Indian Health Service
Millions of Dollars in Property and Equipment Continue to Be Lost or Stolen Gao ID: GAO-09-450 June 2, 2009In 2008, GAO issued a report and testimony revealing gross mismanagement of property at the Indian Health Service (IHS). GAO found that 5,000 items with an acquisition value of $15.8 million were reported lost or stolen for fiscal years 2004 through 2007. GAO attributed the property mismanagement and waste to weak internal controls. GAO made 10 recommendations to IHS. IHS ultimately agreed to implement all 10 recommendations. Given the extent and seriousness of the property management problems at IHS, GAO was asked to determine (1) whether property loss, property theft, and wasteful spending continue at IHS; and (2) to what extent IHS made progress in implementing GAO's prior recommendations. GAO analyzed IHS property records from fiscal year 2008 through January 2009, conducted a full physical inventory at IHS headquarters, and performed a probability sample of information technology equipment inventory at six IHS field locations. GAO also examined IHS policies, analyzed documents, and conducted interviews with IHS officials.
IHS continues to lose property at an alarming rate, reporting lost or stolen property with an acquisition value of about $3.5 million dollars in little over a year, including new medical equipment. IHS management's failure to implement most of our June 2008 recommendations and hold staff accountable for losses contributes significantly to ongoing property problems. These property losses at IHS are in addition to what GAO identified in its June 2008 report. GAO completed a full audit of IHS headquarters and found that 126 items worth $216,000 (or 8 percent of the items tested) had been lost, stolen, or were otherwise unaccounted for. GAO also estimates that about 800 equipment items at six field locations with an acquisition value of about $1.7 million were lost, stolen, or unaccounted for. Furthermore, although IHS performed an annual inventory as GAO recommended, as of March 2009, it had not finished reconciling the inventory and cannot locate many items, including medical equipment. These items include a 2002 ultrasound unit valued at $170,000; a 2003 X-ray mammography machine valued at $100,795; dental chairs, cardiac and vital sign monitors; and a pharmacy tablet counter machine. Aside from issuing a memorandum from the IHS Director that restated and refined existing policies, IHS has taken little action to ensure that employees are aware of and complying with property policies. One way to enforce policies involves holding individuals accountable; however, GAO found that the Senior Service Executive in charge of the IHS property group and other areas was given a $13,000 bonus after GAO's report exposed mismanagement of property under the executive's purview. Furthermore, IHS could only provide one example of an individual held financially liable for lost or stolen property over a 1-year period; but at the time of our audit, the individual still had not reimbursed the government for the loss. GAO also identified the following examples where IHS investigated the loss of property but did not hold anyone accountable.
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: Team: Phone:GAO-09-450, Indian Health Service: Millions of Dollars in Property and Equipment Continue to Be Lost or Stolen
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2009:
Indian Health Service:
Millions of Dollars in Property and Equipment Continue to Be Lost or
Stolen:
GAO-09-450:
GAO Highlights:
Highlights of GAO-09-450, a report to congressional requesters.
Why GAO Did This Study:
In 2008, GAO issued a report and testimony revealing gross
mismanagement of property at the Indian Health Service (IHS). GAO found
that 5,000 items with an acquisition value of $15.8 million were
reported lost or stolen for fiscal years 2004 through 2007. GAO
attributed the property mismanagement and waste to weak internal
controls. GAO made 10 recommendations to IHS. IHS ultimately agreed to
implement all 10 recommendations. Given the extent and seriousness of
the property management problems at IHS, GAO was asked to determine (1)
whether property loss, property theft, and wasteful spending continue
at IHS; and (2) to what extent IHS made progress in implementing GAO‘s
prior recommendations.
GAO analyzed IHS property records from fiscal year 2008 through January
2009, conducted a full physical inventory at IHS headquarters, and
performed a probability sample of information technology equipment
inventory at six IHS field locations. GAO also examined IHS policies,
analyzed documents, and conducted interviews with IHS officials.
What GAO Found:
IHS continues to lose property at an alarming rate, reporting lost or
stolen property with an acquisition value of about $3.5 million dollars
in little over a year, including new medical equipment. IHS
management's failure to implement most of our June 2008 recommendations
and hold staff accountable for losses contributes significantly to
ongoing property problems. These property losses at IHS are in addition
to what GAO identified in its June 2008 report. GAO completed a full
audit of IHS headquarters and found that 126 items worth $216,000 (or 8
percent of the items tested) had been lost, stolen, or were otherwise
unaccounted for. GAO also estimates that about 800 equipment items at
six field locations with an acquisition value of about $1.7 million
were lost, stolen, or unaccounted for. Furthermore, although IHS
performed an annual inventory as GAO recommended, as of March 2009, it
had not finished reconciling the inventory and cannot locate many
items, including medical equipment. These items include a 2002
ultrasound unit valued at $170,000; a 2003 X-ray mammography machine
valued at $100,795; dental chairs, cardiac and vital sign monitors; and
a pharmacy tablet counter machine.
Aside from issuing a memorandum from the IHS Director that restated and
refined existing policies, IHS has taken little action to ensure that
employees are aware of and complying with property policies. One way to
enforce policies involves holding individuals accountable; however, GAO
found that the Senior Service Executive in charge of the IHS property
group and other areas was given a $13,000 bonus after GAO's report
exposed mismanagement of property under the executive's purview.
Furthermore, IHS could only provide one example of an individual held
financially liable for lost or stolen property over a 1-year period;
but at the time of our audit, the individual still had not reimbursed
the government for the loss. GAO also identified the following examples
where IHS investigated the loss of property but did not hold anyone
accountable.
Table: Examples of Poor Accountability for Property: Description:
Description: Laptop;
Explanation:
* A laptop was reported stolen during IHS‘s 2008 inventory.
* Employee had several laptops assigned to him and did not know that
this one was stolen.
* Nobody held accountable.
Description: Laptop;
Explanation:
* IHS identified an employee that lost a laptop.
* Employee stated she could not remember what happened to the laptop.
* Employee was not held accountable.
Description: Laptop;
Explanation:
* A laptop was lent to an employee for home use.
* The employee left the agency without returning the laptop.
* Employee was not held accountable.
Source: GAO.
[End of table]
What GAO Recommends:
GAO recommends that IHS fully implement last year‘s recommendations and
take six new actions to ensure timely and accurate inventory records.
HHS agreed with all six recommendations, however, GAO is concerned with
the lack of specificity in the HHS response.
View [hyperlink, http://www.gao.gov/products/GAO-09-450] or key
components. For more information, contact Gregory Kutz at (202) 512-
6722 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Background:
Alarming Rate of Property Loss Continues at IHS:
IHS Has Made Limited Progress in Implementing GAO's Recommendations:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Health & Human Services:
Appendix III: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Sample Results for Six IHS Field Locations:
Table 2: GAO's June 2008 Recommendations and IHS Actions:
Table 3: 95 Percent Confidence Intervals for Sample Estimates:
Figures:
Figure 1: IT Equipment Stored in Unlocked Vacant Office:
Figure 2: Broken Door to Server Room at Aberdeen Region Office
Utilizing Memo to Restrict Access:
Abbreviations:
CIO: Chief Information Officer:
GSA: General Services Administration:
HHS: Department of Health and Human Services:
IHS: Indian Health Service:
IT: information technology:
OIG: Office of Inspector General:
PCO: Property Custodial Officer:
PDA: Personal Digital Assistant:
PMIS: Property Management Information System:
PMO: Property Management Officer:
PO: Purchase Order:
PSC: Program Support Center:
ROS: Report of Survey:
SGM: Special General Memorandum:
UFMS: Unified Financial Management System:
USAO: United States Attorney's Office:
USB: universal serial bus:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 2, 2009:
The Honorable Byron L. Dorgan:
Chairman:
Committee on Indian Affairs:
United States Senate:
The Honorable Nick J. Rahall II:
Chairman:
Committee on Natural Resources:
House of Representatives:
The Honorable Lisa Murkowski:
United States Senate:
The Honorable Don Young:
House of Representatives:
This report responds to your request to perform a follow-up audit to
assess the Indian Health Service's (IHS) progress in improving its
property management. In a June 2008 report and July 2008 testimony we
revealed gross mismanagement of property and waste at IHS, including
the loss or theft of 5,000 computers and other property worth $15.8
million.[Footnote 1] Furthermore, we discussed examples of waste at IHS
and estimated that there were about 10 pieces of information technology
(IT) equipment per each headquarters employee. We attributed the
property mismanagement and waste to a weak internal control environment
and ineffective implementation of numerous existing property policies.
We stressed that this lack of control had persisted for years due to
management failures and a weak "tone at the top."
We made 10 recommendations to IHS to improve its property management.
Among our recommendations, we indicated that IHS needed to update its
policies, enforce existing policies, and hold staff accountable for
lost or stolen property where applicable. In a response to our findings
reported in June 2008, IHS ultimately agreed with all 10 of the
recommendations and stated they would implement them.
In 1997, the former IHS Director issued a memorandum to IHS
headquarters staff stating that thousands of dollars in computer
equipment had been lost or stolen over a 2-year period. These losses
were blamed on negligence and disregard for the appropriate safeguards.
The memorandum provides evidence that problems related to lost and
stolen property have existed at IHS for over 12 years. Given the extent
and seriousness of the property management problems at IHS, you asked
us to perform a follow-up audit to determine (1) whether property loss,
property theft, and wasteful spending continue at IHS; and (2) to what
extent IHS made progress in implementing our prior recommendations.
