oversight

Recipient Financial Management System Contract awarded to Computer Data System, Incorporated (CDSI).

Published by the Department of Education, Office of Inspector General on 2000-09-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

          Recipient Financial Management System Contract
                           Computer Data Systems, Incorporated
                                  Rockville, Maryland



                                  FINAL AUDIT REPORT




                          Audit Control Number ED-OIG/A02-80002
                                      September 2000


Our mission is to promote the efficient                     U.S. Department of Education
and effective use of taxpayer dollars                         Office of Inspector General
in support of American education.                                            Boston, MA
                                          NOTICE

         Statements that financial and/or managerial practices need improvement or
   recommendations that costs questioned be refunded or unsupported costs be adequately
  supported, as well as other conclusions and recommendations in this report, represent the
opinions of the Office of Inspector General. Determinations on these matters will be made by
   appropriate U.S. Department of Education officials. In accordance with the Freedom of
    Information Act (5 U.S.C. §552), reports issued by the Office of Inspector General are
 available, if requested, to members of the press and general public to the extent information
                    contained therein is not subject to exemptions in the Act.
                                                       Table of Contents



EXECUTIVE SUMMARY..............................................................................................................1


        Audit Results ...........................................................................................................................2

                 Finding: One Manager Performed Work Unrelated to the Contract..............................2

                          Recommendations .................................................................................................2

                          CDSI’s response ....................................................................................................3

                          OIG’s reply............................................................................................................3


Background.......................................................................................................................................4

Objective, Scope, and Methodology................................................................................................4

Statement on Management Controls ..............................................................................................5

Auditee’s Response ...........................................................................................................Attachment
Final – Computer Data Systems, Inc.
            Rockville, Maryland                       Page 1                             ED/OIG A02-80002



                                    EXECUTIVE SUMMARY

We audited the Recipient Financial Management System (RFMS) contract awarded to Computer
Data Systems, Incorporated (CDSI)1 . Our objective was to determine the accuracy and
reasonableness of costs incurred for products and services provided. Our audit covered the
period of June 23, 1997 through December 31, 1998.

We found that CDSI’s charges under the contract were generally accurate and reasonable.
However, our tests of charges disclosed that one manager assigned to the RFMS contract spent a
substantial amount of time on other projects.

The contract requires CDSI to assign managers and supervisors to the project full time and not
assign them to any other tasks. Accordingly, payment for such personnel are fixed monthly
amounts. We are recommending that the Contracting Officer for the RFMS contract require
CDSI to reimburse the U.S. Department of Education (ED) $39,565.13 and ensure that all RFMS
managers and supervisors are assigned to the project full time.

CDSI agreed with the premise of the finding but disagreed with the costs. We reviewed CDSI’s
response and our corresponding documentation and have adjusted the report as appropriate but
our position remains unchanged. The costs questioned are based on actual monthly time charged
by the manager. CDSI should reimburse ED $39,565.13.




1
  CDSI was acquired by Dallas-based Affiliated Computer Services, Inc. (ACS) during the audit period and is
presently known as ACS Government Solutions Group.
Final – Computer Data Systems, Inc.
            Rockville, Maryland                Page 2                        ED/OIG A02-80002

One Manager Performed Work Unrelated to the Contract

One manager assigned to the RFMS contract, charged 29 percent of his direct time to other
projects during the first 14 months of the contract. However, CDSI charged ED for 100 percent
of the manager’s time. As a result, CDSI over-billed $39,565.13 and reduced the effort required
under the contract.

As part of our audit, we reviewed a judgmental sample of CDSI’s time sheets for personnel
assigned to the contract. Our review disclosed that one manager had charged time to other
projects. We therefore reviewed all time sheets pertaining to this manager for the audit period.
From June 25, 1997 through August 31, 1998, 71 percent of the direct hours (1,940.5 of 2,724.5)
reported for this manager were spent on the RFMS contract. The remaining 29 percent (784
hours) were spent on other direct tasks.

The contract between ED and CDSI (Contract No. PM 97 002 001) requires CDSI to assign
managers or supervisors to the project full time. Specifically, Section C-1.2, paragraph three of
the Performance Work Statement (Attachment I to the Contract) states: “The contractor shall
assign all individuals designated as managers or supervisors to the project full time, and not
assign any other duties to these individuals.”

The contract’s billing terms establish a fixed monthly rate of $10,732.84 for the applicable
manager position. On its initial invoice, covering the period June 24, 1997 through July 31,
1997, CDSI charged ED $8,686.89. However, the manager’s time sheets for this period
disclosed he spent only 56.49 percent of his direct time on the project. As a result, we are
questioning $1,209.18 for the portion of the payment attributable to time spent on other tasks.
During the subsequent 13 months, covering the period August 1, 1997 through August 31, 1998,
CDSI charged the full monthly rate of $10,732.84. However, the manager’s time sheets for this
period disclosed he spent only 72.51 percent of his direct time on the project. Accordingly, we
are questioning $38,355.95 for time spent on other tasks during those 13 months.

Based on the amounts paid and actual time worked on the project, we are questioning a total of
$39,565.13.


Recommendations

We recommend that the Contract Officer for the RFMS contract ensure that CDSI:
1.    Refunds $39,565.13 paid fo r time that the manager spent on other tasks, and

2.    Adheres to the terms of the contract requiring that managers and supervisors be assigned to
      the contract full time and not be assigned any other duties.
Final – Computer Data Systems, Inc.
            Rockville, Maryland               Page 3                       ED/OIG A02-80002

CDSI’s response

CDSI agreed that the Operations Manager worked on another project, but believes that the
calculation of the amount should be based on the 80 hour per pay period standard. CDSI charged
100 percent of the fixed monthly fee for each month. This was based on a full time equivalent that
equates to 8 hour per day and 80 hours per pay period. Using this reasoning, CDSI calculated the
amount to be returned to the U.S. Department of Education to be $18,453.77.

