Intragovernmental Revolving Funds
NIST's Interagency Agreements and Workload Require Management Attention Gao ID: GAO-11-41 October 20, 2010GAO previously found that a significant portion of the National Institute of Standards and Technology's (NIST) working capital fund contained a growing carryover balance. Almost all of the fund's resources come from appropriations advanced from federal clients for NIST's technical services through interagency agreements. Monitoring and tracking key information about agreements and the funds advanced for them is critical for both NIST and its clients to make well-informed budget decisions, comply with applicable fiscal laws and internal controls, and ensure the proper use of federal funds. GAO was asked to review (1) the factors contributing to the working capital fund's carryover balance and (2) NIST's processes for managing its interagency agreements and workload. To do so, GAO reviewed laws and fiscal requirements, analyzed NIST budget data and policies related to its interagency agreements, analyzed a random sample of agreements, and interviewed NIST officials.
NIST's working capital fund carryover balance is largely driven by appropriations advanced from federal clients to support interagency agreements. Most agreements cross fiscal years and because more than half were accepted in the second half of the fiscal year, some carryover of funds and work is expected. NIST's processes for managing agreements are insufficient to help ensure compliance with applicable fiscal laws. 1) NIST does not monitor the period of availability of appropriations advanced from client agencies and therefore cannot be sure that funds are legally available when it bills against them. If NIST were to use funds after an account closes, its clients could be exposed to possible Antideficiency Act violations. GAO found two reasons for this. First, NIST treats these funds as being available without fiscal year limitation. Second, NIST does not manage agreements in a way that would allow it to monitor the availability of client advances. 2) NIST does not ensure that it starts work on its agreements within a reasonable amount of time after client agencies advance funds to NIST. Long delays in starting work may lead to the improper use of appropriated funds. There is no governmentwide standard for a reasonable time in which to begin work. NIST has not considered such a standard for itself, but some agencies use 90 days as a general guide. NIST took, on average, an estimated 125 days to start work. Further, GAO estimates that NIST began work about 7 months after receiving funds advanced from clients for about half of its agreements. In some cases the delay was 1-2 years. There were several reasons for this, including that NIST does not record or monitor the date it begins work on agreements, and does not consider whether it has the appropriate resources agencywide before accepting new work. NIST lacks a high-level, senior management focus on managing its interagency agreement workload. Strategic workforce planning requires the effective deployment of staff to achieve agency goals. NIST places a high priority on its interagency agreements; however, senior managers play no role in determining whether appropriate resources are available agencywide to support its workload. Further, although NIST shares responsibility with its federal clients for ensuring the proper use of appropriated funds, it does not sufficiently communicate important information to clients--such as when work is expected to begin on agreements--that would better inform client decisions about how to best use their funds. Absent strategic workload management and improved client communications, NIST cannot meet the needs of this high-priority area. As a result of our review, NIST began revising its interagency agreement process. Because NIST did not provide this information to GAO until after the review was complete, GAO was unable to determine the effect of those changes. GAO is making 5 recommendations to improve NIST's management of its interagency agreements, including holding senior managers responsible for strategic workload management, improving internal monitoring and reporting, ensuring compliance with applicable fiscal laws, and communicating key information to clients on its agreement status. NIST agreed with all 5 recommendations and is taking action to implement them by the end of this fiscal year.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Denise M. Fantone Team: Government Accountability Office: Strategic Issues Phone: (202) 512-4997GAO-11-41, Intragovernmental Revolving Funds: NIST's Interagency Agreements and Workload Require Management Attention
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Report to the Subcommittee on Commerce, Justice, Science, and Related
Agencies, Committee on Appropriations, House of Representatives:
United States Government Accountability Office:
GAO:
October 2010:
Intragovernmental Revolving Funds:
NIST's Interagency Agreements and Workload Require Management
Attention:
GAO-11-41:
GAO Highlights:
Highlights of GAO-11-41, a report to the Subcommittee on Commerce,
Justice, Science, and Related Agencies, Committee on Appropriations,
House of Representatives.
Why GAO Did This Study:
GAO previously found that a significant portion of the National
Institute of Standards and Technology‘s (NIST) working capital fund
contained a growing carryover balance. Almost all of the fund‘s
resources come from appropriations advanced from federal clients for
NIST‘s technical services through interagency agreements. Monitoring
and tracking key information about agreements and the funds advanced
for them is critical for both NIST and its clients to make well-
informed budget decisions, comply with applicable fiscal laws and
internal controls, and ensure the proper use of federal funds. GAO was
asked to review (1) the factors contributing to the working capital
fund‘s carryover balance and (2) NIST‘s processes for managing its
interagency agreements and workload. To do so, GAO reviewed laws and
fiscal requirements, analyzed NIST budget data and policies related to
its interagency agreements, analyzed a random sample of agreements,
and interviewed NIST officials.
What GAO Found:
NIST‘s working capital fund carryover balance is largely driven by
appropriations advanced from federal clients to support interagency
agreements. Most agreements cross fiscal years and because more than
half were accepted in the second half of the fiscal year, some
carryover of funds and work is expected.
NIST‘s processes for managing agreements are insufficient to help
ensure compliance with applicable fiscal laws.
* NIST does not monitor the period of availability of appropriations
advanced from client agencies and therefore cannot be sure that funds
are legally available when it bills against them. If NIST were to use
funds after an account closes, its clients could be exposed to
possible Antideficiency Act violations. GAO found two reasons for
this. First, NIST treats these funds as being available without fiscal
year limitation. Second, NIST does not manage agreements in a way that
would allow it to monitor the availability of client advances.
* NIST does not ensure that it starts work on its agreements within a
reasonable amount of time after client agencies advance funds to NIST.
Long delays in starting work may lead to the improper use of
appropriated funds. There is no governmentwide standard for a
reasonable time in which to begin work. NIST has not considered such a
standard for itself, but some agencies use 90 days as a general guide.
NIST took, on average, an estimated 125 days to start work. Further,
GAO estimates that NIST began work about 7 months after receiving
funds advanced from clients for about half of its agreements. In some
cases the delay was 1–2 years. There were several reasons for this,
including that NIST does not record or monitor the date it begins work
on agreements, and does not consider whether it has the appropriate
resources agencywide before accepting new work.
NIST lacks a high-level, senior management focus on managing its
interagency agreement workload. Strategic workforce planning requires
the effective deployment of staff to achieve agency goals. NIST places
a high priority on its interagency agreements; however, senior
managers play no role in determining whether appropriate resources are
available agencywide to support its workload. Further, although NIST
shares responsibility with its federal clients for ensuring the proper
use of appropriated funds, it does not sufficiently communicate
important information to clients”such as when work is expected to
begin on agreements”that would better inform client decisions about
how to best use their funds. Absent strategic workload management and
improved client communications, NIST cannot meet the needs of this
high-priority area. As a result of our review, NIST began revising its
interagency agreement process. Because NIST did not provide this
information to GAO until after the review was complete, GAO was unable
to determine the effect of those changes.
What GAO Recommends:
GAO is making 5 recommendations to improve NIST‘s management of its
interagency agreements, including holding senior managers responsible
for strategic workload management, improving internal monitoring and
reporting, ensuring compliance with applicable fiscal laws, and
communicating key information to clients on its agreement status. NIST
agreed with all 5 recommendations and is taking action to implement
them by the end of this fiscal year.
View [hyperlink, http://www.gao.gov/products/GAO-11-41] or key
components. For more information, contact Denise M. Fantone at (202)
512-6806 or fantoned@gao.gov.