To answer these questions, we analyzed IHS documents that reported lost
or stolen property for fiscal year 2008 and part of fiscal year 2009
covering the dates October 2007 through January 2009;[Footnote 2]
conducted interviews with IHS and Department of Health & Human Services
(HHS) officials; reviewed IHS and HHS responses to our recommendations
as well as updated polices and procedures; conducted a full physical
inventory of property at IHS headquarters;[Footnote 3] and performed a
probability sample of IT equipment inventory at six field locations
that we selected based on book value of inventory and geographic
proximity to other testing locations.[Footnote 4] To identify specific
cases of lack of accountability, lost or stolen property, and wasteful
spending, we analyzed IHS documents and made observations during our
physical inventory and statistical tests. We limited our scope to
testing only IT equipment items which are highly pilferable or can be
easily converted to personal use, such as laptops, desktop computers,
digital cameras, and personal data assistants (PDA). Although we did
not perform a systematic review of IHS internal controls, we identified
the key causes of lost and stolen property and wasteful spending at IHS
by examining IHS policies and procedures, conducting interviews with
IHS officials, and assessing the physical security of property through
our inventory testing.
We conducted this forensic audit from October 2008 through March 2009
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. A detailed discussion of our
scope and methodology is included in appendix I.
Background:
IHS, an operating division of HHS, is responsible for providing health
services to federally recognized tribes of American Indians and Alaska
Natives. According to IHS, in 2008, it provided health services to
approximately 1.9 million American Indians and Alaska Natives from more
than 562 federally recognized tribes. As an operating division of HHS,
IHS is included in the agency's consolidated financial statement and
has not been audited independently since 2002.
IHS is divided into 12 regions with 161 service units throughout the
country.[Footnote 5] Service units may contain one or more health
facilities, including hospitals, health centers, village clinics,
health stations, and school health centers. There are 124 IHS-operated
health facilities and 522 tribally operated health facilities. The IHS
budget appropriation in 2008 was $3.39 billion.[Footnote 6] Overall,
over 40 percent of the IHS budget authority appropriation is
administered by tribes, primarily through various contracts and
compacts with the federal government.
Alarming Rate of Property Loss Continues at IHS:
We found that property continues to be lost or stolen at IHS at an
alarming rate. From October 2007 through January 2009, IHS identified
about 1,400 items with an acquisition value of about $3.5 million that
were lost or stolen agencywide.[Footnote 7] These property losses are
in addition to what we identified in our June 2008 report. Our full
headquarters inventory testing and our random sample testing of six
field offices estimated that over a million dollars worth of IT
equipment was lost, stolen, or unaccounted for, confirming that
property management weaknesses continue at IHS. Also, IHS headquarters
and many IHS regions continue to reconcile 2008 inventory as of March
2009. In addition to the $3.5 million reported as lost or stolen, IHS
also had thousands of unreconciled and unaccounted for property items
with an acquisition value of $14.5 million missing about 2 months after
conducting its 2008 inventory. These unreconciled and unaccounted for
items had largely been located at four field locations that had over 40
percent of inventory items missing. Some of these items will likely be
reported as lost or stolen.
IHS Records Indicate Over $3.5 Million in Lost or Stolen Property:
We analyzed IHS Report of Survey documents from fiscal years 2008 and
2009 covering the period of October 2007 through January 2009 for IHS
headquarters, National Programs, and the 12 regions.[Footnote 8] These
reports identified that about 1,400 items with an acquisition value of
about $3.5 million were reported lost or stolen in little over a year.
Some of the more egregious examples of lost or stolen property during
October 2007 through January 2009 on reports of survey include the
following:
* An audiometer--a machine used for evaluating hearing loss--with an
acquisition value of $961 was "put out for trash" at an Oklahoma
location that was new and listed in "Unused-Good" condition.
* A laboratory analyzer at a Navajo health care facility with an
acquisition value of $37,000.
* A defibrillator with an acquisition value of $7,000 and over $13,000
in desktop and laptop computers that were new in June 2007 at a Tucson
location.
* A telephone switch from National Programs in Albuquerque with an
acquisition value of $25,500.
* A trailer with an acquisition value of $7,300 stolen from a Nashville
Region Office parking lot over the weekend when the security gates were
broken and remained open.
We also found that about 2 months after conducting its 2008 inventory,
IHS was still looking for about $14.5 million in items it identified as
missing. Items that IHS continued to search for include the following:
* A 2002 ultrasound unit valued at $170,000, a 2003 X-ray mammography
machine valued at $100,795, and a 2004 medication dispensing system
valued at $168,285.
* A new pharmacy tablet counter with an acquisition value of $4,000
from a Washington location.
* A new electrocardiograph--a machine used to record the electrical
activity of the heart--with an acquisition value of $4,000.
* Seven vital sign monitors from a South Dakota Hospital purchased at
$731 each.
* Multiple dental chairs from a Kansas location with acquisition values
of $3,200 each.
* High-dollar-value IT equipment purchased in 2006 including a Central
Processing Unit with an acquisition value over $30,000 and two servers
worth $29,000 and $12,000.
* A $14,000 John Deere tractor purchased in 2005.
* Unused IT equipment purchased in 2007 including laptops, desktops, an
$11,000 server, and a television.
GAO Inventory of IHS Headquarters and Selected Field Locations Shows
Continuing Property Loss:
Our physical inventory testing results were similar to IHS's inventory
results and confirmed lost, stolen, or unaccounted for property. Our
full inventory testing at IHS headquarters identified that out of the
1,518 items tested that were on IHS's inventory records as of December
5, 2008, 126 items with an acquisition value of $216,000 (or about 8
percent of the items tested) were lost, stolen, or unaccounted for--
including 13 computers purchased in the summer of 2008. These 126
missing items were in addition to the 35 assets that IHS stated were
missing in their physical inventory ending September 2008.[Footnote 9]
The types of equipment missing included digital cameras, laptops, PDAs,
and cell phones.
Furthermore, we performed limited testing on new purchases made in
fiscal year 2008 at IHS headquarters. We analyzed 19 new purchases to
determine if the items existed and were on IHS books. We found that 10
of the 19 items that we tested were not in IHS's inventory records as
of December 2008. In addition, IHS could not account for 7 of the 19
items--37 percent of the newly purchased equipment.
We also identified examples of waste that we observed during our audit
of IHS headquarters. During our exit conference discussions, IHS agreed
some equipment may be underutilized. We identified the following
examples of waste:
* One employee was issued a PDA but told GAO that he had not used it in
2 years.
* Another employee was issued a laptop and never used the laptop.
* One user was assigned three laptops but only used one of them. The
employee stated that one of the laptops was to be disposed of but
provided no explanation for the third laptop.
* We selected a probability sample of IT equipment inventory at six IHS
field offices to determine whether the lack of accountability for
inventory was confined to headquarters or present elsewhere within the
agency.[Footnote 10] Our estimates are based on a probability sample of
250 items from a population of 6,085 IT equipment items worth over $19
million recorded in property records for IT equipment at the six field
locations. Similar to our finding at IHS headquarters, our sample
results indicate that a substantial number of pieces of IT equipment
such as laptops, desktops, and printers were lost, stolen, or
unaccounted for. Specifically, we estimate that for the six locations,
about 800 equipment items with an acquisition value of $1.7 million
were lost, stolen, or unaccounted for.[Footnote 11] This amounts to
about 13 percent of all the IT equipment at these six locations. Table
1 below summarizes the disposition of the 250 sampled IT items.
Table 1: Sample Results for Six IHS Field Locations:
Item status: Items physically observed during inventory or observed via
picture;
Items: 163.
Item status: Items with documentation to support disposal;
Items: 54.
Item status: Lost, stolen, or unaccounted for items;
Items: 33.
Item status: Total Items;
Items: 250.
Source: GAO.
[End of table]
IHS Has Made Limited Progress in Implementing GAO's Recommendations:
Weak "tone at the top" persists at IHS, with senior leadership failing
to fully implement and enforce 8 of the 10 recommendations we made in
June 2008. These failures strongly contribute to the continued loss and
theft of property at IHS. Aside from issuing a memorandum from the IHS
Director that restated and refined existing IHS policies, IHS has taken
little action to provide assurance that employees are aware of and
complying with property policies. One way to enforce policies involves
holding individuals accountable. However, we found little evidence that
IHS has held employees accountable for thousands of lost or stolen
items worth millions of dollars. For example, in December 2008, the IHS
executive in charge of the property group and other areas received a
$13,000 performance award (8 percent of the executive's salary) from
IHS senior leadership. This award was granted 5 months after the July
2008 hearing exposed mismanagement of property under the executive's
purview. By failing to hold this key property management official
accountable, the IHS Director and senior managers missed an opportunity
to communicate the seriousness of IHS property problems to the
responsible official.
Although IHS has taken steps to update policy and perform physical
inventories, most of our recommendations were only partially
implemented. Of the 10 recommendations, IHS has fully implemented 2 and
has begun taking steps to implement the remaining items. Table 2 shows
the IHS action and status of implementing our recommendations.
Table 2: GAO's June 2008 Recommendations and IHS Actions:
GAO recommendation: Update IHS personal property management policies to
reflect any policy changes that have occurred since the last update in
1992;
Status: Incomplete;
Notes:
* IHS has taken some steps to update its personal property management
policy, but still needs to address gaps including:
- Establishing local receiving and inspection procedures;
- Finalizing national inventory management policy in consultation with
region staff;
- Updating policies for such areas as disposals and Reports of Survey.
GAO recommendation: Investigate circumstances surrounding missing or
stolen property instead of writing off losses without holding anyone
accountable;
Status: Incomplete;
Notes:
* Reports of Survey are used to document the result of an investigation
into lost or stolen property, including findings of financial
liability;
* IHS identified over 5,000 missing inventory items in its 2008
inventory and as of March 2009 IHS headquarters and many regions were
still reconciling inventory;
* IHS could only provide one example of an individual held financially
liable for lost or stolen property over a 1-year period;
* Over 40 percent of IHS Report of Survey documents have not had a
final determination made. A final determination is required to hold
individuals accountable and adjust inventory records.
GAO recommendation: Enforce policy to conduct annual inventories of
accountable personal property at headquarters and all field locations;
Status: Complete;
Notes:
* Conducted 2008 physical inventory at all regions, Headquarters and
National Programs, by September 2008[A];
* However, as of March 2009, property officials stated that IHS
headquarters and many of the regions were still in the process of
reconciling the inventory.
