FAA Alaska:

Weak Controls Resulted in Improper and Wasteful Purchases

GAO-02-606: Published: May 30, 2002. Publicly Released: May 30, 2002.

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GAO reviewed purchasing controls and activities within the Airway Facilities Division of the Federal Aviation Administration (FAA) in Alaska. This unit, referred to as AFA, is responsible for maintaining airway navigation and communication equipment throughout the state. AFA implemented a pilot program in March 1997 called the Corporate Maintenance Philosophy (CMP) that reduced periodic maintenance and certification requirements for equipment, thus allowing AFA to work with fewer staff. Under this program, AFA's funds originally intended for payroll compensation and benefits were freed for use on capital improvements and an employee recognition system. However, AFA did not have good internal controls. GAO reviewed 150 purchases made in fiscal years 1999 through 2001. Of these, 118 did not comply with one or more FAA purchasing requirements. AFA's highly decentralized operating environment made it susceptible to internal controls weaknesses and improper or wasteful purchases. FAA headquarters in Washington, DC, provides little oversight of spending practices, and regional officials in Alaska have no oversight authority over AFA's practices. AFA personnel work in various locations, with more than half having agency credit cards. GAO found that most cardholders received no training on the use of these cards. Although CMP ended in 2001, AFA remains vulnerable to the problems GAO identified because the specific control weaknesses continue to exist. Management's commitment to addressing and correcting them is necessary to reduce AFA's vulnerability to improper and wasteful expenditures.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: FAA issued a policy on April 30, 2002, requiring approving officials to verify that purchases are authorized and that appropriate supporting documentation is attached. In addition, the Airway Facilities Division Manager issued a policy on May 3, 2002, emphasizing that approving officials must review purchases to ensure proper supporting documentation is present before approving the credit card statement. These new policies should help identify and reduce non-compliant and improper purchases.

    Recommendation: With regard to improving AFA's internal controls over purchasing, the Alaskan Region Logistics Division Manager and the AFA Division Manager should require approving supervisors to review supporting documentation including applicable waivers, proper object class code, and any applicable Personal Property In-Use Management System (PPIMS) input forms for purchase card procurement transactions prior to approving the credit card statements. In addition, supervisors should also review for potential split purchases.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  2. Status: Closed - Implemented

    Comments: In fiscal year 2004, FAA Alaska implemented an updated purchase card system and a new accounting system. In December 2003, the Purchase Card Program Manager sent out an email to purchase cardholders noting that when the new system was up and running, cardholders would be required to update the object classification code as well as the project code. In January 2004, when the new system became available, the Purchase Card Program Manager sent another email informing cardholders and approving officials that 1) the new system had only one default object class code and one default project code (during our review, we found each cardholder could set up their own default codes); 2) cardholders should not use the default codes, and are now required to updated the object class code and project code; and 3) approving officials that receive documentation with the specified default codes should return the transactions to the cardholder for proper coding. In addition, attached to that email was a system overview that discussed changes in the new system. One of the changes discussed in the overview was a new status of "Updated to Default" that would easily indicate to the approving official that the purchase cardholder updated purchase transactions in the purchase card system without changing the account string (including the object classification code). AFA has also implemented a quality control by internally reviewing purchase transactions for various attributes including correct object classification coding. We believe these compensating controls under the new system address the weakness we originally identified.

    Recommendation: With regard to improving AFA's internal controls over purchasing, the Alaskan Region Logistics Division Manager and the AFA Division Manager should require purchase card system users to input an object class code for each transaction and eliminate the default object class code feature in the system.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  3. Status: Closed - Implemented

    Comments: The AFA division manager issued a memorandum on May 3, 2002, designating the AFA Resource Management Branch Manager responsible for ensuring that AFA's property custodians are trained and comply with inventory requirements, thus effectively making him AFA's focal point for property management. The new property management focal point in AFA should facilitate conveyance of policies and procedures to custodians and help ensure timely completion of physical inventories.

