March 27, 2018 —
We determined whether the Defense Human Resources Activity (DHRA) properly prepared, executed, and accounted for reimbursable agreements. We performed this audit in response to a request from DHRA management that we review active reimbursable agreements, as of December 31, 2016, where the DHRA was the service provider.
The DHRA provides goods and services, such as providing common access cards, language translation services, and commercial travel support, to Federal organizations through reimbursable agreements.
Although DHRA personnel correctly prepared 9 of 45 reimbursable agreements, they did not adequately prepare the remaining 36 reimbursable agreements, valued at $ 207.4 million. In addition, DHRA personnel did not perform the required annual review for 27 of the 32 reimbursable agreements that were at least 1 year old and did not perform the required triennial review of all 10 reimbursable agreements that were more than 3 years old. This occurred because DHRA management did not effectively oversee DHRA reimbursable programs by developing and implementing procedures for preparing and reviewing reimbursable agreements.
As a result, DHRA management could not demonstrate that all active reimbursable agreements were adequately prepared to confirm that the DHRA had the appropriate legal and funding authority.
In addition, DHRA personnel did not properly execute DHRA reimbursable agreements, resulting in potential Antideficiency Act violations. This occurred because DHRA personnel did not request reimbursement from the Military Services and Defense Agencies for all reimbursable costs. This also occurred because DHRA management did not have procedures to review reimbursable programs to identify and streamline unnecessarily complex funding and reimbursement processes.
Furthermore, DHRA personnel did not accurately account for DHRA reimbursable agreements in a timely manner. This occurred because:
• DHRA management did not have procedures to record accounts payable and expense
transactions in the reporting periods when services were provided;
• DHRA management did not coordinate with Defense Finance and Accounting Service–
Columbus to ensure the DHRA had the procedures necessary to record corresponding
revenues and expenses in the same reporting period; and
• DHRA management did not maintain a centralized database to retain and readily retrieve
reimbursable agreements and related funding documents and did not have the infrastructure
to provide supporting documentation in a timely manner.
As a result, DHRA management did not have the complete and accurate financial information needed to oversee the DHRA’s reimbursable programs and prevent: (1) inaccurate financial reporting, (2) incorrect use of direct appropriated and reimbursable funds, (3) expenditure of funds in excess of available reimbursable funds, and (4) reimbursable processes that were not cost-effective.
During this audit, DHRA management implemented new procedures to correct the preparation deficiencies and identified the need for additional procedures to resolve the execution and accounting deficiencies. However, because they only recently implemented them, DHRA personnel could not demonstrate the operating effectiveness of these procedures.
We recommend that the Director, DHRA:
• implement procedures to review reimbursable agreements in accordance with DoD guidance,
• complete a preliminary review of the potential Antideficiency Act violations within 14 weeks
from the date of initial discovery,
• implement procedures to prevent funding and reimbursement processes that are not cost-
• implement procedures to maintain a centralized database of reimbursable agreements and
related funding documents for reimbursable agreements that went into effect before FY 2017,
• implement an audit infrastructure that allows for the provision of information within 5
In addition, we recommend that the Director, DHRA, improve accounting procedures and coordinate with the Director, Defense Finance and Accounting Service–Columbus, to correct misstated account balances.
Management Comments and Our Response:
The Director, DHRA, agreed with all of our findings and addressed all of the specifics of our recommendations. He addressed our recommendations by implementing:
• procedures to review reimbursable agreements in accordance with DoD guidance,
• an appointment of a preliminary investigator to review the potential Antideficiency Act
• a plan to establish a work group to ensure the cost effectiveness and efficiency of
• procedures to maintain a centralized database of reimbursable agreements and related
funding documents for reimbursable agreements that went into effect before FY 2017, and
• an infrastructure that allows for the provision of information to auditors within 5 business
Therefore, we consider these recommendations resolved. However, they will remain open until DHRA provides support for corrective actions and we verify their effectiveness.
This report is a result of Project No. D2017-D000FL-0074.000.