This is the accessible text file for GAO report number GAO-11-41 
entitled 'Intragovernmental Revolving Funds: NIST's Interagency 
Agreements and Workload Require Management Attention' which was 
released on October 20, 2010. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to the Subcommittee on Commerce, Justice, Science, and Related 
Agencies, Committee on Appropriations, House of Representatives: 

United States Government Accountability Office:
GAO: 

October 2010: 

Intragovernmental Revolving Funds: 

NIST's Interagency Agreements and Workload Require Management 
Attention: 

GAO-11-41: 

GAO Highlights: 

Highlights of GAO-11-41, a report to the Subcommittee on Commerce, 
Justice, Science, and Related Agencies, Committee on Appropriations, 
House of Representatives. 

Why GAO Did This Study: 

GAO previously found that a significant portion of the National 
Institute of Standards and Technology’s (NIST) working capital fund 
contained a growing carryover balance. Almost all of the fund’s 
resources come from appropriations advanced from federal clients for 
NIST’s technical services through interagency agreements. Monitoring 
and tracking key information about agreements and the funds advanced 
for them is critical for both NIST and its clients to make well-
informed budget decisions, comply with applicable fiscal laws and 
internal controls, and ensure the proper use of federal funds. GAO was 
asked to review (1) the factors contributing to the working capital 
fund’s carryover balance and (2) NIST’s processes for managing its 
interagency agreements and workload. To do so, GAO reviewed laws and 
fiscal requirements, analyzed NIST budget data and policies related to 
its interagency agreements, analyzed a random sample of agreements, 
and interviewed NIST officials. 

What GAO Found: 

NIST’s working capital fund carryover balance is largely driven by 
appropriations advanced from federal clients to support interagency 
agreements. Most agreements cross fiscal years and because more than 
half were accepted in the second half of the fiscal year, some 
carryover of funds and work is expected. 

NIST’s processes for managing agreements are insufficient to help 
ensure compliance with applicable fiscal laws. 

* NIST does not monitor the period of availability of appropriations 
advanced from client agencies and therefore cannot be sure that funds 
are legally available when it bills against them. If NIST were to use 
funds after an account closes, its clients could be exposed to 
possible Antideficiency Act violations. GAO found two reasons for 
this. First, NIST treats these funds as being available without fiscal 
year limitation. Second, NIST does not manage agreements in a way that 
would allow it to monitor the availability of client advances. 

* NIST does not ensure that it starts work on its agreements within a 
reasonable amount of time after client agencies advance funds to NIST. 
Long delays in starting work may lead to the improper use of 
appropriated funds. There is no governmentwide standard for a 
reasonable time in which to begin work. NIST has not considered such a 
standard for itself, but some agencies use 90 days as a general guide. 
NIST took, on average, an estimated 125 days to start work. Further, 
GAO estimates that NIST began work about 7 months after receiving 
funds advanced from clients for about half of its agreements. In some 
cases the delay was 1–2 years. There were several reasons for this, 
including that NIST does not record or monitor the date it begins work 
on agreements, and does not consider whether it has the appropriate 
resources agencywide before accepting new work. 

NIST lacks a high-level, senior management focus on managing its 
interagency agreement workload. Strategic workforce planning requires 
the effective deployment of staff to achieve agency goals. NIST places 
a high priority on its interagency agreements; however, senior 
managers play no role in determining whether appropriate resources are 
available agencywide to support its workload. Further, although NIST 
shares responsibility with its federal clients for ensuring the proper 
use of appropriated funds, it does not sufficiently communicate 
important information to clients—such as when work is expected to 
begin on agreements—that would better inform client decisions about 
how to best use their funds. Absent strategic workload management and 
improved client communications, NIST cannot meet the needs of this 
high-priority area. As a result of our review, NIST began revising its 
interagency agreement process. Because NIST did not provide this 
information to GAO until after the review was complete, GAO was unable 
to determine the effect of those changes. 

What GAO Recommends: 

GAO is making 5 recommendations to improve NIST’s management of its 
interagency agreements, including holding senior managers responsible 
for strategic workload management, improving internal monitoring and 
reporting, ensuring compliance with applicable fiscal laws, and 
communicating key information to clients on its agreement status. NIST 
agreed with all 5 recommendations and is taking action to implement 
them by the end of this fiscal year. 

View [hyperlink, http://www.gao.gov/products/GAO-11-41] or key 
components. For more information, contact Denise M. Fantone at (202) 
512-6806 or fantoned@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Unfinished Interagency Agreements Significantly Contribute to NIST's 
Working Capital Fund Carryover Balance: 

NIST's Management Practices Related to Interagency Agreements Do Not 
Ensure Compliance with Applicable Fiscal Laws: 

NIST Lacks Strategic Workload Management and Client Focus for Its 
Interagency Agreements: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Proposed Changes to NIST's Interagency Agreement Process: 

Appendix II: Simple Random Sample of Interagency Agreements: 

Appendix III: Comments from the National Institute of Standards and 
Technology: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: NIST's Working Capital Fund Serves Four Primary Functions: 

Table 2: The Carryover Balance Is a Significant Portion of NIST's 
Working Capital Fund: 

Table 3: Interagency Agreements Constitute a Large Portion of NIST's 
Carryover Balance: 

Table 4: NIST Accepted Most of Its Agreements in the Second Half of 
the Fiscal Year: 

Table 5: NIST Took at Least 90 Days to Begin Work for Almost Half of 
All Agreements: 

Figures: 

Figure 1: NIST Is Comprised of 12 Operating Units: 

Figure 2: Use of the Working Capital Fund in Fiscal Year 2009: 

Figure 3: Unfinished Work Contributes to the Working Capital Fund's 
Carryover Balance: 

Figure 4: NIST Manages by Project, Which Can Include Multiple 
Agreements: 

Abbreviation: 

Commerce: Department of Commerce: 

NIST: National Institute of Standards and Technology: 

SRM: Standard Reference Material®: 

TAS: Treasury Account Symbol: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

October 20, 2010: 

The Honorable Alan B. Mollohan: 
Chairman: 
The Honorable Frank R. Wolf: 
Ranking Member: 
Subcommittee on Commerce, Justice, Science, and Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

As the leading scientific research agency of the federal government, 
the National Institute of Standards and Technology (NIST) plays a key 
role in supporting new technologies that will shape life in the 21st 
century. In line with the President's recent emphasis on scientific 
discovery, technological breakthroughs, and innovation, NIST enhances 
the nation's capacity for strengthening cybersecurity, developing 
clean energy technologies, revitalizing the manufacturing base, as 
well as helping to ensure air and water quality. Additionally, NIST's 
staff--almost 3,000 scientists, including three Nobel Laureates--
perform technical work for other federal agencies, as well as state 
and local governments and the private sector. 

In our review of the President's fiscal year 2009 budget request for 
NIST, we identified a generally increasing carryover balance in its 
working capital fund. Carryover is the reported dollar value of work 
that has been ordered and funded (obligated) by clients but not 
completed by the end of the fiscal year. Carryover consists of both 
the unfinished portion of work started but not completed, as well as 
accepted work that has not yet begun. The working capital fund largely 
comprises appropriations advanced from other federal agencies to 
reimburse NIST for its technical services. The payment terms for these 
services are generally documented in interagency agreements between 
NIST and its federal clients. Managing and monitoring key information 
associated with interagency agreements between federal agencies and 
the funds advanced to support these agreements is critical for both 
NIST and client agencies.[Footnote 1] This information supports NIST's 
ability to make well-informed budget decisions as well as helps to 
ensure its compliance with applicable fiscal laws and federal internal 
controls. You asked us to provide information on (1) what factors have 
contributed to the carryover balance in NIST's working capital fund 
and (2) the processes by which NIST manages its interagency agreements 
and workload. 