[End of section]
Contents:
Letter:
Background:
Unfinished Interagency Agreements Significantly Contribute to NIST's
Working Capital Fund Carryover Balance:
NIST's Management Practices Related to Interagency Agreements Do Not
Ensure Compliance with Applicable Fiscal Laws:
NIST Lacks Strategic Workload Management and Client Focus for Its
Interagency Agreements:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Proposed Changes to NIST's Interagency Agreement Process:
Appendix II: Simple Random Sample of Interagency Agreements:
Appendix III: Comments from the National Institute of Standards and
Technology:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: NIST's Working Capital Fund Serves Four Primary Functions:
Table 2: The Carryover Balance Is a Significant Portion of NIST's
Working Capital Fund:
Table 3: Interagency Agreements Constitute a Large Portion of NIST's
Carryover Balance:
Table 4: NIST Accepted Most of Its Agreements in the Second Half of
the Fiscal Year:
Table 5: NIST Took at Least 90 Days to Begin Work for Almost Half of
All Agreements:
Figures:
Figure 1: NIST Is Comprised of 12 Operating Units:
Figure 2: Use of the Working Capital Fund in Fiscal Year 2009:
Figure 3: Unfinished Work Contributes to the Working Capital Fund's
Carryover Balance:
Figure 4: NIST Manages by Project, Which Can Include Multiple
Agreements:
Abbreviation:
Commerce: Department of Commerce:
NIST: National Institute of Standards and Technology:
SRM: Standard Reference Material®:
TAS: Treasury Account Symbol:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
October 20, 2010:
The Honorable Alan B. Mollohan:
Chairman:
The Honorable Frank R. Wolf:
Ranking Member:
Subcommittee on Commerce, Justice, Science, and Related Agencies:
Committee on Appropriations:
House of Representatives:
As the leading scientific research agency of the federal government,
the National Institute of Standards and Technology (NIST) plays a key
role in supporting new technologies that will shape life in the 21st
century. In line with the President's recent emphasis on scientific
discovery, technological breakthroughs, and innovation, NIST enhances
the nation's capacity for strengthening cybersecurity, developing
clean energy technologies, revitalizing the manufacturing base, as
well as helping to ensure air and water quality. Additionally, NIST's
staff--almost 3,000 scientists, including three Nobel Laureates--
perform technical work for other federal agencies, as well as state
and local governments and the private sector.
In our review of the President's fiscal year 2009 budget request for
NIST, we identified a generally increasing carryover balance in its
working capital fund. Carryover is the reported dollar value of work
that has been ordered and funded (obligated) by clients but not
completed by the end of the fiscal year. Carryover consists of both
the unfinished portion of work started but not completed, as well as
accepted work that has not yet begun. The working capital fund largely
comprises appropriations advanced from other federal agencies to
reimburse NIST for its technical services. The payment terms for these
services are generally documented in interagency agreements between
NIST and its federal clients. Managing and monitoring key information
associated with interagency agreements between federal agencies and
the funds advanced to support these agreements is critical for both
NIST and client agencies.[Footnote 1] This information supports NIST's
ability to make well-informed budget decisions as well as helps to
ensure its compliance with applicable fiscal laws and federal internal
controls. You asked us to provide information on (1) what factors have
contributed to the carryover balance in NIST's working capital fund
and (2) the processes by which NIST manages its interagency agreements
and workload.
For the first objective, we reviewed relevant legislation and
statutory authorities that govern the working capital fund, as well as
analyzed budget, financial, and workload data. We examined NIST data
on interagency agreements, documents, guidance, and policies related
to its working capital fund, as well as relevant budget documents from
fiscal years 2000 to 2010. We also referred to our prior work on
intragovernmental revolving funds and to related Department of
Commerce (Commerce) Inspector General reports.
To evaluate NIST's processes for managing interagency agreements, we
identified and reviewed NIST's responsibilities as the performing
agency entrusted with the client agency's appropriated funds as
described in relevant fiscal laws as well as U.S. Comptroller General
decisions and opinions. We also reviewed aspects of the financial
management system that NIST uses to track and manage these agreements.
In August 2010, NIST officials told us that they began changing the
processes for managing interagency agreements. The processes we
discuss in this letter were in effect for the agreements in our review
time frames. See appendix I for a description of draft changes to
NIST's processes.
To assess NIST's processes for managing its workload, we analyzed
NIST's interagency agreement data and identified 354 interagency
agreements with performance periods of 1 or more fiscal years that
began after October 1, 2004 and ended on or before September 30, 2009.
[Footnote 2] Because the NIST financial system does not include when
NIST started work on its agreements, we drew a random sample of 76
agreements from the population of 354 agreements to determine when
NIST began work.[Footnote 3] To do so, we reviewed and verified all
transactions associated with 76 agreements to identify the time and
amount of NIST's first charge--reflecting the beginning of NIST work--
in support of each of these agreements. We also conducted case-file
reviews for a nongeneralizable sample of 11 out of the 76 agreements.
[Footnote 4] See appendix II for more information on the design and
analysis of the random sample.
We interviewed senior staff from NIST's budget and finance divisions
as well as those from selected NIST laboratories, including Operating
Unit Directors, Administrative Officers, and Senior Management
Advisors. Finally, to assess the reliability of interagency agreement
data from NIST's financial system, we (1) performed electronic testing
of data elements, (2) reviewed existing information about the data and
the system that produced them, and (3) interviewed agency officials
knowledgeable about the data. We determined that the data were
sufficiently reliable for the purposes of this report.
We conducted our review between July 2009 and October 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
NIST's Mission, Organization, and Working Capital Fund:
NIST serves as the focal point for conducting scientific research and
developing measurements, standards, and related technologies in the
federal government. NIST carries out its mission through 12 research
and development laboratories (also known as Operating Units). See
figure 1 for NIST's organizational chart. In 1950, Congress
established NIST's working capital fund, giving it broad statutory
authority to use the fund to support any activities NIST is authorized
to undertake as an agency.
Figure 1: NIST Is Comprised of 12 Operating Units:
[Refer to PDF for image: illustration]
Office of the Director:
28 administrative offices and divisions, including budget and finance.
12 Operating Units:
Building and Fire Research Laboratory (3 divisions);
Chemical Science and Technology Laboratory (6 divisions);
Electronics and Electrical Engineering Laboratory (4 divisions);
Information Technology Laboratory (6 divisions);
Manufacturing Engineering Laboratory (5 divisions);
Physics Laboratory (6 divisions);
Technology Services (4 divisions);
Materials Science and Engineering Laboratory (4 divisions);
NIST Center for Neutron Research (No divisions);
Center for Nanoscale Science and Technology (No divisions);
Technology Innovation Program (No divisions);
Manufacturing Extension Partnership Program (No divisions).
Source: GAO analysis based on NIST document.
Note: NIST has a different organizational structure, effective October
1, 2010.
[End of figure]
NIST's working capital fund is a type of intragovernmental revolving
fund. These funds--which include franchise, supply, and working
capital funds--finance business-like operations. An intragovernmental
revolving fund charges for the sale of products or services it
provides and uses the proceeds to finance its operations. See table 1
for the NIST working capital fund's four purposes and the funding
sources that support those uses.
Table 1: NIST's Working Capital Fund Serves Four Primary Functions:
Working capital fund purpose: Receiving advances in support of
interagency agreements;
Funding: Funds appropriated to client agencies and advanced to NIST
pursuant to interagency agreements.
Working capital fund purpose: Supporting calibrations and testing
services as well as the sales of Standard Reference Material[®]
provided to the public and private institutions[A];
Funding: Service fees.
Working capital fund purpose: Supporting agency equipment investments;
Funding: Transfer of NIST appropriations authorized for this purpose
into the working capital fund.
Working capital fund purpose: Supporting NIST administrative and
overhead costs[B];
Funding: Amounts charged to NIST's various internal project accounts.
