Embassy Contracting: Contracts With Employee Associations Should Be Terminated
NSIAD-86-57
Published: Mar 18, 1986. Publicly Released: Apr 17, 1986.
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Highlights
Pursuant to a congressional request, GAO reviewed: (1) the extent to which U.S. embassies enter into contracts with employee associations to provide commissary, restaurant, and recreational facilities; (2) the rationale for using associations as contractors; and (3) the appropriateness of these arrangements.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of State | The Secretary of State should terminate existing service contracts between the embassies and the associations as soon as possible in the orderly course and conduct of public business, unless there are compelling reasons to continue using the associations as contractors. |
Closed – Implemented
State instructed overseas posts to phase out service contracts between associations and embassies. Posts were directed to review all such contracts, giving consideration to using commercial contractors or hiring personnel directly on personal service contracts. Virtually all association contracts have been phased out and the remainder will be terminated in the near future.
|
| Department of State | The Secretary of State should direct the posts to hire contract personnel directly to provide support services overseas but, require that posts formally justify to the Department, in advance, the need for such contract personnel. |
Closed – Implemented
State directed posts worldwide to obtain necessary support services through commercial contracts or by hiring contract employees directly under personal services contracts. Posts are also required to justify the need for such contract personnel before any new contracts are awarded.
|
| Department of State | The Secretary of State should, in those cases where the posts determine there are compelling reasons to contract with the association, require that such arrangements: (1) be approved in advance at the Department level; (2) establish sufficient oversight and guidance to ensure contracting practices and procedures meet federal and Department procurement regulations; and (3) require that association financial records are adequate to support costs claimed. |
Closed – Implemented
Procedures were developed. Advance State approval is required and regional bureaus are to ensure that association records are adequate to support the costs claimed on such contracts. The only request for a waiver was denied.
|
| Department of State | The Secretary of State should direct Department and post officials to recover the funds remaining in the contingent liability accounts related to these contracts and take appropriate actions to return these funds to the U.S. Treasury following the termination of service contracts between the embassies and the associations. |
Closed – Implemented
The service contracts were terminated. State issued a worldwide cable requesting that all associations: (1) properly safeguard the severance reserves controlled by the associations; (2) maintain close control over all severance reserves in escrowed, interest-bearing accounts; (3) maintain detailed records of transactions involving severance reserves; and (4) promptly return excess reserves.
|
| Department of State | The Secretary of State should direct embassy officials in Mexico City to determine the amount of severance funds improperly spent by the association for purchases unrelated to the embassy service contract and make appropriate arrangements to recover these funds. |
Closed – Implemented
State directed post personnel to investigate the matter. Posts responded that, although funds were commingled, association and contract-related severance funds were isolated in separate accounts. As far as posts could determine, all funds were accounted for and none were improperly spent for association purposes. Follow-up information from post reaffirmed its original position.
|
| Department of State | The Secretary of State should direct embassy officials in Ankara to determine the amount of snack bar employee salaries improperly charged to the government contract and make arrangements to return these funds to the government. |
Closed – Implemented
In response to the State directive to investigate improper charges to the contract, the post responded that the GAO allegation was incorrect. The post did admit, however, that it had covered cafeteria losses with government funds, but believed that this was acceptable because local practice required the government to provide free or subsidized meals in-house for local employees.
|
| Department of State | The Secretary of State should request the Inspector General to also determine whether association funds were misused or used for questionable purposes for associations in Mexico City and Ankara. |
Closed – Implemented
State's Program Inspector General is directing all senior team leaders to make reviews of embassy/association contracts, which up to this time were routinely carried out as special-interest items. Particular attention will be given to the use of association funds from government contracts.
|
| Department of State | The Secretary of State should direct embassy officials to take action necessary to recover unauthorized profits paid to employee associations after July 1985. |
Closed – Implemented
State has recovered unauthorized profits amounting to about $106,700. According to officials in State's Office of the Comptroller, these funds are currently in a temporary suspense account, but will automatically revert back to the U.S. Treasury.
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