GAO recommendation: Enforce policy to use receiving agents to document
the receipt of property and distribute the property to its intended
user and to designate property custodial officers (PCO) in writing to
be responsible for the proper use, maintenance, and protection of
property;
Status: Incomplete;
Notes:
* IHS has trained most receiving agents;
* Our review of supporting documents for new purchases shows some
improvement, but we identified ongoing problems with receiving reports;
* IHS designated PCOs in writing for some of the regions, but there are
still gaps of written designations at IHS headquarters and at 4 of the
12 regions.
GAO recommendation: Enforce policy to place bar codes on all
accountable property;
Status: Incomplete;
Notes:
* IHS stated that the policy is enforced and the agency will use the
2008 inventory to update unbarcoded items;
* However, our inventory testing, which we started 2 months after IHS's
2008 inventory, identified over 50 items with no bar code at IHS
headquarters.
GAO recommendation: Enforce policy to document the issuance of property
using hand receipts and make sure that employees account for property
at the time of transfer, separation, change in duties, or on demand by
the proper authority;
Status: Incomplete;
Notes:
* Hand receipts are physical records created when an item is issued to
an employee;
* Implementation at headquarters and field locations is not yet
complete, with some hand receipts issued for items such as PDAs and
laptops but not for other items including desktops.
GAO recommendation: Maintain information on users of all accountable
property, including their buildings and room numbers, so that property
can easily be located;
Status: Incomplete;
Notes:
* We found numerous errors in the Property Management Information
System (PMIS) after the IHS annual inventory, such as user errors of 87
percent and location errors of 89 percent at the six IHS field
locations where we performed testing[B];
* Not all IHS field locations maintain specific user and location
information in PMIS.
GAO recommendation: Physically secure and protect property to guard
against loss and theft of equipment;
Status: Incomplete;
Notes:
* Although the IHS Director addressed physical security in an agency
wide memorandum where responsibilities were delegated to supervisors
and users, we identified examples of unsecured equipment during our
work at IHS headquarters and selected field locations including an
unsecured server room.
GAO recommendation: Enforce the use of the PMIS property management
database to create reliable inventory records;
Status: Incomplete;
Notes:
* Training of all relevant property staff is incomplete;
* Many service units still do not have full access to edit and add
items to PMIS;
* Some service units are still using legacy systems or not yet fully
utilizing PMIS.
GAO recommendation: Establish procedures to track all sensitive
equipment such as blackberries and cell phones even if they fall under
the accountable dollar threshold criteria;
Status: Complete;
Notes:
* IHS did not originally concur with this recommendation;
* IHS ultimately did concur and now follows the updated HHS policy on
handling sensitive equipment[C].
Source: GAO.
[A] IHS identified a completed physical inventory as the completion of
the wall-to-wall walk-through, but stated that it did not include the
complete reconciliation of inventory results to property records to
make appropriate adjustments.
[B] Based on our sample, we are 95 percent confident that the PMIS user
error rate was between 80 and 92 percent and that the location error
rate is between 83 and 93 percent for the six tested locations.
[C] HHS policy on handling sensitive equipment does not include cell
phones.
[End of table]
Although IHS took some steps in implementing our recommendations such
as changing their policy on handling sensitive items to include
Blackberries regardless of the threshold, we identified the following
examples of problems fully implementing these corrective actions.
Investigating circumstances surrounding missing property: We saw little
improvement in investigating incidents of lost or stolen property.
Without these investigations, IHS remains unable to hold individuals
financially liable. Out of 1,400 items with an acquisition value of
$3.5 million reported as lost or stolen in IHS Reports of Survey for
fiscal year 2008 through January 2009, IHS could only provide one
example in which an employee was found to be financially liable for
lost or stolen property. However, as of February 2009, the individual
has still not reimbursed the government for the loss--4 months after he
was found financially liable. We identified other examples where
individuals were not held accountable:
* One employee who was assigned a laptop that was missing told IHS
property managers that she could not remember what happened to the
laptop. IHS wrote the laptop off its books in September 2008 without
holding the employee responsible.
* A laptop was given to an employee in Oklahoma to use at home but IHS
did not issue a hand receipt. The employee left the agency and did not
return the laptop. According to the Report of Survey, IHS did not hold
the employee accountable because the employee left the agency.
* A Phoenix employee's cellular phone was stolen after he left the
phone on his desk overnight. The board of survey[Footnote 12] concluded
that the individual was negligent in not properly safeguarding his
cellular phone, but recommended that no assessment of liability be held
against the employee.
* According to a Portland property officer, a laptop was stolen from an
employee's workstation. The workstation was accessible to the public
and was not secured in accordance with HHS regulations. According to an
IHS property official, the employee had several laptops assigned to him
and he did not know that the computer was missing. However, the board
did not hold the employee financially liable for the missing laptop.
Enforcing annual physical inventories: Although IHS made progress by
conducting a 100 percent physical inventory at IHS headquarters,
National Programs, and all 12 regions for the first time in at least 4
years, improvements are needed in timely reconciliation of shortages
and updating of its inventory records. Although physical inventories
should be performed over a finite period, IHS officials performed
extensive searches in an attempt to locate missing items before
preparing Reports of Survey to write them off. As of March 2009, IHS
headquarters property officials stated that IHS headquarters and many
of the regions were still in the process of reconciling their 2008
physical inventory which they stated they completed in September 2008.
For example, we verified in December 2008 that IHS was able to find the
Jaws of Life medical equipment reported as lost or stolen in September
2006, but for about 2 years these items were unaccounted for.
Furthermore, according to IHS property officials, a board of survey was
recently established in March 2009 at IHS headquarters, but has not yet
determined what actions should be taken to finalize Reports of Survey
in order to update inventory records. In fact, IHS headquarters has not
completed a Report of Survey to finalize inventories since 2004.
Enforcing the use of hand receipts: HHS requires the use of hand
receipts, known as HHS form 439, any time property is issued to an
employee. This form should be retained by a property official so that
property can be tracked at the time of transfer, separation, change in
duties, or when requested by the proper authority. By signing this
form, an IHS employee takes responsibility for the government-issued
equipment. In our last audit, we found IHS headquarters did not use the
HHS form 439, nor did they use any other type of hand receipt. To
enforce this policy, the Director of IHS issued a memorandum in
November 2008 which stated that a hand receipt should be signed by
employees for all property issued in order to acknowledge receipt and
assign responsibility. Based on our limited testing of hand receipts,
we confirmed that IHS has begun to implement hand receipts at
headquarters and a majority of the field locations where we performed
site visits for items such as PDAs and laptops but has not yet started
issuing hand receipts for all issued items such as desktops. Also, we
found that some of the items we tested did not have hand receipts and
one field location has not yet started issuing hand receipts for any
type of property.
Maintaining information on users and location: HHS requires IHS to
document information on the user and the location of equipment,
including building and room number, in order to easily track and locate
property. Although the IHS Director included in his November 2008
memorandum a requirement to designate user information for each asset
in PMIS, not all of the IHS field locations that we tested maintained
specific user and location information in PMIS. Also, our tests of user
and location data in PMIS at IHS headquarters and at the six field
location shows that PMIS user and location information is not accurate.
More specifically, IHS headquarters had user and location errors of 21
percent and 28 percent, respectively; these errors were much higher at
the tested field locations at about 87 and 89 percent, respectively.
[Footnote 13] As a result of inaccurate user and location information,
field staff took several days to locate items that were included in our
sample inventory, and IHS headquarters had delays in finding remaining
inventory items during GAO's full physical inventory. Inaccurate user
and location information also contributes to the lengthy duration of
IHS physical inventories--taking several months to reconcile and locate
items.
Enforcing the use of PMIS to create reliable inventory records: In a
November 2008 memorandum, the IHS director mandated the use of PMIS and
removal of all legacy systems.[Footnote 14] Despite this memorandum,
our inquiries at field locations found that legacy systems are still
being used. Training has not been completed at the property custodial
officer level and not all service units have full access to edit and
add items to PMIS. IHS's database is incomplete--at IHS headquarters
property officials identified over 500 items during their fiscal year
2008 inventory that need to be added to the PMIS database. This was
also the case at one of the field locations where we performed our
sample testing; the Aberdeen, South Dakota location has not entered any
inventory assets into PMIS since 2007 (about 1,000 items) and stated
that they have not been updating any system of record (neither their
legacy nor PMIS) since August 2008. Another field location added that
they only migrated about 60 percent of their inventory from their
legacy system to PMIS. Our testing further verified the incompleteness
of IHS's inventory records identifying nearly half of the items
selected at the six field locations as not recorded in PMIS.
In addition to ensuring that inventory assets are included in PMIS, a
reliable database also should remove from inventory records items that
have been disposed of. Our tests showed that at IHS headquarters there
was a 63 percent failure rate and the six field locations where we
performed testing had an estimated 100 percent failure rate of removing
disposed items from property records.[Footnote 15] We found examples of
property items that had been disposed of as far back as 2003 still on
the inventory records. IHS property officials said that some of the
difficulty in removing the items arises in coordinating with the
Program Support Center (PSC) which maintains the PMIS system and
reviews and approves items to be removed from the records. Improved
communication and procedures are needed to expedite removing disposal
items from the inventory records. Because it has not entered all
property information into PMIS or removed all assets that have been
disposed of, IHS does not have reliable inventory records for
management to be able to make sound purchase decisions.
Physically securing assets: The IHS Director's memorandum issued in
November of 2008 stated explicitly the responsibility of supervisors
and users of equipment to safeguard property from loss and misuse.
However, during our inventory tests of IHS headquarters and selected
field locations we still identified examples showing that the policy is
not enforced. For example, we identified new IT equipment stored in
unlocked vacant offices--see figure 1.
Figure 1: IT Equipment Stored in Unlocked Vacant Office:
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
Physical security weaknesses increase the risk of loss and theft. For
example, we identified that a laptop, digital camera, and digital voice
recorder, with a total acquisition value of $3,510, were stolen in
April 2008 from an office at IHS headquarters.
