oversight

Telecommunication Costs and Services

Published by the Farm Credit Administration, Office of Inspector General on 2000-03-28.

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

   FARM CREDIT ADMINISTRA TION

OFFICE OF INSPECTOR GENERAL





   REPORT OF

  INSPECTION

    Telecommunications

             A99-0 1





          March 28, 2000
Farm Credit Administration	                           Of ce af ns Act'"'r GellP a
                                                      1501 Fa rr Cred t ~rt"t>
                                                      McLean VI'glll 3 221 2-5090
                                                      (703) 883 4030




 March 28, 2000


 Michael M. Reyna, Chairnlan
   and Chief Executive Officer
 FaIDl Credit Administration
 McLean, Virginia

 Dear Mr. Reyna:

 We have completed our inspection of the FaIDl Credit Administration's (FCA or Agency)
 TelecGTamunication Costs and Service~. Our objectives were to evaluate the cost of
 telecommunication services provided to FCA through the FCS Building Association
 (FCSBA); identify alternative providers, if appropriate; test the accuracy and integrity of
 billings for these services; and review the Agency's oversight of this area.

 After t.~e entra..'1ce conference for this inspection, the FCSBA contracted with the General
 Services Administration's Federal Technology Service (FTS) 2001 Program. Upon its
 full impiemer,tation, FTS 2001 will reduce the future cost of telecommunication services.
 Implementatifm of our recommendation to buy videoconferencing services can
 significantly reduce travel expenses. We identified approximately $3,500 in billing
 errors by the provider that were passed on to FCA. FCSBA has credited FCA for this
 amount. We also found that FCSBA billed FCA for approximately $9,300 in costs that
 are not consistent with the Memorandum of Understanding (MOU). Some of this amount
 was applied against the amortized costs of system upgrades.

 As a result of this inspection and discussions with management throughout this process,
 the Agency's arrangement with the FCSBA for telecommunication services will be
 improved in the following ways:

 •	 FCA will update the MOU with FCSBA to clarify practices that are not consistent
    with the current MOU.
 •	 FCA will ensure the accuracy and integrity of telecommunication charges to FCA and
    take an active part in making adjustments when necessary.
 •	 FCA will have the Office of General Counsel opine on whether FCA is eligible for
    tax-exempt treatment when buying telecommunication services through FCSBA.
 •	 FCA agrees to ask that FCSBA buy videoconferencing services for the Agency.
•	 FCA's Office of Resources Management agrees to develop and distribute guidance to
   educate staff about the most economical way to use the various telephone choices
   available to them.
•	 FCA will refine its review and control procedures for long-distance telephone calls
   and supervise their application to ensure compliance with internal policy.

We conducted this review in accordance with the Quality Standards for Inspections issued
by the President's Council on Integrity and Efficiency. We conducted our fieldwork
from April 1999 to October 1999 at FCA headquarters in McLean, Virginia. An entrance
conference was held on March 4, 1999. Management and FCSBA were provided a draft
of this report on October 15, 1999 and we have included their written responses.




~;rJ/
Eldon W. Stoehr
Inspector General
                                    Table of Contents




Background                                                                             1


Objectives, Scope and Methodology                                                      1


Findings, Conclusions, and Agreed Upon Actions


    Substantial savings will be gained by using GSA's FTS 2001                         1


    The existing Memorandum of Understanding (MOU) between the Agency

    and FCSBA does not authorize some of the telecommunication costs

    billed to FCA by FCSBA                                                            2


    FCSBA's internal call tracking software does not generate reliable billings to

    the FCA                                                                           3


    Videoconferencing should be included in the range of services provided to FCA     5


    There are opportunities to reduce Agency telecommunication costs by educating

    FCA staff about the most cost-efficient uses of available options                 6


   The Agency has not followed the review and control procedures established in

   FCA policies and procedures (PPMs) 700 and 707                                     6



Appendix A

FCA Response

FCSBA Response
                                FCA Office of Inspector General

              A 99-01: Inspection of FCA's Telecommunication Costs and Services





BACKGROUND

FCA is a nonappropriated agency with regulatory, examination and supervisory
responsibilities over the Farm Credit System (FCS or System) banks and associations and
assesses System institutions for its administrative costs. The FCS Building Association
(FCSBA) was formed by the banks of the System to provide a vehicle through which
they could acquire, construct, develop, own, hold, improve, maintain, lease, and dispose
of physical facilities and related properties to house the offices of the FCA. The FCA
Board members serve as the board for FCSBA and are authorized to act as the agent of
the banks.

