial intelligence as part of awarding four new investments, worth $49.2 million, to three agencies yesterday. The State Department received its first two awards from the TMF, including $18.2 million to use GenAI in its data environment to improve the sharing and understanding of information among all of its offices around the world. The State Department also won funding to modernize its identity and access management tools. The National Oceanic and Atmospheric Administration and the Office of Federal Student Aid won the two awards from the TMF to modernize customer-facing systems. Since January 1, the TMF Board has made nine awards to eight agencies.
  (State, NOAA, Education win new IT modernization funding - Federal News Network)
• The Army is getting rid of its online training for enlisted troops. The service is eliminating the requirement for all enlisted soldiers to complete the Distributed Leader Course. Soldiers currently working on the courses will not be required to complete them. And soldiers who have not begun the training are no longer required to start. Enlisted soldiers were previously required to complete the courses before attending a noncommissioned officer academy.
  (Army eliminating Distributed Leader Course - U.S. Army)
• The Department of Veterans Affairs is trying to use a career development portal to boost its cyber workforce skills. The internal VA website includes training modules spanning 32 different cyber work roles across the agency. Through the portal, the VA is offering courses in IT, AI awareness and much more. VA employees can also take a self-assessment to decide what skills they can — and should — try to develop. The goal is two-fold: improve retention of the agency’s cyber employees, and close some of the VA's existing skills gaps in technology.
  (VA career development portal - Department of Veterans Affairs)
• The Department of Homeland Security will launch a cyber task force focused on artificial intelligence if a bipartisan bill makes it through Congress. The bill would require the Cybersecurity and Infrastructure Security Agency to lead a group to address safety and security challenges posed by AI. CISA’s AI task force would give annual updates on its work to Congress. Reps. Troy Carter (D-La.) and Bennie Thompson (D-Texas) introduced the bill.
  (Congressman Carter, Thompson Introduce CISA Securing AI Task Force Act - Rep. Troy Carter (D-La.))
• House lawmakers want to give personnel at the Office of Strategic Capital temporary assignments in the private sector. The House Armed Services Committee’s draft defense bill would require the Defense Department to establish a program under which the Office of Strategic Capital would arrange assignments for its employees at private companies, with the goal of improving their understanding of emerging defense industrial base capabilities and the role of venture capital in shaping future modernization requirements.
  (Lawmakers want to place Office of Strategic Capital employees in private companies - House Documents)

The post Spanberger demands VA clean up its act when awarding financial incentives first appeared on Federal News Network.

Sikorsky Aircraft and the Defense Department have been arguing in court for the past 17 years, over the company’s compliance with cost-accounting standards. One reason it has been running so long is the government keeps asserting violations but takes no action. For more on the importance of this case, the Federal Drive with Tom Temin spoke with Haynes Boone procurement attorney Zach Prince.

Interview transcript: 

Tom Temin Sikorsky Aircraft and the Defense Department have been arguing in court for the past 17 years over the company’s compliance with cost accounting standards, CAS. One reason it’s been running so long is the government keeps asserting violations but takes no action. For more on the importance of this long-running case, we turn to Haynes Boone procurement attorney Zach Prince. Is this, like, the biggest thing since the INS law case, which might be still running after 50 years, for all I know?

Zach Prince  So, Tom, the dispute has been essentially based on facts that came up in 2007. So, what happens, if you’ve got a contract that’s subject to the full cost accounting standards, you have to submit a disclosure statement. And the disclosure statement sets forth your accounting methodologies, the way that you’re accounting for costs.

Tom Temin And the way you have to account for cost is clearly delineated in regulation, correct, if you’re a defense contractor?

Zach Prince Yeah. So, if you’ve got the cost accounting standards, it sets forth standards. So, those are broad frameworks for certain categories of costs or how you have to set up your accounting. The way you implement that is somewhat up to you. It’s intentionally set up as more of a framework than very specific ‘you must do X, Y, and Z, and no other accounting is okay.’ But the reason you have a disclosure statement is so that you can tell the government this is how we account within the framework for these categories of costs. The government reviews it and then they start issuing contracts — multi-million dollars of contracts — necessarily, right? Because if you’ve got cash contracts that means they’re at least $2 million. Full CAS means you got 50-plus million dollars in CAS-covered work. So, we’re talking about huge contracts that are based on a understanding of what your accounting framework is.

Tom Temin Many years ago, before it got into dispute territory, we should say — the dispute hasn’t been going as long as I said, but the contract has — Sikorsky submitted its methodology for cost accounting and it seemed to be okay with the government?

Zach Prince Yes. So, they submitted their disclosure statement in 2007. And included in that disclosure statement are explanations of how it’s dealing with IRAD, independent research and development costs, and bid and proposal costs. Any big contractor that’s dealing with this is setting forth those methodologies. The government looks at it for adequacy. And then years later, in this case, they came back and they said, hold on a second, we think the way you’re actually doing this for IRAD and BMP, which is a CAS 420 issue, is wrong, and they demanded millions of dollars in a cost impact. The magnitude is blocked out in the decision. So we don’t know exactly the dollars, but it’s got to be millions for this dispute to be worthwhile.

Tom Temin All right, and Sikorsky, then, obviously has not agreed. And there’s the idea of post-facto discovery after acceptance of the disclosure statement is really what this dispute is all about.

