UNCLASSIFIED

October 29, 2009

MEMORANDUM

TO: CFO – Mr. James L. Millette

FROM: OIG – Harold W. Geisel, Acting /s/

SUBJECT: Report on Review of Policies and Procedures for Implementing the

American Recovery and Reinvestment Act of 2009 at the Department of
State (AUD/PP-10-07)

The subject report is attached for your information. The Office of Inspector
General (OIG) prepared this status report as the first of several reports anticipated by
the OIG on the use of American Recovery and Reinvestment Act funds by the
Department of State.

This report is part of an OIG community effort to ensure that Federal agencies
have a documented process for reviewing Recovery Act data quality and identifying
any material omissions or significant reporting errors. The Recovery and
Transparency Board will compile the results of these reports and issue a consolidated
report that will identify any systemic issues; will make, if applicable,
recommendations for improvements throughout the Federal Government; and will
post individual reports on the Web site at www.recovery.gov.

OIG appreciates the assistance provided by Bureau of Management personnel

during the review. If you have any questions, please have your staff contact Richard
Astor, Audit Director, at (703) 284-2601 or by e-mail at astorr@state.gov.

Attachment: As stated.

cc: M/PRI – Rachel M. Arndt

A/EX – Joseph H. McGuire
IRM/BPC – DeAnne Bryant
IRM/BPC – Renate M. Benham
DS/EX – Stephen J. Mergens
CA/EX – Dean J. Haas
RM/EX – Marlene X. Baxter
RM/EX – LaTanya T. Perry
HHS OIG – joseph.vengrin@oig.hhs.gov
GAO – JonesY@gao.gov; mctiguej@gao.gov; kordahlj@gao.gov
Recovery Board – recoveryupdates@ratb.gov

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United States Department of State

and the Broadcasting Board of Governors
Office of Inspector General

Office of Audits

Review of Policies and Procedures for Implementing

the American Recovery and Reinvestment Act of 2009
at the Department of State

AUD/PP-10-07

October 2009

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Table of Contents
Section Page

Executive Summary ........................................................................................................................ 1

Background ..................................................................................................................................... 2
Objective, Scope, and Methodology ............................................................................................... 4
Results of Review ........................................................................................................................... 5
Appendices ........................................................................................................................................
A. Laws, Regulations, and Relevant Criteria........................................................................... 8
B. Independent Public Accountants’ Report ........................................................................... 9

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Executive Summary

The American Recovery and Reinvestment Act of 2009 (ARRA) included $600 million
in funding for infrastructure improvements at the Department of State (the Department) and
established new reporting requirements related to the awarding and use of Recovery Act funds to
promote transparency and accountability. ARRA also included mandates for the Office of
Inspector General (OIG) to provide oversight and audits of programs, grants, and activities
funded by the Act.

This status report is the first of several reports anticipated by the OIG on the use of
Recovery Act funds by the Department. Based on information provided by responsible
Department officials, OIG found that the Department has made satisfactory progress in applying
ARRA requirements and guidance from the Office of Management and Budget (OMB) for
reporting and monitoring the use of ARRA funds. Specifically, the Department has developed
policies and procedures and plans for reviewing quarterly Recovery Act data, ensuring that
quarterly reports are filed by funds recipients, and conducting required reviews of those reports.
Furthermore, policies, procedures, and plans are in place to avoid key data problems; remediate
systemic reporting problems; and use the reported data to help assess compliance by receipients
of Recovery Act funds with the terms and conditions of contract award agreements.

Additionally, this report includes, as Appendix B, the draft report International Boundary
and Water Commission [IBWC], United States and Mexico, United States Section–Report on
Controls Placed in Operation for Compliance With the Requirements of the American Recovery
and Reinvestment Act of 2009. The independent public accountant performed the audit to assess
controls for Recovery Act compliance requirements by the IBWC. In its report, the independent
public accountant found that controls in place as of September 30, 2009, were operating with
sufficient effectiveness to provide reasonable, but not absolute, assurance that IBWC has
adequate processes and systems in place to track and report Recovery Act funds and that
IBWC’s Recovery Act reports are accurate and complete.

