Intragovernmental Revolving Funds:

NIST's Interagency Agreements and Workload Require Management Attention

GAO-11-41: Published: Oct 20, 2010. Publicly Released: Oct 20, 2010.

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GAO previously found that a significant portion of the National Institute of Standards and Technology's (NIST) working capital fund contained a growing carryover balance. Almost all of the fund's resources come from appropriations advanced from federal clients for NIST's technical services through interagency agreements. Monitoring and tracking key information about agreements and the funds advanced for them is critical for both NIST and its clients to make well-informed budget decisions, comply with applicable fiscal laws and internal controls, and ensure the proper use of federal funds. GAO was asked to review (1) the factors contributing to the working capital fund's carryover balance and (2) NIST's processes for managing its interagency agreements and workload. To do so, GAO reviewed laws and fiscal requirements, analyzed NIST budget data and policies related to its interagency agreements, analyzed a random sample of agreements, and interviewed NIST officials.

NIST's working capital fund carryover balance is largely driven by appropriations advanced from federal clients to support interagency agreements. Most agreements cross fiscal years and because more than half were accepted in the second half of the fiscal year, some carryover of funds and work is expected. NIST's processes for managing agreements are insufficient to help ensure compliance with applicable fiscal laws. 1) NIST does not monitor the period of availability of appropriations advanced from client agencies and therefore cannot be sure that funds are legally available when it bills against them. If NIST were to use funds after an account closes, its clients could be exposed to possible Antideficiency Act violations. GAO found two reasons for this. First, NIST treats these funds as being available without fiscal year limitation. Second, NIST does not manage agreements in a way that would allow it to monitor the availability of client advances. 2) NIST does not ensure that it starts work on its agreements within a reasonable amount of time after client agencies advance funds to NIST. Long delays in starting work may lead to the improper use of appropriated funds. There is no governmentwide standard for a reasonable time in which to begin work. NIST has not considered such a standard for itself, but some agencies use 90 days as a general guide. NIST took, on average, an estimated 125 days to start work. Further, GAO estimates that NIST began work about 7 months after receiving funds advanced from clients for about half of its agreements. In some cases the delay was 1-2 years. There were several reasons for this, including that NIST does not record or monitor the date it begins work on agreements, and does not consider whether it has the appropriate resources agencywide before accepting new work. NIST lacks a high-level, senior management focus on managing its interagency agreement workload. Strategic workforce planning requires the effective deployment of staff to achieve agency goals. NIST places a high priority on its interagency agreements; however, senior managers play no role in determining whether appropriate resources are available agencywide to support its workload. Further, although NIST shares responsibility with its federal clients for ensuring the proper use of appropriated funds, it does not sufficiently communicate important information to clients--such as when work is expected to begin on agreements--that would better inform client decisions about how to best use their funds. Absent strategic workload management and improved client communications, NIST cannot meet the needs of this high-priority area. As a result of our review, NIST began revising its interagency agreement process. Because NIST did not provide this information to GAO until after the review was complete, GAO was unable to determine the effect of those changes. GAO is making 5 recommendations to improve NIST's management of its interagency agreements, including holding senior managers responsible for strategic workload management, improving internal monitoring and reporting, ensuring compliance with applicable fiscal laws, and communicating key information to clients on its agreement status. NIST agreed with all 5 recommendations and is taking action to implement them by the end of this fiscal year.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: We reported that some interagency agreements at the National Institute of Standards and Technology (NIST) were incomplete or included incorrect information. Specifically, some agreement files lacked documentation needed to provide a complete and accurate record of the agreement as well as transactions between NIST and client agencies; others incorrectly recorded the dates on which funds were advanced to NIST from client agencies. To provide reasonable assurance that NIST's interagency agreements are complete, accurate, and constitute a binding legal agreement, we recommended that NIST create, document, and implement a robust fiscal and legal review process for its interagency agreements. NIST agreed with our recommendation and in 2010 conducted a 90-day legal review of all its interagency agreements, which led to a number of improvements to NIST's processes for managing and reviewing agreements. The Department of Commerce's General Law Division now conducts a legal review of all work before NIST accepts an agreement. NIST also developed an interagency agreement checklist form to ensure that all required legal and financial information is included in each agreement file. In addition, NIST conducted staff trainings on how to process NIST's interagency agreements to comply with federal fiscal law.

    Recommendation: To improve the management of NIST interagency agreements and provide reasonable assurance that NIST is efficiently using its resources and complying with applicable fiscal laws, the Secretary of Commerce should direct the NIST Director to provide reasonable assurance that its interagency agreements are complete, accurate, and constitute a binding legal agreement, create, document, and implement a robust fiscal and legal review process for interagency agreements. This could include (a) developing and delivering periodic training to staff involved in accepting, processing, managing, and overseeing interagency agreements on how to appropriately accept, process, review, and monitor its interagency agreements and (b) maintaining complete, accurate, and easily accessible files for all agreements.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: The National Institute of Standards and Technology (NIST) accepts funds from federal clients to support interagency agreements to conduct scientific research. In a 2010 report, we determined that NIST's processes for managing these agreements are insufficient to help ensure compliance with applicable fiscal laws, in part because NIST does not monitor the period of availability of appropriations advanced to NIST from client agencies. Without this information, NIST cannot be sure that funds are legally available when it bills against them. As a result, federal clients could be vulnerable to Antideficiency Act violations. To remedy this, we recommended that NIST monitor key information about the period of availability of appropriations advanced from client agencies. NIST agreed with our recommendation and, in response, implemented a system that tracks and monitors information including the period of availability of advanced funds. This allows NIST to determine the amount of unobligated funds legally available for use in the next fiscal year. As a result, the agency has returned $1,151,731 to customers as of February 2012.