Zach Prince Yeah. They made an argument that I’m extremely sympathetic to, and it’s one that a lot of big defense contractors have. And that’s, the government saw what we’re doing, right? They knew the methodology that we’re applying. They should not be allowed now, years later, after they’ve awarded millions of dollars in contracts, to say, actually, that was always wrong from the get-go. Set aside the merits of whether CAS 420 is or is not violated here. Sikorsky argued we shouldn’t have to get there because the government accepted this. We should just move on. This came up in the big Raytheon case a couple of years ago at the Federal Circuit, first at the Armed Services Board. Also, the Armed Services Board agreed in that case that the disclosure statement that Raytheon had filed had set forth how they were accounting for certain lobbying costs and other corporate organizational costs, and that that should have prevented the government from raising the challenges that it did. The circuit ignored it all. So this still hasn’t been tested at the circuit. They just set aside that issue and dealt with something else. Here, at the Court of Federal Claims, Sikorsky brought up the same argument, and the government said in 2022, they moved to dismiss on that basis. They said there’s no sound basis within the law for Sikorsky to prevent us, the government, from challenging a CAS violation based on their disclosed practices. We have the right to challenge any violation of CAS within the six-year statute of limitations, and that’s it. And this was a big decision in 2022 was that Judge Leto, at the Court of Federal Claims, denied the government’s motion to dismiss. In other words, the court said, we’re going to entertain this argument that you are, in fact, prevented from arguing that Sikorsky had an issue when you’ve accepted their disclosed practice. It didn’t say at that time that this is definitely going to win, but it did represent what we thought was potentially a sea change in what are often 100-million-plus dollar disputes that the government should not, in all fairness, come in years later and say, we knew what your practice was, but now we don’t like it and it’s too late for you to fix it because you’ve incurred these costs. But tough, you now owe us money.

Tom Temin We’re speaking with procurement attorney Zach Prince. He’s a partner at Haynes Boone. And let me just ask you about a fine-sounding distinction. And that is the government could or could not accept the methodology in the disclosure. But then later, could it find that while we are still in agreement with your methodology, you, Mr. Contractor, violated your own methodology and we’re going to challenge that cost on that basis? But that’s not what’s happening here, right?

Zach Prince No, that’s not what’s happening here. And I think even Sikorsky would agree in that situation that the government would be permitted to come in and say, you aren’t following your disclosed practice, right? You have to follow your disclosed practice. The issue that Sikorsky, I think, rightfully raised, and the court was clearly sympathetic to, was we were following our disclosed practice, and the government is saying that our disclosed practice is insufficient.

Tom Temin Interesting. And what’s also surprising to, you know, a layman in this, if you look at a company like Sikorsky, which has been a federal contractor since the founding of the first helicopter, and then you’ve got places like Raytheon, which go back decades, what could possibly be different in the way they’re accounting for contract 10,000 that they weren’t doing in contract 9,999 back to zero?

Zach Prince So, it is common practice. A large company is going to have some changes in the way that they are approaching their accounting. And they’ve decided that accounting for costs this way versus that way, this gets really arcane, is beneficial to us for different reasons that have benefits. One cost objective, there’s another cost objective. There is a lot to the accounting treatment of different costs. And when they want to change a cost accounting practice and a CAS-covered contract in particular, they have to go through a whole process for explaining to the government what the change is and why it’s beneficial to the government and why they ought to accept it. That’s not exactly what was the issue here, but there’s plenty of reasons that a company would be changing their cost accounting.

Tom Temin What is the status of this case now? And it sounds like something the entire industry should be watching. Really?

Zach Prince The industry ought to be watching this. So this case is now in discovery. And that’s where this decision that I’m bringing up today and why it’s on my mind again, came up. The government in discovery started asking about information relating to 155 separate IRAD or independent research development projects. They’ve got a contracting officer’s final decision here, though, that question costs related to two specific projects. The government seemed to be in discovery, making these sweeping requests that are wasting a lot of company resources, potentially in a phishing expedition, to find more fodder for another claim. And Sikorsky said the government ought not to be allowed to do this. The way they tried to bring this to the court’s attention, usually in discovery, and without going too far into the weeds in this kind of thing, you’d ask for a motion to essentially prevent the government from asking about these things. They asked for a motion to dismiss instead. They wanted to dismiss the government claims pertaining to anything except for the two IRAD projects that were in dispute. The problem was, that the court was grappling with, there were no claims from the government relating to anything except for those two projects. That is, the court can’t dismiss something that hasn’t been asserted. On the other hand, the government can’t ask for things pertaining to something that it hadn’t asserted either. So, Sikorsky really did win on that point. The court said, notwithstanding the government’s suggestion, that maybe there’s some sort of broader argument the government had initially brought against Sikorsky that every IRAD project is flawed somehow. That’s not actually what they asserted. The government claim, just like a contractor claim, is subject to what you actually state, right? And what the government then decides in a final decision. So, Sikorsky is still protected from these sweeping government demands for more information. And so the government has to stay focused on the claim that’s before it, for now at least, unless they want to issue a new decision on these two projects. And so we’re still working our way to an actual decision on the merits. My guess is a trial and a decision on the merits. So this is going to be percolating for years to come, I suspect.

Tom Temin Right. And by the way, the two projects you were talking about are improvements to the H60 Blackhawk and the S92 gearbox. So it can get pretty arcane what it is you’re dealing with, whatever the S92 gearbox is, but sounds like there’s some sand in that gearbox at this point.

Zach Prince That’s a good way to frame it.

Tom Temin Procurement attorney Zach Prince is a partner at Haynes Boone. As always, thanks so much.

Zach Prince Thanks for having me, Tom.

Tom Temin We’ll post this interview at federalnewsnetwork.com/federaldrive. Hear the Federal Drive on demand. Subscribe wherever you get your podcasts.

The post Contractor’s dispute over cost-accounting standards has roots dating back 17 years first appeared on Federal News Network.