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Background
On February 17, 2009, President Barack Obama signed into effect the American
Recovery and Reinvestment Act of 2009, which provided $787 billion for Tax Relief ($288
billion), State and Local Fiscal Relief ($144 billion), Federal Social Programs ($244 billion), and
Infrastructure ($111 billion).

Section 1512 of the Recovery Act requires that not later than 10 days after the end of
each calendar quarter, each recipient that received Recovery Act funds from a Federal agency
submit a report to that agency to include the following: (1) the amounts spent on projects or
activities; (2) a list of projects or activities funded by name, including a description and
completion status; (3) estimates of the number of jobs created and retained by those projects or
activities; and (4) details on sub-awards and other payments.

On June 22, 2009, OMB issued, to heads of departments and agencies, OMB-09-21,
Implementing Guidance for the Reports on Use of Funds Pursuant to the American Recovery and
Reinvestment Act of 2009. This guidance was to provide Federal agencies and funding recipients
with information to effectively implement section 1512 reporting requirements. The guidance
requires prime recipients 1 to enter their data to the on-line Web portal 2 for collecting all
Recovery Act recipient reports beginning on October 10, 2009.

The Department seeks to use ARRA funds to create and save jobs, repair and modernize
domestic infrastructure crucial to the safety of American citizens, enhance energy independence
and reduce global warming by “greening” its facilities, and expand consular services offered to
American taxpayers. From the infrastructure portion, the Department is overseeing $600 million
of investment for seven projects and a funds transfer to the U.S. Agency for International
Development (USAID), as shown in Table 1.

Table 1. Activity and ARRA Funds

Amount
Program/Activity (In 000s)
Diplomatic and Consular Programs $ 90,000
Hard Skills Training Center 70,000
Passport Facilities 15,000
National Foreign Affairs Training Center 5,000
Capital Investment Fund 290,000
Data Center $120,000
IT Platform $ 33,500
Cyber Security $ 98,500
Transfer to USAID $ 38,000
IBWC Construction $220,000
Total $600,000
Source: OIG.

1
Prime recipients are non-Federal entities that receive Recovery Act funding as Federal awards in the form of
grants, loans, or cooperative agreements directly from the Federal Government.
2
The on-line Web portal is www.FederalReporting.gov.

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Diplomatic and Consular Programs – The Hard Skills Training Center ($70 million)
will be built within 150 miles of Washington, D.C., and will provide a centralized location to
support all security-related training that is currently conducted at 15 locations throughout the
United States. The Passport Facilities ($15 million) will fund five new start-up sites and the
renovation and expansion of two existing sites. The National Foreign Affairs Training Center
($5 million) will expand existing training capacity to ensure personnel assigned overseas have
the necessary language training and information technology training. Projects include upgrading
facility and grounds, updating orientation signage for the 72-acre campus, and upgrading
infrastructure wiring and public address systems.

Data Center – The Data Center program ($120 million) will build an enterprise data
center in the western United States and consolidate all domestic servers into four enterprise data
centers. The program will provide a highly available, scalable, and redundant data center
infrastructure that will substantially reduce the Department’s risk and provide for future
information technology (IT) growth. The new data center to be built is the Enterprise Server
Operations Center - West. It will be established on the western power grid. The facility will be
built in conjunction with the General Services Administration but will be owned by the
Department. The three other facilities are the Enterprise Server Operations Center - East, which
is a new data center recently established in a commercial collocation facility; the Beltsville,
Maryland, Enterprise Server Operations Center, which will host all development systems; and
the Old War Data Center at the Harry S Truman building in Washington, D.C., which will host
other secure systems.

IT Platform – The funds allotted are programmed for new telephone systems ($10
million), new computers and support ($11.8 million and $1.2 million), and mobile
communications for emergency situations ($10.5 million).

Cyber Security – The funds allotted are for smaller projects to guard against and track
cyber attacks ($62.2 million), improve hardware security and testing ($6 million), safeguard U.S.
citizens’ cyber security ($25.4 million), and expand cyber education ($4.9 million). These
projects include deploying new computer security systems, using “Smart” ID Cards by all
employees to access systems, and providing the next generation of secure phones.

Transfer to USAID – The Department will transfer $38 million to USAID to manage IT
security and upgrades that will support overseas mission‐critical operations. The Department
collaborated with USAID and determined that the funding should be dedicated to the Global
Acquisition and Assistance System project currently managed and planned by USAID.