Failure to secure assets also leaves IHS vulnerable to data breaches.
For example, in August 2008, a USB stick that contained personally
identifiable information on six patients was stolen from IHS's Phoenix
health office. This theft has already been referred to HHS through
their breach response process.
We also identified a security vulnerability in which the lock for the
computer server room in one of the region offices was broken. Rather
than repair the door, IHS attempted to restrict access by posting a
memorandum on the door--an ineffective means of securing expensive
server equipment which could potentially contain sensitive information.
See figure 2.
Figure 2: Broken Door to Server Room at Aberdeen Region Office
Utilizing Memo to Restrict Access:
[Refer to PDF for image: three photographs]
Source: GAO.
[End of figure]
Conclusions:
A 1997 memorandum issued by the former IHS Director shows that problems
related to lost and stolen property have existed at IHS for over 12
years. Although the memorandum indicates that individuals will be held
financially liable for missing items, we found no evidence that IHS has
ever taken such steps. As a result, property management problems have
continued, and IHS property managers are now faced with the large
challenge of gaining control under a decentralized and wide-ranging
service structure. Although IHS has taken some steps to improve
property management since our June 2008 report, our work shows that
these steps are incomplete and that serious attention and effort is
required to stop the alarming rate of property loss. Ultimately these
problems hinder IHS's mission to deliver health care to American
Indians and Alaska Natives.
Recommendations:
We recommend that the Director of IHS strengthen IHS's overall control
environment and "tone at the top" by fully implementing our prior
recommendations and enforcing and updating its property management
policies and procedures. As part of this effort, the Director of IHS
should direct IHS property officials to take the following six
additional actions:
* Develop and enforce procedures and deadlines to reconcile and update
inventory records in a timely manner.
* Establish specific deadlines and enforce them for finalizing a Report
of Survey once an inventory has been completed so that research on
missing items is completed expeditiously and does not continue
indefinitely.
* Enforce policy to dispose of unused inventory in a timely manner.
* Establish an approach to stop loss of property to include addressing
region-specific inventory shortages.
* Work with PSC to develop procedures to remove disposed items from
inventory records in a timely manner.
* Work with PSC to develop procedures to enter overages in PMIS in a
timely manner.
Agency Comments and Our Evaluation:
We provided HHS with a draft of this report for review and comment. The
Acting Assistant Secretary for Legislation of HHS provided written
comments that are reprinted in appendix II. HHS agreed with all six of
our recommendations to strengthen property management at IHS. As part
of its response, HHS outlined actions it plans to take or has taken to
address current and prior recommendations. The following represents a
summary and overall evaluation of the HHS response. We also summarize
and evaluate the actions IHS plans to take to address our
recommendations. We provide comments on specific sections of the HHS
response letter in appendix II.
In its response, HHS stated that IHS is committed to proper and
accountable property management. According to the response, IHS has
spent thousands of hours to respond to our requests and to implement
our recommendations. Further, IHS is confident that most, if not all,
inventory currently unaccounted for will be identified as a result of
the implementation of the PMIS system. HHS also highlighted that
training on an agencywide scale has begun on PMIS and that employees
are being educated on both the use of this system as well as on agency
property policies and guidelines for accountability. A number of
actions IHS has taken or plans to take to address our prior
recommendations were summarized, including plans to address our current
recommendations.
We are pleased that IHS has devoted considerable time and resources to
fixing its property management system and to respond to our audit
requests. However, we are concerned that numerous significant issues
raised by our report were not addressed in the response. Specifically,
we are concerned that HHS did not acknowledge the rate of property loss
at IHS and the continuing lack of employee accountability for millions
of dollars of lost and stolen property. The response indicated that the
implementation of PMIS will allow IHS to locate the property that it
could not find during the 2008 annual inventory, but we note that
completing annual physical inventories is key to identifying missing
property. Therefore, IHS should focus on addressing our recommendation
to reconcile and update inventory records in a timely manner in order
to locate missing property. Further, we note that the accuracy of a
system is only as good as the data that is put into it, and that our
work has found ongoing, significant errors with the completeness and
accuracy of the data input into the PMIS system. IHS has been
attempting to implement the PMIS system for nearly 2 years, and our
work shows that it continues to experience significant problems. While
IHS struggles to implement PMIS, property losses continue.
Regarding our recommendations, HHS agreed with all six of our new
recommendations and cited actions that IHS will take to address them.
However, the response to some of our recommendations provided little
specificity on actions and timing. Further, for two of our
recommendations, the HHS response listed actions with no clear link to
our recommendations.
* GAO Recommendation #1. We recommended that IHS develop and enforce
procedures and deadlines to reconcile and update inventory records in a
timely manner. This recommendation resulted from our finding that IHS
was unable to complete its 2008 inventory due to reconciliation issues
and that millions of dollars in missing items cannot be found. To be
effective, an annual inventory needs to be resolved quickly. However,
the HHS response addressed inventory overages and indicated that
policies regarding receiving and inspection, inventory management,
reports of survey, and property disposal were "in process." The link
between this response and our recommendation is not clear and the issue
of how IHS will hold staff accountable for completing the inventory in
a timely manner is unresolved. This is a particularly important issue
given that IHS will need to prepare for its 2009 inventory soon.
* GAO Recommendation #2. We recommended that IHS establish specific
deadlines and enforce them for finalizing a Report of Survey once an
inventory has been completed. The response to our recommendation
indicates that IHS is enhancing the Report of Survey process to include
timelines and guidance on Board of Survey requirements, but provides no
specific details for when this process will be complete. IHS also does
not address how it plans to enforce the new guidelines once they are in
place.
* GAO Recommendation #3. We recommended that IHS enforce the policy to
dispose of unused inventory in a timely manner. In response, HHS
indicates that IHS has a number of agreements with other agencies to
assist it in disposing of property. It also lists several actions it
plans to take to address our recommendation, including establishing
specific timeframes in a new policy to address timely disposal. HHS
indicates that IHS will also "emphasize" a policy to conduct walk-
through surveys of IHS facilities and remind staff that proper and
adequate justifications must be provided for new acquisitions. Although
these actions will help address our recommendation, many of the
problems we identified with missing property related to a lack of
enforcement of existing disposal policies. The IHS response does not
include specific details on enforcement.
* GAO Recommendation #4. We recommended that IHS establish an approach
to stop the loss of property to include addressing region-specific
inventory shortages. This recommendation directly resulted from our
finding that property loss continued at an alarming rate, and that some
regions had substantial numbers of missing property. However, the HHS
response did not address property loss and instead addressed the IHS
policy for issuing hand receipts. The link between this response and
our recommendation is not clear. The issuance of hand receipts is only
part of the solution to stopping property loss and addressing region-
specific inventory shortages. A more appropriate response would have
involved the development of a strategic plan to stop property loss with
a focus on specific regions, outlining the specific controls and
enforcement procedures that should be put in place.
* GAO Recommendation #5. We recommended that IHS work with PSC to
develop procedures to remove disposed items from inventory records in a
timely manner. In response to our recommendation IHS stated that PSC
distributed a procedures guide to all PMIS users in March 2009 and that
PSC discussed the guide at an April meeting. According to HHS, the
guide outlines the specific requirements and forms needed to process
all final events in the property management system. These actions are a
step forward, but they do not address how disposal will be completed in
a timely manner. Further, HHS stated that a revised property disposal
policy will also assist IHS property managers; however IHS provides no
detail on what the new disposal policy entails, how it will improve
inventory records, or when this policy will be updated.
* GAO Recommendation #6. We recommended that IHS work with PSC to
develop procedures to enter overages in PMIS in a timely manner. In
their response, HHS stated that the new Purchase Order interface
between the Unified Financial Management System and the PMIS will
reduce the number of inventory overages that are currently being
recorded. In addition, the response stated that IHS can utilize the PSC
on a fee basis to add their overages to PMIS. We agree that this new
process is likely to help decrease the number of future overages
needing to be recorded. However, IHS must still work with PSC to ensure
that all current overages are added to PMIS in a timely manner.
If you or your staffs have any questions concerning this report, please
contact Gregory D. Kutz at (202) 512-6722 or kutzg@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs
may be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix III.
Signed by:
Gregory D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
[End of section]
Appendix I: Scope and Methodology:
To determine whether property loss, property theft, and wasteful
spending continues at the Indian Health Service (IHS)[Footnote 16] and
to what extent IHS made progress in implementing our prior
recommendations, we analyzed IHS documents that identified lost or
stolen property from fiscal year 2008 through January 2009,[Footnote
17] reviewed IHS and Department of Health & Human Services (HHS)
responses to our recommendations and updated policies and procedures,
conducted a full physical inventory of property at IHS headquarters,
and statistically tested information technology (IT) equipment
inventory at six selected IHS field locations. To identify specific
cases of lack of accountability, lost or stolen property, and wasteful
spending, we analyzed IHS documents and made observations during our
physical inventory and statistical tests.
We evaluated IHS's progress in implementing our previously reported
recommendations by reviewing agency documentation and interviewing
property management officials on actions taken in response to
recommendations in our June 2008 report. To identify management actions
taken in response to previously identified control weaknesses, we
obtained and reviewed copies of new and revised IHS and HHS policies
and procedures. We reviewed training certificates and property
custodial designations, and randomly selected and tested for hand
receipts on a limited number of assets at both IHS headquarters and
some of the selected field locations.
To determine if IHS physical inventory testing identified continuing
weaknesses in property management, we obtained and reviewed information
on IHS physical inventory results from all IHS headquarters, National
Programs, and 12 IHS regions.[Footnote 18]
We also performed a full physical inventory at IHS where we identified
problems disclosed in our June 2008 report. Specifically, we tested all
1,518 headquarters property items--largely these items were IT
equipment that IHS had recorded in its property records as of December
5, 2008. We physically observed each item and its related IHS-issued
bar code and verified that the serial number related to the bar code
was consistent with IHS property records. In addition, we selected a
nonrepresentative sample of new purchases made in fiscal year 2008 for
testing at IHS headquarters from documents provided by an IHS vendor
and IHS officials. We tested each sample item by either (1) physically
observing the asset or (2) obtaining a picture of the asset with a
visible bar code and serial number.