For the first objective, we reviewed relevant legislation and 
statutory authorities that govern the working capital fund, as well as 
analyzed budget, financial, and workload data. We examined NIST data 
on interagency agreements, documents, guidance, and policies related 
to its working capital fund, as well as relevant budget documents from 
fiscal years 2000 to 2010. We also referred to our prior work on 
intragovernmental revolving funds and to related Department of 
Commerce (Commerce) Inspector General reports. 

To evaluate NIST's processes for managing interagency agreements, we 
identified and reviewed NIST's responsibilities as the performing 
agency entrusted with the client agency's appropriated funds as 
described in relevant fiscal laws as well as U.S. Comptroller General 
decisions and opinions. We also reviewed aspects of the financial 
management system that NIST uses to track and manage these agreements. 
In August 2010, NIST officials told us that they began changing the 
processes for managing interagency agreements. The processes we 
discuss in this letter were in effect for the agreements in our review 
time frames. See appendix I for a description of draft changes to 
NIST's processes. 

To assess NIST's processes for managing its workload, we analyzed 
NIST's interagency agreement data and identified 354 interagency 
agreements with performance periods of 1 or more fiscal years that 
began after October 1, 2004 and ended on or before September 30, 2009. 
[Footnote 2] Because the NIST financial system does not include when 
NIST started work on its agreements, we drew a random sample of 76 
agreements from the population of 354 agreements to determine when 
NIST began work.[Footnote 3] To do so, we reviewed and verified all 
transactions associated with 76 agreements to identify the time and 
amount of NIST's first charge--reflecting the beginning of NIST work-- 
in support of each of these agreements. We also conducted case-file 
reviews for a nongeneralizable sample of 11 out of the 76 agreements. 
[Footnote 4] See appendix II for more information on the design and 
analysis of the random sample. 

We interviewed senior staff from NIST's budget and finance divisions 
as well as those from selected NIST laboratories, including Operating 
Unit Directors, Administrative Officers, and Senior Management 
Advisors. Finally, to assess the reliability of interagency agreement 
data from NIST's financial system, we (1) performed electronic testing 
of data elements, (2) reviewed existing information about the data and 
the system that produced them, and (3) interviewed agency officials 
knowledgeable about the data. We determined that the data were 
sufficiently reliable for the purposes of this report. 

We conducted our review between July 2009 and October 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

NIST's Mission, Organization, and Working Capital Fund: 

NIST serves as the focal point for conducting scientific research and 
developing measurements, standards, and related technologies in the 
federal government. NIST carries out its mission through 12 research 
and development laboratories (also known as Operating Units). See 
figure 1 for NIST's organizational chart. In 1950, Congress 
established NIST's working capital fund, giving it broad statutory 
authority to use the fund to support any activities NIST is authorized 
to undertake as an agency. 

Figure 1: NIST Is Comprised of 12 Operating Units: 

[Refer to PDF for image: illustration] 

Office of the Director: 
28 administrative offices and divisions, including budget and finance. 

12 Operating Units: 

Building and Fire Research Laboratory (3 divisions); 

Chemical Science and Technology Laboratory (6 divisions); 

Electronics and Electrical Engineering Laboratory (4 divisions); 

Information Technology Laboratory (6 divisions); 

Manufacturing Engineering Laboratory (5 divisions); 

Physics Laboratory (6 divisions); 

Technology Services (4 divisions); 

Materials Science and Engineering Laboratory (4 divisions); 

NIST Center for Neutron Research (No divisions); 

Center for Nanoscale Science and Technology (No divisions); 

Technology Innovation Program (No divisions); 

Manufacturing Extension Partnership Program (No divisions). 

Source: GAO analysis based on NIST document. 

Note: NIST has a different organizational structure, effective October 
1, 2010. 

[End of figure] 

NIST's working capital fund is a type of intragovernmental revolving 
fund. These funds--which include franchise, supply, and working 
capital funds--finance business-like operations. An intragovernmental 
revolving fund charges for the sale of products or services it 
provides and uses the proceeds to finance its operations. See table 1 
for the NIST working capital fund's four purposes and the funding 
sources that support those uses. 

Table 1: NIST's Working Capital Fund Serves Four Primary Functions: 

Working capital fund purpose: Receiving advances in support of 
interagency agreements; 
Funding: Funds appropriated to client agencies and advanced to NIST 
pursuant to interagency agreements. 

Working capital fund purpose: Supporting calibrations and testing 
services as well as the sales of Standard Reference Material[®] 
provided to the public and private institutions[A]; 
Funding: Service fees. 

Working capital fund purpose: Supporting agency equipment investments; 
Funding: Transfer of NIST appropriations authorized for this purpose 
into the working capital fund. 

Working capital fund purpose: Supporting NIST administrative and 
overhead costs[B]; 
Funding: Amounts charged to NIST's various internal project accounts. 

Source: GAO analysis of NIST working capital fund documents. 

[A] NIST supports accurate and compatible measurements by certifying 
and providing over 1,300 Standard Reference Materials® (SRM) with well-
characterized composition or properties, or both. SRMs are used to 
perform instrument calibrations in units as part of overall quality 
assurance programs, to verify the accuracy of specific measurements, 
and to support the development of new measurement methods. Industry, 
government, and academia use SRMs in areas such as industrial 
materials production and analysis, environmental analysis, health 
measurements, and basic measurements in science and metrology. 

[B] According to officials, NIST uses intraagency surcharges to 
distribute administrative and overhead costs. 

[End of table] 

In fiscal year 2009, nearly 70 percent of NIST's working capital fund 
was related to interagency agreements (see figure 2). Almost all of 
NIST's federal clients advanced funds to NIST for those agreements. 
Client agency advances to the working capital fund cannot be earned 
until NIST begins work on the agreement and retain the period of 
availability from the original appropriation.[Footnote 5] Once NIST 
earns those amounts, receipts and collections are available to NIST 
without fiscal year limitation. 

Figure 2: Use of the Working Capital Fund in Fiscal Year 2009: 

[Refer to PDF for image: pie-chart] 

Advanced funds for interagency agreements: 69% ($117 million); 
Equipment calibrations, testing, advisory services, and Standard 
Reference Material® (SRM) reproduction: 29% ($50 million); 
Agency equipment investments: 2% ($3 million). 

Source: GAO analysis of NIST data. 

Note: These are the major uses associated with the working capital 
fund as identified in NIST’s budget documents. NIST administrative and 
overhead cost distribution among laboratories is not included in this 
figure. 

[End of figure] 

NIST's Interagency Agreement Acceptance Process: 

NIST's interagency agreements with federal clients originate in many 
ways, including through congressional mandates and client requests. 
NIST has established criteria for accepting requests for work from 
client agencies, which include: (1) the need for traceability of 
measurements to national standards; (2) the need for work that cannot 
or will not be addressed by the private sector; (3) work supported by 
legislation that authorizes or mandates certain services; and (4) work 
that would result in an unavoidable conflict of interest if carried 
out by the private sector or regulatory agencies. Operating Unit 
Directors commit NIST to providing services to client agencies, while 
the Deputy Chief Finance Officer accepts the order. Upon acceptance, 
the finance division and NIST's Office of General Counsel takes steps 
to process, monitor, and close-out each agreement.[Footnote 6] 

Unfinished Interagency Agreements Significantly Contribute to NIST's 
Working Capital Fund Carryover Balance: 

The Working Capital Fund's Carryover Balance Is Largely Driven by 
Pending and Ongoing Work Associated with Interagency Agreements: 

The carryover balance in NIST's working capital fund is largely driven 
by pending and ongoing work associated with interagency agreements as 
well as work for which NIST has accepted advanced funds but not yet 
started. In fiscal year 2009, NIST carried forward $120 million to 
fiscal year 2010. This amounts to 41 percent of the working capital 
fund's total resources, down from a high of 51 percent (see table 2). 
However, because NIST does not monitor its interagency agreement 
workload it was unsure what factors have led to a decline in the last 
two years. 