FCA headquarters and the McLean field office occupy office space in the building owned
by FCSBA. Four other field offices occupy office space leased by FCSBA. The Agency
pays no rent for this office space. FCSBA also provides telecommunication equipment to
FCA under a reimbursable operating lease that is renewable yearly. FCA's
telecommunication expenses were $280,815 and $295,989 for FY 1998 and FY 1997,
respectively.

The inspection was prompted· in part by the well-publicized reduction in
telecommunication costs available to Federal agencies through the FTS 200 1 contract
negotiated by the General Services Administration (GSA) and announced in January
1999.


OBJECTIVES, SCOPE, and METHODOLGY

The objectives of this inspection were to evaluate the cost of telecommunication services
provided to FCA through the FCSBA; identify alternative providers, if appropriate; test
the accuracy and integrity ofFCSBA billings for these services; and review the Agency's
monitoring activities over this area. We reviewed Agency billings for three months to
identify: 1) how FCA staff used the telecommunications available to them; 2) how
established controls were applied; and 3) any exceptions to the appropriate, authorized,
efficient and effective use of telecommunication services. We also surveyed other Federal
financial regulatory agencies about their use of videoconferencing and the GSA's Federal
Technology Service 2000/2001. Finally, we compared the contract negotiated by
FCSBA and FCA to the telecommunications contract negotiated by GSA for Federal
agencies.


FINDINGS, CONCLUSIONS, and AGREED UPON ACTIONS

Substantial savings will be gained by using GSA's FTS 2001.

During the entrance conference for this evaluation, we noted that FCSBA had not asked
for proposals from the FTS 2000 program (FTS 2001 predecessor) when negotiating the

03/28/00                                                                           Page 1 of7
                                 FCA Office of Inspector General

               A 99-01: Inspection of FCA's Telecommunication Costs and Services



then-existing contract and asked whether they were considering the new FTS 2001
program for FCA. FCSBA stated that, historically, there were no significant price
advantages to the FTS 2000 program over other providers of telecommunication services
and that FCA management preferred other providers. Nevertheless, FCSBA stated GSA
had been doing some "good things over there" and they would be keeping them in mind
for future contracts. After the entrance conference, FCSBA contacted GSA about
getting a bid for services from FTS 2001 and have told us that, on October 15, 1999, they
committed to buy telecommunications services through GSA's FTS 2001. The favorable
pricing available through FTS 2001 should provide substantial savings to the Agency as
well as bolster the FCSBA's ability to generate income from other non-Agency tenants
for whom the FCSBA provides telecommunication services.

The existing Memorandum of Understanding (MOU) between the Agency and
FCSBA does not authorize some of the telecommunication costs billed to FCA by
FCSBA.

The MOD between FCA and FCSBA for telecommunication services provides, in
essence, that FCSBA's billings will "pass through" only actual costs unless FCA
specifically allows otherwise. Specifically, Section V4(c) states that the FCSBA "will not
charge the FCA and the FCA will not pay FCSBA a fee or profit for FCSBA's
performing under the MOD." Furthermore, Section V4(d) of the MOD states that "The
FCSBA will submit to the FCA's Fiscal Resources Division an invoice, on a monthly
basis, that describes and itemizes the actual costs allocated and/or prorated to the FCA for
the monthly billing period. The invoice will include any reasonable information and
documentation deemed necessary by FCA to substantiate the costs allocated and/or
prorated to the FCA and to authorize payment by the FCA." The following instances do
not comply with the MOD. The estimated amounts shown were supplied by FCSBA and
are conservative, based on our own analysis.

•	 Local calls were charged to FCA at 10 cents per call rather than the 7 cents per call
   charged by the provider (a 42 per~ent premium). This premium amounted to an
   estimated $2,600/year in additional charges to the Agency. FCSBA stated that they
   applied this excess against the amortized costs associated with the change in the
   provider of local service. However, this amortized amount was not identified on the
   invoice to the Agency as is prescribed by the MOD. This method of payment is not
   consistent with the treatment of similar fixed costs associated with switching
   providers.

•	 Local calls were charged to FCA for each dialing attempt even though the provider
   billed FCSBA only when a successful connection was made. This premium
   amounted to an estimated $700/year in additional billings to the Agency. FCSBA
   stated that this is a long-standing practice that was common knowledge to the Agency
   even though the MOD calls for pass through billing of costs. We were unable to
   identify FCA personnel who were familiar with this practice.