Although IHS property at the field locations includes inventory items
such as medical equipment and heavy machinery, we performed a
statistical test of only IT equipment inventory at six IHS field
locations. We limited our scope to testing only IT equipment items that
are highly pilferable or can be easily converted to personal use such
as laptops, desktop computers, digital cameras and personal data
assistants. We selected the six field locations based on the book value
of inventory and geographic proximity to other testing locations.
[Footnote 19] We retested five sites that we sampled last year and
added the Aberdeen, South Dakota location because of the high dollar
value of assets. Our findings at these six locations can not be
generalized to IHS's other locations.
To estimate the extent of lost or stolen property at these six
locations, we selected a simple random sample of 250 items from a
population of 6,085 IT items valued at over $19 million. Because we
followed a probability procedure based on random selections with each
item having an equal chance of being selected, our sample is only one
of a large number of samples that we might have drawn. Because each
sample could have provided different estimates, we express our
confidence in the precision of our particular sample's results as a 95
percent confidence interval. This is the interval that would contain
the actual population value for 95 percent of the samples we could have
drawn. As a result, we are 95 percent confident that each of the
confidence intervals in this report will include the true values in the
study population. Based on this sample, we estimate the percentage
missing or with other errors, the number of and the dollar amount of
lost, stolen, or unaccounted for property for these six IHS locations.
The following table summarizes the estimates used in this report along
with their corresponding 95 percent confidence intervals.
Table 3: 95 Percent Confidence Intervals for Sample Estimates:
Description: Estimated lost, stolen, or unaccounted for items;
Estimate: 803;
Lower endpoint of 95 percent confidence interval: 564;
Upper endpoint of 95 percent confidence interval: 1,097.
Description: Estimated percentage of lost, stolen, or unaccounted for
items;
Estimate: 13.20%;
Lower endpoint of 95 percent confidence interval: 9.26%;
Upper endpoint of 95 percent confidence interval: 18.03%.
Description: Estimated dollar amount of lost, stolen, or unaccounted
for items;
Estimate: $1,741,503;
Lower endpoint of 95 percent confidence interval: $1,133,855;
Upper endpoint of 95 percent confidence interval: $2,408,248.
Description: Estimated percentage with PMIS user errors;
Estimate: 86.71%;
Lower endpoint of 95 percent confidence interval: 80.40%;
Upper endpoint of 95 percent confidence interval: 91.58%.
Description: Estimated percentage with PMIS location errors;
Estimate: 88.75%;
Lower endpoint of 95 percent confidence interval: 82.81%;
Upper endpoint of 95 percent confidence interval: 93.20%.
Description: Estimated percent failure rate of removing disposed items
from their property records;
Estimate: 100%;
Lower endpoint of 95 percent confidence interval: 92.95%;
Upper endpoint of 95 percent confidence interval: 100%.
Source: GAO.
[End of table]
We considered equipment to be lost, stolen, or unaccounted for if (1)
we could not physically observe the item during the inventory; (2) IHS
could not provide us with a picture of the item, with a visible bar
code and serial number, within 1 week of our initial request; or (3)
IHS could not provide us with adequate documentation to support the
disposal of the equipment.[Footnote 20]
To evaluate IHS's progress in implementing GAO's recommendation that
IHS maintain information on users of accountable property including
their building and room numbers, we tested each asset for user and
location accuracy for IHS headquarters and the random sample testing at
the six field locations. Once an item was determined to exist in
current inventory, we assessed whether the asset's principal user and
physical location matched what was recorded in the inventory property
database. We also tested the inventory status accuracy in IHS's
property database. If adequate disposal documentation was provided for
an asset, the asset was identified as an Inventory Status Error rather
than missing.
We performed appropriate data reliability procedures for our physical
inventory testing at IHS headquarters and sample testing at the six
field locations including (1) testing the existence of items in the
database by observing physical existence of all items at the IHS
headquarters and IT equipment selected in our sample; (2) testing the
accuracy of the database by comparing user, location and inventory
status; and (3) testing the completeness of the database by performing
a 100 percent floor-to-book inventory at IHS headquarters and
judgmentally selecting up to two items in the same or adjacent rooms of
the randomly selected items tested for existence to determine if these
items were maintained in IHS inventory records. Although our testing of
the existence, accuracy, and completeness of IHS property records
determined that IHS inventory records are neither accurate nor
complete, we determined that the data were sufficient to perform these
tests and project our results to the population of IT equipment. In
addition, we interviewed IHS agency officials, property management
staff, and other IHS employees. We also interviewed officials at the
Program Support Center (PSC)[Footnote 21] and individuals from the HHS
Office of Inspector General.
Although we did not perform a systematic review of IHS internal
controls, we identified key causes of lost and stolen property and
wasteful spending at IHS by examining IHS and HHS policies and
procedures, conducting interviews with IHS officials and our
observations of property through our inventory testing.
We conducted this forensic audit from October 2008 through March 2009
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.
[End of section]
Appendix II: Comments from the Department of Health & Human Services:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department of Health & Human Services:
Office of the Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
May 1, 2009:
Gregory D. Kutz:
Managing Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Kutz:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Indian Health Service: Millions of Dollars in
Property and Equipment Continues to be Lost or Stolen (GAO-09-450).
The Department appreciates the opportunity to review this report before
its publication.
Sincerely,
Signed by:
Barbara Pisaro Clark:
Acting Assistant Secretary for Legislation:
Attachment:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Office's (GAO) Draft Report Entitled:
Indian Health Services - Millions Of Dollars In Property And Equipment
Continue To Be Lost Or Stolen (GAO-09-450):
The Indian Health Service (IHS or Agency) appreciates the opportunity
to respond to the Government Accountability Office's (GAO) report on
IHS property management. IHS and its leadership have been and remain
committed to proper and accountable property management. As such, IHS
has dedicated thousands of hours of manpower to respond to all GAO
requests and implementation of GAO's recommendations beginning August
2007 through March 2009. This commitment of time and resources was
undertaken while IHS was in the process of implementing a new and more
effective Property Management Information System (PMIS) to more
accurately account for all purchases and distribution of inventory
throughout the IHS system. [See comment 1]
Moreover, although GAO estimates the number of lost, stolen or
unaccounted for property, IHS is confident that most, if not all,
inventory currently unaccounted for will be identified as a result of
implementation of the new and more accurate PMIS. [See comment 2] IHS
also highlights that training on an agency-wide scale has begun on the
new PMIS and that employees are being educated on both the use of this
new system as well as agency property policies and guidelines for
accountability. Furthermore, in a subsequent referral of this issue to
the Office of the Inspector General, it was determined that any charges
against IHS employees responsible for agency property management could
not be substantiated and that no criminal violations could be cited.
[See comment 3]
Overview of Property Management at Indian Health Service:
IHS, an Agency of the U.S. Department of Health and Human Services
(HHS), is responsible for a national, comprehensive health care
delivery system serving American Indians and Alaska Natives. Indian
Tribes are authorized by Public Law 93-638, "Indian Self-Determination
and Education Assistance Act," to assume control of programs
administered by IHS, including administrative support functions. Over
50% of IHS programs and services are operated directly by Tribes.
The Agency structure is a decentralized organization, with the central
Headquarters (HQ) office located in Rockville, Maryland and 12 regions
(Areas) throughout the United States. Each of the 12 regions is
overseen by a senior executive Area Director, who reports directly to
the IHS Director, and in turn, oversees service units within their
respective Areas that include hospitals, health centers and clinics,
utilizing a variety of equipment items necessary to provide direct
health care services. The HQ Office primarily serves in a policy
advisory role to the IHS Director, and provides technical assistance to
the Area Offices to implement those policies, as appropriate. Thus,
authority for all operational matters of the local IHS Area has been
delegated to each respective Area Director, whereby a broad management
control plan is developed each year by HQ for subject areas of highest
relative management control risk and necessary focus and oversight is
directed to those subject areas by HQ and Area Directors. Moreover,
performance measures for property management were placed in all senior
managers' performance plans in October 2008 for the performance year
ending September 30, 2009.
In early fiscal year 2005, HHS made a decision to utilize PMIS, a
global system to be used by HHS Operating Divisions, including IHS. IHS
focused on migrating then-current property data into the new PMIS was
comprised of approximately 121,000 items with an original acquisition
cost of $302 million prior to assigning new and higher HHS
accountability thresholds and assessing value of depreciation. IHS
converted to the PMIS with a "go live" date in October 2007 and IHS HQ
mandated the use of the PMIS system in May 2008 in order to conduct the
2008 inventory. As of April 2009, there are approximately 38,000 items
with an original acquisition cost of $170 million in PMIS. Of the
38,000 items, 852 items are capitalized assets with an original
acquisition cost of $67,918,840 and with a current net book value of
$11,010,514.
The PMIS includes many features that have improved IHS accountability
for property. Implementation of the use of each feature is ongoing and
should be fully implemented in 2009. A depreciation expense feature,
which will adjust the book value of the IHS inventory when it has been
fully implemented, was unavailable in the legacy property system.
Additionally, the PMIS provides for the Purchase Order (PO) interface
between the Unified Financial Management System (UFMS) and the PMIS.
This process will allow for all equipment acquisitions to be
electronically transferred from the UFMS to the PMIS, thereby, reducing
the number of inventory overages that are currently being recorded.
During the IHS Property Management Officer's meeting held April 14-16,
2009, an overview presentation of the PO interface functionality was
demonstrated. Current plans are to conduct a PO interface training
session via WebEx for all current PMIS users in IHS in 2009. Once this
training is complete, all IHS Areas will be required to utilize this
function in the PMIS.