IBWC – This project, totaling $220 million, will evaluate and repair portions of the flood
control systems for 495 miles of the upper and lower Rio Grande River, protecting about 3
million U.S. citizens in New Mexico and Texas. The project consists of $213 million for the
construction and repair of levees, $6 million to rehabilitate contaminated soil and groundwater,
and $1 million for other related projects.

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ARRA Reporting Requirements and OIG Oversight Responsibilities

The Recovery Act established new reporting requirements related to the awarding and
use of funds to promote transparency, which will help drive accountability for the timely,
prudent, and effective spending of Recovery Act dollars. Challenges associated with the new
reporting requirements include developing the systems and infrastructure for collecting and
reporting the required information, educating recipients about the reporting requirements,
assessing the quality of the reported information, and using the collected information effectively
to monitor and oversee Recovery Act programs and performance. Laws, regulations, and criteria
relevant to Recovery Act reporting and monitoring requirements are listed in Appendix A.

Along with the provisions for the Department, the Recovery Act mandates that OIGs
provide oversight and audits of programs, grants, and activities funded by the Recovery Act.
Although the Department will not be making any grants from its ARRA funds, OIG has
embarked on a program of oversight related to Recovery Act funding of Department programs
and activities to minimize the risks of inefficient or improper actions that could put taxpayers’
money at risk.

Objective, Scope, and Methodology

The overall objective of OIG’s review of Department oversight of ARRA funds is to
ensure that policies and procedures are developed to provide the following:

• timely and effective implementation of ARRA projects and activities in compliance with
ARRA requirements.
• timely and accurate reporting on the use of Recovery Act funds and the progress of
ARRA-funded projects and activities.
• the establishment of proper internal control procedures to mitigate instances of fraud,
waste, error, and abuse.
• confirmation that contractors and other fund recipients meet eligibility requirements and
comply with award requirements.

The scope of this status report, which OIG anticipates will be one of several reports
related to oversight of Recovery Act funds, was limited to information provided by Department
officials or obtained on the Department’s Web site. OIG did not provide a draft of the report to
the Department, but officials were briefed on the report’s content. Work for the review was
performed in October 2009 and, because of time constraints and the review’s limited scope, did
not follow Government Auditing Standards, as established by the Comptroller General of the
United States.

OMB guidance also requires that 22 to 29 days after each quarter (for example, October
22-29, 2009), Federal agencies perform a limited data quality review of the submitted
information and notify recipients of two key data problems: Material omissions and significant

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reporting errors. No later than 30 days after the end of the quarter (for example, October 30,
2009), the detailed recipient report will be made available to the public on a Web site. 3

Additionally, this status report provides the results of the audit performed by OIG’s
independent public accountant that assessed controls for Recovery Act compliance requirements
by the International Boundary and Water Commission, United States and Mexico, United States
Section (see Appendix B). The independent public accountant performed a limited data quality
review of information submitted by IBWC. 4

OIG requested information from Department officials and performed limited testing to
determine whether they had developed policies and procedures and plans for reviewing quarterly
Recovery Act data, ensuring that quarterly reports are filed by funds recipients, and conducting
required reviews of those reports. OIG also requested information from Department officials to
determine whether they had developed policies and procedures to avoid two key data problems,
material omissions and significant reporting errors, or had developed plans or processes to
remediate systemic reporting problems. Finally, OIG asked Department officials if they
anticipated that they will be able to use the reported information as a tool to assess compliance
with the terms and conditions of contract award agreements, assess the risk of contract awards,
and determine when to release remaining funds for such contract awards.

Results of Review

The Department has developed policies, procedures, and plans for reviewing quarterly
Recovery Act data, ensuring that reports are filed by funds recipients and has ensured that the
required reviews are conducted. Additionally, officials noted that they had developed policies
and procedures and plans to avoid data quality and reporting problems and assess fund
recipients’ compliance with contract terms and conditions. OIG believes that these actions
represent satisfactory progress in applying ARRA requirements and guidance from the Office of
Management and Budget (OMB) for reporting and monitoring the use of Recovery Act funds.