Source: GAO analysis of NIST working capital fund documents.
[A] NIST supports accurate and compatible measurements by certifying
and providing over 1,300 Standard Reference Materials® (SRM) with well-
characterized composition or properties, or both. SRMs are used to
perform instrument calibrations in units as part of overall quality
assurance programs, to verify the accuracy of specific measurements,
and to support the development of new measurement methods. Industry,
government, and academia use SRMs in areas such as industrial
materials production and analysis, environmental analysis, health
measurements, and basic measurements in science and metrology.
[B] According to officials, NIST uses intraagency surcharges to
distribute administrative and overhead costs.
[End of table]
In fiscal year 2009, nearly 70 percent of NIST's working capital fund
was related to interagency agreements (see figure 2). Almost all of
NIST's federal clients advanced funds to NIST for those agreements.
Client agency advances to the working capital fund cannot be earned
until NIST begins work on the agreement and retain the period of
availability from the original appropriation.[Footnote 5] Once NIST
earns those amounts, receipts and collections are available to NIST
without fiscal year limitation.
Figure 2: Use of the Working Capital Fund in Fiscal Year 2009:
[Refer to PDF for image: pie-chart]
Advanced funds for interagency agreements: 69% ($117 million);
Equipment calibrations, testing, advisory services, and Standard
Reference Material® (SRM) reproduction: 29% ($50 million);
Agency equipment investments: 2% ($3 million).
Source: GAO analysis of NIST data.
Note: These are the major uses associated with the working capital
fund as identified in NIST‘s budget documents. NIST administrative and
overhead cost distribution among laboratories is not included in this
figure.
[End of figure]
NIST's Interagency Agreement Acceptance Process:
NIST's interagency agreements with federal clients originate in many
ways, including through congressional mandates and client requests.
NIST has established criteria for accepting requests for work from
client agencies, which include: (1) the need for traceability of
measurements to national standards; (2) the need for work that cannot
or will not be addressed by the private sector; (3) work supported by
legislation that authorizes or mandates certain services; and (4) work
that would result in an unavoidable conflict of interest if carried
out by the private sector or regulatory agencies. Operating Unit
Directors commit NIST to providing services to client agencies, while
the Deputy Chief Finance Officer accepts the order. Upon acceptance,
the finance division and NIST's Office of General Counsel takes steps
to process, monitor, and close-out each agreement.[Footnote 6]
Unfinished Interagency Agreements Significantly Contribute to NIST's
Working Capital Fund Carryover Balance:
The Working Capital Fund's Carryover Balance Is Largely Driven by
Pending and Ongoing Work Associated with Interagency Agreements:
The carryover balance in NIST's working capital fund is largely driven
by pending and ongoing work associated with interagency agreements as
well as work for which NIST has accepted advanced funds but not yet
started. In fiscal year 2009, NIST carried forward $120 million to
fiscal year 2010. This amounts to 41 percent of the working capital
fund's total resources, down from a high of 51 percent (see table 2).
However, because NIST does not monitor its interagency agreement
workload it was unsure what factors have led to a decline in the last
two years.
Table 2: The Carryover Balance Is a Significant Portion of NIST's
Working Capital Fund:
Carryover balance:
Fiscal year 2004: $125 million;
Fiscal year 2005: $155 million;
Fiscal year 2006: $132 million;
Fiscal year 2007: $141 million;
Fiscal year 2008: $124 million;
Fiscal year 2009: $120 million.
Total working capital fund resources:
Fiscal year 2004: $291 million;
Fiscal year 2005: $305 million;
Fiscal year 2006: $321 million;
Fiscal year 2007: $310 million;
Fiscal year 2008: $296 million;
Fiscal year 2009: $291 million.
Carryover as a percentage of total working capital fund resources:
Fiscal year 2004: 43%;
Fiscal year 2005: 51%;
Fiscal year 2006: 41%;
Fiscal year 2007: 45%;
Fiscal year 2008: 42%;
Fiscal year 2009: 41%.
Source: GAO analysis of NIST and Office of Management and Budget data.
[End of table]
Specifically, funds from interagency agreements constituted between 71
to 89 percent of the working capital fund's carryover balance from
fiscal years 2004 to 2009; in fiscal year 2009, it was 71 percent--the
lowest over the 6-year period (see table 3). Again, NIST officials
were unsure about the reasons for the decline in this balance.
Table 3: Interagency Agreements Constitute a Large Portion of NIST's
Carryover Balance:
Carryover from interagency agreement advances:
Fiscal year 2004: $95 million;
Fiscal year 2005: $128 million;
Fiscal year 2006: $118 million;
Fiscal year 2007: $117 million;
Fiscal year 2008: $97 million;
Fiscal year 2009: $85 million.
Total working capital fund carryover balance:
Fiscal year 2004: $125 million;
Fiscal year 2005: $155 million;
Fiscal year 2006: $132 million;
Fiscal year 2007: $141 million;
Fiscal year 2008: $124 million;
Fiscal year 2009: $120 million.
Interagency agreement carryover as a percentage of total working
capital fund carryover:
Fiscal year 2004: 76%;
Fiscal year 2005: 83%;
Fiscal year 2006: 89%;
Fiscal year 2007: 83%;
Fiscal year 2008: 78%;
Fiscal year 2009: 71%.
Source: GAO analysis of NIST budget data.
[End of table]
NIST's budget documents refer to the interagency agreement carryover
balance as unobligated because it is for unfinished work that NIST has
not yet earned.[Footnote 7] However, client agencies are to record an
obligation against their own appropriation when they entered into the
agreement with NIST. Therefore, that balance is only available to NIST
for work on that agreement.[Footnote 8] See figure 3 for an
illustration of how unfinished work on interagency agreements
contributes to the working capital fund carryover balance.
Figure 3: Unfinished Work Contributes to the Working Capital Fund's
Carryover Balance:
[Refer to PDF for image: illustration]
Congress appropriates funds to client agencies.
Client agencies obligate their appropriations and advance funds to NIST
in support of interagency agreement work.
NIST‘s working capital fund receives advances from client agencies for
interagency agreement work:
1. NIST performs work for client agencies (begins to incur costs for
labor, materials, etc.).
2. NIST bills incurred costs against client advances.
Carryover balance (unfinished and pending work):
Made up of client advances that NIST has not yet earned because work
on the agreement is still ongoing or has not yet started.
Source: GAO.
[End of figure]
Some Carryover Is Expected Because Most Interagency Agreements Cross
Fiscal Years:
Some carryover in the working capital fund can be expected given the
basic characteristics of NIST's interagency agreements. Ninety-three
percent of all NIST agreements had a period of performance of more
than 1 fiscal year between fiscal years 2004 to 2009. Accordingly,
work associated with those agreements will not be completed within a
single fiscal year. By definition, unearned amounts associated with
these agreements would be carried over to the next fiscal year. As
such, 82 percent of the active agreements in fiscal year 2009
generated carryover balances.
The timing of when NIST accepts new work also affects the carryover
balances in the working capital fund. NIST accepts most of its
agreements in the second half of the fiscal year. Further, since most
agreements cross fiscal years, many are also likely to extend into the
next fiscal year. Table 4 shows that 63 percent of all new agreements
between fiscal years 2004 to 2009 were accepted during the second half
of the fiscal year.
Table 4: NIST Accepted Most of Its Agreements in the Second Half of
the Fiscal Year:
Number of agreements:
Quarter 1: 65;
Quarter 2: 69;
Quarter 3: 91;
Quarter 4: 130;
Total: 355.
Percentage of total:
Quarter 1: 18%;
Quarter 2: 19%;
Quarter 3: 26%;
Quarter 4: 37%;
Total: 100%.