Additional Steps Taken to Improve IHS Property Management:
IHS had already begun the process of migration to the PMIS when GAO
began their investigation of IHS Property Management. From June 2007 to
May 2008, IHS Headquarters and Area Offices worked with GAO in the
audit and investigation by providing group briefings, individual
interviews, multiple document productions, and IHS staff support to
assist GAO in the completion of their inventories and perform extensive
data reconciliations upon GAO's request. In addition to producing
documents, IHS made available Agency policies, organizational
structures, and inventory records for GAO's review. Through this
process, IHS identified additional areas of improving property
management. Additionally, at the July 2008 hearing before the Senate
Committee on Indian Affairs, the IHS Director testified that he is
committed to strong enforcement of Agency policies designed to ensure
accurate and timely inventories of accountable personal property
throughout the entire Agency. [See comment 1]
Specifically, during the months immediately following the hearing, IHS
completed an Agency-wide 100% physical inventory. Furthermore, IHS
carefully mapped out key deliverables to implement necessary policies
relating to the recommendations, as agreed to and addressed in the GAO
final report (GAO-08-727). Markers for implementation were conveyed to
the Congress and GAO on September 19, 2009 in IHS' 60-day status update
on recommendations addressed in the GAO report.[Footnote 22] Please see
Attachment to GAO-09-450 found at the end of IHS' comments for detailed
status of IHS' implementation of GAO recommendations from the June 2008
report. [See comment 4]
In November 2008, the IHS Director issued an agency-wide policy
strengthening the standards for personal accountability for all
employees. When the GAO returned in October 2008 for a follow-up
investigation which ended in March 2009, reconciliations of the 2008
inventories and the related record clean-up were underway. In an effort
to accommodate GAO's audit, IHS prioritized response to GAO's
engagement by making available numerous records for review and
providing multiple IHS property staff to assist GAO in their review.
Although record clean-up resulting from the 2008 inventory is an
extensive process, IHS is now able to focus on completion of the needed
adjustments as of April 2009, given the completion of GAO's work.
Additionally, updates are being made to correct designated
users/locations, bar code tagging of new property, including initiation
and completion of reports of survey for any remaining shortages. [See
comment 1]
Moreover, a national meeting was held in April 2009, where all IHS Area
Property Management Officers attended. At this meeting, new policies
were reinforced, draft policies discussed, and training was conducted
on the PMIS. New policies and procedures that are being drafted include
the subject areas of receiving and inspection, inventory management,
report of survey, and property disposal process. The revised policies
will be drafted as IHS Circulars and will be a part of the Indian
Health Manual. As such, these policies will establish deadlines for
completion of various business processes.
Response to GAO Report:
When the GAO's concerns and questions regarding IHS property management
practices first came to light, the Department reached out to IHS
leadership, including the current Director, to convey the Department's
concern about the seriousness of GAO's allegations and IHS' response.
IHS leadership responded by implementing steps to reassure that full
accountability would continue to be a priority in the property
management process. At the same time, the Department worked closely
with GAO to fully understand the substantive questions and concerns GAO
raised. As new issues have arisen, the HHS has worked with IHS to
respond to GAO in a timely manner.
When appropriate, the Department referred matters raised by GAO to the
HHS Inspector General (IG) for investigation. Additionally, the IG
investigated matters addressed in the June 2008 GAO report as well as
matters directly referred by the GAO. IHS remains committed to taking
corrective actions, as recommended in reports issued by the GAO and IG.
[See comment 3]
While GAO and IHS have met on multiple occasions to discuss specific
issues addressed in the GAO report, we would like to clarify the
following issues:
Hand Receipts: [See comment 5]
GAO states in their report that the November 2008 policy requiring hand
receipts has not been fully implemented as of March 2009. IHS notes
that the GAO used data for their testing and analysis from November and
December 2008 inventory records, prepared only days after the new
policy was signed by the IHS Director. Implementation of the new policy
is mandatory, and the Area Directors are given a full one-year
performance cycle ending September 2009, to have the policy fully
implemented. Implementation of a hand receipt system increases the
level of accountability whereby all assets being tracked in the PMIS
will reflect a designated user that must sign for those assets assigned
to them. It also provides support documentation to hold individuals
financially liable, if warranted, using the report of survey process if
items assigned to a designated user cannot be produced at the time of
transfer, separation, change in duties, physical inventory, or on
demand by the proper authority.
Determination of Lost, Stolen, or Unaccounted for: [See comment 6]
According to GAO, equipment was considered to be lost, stolen, or
unaccounted for during their field testing if (1) GAO could not
physically observe the item during the inventory; (2) IHS could not
provide a picture of the item, with a visible bar code and serial
number, within 1 week of GAO's initial request; or (3) IHS could not
provide GAO with adequate documentation to support the disposal of the
equipment. IHS notes that not all items are lost or stolen, but that in
many cases these items are temporarily unavailable to be inspected
during GAO's visit because items are in use by employees who are out in
the field.
Physical Security of Property: [See comment 7]
Perimeter security is in place for all IHS administrative offices and
IHS continues to safeguard all property by ensuring that access to IHS
space is limited to those who have obtained the proper security
clearances for each office and/or storage location.
Response to New GAO Recommendations:
IHS concurs with all six new recommendations in this draft report and
IHS' response is, as follows:
GAO Recommendation #1: Develop and enforce procedures and deadlines to
reconcile and update inventory records in a timely manner.
IHS Response:
As noted above, the PO interface between the UFMS and the PMIS will
reduce the number of inventory overages that are currently being
recorded and IHS is in the process of updating existing policy to
address four specific areas regarding receiving and inspection,
inventory management, report of survey, and property disposal process.
Additionally, the policy development process involves distribution of
the draft policies IHS-wide to solicit review and comment which are
considered when finalizing each policy.
GAO Recommendation #2: Establish specific deadlines and enforce them
for finalizing a Report of Survey once an inventory has been completed
so that research on missing items is completed expeditiously and does
not continue indefinitely.
IHS Response:
IHS continues to investigate incidences of missing items and close out
existing Report of Surveys as soon as possible. The Logistics Policy
Division in the Office of the Assistant Secretary for Administration
and Management within HHS is in the process of reviewing the policies
in the Logistics Management Manual. Specifically, the HHS Report of
Survey process is being enhanced to include required timelines and
guidance on Board of Survey requirements and IHS is in the process of
updating the existing Report of Survey policy, accordingly.
GAO Recommendation #3: Enforce policy to dispose of unused inventory in
a timely manner.
IHS Response:
On April 28, 2009 IHS signed a renewal of its Inter-Agency Agreement
with the Defense Reutilization and Marketing Service to turn-in
property that is not required or is in scrap condition in the IHS
Areas. Those Areas not participating in the agreement are utilizing
other methods of disposal such the Federal Prisons Industries - UNICOR
Recycling program, U.S. General Services Administration's (GSA) E-Waste
Recycling program, and other GSA disposal services. IHS Headquarters
has in place an Inter-Agency Agreement to turn-in unrequired property
[Footnote 23] to the HHS Program Support Center (PSC) warehouse
facility in Gaithersburg, MD. Specifically, IHS will be implementing
the following:
* IHS is in the process of updating the current property disposal
process and will address property (under)utilization as well. Moreover,
specific timeframes will be established in the new policy to address
timely disposal processes.
* Emphasize the policy to conduct walk-through surveys of all IHS
facilities to inspect operating areas to locate and dispose of
unrequired property.
* A reminder of the property approval process will be distributed to
all IHS Areas to reinforce that a proper and adequate justification
must be provided for all new equipment acquisitions.
GAO Recommendation #4: Establish an approach to stop loss of property
to include addressing region-specific inventory shortages.
IHS Response:
The Special General Memorandum 2008-03 dated November 26, 2008 to all
IHS employees addresses the supervisory and personal responsibility for
government property that is required by all IHS employees and
established an Agency-wide hand receipt system. Specifically, IHS will
implement the following:
* All assets will be tracked in the PMIS will have a designated user
and a hand receipt will be issued to each designated user for the
assets assigned to them.
* A performance element was implemented in FY 2009 for all IHS
Headquarters Office Directors and all IHS Area Directors to complete
property inventories by August 2009 and to complete issuance of hand
receipts by September 2009.
GAO Recommendation #5: Work with PSC to develop procedures to remove
disposed items from inventory records in a timely manner.
IHS Response:
The PSC distributed a Final Events Procedures guide to all PMIS users
in March 2009 that listed specific document requirements and forms
needed to process all final events in PMIS which was discussed in
detail by the PSC at the IHS PMO meeting held April 14-16, 2009.
Further, the revised property disposal policy will also assist IHS
property managers in this process.
GAO Recommendation #6: Work with PSC to develop procedures to enter
overages in PMIS in a timely manner.
IHS Response: [See comment 8]
Similar to INS' response to GAO Recommendation #1, the PO interface
between the UFMS and the PMIS will reduce the number of inventory
overages that are currently being recorded. Thus, the process to add
overages or new assets to the PMIS will be refreshed with all IHS
property managers. If necessary, IHS can utilize the PSC on a fee basis
to add their overages to PMIS by uploading them from spreadsheet
format.
Table:
Update IHS personal property management policies to reflect any policy
changes that have occurred since the last update in 1992:
Hand Receipts:
* Indian Health Service Headquarters (HQ) has implemented a policy
requiring hand receipts for all blackberries and cell phones. The HQ
policy was implemented on May 1, 2008.
* These hand receipts will be issued and maintained by Property
Custodial Officers at each site where equipment is distributed to
employees.
* The requirement for hand receipts was expanded to all accountable
property through the issuance of a Special General Memorandum (SGM)
from the Director on November 26, 2008 outlining personal
responsibility of all IHS employees.
SES Performance Element:
* On October 1, 2008, IHS HQ placed a performance requirement in all FY
09 Area Directors' performance plans to complete physical inventories
and issue required band receipts by 9/30/09.