Reviewing Quarterly Recovery Act Data and Ensuring Reports Are Filed
The Department has three offices with contracting authority responsible for projects
funded through the Recovery Act: the Bureau of Administration, Office of Logistics
Management, Office of Acquisitions Management (A/LM/AQM); the Foreign Service Institute
(FSI); and IBWC. Each office is aware of and is working internally to develop appropriate
policies and procedures for reviewing reported data.

A/LM/AQM developed guidance on Recovery Act implementation that was last updated
on October 1, 2009. This guidance includes a reporting review requirement for contracting
officers (CO). If issues arise or additional instructions are received as Recovery Act contract
administration progresses, A/LM/AQM officials said that this guidance would be updated.

3
The Recovery Act Web site is www.recovery.gov.
4
Because only a limited amount of ARRA funds were obligated and reported, other than IBWC, OIG did not
perform a data quality review.

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A/LM/AQM has assigned specific COs to each Recovery Act transaction. Each CO
responsible for specific transactions will review the reports submitted by recipients on
www.federalreporting.gov and will note any discrepancies between contractor and Department
information. If it is determined that another individual will review the submissions, each CO
will still be responsible for ensuring that the review is completed and that any discrepancies are
noted.

FSI has assigned responsibility for the tracking of all stimulus funds and review of
Recovery Act transactions to the Director of Acquisitions. This individual will review the
reports submitted by recipients on www.federalreporting.gov. Any discrepancies will be noted,
and the contractor will be promptly notified so that any discrepancies can be corrected.

The IBWC has developed standard operating procedures for implementation by COs
consistent with ARRA and Department guidance. COs are required to verify that specific
information has been reported by recipients, which requires COs to validate all data posted by
IBWC recipients on www.federalreporting.gov and compare the data with contracting
information. The review and validation process is to be documented in the checklist provided in
the SOP by each CO for each recipient. Discrepancies are to be reported in a timely manner in
accordance with ARRA guidance and the IBWC SOP to ensure that recipients take proper and
timely actions to correct posted data.

Ensuring Required Reviews Are Conducted

A Department official noted that A/LM/AQM will survey all COs via e-mail one week
after the review period begins. Each CO will return a survey noting the reviews conducted or not
conducted. A follow-up survey will be sent for reviews identified as not-yet-conducted one
week later to ensure that all required reviews have been completed.

The Director of Acquisition at FSI will review all Recovery Act transactions and
submissions on a weekly basis. The Director of Acquisitions maintains a detailed spreadsheet
showing commitments, obligations, and outlays pertaining to all contracts associated with FSI
transactions.

The IBWC administrators for Recovery Act funds will continue to review all ARRA
activity, performing specific reviews of the COs’ recipient reporting checklists to ensure that all
recipient reporting reviews are conducted as required.

Given the relatively small volume of required data reviews, A/LM/AQM will perform
full reviews only of reported data. Because of the small number of contracts at FSI, the Director
of Acquisitions will perform 100 percent reviews at least once a week. Additionally, the IBWC
will validate all recipient reporting data as specified in the ARRA guidance.

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Avoiding Data Quality/Reporting Problems and Assessing Contract Compliance

On October 6, 2009, A/LM/AQM staff provided specific instructions to contracting

personnel that their responsibility was to validate that a report was submitted by a recipient and
to look for material omissions and significant reporting errors. If any omissions or significant
errors were noted, the CO was to include questions in the comments section for recipient
(vendor) response.

All staff were provided copies of the September 29, 2009, OMB Office of Federal
Procurement Policy Memorandum, Interim Guidance on Reviewing Contractor Reports on the
Use of Recovery Act Funds in Accordance with FAR Clause 51.204-11. Staff also were given a
slide presentation by A/LM using Recovery Board screen shots and guidance. All A/LM/AQM
managers were provided copies of all the material. A/LM officials said that a follow-up briefing
would be conducted with contracting personnel who were unable to attend the briefing.

The Director of Acquisitions at FSI maintains a detailed document containing all

information that each contractor should be reporting that will be used to check the contractor’s
submissions, thereby allowing the immediate identification of any discrepancies.