Table 2: The Carryover Balance Is a Significant Portion of NIST's 
Working Capital Fund: 

Carryover balance: 
Fiscal year 2004: $125 million; 
Fiscal year 2005: $155 million; 
Fiscal year 2006: $132 million; 
Fiscal year 2007: $141 million; 
Fiscal year 2008: $124 million; 
Fiscal year 2009: $120 million. 

Total working capital fund resources: 
Fiscal year 2004: $291 million; 
Fiscal year 2005: $305 million; 
Fiscal year 2006: $321 million; 
Fiscal year 2007: $310 million; 
Fiscal year 2008: $296 million; 
Fiscal year 2009: $291 million. 

Carryover as a percentage of total working capital fund resources: 
Fiscal year 2004: 43%; 
Fiscal year 2005: 51%; 
Fiscal year 2006: 41%; 
Fiscal year 2007: 45%; 
Fiscal year 2008: 42%; 
Fiscal year 2009: 41%. 

Source: GAO analysis of NIST and Office of Management and Budget data. 

[End of table] 

Specifically, funds from interagency agreements constituted between 71 
to 89 percent of the working capital fund's carryover balance from 
fiscal years 2004 to 2009; in fiscal year 2009, it was 71 percent--the 
lowest over the 6-year period (see table 3). Again, NIST officials 
were unsure about the reasons for the decline in this balance. 

Table 3: Interagency Agreements Constitute a Large Portion of NIST's 
Carryover Balance: 

Carryover from interagency agreement advances: 
Fiscal year 2004: $95 million; 
Fiscal year 2005: $128 million; 
Fiscal year 2006: $118 million; 
Fiscal year 2007: $117 million; 
Fiscal year 2008: $97 million; 
Fiscal year 2009: $85 million. 

Total working capital fund carryover balance: 
Fiscal year 2004: $125 million; 
Fiscal year 2005: $155 million; 
Fiscal year 2006: $132 million; 
Fiscal year 2007: $141 million; 
Fiscal year 2008: $124 million; 
Fiscal year 2009: $120 million. 

Interagency agreement carryover as a percentage of total working 
capital fund carryover: 
Fiscal year 2004: 76%; 
Fiscal year 2005: 83%; 
Fiscal year 2006: 89%; 
Fiscal year 2007: 83%; 
Fiscal year 2008: 78%; 
Fiscal year 2009: 71%. 

Source: GAO analysis of NIST budget data. 

[End of table] 

NIST's budget documents refer to the interagency agreement carryover 
balance as unobligated because it is for unfinished work that NIST has 
not yet earned.[Footnote 7] However, client agencies are to record an 
obligation against their own appropriation when they entered into the 
agreement with NIST. Therefore, that balance is only available to NIST 
for work on that agreement.[Footnote 8] See figure 3 for an 
illustration of how unfinished work on interagency agreements 
contributes to the working capital fund carryover balance. 

Figure 3: Unfinished Work Contributes to the Working Capital Fund's 
Carryover Balance: 

[Refer to PDF for image: illustration] 

Congress appropriates funds to client agencies. 

Client agencies obligate their appropriations and advance funds to NIST
in support of interagency agreement work. 

NIST’s working capital fund receives advances from client agencies for
interagency agreement work: 

1. NIST performs work for client agencies (begins to incur costs for 
labor, materials, etc.). 

2. NIST bills incurred costs against client advances. 

Carryover balance (unfinished and pending work): 

Made up of client advances that NIST has not yet earned because work 
on the agreement is still ongoing or has not yet started. 

Source: GAO. 

[End of figure] 

Some Carryover Is Expected Because Most Interagency Agreements Cross 
Fiscal Years: 

Some carryover in the working capital fund can be expected given the 
basic characteristics of NIST's interagency agreements. Ninety-three 
percent of all NIST agreements had a period of performance of more 
than 1 fiscal year between fiscal years 2004 to 2009. Accordingly, 
work associated with those agreements will not be completed within a 
single fiscal year. By definition, unearned amounts associated with 
these agreements would be carried over to the next fiscal year. As 
such, 82 percent of the active agreements in fiscal year 2009 
generated carryover balances. 

The timing of when NIST accepts new work also affects the carryover 
balances in the working capital fund. NIST accepts most of its 
agreements in the second half of the fiscal year. Further, since most 
agreements cross fiscal years, many are also likely to extend into the 
next fiscal year. Table 4 shows that 63 percent of all new agreements 
between fiscal years 2004 to 2009 were accepted during the second half 
of the fiscal year. 

Table 4: NIST Accepted Most of Its Agreements in the Second Half of 
the Fiscal Year: 

Number of agreements: 
Quarter 1: 65; 
Quarter 2: 69; 
Quarter 3: 91; 
Quarter 4: 130; 
Total: 355. 

Percentage of total: 
Quarter 1: 18%; 
Quarter 2: 19%; 
Quarter 3: 26%; 
Quarter 4: 37%; 
Total: 100%. 

Source: GAO analysis of NIST data on interagency agreements from 
fiscal years 2004 to 2009. 

[End of table] 

NIST's Management Practices Related to Interagency Agreements Do Not 
Ensure Compliance with Applicable Fiscal Laws: 

NIST Lacks Processes to Ensure It Complies with the Time Limitations 
of Advanced Funds: 

Our previous work has established that a high carryover in working 
capital funds may indicate poor workload planning, which could lead to 
inefficient use of agency resources and missed opportunities to use 
those funds for other needs.[Footnote 9] Significant carryover 
balances may also reflect a situation in which the performing agency 
is using appropriations advanced in prior years to support an 
interagency agreement when the funds are no longer legally available. 

NIST does not monitor the period of availability of appropriations 
advanced from client agencies; therefore, it cannot ensure that funds 
are legally available for obligation when it bills against them. 
[Footnote 10] Client advances to the working capital fund that have 
not yet been earned retain the period of availability from the 
original appropriation. Those advances are available to NIST for 
covering costs of performance under the agreement during the 
appropriation's period of availability plus 5 fiscal years, regardless 
of the specified period of performance for an agreement.[Footnote 11] 
After this time, those amounts are canceled by operation of law and 
are no longer available to cover NIST's costs.[Footnote 12] In other 
words, NIST cannot liquidate, or bill against, these funds after the 
account closes.[Footnote 13] If NIST were to use funds after the 
account closes, the client agency would be required to transfer 
currently available funds to NIST. If the client does not have such 
funds available, they could be exposed to possible Antideficiency Act 
violations.[Footnote 14] 

In our case-file review of 11 agreements, we found instances where 
NIST could potentially be billing against closed accounts because it 
does not monitor the dates that funds expire and become canceled. Ten 
of these agreements remain open and active in NIST's financial system. 
[Footnote 15] NIST officials told us that the system prevents an 
agreement from being closed and deemed inactive if there are any 
outstanding transactions. Further, they said that some of those 
agreements may have outstanding undelivered orders that need to be 
resolved. However, if the funds advanced in support of these 
agreements are time-limited, it is possible that they are legally 
unavailable to NIST for further billing. We found the expiration date 
of funds advanced to NIST in the paper files of 3 agreements and were 
therefore able to determine their legal availability. For the other 8 
agreements, however, NIST lacked the necessary information to allow it 
to determine the legal availability of funds without requesting 
specific appropriation information from NIST's client agencies--
agencies that were not included in the scope of our review. 