OIG’s reply

Section C-1.2, paragraph three of the Performance Work Statement (Attachment I to the Contract)
states: “The contractor shall assign all individuals designated as managers or supervisors to the
project full time, and not assign any other duties to these individuals.” Therefore, the Operations
Manager should not have had other duties while assigned to this project. The OIG’s calculation was
based on actual hours worked rather than the 80 hour per pay period standard, because the contract
indicated that the Operations Manager would only be working on this project. Using this reasoning
the amount stated in the finding of $39,565.13, remains as the amount recommended to be returned
to the U. S. Department of Education.
Final – Computer Data Systems, Inc.
            Rockville, Maryland                 Page 4                     ED/OIG A02-80002

BACKGROUND

The RFMS contract is a single contract for developing, implementing, operating, and
maintaining the system(s) which process recipient and financial management data for designated
Title IV programs including, but not necessarily limited to the Federal Pell Grant program. This
contract requires the development of a new processing system to be known as the Recipient and
Financial Management System to deliver Federal Pell Grant awards. The contract also requires
the provision of all services, personnel, hardware and software, to operate and maintain the
system, to update the system annually, and to process data effectively.
The initial contract award was for $3.5 million. This amount has been increased to $7,497,726 based
upon subsequent contract modifications through September 8, 1998.

OBJECTIVE, SCOPE, AND METHODOLOGY

The purpose of our audit was to determine the accuracy and reasonableness of costs incurred for
products and services provided by CDSI under the RFMS Contract.

To accomplish our audit objective we obtained and reviewed documentation pertaining to the
contract, selected deliverables and associated costs, including:
•   RFMS Contract (including Modifications),
•   CDSI policies and procedures,
•   Results from prior internal and external audits,
•   Various correspondence between CDSI and ED,
•   CDSI invoices,
•   Resumes and time sheets of contractor personnel, and
•   Deliverables

We reviewed 100 percent of the resumes for key personnel assigned to the contract. We
judgmentally selected three key personnel and two non-key personnel to test the allowability of
personnel charges to the contract. Due to an exception found with the time charges for one of
the key personnel we expanded our sample to determine whether similar conditions affected
other key personnel. We tested the charges for three additional key personnel, resulting in a
review of 50 percent of the key personnel assigned to the contract. We also reviewed all time
sheets for the exception to quantify the unallowable charges to the contract.

We obtained and reviewed all invoices submitted and Independent Quality Control Unit (IQCU)
reports provided to ED as of the date of our review. We also judgmentally selected three specific
deliverables required under the contract for our review.

We also interviewed ED and CDSI officials and observed various processes being performed by
CDSI personnel under the contract.
Final – Computer Data Systems, Inc.
            Rockville, Maryland                Page 5                         ED/OIG A02-80002

Our audit covered the period June 23, 1997 through December 31, 1998. Our field work was
performed at both CDSI, Rockville, Maryland and the U.S. Department of Education,
Washington, DC between June 3, 1998 and November 20, 1998. We performed a follow-up site
visit at CDSI in July 1999 and discussed the status of our finding with CDSI officials in July
2000.

Our audit was conducted in accordance with government auditing standards appropriate to the
audit scope.

MANAGEMENT CONTROLS

As part of our review, we assessed CDSI’s management control structure, as well as its policies,
procedures and practices applicable to the scope of the audit. The purpose of our review was to
assess the level of control risk for determining the nature, extent and timing of our substantive
tests. For the purpose of this report, we assessed and classified the significant controls into the
following categories:
•   Production
•   Billing
•   Customer Service
•   Monitoring
•   Personnel Time and Attendance Reporting


Because of inherent limitations, a study and evaluation made for the limited purpose described
above would not necessarily disclose all material weaknesses in the control structure. Our audit
did not disclose material weaknesses in the internal controls applicable to the above categories.
However, our compliance testing disclosed one instance of material noncompliance during our
audit tests, as described in this report.
                                      REPORT DISTRIBUTION LIST

                                                                                                   No. of copies
Auditee
Robert Woods
President
ACS GSG
One Curie Court
Rockville, MD 20850.................................................................................................1


Action Official
Glenn Perry
Director
Contract and Purchasing Operations
U.S. Department of Education
400 Maryland Ave., S.W.
Regional Office Building 3, Room 3600
Washington, DC 20202..............................................................................................2


Other ED Offices
Chief Operating Officer, Student Financial Assistance .............................................1
Assistant Secretary, Office of Postsecondary Education...........................................1
Team Leader, Pell Systems Team..............................................................................1
Post Audit Group Supervisor. ....................................................................................1
Chief Financial Officer, Student Financial Assistance ..............................................1
Postsecondary Education Division Assistant General Counsel,
 Office of General Counsel.......................................................................................1
Director, Office of Public Affairs ..............................................................................1

ED-OIG
Inspector General.......................................................................................................1
Deputy Inspector General...........................................................................................1
Assistant Inspector General for Investigations...........................................................1
Assistant Inspector General for Audit (A) .................................................................1
Deputy Assistance Inspector General for Audit (A) ..................................................1
Planning, Analysis, and Management Services ........................................................1
Director, Student Financial Assistance Advisory & Assistance Team......................1
Area Managers ..........................................................................................................6