Source: GAO analysis of NIST data on interagency agreements from
fiscal years 2004 to 2009.
[End of table]
NIST's Management Practices Related to Interagency Agreements Do Not
Ensure Compliance with Applicable Fiscal Laws:
NIST Lacks Processes to Ensure It Complies with the Time Limitations
of Advanced Funds:
Our previous work has established that a high carryover in working
capital funds may indicate poor workload planning, which could lead to
inefficient use of agency resources and missed opportunities to use
those funds for other needs.[Footnote 9] Significant carryover
balances may also reflect a situation in which the performing agency
is using appropriations advanced in prior years to support an
interagency agreement when the funds are no longer legally available.
NIST does not monitor the period of availability of appropriations
advanced from client agencies; therefore, it cannot ensure that funds
are legally available for obligation when it bills against them.
[Footnote 10] Client advances to the working capital fund that have
not yet been earned retain the period of availability from the
original appropriation. Those advances are available to NIST for
covering costs of performance under the agreement during the
appropriation's period of availability plus 5 fiscal years, regardless
of the specified period of performance for an agreement.[Footnote 11]
After this time, those amounts are canceled by operation of law and
are no longer available to cover NIST's costs.[Footnote 12] In other
words, NIST cannot liquidate, or bill against, these funds after the
account closes.[Footnote 13] If NIST were to use funds after the
account closes, the client agency would be required to transfer
currently available funds to NIST. If the client does not have such
funds available, they could be exposed to possible Antideficiency Act
violations.[Footnote 14]
In our case-file review of 11 agreements, we found instances where
NIST could potentially be billing against closed accounts because it
does not monitor the dates that funds expire and become canceled. Ten
of these agreements remain open and active in NIST's financial system.
[Footnote 15] NIST officials told us that the system prevents an
agreement from being closed and deemed inactive if there are any
outstanding transactions. Further, they said that some of those
agreements may have outstanding undelivered orders that need to be
resolved. However, if the funds advanced in support of these
agreements are time-limited, it is possible that they are legally
unavailable to NIST for further billing. We found the expiration date
of funds advanced to NIST in the paper files of 3 agreements and were
therefore able to determine their legal availability. For the other 8
agreements, however, NIST lacked the necessary information to allow it
to determine the legal availability of funds without requesting
specific appropriation information from NIST's client agencies--
agencies that were not included in the scope of our review.
NIST shares responsibility with its client agencies to ensure the
proper use of federal funds when entering into interagency agreements.
NIST finance officials told us that expiration and account closing
dates of appropriations were not available to them. However, NIST's
policies require that all interagency agreements state the Treasury
Account Symbol (TAS), from which the period of availability of
appropriated funds could be determined.[Footnote 16] We found that
most of the hard-copy agreement files we reviewed included such an
appropriation code.
We found three reasons why NIST does not electronically record or
monitor the period of availability of appropriations advanced from
client agencies. First, NIST treats all client advances as if they are
free from the original appropriation's period of availability. Second,
NIST manages agreements by period of performance, which can be
different from the client appropriation's period of availability.
Third, NIST does not manage at the agreement level--the legal level of
control. Rather, it manages at the project level, which can include
multiple agreements.
NIST officials treat funds advanced for agreements accepted under
NIST's statutory authority as no-year funds; that is, free from the
time period of availability associated with the original
appropriation. This policy is contained in NIST's Administrative
Manual and is based on an interpretation of Commerce policy described
in a 1983 legal memo. When we sought clarification on this policy in
January 2010, Commerce's Office of General Counsel clarified the
interpretation of the legal memo and responded that it is revising its
policy and working with NIST to revise the Administrative Manual in
response to our inquiry. As we will discuss, NIST officials provided
additional details on these efforts in August 2010. Further, NIST
manages agreements by period of performance, which can be different
from the client appropriation's period of availability. The period of
performance is defined by the start and end dates of the agreement.
However, appropriations acts determine the period of availability of
appropriations.
Lastly, NIST manages the technical work it performs for client
agencies and bills and records transactions through projects.[Footnote
17] NIST officials explained that they manage by project because it
allows them to track and monitor related agreements together. However,
client agencies advance funds to NIST based on the terms and amounts
specified in interagency agreements, which is the legal level of
control. Although most projects relate to a single agreement, some
projects comprise multiple agreements (see figure 4). For example,
related agreements from a client agency are sometimes grouped together
under an umbrella project. Occasionally, NIST combines several related
agreements from different clients under a consortium project.
Figure 4: NIST Manages by Project, Which Can Include Multiple
Agreements:
[Refer to PDF for image: illustration]
Most projects have only one agreement associated with them:
Agreement with client agency A:
Project 1.
’Umbrella“ agreements: Multiple agreements with the same client are
associated with one project:
Agreement with client agency B:
Agreement with client agency B:
Project 2.
’Consortium“ or shared agreements: Multiple agreements with different
clients are associated with one project:
Agreement with client agency C:
Agreement with client agency D:
Agreement with client agency E:
Project 3.
Source: GAO.
[End of figure]
As a result of our review, Commerce is working with NIST to review and
revise policies described in the Administrative Manual and processes
related to interagency agreements. In August 2010, NIST officials told
us that they have begun to identify and resolve issues related to the
interagency agreement process, including drafting templates and
checklists for interagency agreements. The Commerce Office of General
Counsel has begun communicating these changes to NIST staff through
training sessions and town hall meetings. However, because we did not
receive this information until after we completed our review, we were
unable to determine what effect the changes may have on NIST's
interagency agreement process. See appendix I for more information
about these changes.
NIST Does Not Monitor Interagency Agreements to Ensure that Work
Begins within a Reasonable Time:
NIST does not record or monitor whether it begins working on
agreements within a reasonable amount of time after it received funds
advanced by client agencies. Performing agencies should begin work
within a reasonable period of time to ensure that the use of a client
agency's funds fulfill a bona fide need of the client arising during
the fund's period of availability.[Footnote 18] That is,
appropriations may be obligated only to meet a legitimate need,
arising in--or in some cases, arising prior to but continuing to exist
in--the fiscal years for which the appropriation was made. Long delays
between when an agency accepts funds advanced from clients and when it
begins work on its agreements may lead to the improper use of
appropriated funds. Although client agencies bear ultimate
responsibility for proper use of their funds, performing agencies
share responsibility as well. Because NIST, as the performing agency,
does not record or monitor when work begins on its agreements, it
would be difficult for it to carry out this responsibility.
There is no governmentwide standard for a reasonable time period for
performing work under an interagency agreement as it relates to a
client agency's bona fide need. A reasonable time frame depends on the
nature of the work to be performed and any associated requirements
such as hiring a subcontractor or developing a specialized tool or
machinery. Although neither Commerce nor NIST has established such a
standard, other federal agencies have done so. For example, both the
General Services Administration and the Department of Defense consider
90 days as a reasonable period of time for starting work.[Footnote 19]
Because NIST has not considered what a reasonable standard for
starting its work might be, we use 90 days as a point of reference for
the purposes of this report. We recognize that if NIST were to
consider a standard time frame for starting work, it may not
necessarily select 90 days.
We estimate that NIST took, on average, 125 days to begin work on its
interagency agreements in fiscal years 2004 through 2009.[Footnote 20]
We also estimate that work began for almost half of all agreements at
least 90 days after NIST received funds advanced from client agencies.
For these agreements, NIST waited an average of 226 days--or over 7
months--before beginning work (see table 5). We also found some
agreements that were delayed for as long as 301, 464, 669, and 707
days.[Footnote 21]
Table 5: NIST Took at Least 90 Days to Begin Work for Almost Half of
All Agreements:
Work began 90 days or less after funds were advanced to NIST:
Percentage of agreements: 58%;
Average number of days it took NIST to begin work: 51[A].
