Report | Jan. 13, 2014

Navy Needs to Improve Contract Oversight of Its Financial Improvement and Audit Readiness Program Contracts

DODIG-2014-030

Objective

The objective of the audit was to determine whether the Navy is performing effective oversight of the contracts for its Financial Improvement and Audit Readiness Program.

Findings

The Navy Office of Financial Operations and Naval Supply System Command, Fleet Logistics Center Norfolk, Philadelphia Office (NAVSUP FLC Philadelphia) did not perform adequate contract oversight on all 13 nonstatistically selected sampled task orders related to the Navy’s Financial Improvement and Audit Readiness efforts as of September 30, 2012.

This occurred because the contracting officer believed the quality assurance surveillance plan for the SeaPort-e contract or the performance standards within each task order fulfilled the requirements; the Navy Office of Financial Operations reprioritized its audit-readiness focus and believed part of the deliverable was not required; no mechanism was in place to track deliverable submission dates; and the contracting officer and the Deputy Director, Office of the Deputy Assistant Secretary Financial Operations, did not process appointment letters accurately. As a result, NAVSUP FLC Philadelphia had limited assurance on the quality of audit-readiness services totaling $26.3 million in expended funds as of September 30, 2012.

Recommendations

We recommend that the Site Director of NAVSUP FLC Philadelphia:

  • Verify contracting officers prepare quality assurance surveillance plans.
  • Establish procedures to validate that contracting officers’ representatives only accept deliverables that meet task-order requirements.

We also recommend that the Deputy Assistant Secretary of the Navy, Financial Operations, establish procedures requiring contracting officer representatives to communicate changes to the deliverables to the contracting officers.

Management Comments and Our Response

Management comments partially addressed the recommendations. The Commander, Naval Supply Systems Command, agreed with all the recommendations and immediately began modifying existing orders and updating procedures. However, we request that management provide additional comments on recommendation 1.d by February 13, 2014. The Deputy, Financial Operations agreed with our recommendations and will increase contract oversight staff and update technical assistant letters. According to the Deputy’s comments, the Navy has provided training to reiterate COR duties. We consider these comments responsive.