internal control | The Contracting Education Academy

August 1, 2017 By AMK

Pentagon fixing problems that let fake federal agency get $1.2 million in military hardware

Officials from the Defense Logistics Agency (DLA) told Congress that they have taken several steps to shore up the integrity of a program that distributes surplus military equipment to law enforcement agencies after the Government Accountability Office demonstrated that it was highly susceptible to fraud.

But the assurances were insufficient for at least two senior members of Congress, who say the Defense Department needs to suspend its transfers of “controlled” military equipment until DLA has completely solved the internal control problems GAO identified in a recently-disclosed sting operation.

At issue is one of the two surplus property programs operated by DLA’s Law Enforcement Support Office (LESO). Although the division that deals with state and local law enforcement agencies appears to have more robust safeguards to keep equipment from falling into the wrong hands, GAO showed that it was able to pose as a federal agency that does not exist to get hold of $1.2 million in military gear that’s not available to the general public.

In an audit released last week, the office said its investigators, posing as employees of the fake federal agency, sought and gained approval to participate in the program by corresponding with DLA solely via email. Later, the undercover GAO employees were able to pick up more than 100 pieces of controlled property from DLA warehouses — and in two of the three cases, did so without being asked to show any form of identification.

Keep reading this article at: https://federalnewsradio.com/defense/2017/07/pentagon-fixing-problems-that-let-fake-federal-agency-get-1-2-million-in-military-hardware/

June 8, 2017 By AMK

The reality of risk in third-party contract relationships

Government organizations rely on outside third-parties to provide the goods and services they need to operate effectively. Contracting with an outside third-party exposes these organizations to significant risks.

Picture these scenarios:

A contractor prepared and submitted inflated invoices and false change orders for labor and materials on a project to build a water treatment plant for a State agency resulting in overbilling of $4.8 million.
A municipal government contracted with a fire safety company to annually inspect and re-size firefighter safety equipment. However, the company failed to perform this critical function, putting the safety of firefighters in jeopardy.
A freight merchant submitted false fuel and weight claims to the U.S. Government totaling $13 million for oversized air shipments when the standard load was actually delivered via ground transport.

Scenarios like these are just a few of the many risks affecting organizations that work with third-party vendors. As Government organizations continue to rely on outside suppliers or service providers, their exposure to risk and fraud increases.

You might be asking, “What measures could these organizations have taken to prevent and detect these scenarios?”

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=596650

September 18, 2015 By AMK

United Technologies in Pentagon’s penalty box on business systems

The Pentagon often feuds with defense contractors about billion-dollar weapons that are over budget or underperforming. But it also holds back millions of dollars over flaws in everyday business systems.

United Technologies Corp. tops the most recent target list of 15 companies whose payments are being withheld for inadequate systems to manage subcontractor purchases, estimate costs or keep track of schedules.

As of Aug. 12, the Defense Contract Management Agency was holding back almost $180 million in billings, or as much as 5 percent, from the company’s two military units. That’s up from $130 million in May.

The recent total includes $123.4 million from Sikorsky Aircraft — the helicopter maker that United Technologies has agreed to sell to Lockheed Martin Corp. — and $56.1 million from the Pratt & Whitney engine unit.

The withholdings signal steady Pentagon enforcement of a three-year-old regulation calling for contractor compliance with six internal systems that the government says are necessary to measure a company’s progress in meeting cost and schedule goals for weapons contracts.

Keep reading this article at: http://www.bloomberg.com/news/articles/2015-09-08/united-technologies-in-pentagon-penalty-box-on-business-systems

April 8, 2014 By AMK

State Dept. IG issues alert over $6 billion in contracting money unaccounted for

The State Department’s inspector general has warned the department that $6 billion in contracting money over the past six years cannot be properly accounted for and cited “significant financial risk and . . . a lack of internal control.”

The warning was the second “management alert” in State Department history, both issued by new Inspector General Steve Linick. Linick took over the job in late September, after it had been vacant for nearly six years.

oth the alert, dated March 20, and the department’s response a week later, were made public Thursday, April 3, 2014.

The department said it concurred in all recommendations and outlined steps it will take to address what it agreed is a “vulnerability.”

Linick initiated the alert format to report on problems that remain unaddressed despite repeatedly being identified in IG audits and investigations. The first alert, released in January in partly classified form, cited “significant and recurring weaknesses in the Department of State Information System Security Program.”

Keep reading this article at: http://www.washingtonpost.com/world/national-security/state-department-inspector-general-issues-alert-over-6-billion-in-contracting-money/2014/04/03/8ebf465c-bb73-11e3-9a05-c739f29ccb08_story.html

Government organizations rely on outside third-parties to provide the goods and services they need to operate effectively. Contracting with an outside third-party exposes these organizations to significant risks.

The Pentagon often feuds with defense contractors about billion-dollar weapons that are over budget or underperforming. But it also holds back millions of dollars over flaws in everyday business systems.

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