The IBWC has sent its acquisition staff all recipient reporting ARRA guidance and
memorandums issued to date. In particular, June 22, 2009, OMB M-09-21, Implementing
Guidance for the Reports on Use of Funds Pursuant to the American Recovery and Reinvestment
Act of 2009, and all subsequent guidance on recipient reporting. In addition, an SOP was
developed and issued to all COs working on the ARRA project.

The Department will be able to determine the usefulness of the reported data for
additional assessments after the first quarterly reporting and review has been completed.
Officials anticipate that reported data will assist with assessment of compliance with terms and
conditions of contract award agreements, but not with risk or funding matters. In addition,
according to a Department official, systemic reporting problems are not anticipated. However, if
any reporting problems arise, they will be handled as a contract performance matter.

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Appendix A

Laws, Regulations, and Relevant Criteria

The Office of Inspector General used the laws, regulations, and criteria applicable to the
review of the policies and procedures for implementation of the American Recovery and
Reinvestment Act of 2009 as follows:

• American Recovery and Reinvestment Act of 2009 (Recovery Act), Public Law 111-5,
February 17, 2009.
• The Administration created a Web site, www.recovery.gov to provide information to the
public on the planning and implementation of ARRA.
• Office of Management and Budget (OMB) Circular A-133 Compliance Supplement.
• OMB Memorandum, Initial Implementing Guidance for the American Recovery and
Reinvestment Act of 2009 (M-09-10), February 18, 2009.
• OMB Bulletin No. 09-02, Budget Execution of the American Recovery and Reinvestment Act
of 2009 Appropriations, February 25, 2009.
• OMB Memorandum, Updated Implementing Guidance for the American Recovery and
Reinvestment Act of 2009 (M-09-15), April 3, 2009.
• OMB Memorandum, Guidance on Data Submission under the Federal Funding Accountability
and Transparency Act (M-09-19), June 1, 2009.
• OMB Memorandum, Implementing Guidance for the Reports on Use of Funds Pursuant to
the American Recovery and Reinvestment Act of 2009 (M-09-21), June 22, 2009.
• OMB, Office of Federal Procurement Policy Memorandum, Interim Guidance on Reviewing
Contractor Reports on the Use of Recovery Act Funds in Accordance with FAR Clause
51.204-11, September 29, 2009.

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Appendix B

International Boundary and Water Commission,

United States and Mexico, United States Section

Report on Controls Placed in Operation

for Compliance With the Requirements of
the American Recovery and Reinvestment Act of 2009

Leonard G. Birnbaum and Company, LLP

Certified Public Accountants
6265 Franconia Road
Alexandria, Virginia 22310

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Independent Accountant’s Report

At the request of the Office of Inspector General (OIG), U.S. Department of State, we
evaluated the controls placed into operation by the International Boundary and Water
Commission, United States and Mexico, U.S. Section (IBWC). We evaluated the controls for
compliance with the requirements of the American Recovery and Reinvestment Act of 2009
(ARRA) for tracking and reporting Recovery Act funds as established by the April 3, 2009,
Office of Management and Budget (OMB) Memorandum M-09-15, Updated Implementing
Guidance for the American Recovery and Reinvestment Act of 2009.

We conducted this performance audit in accordance with auditing standards generally

accepted in the United States of America and Government Auditing Standards. Those standards
require that we plan and perform the audit to obtain a reasonable basis for our findings and
conclusions based on our audit objectives. Our audit included tests of specific controls to obtain
evidence about their effectiveness. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the controls in place as of September 30, 2009, as discussed in this report,
were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance
that IBWC had adequate processes and systems in place to track and report Recovery Act funds
and that IBWC’s Recovery Act reports were accurate and complete.

Background
On February 17, 2009, President Barack Obama signed the Recovery Act into effect,
providing $787 billion for Tax Relief ($288 billion), state and local fiscal relief ($144 billion),
Federal social programs ($244 billion), and infrastructure ($111 billion). Of the $787 billion, the
Department is overseeing $600 million of investments. Of the $600 million, $220 million has
been allotted for IBWC projects.

IBWC Recovery Act projects will evaluate and repair portions of the flood control
systems for 495 miles of the upper and lower Rio Grande River, protecting about 3 million U.S.
citizens in New Mexico and Texas. The project contains funding of $213 million for the
construction/repair of levees, $6 million to rehabilitate contaminated soil and groundwater, and
$1 million for other related projects.