• Sen. Chuck Grassley (R-Iowa) wants a progress report on how the Defense Department is improving oversight of its purchase cards. The senator is looking for answers from the Pentagon by early May about how it is implementing auditor recommendations to increase oversight of employees using the government purchase card. Grassley said a recent inspector general report, finding employees classified purchases for COVID-related emergency services that turned out not to be COVID-related, shows a lack of internal controls. The purchases ranged from plumbing repairs to NordicTrack ski machines to lab chemicals and supplies. Grassley detailed five questions, including asking for all the processes and procedures DoD has in place to ensure the purchases are what they are purported to be.
  (Sen. Grassley presses DoD on purchase card oversight - Sen. Chuck Grassley (R-Iowa))
• Agencies considering moving offices now have to take into account several social, economic and environmental factors before making a decision. An updated Federal Management Regulation from the General Services Administration told agencies to keep in mind factors like proximity to transportation corridors and promoting environmentally sustainable development. These requirements, for both leased and owned buildings, are in addition to agency mandates around mission, physical security and cost considerations. GSA issued the final rule as part of its requirements under the Biden administration's federal sustainability plan. GSA had not updated the regulation since 2005. The new rule goes into effect on May 22.
  (New factors for agencies to consider when moving office buildings - GSA)
• Agencies have more answers for handling hiring changes under the Fair Chance Act. To start, agencies have to make job applicants aware of the requirements in the Act, the Office of Personnel Management (OPM) said. That law bans agencies from asking applicants about their criminal history until after giving them a conditional job offer. OPM said agencies should also make sure their procedures for implementing the Fair Chance Act are well-documented. That can help, for example, if an applicant questions the timing of a criminal history check. OPM said agencies who have clear documentation on hand are better able to mitigate complaints or adverse actions.
  (Guidance on restrictions on preemployment criminal history inquiries - Office of Personnel Management )
• The Department of Veterans Affairs is seeing new pay incentives drive up employee retention. VA Secretary Denis McDonough said “quit rates” for its workforce are at “historic lows.” He said data shows its use of a new critical skills incentive is contributing to higher retention. VA got that authority under the toxic-exposure PACT Act and can offer bonuses to employees with skills in short supply at the department. McDonough said the VA is also recruiting more nurses after losing them to big pandemic hiring bonuses offered by private health care providers. “We have some evidence to suggest that some of those nurses are returning,” McDonough said.
  (VA sees its special pay authorities driving up workforce retention - Federal News Network)
• The Coast Guard is planning to eliminate some units and realign some others because of “unprecedented” staffing shortfalls. The agency said it intends to shut down almost two dozen small-boat stations across the country. Those stations will stay in the Coast Guard inventory, but only be used during special circumstances, because the service does not have enough crew members to staff them full time. The service is accepting public comments on the plan through May 24.
  (Operational Adjustments Resulting from Workforce Shortages - U.S. Coast Guard (via Federal Register))
• The State Department can take years to get a new embassy up and running. But the top Republican on the Senate Foreign Relations Committee said that is not fast enough when diplomats need to hit the ground running. So Committee Ranking Member Jim Risch (R-Idaho) has introduced the Embassy in a Box Act. The bill would require the department to develop a way to fast-track the planning and construction of new missions overseas, and would require the State Department to issue guidance on the expedited construction methods.
  (Risch introduces Embassy in a Box Act - Sen. Jim Risch (R-Idaho))
• Specialists in acquisition, HR and budgeting will have a new website to get information on the federal workforce. The so-called “HR marketplace” compiles personnel data, along with available solutions to governmentwide human-capital challenges. The Office of Personnel Management launched the new website earlier this week, with the idea of creating a “one-stop shop” for anyone looking to better understand workforce issues. One of the end goals is to help agencies more effectively invest in HR technology.
  (HR marketplace website - Office of Personnel Management)
• The Air Force is moving forward with what might end up being DoD's biggest example of teaming manned and unmanned systems together. That is an idea Defense officials started pressing for, in a big way, a decade ago. Officials said they have executed contract options that will give existing vendors the go-ahead to start building real-world examples of the unmanned systems that would fly alongside human pilots in the Air Force’s Collaborative Combat Aircraft program. Eventually, the Air Force wants to build about 1,000 of those systems, with a final production decision expected in 2026.
  (Air Force exercises two Collaborative Combat Aircraft option awards - U.S. Air Force)

The post Senator underwhelmed by DoD oversight of government purchase card first appeared on Federal News Network.

It might seem like agencies designated as high impact service providers receive the bulk of the attention when it comes to customer experience efforts in government, but small component and independent agencies also are pursuing transformative CX — some using Technology Modernization Fund dollars.

Two cases in point: AmeriCorps, which fosters volunteerism in service of others, and the National Transportation Safety Board, which investigates civil aviation and other U.S. transportation accidents. We talked with technology leaders from both agencies for a panel during Federal News Network’s CX Exchange 2024.

NTSB Chief Information Officer Michael Anthony noted a CX theme that many agencies encounter, namely, the importance of a broad definition of “customer.”

For NTSB, everyone is a potential stakeholder or customer constituent, Anthony said. He named the traveling public, those affected by transportation accidents, the industries whose accidents the NTSB investigates, other federal agencies with which NTSB cooperates, and the agency’s own staff as possible customers.

AmeriCorps has an equally broad constituency. Chief Modernization Officer Linda Southcott said the agency thinks in terms of the thousands of its grant-receiving organizations with whom a quarter million volunteers interact directly each year.

Tapping TMF to tackle core systems revamps

Through its TMF-funded customer experience project, AmeriCorps is replacing its 20-year-old core grant management case system. The leadership team hopes to improve things for both the agency staff and the grantees, Southcott said. AmeriCorps received a $14 million TMF investment for the modernization effort.

“We’re developing a new grants management system,” she said, “trying to bring more flexibility and efficiency to our business processes and our workflows, but also increasing access to those resources for our public constituents.”

Southcott added that with the existing system, “we have challenges in meeting our business needs and also growing and scaling up as national service continues to grow.” One issue is that federal grant management standards evolve, and it had become increasingly difficult for the legacy system to inculcate what’s known as the Federal Integrated Business Framework for Grants.

AmeriCorps planners expect the new system, which is nearing completion, to better support data-driven decision-making and deliver more value from grant-related data, said Andrea Gibbons, the agency’s chief data officer. She envisions the new system helping AmeriCorps get “to a place where we can start to do more predictive analytics and to see what changes that we can make to our programs.”

The agency began the effort to modernize the grant system and its workflow in 2022. It’s now in the final phases of design and configuration.

By comparison, NTSB’s program is nascent. It launched its TMF-funded effort about six months ago, Anthony said. The goal is to solve problems stemming from the scattered nature of the agency’s data and applications.

