Payments to Vendors by United States Attorneys' Offices
Report No. 04-07
Office of the Inspector General
The United States Attorneys (USAs) are the chief federal law enforcement officers in their jurisdictions. Their responsibilities include the prosecution of criminal cases brought forth by the federal government, the prosecution and defense of civil cases in which the United States is a party, and the collection of debts owed to the federal government that are administratively uncollectible. In support of their mission, United States Attorneys' Offices (USAOs) procure a variety of goods and services and make payments to vendors.
The objective of this audit was to determine whether payments to vendors by the USAOs were made in accordance with federal regulations, the policies prescribed by the Executive Office for United States Attorneys (EOUSA), and various payment handbooks.
Our audit tested vendor payments made at EOUSA and six USAOs - the Eastern District of New York, Southern District of Florida, District of New Mexico, District of Oregon, District of Utah, and Eastern District of Tennessee - using third-party drafts, purchase cards, electronic fund transfers, and Treasury checks. EOUSA was selected with the expectation we would review large dollar value purchases. The other district offices were judgmentally selected to be able to review two extra large offices, two large offices, and two medium offices.1
In order to determine if payments to vendors made were in compliance with regulations and EOUSA's procedures, we used random and judgmental sampling procedures to choose a total of 1,517 out of 30,422 transactions at the seven locations. The dollar value of our sampled transactions totaled $2,755,123 out of a total of $31,726,084.
Our audit procedures also included reviewing delegations of procurement authority, interviewing key personnel, and employing other testing methods at EOUSA and the district offices sampled.
Results of Two OIG Fraud Investigations
Recently, the OIG investigated procurement and payment frauds at two USAOs. Both frauds involved administrative staff misusing the government purchase card or third-party drafts to improperly acquire personal goods and services. One fraud (over $435,000) occurred in the Central District of California and the other fraud ($39,105) in the District of Oregon.
In the Central District of California, the fraud occurred because the Chief of Support Services did not carefully review the purchase card purchases made by a subordinate. At the conclusion of the investigation, the administrative clerk was convicted of defrauding the government and the Chief resigned in lieu of termination.
The fraud at the District of Oregon was a more complicated scheme involving third-party drafts. The Deputy Administrative Officer forged the disbursing officer's signature, destroyed copies of signed drafts, used passwords of former employees, authorized drafts to be written without supporting documentation, and entered drafts into the accounting system that caused the drafts to be written to herself. This fraud primarily occurred because the third-party draft disbursing officer, the Deputy Administrative Officer's subordinate, signed drafts without reviewing supporting documentation. The Deputy was convicted of fraud.
In summary, we found that overall the USAOs' controls and procedures for acquisition and payment of purchases generally were adequate to reduce the opportunities for fraud, loss, or undetected error. Further, our tests found the controls and procedures were generally followed. However, we identified some instances of noncompliance at all the offices we reviewed. Some of the occurrences of noncompliance were similar to the noncompliance that permitted the two cases of fraud described above to occur. Although the number and types of noncompliance that we identified were small in relation to the universe of testing, they indicate that EOUSA should take additional steps to reduce the likelihood of fraud occurring in the future.
One of the most significant controls in any disbursement system is the separation of duties, i.e., the approval of purchases and the obligation and payment of funds being performed by separate individuals. We found that, while generally adhered to, in 42 transactions out of 1,517 tested, separation of duties was lacking. The 42 transactions were for a total of $47,640. In each of the transactions, one person acted as both the purchaser and the approving official or budget officer.
Another significant control is to have individuals involved in the procurement and payment processes be officially designated as accountable officers, who can be held personally liable for losses or improper payments. We found over 140 transactions where individuals were not so designated. These were primarily at the District of Utah, where non-designated officials were involved in 116 transactions totaling over $40,000.
In addition to the deficiencies stated above, other deficiencies we noted involved approval of purchases, obligations of funds, receipt of goods, payments, and accounting for property. Specific acquisition process deficiencies included missing procurement forms or support for them, procurement without written approval, procurement prior to approval, not considering required sources first before procurement, and not determining reasonableness of prices. We also found purchases that were technically prohibited under EOUSA guidelines, which do not allow printing and telecommunication expenses to be paid with a government purchase card. However, we did not find any instances of unnecessary or unlawful purchases.
We also found that the Accountable Officer Signature Form, a form designating approval authority, did not adequately identify each type of accountable officer. In the area of delegated procurement authority, we found no dollar limitation placed on procurements by the USAOs' contracting officers when making purchases from specific government agencies. We discovered that the procurement forms developed at the USAOs did not always contain the required elements to fully document the procurement requirements. In our judgment, the procurement form used by the Southern District of Florida was superior to the procurement forms used by other district offices in that it contained virtually all of the required elements and is used for all purchases. Among several things, the Florida form documents contractor and open market information, justification for not using a small business, accessibility standards, energy efficiency, and price reasonableness and basis. The form thoroughly documents the required data elements for a purchase transaction.
This report contains seven recommendations designed to improve compliance with established acquisition and payment regulations and procedures by enhancing existing forms and monthly statements used in the acquisition and payment process, expanding EOUSA's review process, and reviewing current acquisition and payment limits. We also recommend improved documentation of the actions taken by accountable officers.