Sensitive Policy Update:
* HHS updated the policy on handling sensitive equipment on January 12,
2009.
* IHS will implement by adding blackberries to definition of sensitive
equipment regardless of acquisition cost, and track in PMIS.
Receiving of Property Procedures:
* In 2008, IHS revised its receiving process for Information Technology
(IT) equipment orders at IHS HQ.
* IT equipment ordered in bulk is received from the vendor at the HHS
warehouse.
* IHS property staff and IHS IT staff jointly verify the items on site
at the warehouse. Receiving reports are prepared and inventory tags are
placed on the equipment at this time.
* If an item is being replaced, the MS end user must turn in the old
item before the replacement item will be issued. This complements the
existing IHS cost-effectiveness strategy by purchasing computer
technology in larger quantities to take advantage of price discounts.
Perceived underutilization noted by GAO:
* All of the computers purchased and stored in 2007 have been installed
and are currently being used by IHS staff. Purchases made in 2008 are
currently being deployed according to the established replacement
schedule.
National implementation:
* IHS will ensure that receiving and inspection policies are current
and being followed, to ensure that receiving reports are processed in a
timely manner and all accountable property is recorded in the Property
Management Information System (PMIS). All Areas will be required to
review and update as needed, their local receiving and inspection
procedures in accordance with national policy guidelines and provide
copies of those procedures to HQ. This requirement was reinforced at
the National Property Officers meeting in April 2009.
* In our decentralized management structure, authority for purchasing
decisions is delegated to Area Directors by the IHS Director. HQ has
encouraged Area Offices to make bulk purchases for cycle replacements
(e.g. every 4 or 5 years) as appropriate to local needs.
National Inter-Agency Agreement for property disposal:
* IHS HQ has encouraged all IRS Areas to participate in an Interagency
Agreement with the Department of Defense (DOD) to turn-in excess
property to a DOD facility. This will alleviate the need to store
property that is pending disposal.
* On April 28, 2009, IHS signed a renewal of the national IAA.
* If an Area does not utilize this agreement with DOD, they have been
required to demonstrate they have an alternative agreement with an
agency or organization to accept property disposals in a timely manner.
Investigate circumstances surrounding missing or stolen property
instead of writing off losses without holding anyone
accountable:
Timely Decisions on Property Accountability:
* IHS HQ issued a policy requirement in August 2008 for Area Directors
to approve all Reports of Survey for their respective Area and submit
the reports to HQ.
* As a part of the inventory reconciliation process, a Report of Survey
(ROS) is initiated for inventory shortages.
* IHS policy provides 180 days from the time the ROS is initiated, to
research the shortages and make final decisions regarding
accountability for any losses.
* IHS will complete the needed investigations regarding property that
is unaccounted for from 2008, removing the item from inventory as
appropriate, and will hold employees accountable as deemed appropriate
throughout the Report of Survey process.
* The new policy issued by the IHS Director in November 2008 to use
hand receipts for all items of equipment used on a regular basis by
employees, will improve personal accountability.
Follow up on allegations of misconduct in the June 2008 report: Yard
Sale: [See comment 3]
* The "Yard Sale", as discussed in GAO's June 2008 report was referred
to the Department of Health and Human Services (HHS) Office of
Inspector General (OIG). The IG has reported to IRS that no criminal
activity was found to have occurred.
Fabricated documents:
* IHS reviewed GAO's allegation that IHS staff fabricated documents.
Going forward, IHS employees will be trained on using the proper
procedures for documenting disposals in a timely manner.
* The issue was reviewed by the HHS OIG. The IG has reported to IHS
that no criminal activity was found to have occurred.
Enforce policy to conduct annual inventories of accountable personal
property at headquarters and all field locations: [See comment 4]
Policy requirement to use PMIS:
* IHS HQ issued an agency wide directive requiring the use of PMIS to
conduct annual inventories in May 2008.
* All IHS completed a 2008 physical inventory as required by IHS
policy.
* This requirement will be enforced each year.
Enforce policy to use receiving agents to document the receipt of
property and distribute the property to its intended user and to
designate property custodial officers in writing to be responsible for
the proper use, maintenance, and protection of property: [See comment
8]
* 100% of receiving agents have been trained. Property Custodial
Officers are designated by each Area Property Management Officer and
are trained as a system access requirement of the new PMIS.
* Training was reinforced and updated at the National Property
Officer's meeting in April 2009.
Enforce policy to place barcodes on all accountable property: [See
comment 8]
* All accountable and sensitive property items were reviewed and
barcode tags affixed as a part of the completion of the 2008 inventory.
* Any item needing to be tagged will be added to the PMIS.
* IHS will distribute periodically the PMIS catalog of items to all
property managers, to assist in determining what items require tagging.
* This will be a subject area of review in the annual assessment by HQ
of Area Office performance.
Enforce policy to document the issuance of property using hand receipts
and make sure that employees account for property at the time of
transfer, separation, change in duties, or on demand by the proper
authority: [See comment 5]
* IHS Headquarters implemented a policy in May 2008 to require the use
of a "Property Pass" to be used for property items being removed from
buildings.
* Use of hand receipts was included in the topics covered in the SGM
from the Director issued on November 26, 2008. Implementation will
complete, and performance will be monitored in FY 2009.
* IHS uses a clearance form for separating employees. This policy and
the use of this form will be enforced prior to an employee's last day
of work. It is an IHS-wide policy - Indian Health Manual Circular 2002-
06.
Maintain information on the user of all accountable property, including
building and room number, so that property can easily be located: [See
comment 8]
* This information was reviewed as the 2008 physical inventory was
conducted.
* Updates to the PMIS are being continuously made to reflect the
current user and location of all accountable and sensitive property.
* This is an ongoing process.
Physically secure and protect property to guard against loss and theft
of equipment: [See comment 7]
* IHS continues to safeguard all property by ensuring that access to
IHS space is limited to those who have obtained the proper security
clearances for each office and/or storage location. Perimeter security
is in place for all HIS space.
* The issue of personal and supervisory responsibilities to safeguard
property was addressed in the topics covered in the SGM from the
Director issued on November 26, 2008.
Enforce the use of the PMIS property management database to create
reliable inventory records:
* Training and system implementation has been completed for HQ and Area
Office property managers as of May 2008.
* Further implementation to the Property Custodial Officer/Asset Center
Representative level is ongoing.
* National training was conducted for all Area Property Officers the
week of April 14, 2009 in Rockville.
Establish procedures to track all sensitive equipment such as
blackberries and cell phones even if they fall under the accountable
dollar threshold criteria:
Improvements in tracking:
* HHS updated the policy on handling sensitive equipment on January 12,
2009 for which IHS will implement by adding blackberries to definition
of sensitive equipment regardless of acquisition cost, and track in
PMTS.
Improvements in security measures:
* On December 23, 2008, the HHS Chief Information Officer (CIO) issued
HHS-CIO-2008-0007.001S implementing new encryption standards for all
HHS laptop computers, and all sensitive information stored on
government-furnished desktops and non-government-furnished desktops
used on behalf of the HHS.
* IHS will ensure appropriate and timely implementation of this new HHS
policy directive.
* In addition, IHS employs a number of management and technical
measures to ensure a high degree of security for IT equipment. This
includes: 1) All IHS laptops are equipped with hard-drive encryption
software; 2) IRS policy prohibits the use or storage of sensitive
information on mobile devices (e.g., blackberries) and portable media
(e.g., CD/DVD); 3) password protection on all laptop and desktop
computers and blackberries; and 4) mandatory IT security training for
all IHS employees on how to protect personally identifiable
information. IHS has met this training for 100% of all employees with
access to IT equipment, if a waiver is required, the mobile device or
portable media must be encrypted.
* All laptops are currently encrypted with the encryption solution that
is designated by HHS.
* The IHS policy that prohibits the storage of sensitive information on
mobile devices is in place and reminders are routinely sent to
appropriate staff.
* Mandatory IT training occurs on an annual basis with additional
updates as needed.
[End of table]
Our comments on the Department of Health & Human Services (HHS) letter
dated May 1, 2009, follow.
GAO Comments:
1. Time spent responding to GAO requests and recommendations. In its
response, HHS emphasizes a commitment to proper and accountable
property management and stresses that IHS has spent thousands of hours
responding to GAO requests and recommendations. We are pleased to see
that IHS has begun devoting resources to addressing the chronic issue
of lost and stolen property. As we reported in June of 2008, IHS
property management problems date back to at least 1997. Given the
chronic nature of the problem, IHS should be prepared to spend
additional hours in the future, and should dedicate resources to
enforcement and compliance when, and if, the significant challenges it
faces have been resolved.
2. PMIS. In its response, IHS states that it is confident that
implementation of its new property management system will eliminate
"most, if not all, inventory currently unaccounted for." This
widespread property management problem will not simply be resolved as a
result of implementing a new system. IHS must actively manage its
property and enforce existing HHS property management policies, to
include annual inventories, the issuance of hand receipts, physical
security measures, and, critically, a commitment to holding IHS
employees accountable for lost or stolen property.
3. Referrals from Prior Report. In our first report, we found evidence
that an IHS property employee had fabricated documents and that a "yard
sale" of IHS equipment had occurred in Nevada. We referred these
incidents to the HHS Office of Inspector General (OIG) for further
investigation. In its response to this report, HHS indicated that the
OIG had concluded an investigation and that referrals of charges
against IHS employees for fabrication of documents and a yard sale
could not be substantiated. Concerning the allegations of fabricated
documents, the OIG presented the case to the United States Attorney's
Office (USAO) for the District of Maryland--Southern District. Based on
the lack of evidence, a criminal prosecution was declined by the USAO.
We reported on this incident because an IHS property official admitted
to GAO to fabricating documents in order to satisfy our request for the
disposition of property. Concerning the yard sale, the OIG reported
that no criminal activity was found to have occurred. We reported on
this "yard sale" based on the confirmation of eight IHS property
officials, including the Phoenix Area executive officer. Although
criminal charges could not be substantiated in these cases, we believe
that administrative action could still be warranted. We believe these
cases are important because they represent opportunities for IHS to
improve accountability for property management.
4. Physical Inventory. IHS stated that it completed an "agencywide 100
percent physical inventory." We are pleased that IHS has conducted
inventories at all locations as of the end of fiscal year 2008.
However, conducting and completing inventories are separate matters.
Specifically, reconciliation of missing items, to include the use of
reports of survey to hold employees accountable for missing property,
is the final step in completing an annual inventory. As of April 2009,
IHS had not completed the reconciliation process.
5. Hand Receipts. We found that IHS had not fully implemented the use
of hand receipts agencywide. In its response, IHS attributes this to
the fact that it has issued a new policy and given Area Directors until
September 2009 to have the policy fully implemented. Further, IHS
mentions that "performance will be monitored in FY 2009." The proper
use and enforcement of hand receipts is a critical issue for IHS and it
remains to be seen whether IHS will effectively manage its hand receipt
program.
6. Determination of Lost, Stolen or Unaccounted For Property. We
provided IHS with three options for proving that property was not lost,
stolen, or otherwise unaccounted for during our field tests; these
options were (1) direct physical observation; (2) for items not readily
available for inspection, photographs with a visible bar code and
serial number, to be provided within 1 week; and (3) for items
represented as being disposed of, supporting documentation (e.g.,
disposal records). In response to our draft, HHS stated that these
options were not sufficient because, "in many cases these items are
temporarily unavailable to be inspected— because they are in use by
employees who are out in the field." We understand that IHS is a
decentralized organization with numerous field locations. We believe
that we provided a reasonable amount of time for a federal agency such
as IHS to locate the items we selected, given its access to digital
photography, mobile phones, and the Internet. The fact that IHS was
unable to readily identify and provide support for the location of
numerous items during our audit is consistent with the results of its
2008 annual inventory.
7. Physical Security of Property. We have identified physical security
of property as an ongoing issue for IHS. We disagree with the statement
that "IHS continues to safeguard all property." We understand that
property security was addressed in a memorandum from the IHS Director
in November 2008, but without an enforcement mechanism to ensure that a
policy or procedure is implemented and operating effectively, IHS has
no assurance that it is safeguarding property effectively. Further, we
did not systematically evaluate perimeter security, but we found
examples where a lack of perimeter security facilitated a loss of
property. For example, one Report of Survey indicated a trailer with an
acquisition value of $7,300 was stolen from a Nashville Region Office
parking lot when the security gates were broken and remained open. In
another Report of Survey, a laptop was stolen from an employee's
workstation in Portland. The workstation was accessible to the public
and was not secured. Further, we identified additional examples of
unsecured equipment including an unsecured server room at one IHS area
office.
8. Status of Prior Year Recommendations. In its response, HHS includes
a table showing the status of progress made in implementing our prior
year recommendations. However, the findings in our report contradict
some of the statements made in this table:
* Regarding our recommendation to designate property custodial officers
in writing, IHS states that "property custodial officers are designated
by each Area Property Management Officer." Designating property
custodial officers in writing is important because it establishes clear
responsibility and accountability for property. However, as discussed
previously, we found that IHS designated property custodial officers in
writing for some of the regions but there were still gaps of written
designations at IHS headquarters and at 4 of the 12 regions. This
creates uncertainty over property management responsibilities and
fosters a lack of accountability at IHS headquarters and the 4 regions.
* Regarding our recommendation to enforce barcoding of accountable
property, IHS states that all accountable and sensitive property items
were reviewed and barcode tags affixed as part of the 2008 inventory.
However, our inventory testing identified over 50 accountable items
with no barcode at IHS headquarters. These tests began 2 months after
the IHS 2008 annual inventory, indicating that IHS still faces
challenges ensuring that all accountable property is affixed with
barcodes.
* Regarding our prior recommendation to maintain information on the
users of all accountable property, IHS states that it reviewed this
information during the 2008 annual inventory and that "this is an
ongoing process." However, as previously discussed, we tested inventory
at IHS headquarters and found user and location errors of 21 percent
and 28 percent, respectively. These errors were much higher at the
tested field locations, where we found errors of 87 and 89 percent,
respectively. These tests were performed 2 months after the IHS annual
inventory, indicating that IHS still faces significant challenges in
keeping PMIS accurate. Regarding the comment that "this is an ongoing
process," we agree; for as long as IHS continues to purchase property,
enter it into PMIS, and assign it to staff, property managers must
remain vigilant to ensure that records are accurate.
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contact:
Gregory Kutz, (202) 512-6722 or kutzg@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Cindy Brown Barnes, Assistant
Director; John Ahern, Donald Brown, Arturo Cornejo, Jennifer Costello,
Paul Desaulniers, Dennis Fauber, Heather Hill, Christopher Howard,
Elizabeth Isom, Leslie Kirsch, Barbara Lewis, Andrew McIntosh, Sandra
Moore, James Murphy, Andy O'Connell, George Ogilvie, Lerone Reid, Phil
Reiff, Verginie Tarpinian, and Emily Wold made key contributions to
this report.
[End of section]
Footnotes:
[1] See GAO, IHS Mismanagement Led to Millions of Dollars in Lost or
Stolen Property, [hyperlink, http://www.gao.gov/products/GAO-08-727]
(Washington, D.C.: June 18, 2008) for the report and GAO, Mismanagement
Led to Millions of Dollars in Lost or Stolen Property and Wasteful
Spending, [hyperlink, http://www.gao.gov/products/GAO-08-1069T]
(Washington, D.C.: July 31, 2008) for the testimony.
[2] We analyzed Report of Survey documents identifying property as
lost, stolen, missing, or inventory shortages and 2008 inventory status
reports. These documents did not overlap IHS property documents which
we analyzed in our June 2008 report, covering the period of fiscal year
2004 through fiscal year 2007.
[3] IHS headquarters property consists mostly of IT equipment.
[4] We considered equipment to be lost or stolen in our physical
inventory testing and random sample testing of six field locations if
we could not observe the item to confirm bar code and serial number, or
if IHS could not provide us with adequate documentation to support the
disposal of the equipment. Our findings at these six locations can not
be generalized to IHS's other locations. The six sites we selected
account for 27 percent of the IT equipment items or 35 percent of the
value of IT equipment. The six locations we tested included both IHS
region offices and service units such as hospitals and supply centers.
Five of the sites we tested in our last audit and one site was a new
location included in this sample.
[5] IHS region offices are located in Aberdeen, South Dakota;
Anchorage, Alaska; Albuquerque, New Mexico; Bemidji, Minnesota;
Billings, Montana; Nashville, Tennessee; Oklahoma City, Oklahoma;
Phoenix, Arizona; Portland, Oregon; Sacramento, California; Tucson,
Arizona; and Window Rock, Arizona.
[6] Additionally, IHS reported about $656 million in third-party
collections.
[7] The amount of lost or stolen property stated throughout the report
was valued at acquisition cost, which is how IHS typically values the
property in its records.
[8] A Report of Survey is the document used to record and present
findings and recommendations concerning the loss, theft, damage, or
destruction of government property; to approve corrective actions,
including financial recovery efforts; and to approve the resulting
adjustments to property accountability records.
[9] IHS performed their fiscal year 2008 inventory based on inventory
records as of May 2008.
[10] We selected the six field locations based on book value of
inventory and geographic proximity to other field locations being
tested. We selected these six from the top nine highest dollar value of
pilferable equipment. We tested five of the field locations in our
previous audit and added one new field location.
[11] Because these estimates are based on a probability sample, they
are subject to sampling error. For example, we are 95 percent confident
that missing IT equipment is valued between $1.13 million and $2.41
million at these locations. Likewise, we are 95 percent confident that
between 9 and 18 percent (or between 564 and 1,097) of the IT equipment
items were lost, stolen, or unaccounted for. Additional information on
our sample and estimates is presented in appendix I.
[12] A board of survey is responsible for reviewing and investigating
incidents involving loss, damage, or destruction of government
property. The board of survey determines whether or not the individuals
cited were responsible for the loss, damage, or destruction of
government property.
[13] We are 95 percent confident that the user error rate is between 80
and 92 percent and that the location error rate is between 83 and 93
percent for the six tested locations.
[14] HHS mandated the property management information system, PMIS,
which was implemented over a 2-year process effective October 18, 2007,
and contains IHS personal property, including inventory that is
capitalized and sensitive.
[15] We are 95 percent confident that this failure rate exceeds 93
percent for these locations.
[16] The scope of our audit only included testing IHS property, which
does not include the tribal communities.
[17] We analyzed Report of Survey documents identifying property as
lost, stolen, missing, or inventory shortages and 2008 inventory status
reports.
[18] IHS region offices are located in Aberdeen, South Dakota;
Anchorage, Alaska; Albuquerque, New Mexico; Bemidji, Minnesota;
Billings, Montana; Nashville, Tennessee; Oklahoma City, Oklahoma;
Phoenix, Arizona; Portland, Oregon; Sacramento, California; Tucson,
Arizona; and Window Rock, Arizona.
[19] The six sites we selected account for 27 percent of the IT
equipment items or 35 percent of the value of IT equipment. The six
locations we tested included both IHS region offices and service units
such as hospitals and supply centers.
[20] To be conservative, we accepted properly documented disposed
items, even though it is considered a poor property management
practice.
[21] PSC is the support center within HHS that maintains PMIS.
[22] The following Committees received an update: Senate Committee on
Appropriations, Senate Committee on Homeland Security and Governmental
Affairs, House Committee on Appropriations, and House Committee on
Oversight and Government Reform.
[23] IHS policy defines "unrequited property" as any Government-owned
property under the control of any office or installation which is not
required for its needs or the discharge of its responsibilities, as
determined by the head thereof. Also, unrequired property does not
become excess property until it is determined that no need exists for
such property within the entire Department.
[End of section]
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U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
