Transportation’s working capital fund is missing controls for cost recovery, IG warns

The Transportation Department doesn’t have the controls to know if its working capital fund is achieving cost recovery, according to a new oversight report. 

Administered by the agency’s chief information officer with the Office of Financial Management to offer services to agency components, including IT, the fund is meant to be self-sustaining. 

But the department doesn’t know if it actually is, according to an audit released July 3 by the agency's inspector general.

“DOT [Office of the Chief Information Officer] could not demonstrate that the rates set recovered the expenses,” the report states. “We also identified a number of internal control weaknesses that hinder OCIO’s ability to confirm cost recovery.” Auditors added: "Until DOT enhances its management of the WCF to address these weaknesses, it will not be able to demonstrate that it is fully recovering costs for all services provided."

The new audit isn’t the first from the watchdog on the topic. It’s previously called out inconsistencies with Transportation billing procedures. 

The Office of the CIO didn’t have documentation for the billing rates of most of the transactions the inspector general dug into, according to the report. That meant the watchdog couldn’t confirm if the rates it charged were recovering costs for 26 of 36 tested transactions, totaling almost $3 million, the report notes. 

The watchdog also called out “internal control weaknesses.” The report points to an incident where the OCIO overbilled a customer by over $16,000 for server administration over a more than two year period because of an administrative mistake. 

“OCIO did not review and validate customer charges prior to billing,” the report states, noting that this means “there is a risk that… financial reporting is not accurate.”

The inspector general also found that the CIO office was not reporting all of its transactions in the department’s accounting system, a point that the watchdog says raises more questions about internal controls for the fund and its financial records.

The Office of Financial Management also lacks ways to find excess funds and evaluate if the working capital fund is meeting cost recovery, the report states.

The watchdog left the department with nine recommendations, all but one of which the department at least partially concurred with. Among them was a push for the OCIO to publish updated billing rates. 

In a May 30 response included in the report, Philip McNamara, assistant secretary for administration, wrote that in 2023, the department launched the “WCF Improvement Project” to design a future state for the fund. 

“OFM has already begun to review, revise, and thoroughly document policies and processes,” including billing methodologies and improved governance, McNamara wrote.