Use of GSA fund might violate federal law, audit found

The General Services Administration was told more than a year ago that government agencies might be violating federal law when using a GSA fund for technology projects, according to an audit report.

In June 2002, the Defense Department inspector general reviewed a series of deposits made by the Army Claims Service, an agency which processes Army personnel claims and recovers money from medical insurers, into the Information Technology Fund, an account managed by GSA's Federal Technology Service. FTS provides contracting services to other government organizations for a fee, and often uses the IT Fund to pay for work.

The Defense audit found that the Army Claims Service had "improperly 'banked'" about $2.8 million in the IT Fund, into which FTS' customer agencies place budget funds to avoid returning them to the Treasury at the end of a fiscal year. Although the Army Claims money was earmarked "for future requirements"-work for which FTS was expected to issue contracts and orders-investigators found those requirements weren't defined and that no justification was shown for keeping the money in the fund.

Federal law requires agencies to demonstrate a "bona fide" need for holding over appropriated money in a revolving account such as the IT Fund, the investigators noted. Since Army Claims hadn't shown a need, the agency may have violated the Antideficiency Act (U.S. Code, Title 31, Sec. 1341), they concluded. Government employees who break that law may be subject to a fine, a prison sentence, or both.

GSA was given a copy of the audit's findings, but the agency did not respond to the audit, according to a GSA spokeswoman. "It is my understanding that there was no formal or informal response," the spokeswoman said.

From 1997 to 2000, Army Claims deposited $11.6 million in the IT Fund, most of it during the last three days of each fiscal year, the audit found. The agency had hired a contracting shop at FTS called the Federal System Integration and Management Center (FEDSIM) to procure information technology on its behalf.

The inspector general noted that Army Claims employees had little contracting expertise, and that they depended on FTS to guide the procurement process. However, the Army could have used an internal contracting office, and would have saved money doing so, the auditors said. FTS charged fees for its services that, in one instance, were nearly 40 percent of the total goods it purchased for Army Claims, the audit showed.

GSA's inspector general is currently reviewing FTS' contracting practices at its offices across the country. The investigation has revealed that employees in Bremerton, Wash., improperly used technology contracts to procure construction services. The employees also misused nearly $40 million from the IT Fund to pay for work on behalf of the Army and the Washington National Guard.

Directly addressing FTS' contracting practices, the Defense investigators said that if FTS was holding Army Claims money in the IT Fund, it was doing so "contrary to GSA policy."

The investigators cited a March 2001 GSA audit of another FTS contracting office, the Center for Information Security Services (CISS), in which FTS senior managers were told hundreds of thousands of dollars from customers were being held over for no apparent reason.

The GSA investigators advised FTS Commissioner Sandra Bates to determine whether the funds should be returned to the agencies that deposited them or returned to the Treasury.

From July 2001 to June 2002, FTS reviewed those orders and ultimately returned $11.7 million in unused funds to 60 organizations, according to agency records. FTS officials said they didn't know if those funds were turned back over to the Treasury.

In March 2001, the GSA general counsel addressed the entire CISS staff on procurement law, including the bona fide need rule, officials said. FTS also held a training session on use of the IT Fund for its national and regional directors in January 2002 and 2003.

The Defense probe made findings similar to the 2001 GSA audit. For instance, the Defense auditors stipulated that FTS officials were parking Army Claims money in the IT Fund until documented requirements for projects could be developed "well into the next fiscal year."

The GSA's March audit found that FTS' Center for Information Security Services was holding onto hundreds of thousands of dollars in Air Force funds and only spending a fraction of the deposit. CISS employees told investigators this account served as the Air Force's "checkbook," and that money was continually transferred among different Air Force orders, not just the one for which the funds were obligated.