Work began more than 90 days after NIST received advanced funds:
Percentage of agreements: 42%;
Average number of days it took NIST to begin work: 226[B].
All agreements:
Percentage of agreements: 100%;
Average number of days it took NIST to begin work: 125[C].
Source: GAO analysis of NIST billing data for interagency agreements.
Note: The figures in this table are estimates. Unless otherwise
indicated, the margin of error for percent estimates based on this
survey cited in the report are within ±12 percentage points at the 95
percentage point confidence level.
[A] The 95 percent confidence interval for this estimate is within ±7
days.
[B] The 95 percent confidence interval for this estimate is within ±52
days.
[C] The 95 percent confidence interval for this estimate is within ±30
days.
[End of table]
Failure to begin work in a reasonable period of time raises legitimate
questions about whether the client's order fulfills a bona fide need
of the client agency. Long gaps between when NIST accepts advanced
funds and when it begins work on agreements may lead to NIST using
funds that are no longer legally available. Further, client agencies
may incur opportunity costs associated with funds advanced to NIST
that remain untapped for a prolonged period of time.
Because determining whether work began within a reasonable period of
time depends on specific facts, we reviewed 11 agreements in more
depth to better understand why work was delayed in some instances. In
one case, NIST did not begin work on an agreement it entered into in
December 2006 until October 2007--over 300 days later. NIST officials
explained that staff who could perform the work could not start
earlier because they were working on other projects. This suggests
that NIST did not assess whether it had appropriate resources
available before accepting the agreement. In another case, NIST said
that it took over 260 days to establish a relationship with the
National Cancer Institute and coordinate work plans with nine NIST
divisions before work could begin for an agreement. Assessing whether
it has appropriate resources available before accepting an agreement
is critical, because long gaps between when NIST accepts advanced
funds from clients and when it begins work raises concerns about
whether an agreement reflects a bona fide need of the client agency,
and may lead to an improper use of appropriated funds and, as such,
noncompliance with fiscal law.
We found two reasons why NIST does not know whether it begins work
within a reasonable period of time. First, the start date in NIST's
financial system--the system NIST uses to track its interagency
agreements--does not reflect when work actually begins on an
agreement. According to finance division officials, NIST tracks the
date that it enters into an agreement with a client agency; however,
we found that this is usually not the date that work actually begins.
NIST also does not electronically track or monitor the date it
received funds advanced from client agencies. Without monitoring the
amount of time that elapsed between when funds were advanced and when
work actually began, NIST cannot know whether it is starting work
within a reasonable period of time.
Second, because NIST manages by project instead of by agreement, it
does not record information about agreements that is important for
knowing whether work begins within a reasonable period of time. For
example, billing information is only tracked at the project level and
cumulatively by fiscal year. When we requested the individual charges
for each agreement to analyze when work began, NIST said it does not
manage or review billing information that way and had to create a
special report. Accordingly, NIST could not provide any billing data
for umbrella projects (see figure 4 above). Each agreement is funded
by different appropriations and may be conducted under unique
authorities and circumstances. Absent information on billed costs at
the agreement level, NIST cannot determine whether it is starting work
within a reasonable period of time given the facts of each particular
agreement.
Some Interagency Agreement Files Were Incomplete or Contained
Incorrect Information:
In our case file review, we found that some of NIST's interagency
agreements were incomplete or included incorrect information. Federal
internal control standards require that transactions be properly
authorized and executed, recorded timely, and documented
appropriately.[Footnote 22] Absent these types of robust internal
controls, NIST cannot provide reasonable assurance that it is
efficiently using its resources and complying with applicable fiscal
laws.
Some agreement files we reviewed lacked documentation of information
needed to provide a complete and accurate record of the agreement as
well as transactions between NIST and client agencies. For example, we
found instances where required documents were not included in the
agreement files. One agreement file we reviewed did not include a
statement of work. At the time NIST and the client agency enter into
an interagency agreement, the client incurs an obligation for the
costs of the work to be performed. However, to properly record an
obligation, the client must have documentary evidence of a binding
agreement between the 2 agencies for specific goods and services.
[Footnote 23] In another example, only one of the agreements we
reviewed documented how NIST handled unused funds that had been
advanced in support of an agreement. Federal internal control
standards require clear documentation of all transactions and
significant events.[Footnote 24] Moreover, NIST's processes for
closing out completed agreements require it to return unused funds if
they are greater than $1,000 to the client.[Footnote 25] Absent clear
authority, NIST may not write off any amount of unearned funds to the
working capital fund.
We also found agreement files that incorrectly recorded the dates of
when funds were advanced to NIST from client agencies. One file showed
that NIST accepted advanced funds before a formal interagency
agreement with the agency was in place. Federal agencies are
prohibited from transferring funds for an interagency transaction like
orders placed with NIST without a binding legal agreement. When we
asked NIST finance officials to explain this, they said that the date
was recorded in error and should be 1 year after the date indicated in
the file. The corrected date would indicate that NIST accepted
advanced funds after a binding agreement was in place; however, the
error reflects an inaccurate record of this transaction. Federal
internal control standards require an accurate recording of
transactions to maintain their relevance to managers in controlling
operations and making decisions.[Footnote 26] In another example, the
file incorrectly recorded an advance as having been made 10 months
later than the actual transaction date.
NIST's Deputy Chief Financial Officer told us that NIST does not
maintain a single consolidated file of all pertinent documents related
to each agreement, and that such information is generally spread among
files maintained by other Operating Units across the agency. Finance
division officials explained that legal and financial documents are
kept separately from program files, which are managed by scientists in
the Operating Unit that accepted the agreement. While we recognize
that program managers may also have a need to maintain separate files
for their own purposes, absent complete, easily accessible agreement
files, NIST will have difficulty monitoring and managing agreements in
a manner consistent with applicable fiscal laws and federal internal
control standards.
NIST Lacks Strategic Workload Management and Client Focus for Its
Interagency Agreements:
NIST lacks a high-level, senior management focus on managing its
interagency agreement workload. Effective workforce planning
strategies help address an agency's mission and goals by making the
best use of the government's most important resource--its people. A
key principle of strategic workforce planning is the effective
deployment of staff to achieve the agency's mission and goals.
[Footnote 27] NIST places a high priority on its interagency
agreements. However, NIST senior managers play no role in determining
whether the appropriate resources are available agencywide to support
its interagency agreement workload.
NIST's decentralized workload acceptance process may contribute to
NIST's having more work than it has the resources to handle. Division
Chiefs--the officials generally responsible for accepting new work--do
not fully consider resource constraints agencywide or include an
assessment of whether NIST has the resources available to begin work
within a reasonable period of time. Even though more than one division
contributes staff or resources to over half of all agreements,
Division Chiefs do not consult with other parts of NIST before
accepting work. Therefore, even if the accepting division or Operating
Unit has adequate resources to begin work within a reasonable time
frame, NIST lacks assurance that the necessary resources are available
agencywide. As previously mentioned, we found several instances where
NIST delayed starting work on agreements because it did not have the
available staff or resources to do the work. Poor use of NIST's staff
and resources may also have potential legal implications for NIST and
its clients, as previously discussed. Without strategically managing
its workload, NIST cannot be sure that it is effectively managing this
high-priority area.
Although NIST shares responsibility with its federal clients for
ensuring the proper use of appropriated funds, it does not
sufficiently communicate to clients important information about the
status of work and the use of these funds--information that would help
its clients know whether their funds are being properly used. For
example, it does not provide its clients with estimated work start
dates for each agreement. Agencies strive to become high-performing
service organizations by focusing on client satisfaction through
sustaining high-quality and timely service.[Footnote 28] Although
NIST's Administrative Manual discusses the need for a coordinator to
serve as the principal contact with each client agency, officials told
us this position does not exist nor does anyone currently perform
those duties. Such a coordinator could communicate important
information--including when NIST expects to begin work on agreements--
that would better inform client decisions about how best to use their
appropriated funds.