    Recommendation: To improve the management of NIST interagency agreements and provide reasonable assurance that NIST is efficiently using its resources and complying with applicable fiscal laws, the Secretary of Commerce should direct the NIST Director to help guard against the use of cancelled appropriations, electronically record and monitor key information about the period of availability of appropriations advanced to NIST from client agencies.

    Agency Affected: Department of Commerce

  3. Status: Closed - Implemented

    Comments: The National Institute of Standards and Technology (NIST) accepts funds from federal clients to support interagency agreements to conduct scientific research. In a 2010 report, we determined that NIST's processes for managing these agreements are insufficient to help ensure compliance with applicable fiscal laws, in part because NIST does not monitor the period of availability of appropriations advanced to NIST from client agencies. Without this information, NIST cannot be sure that funds are legally available when it bills against them. As a result, federal clients could be vulnerable to Antideficiency Act violations. To remedy this, we recommended that NIST monitor key information about the period of availability of appropriations advanced from client agencies. NIST agreed with our recommendation and, in response, implemented a system that tracks and monitors information including the period of availability of advanced funds. This allows NIST to determine the amount of unobligated funds legally available for use in the next fiscal year. As a result, the agency has returned $1,151,731 to customers as of February 2012.

    Recommendation: To improve the management of NIST interagency agreements and provide reasonable assurance that NIST is efficiently using its resources and complying with applicable fiscal laws, the Secretary of Commerce should direct the NIST Director to meet its responsibilities in ensuring the proper use of federal funds, (a) develop, implement, and communicate to its clients policies regarding reasonable time frames for beginning work on interagency agreements; (b) track and monitor the work start date for each agreement; and (c) monitor and report internally, and periodically inform federal clients about, the amount of time elapsed between when funds were advanced to it from client agencies and when it actually began billing against an agreement. For example, NIST could provide estimated work start dates for each agreement based on agencywide resource considerations; devise a notification system that would indicate when work has not begun within a certain time frame and provide the date work actually began; or periodically provide clients with a report detailing the balance of unbilled funds as the account closing date approaches.

    Agency Affected: Department of Commerce

  4. Status: Closed - Implemented

    Comments: We reported that the National Institute of Standards and Technology (NIST) lacked a high-level, senior management focus on managing its interagency agreement workload. Specifically, senior managers played no role in determining whether appropriate resources were available agencywide to support NIST's workload and may have contributed to NIST accepting more work than it had the resources to accomplish. To help NIST ensure efficient, effective deployment of its workforce and be a responsible steward of federal resources, we recommended that NIST holds senior managers accountable for strategically managing its interagency agreements. NIST agreed with our recommendation and in May 2011 created the Reimbursable Agreements Coordination Office--to oversee how NIST accepts and manages interagency agreements. Further, NIST took steps to focus senior managers' attention on ensuring that resources are available agency-wide before accepting new work. For example, as of fiscal year 2011, senior managers are required to sign a document certifying that resources exist to begin work within a reasonable amount of time (which NIST considers to be 120 days) before accepting new work. Senior managers' compliance with this requirement is also part of individual performance reviews. NIST officials told us that in fiscal year 2012, they are reviewing to ensure that the compliance statements are incorporated into the individual performance review plans for that fiscal year.

    Recommendation: To improve the management of NIST interagency agreements and provide reasonable assurance that NIST is efficiently using its resources and complying with applicable fiscal laws, the Secretary of Commerce should direct the NIST Director to help ensure efficient, effective deployment of NIST's workforce and be a responsible steward of federal resources, hold senior management accountable for strategically managing its interagency agreements. This includes periodic senior management involvement in reviewing whether NIST has the appropriate resources to begin and perform new and existing work.

    Agency Affected: Department of Commerce

  5. Status: Closed - Implemented

    Comments: In 2011, we determined that the National Institute of Standards and Technology's (NIST) processes for managing interagency agreements are insufficient to help ensure compliance with applicable fiscal laws. Specifically, NIST's processes for closing out completed agreements only required it to return unused funds in excess of $1,000 to the client. Absent clear authority to do so, NIST may not write off any amount of unearned funds. We recommended that NIST review its close-out policies and adjust its accounts accordingly. NIST agreed with our recommendation and, in response, revised its policies and procedures to return all unused funding to its clients. NIST notified us that they returned $8 million to its clients as a result of this revised policy in fiscal year 2011.

    Recommendation: To improve the management of NIST interagency agreements and provide reasonable assurance that NIST is efficiently using its resources and complying with applicable fiscal laws, the Secretary of Commerce should direct the NIST Director to comply with fiscal law, NIST should review its close-out policies regarding returning unearned funds to client agencies and adjust its accounts accordingly.

    Agency Affected: Department of Commerce

 

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