    Recommendation: With regard to improving AFA's internal controls over purchasing, the Alaskan Region Logistics Division Manager and the AFA Division Manager should establish a focal point in AFA to assist property management in ensuring that property custodians are informed of their responsibilities and timely comply with policies and procedures such as periodic inventory requirements.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  4. Status: Closed - Not Implemented

    Comments: The Alaskan Region Logistics Property Manager indicated that she now has access to the general ledger system (DELPHI) but not the purchase card system (NACCS). However, the purchase transaction descriptions in DELPHI are not detailed enough to describe the item purchased. She can look up the account number charged but this does not give specific detail about what was purchased. Our recommendation was for the property manager or designee to have read-only access to obligating systems so purchases could be reviewed for potential accountable asset purchases. Since the system the property manager was given access to does not contain sufficient detail for the property manager to ascertain whether an accountable asset was purchased, this recommendation remains open. We sent a follow-up request to determine their plans for providing the property manager with read-only access to NACCS. On May 27, 2005 the Director of the Western Service Area replied that, although extremely labor intensive, this is the agency's process for identifying accountable asset purchases. He further indicated that since the purchase card system NACCS is planned to be replaced later in 05, no further actions on this subject will be taken. In April 06, the assistant for the Director of the Western Service Area Director indicated that NACCS was being phased out and a new credit card system was being implemented in May 06. Cardholders and approving officials are in the process of receiving training. Access to purchase information will be granted to those requiring use of the system.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should provide the property manager or designee read-only access to obligating systems to review for potential accountable assets that can then be compared against PPIMS input forms to verify that accountable assets have been identified and input forms received.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  5. Status: Closed - Not Implemented

    Comments: The AFA Division Manager indicated that the physical inventories that were in progress at the time of our review were completed in June 2002 and that another triennial inventory commenced on 4/14/03. These triennial inventories are conducted by property management on a unit by unit basis. The entire region is supposed to be inventoried over the course of three or four months. We received as supporting documentation the results of 23 out of a total of 86 units' inventories. The Alaskan Region Logistics Division Property Manager indicated that this was all the supporting documentation she had from the inventory that commenced 4/14/03. She noted that although there were many more units in which inventories were performed, supporting documentation of the inventory was only maintained for those units in which property issues were identified. Other units with minor discrepancies may have received emails for clarification but copies of these emails were not maintained. She noted that they did not prepare an overall summary of the regionwide inventory results. They plan to begin the next regionwide inventory during the spring of 2006. We sent a follow-up request to provide us documentation when the inventory was done.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should conduct a complete regionwide inventory (floor to book and book to floor) of all accountable assets.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  6. Status: Closed - Implemented

    Comments: In their OMB A-50 response DOT concurred with the recommendation and indicated the "input of existing backlogged PPIMS forms was completed by FY 02 year-end." The Manager of the Airway Facilities Division in Alaska (AFA) noted that the Alaskan Region Logistics Division completed input of the backlogged PPIMS forms prior to the commencement of the triennial inventory, which began in April 2003. The implementation of AITS, a new asset information tracking system, shifted the data entry responsibility from the property manager to the property custodians. The Logistics Division Property Manager now only needs to approve property input to AITS by custodians. The AFA manager further indicated that there are no outstanding items (backlog) except "action items currently in progress as a result of the triennial inventory".

    Recommendation: Further, the Alaskan Region Logistics Division Manager should complete the input of existing backlogged PPIMS input forms by fiscal year-end 2002.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  7. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT partially concurred with the recommendation, indicating FAA planned to allow 30 days to enter the data into the system. The Manager of NAS Logistics Property Management Division sent out a memorandum dated September 11, 2003, to Logistics Division, Airway Facilities, and other division managers. The memorandum reemphasizes agency policy that "each ordering and receiving organization is to exercise appropriate internal controls when dealing with newly acquired property. In accordance with FAA Order 4650.21C, newly acquired assets are to be examined, receipted and applicable information recorded in FAA's Personal Property In-Use Management System (PPIMS), within 30 days of receipt". On October 6, 2003, the AFA Division Manager sent out a memo to Branch and SMO managers with the above noted memo attached, reiterating that newly acquired assets should be input to PPIMS within 30 days of receipt. AFA has issued guidance and appears to be following up to help ensure newly acquired assets are input to PPIMS within 30 days as a result of our recommendation. We believe allowing 30 days sufficiently addresses our original concern with property not being entered in a timely manner.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should establish a policy requiring PPIMS input forms to be completed and entered within ten business days after the items have been placed into service.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  8. Status: Closed - Implemented

    Comments: The FAA CFO issued a policy on June 4, 2002, effective immediately, specifically prohibiting the purchase or rental of plasma displays, flat panel computer display monitors, and personal digital assistants unless personally approved by the Associate or Administrative Manager as vital to a person or organization successfully achieving their mission in an effective or efficient manner. This new policy should reduce spending on these costly items and, where necessary, promote purchasing of less costly alternatives.

    Recommendation: With regard to identifying noncompliance with and enforcing purchasing requirements at AFA, the Alaskan Region Logistics Division Manager and the AFA Division Manager should establish policies covering the allowability, justification, and approvals required for purchasing specific high cost or sensitive items such as plasma displays, flat panel monitors, PDAs, and digital cameras.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  9. Status: Closed - Not Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation. FAA's CFO issued a memorandum on June 4, 2002, requiring additional approval for purchases of specific high cost or sensitive items, and that further policy and guidance covering such purchases would be completed by December 31, 2002. AFA responded that they had already implemented a requirement that all purchases for automated data processing equipment and software be reviewed by the Information Resource Management (IRM) staff and the Resource Manager prior to purchase. On August 12, 2004 the AFA Division Manager issued a memorandum as a "reminder that all requests for purchases of computer equipment and software should be forwarded to AAL-423 (IRM staff) for review prior to purchase. The purpose of this review is to ensure compatibility with currently installed equipment and any planned automated equipment installations. Once reviewed, final approval will be made by AAL-420" (Resource Manager). The memo goes on to note that guidance distributed in the "CFO memo dated 6/4/02 remains in effect in that federal funds will not be used to purchase or rent flat panel computer display monitors, plasma displays, or personal data assistants." This guidance requires computer and computer related equipment, to be "coordinated" with IRM staff. This guidance would facilitate standardizing equipment but it does not address purchasing in bulk to take advantage of economies of scale. We sent a follow-up request to determine their plans to implement the rest of the recommendation. On May 27, 2005, the Director of the Western Service area responded and included several additional memos noting the policy that requires IRM (IT) staff to "bless" computer purchases. One of the memos highlights a recent occurrence where 50 computers were purchased without IRM coordination. This purchase resulted in paying $25,000-$50,000 too much for the computers. Consequently, central coordination is still not occurring. As of April 2006, they did not have any additional plans to improve coordination.

    Recommendation: With regard to identifying noncompliance with and enforcing purchasing requirements at AFA, the Alaskan Region Logistics Division Manager and the AFA Division Manager should require purchases of certain assets such as computer equipment, handheld radios, and snowmobiles to be coordinated centrally to take advantage of economies of scale and to standardize types of equipment purchased.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  10. Status: Closed - Not Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation, indicating it would ensure that annual reassessments are completed for all housing construction projects lasting more than 1 year. However, it did not address non-housing construction projects, nor how the annual reassessments would be done. In 2004 the Division Manager of the Airway Facilities Division in Alaska (AFA) indicated that at the current time there were no projects that fell within the scope of this recommendation. He noted that if there were such a project, the Service Delivery Plan (SDP) process would be used for validating project viability, need, and size. He indicated that under SDP, various lines of business identify and validate their project requirements and prioritize them against resources. We requested a copy of the SDP policies and procedures to verify whether it requires an annual reassessment, and how they plan to validate project viability, need, and size. On May 27, 2005, the Director provided a document that deals with prioritization of funding. The document does not address reassessment of projects. In April 2006 the Assistant for the Western Services Area Director indicated that there are no long-term construction projects, however, we do not believe this justifies not having a standard procedure.

    Recommendation: With regard to identifying noncompliance with and enforcing purchasing requirements at AFA, the Alaskan Region Logistics Division Manager and the AFA Division Manager should require annual reassessments of construction projects lasting over one year, from the time of initial bid to time of completion, as to the continued viability, need, and size of the projects.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  11. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation. DOT auditors conducted a follow-up evaluation in Alaska from July 22, 2002 to August 2, 2002. They indicated they plan to continue reviewing purchase card activities at each of its regions on a cyclical basis. In an August 16, 2004 follow-up letter, the Alaskan Region Manager of Airway Facilities noted that the Alaskan Region conducts quarterly and annual financial reviews that include the review of purchase transactions, approval process, documentation, and determination of best value. Annual reviews were scheduled regionwide for October and November of 2004. Plans are to continue this review effort indefinitely.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should perform periodic independent reviews of AFA purchase transactions, including the supervisory approval function, and test for compliance with specific purchasing requirements.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  12. Status: Closed - Implemented

    Comments: DOT concurred with the recommendation. DOT indicated that Airway Facilities was in the process of evaluating its purchase cardholders and that repeat offenders would have their purchasing privileges revoked and be appropriately disciplined. The Alaskan Region purchase card Program Coordinator (APC) subsequently told us that she maintains a file on each cardholder. When an instance of noncompliance is identified a notation is made in the cardholder's file. Per the APC, she is familiar with most of the cardholders and is made aware whenever there is an instance of non-compliance. Further, she has not found any cardholders non-compliant twice in a six month period which is the FAA's criteria for suspension of purchase card privileges. FAA's policy on suspension and revocation is contained in the FAA's "toolbox" on the Commercial and Simplified Purchase Method (T.2.2.5 - 1.o.). The FAA's policy on suspension and revocation, and the APC's system for documenting non-compliance, should help in reducing instances of non-compliance and aid in identifying and revoking or suspending purchasing authority of repeat purchase card offenders.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should revoke or suspend purchasing authority of cardholders found to be repeatedly noncompliant with policies.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  13. Status: Closed - Implemented

    Comments: On December 30, 2002, the AFA Division Manager and the Alaskan Region Logistics Division Manager issued purchase card guidance requiring purchase cardholders to obtain documented approval from their approving official and funds certifier prior to purchase. In May 2003 the Alaskan Region Agency Program Coordinator and the newly created AFA Program Coordinator each issued memoranda reiterating purchase card guidance including the requirement for segregation of duties. In December of 2003, the North and South System Management Offices (departments within AFA) each conducted an internal review of judgmentally selected purchase card transactions, testing them for review and approval by approving officials.

    Recommendation: With regard to improving AFA's internal controls over purchasing, the Alaskan Region Logistics Division Manager and the AFA Division Manager should establish and implement policies and procedures to effectively implement the segregation of duties principle. No individual should be able to take all the steps needed to make and pay for a purchase.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  14. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation. DOT indicated that the Director of Airway Facilities or a designee would visit AFA at least once a year to receive program reviews on financial controls and direct local officials to take appropriate corrective action. In late 2004, the Manager of Evaluation staff at FAA HQ stated that the evaluation staff reviewed internal controls at the Airways Facilities and Logistics divisions of the Alaskan Region in late July 2002. He provided us copies of their evaluation reports showing they examined each division's progress in implementing GAO's recommendations and their compliance with FAA acquisition policies and procedures, internal controls over purchase cards and credit card checks, and FAA real and personal property accounting policies and made numerous recommendations. However, they had not conducted a similar review since. On May 27, 2005, the Director of Western Technical Operations stated that he and his top managers had all been to Alaska within the last six months and continue to follow-up on GAO's recommendations. He added that one of his top managers, Mr. Alan Hanson, Mission Support, works on a weekly basis to review and approve financial issues in Alaska, and that there is improved communication with the Regional Administrator and staff in the Alaska Region. These ongoing visits and oversight appear responsive to the recommendation.

    Recommendation: In order to provide a positive and supportive attitude toward internal control at AFA, the Director of Airway Facilities or designee should perform periodic site visits to Alaska to review AFA's financial operations and activities, including management's decision-making process behind the procurement of large purchases.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  15. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation. DOT indicated that Airway Facilities completed a preliminary review of its cardholders and performed a follow-up evaluation. In 2004 the Manager of the Airway Facilities Division in Alaska noted that FAA's Purchase Card policy now requires approving officials to quarterly review purchase cardholders' single purchase limits to ensure they coincide with their needs. The policy further requires that purchase cards not used in a one year period be canceled. We requested additional supporting documentation that an overall assessment of the number of needed purchase cardholders was in fact done. On May 27, 2005 the Director of the Western Services Area responded with copies of emails confirming that annual review had been conducted throughout the Alaskan Region.

    Recommendation: The Director of Airway Facilities and the AFA Division Manager should assess the number of individuals at AFA who need purchase cards and whether current purchasing limits are appropriate.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  16. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT concurred. FAA issued a policy on April 30, 2002, requiring agency program coordinators to maintain a certificate for each purchase cardholder and approving official certifying that they have read, understood, and agree to follow all purchase card guidance and policies.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should require existing and new purchase cardholders and approving officials to sign that they have read, understood, and agreed to follow all local and national acquisition policies.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  17. Status: Closed - Not Implemented

    Comments: In its OMB A-50 response DOT concurred with the recommendation and noted that all existing and new purchase cardholders and approving officials who were trained prior to June 2001 would be required to attend refresher training by October 1, 2002. On September 9, 2004, a database was provided to us that identified numerous purchase cardholders and approving officials (AOs) who had not received refresher training for over 5 years. The database included current and former purchase cardholders and AOs so it could not determine who the current cardholders and AOs were. On May 27, 2005 the Director of the Western Service Area sent us a status report and updated cardholder and AO training database. He also noted that all purchase cardholders and AOs received refresher training during the period July through December 2002 and that there is a policy that all receive refresher training every two years. The database we received appeared to be updated to show only current purchase cardholders and AOs, but it also showed that 59 of the 277 cardholders/AOs were not in compliance with the two year refresher training policy. In April 2006 the Assistant for the Western Services Area Director provided an updated schedule of training provided to cardholders and approving officials. The schedule indicated that there were still numerous cardholders and approving officials who had not received refresher training for several years. Thus, they have not effectively implemented the recommendation.

    Recommendation: Further, the Alaskan Region Logistics Manager should require all existing purchase cardholders and approving officials to attend periodic refresher training covering key purchasing requirements such as documentation requirements, segregation of duty requirements, proper object class coding, as well as any recent policy changes.

    Agency Affected: Department of Transportation: Federal Aviation Administration

  18. Status: Closed - Implemented

    Comments: In its OMB A-50 response DOT concurred, noting that a system to track training for purchase card holders and approving officials should be completed by March 31, 2003. In subsequent follow-up, we obtained and reviewed a copy of the Purchase Card Program Manager's database to track training. The database as of September 9, 2004, showed cardholders and approving officials and their dates of purchase card training. However, we noted many names listed did not show any training for at least 5 years. The purchase card program manager informed us this is because the database did not show which names were current cardholders and approving officials. We sent a follow-up request asking how they are able to use the system to help ensure current cardholders and approving officials receive timely training, and have requested an updated database printout with the current cardholders and approving officials indicated. On May 27, 2005 we received an updated database indicating only current purchase cardholders and approving officials and all of the dates of initial and refresher training through May 2005. Thus, they now have a system to track and monitor training of purchase card holders and approving officials.

    Recommendation: Further, the Alaskan Region Logistics Division Manager should establish a system to track and monitor training for purchase cardholders and approving officials to help ensure they receive training before being granted purchase cards or approval authority and receive timely refresher training.

    Agency Affected: Department of Transportation: Federal Aviation Administration

 

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