NIST shares responsibility with its client agencies to ensure the 
proper use of federal funds when entering into interagency agreements. 
NIST finance officials told us that expiration and account closing 
dates of appropriations were not available to them. However, NIST's 
policies require that all interagency agreements state the Treasury 
Account Symbol (TAS), from which the period of availability of 
appropriated funds could be determined.[Footnote 16] We found that 
most of the hard-copy agreement files we reviewed included such an 
appropriation code. 

We found three reasons why NIST does not electronically record or 
monitor the period of availability of appropriations advanced from 
client agencies. First, NIST treats all client advances as if they are 
free from the original appropriation's period of availability. Second, 
NIST manages agreements by period of performance, which can be 
different from the client appropriation's period of availability. 
Third, NIST does not manage at the agreement level--the legal level of 
control. Rather, it manages at the project level, which can include 
multiple agreements. 

NIST officials treat funds advanced for agreements accepted under 
NIST's statutory authority as no-year funds; that is, free from the 
time period of availability associated with the original 
appropriation. This policy is contained in NIST's Administrative 
Manual and is based on an interpretation of Commerce policy described 
in a 1983 legal memo. When we sought clarification on this policy in 
January 2010, Commerce's Office of General Counsel clarified the 
interpretation of the legal memo and responded that it is revising its 
policy and working with NIST to revise the Administrative Manual in 
response to our inquiry. As we will discuss, NIST officials provided 
additional details on these efforts in August 2010. Further, NIST 
manages agreements by period of performance, which can be different 
from the client appropriation's period of availability. The period of 
performance is defined by the start and end dates of the agreement. 
However, appropriations acts determine the period of availability of 
appropriations. 

Lastly, NIST manages the technical work it performs for client 
agencies and bills and records transactions through projects.[Footnote 
17] NIST officials explained that they manage by project because it 
allows them to track and monitor related agreements together. However, 
client agencies advance funds to NIST based on the terms and amounts 
specified in interagency agreements, which is the legal level of 
control. Although most projects relate to a single agreement, some 
projects comprise multiple agreements (see figure 4). For example, 
related agreements from a client agency are sometimes grouped together 
under an umbrella project. Occasionally, NIST combines several related 
agreements from different clients under a consortium project. 

Figure 4: NIST Manages by Project, Which Can Include Multiple 
Agreements: 

[Refer to PDF for image: illustration] 

Most projects have only one agreement associated with them: 

Agreement with client agency A: 
Project 1. 

“Umbrella” agreements: Multiple agreements with the same client are
associated with one project: 

Agreement with client agency B: 
Agreement with client agency B: 
Project 2. 

“Consortium” or shared agreements: Multiple agreements with different 
clients are associated with one project: 

Agreement with client agency C:
Agreement with client agency D: 
Agreement with client agency E: 
Project 3. 

Source: GAO. 

[End of figure] 

As a result of our review, Commerce is working with NIST to review and 
revise policies described in the Administrative Manual and processes 
related to interagency agreements. In August 2010, NIST officials told 
us that they have begun to identify and resolve issues related to the 
interagency agreement process, including drafting templates and 
checklists for interagency agreements. The Commerce Office of General 
Counsel has begun communicating these changes to NIST staff through 
training sessions and town hall meetings. However, because we did not 
receive this information until after we completed our review, we were 
unable to determine what effect the changes may have on NIST's 
interagency agreement process. See appendix I for more information 
about these changes. 

NIST Does Not Monitor Interagency Agreements to Ensure that Work 
Begins within a Reasonable Time: 

NIST does not record or monitor whether it begins working on 
agreements within a reasonable amount of time after it received funds 
advanced by client agencies. Performing agencies should begin work 
within a reasonable period of time to ensure that the use of a client 
agency's funds fulfill a bona fide need of the client arising during 
the fund's period of availability.[Footnote 18] That is, 
appropriations may be obligated only to meet a legitimate need, 
arising in--or in some cases, arising prior to but continuing to exist 
in--the fiscal years for which the appropriation was made. Long delays 
between when an agency accepts funds advanced from clients and when it 
begins work on its agreements may lead to the improper use of 
appropriated funds. Although client agencies bear ultimate 
responsibility for proper use of their funds, performing agencies 
share responsibility as well. Because NIST, as the performing agency, 
does not record or monitor when work begins on its agreements, it 
would be difficult for it to carry out this responsibility. 

There is no governmentwide standard for a reasonable time period for 
performing work under an interagency agreement as it relates to a 
client agency's bona fide need. A reasonable time frame depends on the 
nature of the work to be performed and any associated requirements 
such as hiring a subcontractor or developing a specialized tool or 
machinery. Although neither Commerce nor NIST has established such a 
standard, other federal agencies have done so. For example, both the 
General Services Administration and the Department of Defense consider 
90 days as a reasonable period of time for starting work.[Footnote 19] 
Because NIST has not considered what a reasonable standard for 
starting its work might be, we use 90 days as a point of reference for 
the purposes of this report. We recognize that if NIST were to 
consider a standard time frame for starting work, it may not 
necessarily select 90 days. 

We estimate that NIST took, on average, 125 days to begin work on its 
interagency agreements in fiscal years 2004 through 2009.[Footnote 20] 
We also estimate that work began for almost half of all agreements at 
least 90 days after NIST received funds advanced from client agencies. 
For these agreements, NIST waited an average of 226 days--or over 7 
months--before beginning work (see table 5). We also found some 
agreements that were delayed for as long as 301, 464, 669, and 707 
days.[Footnote 21] 

Table 5: NIST Took at Least 90 Days to Begin Work for Almost Half of 
All Agreements: 

Work began 90 days or less after funds were advanced to NIST: 
Percentage of agreements: 58%; 
Average number of days it took NIST to begin work: 51[A]. 

Work began more than 90 days after NIST received advanced funds: 
Percentage of agreements: 42%; 
Average number of days it took NIST to begin work: 226[B]. 

All agreements: 
Percentage of agreements: 100%; 
Average number of days it took NIST to begin work: 125[C]. 

Source: GAO analysis of NIST billing data for interagency agreements. 

Note: The figures in this table are estimates. Unless otherwise 
indicated, the margin of error for percent estimates based on this 
survey cited in the report are within ±12 percentage points at the 95 
percentage point confidence level. 

[A] The 95 percent confidence interval for this estimate is within ±7 
days. 

[B] The 95 percent confidence interval for this estimate is within ±52 
days. 

[C] The 95 percent confidence interval for this estimate is within ±30 
days. 

[End of table] 

Failure to begin work in a reasonable period of time raises legitimate 
questions about whether the client's order fulfills a bona fide need 
of the client agency. Long gaps between when NIST accepts advanced 
funds and when it begins work on agreements may lead to NIST using 
funds that are no longer legally available. Further, client agencies 
may incur opportunity costs associated with funds advanced to NIST 
that remain untapped for a prolonged period of time. 

Because determining whether work began within a reasonable period of 
time depends on specific facts, we reviewed 11 agreements in more 
depth to better understand why work was delayed in some instances. In 
one case, NIST did not begin work on an agreement it entered into in 
December 2006 until October 2007--over 300 days later. NIST officials 
explained that staff who could perform the work could not start 
earlier because they were working on other projects. This suggests 
that NIST did not assess whether it had appropriate resources 
available before accepting the agreement. In another case, NIST said 
that it took over 260 days to establish a relationship with the 
National Cancer Institute and coordinate work plans with nine NIST 
divisions before work could begin for an agreement. Assessing whether 
it has appropriate resources available before accepting an agreement 
is critical, because long gaps between when NIST accepts advanced 
funds from clients and when it begins work raises concerns about 
whether an agreement reflects a bona fide need of the client agency, 
and may lead to an improper use of appropriated funds and, as such, 
noncompliance with fiscal law. 