“Our investigative data is not centrally located,” Anthony said. “And because of that, it’s not easily accessible or even exploitable for our internal and external stakeholders.” Investigators have trouble sharing data, and they often must enter the same data into multiple systems separately, he said.

The to-be state will bring all investigative data into a single, secure environment, Anthony said.

“This is really going to streamline the management of our investigative artifacts,” he said. “That’s investigative reports, supplemental documents, accident data and, probably — most importantly  safety recommendations.”

The future system, he added, will incorporate a modern, intuitive search function. Anthony anticipates future data visualization capabilities and improved data sharing with stakeholders such as the Federal Aviation Administration using application programming interfaces.

“We’re also going to be doing something we haven’t done before, and that is proactive notification of when an investigation changes,” Anthony said. Customers will be able to subscribe to alerts, rather than having to keep checking the NTSB website.

The new system, moreover, will better support an enterprise case management environment for NTSB, he said. Eventually staff will also digitize past incident and investigative data.

“And that’s where I think you really see like a force multiplier,” Anthony said. “You can really run analytics, generative artificial intelligence, all those capabilities on top of that. All of these things are really going to benefit our external constituents as well as internal staff.”

TMF benefits beyond access to funding

Small agencies typically lack deep budgetary resources to take on projects like total systems modernizations, which can leave them unable to keep pace with larger agencies they cooperate with. For instance, Southcott said, AmeriCorps has struggled to keep its systems as up to date as those of agencies like the Federal Emergency Management Agency and the Centers for Disease Control and Prevention. AmeriCorps partners with both in its public health channel.

Besides the extra money, “the TMF opportunity also gave us access to technical assistance and guidance from industry experts at the TMF board,” Southcott said.

TMF funding also comes with the virtue of not being tied to the uncertainties of regular appropriations. For fiscal 2024, those are arriving in agency coffers six months into the fiscal year. Plus, Southcott added, the TMF board will negotiate repayment plans other than 100%.

For Anthony, small agency work proved a revelation after spending the bulk of his early career as an Army civilian and at the IRS, Anthony said. At NTSB, funding is relatively thinner, and people typically wear multiple hats, he said.

“The bottom line is: Our past and current appropriations simply don’t meet our internal and external customer demands,” Anthony said. “And because of this, we continue to add technical debt.” Multiple mandates pertaining to initiatives such as zero trust and artificial intelligence only compound the problem, he said.

“TMF for us is a game changer to enable us to do some of the things we know we need to do,” Anthony said. “We just haven’t had the resources to do it.”

Prioritizing CX investments

Even with extra money from TMF, technical and program managers must pick their opportunities carefully, starting with understanding what customers need most, all three panelists said.

Up-to-date case management topped the NTSB list.

“However, in our, in our case, we had to figure out what not to include,” Anthony said. “There’s a lot more demand than capacity, so we tried to select some of the most important pain points for each of our various stakeholder communities, something that we could do in a timely manner.”

At AmeriCorps, “our staff has mentioned for years, the pain points with our legacy systems,” Southcott said. Effectively going after the pain points, she said, required collaboration. That’s because one of the goals for modernization is to capture knowledge in users’ heads and express it as sharable data.

“It’s important to be doing this together with the chief data officer — having a solution that allows folks to do their jobs and do the transactions, but then building centralized data where the analytics can happen,” she said.

Added Gibbons: “We rely so heavily on institutional knowledge. We have a staff that knows everything about everything.” But they must spend a lot of time hunting for information. “That’s really what this whole effort will free people up for, to be able to use data more innovatively.”

Discover more customer experience tactics and takeaways from Federal News Network’s CX Exchange 2024 now.

The post CX Exchange 2024: AmeriCorps, NTSB on using TMF funding to reimagine systems and services first appeared on Federal News Network.

New data from the Government Accountability Office estimates agencies lost as much as $521 billion due to programmatic fraud between fiscal 2018 and 2022.

The Office of Management and Budget strongly disagrees with that estimate, questioning the plausibility of GAO’s assessment.

No matter what the real amount of fraud is across government — and agencies may never truly know — the Treasury Department is giving agencies tools to stop fraud before it starts.

David Lebryk, the fiscal assistant secretary at the Treasury Department, said Treasury is offering new and existing platforms and databases to help agencies move from being reactive to proactive in stopping fraudulent payments.

“Oftentimes was very difficult to have to raise our hand in real time and say, ‘we can get money out the door and prevent fraud at the same time.’ So one of the really major focuses that we’re having at Treasury is to think about ways that as you design programs and you have tools available to the agencies to make sure that you can do both — you can get the money out the door quickly but also make sure that you’re preventing fraud to the maximum extent possible,” Lebryk said in an exclusive interview with Federal News Network. “We have something called the Center of Payment Integrity, in which we have a number of databases that we allow agencies to match against. That includes looking at things like eligibility verification, making sure we’re not paying dead people, for example, understanding whether the vendor has problems and we shouldn’t be doing business with a vendor, whether there’s been someone incarcerated and other kinds of eligibility criteria. In addition, we’re also offering a service called Account Verification Services, in which we can make sure that when a payment goes to a bank account, it is in fact going to a real bank account holder. We can do that in real time. And third, we’ve had some success with really looking at check fraud and how we can minimize check fraud, which is a problem that’s impacting the private sector.”

While the Treasury makes 98% of all payments electronically, the 2% that goes out via paper check are facing a higher risk of fraud.

Treasury tool stopped $500M in potential fraud

Lebryk said Treasury has been piloting and is now expanding a new tool that uses machine learning to look for anomalies on paper checks. So far, Treasury has run about 40 million checks through the ML application.

“If we see an anomaly, we actually flag that check and let the financial institution know that there’s a potential problem with it,” he said. “To date, that tool has stopped over $500 million of fraudulent payments that would have gone out. It is a case of very good collaboration with the inspector general community. They allowing us to then use it to actually bring more cases against fraudsters. We have a lot more opportunity to do even more of that kind of thing.”