03/28/00	                                                                           Page 2 of?
                                 FCA Office of Inspector General

               A 99-01: Inspection of FCA's Telecommunication Costs and Services



•	 Long-distance calls were billed to FCA at 8 cents per minute rather than the 6.5 cents
   per minute billed by the provider (a 23 percent premium). This premium amounted to
   an estimated $3,600 in additional charges to the Agency annually. FCSBA stated that
   they applied this excess against the amortized costs associated with the change in the
   provider of long-distance service. However, this amortized amount was not identified
   as such on FCSBA's invoice to the Agency as prescribed in the MOU. This method
   of payment is not consistent with the treatment of similar fixed costs associated with
   switching providers.

•	 Long-distance calls billed to FCA were "rounded up" to the next minute rather than
   the "rounding up" to next 1/1 otl1 of minute billed to FCSBA by the service provider.
   This practice amounted to an estimated $2,400 in additional charges to the Agency
   annually. FCSBA stated that this is a long-standing practice that was common
   knowledge to the Agency even though the MOU calls for pass through billing of
   costs. We were unable to identify any FCA personnel who were familiar with this
   practice.

Agreed Upon Action

1.	     FCA will update the MOU to clarify the basis for telecommunications billings
        and provide sufficient oversight to assure that future billings are consistent with
        theMOU


FCSBA's internal call tracking software does not generate reliable billings to the
FCA.

Various providers bill FCSBA for telecommunication services used by the FCSBA, FCA
and some other tenants of the McLean Headquarters Building. FCSBA then bills the
users for their share of these costs, some of which are direct and some of which are
allocations. Appendix A shows that $3,445.08 (total of footnote #1) of the March 1999
telecommunications bill to the Agency was allocated costs calculated by FCSBA' s
internal call tracking software. The billings to FCA that result from this process are not
reliable because they are difficult to understand, some charges are inconsistent with the
MOU (as described in the previous section), and include errors and omissions.

Billings are difficult to understand because of the way the fixed costs of equipment
upgrades are amortized. Rather than amortizing these fixed costs uniformly over a
specified period of time, FCSBA has "rounded up" actual rates for some costs (see above
section) and applied this overage against the retirement of the fixed cost. It is difficult to
track the variable results of such rounding amounts and its credit against the original cost.
Also, the problems we have identified in the allocation process further complicate this
area.

FCA has not been requiring documentation to explain unusual components of billings
from FCSBA. The following are more examples of items that should have been

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                                FCA Office of Inspector General

              A 99-01: Inspection of FCA's Telecommunication Costs and Services



investigated. Individually, these examples may seem insignificant; however, collectively
they signal that improvement is necessary.

We found the following items in our review of three month's calling data generated by
this system:

•	 Individual long-distance calls lasting more than 550 minutes (over 9 hours) were
   billed to FCA. We identified three such calls totaling over $130 in our review of three
   months of data. The service provider had not billed FCSBA for these charges but
   they were generated by FCSBA's internal call tracking software. FCSBA initially
   stated that it had no knowledge of why these charges were occurring in its.
   Subsequently, FCSBA ran a software test to identify all calls in 1999 of this nature.
   That test identified three such calls; however, only one of the calls documented by us
   was noted in the FCSBA test.

•	 Part of the allocation of indirect telecommunication costs to FCA is based on the total
   number of handsets installed by FCSBA, including those installed for other tenants.
   As of August 25, 1999, FCA had 328 individuals on staff (including seasonal help)
   but was being billed by FCSBA .for the use and maintenance of 425 handsets.
   Currently, the Agency does not have a process to ensure that all handsets currently
   installed are necessary. To the extent that FCA has more handsets assigned than in
   actual use, the allocation results in a higher cost to FCA than necessary.

•	 Some local and long-distance calls were not billed to FCA at all. This deficiency
   amounted to an estimated $1,500/year in non-charges to the Agency.

We also identified errors in billing data for February 1999 - April 1999 unrelated to the
FCSBA internal call tracking software. These included:

•	 FCA was billed over $3,250 from September of 1998 to June of 1999 for toll calls by
   the Denver field office that were actually local calls.

•	 Charges for the Agency's 800 numbers for its Remote Access System (RAS) were
   overcharged by $309.50

•	 FCA was overcharged $101.98 in March 1999 for calling card use.