We found two reasons why NIST does not know whether it begins work 
within a reasonable period of time. First, the start date in NIST's 
financial system--the system NIST uses to track its interagency 
agreements--does not reflect when work actually begins on an 
agreement. According to finance division officials, NIST tracks the 
date that it enters into an agreement with a client agency; however, 
we found that this is usually not the date that work actually begins. 
NIST also does not electronically track or monitor the date it 
received funds advanced from client agencies. Without monitoring the 
amount of time that elapsed between when funds were advanced and when 
work actually began, NIST cannot know whether it is starting work 
within a reasonable period of time. 

Second, because NIST manages by project instead of by agreement, it 
does not record information about agreements that is important for 
knowing whether work begins within a reasonable period of time. For 
example, billing information is only tracked at the project level and 
cumulatively by fiscal year. When we requested the individual charges 
for each agreement to analyze when work began, NIST said it does not 
manage or review billing information that way and had to create a 
special report. Accordingly, NIST could not provide any billing data 
for umbrella projects (see figure 4 above). Each agreement is funded 
by different appropriations and may be conducted under unique 
authorities and circumstances. Absent information on billed costs at 
the agreement level, NIST cannot determine whether it is starting work 
within a reasonable period of time given the facts of each particular 
agreement. 

Some Interagency Agreement Files Were Incomplete or Contained 
Incorrect Information: 

In our case file review, we found that some of NIST's interagency 
agreements were incomplete or included incorrect information. Federal 
internal control standards require that transactions be properly 
authorized and executed, recorded timely, and documented 
appropriately.[Footnote 22] Absent these types of robust internal 
controls, NIST cannot provide reasonable assurance that it is 
efficiently using its resources and complying with applicable fiscal 
laws. 

Some agreement files we reviewed lacked documentation of information 
needed to provide a complete and accurate record of the agreement as 
well as transactions between NIST and client agencies. For example, we 
found instances where required documents were not included in the 
agreement files. One agreement file we reviewed did not include a 
statement of work. At the time NIST and the client agency enter into 
an interagency agreement, the client incurs an obligation for the 
costs of the work to be performed. However, to properly record an 
obligation, the client must have documentary evidence of a binding 
agreement between the 2 agencies for specific goods and services. 
[Footnote 23] In another example, only one of the agreements we 
reviewed documented how NIST handled unused funds that had been 
advanced in support of an agreement. Federal internal control 
standards require clear documentation of all transactions and 
significant events.[Footnote 24] Moreover, NIST's processes for 
closing out completed agreements require it to return unused funds if 
they are greater than $1,000 to the client.[Footnote 25] Absent clear 
authority, NIST may not write off any amount of unearned funds to the 
working capital fund. 

We also found agreement files that incorrectly recorded the dates of 
when funds were advanced to NIST from client agencies. One file showed 
that NIST accepted advanced funds before a formal interagency 
agreement with the agency was in place. Federal agencies are 
prohibited from transferring funds for an interagency transaction like 
orders placed with NIST without a binding legal agreement. When we 
asked NIST finance officials to explain this, they said that the date 
was recorded in error and should be 1 year after the date indicated in 
the file. The corrected date would indicate that NIST accepted 
advanced funds after a binding agreement was in place; however, the 
error reflects an inaccurate record of this transaction. Federal 
internal control standards require an accurate recording of 
transactions to maintain their relevance to managers in controlling 
operations and making decisions.[Footnote 26] In another example, the 
file incorrectly recorded an advance as having been made 10 months 
later than the actual transaction date. 

NIST's Deputy Chief Financial Officer told us that NIST does not 
maintain a single consolidated file of all pertinent documents related 
to each agreement, and that such information is generally spread among 
files maintained by other Operating Units across the agency. Finance 
division officials explained that legal and financial documents are 
kept separately from program files, which are managed by scientists in 
the Operating Unit that accepted the agreement. While we recognize 
that program managers may also have a need to maintain separate files 
for their own purposes, absent complete, easily accessible agreement 
files, NIST will have difficulty monitoring and managing agreements in 
a manner consistent with applicable fiscal laws and federal internal 
control standards. 

NIST Lacks Strategic Workload Management and Client Focus for Its 
Interagency Agreements: 

NIST lacks a high-level, senior management focus on managing its 
interagency agreement workload. Effective workforce planning 
strategies help address an agency's mission and goals by making the 
best use of the government's most important resource--its people. A 
key principle of strategic workforce planning is the effective 
deployment of staff to achieve the agency's mission and goals. 
[Footnote 27] NIST places a high priority on its interagency 
agreements. However, NIST senior managers play no role in determining 
whether the appropriate resources are available agencywide to support 
its interagency agreement workload. 

NIST's decentralized workload acceptance process may contribute to 
NIST's having more work than it has the resources to handle. Division 
Chiefs--the officials generally responsible for accepting new work--do 
not fully consider resource constraints agencywide or include an 
assessment of whether NIST has the resources available to begin work 
within a reasonable period of time. Even though more than one division 
contributes staff or resources to over half of all agreements, 
Division Chiefs do not consult with other parts of NIST before 
accepting work. Therefore, even if the accepting division or Operating 
Unit has adequate resources to begin work within a reasonable time 
frame, NIST lacks assurance that the necessary resources are available 
agencywide. As previously mentioned, we found several instances where 
NIST delayed starting work on agreements because it did not have the 
available staff or resources to do the work. Poor use of NIST's staff 
and resources may also have potential legal implications for NIST and 
its clients, as previously discussed. Without strategically managing 
its workload, NIST cannot be sure that it is effectively managing this 
high-priority area. 

Although NIST shares responsibility with its federal clients for 
ensuring the proper use of appropriated funds, it does not 
sufficiently communicate to clients important information about the 
status of work and the use of these funds--information that would help 
its clients know whether their funds are being properly used. For 
example, it does not provide its clients with estimated work start 
dates for each agreement. Agencies strive to become high-performing 
service organizations by focusing on client satisfaction through 
sustaining high-quality and timely service.[Footnote 28] Although 
NIST's Administrative Manual discusses the need for a coordinator to 
serve as the principal contact with each client agency, officials told 
us this position does not exist nor does anyone currently perform 
those duties. Such a coordinator could communicate important 
information--including when NIST expects to begin work on agreements--
that would better inform client decisions about how best to use their 
appropriated funds. 

Conclusions: 

Funds advanced in support of interagency agreements are the biggest 
driver of the carryover balance in NIST's working capital fund. 
Although some carryover is to be expected, insufficient management of 
interagency agreements can lead to inefficient use of federal 
resources. NIST does not monitor the period of availability of 
appropriations advanced from client agencies and therefore cannot 
ensure that funds are legally available when it bills against them. If 
NIST were to use funds after the account closes, the client agency 
would be required to transfer currently available funds to NIST. 
Additionally, NIST does not track or monitor when it actually begins 
work on agreements, nor does it have a standard for what it considers 
a reasonable time frame for starting work. NIST's decentralized 
approach to accepting agreements results in no consideration given to 
whether the necessary resources exist agencywide to start work within 
a reasonable time frame. Further, our case-file review found 
agreements that were incomplete or included incorrect information. As 
such, NIST will have difficulty ensuring that it has entered into 
binding legal agreements and is managing them in a manner consistent 
with applicable fiscal laws and federal internal control standards. 
NIST and its client agencies have joint responsibility for ensuring 
that amounts advanced to NIST in support of NIST's technical service 
to federal clients are used in accordance with fiscal requirements; 
however, we found weaknesses in NIST's processes in these areas. For 
example, NIST lacks an identified legal basis for NIST's policy of 
writing off unearned funds less than $1,000. Absent improvements in 
how NIST tracks and monitors its interagency agreements, client 
agencies and the Congress will lack assurance that these requirements 
are being met. 