The verification tool scans checks looking for unusual such as a foreign bank account or address, or if the person has never received a government check before.

Like with any machine learning and similar tools, Lebryk said Treasury has been improving the data and models to gain confidence in the approach and reduce false positives.

Lebryk said Treasury is now using the check verification tool on all checks go through Treasury and the Federal Reserve.

“That information that is going back to financial institutions in really near-real time so that the financial institution can take quick action,” he said. “This is another case where the government has limited capability to design quickly, new technology and skills that the private sector is actually investing a lot of money in. So this is another example where we have leveraged the private sector, and we will continue to level of private sector in terms of looking at really their tools that are being used and that we might be able to take advantage of.”

GAO makes 3 recommendations

Treasury is looking for similar tools and capabilities from the private sector. It is holding an industry day on April 18-19, and released a request for information in early March to get a better understanding of what industry is using or is developing to improve payment integrity.

The use of better tools and data is one of three broad recommendations from GAO for how OMB and Treasury can do more to reduce and eliminate fraud.

GAO said OMB should issue new guidance that identifies and establishes consistent data elements and terminology for use across agencies and requires agencies to use existing data systems and processes to do more to limit fraud.

Meanwhile, GAO says Treasury should establish an effort to evaluate and identify methods to expand governmentwide fraud estimation to support fraud risk management. It should prioritize programs at increased risk of fraud. Treasury also should take more advantage of its data-analytics capabilities, such as within the Office of Payment Integrity, which includes the Do Not Pay program.

Lebryk said the Center for Payment Integrity proved its value time and again during the pandemic, and it’s expanding those lessons across the government.

“When we started using the account verification tool, we said if we were going to make an economic impact payment to an individual who already was receiving a government payment and we were comfortable that that was a legitimate account, we flipped some of those payments to go directly to those accounts,” he said. “That ability to do that significantly reduced fraud, but also importantly, it made for a much better end user experience.”

Treasury goal to risks core all payments

Lebryk said all of the tools through the Center for Payment Integrity are free to agencies.

“We want to encourage agencies to actually use these databases and to run their payments against those databases. Now, in the end, that agency has to make a determination about whether they want that payment to go through or not, with so many payments that we issue, we don’t have the ability to make judgments ourselves at Treasury. Only the agency can make a judgment about whether it’s a payment that they’d like to make or not make because they’re the ones who provide us the amount, and the person who’s actually going to receive the payment,” he said. “One of the challenges I think that we face is how do we make sure that agencies have the capability to use our services, and then once they get the information back from us, what do they do with that information? In some cases, there are situations where a hit will occur and, in fact, it should be a payment because it’s legitimate. There are other cases where it’s really shouldn’t be a flag. I think as we look into the future as we are trying to really develop these capabilities, we should be scoring every payment that the government makes. We should be putting some sort of confidence level of around that payment.”

Lebryk added in time the tools will continue to improve and give agencies a better sense of where a payment falls in the fraud/risk spectrum.

He said Treasury will continue to build or take advantage of private sector fraud detection capabilities and build internal analytical tools.

In fact, a new bipartisan bill, introduced Monday, backed by House and Senate lawmakers, as well as the White House and federal watchdog agencies still investigating pandemic fraud, would preserve analytics tools built by the Pandemic Response Accountability Committee (PRAC), a governmentwide council of inspectors general, and would repurpose those tools use to uncover more fraud in federal spending.

The Government Spending Oversight Committee Act would give agency IGs the tools they need to combat fraud across more than 10 major funding bills, including pandemic-related spending.

Lebryk said FEMA is a good example of an agency that is trying to take fraud prevention more seriously and building internal analytical capabilities to stop it proactively.

“It’s an area where there’s real opportunity because much of the money that’s spent is federally-funded, state-administered programs. I think one real area of opportunity for us is how do we engage the states more so they can actually have access to the data that we have available to us?” he said. “There’s things like has someone applied for an unemployment benefit in one state and also done it in two other states? And the ability to have datasets and capability to match against that to find out that’s occurring. It would and can be a really step forward into preventing fraud.”

The post Treasury giving agencies a fighting chance to prevent fraud first appeared on Federal News Network.

Navy Secretary Carlos Del Toro has made it clear, time and again, that readiness will not suffer.

Del Toro met with acquisition leadership yesterday to lay out how it will prioritize readiness over investments in new products.

Russell Rumbaugh, the assistant secretary of the Navy for financial management and comptroller, said Thursday that the acquisition professionals heard some of the details about the steps the Navy would have to take if Congress doesn’t pass a full year budget.

“Obviously, we’re still hoping this doesn’t happen. But it’s a little bit breathtaking when the Secretary has to sit there and hear the bad news delivered to his acquisition professionals,” Rumbaugh said after speaking at the ACT-IAC Digital Transformation Summit in Reston, Va. on Thursday. “Every time we go through these budget shenanigans, it makes everybody’s life harder. All of the funds distributions are different. We have multiple ways that we may have to chop it up to make sure we stay within the controls that we’re stuck with because of a continuing resolution and to create a lapse, it’s even worse. There’s plenty of drama and turbulence no matter what.”

The first of two current continuing resolutions expire March 1 for some agencies and March 8 for others.

It’s unclear if Congress will even pass all spending bills and there is some discussion about a full-year CR.

The Congressional Budget Office reported in January that a full-year CR could require big cuts to agency discretionary budgets. Non-defense agencies would face a 5% or a total of $41 billion in cuts, while defense agencies would have to reduce their discretionary spending by about $1 billion or 1%. If Congress passes a full-year appropriations at current levels, only non-defense agencies would face cuts under sequestration of about 9% or $73 billion.

In December, the Office of Management and Budget said that cuts under sequestration would not be decided until later this spring.

Navy to make readiness a priority

All of this uncertainty is leading the Navy to plan for the worst.

Del Toro said at the AFCEA and U.S. Naval Institute West 2024 conference in San Diego on Feb. 15 that the Navy may face a deficit of $40 billion without a full year budget.