•	 The Agency was billed for calling card rates in excess of the contracted 17 cents per
   minute that resulted in $156.31 in overcharges.

•	 Incorrect rates were assessed on some Agency 800 numbers resulting in $82.14 of
   excess charges.

After we notified FCSBA of these errors during our review, FCSBA credited the FCA for
all the overcharges except for the $309.50 that FCSBA contends is a valid charge.


03/28/00	                                                                          Page 4 of7
                                    FCA Office of Inspector General

                  A 99-01: Inspection of FCA's Telecommunication Costs and Services





FCSBA's billings to FCA "passed through" various state and local taxes, surcharges, and
user charges. As an example, one month's invoice for 800 numbers to access the
Agency's computer network included $241 in taxes on the $4,658 bill. Since FCSBA is
FCA's agent for buying telecommunication services, the Agency's tax-exempt status may
be applicable to some of these telecommunication service costs.

Agreed Upon Actions

2.	         FCA will set up a more effective process for monitoring the accuracy and
            integrity of telecommunication charges and for making adjustments when
            necessary.

3.	         FCA will have the Office of General Counsel opine on whether the Agency is
            eligible for tax-exempt treatment when buying telecommunication services
            through the FCSBA.


Videoconferencing should be included in the range of services provided to FCA.

Videoconferencing offers a significant opportunity to reduce staff time and travel
expenses for various communications among Agency staff and between Agency staff and
external parties. The Office of Examination (OE) could particularly benefit from this
service because of the geographic dispersion of its own staff and the System institutions
OE meets with regularly. OE expects to significantly reduce FY 2000 travel through the
use of videoconferencing. Less travel would also have a positive effect on examiner
morale. Additionally, some internal Agency meetings may be suited for using
videoconferencing.

The Agency has used videoconferencing occasionally but representatives from the
Agency's Information Resources Division (IRD) expressed concerns during our entrance
conference that the technology was not of sufficient quality and historically too
expensive. However, during the inspection, IRD added the costs for installing
videoconferencing capabilities for all field offices in the FY 2000 budget.

Other Federal financial regulators (the Federal Reserve Board and the Federal Deposit
Insurance Corporation) have in-house videoconferencing services that they use regularly
and expressed satisfaction with them. The Agency's limited use has also produced
satisfactory results. The FTS 200 1 program contracted for by FCSBA in October 1999
offers videoconferencing services in various formats.

Agreed Upon Action

4.	     FCA will ask FCSBA to buy videoconferencing services for the Agency.




03/28/00	                                                                              Page 5 of?
                                    FCA Office of Inspector General

                  A 99-01: Inspection of FCA's Telecommunication Costs and Services



There are opportunities to reduce Agency telecommunication costs by educating
FCA staff about the most cost-efficient uses of available options.

Our review of telecommunication billings suggests that Agency staff do not always use
the most cost-efficient options when choosing from existing telecommunication services.
Since it is probable that staff are unaware of the cost implications of the various options,
it is likely that FCA could reduce its telecommunication costs if staff followed these
guidelines:

•	 Use local Agency numbers rather than 800 numbers whenever possible. (Local calls
   are free but 800 numbers carry added charges based on time usage.)
•	 In-office or local phone number dial-in network accesses are the most cost-effective
   ways to access, download, or upload databases on the FCA network.
•	 It is less expensive (32%) for field offices to call McLean on an 800 number than to
   dial McLean direct.
•	 It is less expensive for McLean to dial field offices direct than to dial their 800
   numbers.
•	 Use the Agency's 800 numbers rather than calling cards. This results in a minimum
   saving of 62% for calls to McLean and 44% for calls to the field offices.
•	 Use cellular phones with unlimited calling plans rather than calling cards or the
   Agency's 800 numbers.

Agreed Upon Action

5.	         FCA 's Office ofResources Management will develop and disseminate guidance to
            educate staffabout the most economical way to use the various telephone choices
            available to them.


The Agency has not followed the review and control procedures established in FCA
policies and procedures (PPMs) 700 and 707.

FCA PPMs 700 and 707 establish the Agency's review and control procedures and
require certification that long-distance telephone calls were made for official business
purposes. While these procedures are adequate, they are not followed. Further, these
PPMs exclude 800 numbers, even though most 800 number calls are long-distance and
therefore should be certified as official business. Finally, the statistical sampling method
developed for use with the certification process does not produce a valid random
statistical sampling of the Agency's long-distance phone calls.




