Vendor Payments:

Inadequate Management Oversight Hampers the Navy's Ability to Effectively Manage Its Telecommunication Program

GAO-04-671: Published: Jun 14, 2004. Publicly Released: Jul 13, 2004.

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

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

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 2012, the Department of the Navy's Chief Information Officer issued a policy memorandum that requires all Navy commands (including Navy units) to maintain an accurate and up-to-date inventory of all government-provided commercial mobile services. In addition, the policy memorandum instructs Navy commands to comply with Navy's existing policy requiring the use of telecommunication expense management tools for inventory tracking and invoice validation within the telecommunication services environment. With the issuance of this policy memorandum, the Navy should have reasonable assurance that existing policies are enforced and that units are maintaining an inventory of telecommunication equipment and services.

    Recommendation: The Secretary of the Navy should direct the Chief of Naval Operations (CNO) to ensure that existing policies are enforced. Specifically, the CNO should ensure that the Navy develops and maintains a comprehensive inventory of the Navy's base telecommunication equipment and services.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: In June 2012, the CNO issued OPNAV Instruction 2060.8A to establish policy governing the management, administration, and validation of base telecommunications within the Navy. OPNAV Instruction 2060.8A instructs Navy to comply with DOD policy that establishes DISA's responsibility to review DOD component requests for, among other things, telecommunication services, to determine the most effective and economical telecommunications solution set, and approve DOD component request. According to OPNAV Instruction 2060.8A, this DOD policy directs the formulation of a central management infrastructure to provide oversight, contracting services, validation, standards and internal controls for base telecommunications. With this action, Navy has provided reasonable assurance that it is supporting DISA's efforts to track acquisitions of telecommunications services throughout DOD, trends in usage, and the cost of those services.

    Recommendation: The Secretary of the Navy should direct the CNO to ensure that existing policies are enforced. Specifically, the CNO should ensure that the Navy supports DISA efforts to track acquisitions of telecommunication services throughout DOD, actual costs of those services, and trends in usage (that is, the volume and types of traffic that networks carry).

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Implemented

    Comments: On March 7, 2005, the Navy issued the Department of the Navy Acquisition Policy on Mobile Phone and Data Equipment and Services. This policy memo states that only the Navy's centralized contracts shall be used to obtain wireless services. On September 2, 2005 the Navy issued the Department of the Navy Policy for Issuance, Use and Management of Government-provided Mobile Phone, Data Equipment and Services, and Calling Cards. This policy memo provides guidance governing the issuance, use and management of government-provided mobile phones, data equipment and services, and calling cards--including required periodic assessments of cell phone usage to determine if the plan packages provide the most cost-effective means to satisfy the Navy's usage requirements.

    Recommendation: The Secretary of the Navy should direct the CNO to establish comprehensive policies and guidance governing the purchase and use of cell phone services, which should include (1) the use of prenegotiated or centrally negotiated rates and (2) periodic assessment of cell phone usage to determine if plan packages provide the most cost-effective means to satisfy the Navy's usage requirements.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: On September 2, 2005 the Navy issued the Department of the Navy Policy for Issuance, Use and Management of Government-provided Mobile Phone, Data Equipment and Services, and Calling Cards. This policy memo provides guidance governing the issuance, use and management of government-provided mobile phones, data equipment and services, and calling cards--including guidance on accountability, the proper review of invoices, and the prohibition of sharing calling cards.

    Recommendation: The Secretary of the Navy should direct the CNO to establish comprehensive policies and guidance governing the purchase and use of calling card services, which should include policies about accountability, the proper review of invoices, and the prohibition of sharing of calling cards.

    Agency Affected: Department of Defense: Department of the Navy

  5. Status: Closed - Implemented

    Comments: In March 2013, the Navy issued the Navy Unified Capabilities Implementation Plan, which includes a strategic management framework for, among other things, managing the acquisition and life cycle costs of telecommunication services. The Navy Unified Capabilities Implementation Plan also identifies the specific roles and responsibilities of the Navy commands for maintaining cost and inventory information on its telecommunication services as well as determining existing and future requirements for current and potential users. With the implementation of this strategic management framework, the Navy should have reasonable assurance that it has strengthened its ability to acquire telecommunication services more effectively and efficiently.

    Recommendation: To strengthen the Navy's ability to acquire telecommunication services effectively and efficiently, the Secretary of the Navy should direct the CNO to develop, in coordination with the Navy commands, a strategic management framework for improving the acquisition of telecommunication services. This framework should include provisions for inventorying current and potential users of telecommunication services to determine existing and future requirements.

    Agency Affected: Department of Defense: Department of the Navy

  6. Status: Closed - Implemented

    Comments: In a November 29, 2007, policy memorandum, the Deputy CNO directed the consolidation of command requirements for cellular and other telecommunication services. The policy memorandum states that, upon consolidation, the requirements are to be submitted through the command's servicing contract office and procured through nationwide Department of the Navy Multiple Award wireless contracts. In addition, the policy memorandum directs all Navy commands to conduct a cost/benefit analysis to ensure the greatest value at the lowest cost.

