Employing People With Blindness or Severe Disabilities:

Enhanced Oversight of the AbilityOne Program Needed

GAO-13-457: Published: May 30, 2013. Publicly Released: May 30, 2013.

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What GAO Found

Federal agencies need to exercise strong oversight to promote effectiveness and efficiency and prevent waste, fraud, and abuse--especially in a federal procurement program such as this, which is exempt from full and open competition requirements. However, although the AbilityOne Commission is ultimately responsible for overseeing the program, the Commission cannot control how CNAs (1) spend their funds, (2) set and manage their performance goals, or (3) set and implement governance policies and other internal controls. The Commission's authority to direct CNA budget priorities--including how much they compensate their executives and the level and growth of their reserves--is limited. As independent entities, the CNAs are responsible for determining their spending. Most of their money comes from fees they charge their affiliates as a percent of revenue earned from AbilityOne contracts. Moreover, the Commission does not have sufficient authority to set CNA performance and governance standards, so it depends on the CNAs to set and enforce such standards. Although the CNAs have instituted their own internal controls, the Commission does not have procedures to monitor alleged CNA control violations, nor is there an inspector general to provide independent audit and investigative capabilities for the program, including at the CNAs.

The AbilityOne Commission is responsible for determining which products and services can be suitably provided by the program. It delegates to the CNAs most of the responsibility for deciding which affiliates should develop and provide these projects. According to CNA and affiliate officials, the CNAs often do not fully disclose how they make these decisions. This limited transparency could increase the risk of biased decisions because CNA officials have wide latitude in determining which affiliate should be awarded a project. Although AbilityOne Commission officials have acknowledged the importance of transparency and equity in assigning projects, they have done little to indicate how these outcomes can be achieved.

The Commission has statutory responsibility for determining the fair market price of projects in the program, but: (1) its written pricing review policies and procedures are limited and (2) it does not have sufficient internal controls to ensure that prices are appropriately revised over time. The Commission sets procedures that encourage affiliates and federal customers to negotiate prices that reflect the market. Although Commission staff review these prices in accordance with written policies and procedures, they acknowledged that these instructions are not sufficiently explicit or transparent. Such limitations can make it difficult for the CNAs and affiliates to understand the Commission's pricing review procedures and, by extension, its reasons for rejecting prices. This lack of understanding may partially explain the 77 percent rejection rate for initial pricing packages. Commission policy also states that CNAs submit for Commission review any request for adjusting the price of a project beyond a single contract period that does not conform with the prior Commission-approved mechanism. Occasionally customers and affiliates implement non-conforming price revisions without requesting Commission approval. This negates the Commission's internal controls for ensuring fair market prices and results in the Commission not knowing the actual price being charged. Neither the AbilityOne Commission nor the CNAs have procedures in place to systematically identify such instances.

Why GAO Did This Study

In 1938, Congress created a program providing employment opportunities for people who are blind and expanded it in 1971 to include people with severe disabilities. Now known as AbilityOne, the program’s public-private structure consists of the federal, independent U.S. AbilityOne Commission (15 part-time presidentially-appointed members supported by 27 staff) to oversee the program; two central nonprofit agencies (CNAs) to administer much of the program; and hundreds of affiliated nonprofit companies employing people who are blind or severely disabled to provide products and services to federal agencies. Federal agencies are generally required to purchase such products and services through the program.

GAO examined how the AbilityOne Commission: (1) directs and oversees the CNAs; (2) adds products and services (hereafter called projects) to the program and assigns affiliates to provide them; and (3) prices program projects. GAO reviewed policies, procedures, relevant federal laws and regulations, and other documents; interviewed CNA and AbilityOne officials; held five focus groups with affiliates; and analyzed data on program products, services, and pricing reviews.

What GAO Recommends

We are presenting a matter for Congressional consideration to establish an inspector general and several recommendations to the Commission to enhance program oversight. The Commission and CNAs agreed with our recommendations, but disagreed with several findings or provided additional information, which we incorporated as appropriate.

For more information, contact Andrew Sherrill at (202) 512-7215 or sherrilla@gao.gov.

Matter for Congressional Consideration

  1. Status: Open

    Comments: As of August 28, 2014, Congress had not acted on this recommendation.

    Matter: To enhance program effectiveness, efficiency, and integrity in the AbilityOne Program, Congress may wish to consider establishing an independent inspector general for the program with the authority to audit and investigate the Commission and the CNAs.

Recommendations for Executive Action

  1. Status: Open

    Comments: In August 2014, AbilityOne Commission officials stated that they continue to work on implementing this recommendation. They have initiated a requirements definition phase and identified major tasks to be included in the written agreements. In 2015, they plan to continue with the development and execution of the CNA agreement and develop oversight mechanisms. This recommendation will remain open until written agreements between the AbilityOne Commission and each CNA are signed.

    Recommendation: To promote greater accountability for program effectiveness, efficiency, and integrity, the Chairperson of the U.S. AbilityOne Commission should direct the AbilityOne Commission to enter into a written agreement with each CNA within reasonable established time frames, such as within 18 months. The agreements should establish key expectations for each CNA and mechanisms for the Commission to oversee their implementation and could cover, among other things: (1) expenditures of funds, (2) performance goals and targets, (3) governance standards and other internal controls to prevent fraud, waste, and abuse, (4) access to data and records, (5) consequences for not meeting expectations, and (6) provisions for updating the agreement.

    Agency Affected: U.S. AbilityOne Commission

  2. Status: Open

    Comments: Because this recommendation applies only if the AbilityOne Commission is unable to successfully enter into written agreements with the CNAs, we will update its status closer to December 2015, which is the date that the Commission expects to have signed written agreements with each CNA.

    Recommendation: If the Commission is unable to enter into such a written agreement with either CNA, the Commission should take steps to designate a CNA that is willing to enter into such an agreement or seek legislation that would require such an agreement as a prerequisite to designation as a CNA.

    Agency Affected: U.S. AbilityOne Commission

  3. Status: Open

    Comments: In August 2014, AbilityOne Commission officials stated that they continue to implement this recommendation by, among other things, meeting with the CNAs to develop a solution and draft a new policy. We will close this recommendation when the new policy is in place that requires the CNAs to provide the specific information.

    Recommendation: To further improve oversight and transparency in the AbilityOne Program, the Chairperson of the U.S. AbilityOne Commission should routinely obtain from the CNAs any audits and reports of alleged misconduct or other internal controls violations, and information on corrective actions taken by the CNAs.

    Agency Affected: U.S. AbilityOne Commission

  4. Status: Open

    Comments: In August 2014, AbilityOne Commission officials stated that they continue to implement this recommendation by revising their CNA project assignment policy and developing review protocols to determine CNA compliance with the revised policy. They also stated that they will conduct an evaluation study of how CNAs assign projects if Congress funds it in FY 2015 or beyond. We will close this recommendation when the Commission distributes its revised policy and review protocols.

    Recommendation: To further improve oversight and transparency in the AbilityOne Program, the Chairperson of the U.S. AbilityOne Commission should take additional action to better ensure that the CNAs' processes of assigning projects to affiliated agencies result in a transparent and equitable distribution. Such action could include one or more of the following (1) further developing its policy to specify procedures CNAs should follow to ensure equity and transparency in project assignment decisions, (2) developing protocols for how the Commission will review CNA project assignment procedures to ensure their alignment with the Commission's policy, or (3) performing a study to determine if and how the distribution of projects among affiliates affects the number of jobs for people who are blind or have severe disabilities.

    Agency Affected: U.S. AbilityOne Commission

  5. Status: Open

    Comments: In August 2014, AbilityOne Commission officials stated that they continue to implement this recommendation by, among other things, revising Commission pricing manuals, developing internal written procedures for how to review CNA pricing packages, and meeting with the CNAs to discuss price submissions. We will close this recommendation when the Commission completes its revision of its pricing policies and internal procedures for reviewing pricing packages.

    Recommendation: To further improve oversight and transparency in the AbilityOne Program, the Chairperson of the U.S. AbilityOne Commission should develop more explicit and transparent written procedures for how Commission staff review pricing packages and clearly communicate these procedures to affiliates and the CNAs. Such communication might also highlight the most common reasons that pricing packages are rejected by Commission staff.

    Agency Affected: U.S. AbilityOne Commission

  6. Status: Open

    Comments: AbilityOne Commission officials stated in August 2014 that they instituted systematic fixes to price change procedures and revised pricing notices that AbilityOne customers and CNAs receive. In 2015, the Commission plans to continue implementing GAO's recommendation by revising Federal Acquisition Regulations (FAR) dealing with pricing in the AbilityOne programs and continuing to hold workshops with CNAs around pricing. We will close this recommendation when the Commission finalizes its actions.

    Recommendation: To further improve oversight and transparency in the AbilityOne Program, the Chairperson of the U.S. AbilityOne Commission should require the CNAs to provide current pricing information to enable the Commission to better identify instances when current prices differ from approved prices.

    Agency Affected: U.S. AbilityOne Commission

 

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