“[W]hile Congress has so far avoided a painful and disastrous government shutdown, a full-year continuing resolution would be monumentally damaging to our efforts to build and maintain the fleet of today — much less the fleet of the future,” Del Toro said. “Without a full budget, our safety and readiness will suffer, at a time when we are ill able to afford it—lost time in readiness cannot be bought back through future funding.”

Rumbaugh added that the cuts from sequestration in 2013 severely impacted the Navy’s readiness and a decade later, it is “still trying to dig out of that hole.”

Other military services have rang similar alarm bells. The Air Force said a yearlong continuing resolution, estimating that the service would lose as much as $13 billion in buying power before adjusting for inflation. The Space Force would face the largest funding gap, losing nearly $2.6 billion in research dollars. The Air Force would lose up to $1.4 billion in research, test, development and evaluation dollars. It would have to cancel 34 construction projects, and the measure would impact seven national security space launches.

Navy auditability could suffer

Sabrina Singh, the deputy press secretary for the Defense Department, said on Monday that a full-year CR would have a major impact on the services and defense agencies’ readiness.

“No amount of money can buy back the time we lose when we are forced to operate under continuing resolutions,” Singh said. “If you add up the total time spent under a CR going back to 2011, we’ve spent nearly five years under CRs.  That puts our national security at risk and prevents the department from modernizing as we continue to be constrained to existing funding levels and prevented from launching new programs. We must break this pattern of inaction.  We can’t outcompete the People’s Republic of China with one hand tied behind our back three, four, five or even six months of every fiscal year. The best way that Congress can support the department is to pass appropriations bills into law as soon as possible. We need predictable, adequate, sustained and timely funding.”

Rumbaugh said both the potential funding shortfall and the focus on readiness over investment will have downstream effects on the Navy’s goal to become audit ready by 2028.

He said the migration to the new enterprise resource planning (ERP) systems is considered an investment. So if the Navy is prioritizing readiness over investments, including new ships, all the progress the service has made over the last few years will slow down.

“By 2026, we want to shut off [the legacy system] SABERS for the Department of the Navy and be out of that and into our big ERP. The nitty gritty is taking a bunch of commands and moving them, and some of them do have unique financial transactions we haven’t dealt with before,” Rumbaugh said. “Other times it is a modern magnification. And most probably you just kind of take the people with you. They have to learn we’re asking a huge amount of them to not just do their day job, but learn how to do their day job in a totally new environment. We are very sympathetic and very concerned about them even as we have to just do it.”

Marines already migrated

The Navy recently completed the migration of the Bureau of Personnel to the ERP. Rumbaugh said the Fleet Forces Command are among the final organizations that need to migrate and that will happen over the next few years.

“Migrating them is in process. We’re just cleaning their data, which you won’t be surprised to hear is a fairly formidable challenge. But we’re in the process, I can see the end of this migration. It’s great,” he said.

As a part of the ERP modernization effort, Rumbaugh said the Navy has retired 11 of 16 financial management systems, but a CR and/or sequestration would impact the service’s ability to shut down the remaining systems.

The Marines Corps already are well on their way to not only moving to a new systems, but, hopefully, auditability.

Rumbaugh said the Marines decided to move to Defense Agencies Initiative (DAI), a financial management modernization effort that doesn’t involve the services.

“They’re all the way there on the financial management, and that does just address a huge amount of problems,” he said. “There was still a bunch of side things we had to do, but that migration, that huge cultural change, which was absolutely turbulent, absolutely painful, they are through, and in fact, I think, now healing from it.”

The post Without full year budget, Navy to face $40B shortfall first appeared on Federal News Network.

The Coast Guard’s transition to a new Department of Homeland Security financial management system is under the microscope at the Senate Appropriations Committee, where lawmakers are seeking more information about delayed payments and cost increases.

The committee, in the report on its fiscal 2023 spending bill, is directing DHS’s chief financial officer and chief information officer, along with the Coast Guard, to brief the committee on the delays once the annual spending bill becomes law.

“The committee is concerned with delayed payments and significant cost escalations resulting from the Coast Guard’s transition to its new financial management system,” the committee’s report states.

Lawmakers want to know the “full extent of the delays,” as well as whether they’ve been fixed. The report also calls for the CFO and CIO to brief the committee on “lessons learned from all prior transitions and measures that are being taken to ensure that further transitions are successful and cost effective.”

The Coast Guard announced it had fully transitioned to the Financial Management System Modernization Solution in January. It’s the third DHS component to adopt the new system after the Countering Weapons of Mass Destruction Office and the Transportation Security Administration, respectively.

But challenges that existed prior to the official transition only deepened, with technical issues causing delays in payments across the Coast Guard, including for contractor invoices, permanent change of station (PCS) claims, temporary duty (TDY) claims and other expenses. At one point, the backlog reached 29,000 invoices.

In March, the Coast Guard established an Incident Management Team to address the technical issues and chip away at the backlogs. The team is led by Rear Adm. John Hickey, director of operational logistics. The team has been working with contractors IBM and Oracle on the FSMS technical issues.

In an Aug. 2 email, a Coast Guard spokeswoman said the backlog is down to 2,800 invoices. The service is now “on track” to pay all invoices over 30 days old by the end of fiscal 2022, according to the spokeswoman.

The Coast Guard has also fully cleared the backlog of PCS and TDY claims, respectively, and is processing those claims in real-time, according the spokeswoman.

“The Coast Guard continues to resolve defects and improve FSMS and its interfaces,” the spokeswoman said. “While system responsiveness has improved and significant progress has been made on fixing problems, the Coast Guard continues to work with the contractors to prioritize efforts, reduce latency and resolve remaining defects to improve user experience.”

Meanwhile, Senate appropriators are asking  more questions about DHS’s broader financial systems modernization plans. The report on the fiscal 2023 spending bill directs DHS “to provide a strategy for the acquisition of software and services related to FSM, including an analysis of alternatives and a plan for how the department will ensure full and open competition in the award of all related contracts.”