03/28/00	                                                                              Page 6 of7
                                    FCA Office of Inspector General

                  A 99-01: Inspection of FCA's Telecommunication Costs and Services





Agreed Upon Action

6.	         FCA will refine its review and control procedures for long-distance telephone
            calls and supervise the application of them to ensure compliance with internal
            policy.




03/28/00	                                                                              Page 7 of 7
                                                             Telecommunication                                                              Appendix A
                                                        Costs Incurred by FCSBA and
                                                                 Billed to FCA
                                                                 March 1999

                      MCI!       Cable &       Fairchild      Bell         AT&T        Others·        Totals         Billed to      Questioned
                      World Com. Wireless                     Atlantic                                               Agency         Costs Figures
Services
Long Distance         $7,270.15                                                                       $   7,270.15   $   3,325.62   $1,886.06 (1)
Conference Calls      $ 230.17                                                                        $     230.17   $     230.17
Data Lines            $ 5,841.68                                                                      $   5,841.68   $   5,841.68
Data Line Change      $2,467.47                                                                       $   2,467.47   $   2,467.47
Internet              $1,101.06                                                                       $   1,101.06   $   1,101.06
Calling Cards         $ 623.02                                                                        $     623.02   $     725.00   $101.98 (2)
Local Service         $1,379.15                                $1,147.08                 $ 3,132.43   $   5,658.66   $   4,671.12   $1,559.02 (1)
ISDN Lines                                                     $ 565.78                               $     565.78   $     565.78
Modems & Faxes        $    23.28   $ 637.59                    $1,336.00                              $   1,996.87   $   1,022.19   $ 22.00 (2)
800# s for RAS        $   422.95   $4,021.19                                                          $   4,444.14   $   4,754.04   $309.50 (2)
Cell Phones                                                                 $ 560.01 .                $     560.01   $     545.74

Teleset and PBX                                $1,984.50                                              $ 1,984.50      $ 1,604.69    $1,604.69 (3)
Switch Maintenance
Repair Voice Mail                              $ 160.00                                               $    160.00         $160.00

Taxes & Surcharges    $ 1,292.54                                                                      $ 1,292.54

Total Billings                                                                                        $34,196.05      $27,014.56
Prior Costs per MOU                                                                                   ========        $2,164.82(4) $1,147.82 (3)

                                                                                                                      $29,179.38
      Kev                                                                                                             --------­
                                                                                                                      --------­
Others·
$         1,606.48     US West                 (1)   Unrealiable
$           197.53     Bell South              (2)   Billing Error
$            40.88     Citizen Comm.           (3)   Prorated Portion Affected by Agency Teleset Excess
$           339.93     Pacific Bell            (4)   These amortized costs in place since 3/31/95 will cease 2/28/00.
$           947.61     Southwestern Bell
$         3,132.43
FCA Response

  Memorandum	                                          Farm Credit Administration
                                                       1501 Farm Credit Drive
                                                       McLean, Virginia 22102-5090




March 24, 2000



To:          Eldon W. Stoehr
             Inspector General

From:


Subject:     Final Draft 0 Inspection Report 99-01: FCAts Telecommunication Costs and Services


Attached is management's response to the subject inspection report. Management agrees with
five of the six recommendations and proposes that the remaining recommendation (number
four) be amended to provide that the Farm'Credit Administration, rather than the FCS Building
Association, acquire videoconferencing services.

Suggested technical and editorial revisions are noted in pencil on the attached copy of the
report. Should you have any questions or wish to discuss the response or suggested revisions,
please contact me at your earliest convenience.


Attachment

Copy to:	 Michael M. Reyna
          Donald Clark
  Memorandum	                                            Farm Credit Administration
                                                         1501 Farm Credit Drive
                                                         McLean, Virginia 22102-5090




March 15, 2000


To:           James R. Ritter                  ~             /?
               Audit   FOllOW-~?f~4'~~
From:         Donald P.  ~~ect~
              Office of Resources Management

Subject:       Management Responses to OIG Inspection ofFCA's Telecommunications Costs
               and Services (Final Draft of February 17,2000)


I am providing our responses to the six recommendations of subject inspection, based on your
March 1 e-mail. We have also provided comments on the text of the inspection report where we
believe clarification is necessary.

Responses to Recommendations

1.	 FCA will update the Memorandum ofDnderstanding (MOlD to provide improved
    clarification for FCSBA practices that are not consistent with the current MOD.