Conclusions:
Funds advanced in support of interagency agreements are the biggest
driver of the carryover balance in NIST's working capital fund.
Although some carryover is to be expected, insufficient management of
interagency agreements can lead to inefficient use of federal
resources. NIST does not monitor the period of availability of
appropriations advanced from client agencies and therefore cannot
ensure that funds are legally available when it bills against them. If
NIST were to use funds after the account closes, the client agency
would be required to transfer currently available funds to NIST.
Additionally, NIST does not track or monitor when it actually begins
work on agreements, nor does it have a standard for what it considers
a reasonable time frame for starting work. NIST's decentralized
approach to accepting agreements results in no consideration given to
whether the necessary resources exist agencywide to start work within
a reasonable time frame. Further, our case-file review found
agreements that were incomplete or included incorrect information. As
such, NIST will have difficulty ensuring that it has entered into
binding legal agreements and is managing them in a manner consistent
with applicable fiscal laws and federal internal control standards.
NIST and its client agencies have joint responsibility for ensuring
that amounts advanced to NIST in support of NIST's technical service
to federal clients are used in accordance with fiscal requirements;
however, we found weaknesses in NIST's processes in these areas. For
example, NIST lacks an identified legal basis for NIST's policy of
writing off unearned funds less than $1,000. Absent improvements in
how NIST tracks and monitors its interagency agreements, client
agencies and the Congress will lack assurance that these requirements
are being met.
Although NIST designates interagency agreements as an agency priority,
it lacks a strategic focus and oversight for how its resources are
deployed in support of this important work. Further, NIST shares
responsibility with its client agencies for ensuring the proper use of
federal funds advanced to it. Because NIST does not monitor and
communicate clearly and consistently the status and progress of its
interagency agreements, both parties lack important information that
would help ensure compliance with applicable fiscal requirements.
Recommendations for Executive Action:
To improve the management of NIST interagency agreements and provide
reasonable assurance that NIST is efficiently using its resources and
complying with applicable fiscal laws, we recommend that the Secretary
of Commerce direct the NIST Director to take the following five
actions:
(1) To help ensure efficient, effective deployment of NIST's workforce
and be a responsible steward of federal resources, hold senior
management accountable for strategically managing its interagency
agreements. This includes periodic senior management involvement in
reviewing whether NIST has the appropriate resources to begin and
perform new and existing work.
(2) To meet its responsibilities in ensuring the proper use of federal
funds, (a) develop, implement, and communicate to its clients policies
regarding reasonable time frames for beginning work on interagency
agreements; (b) track and monitor the work start date for each
agreement; and (c) monitor and report internally, and periodically
inform federal clients about, the amount of time elapsed between when
funds were advanced to it from client agencies and when it actually
began billing against an agreement. For example, NIST could provide
estimated work start dates for each agreement based on agencywide
resource considerations; devise a notification system that would
indicate when work has not begun within a certain time frame and
provide the date work actually began; or periodically provide clients
with a report detailing the balance of unbilled funds as the account
closing date approaches.
(3) To help guard against the use of canceled appropriations,
electronically record and monitor key information about the period of
availability of appropriations advanced to NIST from client agencies.
(4) To provide reasonable assurance that its interagency agreements
are complete, accurate, and constitute a binding legal agreement,
create, document, and implement a robust fiscal and legal review
process for interagency agreements. This could include (a) developing
and delivering periodic training to staff involved in accepting,
processing, managing, and overseeing interagency agreements on how to
appropriately accept, process, review, and monitor its interagency
agreements and (b) maintaining complete, accurate, and easily
accessible files for all agreements.
(5) To comply with fiscal law, NIST should review its close-out
policies regarding returning unearned funds to client agencies and
adjust its accounts accordingly.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Director of NIST. The agency
provided us with written comments which are summarized below and
reprinted in appendix III.
NIST concurred with our findings and all five of our recommendations.
For each recommendation NIST described corrective actions it is
taking. NIST expects to fully implement these actions by September 30,
2011. NIST also provided technical comments which we incorporated in
the report as appropriate.
In its comments, NIST stated that it immediately began revising its
interagency agreement operating procedures and related financial
management policies and practices in response to Commerce's
clarification of the policy on which these procedures were based. NIST
said that it provided documentation on these policies and procedures
for our review but that we did not examine them as a part of our
audit. We note that Commerce clarified its policy in February 2010 and
that NIST provided us with information about its proposed changes in
August 2010 at the exit conference for this engagement. We responded
that we would include the existence of the new policies in our report
(see appendix I for a summary of these changes) but since NIST chose
not to provide this information until the end of our review, we would
be unable to determine what effect the new policies may have.
NIST also stated that the 1983 legal opinion upon which the operating
and financial policies of its interagency agreement were based has not
been disputed until recently and that the propriety of its treatment
of interagency agreement funding has never been in question. We note
that a 2004 Commerce Office of Inspector General review of NIST
questioned the 1983 Commerce opinion and raised numerous concerns
regarding the agency's management of interagency agreements.
We are sending copies of this report to the Secretary of Commerce, the
NIST Director, and other interested parties. The report is available
at no charge on the GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-6806 or by e-mail at fFantonedD@gao.gov.
Contact points for our Congressional Relations and Public Affairs may
be found on the last page of this report. Major contributors to this
report are listed in appendix IV.
Signed by:
Denise M. Fantone:
Director Strategic Issues:
[End of section]
Appendix I: Proposed Changes to NIST's Interagency Agreement Process:
In August 2010, the National Institute of Standards and Technology
(NIST) provided information about the steps it is taking to improve
the overall internal control of interagency agreements and funding it
receives, as a result of our review. From March to May 2010, the
Department of Commerce's (Commerce) Office of General Counsel, General
Law Division, and NIST's Office of General Counsel reviewed all of
NIST's interagency agreements. They conducted a legal review of all
agreements, evaluated existing processes, and created new procedures
through the development of checklists and interagency agreement
templates. Further, NIST began to communicate these changes through
town hall meetings and trainings with Operating Unit staff.
NIST officials told us that Commerce is still reviewing these changes
and they have not yet approved or finalized these processes.
Nevertheless, our review of the interim trainings and draft documents
indicate that NIST is taking steps to help ensure its interagency
agreements comply with fiscal laws. Some changes include the following:
* Documenting time limitations on the use of federal funds. NIST
agreements are required to include the Treasury Account Symbol (TAS)
code, which indicates the period of availability of appropriations.
Draft agreement templates include a placeholder for both the TAS code
and the date of expiration. Additionally, the review checklists
specifically ask for the inclusion of this information. The expiration
date should also be included in NIST's financial management system for
tracking purposes.
* Documenting NIST criteria for accepting work. NIST agreements are
required to cite the specific authorization or criteria for entering
into interagency agreements, as required by the agency's
Administrative Manual. The draft review checklist also requires the
inclusion of this justification in agreement files.
* Clarifying the bona fide needs rule and its accounting implications.
Commerce's trainings discuss the bona fide needs rule and how it
applies to the different types of services that NIST provides. The
training also provides information about the accounting implications
of the bona fide needs rule as well as obligation requirements as it
relates to this rule.
* Clarifying the legal review process. The training materials preview
a legal review process as well as specific roles and responsibilities
for administering interagency agreements. Commerce's General Law
Division is to document legal clearance for certain agreements through
a concurrence memo that includes such information as the period of
availability of funds advanced to NIST and programmatic authorities.
