Vendor Payments

Problems with management oversight and control of DOD's purchase card program led to concerns that similar issues exist for DOD's vendor payments. As a result, this report focuses on the Navy's telecommunication program and whether (1) the Navy has the basic cost and inventory information needed to oversee and manage these purchases and (2) selected Navy sites have adequate control to provide reasonable assurance that goods and services are purchased cost effectively and payments are made only for valid charges.

The Navy did not know how much it spent on telecommunications and did not have detailed cost and inventory data needed to evaluate spending patterns and to leverage its buying power. Obtaining knowledge of current requirements and usage, as well as developing forecasts of future telecommunication needs, would assist Navy's acquisition planning to ensure future needs were met in a more cost-effective manner. At the four case study sites we audited, management oversight of telecommunication purchases did not provide reasonable assurance that requirements were met in the most cost-effective manner. For local and long-distance services, these sites did not follow policies to biennially review and revalidate these requirements. As a result, they paid for services no longer required. Also, the Navy lacks policies to provide assurance that cell phone requirements are met in the most cost-effective manner. Cell phone usage at three sites was not monitored to determine whether plan minutes met users' needs. Consequently, these sites overpaid for cell phone services. Also, none of the sites had adequate controls over review of invoices to provide assurance of payments for only valid charges. These sites failed to detect erroneous charges and potentially improper use of these services. In addition, the Navy lacks specific policies and processes addressing the administration and management of calling cards. Consequently, some sites did not know they owned and were being billed for calling cards. Other sites allowed calling cards to be shared and were unable to determine the legitimacy of the calls, and thus paid for potentially fraudulent or abusive long-distance charges. On one card alone, in a 3-month period, the Navy paid over $17,000. However, because no one was regularly monitoring the activity on this card, the unit was unaware of potentially fraudulent charges. Not until the vendor's fraud unit raised questions about more than $11,000 in charges incurred during the first 6 days of July 2003 was the card suspended.

Recommendations

Our 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.

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