Agree. The Chief of the Administrative Services Branch will lead an effort to review the current
MOD and its supporting exhibits, with assistance of the Senior Accounting Officer, the Assistant
to the Director of the Office of Resources Management (ORM), and the President of the FCS
Building Association (FCSBA). Where necessary, the MOD will be amended to incorporate
FCSBA billing practices and FCA expectations for details of the charges. An amended MOD
will be completed by September 30, 2000.

2.	 FCA will set up a more effective process for monitoring the accuracy and integrity of
    telecommunication charges and for making adjustments when necessary.

Agree. FRD will begin to monitor the accuracy ofFCSBA's telecommunications charges with
the requirements of the amended MOD on October 1,2000. FRD staff will examine vouchers for
adequacy and accuracy before payment. FRD staff will periodically coordinate with the FCSBA
and FCA managers to validate details for bills and confirm the bill is in accordance with the
MOU.
3.	 FCA will have the General Counsel research whether the Agency is eligible for tax-exempt
    treatment when buying telecommunication services through the FCSBA.

Agree. The Director ofORM requested and received the OGC opinion. We are now evaluating
management's options. There are some taxes for which FCA is obligated to pay, and others that
FCA can claim tax-exempt status. Those that can be exempted come with other cost
implications. The Office of the Director, ORM will provide questions and expectations to the
President, FCSBA, by April 30, 2000. Resolution to the impact ofFCA's possible tax-exempt
status will be decided by September 30,2000.

4.	 FCA will request that FCSBA acquire videoconferencing services for the Agency. (The
    Director of the Information Resources Division (IRD) previously recommended that this
    recommendation be amended to read: "FCA will acquire videoconferencing services." He
    thought that FCA might acquire the equipment and ask the FCSBA to acquire the
    telecommunication portion.)

Agree (with proposed alternative recommendation). IRD is leading the Agency's efforts to
evaluate the benefits and costs ofvideoconferencing services. IRD budgeted in FY 2000 for
such services. Recommendations to acquire the services through the best means for the
Agency's business needs based on the evaluation will be forwarded to the FCA Board by August
31,2000.                              .

5.	 FCA's Office of Resources Management will develop and disseminate guidance to educate
    staff about the most economical way to use the various telephone choices available to them.

Agree. The Assistant to the Director ofORM will work with the FCSBA to develop a list of
available telephone services and recommendations for the most economical use of those services.
An FCA This Week article will be published by June 30, 2000 and a wallet-sized guide will be
delivered to each staff member.

6.	 FCA will refine its review and control procedures for long-distance telephone calls and
    supervise the application of them to ensure compliance with internal policy.

Agree. FRD will amend PPMs 700 and 707 about long-distance telephone calls by June 30,
2000. The amendments will strengthen the review of, and control over, long-distance telephone
charges. They will also include a program that will, two months of each fiscal year, require 100
percent verification by offices that long-distance charges were for official business.
FCSBA Response

Farm Credit Administration                            Office   o~        • (;1'­
                                                      1SC1 F;:ulTl C         Orl F
                                                      'v1r.Lear V ....   ~   2·      09
                                                       703 883-40 "




       Inspector General comments on the written response from the

                         President of the FCSBA




 We take strong exception to Mr. Fletcher's written comments. We provided a draft report
 to him on October 15,1999 (over five months ago) for his review. Subsequently, we met
 with him on numerous occasions to explain our positions and to hear his concerns and we
 made some changes to the draft report.based on those exchanges. Information furnished
 by Mr. Fletcher during this time was slow in delivery, often inaccurate or incomplete, and
 sometimes contradicted other information he had previously supplied. He admitted that
 he had not taken our requests seriously and had given them low priority because of other
 demands on his time, notably Year 2000 issues.

 His response challenges the accuracy and relevance of information we have used to
 support our fmdings but has not provided any credible information to support his
 chailenges. In fact, since Mr. Fletcher contested the dollar values our draft report
 attached to potential savings, effect of errors, etc., this fmal report generally uses the
 figures supplied by FCSBA. Our conclusion is the same regardless of which values are
 used.

 This fmal report does not include our estimate of dollars accruing from (1) the decision to
 switch to FTS 2001 as the provider for telecommunications services and (2) reductions in
 travel accompanying the acquisition of videoconferencing services for the Agency.
 These projections are incidental because FCSBA has already subscribed to FTS 2001 and
 FCA      nagement agre that videoconferencing services should be acquired.




