DOT Office of Inspector General Audit of DOT’s Office of the Secretary’s Acquisition Function Federal Audit Executive Council Procurement Training Conference Washington, DC April 17, 2012

Background/Criteria for Audit In May 2008, the Office of Management and Budget (OMB) issued guidelines to Chief Acquisition Officers (CAO) in CFO Act agencies for conducting internal controls reviews of their agency’s acquisition functions under Circular A-123. The template for the OMB guidelines was adopted from GAO’s Framework for Assessing the Acquisition Function at Federal Agencies, consisting of 4 interrelated cornerstones that represent the broad areas that have the greatest impact on the efficiency and effectiveness of the acquisition function: 1.Organizational Alignment and Leadership 2.Policies and Processes 3.Human Capital 4.Information Management and Stewardship

Audit Objective To assess DOT’s Office of the Secretary’s (OST) acquisition function and identify vulnerabilities that could impact DOT’s ability to implement an effective and efficient approach consistent with best practices, including OMB’s guidelines. Our Audit focused on 3 of the 4 OMB cornerstones: 1.Organizational Alignment and Leadership 2.Policies and Processes 3.Information Management and Stewardship We did not focus on Human Capital due to concerns on extensive scope and time limitations.

Audit Results: Organizational Structure and Leadership The organizational structure of OST’s procurement function was restricting information flow, not promoting the achievement of DOT's overall mission, and not positioning acquisitions to play a strategic role in the Department. ▫ The Senior Procurement Executive (SPE) was not reporting directly to the CAO as required ▫ The structure caused insufficient separation of duties Acquisition leadership and staff vacancies preventing fulfillment of key procurement duties. During our audit. ▫ 4 procurement leadership positions were not permanently filled – including the SPE ▫ 7 out of 21 acquisition staff positions (33%) were vacant Strategic Plan was not linked to DOT’s overall goals and missions. ▫ The plan did not put acquisition work in the long-term strategic context ▫ No performance measures or metrics to track achievement of goals

Audit Results: Policies and Processes OST lacks adequate policies and procedures to effectively administer its acquisition functions. ▫ Lack of standard operating procedures for daily acquisition tasks and processes. ▫ DOT’s acquisition policy was not being adequately maintained.  DOT’s acquisition policy and internal operating procedures were last updated in 2005 and 2006, respectively. ▫ Contract and COTR files were incomplete, lacking Federal and Departmental required documents and evidence of contract monitoring and oversight.

Audit Results: Information Management and Stewardship OST lacks basic management controls to report accurate, complete, and timely data. ▫ OST’s Federal Procurement Data System data has a high rate of inaccuracy – 27% and 34% for fiscal year 2008 and 2009, respectively. ▫ Former OST employees’ access to DOT’s procurement databases were never deactivated upon their termination of employment with the Department. ▫ OST could not account for all of its active contracts. ▫ OST’s contingency plan for the department procurement database did not meet Federal requirements regarding plan content, review, and testing.

Mid-Audit Management Advisory Prior to completion of our audit work, we issued an internal management advisory to OST to inform them of 4 specific weaknesses that we felt warranted immediate corrective action as they compromised the integrity of the entire Department's acquisition operations. When the final report was issued almost a year after the Advisory, OST had already fully corrected some of the critical acquisitions weaknesses we found affecting all of DOT. By issuing an advisory the auditee: ▫ Is able to immediately begin formulating corrective action plans to address serious weaknesses instead of letting the problem continue to exist until a final report is issued. ▫ Will be more receptive since the advisory is not a public document and you will be able to give the auditee credit in the public final report for any corrective actions they have taken based on the advisory.

End Result OST revised its acquisition structure to position its acquisition function to effectively communicate with DOT leaders and play a strategic role in the Department. The acquisition function now has stable leadership with a strategic and long-term vision aimed to help attain DOT missions and goals. DOT’s acquisition functions on all levels has improved with more solid, focused leadership, open communication, and established processes and internal controls.

Audit Success Having solid and comprehensive criteria–OMB cornerstones– to guide our audit lead to clear and structured findings and report. We maintained continuous and open communication throughout the audit by: ▫ Holding routine internal status briefings with the auditee ▫ Issuing the mid-audit Management Advisory Constant and open communication throughout the audit allowed the auditee to address a number of weaknesses prior to or shortly after report issuance. It also fostered a good auditee relationship promoting cooperation. By starting at the top-level of an agency, the effects of your audit will have the greatest impact…change starts at the top and sets the tone for Department-wide success.