Finance division and Operating Unit staff are also involved in the
legal review process.
[End of section]
Appendix II: Simple Random Sample of Interagency Agreements:
Because the National Institute of Standards and Technology (NIST) does
not record when it began work on its interagency agreements, we
determined the start date for a sample of its agreements. We drew an
initial simple random sample of 80 agreements from NIST's 354
interagency agreements with federal clients spanning more than 1
fiscal year that began after October 1, 2003, and were completed by
September 30, 2009.[Footnote 29] From this initial sample, cost
information was not available for 16 records. We drew an additional
sample of 15 agreements and achieved a target sample of 76 agreements.
Three of the additional 15 records did not have cost information
associated with them and therefore we did not include them in our
analysis.
We assessed the reliability of NIST's interagency agreement data by
performing electronic testing of the data for missing data, outliers,
and obvious errors; reviewing documentation from the system, such as
screen shots and training materials; and interviewing knowledgeable
agency officials about how primary users enter data into the system
and the internal control steps taken by NIST to ensure data
reliability. Given this information, we determined that the data were
sufficiently reliable for the purposes of this report.
For in-depth case-file reviews, we selected 11 agreements that did not
begin in the fiscal year in which the agreement was accepted and work
that (1) began more than 268 days after the agreement was signed
(which represents the average time it took for NIST to begin work on
agreements that did not begin in the fiscal year during which NIST
accepted them); or (2) had a carryover balance greater than $1.
[End of section]
Appendix III: Comments from the National Institute of Standards and
Technology:
United States Department Of Commerce:
National Institute Of Standards And Technology:
Office Of The Director:
Gaithersburg, Maryland 20899-0001:
October 6, 2010:
Ms. Denise M. Fantone:
Director, Strategic Issues:
United States Government Accountability Office:
Washington, D.C. 20548:
Dear Ms. Fantone:
Thank you for the opportunity to comment on the draft report from the
U.S. Government Accountability Office (GAO) entitled Intragovernmental
Revolving Funds: NIST's Interagency Agreements and Workload Require
Management Attention (GA0-11-41).
It should be noted that NIST's interagency agreement operating
procedures and related financial management policies and practices
were based on a 1983 legal opinion which, until recently, has not been
disputed. In addition, NIST has received unqualified audit opinions on
its financial statements since the mid-1990s and the propriety of the
bureau's treatment of interagency agreement funding has never been in
question.
Immediately upon learning that the 1983 opinion was no longer valid,
NIST developed new policies and procedures for handling interagency
agreements in collaboration with the Office of the Chief Counsel for
NIST (OCC NIST) and the Department of Commerce's (DoC) General Law
Division. Documentation of these policies and procedures were provided
to the GAO team for review; however, they were not examined as a part
of this audit.
In addition to developing new procedures for interagency agreements,
NIST, OCC NIST, and the DoC General Law Division provided training to
all organizational units at NIST in order to inform and reinforce the
new procedures for interagency agreements including acceptance, review
and financial management operations.
Additional detailed comments are provided regarding the enclosed
document including three recommendations to add clarity and context to
the facts presented in the report and specific comments regarding the
five identified findings.
We are looking forward to receiving your final report. Please contact
Rachel Kinney on (301) 957-8707 should you have any questions
regarding this response.
We look forward to further communication with GAO regarding its
conclusions.
Sincerely,
Signed by:
Patrick Gallagher:
Director:
Enclosure:
[End of letter]
Department of Commerce:
National Institute of Standards and Technology (NIST) Comments on the
Draft Government Accountability Office Report Entitled
"Intragovernmental Revolving Funds: NIST's Management of Interagency
Agreements and Workload Require Management Attention" (GAO-11-41,
October 2010):
Recommended Additions for Clarity:
Page 3, first paragraph:
We recommend stating that NIST is using the Commerce Business System
(CBS), which is the official DoC accounting system of record. This
statement clarifies that it was not an intentional act on NIST's part
to exclude the start work date in the system.
Page 8, the paragraph preceding Table 2:
We recommend amplifying the last sentence to indicate that while the
fiscal year 2009 carryover balance represents 41 percent of the
working capital fund's total resources, the balance has been declining
and represents a decrease from the fiscal year 2007 balance by four
percent and a 10 percent decline since fiscal year 2005.
Page 9, the paragraph below Table 3:
Similarly, we recommend that an amplifying statement be added
indicating that from fiscal years 2006-2009 NIST interagency agreement
carryover as a percent of total working capital fund carryover has
dropped by 18 percent.
Page 13, Second Full Paragraph:
We recommend the following editorial changes:
1) the second sentence in the paragraph should be rewritten to say:
"This policy is contained in NIST's Administrative Manual and is based
on an interpretation of a 1983 legal memorandum."
2) the fifth sentence should be changed to read: "When we sought
clarification on this policy in January 2010, Commerce clarified the
interpretation of the legal memorandum and NIST is in the process of
revising the Administrative Manual in response to our inquiry ...."
NIST Response to GAO Recommendations:
Recommendation 1: "To help ensure efficient, effective deployment of
NIST workforce and be a responsible steward of federal resources, hold
senior management accountable for strategically managing its
interagency agreements. This includes periodic senior management
involvement in reviewing whether NIST has the appropriate resources to
begin and perform new and existing work"
NIST Response: NIST concurs with this recommendation. NIST will
continue to refine and improve its policies and operating procedures
regarding the management of interagency agreements. These refined
policies and procedures will facilitate compliance, provide a
benchmark for process improvement, and ensure that senior management
of the bureau are actively involved in and can be held accountable for
management of NIST interagency agreements.
This corrective action will be implemented by March 31, 2011.
Recommendation 2: To meet its responsibilities in ensuring the proper
use of federal funds: a) develop, implement and communicate to its
clients policies regarding reasonable timeframes for beginning work;
b) track and monitor the work start date for each agreement; c)
monitor and report internally and periodically inform clients about
the amount of time elapsed between when funds were advanced and when
it actually began billing against an agreement. For example, NIST
could provide estimated work start dates for each agreement based on
agency wide resource considerations; devise a notification system that
would indicate when work has not begun within a certain timeframe;
provide the date work actually began; and/or periodically provide
clients with a report detailing the balance of unbilled funds as the
account closing date approaches."
NIST Response: NIST concurs with this recommendation. NIST will
develop new policy to guide allowable time frames between agreement
execution and work start dates. NIST, in consultation with legal
counsel, will determine how best to include reasonable work time
frames within already executed reimbursable agreements to clearly
communicate expectations to all parties. NIST policy will include
processes for reporting exceptions, such as unreasonable gaps between
agreement execution and work start date, expected work start dates and
actual work start dates, or gaps between when advances are received
and when costs are billed to the agreement.
NIST will establish a process for independently tracking and
monitoring the work start date of each agreement and monitoring the
time lapse between receipt of advance and cost billing. In
addition, NIST will develop a process to report significant exceptions
to senior management and will document this process within the NIST
policy. NIST will maintain evidence of senior manager review and
acknowledgment of monitoring results with appropriate levels of
approval established within the NIST policy.
NIST will develop and implement a process for periodically informing
clients regarding the time elapsed between when funds are advanced to
when billings actually occur on interagency agreements.
These corrective actions will be implemented by March 31, 2011.
Recommendation 3: To help guard against the use of canceled
appropriations, electronically record and monitor key information
about the period of availability of appropriations advanced to NIST
from client agencies."