    Recommendation: To strengthen the Navy's ability to acquire telecommunication services effectively and efficiently, the Secretary of the Navy should direct the CNO to develop, in coordination with the Navy commands, a strategic management framework for improving the acquisition of telecommunication services. This framework should include provisions for identifying and exploiting opportunities to consolidate requirements among Navy commands.

    Agency Affected: Department of Defense: Department of the Navy

  7. Status: Closed - Implemented

    Comments: In June 2012, the CNO issued OPNAV Instruction 2060.8A that directed the formulation of a central management infrastructure to provide oversight, contracting services, validation, standards and internal controls for telecommunication services. OPNAV Instruction 2060.8A also instructs Navy to comply with DOD policy that requires DOD components to plan, program, and budget for telecommunication services using the guidance in the Unified Capabilities Master Plan, dated October 2011. The Unified Capabilities Master Plan provides the DOD components, including Navy, with a strategic management framework based on commonly used commercial practices, such as conducting spend analyses and competing and negotiating pricing discounts based on overall volume, to strengthen the DOD component's bargaining position in acquiring telecommunication services.

    Recommendation: To strengthen the Navy's ability to acquire telecommunication services effectively and efficiently, the Secretary of the Navy should direct the CNO to develop, in coordination with the Navy commands, a strategic management framework for improving the acquisition of telecommunication services. This framework should include provisions for adopting, when appropriate, commonly used commercial practices, such as conducting spend analyses and competing and negotiating pricing discounts based on overall Navy volume, to strengthen the Navy's bargaining position in acquiring telecommunication services.

    Agency Affected: Department of Defense: Department of the Navy

  8. Status: Closed - Implemented

    Comments: In June 2012, the CNO issued OPNAV Instruction 2060.8A that directed the formulation of a central management infrastructure to provide oversight, contracting services, validation, standards and internal controls for telecommunication services. OPNAV Instruction 2060.8A also instructs Navy to comply with DOD policy that requires DOD components to submit requests for telecommunication services to the Defense Information Systems Agency (DISA). DISA is responsible for reviewing requests, determining the most effective solution set, and approving the request. In addition, DOD policy requires DOD components to plan, program, and budget for telecommunication services using the guidance in the Unified Capabilities Master Plan developed by DISA. The Unified Capabilities Master Plan provides the DOD components with a documented operational framework based on the work already accomplished by DISA through laboratory and pilot testing of products and services in the Unified Capabilities environment, which includes telecommunications. The plan contributes to DOD's efforts to gain visibility over spending and revise business processes to enable DOD components to leverage its buying power. With these actions, Navy should have reasonable assurance that its future requirements and acquisitions of telecommunication services are met in a cost-effective manner.

    Recommendation: To ensure the successful implementation of this strategic management framework and to better leverage Navy buying power, the Secretary of the Navy should direct the CNO to strengthen analysis of telecommunication service requirements, spending, and the capabilities of telecommunication service providers by enhancing core internal technical expertise and information systems.

    Agency Affected: Department of Defense: Department of the Navy

  9. Status: Closed - Implemented

    Comments: In 2004, the Navy has directed Naval Commands and base communications offices to periodically review, validate, and inventory various telecommunications requirements for compilation into a central database repository. (Naval Message 04-04 051935Z and 01-04 26142Z Aug 04). The required periodic reviews are to be conducted to ensure policies are being enforced, processes are kept current, and users' telecommunications needs are being met.

    Recommendation: At the selected units that we audited, the CNO should direct the commanders to provide assurance that existing policies are enforced and fully evaluate the internal controls over the review and revalidation of telecommunication requirements.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Chief of Naval Operations

  10. Status: Closed - Implemented

    Comments: In 2004, the Navy directed Naval Commands and base communications offices to review long distance call use and institute procedures for control and prompts certification of monthly billing. (Naval Message 04-04 051935Z and 01-04 26142Z Aug 04)

    Recommendation: At the selected units that we audited, the CNO should direct the commanders to provide assurance that existing policies are enforced and fully evaluate the internal controls over the reconciliation of telecommunication invoices with a current inventory of telecommunication equipment and services.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Chief of Naval Operations

  11. Status: Closed - Implemented

    Comments: In 2004, the Navy directed commands and base communications offices to review, validate, and inventory assigned calling cards, and take immediate action to cancel unaccounted for cards. Commands were further directed to assess the need for calling cards and cancel cards that are not required. Base communications offices were directed to audit monthly calling card usage and immediately report anomalies to commands and activities(Naval Message 04-04 051935Z and 01-04 26142Z Aug 04).

    Recommendation: At the selected units that we audited, the CNO should direct the commanders to provide assurance that existing policies are enforced and fully evaluate the internal controls over the distribution and use of calling cards and cancellation of cards that are not properly controlled.

    Agency Affected: Department of Defense: Department of the Navy: Office of the Chief of Naval Operations

 

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