 Eldon W. Stoehr
 Inspector General
FCS Building Association

To:         Eldon Stoehr                             cc: Don Clark
                                                         Mike Pickell
From:

 Subject:   IG Draft Report dated March 20,2000

Date:       March 21, 2000


Eldon:
As discussed, enclosed are copies of all the correspondence we have provided your office
regarding this report. In reading through this material, it confirms that we have responded to
every draft in a timely manner and that the 'information has been factual and comprehensive. We
have also gone to great lengths to insure that we have been "objective" at all times. It has been
our intent to cooperate with your investigation completely throughout the 12 months it has taken.
We felt that by cooperating with you the final report would be factual and would become a basis
for improving the telecommunications services we provide FCA. At some point however, the
cooperation has broken down and we are now on the 4th draft of this report and are still no closer
to reaching a consensus on it than we were on October 15th when the initial draft was issued.


At this point the easiest thing for both of us is to ask the Board to resolve this. This would be
unfortunate, as there is nothing of a "material" nature in your findings and it would be a waste of
their time. I think the Board expects us as senior staff members to resolve such matters. As an
organization, the FCSBA is very respectful of the Board's time and would hope that your office
would be sensitive to it as well. Consequently, I would like to reiterate our comments and
suggestions for you one last time in an attempt to produce a report that is factual. Hopefully, the
March 20th draft is not your "final answer" and you will take the time to read and consider the
points we have raised which are as follows:

Page 1 - 2nd Paragraph
1.	 The way the first sentence is written it sounds as if we left the entrance conference and
    immediately called GSA which is far from what happened. We have been tracking the FTS
    program for over 2 years and decided to change some of our service over to it several months
    after the entrance conference.

2.	 FTS 2001 Estimated Savings - Per my earlier correspondence, your estimate of $65,000 a
    year in savings is very aggressive in comparison to our estimate. Evidently, you have some
    basis for your number and I would appreciate it if you would share it with us. Even though
   you say you are "estimating" savings of $65,000 a year, I think it would be irresponsible to
   cite a number in a report to the Board that we know is not achievable.


3.	 In the sentences concerning the savings from video conferencing the report says video
    conferencing "might" save $80,000 a year. In our opinion, using "might" in this context
    implies that the estimate is a guess and not based on any factual analysis.

4.	 The last two sentences of this paragraph are written to distort your findings. The billing
    exceptions you noted totaled only $3,715.79. The reoccurring problem with the PBX in
    Denver of$3,253.96 and one time set up errors totaling $461.83.


Background
Your last paragraph in this section is new and appears to be an attempt to create a headline where
there was none before. That the FTS contract prompted your investigation has never been
mentioned in either your initial memorandum regarding the investigation or in the entrance
conference.

Existing Memorandum of Understanding
1.	 Once again, I take exception with the opening sentence of the first paragraph as you are
    implying that we have profited from the services we provide the FCA. In no instance has the
    FCSBA profited in any way from this relationship. Since the FCA and the FCSBA obtain
    their operating funds from the Farm Credit System what basis would we have to profit from
    our relationship? You cannot substantiate this statement and are intentionally distorting this
    Issue.

   You may disagree with how we billed a particular item but there is no reason or anything to
   gain by distorting an issue. As we have discussed before, the equipment charges being
   amortized would have been better handled if they had been billed to FCA on a lump sum
   basis when they were incurred. By amortizing these costs, we will save FCA $1,500 to
   $2,000. However in doing so, all we did was open ourselves up to criticism.

2.	 In the last sentence you state that the amounts shown are "conservative based on your offices
    analysis." We provided your office these numbers several months ago and it is inappropriate
    at this time to say you disagree with them. We have always been available to answer any
    questions your office had or explain things that you did not understand. If you have analyzed
    these costs I would appreciate it if you would send us a copy as we would be happy to
    reconcile the difference.


3.	 Under this section you are again making the claim that the charges for every dialing attempt
    and the rounding of the long distance calls are not authorized by the MOU. As before, this
    was the practice in effect at the time the MOU was signed. Your claim that the agency was
    not informed or did not know this was the practice when the MOU was signed does not hold
    up. Under contract law, the parties executing a contract are presumed to have full knowledge
    and understanding of the agreement they are entering into. It would be more accurate to
    discuss these two items under a separate section of the report.

FCSBA's Internal Call Tracking Software
This title is misleading in that you make a blanket statement regarding the call accounting system
that it is unreliable. Your only basis for this was the two missing long distance calls in the over
500 minute category. We have solved this mystery. On February 17th, the call accounting
system was moved to our offices and one of the backup disks for February was not loaded into
the computer the system was moved to. Until this disk was loaded, the system did not have the
complete chronological history for February. New reports have been run and they do include all
the calls we previously identified as well as the ones you had found. Other than this to my
knowledge you had no other basis for claiming that the system was unreliable.

In your first paragraph of this section, you reference an Appendix "A" citing $3,445.08 in costs
which are generated by the internal call tracking software. This appendix is confusing, as it is
not clear what you are trying to show and I would recommend that it be revised. To begin with it
is not clear what numbers add up to $3,445.08 nor does it show what your basis is for claiming
these numbers are "unreliable." We have requested an explanation on a number of occasions but
have not received a response. I also question whether it is appropriate to state that the billings
are not reliable because they are in part, difficult to understand. There were two other numbers
that were also incorrect.

•	 Under the category titled 800#s for RAS, it states that there was a billing error of $309.50 for
   this item, which is incorrect. Previously, we have explained and provided you proof that
   these calls were to be billed at the "switched" rate and not the cheaper "dedicated" rate.

•	 Under the Telset and PBX heading, you show two amounts, $1,604.69 and $1,147.82, which
   you are evidently questioning. Some explanation should be made explaining your questions
   or if there is no explanation the numbers should be removed from the summary.

In the second paragraph you again refer to the equipment amortization costs referred to earlier in
the report. This time however you use a different terminology to describe them. In order to
make the report consistent, the same description of an item should be used throughout the report
to avoid confusing the reader. In this explanation, you state that "the rates have been rounded
up" and it makes this sound like an entirely new issue and not just the additional mention of an
item discussed earlier in the report. You also mention that these costs are difficult to track,
however you have been provided detailed schedules that are used to track these costs.

The last sentence of the second paragraph of this section also states that "the problem identified
in the allocation process further complicate this area." In the previous 4 drafts of this report, you
have never mentioned that you had concerns with the allocation process. Could you please
clarify this for us.
The bullet items noted on page 4 of the report are inaccurate as the information provided is
incomplete and should be revised as follows:

•	 550 Minute Calls - As noted earlier, we have figured out why we could not locate the same
   calls that Dave had found. This was due to human error and has been corrected. New reports
   have been run and they show all the calls, the three we found and two Dave found. As we
   previously noted on this issue, all five calls were made from FCA phones and there were no
   such calls like these recorded to any of the other user's accounts. There were also the result
   of an equipment problem at Bell Atlantic or user error. Since this only occurred 5 times
   during 1999 and on FCArs phones and no one else's phones, I am inclined to attribute it to
   user error.

•	 Indirect Telecommunication Costs - You have elected to include the verbiage on the
   telephone equipment and are again implying that this cost is based the number of staff which
   is incorrect. It is based on the phone sets in "place" and you continue to ignore the fact that
   there has to be telephones in the conference rooms, workrooms, file rooms, computer room
   and other such areas for FCA to function correctly. If you feel compelled to mention the
   equipment costs then I would suggest that you say something to the order of:

       That 8% or $24,000 of FCA's annual telephone cost<: i~ for equipment maintenance
       charges that are based on counts taken by the FCSBA. Currently, the Agency does not
       have a process to ensure that the FCSBA's counts are accurate or that all telsets
       currently installed are necessary. To that extent that the FCA has more telsets assigned
       to them than in actual use, could result in a higher cost to FCA than necessary.

•	 Local and Long Distance Calls Not Billed - Once again you are reporting only a portion of
   the facts on an issue. We have explained on a number of occasions that these calls do not
   register because they are being made to newly introduced area codes that have not been added
   to the Call Accounting system. This system is updated on a monthly basis at this time. We
   could go to weekly updates and that would eliminate the missed calls. However, this would
   increase FCA's cost an additional $1,200 to $1,500 a year.

•	 Billing Errors - I think it should be noted that other than the Denver trunk error, these were
   all one-time errors and not reoccurring practices. You have also again mentioned the charges
   for the Remote Access System. We have previously shown you that these charges are correct
   and they should be removed from the report.

   On page 5 in the second paragraph, I think it is more appropriate to say that the FCSBA is not
   tax exempt and that the bills include all federal state and local taxes and surcharges instead of
   using "passed through" verbiage. The use of "passed through" in this context denotes a
   negative connotation, which is not the case.