The Recovery Act incorporated several significant requirements for agencies that have
been appropriated funds under the Act and on the primary recipients of Recovery Act funds
obligated by these agencies. Principal among the new requirements are extensive reporting
requirements.

The “Recovery, Accountability and Transparency Board” was established by the

Recovery Act to coordinate and conduct oversight of funds to prevent fraud of programs, grants,
and activities to minimize the risks of inefficient or improper actions that could put taxpayers’
money at risk.

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The Recovery Act provided funds to the OIGs of recipient agencies to ensure that
agencies complied with the requirements of the Act. To ensure that the agencies comply, OIGs
must assess the agencies’ implementation of the Act’s requirements as early as possible.

Objective
The objective of our audit was to determine whether

• IBWC had adequate processes and systems in place to track and report Recovery Act
funds and

• IBWC’s Recovery Act reports were accurate and complete.

Scope
The scope of this audit was a review and assessment of IBWC’s controls over the
tracking and reporting of Recovery Act funds. The scope of audit included the following:

• Assessing IBWC’s controls over tracking and reporting Recovery Act funds.

• Assessing IBWC’s compliance with financial and reporting requirements contained in

the Recovery Act and all related guidance, including OMB’s February 18, 2009,
memorandum M-09-10, Initial Implementing Guidance for the American Recovery
and Reinvestment Act of 2009, February 18, 2009, and Memorandum M-09-15, April
3, 2009.

 Under Section 1.5, we ensured that IBWC was meeting Transparency and
Reporting requirements, Information Collection and Dissemination, Budget
Execution, Risk Management, and Contract Awards requirements.

 Ensured that specific types of reports were issued in accordance with the
following guidelines: 2.1, “Reporting Requirements”; 2.2, “Recovery.gov posting
requirements”; 2.4, “Weekly Reports”; and 2.6, “Award level transaction data.

• Testing the controls over Recovery Act funds included in IBWC’s Recovery Act
reports. Specifically, we tested, on recovery.gov, weekly updated activity reports
detailing funding, major actions taken to date, major planned actions, and contracts
awarded.

• Testing reported Recovery Act expenditures and transactions for completeness and
accuracy.

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Findings and Conclusions

1. Assessing IBWC’s controls over tracking and reporting Recovery Act funds:

a. The addition of approximately $220 million in Recovery Act funding in FY 2009

represents a substantial increase over the normal annual budget of the IBWC and
potential related increased risk. As a result, our evaluation included the following:

• Review of internal “Risk Assessments” made by IBWC to accommodate the

Strategic, Operations and Reporting Compliance aspects of OMB Memorandum M-
09-15.

We found that formal Memorandum M-09-15 Risk Assessments had been formulated
by the Internal Audit/Compliance section of IBWC to address and rank these
Recovery Act risk areas. Further, Internal Audit plans incorporated specific
assignments for coverage of “ARRA Compliance” and adherence to “Recovery Act
Accountability Objectives” and “ARRA Reporting Oversight.”

• Evaluation of controls over the solicitation, award, and expenditure of program funds,
including identification of the current procurement processes and procedures in place
and their adaptability to Recovery Act acquisitions.

• We reviewed IBWC’s development and submission of draft and final Agency-wide

Recovery Act Plans and the related development of transparent, merit-based selection
criteria for committing, obligating, and expending Recovery Act funds.

b. As a result of what was described in paragraph a, we made the additional observations

and conclusions regarding IBWC’s Recovery Act Plan that were made as follows:

• IBWC developed and submitted draft and final Recovery Act plans and published
them on IBWC’s Web site.
• IBWC developed and submitted draft and final program-specific plans, including
spending plans.
• The “Schedule and Milestones” section of the IBWC – Recovery Act approved
project plan consisted of two major phases; “Pre-Construction” and “Construction.”
• The plans were submitted and incorporated into the Department of State plan by the
required date–May 15, 2009.
• The plan identifies the following:

 Objectives
 Measures
 Schedules and Milestones
 Projects and Activities
 Review Processes
 Cost and Performance Plan

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 Energy Efficiency Spending Plans

 Program Plan award Types
• Risk analysis processes have been established and risk mitigation steps have been
incorporated into the procurement, selection, and reporting aspects of the plan.
• A Senior Accountable Officer has been appointed.