Although NIST designates interagency agreements as an agency priority, 
it lacks a strategic focus and oversight for how its resources are 
deployed in support of this important work. Further, NIST shares 
responsibility with its client agencies for ensuring the proper use of 
federal funds advanced to it. Because NIST does not monitor and 
communicate clearly and consistently the status and progress of its 
interagency agreements, both parties lack important information that 
would help ensure compliance with applicable fiscal requirements. 

Recommendations for Executive Action: 

To improve the management of NIST interagency agreements and provide 
reasonable assurance that NIST is efficiently using its resources and 
complying with applicable fiscal laws, we recommend that the Secretary 
of Commerce direct the NIST Director to take the following five 
actions: 

(1) To help ensure efficient, effective deployment of NIST's workforce 
and be a responsible steward of federal resources, hold senior 
management accountable for strategically managing its interagency 
agreements. This includes periodic senior management involvement in 
reviewing whether NIST has the appropriate resources to begin and 
perform new and existing work. 

(2) To meet its responsibilities in ensuring the proper use of federal 
funds, (a) develop, implement, and communicate to its clients policies 
regarding reasonable time frames for beginning work on interagency 
agreements; (b) track and monitor the work start date for each 
agreement; and (c) monitor and report internally, and periodically 
inform federal clients about, the amount of time elapsed between when 
funds were advanced to it from client agencies and when it actually 
began billing against an agreement. For example, NIST could provide 
estimated work start dates for each agreement based on agencywide 
resource considerations; devise a notification system that would 
indicate when work has not begun within a certain time frame and 
provide the date work actually began; or periodically provide clients 
with a report detailing the balance of unbilled funds as the account 
closing date approaches. 

(3) To help guard against the use of canceled appropriations, 
electronically record and monitor key information about the period of 
availability of appropriations advanced to NIST from client agencies. 

(4) To provide reasonable assurance that its interagency agreements 
are complete, accurate, and constitute a binding legal agreement, 
create, document, and implement a robust fiscal and legal review 
process for interagency agreements. This could include (a) developing 
and delivering periodic training to staff involved in accepting, 
processing, managing, and overseeing interagency agreements on how to 
appropriately accept, process, review, and monitor its interagency 
agreements and (b) maintaining complete, accurate, and easily 
accessible files for all agreements. 

(5) To comply with fiscal law, NIST should review its close-out 
policies regarding returning unearned funds to client agencies and 
adjust its accounts accordingly. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Director of NIST. The agency 
provided us with written comments which are summarized below and 
reprinted in appendix III. 

NIST concurred with our findings and all five of our recommendations. 
For each recommendation NIST described corrective actions it is 
taking. NIST expects to fully implement these actions by September 30, 
2011. NIST also provided technical comments which we incorporated in 
the report as appropriate. 

In its comments, NIST stated that it immediately began revising its 
interagency agreement operating procedures and related financial 
management policies and practices in response to Commerce's 
clarification of the policy on which these procedures were based. NIST 
said that it provided documentation on these policies and procedures 
for our review but that we did not examine them as a part of our 
audit. We note that Commerce clarified its policy in February 2010 and 
that NIST provided us with information about its proposed changes in 
August 2010 at the exit conference for this engagement. We responded 
that we would include the existence of the new policies in our report 
(see appendix I for a summary of these changes) but since NIST chose 
not to provide this information until the end of our review, we would 
be unable to determine what effect the new policies may have. 

NIST also stated that the 1983 legal opinion upon which the operating 
and financial policies of its interagency agreement were based has not 
been disputed until recently and that the propriety of its treatment 
of interagency agreement funding has never been in question. We note 
that a 2004 Commerce Office of Inspector General review of NIST 
questioned the 1983 Commerce opinion and raised numerous concerns 
regarding the agency's management of interagency agreements. 

We are sending copies of this report to the Secretary of Commerce, the 
NIST Director, and other interested parties. The report is available 
at no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 
If you or your staff have any questions regarding this report, please 
contact me at (202) 512-6806 or by e-mail at fFantonedD@gao.gov. 
Contact points for our Congressional Relations and Public Affairs may 
be found on the last page of this report. Major contributors to this 
report are listed in appendix IV. 

Signed by: 

Denise M. Fantone: 
Director Strategic Issues: 

[End of section] 

Appendix I: Proposed Changes to NIST's Interagency Agreement Process: 

In August 2010, the National Institute of Standards and Technology 
(NIST) provided information about the steps it is taking to improve 
the overall internal control of interagency agreements and funding it 
receives, as a result of our review. From March to May 2010, the 
Department of Commerce's (Commerce) Office of General Counsel, General 
Law Division, and NIST's Office of General Counsel reviewed all of 
NIST's interagency agreements. They conducted a legal review of all 
agreements, evaluated existing processes, and created new procedures 
through the development of checklists and interagency agreement 
templates. Further, NIST began to communicate these changes through 
town hall meetings and trainings with Operating Unit staff. 

NIST officials told us that Commerce is still reviewing these changes 
and they have not yet approved or finalized these processes. 
Nevertheless, our review of the interim trainings and draft documents 
indicate that NIST is taking steps to help ensure its interagency 
agreements comply with fiscal laws. Some changes include the following: 

* Documenting time limitations on the use of federal funds. NIST 
agreements are required to include the Treasury Account Symbol (TAS) 
code, which indicates the period of availability of appropriations. 
Draft agreement templates include a placeholder for both the TAS code 
and the date of expiration. Additionally, the review checklists 
specifically ask for the inclusion of this information. The expiration 
date should also be included in NIST's financial management system for 
tracking purposes. 

* Documenting NIST criteria for accepting work. NIST agreements are 
required to cite the specific authorization or criteria for entering 
into interagency agreements, as required by the agency's 
Administrative Manual. The draft review checklist also requires the 
inclusion of this justification in agreement files. 

* Clarifying the bona fide needs rule and its accounting implications. 
Commerce's trainings discuss the bona fide needs rule and how it 
applies to the different types of services that NIST provides. The 
training also provides information about the accounting implications 
of the bona fide needs rule as well as obligation requirements as it 
relates to this rule. 

* Clarifying the legal review process. The training materials preview 
a legal review process as well as specific roles and responsibilities 
for administering interagency agreements. Commerce's General Law 
Division is to document legal clearance for certain agreements through 
a concurrence memo that includes such information as the period of 
availability of funds advanced to NIST and programmatic authorities. 
Finance division and Operating Unit staff are also involved in the 
legal review process. 

[End of section] 

Appendix II: Simple Random Sample of Interagency Agreements: 

Because the National Institute of Standards and Technology (NIST) does 
not record when it began work on its interagency agreements, we 
determined the start date for a sample of its agreements. We drew an 
initial simple random sample of 80 agreements from NIST's 354 
interagency agreements with federal clients spanning more than 1 
fiscal year that began after October 1, 2003, and were completed by 
September 30, 2009.[Footnote 29] From this initial sample, cost 
information was not available for 16 records. We drew an additional 
sample of 15 agreements and achieved a target sample of 76 agreements. 
Three of the additional 15 records did not have cost information 
associated with them and therefore we did not include them in our 
analysis. 