NIST Response: NIST concurs with this recommendation. NIST has begun
and will continue to develop electronic means by which to record and
monitor this information. Upon learning that this was a concern, NIST
staff began working on a new database that will capture the
appropriate information on appropriation availability and other
critical interagency agreement information. This database and the
revised procedures included in the NIST Administrative Manual
subchapter on interagency agreements are being designed to incorporate
the new standard interagency agreement templates soon to be prescribed
by the Office of Management and Budget (OMB). In addition, NIST staff
participated in training sessions regarding the new OMB requirements
and will ensure that these requirements are included in revised
training held for program offices handling new agreements.
These corrective actions will be implemented by September 30, 2011.
Recommendation 4: "To provide reasonable assurance that its
interagency agreements are complete, accurate, and constitute a
binding legal agreement; create, document, and implement a robust
fiscal and legal review process for interagency agreements. This
include a) developing and delivering periodic training to staff
involved in accepting, processing, managing, and overseeing
interagency agreements on how to appropriately accept, process,
review, and monitor its interagency agreements and b)maintaining
complete, accurate, and easily accessible files for all agreements."
NIST Response: NIST concurs with this recommendation. Immediately upon
learning of this concern, the NIST Chief Financial Officer, OCC NIST,
and staff from the laboratory and program offices collaborated with
DoC General Law Division to address this issue. After examining the
operating procedures in place at the time, NIST changed them to
include a requirement for a complete legal review of all interagency
agreements prior to acceptance. NIST policy has since been changed to
reflect this new practice.
In addition, training and educational meetings for NIST staff and
other sponsoring federal agencies have been conducted on the new
interpretation of agreement authorities, on new policies and
procedures, on the use of new monitoring tools that were developed
including interagency agreement checklists and templates, and on
requirements for maintain appropriate records for interagency
agreements. Training sessions will continue to be held on a periodic
basis and as needed to update staff on refined processes. And as
mentioned previously, NIST also developed a tracking data base to
monitor the status of all interagency agreements and to ensure that
those determined to be "urgent" were addressed in a timely manner.
These corrective actions were largely completed on September 30, 2010
and will be fully implemented by March 31, 2011.
Recommendation 5: "To comply with fiscal law, NIST should review its
close-out policies regarding returning unearned funds to client
agencies and adjust its accounting accordingly."
NIST Response: NIST concurs with this recommendation. In the past,
NIST determined that it was not cost effective to return funds in
amounts less than $1,000 and client agencies have concurred with this
determination. Over the past three years, the total amount of unearned
funds not returned to client agencies resulting from this policy has
only amounted to $64,000, an amount immaterial to our financial
statements. NIST will reexamine its policies and procedures for
returning unused funds to client agencies to ensure they meet legal
requirements.
This corrective action will be performed by March 31, 2011.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Denise M. Fantone, (202) 512-6806 or fFantonedD@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Jacqueline M. Nowicki,
Assistant Director, and Shirley Hwang, Analyst-in-Charge, managed this
assignment. Jeffrey Heit, Travis Hill, Felicia Lopez, Julia Matta,
Leah Q. Nash, Rebecca Rose, and Kan Wang made major contributions.
Sheila Rajabiun provided legal assistance. Susan Baker, Jean McSween,
and Dae Park provided sample design and methodological assistance.
[End of section]
Footnotes:
[1] We refer to federal agencies entering into interagency agreements
with NIST as client agencies.
[2] We excluded all agreements that had an order amount of $0. Unless
otherwise noted, figures about interagency agreements cited in this
report pertain to our analysis of these 354 agreements.
[3] NIST uses the Commerce Business System, the official Commerce
accounting system.
[4] We selected 11 agreements that did not begin in the fiscal year in
which the agreement was accepted and (1) for which work began more
than 268 days after the agreement was signed (which represents the
average time it took for NIST to start work on agreements that did not
begin in the fiscal year during which NIST accepted them) or (2) that
had a carryover balance greater than $1.
[5] An appropriation's period of availability refers to the period of
time in which those funds are available for new obligations.
Appropriations may be time-limited and therefore only available for 1,
2, or more years, or they can be available for obligation without
fiscal year limitation.
[6] As a result of our review, and as discussed more fully in appendix
I, Commerce is working with NIST to revise interagency agreement
processes and reviews in the Administrative Manual.
[7] Earned receipts and collections reimburse the working capital fund
for the cost of its operations, which include labor, materials, and so
on for the interagency agreement.
[8] In this report, carryover balances refer to client advances to
NIST for technical work that NIST has not yet started or work that was
started but not finished.
[9] See, for example, GAO, Navy Working Capital Fund: Management
Action Needed to Improve Reliability of the Naval Air Warfare Center's
Reported Carryover Amounts, [hyperlink,
http://www.gao.gov/products/GAO-07-643] (Washington, D.C.: June 26,
2007).
[10] See B-319349 (June 4, 2010).
[11] 31 U.S.C. § 1552.
[12] As mentioned previously, appropriations may be time-limited and
therefore only available for 1, 2, or more years, or available for
obligation without fiscal year limitation.
[13] See B-319349.
[14] The Antidificiency Act prohibits, among other things, the making
or authorizing of an obligation or expenditure from any appropriation
in excess of the amount available in the appropriation. Obligating
parties--in this case NIST's client agencies--are responsible for
complying with this act.
[15] As previously noted, the period of performance for all
interagency agreements in our review ended on or before September 30,
2009.
[16] The TAS is a code assigned by the Department of the Treasury, in
collaboration with the Office of Management and Budget and the owner
agency, to an individual appropriation, receipt, or other fund
account. All financial transactions of the federal government are
classified by TAS for reporting purposes.
[17] Projects are the building blocks of NIST's financial system and
the lowest level at which costs are systematically recorded.
[18] The bona fide needs rule is a fundamental principle of fiscal
law. It dictates that if the performing agency does not use the
client's funds within a reasonable time of their receipt, the
agreement may not reflect a bona fide need of the client agency. See B-
308944 (July 17, 2007). For this review, we consider the date a client
agency advances its appropriations for an interagency agreement as the
date NIST received those funds.
[19] See GAO, Defense Working Capital Fund: Military Services Did Not
Calculate and Report Carryover Amounts Correctly, GAO--06--530
(Washington, D.C.: June 27, 2006); Improper Use of Industrial Funds by
Defense Extended the Life of Appropriations Which Otherwise Would Have
Expired, [hyperlink, http://www.gao.gov/products/GAO/AIMD-84-34]
(Washington, D.C.: June 5, 1984); and General Services Administration,
Interagency Agreements--Acceptance and Obligation of Funds--General
Services Administration Acquisition Letter V-08-04 (Washington-D.C.:
June 10, 2008).
[20] The 95 percent confidence interval for this estimate is ±30 days.
This analysis is based on a statistically representative sample of the
354 multiyear agreements between NIST and federal clients that began
in fiscal year 2004 and ended by the end of fiscal year 2009.
[21] Our case-file review indicated that the client agency was
notified about the delays for only one of these agreements.
[22] GAO: Standards for Internal Control in the Federal Government:
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington-D.C.: November 1999).
[23] See 31 U.S.C. § 1501(a) and B-308944.
[24] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[25] Finance division officials also told us that they return unused
amounts less than $1-000 upon a client agency's request.
[26] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[27] GAO, Human Capital: Key Principles for Effective Strategic
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39]
(Washington-D.C.: Dec. 11-2003).
[28] GAO, Highlights of a GAO Forum: High-Performing Organizations:
Metrics-Means-and Mechanisms for Achieving High Performance in the
21st Century Public Management Environment, [hyperlink,
http://www.gao.gov/products/GAO-04-343SP] (Washington-D.C.: Feb. 13-
2004).
[29] We excluded all agreements that had an order amount of $0. We
selected agreements beginning in fiscal year 2004 because NIST
upgraded to a new financial system that fiscal year.
[End of section]
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