oversight

U.S. Department of Agriculture: Working Capital Fund and Modernization of Administrative Processes Program

Published by the Government Accountability Office on 1997-11-14.

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

Resources, Community,   and
Economic Development    Division



B-278417

November 14, 1997

The Honorable Richard G. Lugar
Chairman, Committee on Agriculture,
 Nutrition, and Forestry
United States Senate

Subject:     U.S. DeDartment of Agriculture: Working Canital Fund and
             Modernization of Administrative Processes Program

Dear Mr. Chairman:

As requested, we are providing you with information on (1) the activities
supported by the U.S. Department of Agriculture’s (USDA) Working Capital
Fund (WCF), its funding sources, and the controls in place to prevent
inappropriate uses and (2) the status of USDA’s Modernization of
Administrative Processes (MAP) Program and its accomplishments. On
October 7, 1997, we briefed your office on the results of our analysis (see enc.
I for the briefing materials provided).

USDA’S WORKING CAPITAL FUND-ACTIVITIES FINANCED, FUNDING
SOURCES. AND INTERNAL CONTROLS

USDA’s WCF, authorized in 1943, finances 22 separate activities that provide a
wide variety of centralized and common administrative services to over 120
federal departments (including USDA), agencies, commissions, and other
entities. The largest activity is conducted by USDA’s National Finance Center
(NFC), located in New Orleans, Louisiana. It operates central administrative
processes, such as payroll/personnel, central accounting, and administrative
billings and collections for USDA and other federal entities. The center also
provides record-keeping services to the Federal Retirement Thrift Investment
Board, which manages the Thrift Savings Plan for all federal employees.

WCF activities are reimbursed from customer agencies for the cost of the
services provided. Of the 22 WCF activities, some are reimbursed on an
actual-cost basis (e.g., for the number of copies printed, number of employee

                              GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
B-278417

records processed, minutes of computer time used); other activities are
reimbursed on either a use-based cost recovery or cost-allocation basis.’
WCF’s costs for fiscal year 1996, the most recent year for which data are
available, were $215 million. These costs were reimbursed by USDA agencies
(64 percent) and non-USDA agencies (36 percent).

There are several controls over WCF to ensure its uses are appropriate. First,
USDA and the Office of Management and Budget must approve the inclusion
of new activities in WCF.’ Approval is given on the basis of whether the
activity would result in cost savings through (1) economies of scale, (2)
reduced overhead costs, (3) central cost-based management, and (4) avoidance
of duplication among those who might provide the services. Approved
activities that subsequently fail to meet these criteria may be eliminated from
WCF.

Second, to ensure that capiti investment and operating estimates are fully
justified, budgets for each activity are annually reviewed by the WCF Working
 Group in USDA’s Office of Chief Financial Officer and the WCF Executive
 Committee, which represents USDA’s customer agencies. The WCF Working
 Group performs a variety of duties, including (1) reviewing estimates for
 capital investment and operating budget needs prepared by WCF activity
 managers, (2) conducting special reviews of WCF’s financial and operational
 activities at the WCF Executive Committee’s request, and (3) presenting
 findings and results of reviews to the Executive Committee. The Executive
 Committee provides recommendations to the Chief Financial Officer on the
 basis of the Working Group’s review results.




lAnnuaIl costs for the use-based activities are estimated on the basis of the
prior year’s usage, which have been adjusted to reflect anticipated changes in
users’ workload for the current year. These cost estimates are provided to the
user agencies at the beginning of the fiscal year, and the agencies are billed
during the fiscal year on the basis of the estimates. Throughout the year, the
activity managers monitor their actual costs. If the costs are greater than
estimated at the beginning of the year, user agencies are billed for the
difference. If the costs are less than estimated, excess funds are to be
returned to the user agencies. For activities reimbursed on a cost-allocation
basis, WCF uses staff years as the basis for allocating costs.
‘The Office of Management and Budget’s approval of each WCF activity is
required by 7 U.S.C. 2235.
 2                         GAOLRCED-9%29R USDA’s Working Capital Fund and MAP Program
B-278417

Third, the WCF Controller (who is the USDA Associate Chief Financial Officer)
and a staff of seven monitor the WCF activities during the year to ensure that
their budgets are properly executed. They do this by reviewing monthly
reports from each activity on planned vs. actual expenditures for operating and
capital expenditures. The WCF Controller issues three summary reports
(midyear, third-quarter, and final) on the budget execution for WCF activities.

Finally, USDA’s Office of the Inspector General (OIG) has a staff of 14 auditors
dedicated to reviewing WCF activities. Additional audit staff may be assigned
to this work as necessary. Over the past 2 years, the OIG has released nine
reports related to NFC and WCF. The OIG also has 15 ongoing or planned
audit efforts related to NFC and WCF in fiscal year 1998. The OIG reported a
number of concerns relating to NFC and WCF,3 including control weaknesses
in the accounting system NFC uses to prepare WCF financial statements-an
issue that will be highlighted in the OIG’s second 1997 Semiannual Report to
the Congress, according to OIG officials. According to the WCF Controller,
NFC’s accounting system is in the process of being replaced, and the new
system and other actions taken by the Office of the Chief Financial Officer will
correct weaknesses identified by the OIG reports. The OIG, however, did not
fully concur in the corrective action proposed for its recommendation to
develop and implement a WCF capital planning and investment control
process.

MAP PROJECTS: STATUS AND ACCOMPLISHMENTS

The MAP Program, formally created in November 1992, is directed at
streamlining USDA’s administrative work by eliminating unnecessary
procedures and paperwork, streamlining remaining policies and procedures
while ensuring adequate management control, and using information
technology to support those streamlined processes. Specifically, the program
was charged with developing and implementing modern administrative
processes that would help USDA share resources across agency lines where
appropriate, reduce the cost of transacting its business, and make effective use
of technology. From fiscal year 1993 through fiscal year 1997, the MAP
Program spent $13 million. It is funded through USDA’s WCF with




3Audit of the NFC Cost Allocation and Billings Process (Report no. 50099-2-FM,
January 1996 and Working Capital Fund Onerations (WCF) - Phase II (Report
no. 50099-g-FM, August 1997).
3                          GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
B-278417

reimbursement from USDA and non-USDA agencies.4 The program’s projects
have focused on procurement, information resources management, human
resources management, and civil rights.

Although the program was originally expected to terminate at the end of fiscal
year 1999, USDA’s Acting Assistant Secretary for Administration (who oversees
the program) told us that he terminated the MAP Program Office at the end of
fiscal year 1997 because he believed that the program had had only limited
accomplishments. The official decided that he could not see any benefits in
allowing the program to continue as a separate organizational unit. The
program will officially cease to exist as a separate entity as of November 15,
 1997. However, its WCF funding activity may continue to exist at least
through fiscal year 1998, and several of its projects will likely continue under
other USDA organizations.

Prior to its termination, the program had seven active projects to improve
USDA’s administrative functions: (1) Purchase Card/Convenience Check, (2)
Procurement System Modernization, (3) Human Resources Management
(personnel system) Modernization, (4) Time and Attendance, (5)
Telecommunications Services, (6) Information Resources Management
Analysis, and (7) EEO Complaints. The Purchase Card project (an automated
system for tracking, reconciling, and paying government credit card purchases
up to $2,500) had begun implementation USDA-wide and is to be completed by
March 1999.5 Pilot testing of the Telecommunications Services project (to
automate and consolidate USDA’s telecommunications needs to allow central
billing, reconciling, and equipment inventory management) is expected to begin
in February 1998. The remaining five projects had not reached the pilot test
phase when the MAP Program was discontinued.

Although the MAP Program has been discontinued as a separate program,
several of its projects may continue under “process owners” (those
organizations that would be responsible for managing-the administrative



4According to MAP Program officials, non-USDA customers are billed for a
share of the costs because they stand to benefit from improved administrative
processes that would result from the program.
 5Various officials p rovided information on project milestone dates only through
 interviews. Because the decision to terminate the program had just occurred
 when we conducted our review, future action on the MAP Program projects
 had not been documented.
 4                          GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
B-278417

processes being redesigned). However, USDA officials have not yet
determined how the projects will be funded. According to the WCF Controller,
several options are being considered by the WCF Executive Committee,
including allowing the program’s WCF activity to continue in order to fund the
projects by reimbursing the process owners. If these WCF funds are not
provided, the process owners may either fund the projects from their
appropriations or discontinue them.

AGENCY COMMENTS

We provided copies of a draft of this report to USDA for its review and
comments. We spoke with officials in the offices of (1) the Assistant Secretary
for Administration, (2) the Chief Financial Officer, and (3) the MAP Program to
obtain USDA’s comments. USDA generally agreed with the report and
provided clarifying and updated information, which we have incorporated as
appropriate.

SCOPE AND METHODOLOGY

We interviewed cognizant USDA officials, including the Acting Assistant
Secretary for Administration, the Acting Chief Financial Officer, the Director of
the MAP Program, and staff from various USDA agencies that worked on the
MAP Program’s seven projects. We reviewed WCF documents, MAP Program
studies, USDA budget submissions, and OIG reports concerning WCF
operations.

We performed this work from July through October 1997 in accordance with
generally accepted government auditing standards.



We are sending copies of this report to the appropriate Senate and House
Committees; interested Members of Congress; the Secretary of Agriculture; the
Director, Office of Management and Budget; and other interested parties. We
will also make copies available to others upon request.




                           GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
Major contributors to this report include Charles Adams, James Dishmon, Jr.,
Deborah Justice, and Rosellen McCarthy. If you or your staff have any
questions, please contact me on (202) 512-5138.

Sincerely yours,




Robert A. Robinson
Director, Food and
 Agriculture Issues

Enclosures - 2




 6                         GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                       ENCLOSURE I



         GA*   Briefing to the Senate Committee on
               Agriculture, Nutrition, and Forestry

               The U.S. Department of Agriculture’s
               (USDA) Working Capital Fund (WCF) and
               Modernization of Administrative
               Processes (MAP) Program




                         GAO/RCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                              ENCLOSURE I



         G*EI       Assignment    Objectives


                l   What activities does USDA’s WCF
                    support, what are its funding sources,
                    and what controls are in place to prevent
                    inappropriate uses?
                l   What is the status of the MAP Program
                    and what has it accomplished?




 8                               GAO/RCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                           ENCLOSURE I



         GAO WCF Uses and Sources                    of Funds

              l   Supports a range of central
                  administrative services provided to
                  USDA and non-USDA customers.
              l   FY 96: $215.5 million/2,008 staff years
                  (64% of the funds and 53% of the staff
                  years spent for USDA customers).
              l   Operating costs for the 22 WCF
                  activities reimbursed from customer
                  agencies.




9                            GAOLRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                                                                ENCLOSURE I




         w                WCF Activities: FY 96 Costs and
                          Staffing
                                               I                                                           I          Ffl996IStaff
         OPERATlNG ORGANIZATION                1 WCF ACTIVITY                                                            costs years
         Office of the Executive Secretariat   1 Exewtive Correspotxienceand Control                       I        $1,604,642 1     17
         DepartmentalAdministration                 Vodemizationof AdministrativeProcesses                           4,442,555          6
                                                    Computer ServicesUnit                                            1,179,369         10
                                                    Central Supply Stores                                            2,522,933          9
                                                    ConsolidatedFom, Publications,end DistributionCenter             2,912,765         24
                                                    Central Excess PropertyOperations                                2,106,675          9
                                                    Central Shipping and Receiving                                     368,007          1
                                                    DepartmentalFunds Management Unit (Imprest Fund)                   192,346          4
                                                    AgricultureContractAutomationSystem                                350,651          2
                                                    Copier Setice                                                     4,053,906        18
                                                    Duplicating                                                       1,086,386        12
                                                    Central Mail Unit                                                 3587,596         89
                                                    DepartmentalMailing List Setice                                     215.642         2
                                                    Training Center (a)                                                                 0
         Office of Chief Information Officer       1 NITC(b) Mainframe                                                                120
                                                   1 NITC TelewmmunicationsService operation                          4,3482701        22
                                                     NITC Applications&%ViCeS Division                                4,317,137        42
                                                     Local Area Network                                               2,859,743         0
                                                     TelephoneServicesOperation                                       1517,810          2
         Office of Communication                     Design Center                                                    2394,110          12
                                                     Video and Teleconferencing                                       2399,809 1        13
          Office of chief Financial Officer          National Rnance Center                                    1    125,523,347 1    1,591
                                                     Financial InformationSystems                                     3,785,782         3
          Capital Equipment(a)                     I                                                                 18,149,765         0
          Total                                                                                                    $214538,664       a006




me Training Center activity was eliminated from WCF in fiscal year 1996. “Capital
Equipment” is not an activity, but shows the amount of capital investment funds
associated with WCF. The remaining items are the 22 current WCF activities.

bThe National Information Technology Center (NITC) is a mainfkme computer processing
center that runs agency applications in support of program delivery. Operated by the
Office of Chief Information Officer, the center is located in Kansas City, Missouri.

Source: Prepared by GAO from USDA’s 1998 budget, Emlanatory Notes for Committee
on Amxotxiations, Vol. 1.


 10                                                         GAOfRCED-9%29R USDA’s Working’ Capital Fund and MAP Program
ENCLOSURE I                                                                    ENCLOSURE I




          GAO Internal Controls: Annual                      Reviews           of
              WCF Activity Budgets
              l   Each WCF activity must annually justify its costs
                  and proposed budget.
              l       Cost estimates and budget proposals        are analyzed
                      by the WCF Working Group.
              l   Additional    budget oversight is provided       by
                  l    WCF Executive Committee: Represents              user
                       agencies; reviews budgets and costs.
                  l    CFO: Approves, prepares, and transmits final
                       budgets to the Secretary of Agriculture (with
                       assistance from the WCF Controller and WCF
                       staff).




                                             ,
11                                GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                        ENCLOSURE I




              GAO Internal Controls: WCF Funding
                  Sources/Restrictions
                  l       All WCF operating             income is derived
                          from customer agencies that reimburse
                          WCF for services received.
                      l       Activities    recover actual cost of
                              operations.
                      l       Excess funds are refunded to
                              cusZomers if estimates were too high.
                          l   WCF operating funds cannot be
                              reprogrammed among activity centers.




 12                                        GAOIRCED-9%29R USDA’s Working ‘Capital Fund and MAP Program
ENCLOSURE I                                                               ENCLOSURE I



              GAO Internal      Controls:       Other

                  l   Office of Management and Budget must
                      approve an activity prior to its inclusion in
                      WCF.
                  l   WCF costs are scrutinized by USDA user
                      representatives; inefficient/inappropriate
                      costs subject to question.
                  l   WCF Controller and WCF staff monitor
                      activities during the fiscal year to ensure
                      that budgets are properly executed.
                  . OIG reviews WCF activities            regularly.




13                              GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                    ENCLOSURE I




              GAO Key OIG Findings                    From WCF Activity
                  Reviews

                    l       Control weaknesses in National Finance
                            Center (NFC) accounting system used in
                            preparing WCF financial statements+)
                    l       NFC process for setting rates for
                            services needs better documentation.
                        l   Inadequate policy for determining how
                            excess WCF revenue will be returned to
                            customer   agencies.(b)




      “According to the WCF Controller, NFC is in the process of installing a new
      accounting system known as the Foundation Financial Information System. This
      system includes elements to correct the control weaknesses identified by the OIG.
      The OIG does not fully concur in the proposed actions by the Office of Chief
      Financial Officer concerning the OIG’s recommendation to develop and implement
      a WCF capital planning and investment control process.

      bWCF officials said that this weakness involves about $5 million in retained excess
      revenues accumulated over more than 10 years of operations during wuch annual
      expenditures ranged from $150 to over $200 million. This affects a very small
      proportion of total WCF expenditures. The officials said that the significance of
      this OIG k-&rig should not be considered equal to the accounting system
      weaknesses discussed above.




 14                                    GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                               ENCLOSURE I




              GAo MAP Program--Background


                  l   Intended to develop and implement modern
                      administrative processes to help USDA share
                      resources across agency lines, reduce costs, and
                      use technology effectively.
                  l   $13 million spent from FY 93 through FY 97.
                  0 Costs reimbursed by USDA agencies (-60%) and
                    non-USDA agencies (-40%).




15                              GAO/RCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                    ENCLOSURE I




              G**      Status of MAP Program Projects
                       (Accomplishments to Date)
                       Seven projects under development;            only one has
                       progressed to implementation.(a)

                         l   Purchase Card/Convenience      Check (being
                             implemented)
                         l   Procurement   System Modernization
                         l   Human Resources Management         (personnel
                             system) Modernization
                          l Time   and Attendance
                          l Telecommunications     Services
                           l Information Resources Management        Analysis
                           0 EEO Complaints




aSee enclosure II for a description of the goals and status of each project.




 16                                    GAO/RCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                ENCLOSURE I




              G**       Early Termination of MAP Program
                        Under Way
                    l   The Acting Assistant Secretary for
                        Administration   (ASA) believes MAP
                        Program has had limited
                        accomplishments.
                    l   MAP Program was originally scheduled
                        to terminate at the end of FY 99;.
                        termination by ASA as a separate
                        program entity begun g/30/97.
                    l   Some MAP projects may be continued
                        under other USDA organizations.




17                                GAO/RCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE I                                                                    ENCLOSURE I




              G**           Continued Funding of MAP Program
                            Projects
                    l       The Acting ASA considering allocating MAP
                            WCF funds to continue some MAP projects
                            under “owner” organizations--WCF
                            Controller and Executive Committee now
                            considering funding options.
                    l       Office of Chief Financial Officer questioning
                            whether funds transfer may be appropriate
                            for certain projects.
                        l   If WCF funds are not transferred, owner
                            organizations  may either fund from
                            aoorooriations  or discontinue the oroiect.




 18                                    GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE II                                                                   ENCLOSURE II

               GOALS AND STATUS OF MAP PROGRAM PROJECTS


Various officials provided information on project milestone dates only through
interviews. Because the decision to terminate the program had just occurred when we
conducted our review, future action on the MAP projects had not been documented.

Purchase Card/Convenience Check

Goals:      (1) Expand purchase card use by allowing micropurchases (< $2,500) by
            nonprocurement staff. (2) Combine convenience checks (used when
            purchase cards are not accepted) with purchase card accounts. (3)
            Establish a departmentwide electronic system of billing and reconciling
            purchase transactions.

status:     Pilot testing completed. Departmentwide implementation began October
            1997- to be fully implemented by March 1999. Transferred to the Office
            of Procurement and Property Management.

Procurement Svstem Modernization

Goals:      (1) Develop a departmentwide electronic “acquisition toolkit” that allows
            processing of any purchase. Toolkit should operate on a system that
            incorporates one-time data entry per transaction and continuous updating
            with each transaction that will provide management information on all of
            USDA’s procurement actions. (2) Link the departmentwide system to the
            NFC accounting system to track progress and payments for each
            purchase. (3) Eliminate separate acquisition systems and agency feeder
            systems.

status:      Final design under way; initial deployment USDA-wide expected to be
             completed by September 1999, with additional enhancements to the
             system to follow. Transferred to the Office of Procurement and Property
             Management.

Human Resources Management (nersonnel svstem) Modernization

Goal:        Develop a USDA-wide system or family of major processes that supports
             recruitment, hiring, classification, promotion, pay, benefits, training, and
             rewards.



19                                    GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE II                                                                ENCLOSURE II
status:     Completed study identifying processes to be redesigned. Initial review of
            commercial off-the-shelf software to determine applicability to system
            needs completed. Transferred to the Office of Human Resources
            Management. No decision on possible implementation.

Time and Attendance

Goals:      (1) Implement an automated system for recording employees’ work hours
            that will eliminate duplicate approvals, reallocate timekeeping to
            employees and managers, and provide on-line access to leave and
            earnings balances. (2) Change policies to promote the use of maxi-flex
            scheduling.

status:     Transferred to the Office of Human Resources Management. One
            candidate system is ready for pilot testing. First pilot to begin in
            November 1997 using commercial off-the-shelf software. Pilot testing of
            all other candidate systems scheduled to be completed by March 1998,
            providing recommendations for a final implementation plan to the Office
            of Human Resources Management.

Telecommunications Services

Goal:       Consolidate USDA’s telecommunications needs to ahow centralized
            ordering, billing, reconciling, and equipment inventory management
            through a single paperless, electronic system.

status:     Transferred to the Office of Chief Information Officer. New
            process/system developed; necessary software being acquired. Pilot
            testing to begin in February 1998.

Information Resources Management (IRM) Analvsis

Goal:        Reengineer how USDA manages its information resources. Create a
             departmentwide system that will facilitate IRM changes mandated by
             law, link business processes and organizational structure to USDA’s IRM
             strategic plan, integrate ongoing IRM initiatives to reduce redundancy,
             and identify IRM initiatives that provide the greatest return on
             investment.

 status:     Study of IRM environmental factors, customer expectations, and USDA’s
             current business framework completed in September 1997. Project not
             proposed to continue in fiscal year 1998.

 20                                  GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
ENCLOSURE II                                                               ENCLOSUREII

EEO Com&tints

Goal:      Reengineer how USDA processes and monitors EEO complaints to
           improve compliance with settlement agreements, increase confidentiality,
           and reduce complaint processing time.

status:    Redesign of process under way. Transferred to the Office of Civil Rights.
           No decision on possible implementation.




(150733)

21                                GAOIRCED-9%29R USDA’s Working Capital Fund and MAP Program
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