2. Assessing IBWC’s compliance with financial and reporting requirements contained in the
Recovery Act and all related guidance:

 Under Section 1.5, we ensured that IBWC was meeting Transparency and
Reporting requirements and Information Collection and Dissemination, Budget
Execution, Risk Management, and Contract Awards requirements.

 We ensured that specific types of reports were issued in accordance with guidelines:
2.1, “Reporting Requirements”; 2.2, “Recovery.gov posting requirements”; 2.4,
“Weekly Reports”; and 2.6, “Award level transaction data.”

a. The following observations and conclusions regarding the IBWC’s financial and
reporting requirements were made:

• News releases and other publications and communications have been issued in
connection with the plans.
• IBWC has dedicated seven Web pages to the Recovery Act and has several other
references at the Department of State level.
• IBWC publishes solicitation and award notices of orders under task and delivery
orders on FedBizOpps.
• IBWC posts summaries of procurements to FedBizOpps.
• Unique Appropriation Codes and Treasury Symbols are used to distinguish Recovery
Act funds from Non-Recovery funds.
• A sealed bid process for construction projects is the preferred award method utilized.
• A contract clause matrix is used to ensure that all applicable clauses are incorporated
into solicitations. Recovery Act clauses are highlighted to ensure awareness of their
importance.
• Awarded contracts using Recovery Act funds include appropriate reference to the
directed Federal Acquisition Regulation clause at §52.204-11.
• Performance milestones and schedules are established for each Recovery Act project
and are monitored by the Contracting Officer on a weekly basis for architect/engineer
design services and reported to management via weekly reports. The same will be
established for construction contracts when awarded as a result of Recovery Act
funding.
• Payments against Recovery Act projects are based on progress payments.
• Only direct costs are introduced for funding considerations under the Recovery Act
appropriation for costs related to pre-construction and construction requirements, per
approved project plans.

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• IBWC’s Engineering Department submits purchase requests for each of the various
types of services required. These are in turn reviewed and approved by the Budget
representatives.
• Obligations are accomplished upon award of the orders in support of the Recovery
Act project.
• Expenditures or payments are made upon receipt of Receiving Reports from the
Contracting Officer’s Representative and invoices from the contractor and after
appropriate reviews and reconciliations are accomplished.

3. Testing controls over Recovery Act funds included in IBWC’s Recovery Act reports.
Specifically, tests were made of the following reports shown on Recovery.gov: weekly
updated activity reports detailing funding, major actions taken to date, major planned
actions, and contracts awarded.

• We observed and concluded that IBWC had submitted weekly reports beginning on
March 3, 2009, that provided a breakdown of funding, major actions taken to date,
and major planned actions.

4. Testing reported Recovery Act expenditures and transactions for completeness and
accuracy.

a. We observed and concluded the following:

• All financial data for recordation and reporting is extracted from the Global Financial
Management System (GFMS).
• Quarterly obligation reports are created using data obtained from GFMS to create the
FACTS II reports and to enter the data into the Treasury system, which generates the
SF-224 report. A review is conducted to ensure that both reports contain the same
subtotals and totals by category.
• Funding Notification Reports come from the standard GFMS accounting processes.
The source of inputs to the GFMS system comes from the normal acquisition process
steps and related documentation, as well as from contractors on invoices and
supporting documentation.
• The Acquisitions Office maintains, among other tracking vehicles, a comprehensive
and detailed “Trackable Synopsis” schedule, which provides a progressive status
summary of all task orders for architect–engineer design and environmental
assessment work.
• Tests of “Spending Chain” milestones and related acquisition supporting
documentation for the awards were made to assess the data gathering means used by
IBWC for funding reporting. No exceptions were noted.
• Selective tests were made of reported Recovery Act expenditures and transactions for
completeness and accuracy. No exceptions were noted.

This report is intended solely for the information and use of the Department of State
Office of Inspector General and management of the International Boundary and Water

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 UNCLASSIFIED

Commission, United States and Mexico, U.S. Section, and is not intended to be, and should not
be, used by anyone other than these specified parties.

Leonard G. Birnbaum and Company, LLP

Alexandria, Virginia

October 8, 2009

15
UNCLASSIFIED