Budget documents show DHS is requesting $114 million for financial systems modernization in fiscal 2023. The funding covers software upgrades for the Federal Emergency Management Agency, Immigrations and Customs Enforcement, the Cybersecurity and Infrastructure Security Agency, DHS’s Science and Technology directorate and the department’s management directorate.

“The Committee is concerned that an expectation of implementation by components exists for these efforts without properly planning for contingencies that preserve congressional prerogatives, and consequently the department is encouraged to ensure transitional flexibility,” lawmakers write in the report on the fiscal 2023 spending bill.

The post Lawmakers flag concerns with payment delays, cost overruns for Coast Guard’s new financial system first appeared on Federal News Network.

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• The Postal Service is reminding employees they can’t get paid for speaking, writing or teaching about their experience on the job. That includes writing a book or article about the specifics of their postal duties or internal postal information. Leaders there want the Postal Service to present a single, united message to the public. Anyone with questions about the policy can call the USPS ethics helpline at (202) 268-6346.
• Continuing resolutions are hurting the ability of agencies to do business or hire. The Government Accountability Office found that Congress enacted 47 continuing resolutions since fiscal 2010. Officials at the Agriculture Department told GAO that CRs can cause hiring activities to slow down or pause. USDA Office of Rural Development officials said they may not extend new hire offers during a CR. The Education Department said travel funds may be inaccessible during a CR and in some cases the department has to delay contracting decisions until it knows its final funding levels. Congress has enacted a CR in all but three of the last 46 fiscal years.
• The Government Accountability Office reported that the Defense Department is likely underreporting how much money it’s spending on cloud services. In part, this is because DoD has not fully and consistently implemented the TBM, the Technology Business Management framework, as required by OMB in 2019. GAO found the Army and the Air Force did not follow leading TBM implementation practices, causing DoD to struggle in how it fully tracks IT costs. GAO recommended the DoD CIO issue new guidance to ensure consistent TBM implementation. But the Pentagon disagreed with that recommendation, saying only that the services and agencies are responsible for data quality.

• The Defense Health Agency came out on top over a protest of one of its major IT services contracts. The Government Accountability Office upheld DHA’s award to Perspecta Enterprise Solutions under its enterprise IT services integrator vehicle. Two losing bidders, Deloitte and ManTech, filed a protest after the May 13 award for this contract that is worth at least $640 million. GAO said Deloitte and ManTech’s claims that the award was tainted by conflicts of interest were not supported. And GAO said the two losing bidders’ allegations that the evaluation and selection decision were unreasonable and inconsistent also fell short. DHA will use the EITSI contract for all IT services and support capabilities, including delivery of a single electronic health record system to support an estimated 9.4 million beneficiaries.

• The U.S. Copyright Office rolled out a new digital service for citizens seeking a copyright. The Copyright Office, part of the Library of Congress, has enabled online posting of documents for obtaining a copyright. Creators can establish an account using Login.gov. They can pay the recordation fees through Pay.gov and track their application status online. The Enterprise Copyright System goes public after a testing period that started in 2020. Mailing in paper is still possible, but the Copyright Office recommends online.

• The Bureau of Prisons must pay $300,000 in a discrimination settlement. The American Federation of Government Employees said BOP prison wardens in Mississippi intentionally discriminated against a local union president. BOP must compensate Cydnee Price for over 1,000 hours of union work she completed on her own time. AFGE said federal wardens prohibited Price from working entirely on official time to perform union work, although the previous union president did not receive the same treatment. Price is the first Black woman to serve as a chapter president for a federal correctional center.

• The Defense Department is encouraging service members at risk for Monkeypox to get vaccinated. The World Health Organization officially declared Monkeypox a health emergency last week. The Defense Department is taking steps to ensure service members know how to stay safe. There is an approved vaccine within the U.S., however supplies are limited. DoD is working with the Centers for Disease Control and Prevention on ensuring service members have access to the vaccine within 24 to 48 hours. DoD said service members should seek medical care immediately if they believe they were in close contact with someone who is infected. Monkeypox spreads through bodily fluids, rashes and through respiratory droplets.

• Lawmakers are shining a spotlight on the Coast Guard’s troubled transition to a new financial management system. The Senate Appropriations Committee is calling on Department of Homeland Security officials to explain payment delays and cost overruns after the Coast Guard switched to a new DHS financial management system. The Coast Guard announced the official transition to the system in January. But technical delays quickly led to a backlog of payments for contractor invoices, permanent change-of-station claims, and other charges. The appropriation committee is directing a briefing on the Coast Guard delays, as well as DHS’ overarching strategy for financial systems modernization.

• The Cybersecurity and Infrastructure Security Agency is in line for another budget increase. The Senate Appropriations Committee’s 2023 Homeland Security spending bill includes $2.9 billion for CISA. That’s $334 million more than CISA’s current budget. The Senate committee’s bill would increase funding for cyber threat hunting and several other CISA programs.

• Most military retirees in DoD’s TRICARE system will soon pay for their health premiums out of their regular paychecks. Paying by allotment has been optional until now, but Congress sought to make it mandatory as part of the 2020 Defense authorization bill. The new rule is finally going into effect today and once fully implemented, DoD said it expects to save about $3 million a year, because it will no longer have to cover the bank processing fees for retirees, who currently pay with credit cards.

• The Senate Special Committee on Aging is looking into the accessibility of federal websites for seniors and people with disabilities. Sen. Bob Casey (D-Pa.), the committee’s chairman, called on the Department of Veterans Affairs to improve digital services for disabled veterans. He’s also urging the Justice Department to restart governmentwide reports evaluating the accessibility of federal technology. DOJ has not issued an accessibility evaluation report since 2012, despite a requirement that the agency complete them every two years.

• The Senate’s bill funding the military would abolish the Hyde amendment and expand abortion access for service members. The Hyde amendment bans abortions by federal entities except in cases of rape, incest or potential harm to the pregnant mother. If passed, the bill would significantly change how service members receive abortion care. Since Roe v. Wade was overturned, some service members have been grappling with travel and financial issues when seeking an abortion.

• Pay day is going to be twice a month — the first and 15th — for all active duty soldiers starting on Oct. 1. The new standard is part of the Army’s effort to move to the Integrated Pay and Personnel System. While the change will impact the number of times soldiers get paid each month, it will not change their total monthly compensation. Soldiers switching to semi-monthly are not going to miss a payment or have to stretch their money out because of the switch.

• Monthly returns on nearly all Thrift Savings Plan stock and Lifecycle funds rose in July. The TSP bounced back after a June slump. The small cap stock index “S fund” had the biggest improvement since June. It increased by 18.27 percentage points. The government securities-backed “G fund” was the only fund that declined. It dropped slightly from 0.29% in June to 0.26% in July. The L Income fund had the smallest monthly increase. It grew from -1.60% in June to 2.21% in July. All funds finished in the black for the first time since April 2021. (Federal News Network)

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The Defense Department and its components are now into their fifth consecutive year of having their financial statements scrutinized by independent auditors. In the first few years, there were some very promising signs that DoD was on the path to eventually earning a clean opinion, as every other federal agency has already done.

But in the assessment of the department’s inspector general — the office with overall responsibility for auditing the financial statements — it’s getting more difficult to find clear signs of widespread financial improvement. To be sure, Defense components are still finding and fixing a lot of individual problems. But as of 2021, there was little to suggest the department was making significant headway against the systemic problems that are holding it back from a clean audit.

That’s at least one of the biggest takeaways from the latest edition of a plain-language summary the OIG publishes each year to summarize the billion dollar-per-year audit effort.

Marcus Gullett, the deputy assistant inspector general for audit, financial management and reporting, said the scale of the DoD audit effort is massive, and in the OIG’s view, still a completely worthwhile endeavor, but that DoD leadership needs to do more to ensure those efforts bear fruit.

“We’re talking about over $900 billion in appropriations. Fifty-four percent of total government assets are in the DoD, and this involves over 1,200 auditors across 26 standalone audits. So it’s worth commending the efforts that the audit teams and the components put in year in and year out,” he said in a wide-ranging interview discussing the results on Federal News Network’s On DoD. “But 17 of those 26 standalone audits have disclaimers of opinion, which basically just means that there’s not enough audit evidence available to conclude that the financial statements are fairly presented. So the theme for FY 2021, frankly, is that the progress has stalled.”

While the audit is a vast enterprise and DoD has had some successes, the overall statistics do tend to suggest the department is treading water.

This year’s financial statements showed the military departments and Defense agencies managed to solve 808 distinct problems — called notices of findings and recommendations (NFRs), in audit parlance. But auditors reissued another 2,678 NFRs that had already been identified in past years’ audits, and added another 690 to the pile this year.

Another way of looking at the problem is to measure DoD’s number material weaknesses: broad categories of problems that are so serious that they could lead to meaningful misstatements about, for example, the department’s spending in a particular area, the valuation of its assets, or the inventory it has on hand.

In 2021, there were 28 of them, two more than the previous year, and 25 were repeats from the 2020 audit. In 2020, there were 17 DoD components that hadn’t yet earned an individual clean opinion. The number was still the same as of 2021.

“One way to think about this is that when we issue NFRs, management agrees with us. We have over 90% concurrence rates, and they’re developing corrective action plans,” Gullett said. “There’s a cadence there of being willing to address a specific issue.”

The harder part seems to be getting DoD financial management leaders to see the forest for the trees — and take serious steps to resolve the much harder underlying challenges that many of those NFRs point toward.

“We’ve been pretty consistent in messaging over the last few years that this effort needs to lead to developing sustainable business processes,” he said. “What we might see, for example, is in the IT realm. One particular system may have an access control issue, so the auditor issues an NFR. And next year, the component addresses the issue in System A. But then, the auditor comes back and says, ‘Okay, the issue is fixed in System A, but System B has the same exact access control issue this year.’ So that’s the type of enterprisewide thinking we need to see before the components are able to move toward addressing the material weaknesses that flow from all of those NFRs.”

But the OIG thinks there’s reason for optimism on that front. During the first few years of audits, many of the politically-appointed leadership positions critical to that enterprisewide view were vacant or led by acting officials. That’s no longer the case. DoD’s top two financial management positions are now held by Senate-confirmed officials. The Army and Air Force also have Senate-confirmed leaders in their respective comptroller/CFO seats.

In the early days of the audit effort, DoD ordered each of its components to draw up credible “roadmaps” for how that component could achieve a clean opinion. Now that those positions are filled, there’s a good opportunity for the Pentagon to not just hold the components to their plans, but for DoD as a whole to draw up one of its own.

“The roadmaps are oftentimes inconsistent across components. They also have sort of vague measures of success,” Gullett said. “So one of the things we’re focused on in developing measurable goals is taking a top down approach from the DoD comptroller level: sort of pushing down their expectations for these roadmaps.”

And asked whether DoD’s “stalled” progress means it’s time to reassess the overall audit effort, Gullett said the answer is clearly no.

After all, most of the 800 NFRs the department managed to close over the past year really were financial management weaknesses that should have been solved anyway, even if the audit weren’t the driving factor behind them. And the more DoD can do to communicate the operational impact of fixing its finances, the better.

“Each year the auditors identify something tangible, it kind of highlights [that’s] important,” Gullett said. “This past year, the Navy highlighted that its inventory records showed [less than what it had]. At another Defense Logistics Agency site, DLA wasn’t measuring certain metals accurately. We have example after example, and the risk here is that if you don’t know what you have and where you have it, your ability to accomplish your mission can be hampered. I’d also point to contingencies. Ukraine, or COVID-19, or Afghanistan. Those things happen, if DoD doesn’t have the controls in place to pivot to support these contingencies, that’s going to have a bigger impact on the overall operating budget. So this is an opportunity to really hone in developing those sustainable solutions with clear goals, holding the components accountable, and kickstarting the audit progress again.”

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