We assessed the reliability of NIST's interagency agreement data by 
performing electronic testing of the data for missing data, outliers, 
and obvious errors; reviewing documentation from the system, such as 
screen shots and training materials; and interviewing knowledgeable 
agency officials about how primary users enter data into the system 
and the internal control steps taken by NIST to ensure data 
reliability. Given this information, we determined that the data were 
sufficiently reliable for the purposes of this report. 

For in-depth case-file reviews, we selected 11 agreements that did not 
begin in the fiscal year in which the agreement was accepted and work 
that (1) began more than 268 days after the agreement was signed 
(which represents the average time it took for NIST to begin work on 
agreements that did not begin in the fiscal year during which NIST 
accepted them); or (2) had a carryover balance greater than $1. 

[End of section] 

Appendix III: Comments from the National Institute of Standards and 
Technology: 

United States Department Of Commerce: 
National Institute Of Standards And Technology: 
Office Of The Director: 
Gaithersburg, Maryland 20899-0001: 

October 6, 2010: 
	
Ms. Denise M. Fantone: 
Director, Strategic Issues: 
United States Government Accountability Office: 
Washington, D.C. 20548: 

Dear Ms. Fantone: 

Thank you for the opportunity to comment on the draft report from the 
U.S. Government Accountability Office (GAO) entitled Intragovernmental 
Revolving Funds: NIST's Interagency Agreements and Workload Require 
Management Attention (GA0-11-41). 

It should be noted that NIST's interagency agreement operating 
procedures and related financial management policies and practices 
were based on a 1983 legal opinion which, until recently, has not been 
disputed. In addition, NIST has received unqualified audit opinions on 
its financial statements since the mid-1990s and the propriety of the 
bureau's treatment of interagency agreement funding has never been in 
question. 

Immediately upon learning that the 1983 opinion was no longer valid, 
NIST developed new policies and procedures for handling interagency 
agreements in collaboration with the Office of the Chief Counsel for 
NIST (OCC NIST) and the Department of Commerce's (DoC) General Law 
Division. Documentation of these policies and procedures were provided 
to the GAO team for review; however, they were not examined as a part 
of this audit. 

In addition to developing new procedures for interagency agreements, 
NIST, OCC NIST, and the DoC General Law Division provided training to 
all organizational units at NIST in order to inform and reinforce the 
new procedures for interagency agreements including acceptance, review 
and financial management operations. 

Additional detailed comments are provided regarding the enclosed 
document including three recommendations to add clarity and context to 
the facts presented in the report and specific comments regarding the 
five identified findings. 

We are looking forward to receiving your final report. Please contact 
Rachel Kinney on (301) 957-8707 should you have any questions 
regarding this response. 

We look forward to further communication with GAO regarding its 
conclusions. 

Sincerely, 

Signed by: 

Patrick Gallagher: 
Director: 

Enclosure: 

[End of letter] 

Department of Commerce: 

National Institute of Standards and Technology (NIST) Comments on the 
Draft Government Accountability Office Report Entitled 
"Intragovernmental Revolving Funds: NIST's Management of Interagency 
Agreements and Workload Require Management Attention" (GAO-11-41, 
October 2010): 

Recommended Additions for Clarity: 

Page 3, first paragraph: 

We recommend stating that NIST is using the Commerce Business System 
(CBS), which is the official DoC accounting system of record. This 
statement clarifies that it was not an intentional act on NIST's part 
to exclude the start work date in the system. 

Page 8, the paragraph preceding Table 2: 

We recommend amplifying the last sentence to indicate that while the 
fiscal year 2009 carryover balance represents 41 percent of the 
working capital fund's total resources, the balance has been declining 
and represents a decrease from the fiscal year 2007 balance by four 
percent and a 10 percent decline since fiscal year 2005. 

Page 9, the paragraph below Table 3: 

Similarly, we recommend that an amplifying statement be added 
indicating that from fiscal years 2006-2009 NIST interagency agreement 
carryover as a percent of total working capital fund carryover has 
dropped by 18 percent. 

Page 13, Second Full Paragraph: 

We recommend the following editorial changes: 

1) the second sentence in the paragraph should be rewritten to say: 
"This policy is contained in NIST's Administrative Manual and is based 
on an interpretation of a 1983 legal memorandum." 

2) the fifth sentence should be changed to read: "When we sought 
clarification on this policy in January 2010, Commerce clarified the 
interpretation of the legal memorandum and NIST is in the process of 
revising the Administrative Manual in response to our inquiry ...." 

NIST Response to GAO Recommendations: 

Recommendation 1: "To help ensure efficient, effective deployment of 
NIST workforce and be a responsible steward of federal resources, hold 
senior management accountable for strategically managing its 
interagency agreements. This includes periodic senior management 
involvement in reviewing whether NIST has the appropriate resources to 
begin and perform new and existing work" 

NIST Response: NIST concurs with this recommendation. NIST will 
continue to refine and improve its policies and operating procedures 
regarding the management of interagency agreements. These refined 
policies and procedures will facilitate compliance, provide a 
benchmark for process improvement, and ensure that senior management 
of the bureau are actively involved in and can be held accountable for 
management of NIST interagency agreements. 

This corrective action will be implemented by March 31, 2011. 

Recommendation 2: To meet its responsibilities in ensuring the proper 
use of federal funds: a) develop, implement and communicate to its 
clients policies regarding reasonable timeframes for beginning work; 
b) track and monitor the work start date for each agreement; c) 
monitor and report internally and periodically inform clients about 
the amount of time elapsed between when funds were advanced and when 
it actually began billing against an agreement. For example, NIST 
could provide estimated work start dates for each agreement based on 
agency wide resource considerations; devise a notification system that 
would indicate when work has not begun within a certain timeframe; 
provide the date work actually began; and/or periodically provide 
clients with a report detailing the balance of unbilled funds as the 
account closing date approaches." 

NIST Response: NIST concurs with this recommendation. NIST will 
develop new policy to guide allowable time frames between agreement 
execution and work start dates. NIST, in consultation with legal 
counsel, will determine how best to include reasonable work time 
frames within already executed reimbursable agreements to clearly 
communicate expectations to all parties. NIST policy will include 
processes for reporting exceptions, such as unreasonable gaps between 
agreement execution and work start date, expected work start dates and 
actual work start dates, or gaps between when advances are received 
and when costs are billed to the agreement. 

NIST will establish a process for independently tracking and 
monitoring the work start date of each agreement and monitoring the 
time lapse between receipt of advance and cost billing. In
addition, NIST will develop a process to report significant exceptions 
to senior management and will document this process within the NIST 
policy. NIST will maintain evidence of senior manager review and 
acknowledgment of monitoring results with appropriate levels of 
approval established within the NIST policy. 

NIST will develop and implement a process for periodically informing 
clients regarding the time elapsed between when funds are advanced to 
when billings actually occur on interagency agreements. 

These corrective actions will be implemented by March 31, 2011. 

Recommendation 3: To help guard against the use of canceled 
appropriations, electronically record and monitor key information 
about the period of availability of appropriations advanced to NIST 
from client agencies." 

NIST Response: NIST concurs with this recommendation. NIST has begun 
and will continue to develop electronic means by which to record and 
monitor this information. Upon learning that this was a concern, NIST 
staff began working on a new database that will capture the 
appropriate information on appropriation availability and other 
critical interagency agreement information. This database and the 
revised procedures included in the NIST Administrative Manual 
subchapter on interagency agreements are being designed to incorporate 
the new standard interagency agreement templates soon to be prescribed 
by the Office of Management and Budget (OMB). In addition, NIST staff 
participated in training sessions regarding the new OMB requirements 
and will ensure that these requirements are included in revised 
training held for program offices handling new agreements. 

These corrective actions will be implemented by September 30, 2011. 

