Audit could recoup millions in mistaken Navy telecom payments

In an attempt to recover what could be hundreds of millions of dollars in erroneous payments, the Navy Department's chief information officer initiated a telecom recovery audit late last year.

It will be performed by Avysion IT Inc. of Middletown, Pa., and officials estimate it could recoup as much as 21 percent of the department's annual telecommunications expenses. While estimates vary, the Navy spends as much as $1 billion a year on telecommunications services within the continental United States.

Auditors will focus on a three-year span and cover all installations used by the Navy and Marine Corps within the continental United States.

The auditors will identify recoverable expenditures resulting from mistakes such as payments on noncompliant contracts or nonoperating circuits, and double billing. They will look at nontactical telecommunications, including local, long distance, data, wireless and calling card services.

The contract, awarded Dec. 26, 2006, is contingency-based, which means that an undisclosed percentage of the money recovered will go toward paying the contractor, said John Lussier, acting CIO for the Navy Department, late last week. Other recovered money will be used to cover the administrative costs incurred by the government during the audit and to prevent similar payment mistakes in the future.

After the contractor is paid and administrative costs and corrective actions have been covered, anything gained will revert to the original appropriations account, Lussier said. Funds from the current fiscal year can be used elsewhere within the appropriation, but funds from past years will go back to the Treasury, he said.

A cost recovery audit is a special type authorized under the fiscal 2002 Defense Reauthorization Act. Recovery auditors cannot examine billing until six months have passed, according to the Navy.

In this case, the auditors will be looking over Navy telecom spending going back three years, Lussier said. As auditors discover records that allow the exploration of older spending, they will examine them, "but it becomes a point of diminishing returns," he said.

A Navy CIO-led pilot recovery audit, competed in April 2006 in an attempt to determine whether potential savings were high enough to justify proceeding with a Navy-wide effort, identified a possible 29 percent savings from recovered payments for local telecom services when detailed invoices were available.

Lussier said he would not assume that there is any malicious intent for the improper billings, but "if there is any evidence that there is, it is our duty to inform the [inspector general] immediately."

Navy studies found that private sector organizations were experiencing erroneous billing of anywhere from 15 percent to 30 percent of their telecommunications expenditures, Lussier said.