Recommendation 4: "To provide reasonable assurance that its 
interagency agreements are complete, accurate, and constitute a 
binding legal agreement; create, document, and implement a robust 
fiscal and legal review process for interagency agreements. This 
include a) developing and delivering periodic training to staff 
involved in accepting, processing, managing, and overseeing 
interagency agreements on how to appropriately accept, process, 
review, and monitor its interagency agreements and b)maintaining 
complete, accurate, and easily accessible files for all agreements." 

NIST Response: NIST concurs with this recommendation. Immediately upon 
learning of this concern, the NIST Chief Financial Officer, OCC NIST, 
and staff from the laboratory and program offices collaborated with 
DoC General Law Division to address this issue. After examining the 
operating procedures in place at the time, NIST changed them to 
include a requirement for a complete legal review of all interagency 
agreements prior to acceptance. NIST policy has since been changed to 
reflect this new practice. 

In addition, training and educational meetings for NIST staff and 
other sponsoring federal agencies have been conducted on the new 
interpretation of agreement authorities, on new policies and 
procedures, on the use of new monitoring tools that were developed 
including interagency agreement checklists and templates, and on 
requirements for maintain appropriate records for interagency 
agreements. Training sessions will continue to be held on a periodic 
basis and as needed to update staff on refined processes. And as 
mentioned previously, NIST also developed a tracking data base to 
monitor the status of all interagency agreements and to ensure that 
those determined to be "urgent" were addressed in a timely manner. 

These corrective actions were largely completed on September 30, 2010 
and will be fully implemented by March 31, 2011. 

Recommendation 5: "To comply with fiscal law, NIST should review its 
close-out policies regarding returning unearned funds to client 
agencies and adjust its accounting accordingly." 

NIST Response: NIST concurs with this recommendation. In the past, 
NIST determined that it was not cost effective to return funds in 
amounts less than $1,000 and client agencies have concurred with this 
determination. Over the past three years, the total amount of unearned 
funds not returned to client agencies resulting from this policy has 
only amounted to $64,000, an amount immaterial to our financial 
statements. NIST will reexamine its policies and procedures for 
returning unused funds to client agencies to ensure they meet legal 
requirements. 

This corrective action will be performed by March 31, 2011. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Denise M. Fantone, (202) 512-6806 or fFantonedD@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Jacqueline M. Nowicki, 
Assistant Director, and Shirley Hwang, Analyst-in-Charge, managed this 
assignment. Jeffrey Heit, Travis Hill, Felicia Lopez, Julia Matta, 
Leah Q. Nash, Rebecca Rose, and Kan Wang made major contributions. 
Sheila Rajabiun provided legal assistance. Susan Baker, Jean McSween, 
and Dae Park provided sample design and methodological assistance. 

[End of section] 

Footnotes: 

[1] We refer to federal agencies entering into interagency agreements 
with NIST as client agencies. 

[2] We excluded all agreements that had an order amount of $0. Unless 
otherwise noted, figures about interagency agreements cited in this 
report pertain to our analysis of these 354 agreements. 

[3] NIST uses the Commerce Business System, the official Commerce 
accounting system. 

[4] We selected 11 agreements that did not begin in the fiscal year in 
which the agreement was accepted and (1) for which work began more 
than 268 days after the agreement was signed (which represents the 
average time it took for NIST to start work on agreements that did not 
begin in the fiscal year during which NIST accepted them) or (2) that 
had a carryover balance greater than $1. 

[5] An appropriation's period of availability refers to the period of 
time in which those funds are available for new obligations. 
Appropriations may be time-limited and therefore only available for 1, 
2, or more years, or they can be available for obligation without 
fiscal year limitation. 

[6] As a result of our review, and as discussed more fully in appendix 
I, Commerce is working with NIST to revise interagency agreement 
processes and reviews in the Administrative Manual. 

[7] Earned receipts and collections reimburse the working capital fund 
for the cost of its operations, which include labor, materials, and so 
on for the interagency agreement. 

[8] In this report, carryover balances refer to client advances to 
NIST for technical work that NIST has not yet started or work that was 
started but not finished. 

[9] See, for example, GAO, Navy Working Capital Fund: Management 
Action Needed to Improve Reliability of the Naval Air Warfare Center's 
Reported Carryover Amounts, [hyperlink, 
http://www.gao.gov/products/GAO-07-643] (Washington, D.C.: June 26, 
2007). 

[10] See B-319349 (June 4, 2010). 

[11] 31 U.S.C. § 1552. 

[12] As mentioned previously, appropriations may be time-limited and 
therefore only available for 1, 2, or more years, or available for 
obligation without fiscal year limitation. 

[13] See B-319349. 

[14] The Antidificiency Act prohibits, among other things, the making 
or authorizing of an obligation or expenditure from any appropriation 
in excess of the amount available in the appropriation. Obligating 
parties--in this case NIST's client agencies--are responsible for 
complying with this act. 

[15] As previously noted, the period of performance for all 
interagency agreements in our review ended on or before September 30, 
2009. 

[16] The TAS is a code assigned by the Department of the Treasury, in 
collaboration with the Office of Management and Budget and the owner 
agency, to an individual appropriation, receipt, or other fund 
account. All financial transactions of the federal government are 
classified by TAS for reporting purposes. 

[17] Projects are the building blocks of NIST's financial system and 
the lowest level at which costs are systematically recorded. 

[18] The bona fide needs rule is a fundamental principle of fiscal 
law. It dictates that if the performing agency does not use the 
client's funds within a reasonable time of their receipt, the 
agreement may not reflect a bona fide need of the client agency. See B-
308944 (July 17, 2007). For this review, we consider the date a client 
agency advances its appropriations for an interagency agreement as the 
date NIST received those funds. 

[19] See GAO, Defense Working Capital Fund: Military Services Did Not 
Calculate and Report Carryover Amounts Correctly, GAO--06--530 
(Washington, D.C.: June 27, 2006); Improper Use of Industrial Funds by 
Defense Extended the Life of Appropriations Which Otherwise Would Have 
Expired, [hyperlink, http://www.gao.gov/products/GAO/AIMD-84-34] 
(Washington, D.C.: June 5, 1984); and General Services Administration, 
Interagency Agreements--Acceptance and Obligation of Funds--General 
Services Administration Acquisition Letter V-08-04 (Washington-D.C.: 
June 10, 2008). 

[20] The 95 percent confidence interval for this estimate is ±30 days. 
This analysis is based on a statistically representative sample of the 
354 multiyear agreements between NIST and federal clients that began 
in fiscal year 2004 and ended by the end of fiscal year 2009. 

[21] Our case-file review indicated that the client agency was 
notified about the delays for only one of these agreements. 

[22] GAO: Standards for Internal Control in the Federal Government: 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington-D.C.: November 1999). 

[23] See 31 U.S.C. § 1501(a) and B-308944. 

[24] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[25] Finance division officials also told us that they return unused 
amounts less than $1-000 upon a client agency's request. 

[26] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[27] GAO, Human Capital: Key Principles for Effective Strategic 
Workforce Planning, [hyperlink, http://www.gao.gov/products/GAO-04-39] 
(Washington-D.C.: Dec. 11-2003). 

[28] GAO, Highlights of a GAO Forum: High-Performing Organizations: 
Metrics-Means-and Mechanisms for Achieving High Performance in the 
21st Century Public Management Environment, [hyperlink, 
http://www.gao.gov/products/GAO-04-343SP] (Washington-D.C.: Feb. 13-
2004). 

[29] We excluded all agreements that had an order amount of $0. We 
selected agreements beginning in fiscal year 2004 because NIST 
upgraded to a new financial system that fiscal year. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: