oversight

Audit of Office of Personnel Managemnet's Invoice Payment Process

Published by the Office of Personnel Management, Office of Inspector General on 2011-03-30.

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

                                                         u.s. OFFICE OF PERSONNEL MANAGElvIENT
                                                                     OFFICE OF THE INSPECTOR GENERA..L
                                                                                      OFFICE OF AUDITS




Final Audit Report
Subject:


         AUDIT OF THE OFFICE OF PERSONNEL

       MANAGEl\lENT'S INVOICE PAYMENT PROCESS



                                              Report No. 4A-CF-OO-IO-023


                                              Date: Harch 30, 2011




                                                                --C.U:TIOJ\--
ThlS audit report hfH. been distrihcltn] to Federal ol"ficial" who are n,spotlsibJe for the, admi[]l~tration of the {j[]dited program. Tb.1s {l[]dit
report fil&y {'(jo[]taill [lropridary data which i8 protc,cted by Fedcnd law (.18 C.S.c. 19051. Then'-fon" while this aut.lit report h HaiJabk
urJder the Freedom of Tnformatioll Act and mad.;: available to the pllbllt: on thi: OTG wt::J[lagc, ("Hllion need.\. to he cwn,iscd before
releasing the report to the general public as it may cont::;in proprkt"'f) \n[,jrmatiIJn that was redaeted [rom the p1-lblid~' distrHlLllcd wp~;.
                              LNTTED STATES OFFICE OF PERSO\:NEL !v!At\AGElvlENT


  O'IT,ce of the
lnspector GUJcral




                                             AUDIT REPORT




                   AUDIT OF THE OFFICE OF PERSONNEL MA~AGEl\IENT'S

                              INVOICE PAY\IENT PROCESS





                          Report No. -tA-CF-OO-IO-023   Date:    March 30,     2 all




                                                                :\Iichae) R. Esser
                                                                Assistant Inspector General
                                                                   for Audits




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                                                        EXECVTIVE SUMMARY




                        AVOIT OF THE OFFICE OF PERSOI\I\EL i\IANAGEMENT'S

                                   INVOICE PAYMENT PROCESS





                                      Report 'io. 4A-CF-OO-IO-023                Date:   March 30,      2011


         The OtIlce of the Inspector General has completed a performance audit of the Oftlce of
         Pcrsonnellllanagement's (OPlI1'i Invoice Payntent Process prior [0 the implementation of the
         Consolidated Business Information Systcm (eElS). Our audl1 was limited to identit\ing the
         causel.s:l as tc~ \\·hy vendor invoices \,vere not processed for pdy·t11ent. by ()P~vl progr3nl ofl¥lces in
         rhe Goveniment Financial InCormatiol1 System (CiFIS) ancllO determine \Vhelher those invoices
         had subsequently been paid.

         Om audit was conducte,1 from April 1.1010 through .lull' 1410111 CIt the OrM headquarters in
         \Vashington, D.C. O\'t'f<1!J. \V(' determined th(jt there \\'-1$ <:1 lack Orinlernal c(1ntrol.s in ttK
         monitoring and trai.:king of'v'cndor invoices \\'ilhin thi..'- program nClices and the Ch!cf FinzUlclCil
         Officer"'s (CFO) furmer Center for Financial SL'fVICcS (CFS}" SpcclfiL~Lllly, venJor J[Jvoii..~cS \\'ere
         not paic] prior to the implemcnlQtion ofCRIS due to f(~)lIr areas requiring irnpruverncnt. \Vt' also
         determined th:l1 not all invoices haJ been sub,cljuently paid.

         A.                  Invoice Processing

                                 1.   '\io Policics and Proccdurcs in    ~lost   Program Offices                  Proced ural

                                      The program otTlces ded not have docnmentccl policies "nd
                                      proce(:ures to ensure that vendor in'o'oiccs \-vere paid in accordzH1ce
                                      \;ith OP\l's F10ilnc,ai 0.lanagemelll Manual (FM~IL




                                                                                                                ...... ww_usaJo bs, 50'
     2.    Weak Internal Controls in CFS                                          Procedural

           The crs did not have controls in place to ensure that they processed
           invoice payments in accordance with OPM's FMM requirements.

     3.    Lack of Accountability between CFS and Program Offices                 Procedural

           The program offices; CFS; and Facilities, Security, and Contracting,
           fonnerly the Center for Contracting, facilities, and Administrative
           Services (CFAS), did not communicate effectively (0 ensure vendor
           invoices were processed for payment.

     4.    Unreliable Management Reports                                          Procedural

           Management reports from GFIS were unreliable and did not provide
           enough inforrnation tor program offices to dctcnnine the status of
           their invoices.


B.   I!npaid Invoices

      1.   Unpaid Invoices                                                        Procedural

           Twenty-six OUT of 110 invoices we sampled were not paid in GFIS
           or CBIS. as of february 17,2011.




                                            II
                            TABLE OF CONTENTS




       EXECUTIVE SUMMARy                                                    .

  I.   INTRODUCTION AND BACKGROUND                                       ..

 II.   OBJECTIVES, SCOPE, AND METHODOLOGy............................            3


Ill.   AUDIT FINDINGS AND RECOMMENDATIONS                                        5


       A. Invoice Processing
          I. No Policies and Procedures in Most Program Offices..........        5

          2. Weak Internal Controls in CFS                                       6

          3. Lack of Accountability between CFS and Program Offices              7

          4. Umeliable Management Reports.....                      .. .         8


       B. Unpaid Invoices
          I. Unpaid Invoices          .                                         10


IV.    MAJOR CONTRIBUTORS TO THIS REPORT                                        12



       APPENDIX         (Facilities, Security and Contracting, Chief Financial Officer, and
                         Human Resources Solutions response, dated March 1,201 l, to our
                         draft memorandum)
                      I. INTRODUCTION AND BACKGROUND


Introduction

This finill audit report details the findings. conclusions, and recommendations resulting from our
perfoITnance audit ofOPM's Invoice Payment Process prior to the implementation of the
Consolidated Business Information System (CBIS), The audit was pedonned by OPM's Office
of the Inspector General (OIC;). as authorized by the Inspector Gener,,1 Act of 1978, as amended.

Background

The Center lor Financial Services (CFS) w", responsible ror developing appropriate linanci"l
management policies and procedures and ensuring that all OPM accounts payable transactions,
including invoice processing. were properly accounted ror in the existing core tinancial system.
the Govcrnment Financial InloTI11ation System (GrIS), in accordance with Federal laws,
regulations, and standards. These policies and procedures werc documented in OPM' s Financial
Management Manual (FMM).

The responsibility for processing invoices at OPM, as dcscribed by the FMM. fell to three
groups: the oftice of the Chid' Financial Onicer (CFO), the program olIices. and the Center lor
Contracting, Facilities. and Administrative Services (CFAS). f\ccording to the FMM:

    o	   The onice of the CFO is responsible lor ensuring that all ofOI'M's liabilities and vendor
         invoice payments are correct and arc recorclcd in a timcly manner. and liqniclated within
         the guidelines set forth by the Prompt Payment Act and other pertincnt FeLleral
         requirements and guiLlclines.
    o	   CTAS, now facilities. Security, and Contracting (FSC), is responsible lor reviewing
         vcndor invoices for compliance with the terms of the procurement document. After
         determining an invoice is valid. the Contract Specialist approves the invoice \\'ith a
         signature and date.
    o	   The program otT!ces document approval of the invoice with a signature and date: create a
         receiving report using the approved invoice: and transmit the invoice to the appropriate
         cro office,
These controls were designed to ensure that the cro records the accounts payable in a timely
and accurate manner so that arM's (inancial position and the results of operations are current
and accurate.

The oflice of the CFO scheduled the implementation of a new financial system effective
October L 2009. The new system. CBIS. was to replace GFIS. which had been OI'M's
accounting system for the last 10 yenrs, To prepare the agency lor the implementation ofCBIS,
the office of the CFO set September 21, 2009 as the date by which all current year's accounts
payable invoices should have been processed.
According to the Government Accountability Office's (GAO) Standards/or Internal Control in
the Federal Government, "Internal control serves as the first line of defense in safeguarding
assets and preventing and detecting errors and fraud. Internal control should generally be
designed to assure that ongoing monitoring occurs in the course of nonnal operations. It is
perfonned continually and is ingrained in the agency's operations. Control activities include a
wide range of diverse activities such as approvals, authorizations, verifications, reconciliations,
perfonnance reviews, and the creation and maintenance of related records which provide
evidence of execution of these activities as well as appropriate documentation."




                                                 2

                II. OBJECTIVES, SCOPE, AND METHODOLOGY

Objectives

The objectives of our audit were limited to identifying the cause(s) as to why vendor invoices
were not processed for payment by OPM program oilices in GFIS and to determine whether
those invoices had subsequently been paid.

The recommendations included in this final report address these objectives.

Scope and Methodology

We conducted this performance audit in accordance with generally accepted government
auditing standards for performance audits as established by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain suflicient.
appropriate evidence to provide a reasonable hasis tor our lindings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our
Endings and conclusions based on our audit objectives.

The scope of our audit cov'ered invoices submitted to OPM, but not processed for payment in
GFIS as of Septemhcr 2 1,2009, or prior to the implcment<ltion of CElS. The invoices were
judgmentally selectcd from tile following 14 OrM program ofticcs. Thc names ofthc oiliccs arc
 listed as they were prior to OPM's most recent reorganization.

    •   Center for Contracting, Facilities and Administrative Services
    •   Center for Information Services, including CISC
    •   Center for Leadership Capacity Services
    •   Center for Financial Scrvices
    •   Center for Retirement Information Systems
    •   Center for Talent Services (CTS)
    •   Electronic Government (e-GOV)
    •   federal Investigative Services (FIS)
    •   Human Resources Products and Services Division (I·lRPS)
    •   Insurance Services
    •   Office of the Chief Financial OUlcer
    •   Ot11cc of the Chicflnfonnation Omeer
    •   Training and Management Assistance Group

We performed this audit fr0111 April 1,20 I0 through July 14, 20 I0 at OPM headquarters located
in Washington D.C.

To accomplish the audit ohjectives noted above, we:

    •   Interviewed employees from the program ot11ces to obtain an understanding of their
        invoice payn1ent process:
                                                3
   •	   Reviewed system screen prints, copies of invoices, and other supporting documentation
        to detennine where the invoices were stopped or de laved during the invoice payment
        process;
   •	   Tested and reviewed CSIS payment reports to determine if our sample of unpaid invoices
        were paid in CSIS as of May 11,2010; and
   •	   Contacted vendors to detennine if they received payments for sampled invoices.

In planning our work and gaining an understanding of the internal controls over the invoice
payment process prior to CBIS, we considered. but did not rely on, the internal control structure
to the extent necessary to develop our audit procedures. These procedures wcre mainly
substantive in nature, although we did gain an understanding of management procedures and
controls to the extcnt necessarv to develop our audit objectives. The purpose of our audit was
not to provide an opinion on internal controls, but mcrely to cvaluate controls over the processes
that were included in thc scope of our audit. Our audit included such tests of invoices and
management reports as we considered necessary under the circnmstances.

In conducting our audit. we judgmcntally tested 116 out of 2.1]0 invoices thm wcre not
processed for payment by thc program oftlces as of September 21, 200'J, to dctel111ine wherc
they stopped or were dclayed in thc invoice payment process. In addition, we judgmentally
tested 110 out of 2, 130 vendor invoices to detennine if the invoiccs had been paid as of May 11.
2010. The results from the vmious samples were not projected to the population.
          HI. AUDIT FINDINGS AND RECOMMENDATIONS
        We have determined that prior to the implementation of CBIS there was a lack of internal
        controls within the office of the CFO and program ot1lces to monitor and track vendor
        invoices to ensure that they were processed and paid. We have identified four
        overarching areas which we believe, if addressed, could have reduced the large number
        of unpaid invoices as of September 21,2009. We also determined that not all invoices
        had been subsequently paid.

       We are aware that the agency has made several changes in the invoice payment process
       since we werc requested to perform this audit. for example, the invoice receipt and
       processing part of the vendor payment process was transferred from the office of the CFO
       to FSC on January L 201 L Those changes were not included in this audit and therefore
       our recommendations should be evaluated against the new process. Our findings and
       recommendations address the control deficiencies that were identified, and if not
       addressed in the new procedures using CB IS, could lead to a repeat of unpaid invoices.

A,      Invoice Processing

     I,	 No Policies and Procedures in Most Program Offices

        We found during our testing ofajudgmental sample of] 16 vendor invoices that the
        program offices, witll the exception of FIS and HRPS, did not have written policies or
        procedures for processing invoices to ensure that they were received by the CFS and
        processed for payment. In addition, the program offices did not truck or monitor the
        payment status of their vendor invoices.

        During our audit, e-Gov provided copies of invoices that included the signatures of the
        Contracting Ot1icer Representative and thc Contracting Officer and dates signed: the
        program office and CFS date stamps; and the receiving repori numbers. However, we
        noted that there was no consistency with how the other program offices reviewed and
        approved vendor invoices and there was a lack of documentation maintained in the
        program offices showing invoice payment approvals. The following are examples of
        specific items that wc noted when the FMM procedures for approving invoices were not
        followed:

           •	   Contract Specialists approved CF AS, CTS, e-Gov, and FIS invoices; hOlvevcr. the
                remaining 10 program offices' invoices that we reviewed diel not have sueh
                approvals.
           •	   31 invoices did no! Ilave a program off!cc's receipt and date stamp documented
                on the invoice.
           •	   33 invoices did not havc a CFS elate stamp documented on the invoice.
           •	   36 invoices did not have a signature and date documented on the invoice showing
                the Contract Specialist or Ot1icer's verification that the invoice was velid,
           •	   48 invoices did not have a signature and date documented on the invoice showing
                the Contracting Officer Representetive's approval for paymcnt.



                                                )
   Some of the program omces stated that they rehed on the information within GFIS and
   felt that it was the responsibility of the office of the CFO to ensure that payments were
   made while they were responsible for the review and approval of invoices for payment.
   Therefore, they did not track or monitor the status of invoices.

   GAO's Standards/or Interna! Conlro! in the Federa! Government states that control
   activities are the policies, procedures, techniques, and mechanisms that enforce
   management's directives. Control activities occur at all levels and functions of the entity.
   They include a wide range of diverse activities such as approvals, authorizations,
   verifications, reconciliations and the creation and maintenance of related records which
   provide evidence ot' execution of these activities as well as appropriate documentation.

   It also stales that internal control should be designed to assure that ongoing monitoring
   occurs in the course of nonrnal operations. It is performed continually and is ingrained in
   the agency's operations and inclndes regular management and supervisory activities.
   comparisons and reconciliations.

   As a result of not having policies and procedures over the vendor invoice payment
   process, invoices were delayed or not processed for payment by the program of1Jces prior
   to the implementation of CEIS.

2.	 \Veak Internal Controls in CFS

   The CFS did not have controls in place to ensure that they processed invoice payments in
   accordancc with the OPM's FMM requircments. For example, CFS did not track and
   monitor invoices or perform reconciliations of the invoices to ensure all invoices were
   processed for payment. In addition. the CFS did not have adcquate controls in place to
   handle rejected invoices.

   The CFS did have written work instructions to fultlll its responsibilities for proccssing
   vendor invoices for payment and a system (Team Track) to track invoiccs received from
   the program oftlces. Howcver, the CFS did not fully utilize this system, as required by
   OPM's FMM. For example, Team Track was capable ofrecoreling the receiving report
   number of an invoice. the elate when the invoice was forwarded to the accounts payable
   team and Certifying Officer. and a Treasury paymcnt date. This information would allow
   the CFS' staff to track and monitor where an invoice is located in the payment process.
   However, the CFS stated that they did nol have the resources to utilize Team Track to
   this extent.

   In addition to the lack of controls over monitoring and tracking invoices, there were no
   controls in place to address rejected invoices. We found that the CFS did not haye
   procedures:

       •	   for notifying the program oftlces when they reject one of their vendors' invoices
            to ensure that the program oftlces were aware of the status of the vendor"s invoice
            payment:



                                             6

      •	 for following up with the vendors to whom they issued invoice rejection notices.
         This would have ensured that vendors receive their rejection notices and were
         correcting the invoices for payment processing; and
      •	 to address invoice payments that were rejected by the Department of Treasury.
         Policies and procedures should have been in place to ensure that a new or revised
         invoice was submitted in order to process the payment.

   GAO's Standards/or IlJtemal Conll'ol in the Federal Governmenr states that control
   activities are the policies, procedures, techniques, and mechanisms that enforce
   management's clirectiws. Control activities occur at all levels and functions of the entity.
   They include a wide range of diverse activities such as approvals, authorizations.
   verifications. reconciliations ancl the creation ancl maintenance of related records which
   provide evidence of execution of these activities as well as appropriate documentation.

   [t also states that internal control should be designed to assure that ongoing monitoring
   occurs in tile course of normal operations. It is pertonned continually and is ingrained in
   the agency's operations ancl includes regular management and supervisory activities,
   comparisons and reconciliations.

   The lack of policies and procedures for processing and tracking vendor invoices resulted
   in 71 invoices that were delayed or not processed for payment by the CFS, prior to the
   implementation of CB1S.

3.	 Lacl{ of Accountability between CFS and Program Offices

   The results of our test work revealed that there was a lack of accountability within the
   CFS and program offices to ensure that invoiccs were processed for payment. We found
   that [he CFS was not effectively communicating with the program oflices regarding
   invoices without receiving reports or receiving reports without invoices. Vv'e also noted
   that the CFS and program offIces did not maintain all documentation pertaining to the
   invoice payment transactions in order to cletennine whether invoices were paid or if they
   were delayed cluring the invoice payment process.

   The FMM states that the C FS will contact the program offices within two to three days if
   en invoice is received by the CFS and no receiving report has been prepared by the
   program ortlce to request payment. However, we did not see evidence that the CFS
   etlectively communicated with the program offices on an on-going basis to ensure
   receiving reports were prepared in order to process vcndor invoice payments. We did
   receive an example of an email that was issued by the crs to program offices that
   included a report of invoices without receiving reports as of August 21, 2009; however,
   we were not provided any additional documentation to show that the CFS and the
   program offices were working together to ensure that vendor invoices listed on the report
   were processed for payment.

   We were able to identify two management reports [hat ifused regularly could have
   prevented the large number of unpaid invoices. The reports are described below:



                                            7

      •	   The office of the cro produced management reports listing all invoices over 30
           days old not liquidated by a disbursement. This report should have been reviewed
           on an on-going basis and at year end, in consultation with program oUices, the
           budget stall and the CFAS, to deternline the validity of open accounts payable by
           CFS
      •	   The office of the CFO produced a report of aged obligations or undelivered orders
           OVer 30 days old, wllich were recorded in GFIS and not matched to a receiving
           report. This report should also have been reviewed on an on-going basis and at
           year end, 111 consultation with program 0111ce5, the budget sta11~ and the CFAS, to
           determine the validity of open obligations by CFS.

   GAO's Standards ji)r Internal Control in the Federal Governmenl statcs that "[nternal
   control and all transactions and other signif1cant events need to be clearly documented,
   and the documentation should be readily available for examination. All documentation
   and records should be properly managed and maintained."

   As a result 0[' poor communication between the CFS and the program ortices, vendor
   invoice payments were not processed d1iciently. In addition, if documentation regarding
   the invoices is not maintained it becomes very difficult to detennine the status of an
   invoice when inquiries are made.

4,	 Unreliable ,\lanagement Reports

   We determined that management reports from the CPS were umeliable and did not
   provide enough infonnation for program 0111ces to detennine the status of their invoices.
   SpeciflcaIly, we fCllmd that.

      •	   cancelled vendor invoices were included on the GFIS management reports as
           unpaid invoices; and
      •	   39 out of the 110 invoices we sampled were paid in GFIS: however, we noted that
           24 of these invoices were incorrectly shown on the CFS management reports as
           unpaid.

   In addition, for 42 unpaid invoices where we received a copy of the invoice, we emailed
   or called thc vendors in an effort to confirm whether they received payment. Wc were
   able to confinn with the vendors that 29 invoices had been paid: however, [he CFS
   reports continued to show them as unpaid.

   The ofUce orthe cro was responsible [()T ensuring that all ofOPM's liabilities and
   vendor invoice payments were correct and promptly recorded to maintain their relevance
   and value to management ill controlling operations and making decisions.

   GAO's Slandurds for Imerna! COn/ro! in the Federal GOl'ernmcm states that control
   activities include accurate and timely recording of transactions. Transactions should be
   promptly recorded to maintain their relevance and vallee to management in controlling



                                            8

operations and making decisions. Control activities help to ensure that all transactions
are completely and accurately recorded.

A lack of internal controls for providing reliable dara and reasonable assurance over the
OPM's operations cOIllpromises the plans, procedures, and resources necessary to meet
missions, goals, and objectives.

Recommendation 1

We recommend that internal controls be designed in the ncw payment process to ensure
that ongoing monitoring and tracking at'vendor inv"oice payrllents occurs during the
normal course of operations.

orM's Response

"Concur with recommendation. CFO genCl'ally agrecs that there were inadequate
controls over invoices that were unpaid when transitioned from GFIS to CBIS.
However, thousands of other invoices were success!l,lIy paid throughout the period in
question.    ['inally, OPM has instituted a weeKly war room to address any unpaid
invoiccs and to communicatc process impro\'ement solutions to meet !'rompt Pa\
requirements."

Recommendation 2

We recommend that controls be implemented in the new invoice payment system to
ensure that financial data and reports arc accurate and reviewed regularlj in order to
ensurc payments are processed timely and recorded accurately in CHIS.

orM's Response

"Concur with recommendation. Ihis internal control risk is being addressed bv the
FSCs new invoicc processing team and it provides management information reports to
program omces for immediate action on a daily basis. During the Cl3IS transition period
and prior to the establishment of this team, program oUices did not h"ve" report that
captured thc "threc way match" of funding, the invoice, and the receiving report and
could not dctermine which documents were missing - an absolute prerequisite to
correcting lagging puyments.

[t is further important tn nole that guidance was in pbcc during the Cl31S transition
process. f-1RS had in place documented HRPS Invoice Payment Process Instructions,
submilled during the audit process, supporting the documented policics and procedures
CIS/Til/IA used for invoice processing, which is a sizable subset of the invoices.

f-1RS believes communication and accounwbility will improve for two reasons associated
with the implementation ofCBlS. Fmt, it introduces an automatic notification feature




                                         9

        that alerts a program official of the need to take aetlon to approve an invoice for payment.
        Second. it includes new critical management information reports.

        We are now operating under a different process flow that includes new roles and
        responsibilities, and our focus is timely resolution and payment of unpaid invoices."

B.      Un paid Invoices

     1. Unpaid Invoices

        We selected a judgmental sample of 110 venclor invoices that were not processed for
        payment. to detclll1inc if they were paid as of May II, 20 I O. As discussed in finding A4,
        we determined that 39 invoices wcre paid by CFS and the vendors confirmed that they
        received payment for another 29 invoices. CFS could not provide support that the
        remaining 42 invoices were paid in GFIS or CBlS at the conclusion of our fieldwork, on
        July 14, 20 I O.

        The office of the CFO was responsible for ensuring that all ofOPM's liabilities and
        vendor invoice payments were correct and promptly recorded to maintain their relevance
        and value to management in controlling operations and making decisions.

        GAO's Standards/or Intema! Contro! in the Federa! GOl'ernmenr stales that control
        activities include accurate and timely recording of transactions. Transactions should be
        promptly recorded to maintain their relevance and value to management in controlling
        operations and making decisions. Control activities help to ensure that all transactions
        are completely and accurately recorded.

        We subsequently contacted CFS and requested the status of the 71 (42+29) invoices thcir
        records indicated were not paid. As of February 17, 201 I, we recei ved doc umentation
        from eFS to support that 45 of the 71 unpaid invoices had been paid. leaving a total 01'26
        invoices that have not been paid.

        Recommendation 3

        We recommend that the FSe work vvith the program oftices and vendors to research the
        cunent status of the 26 unpaid invoices and process accordingly.

        OPM's Response

        "Concur with recommendation. We agree that many of the regular controls over the
        invoice payment process broke down as the agency moved rapidly to deploy CBIS in FY
        2010 and that neither the CFO nor other OPM offices adequately monitored these unpaid
        invoices. That said, CFO has provided information showing that only 23 of the invoices
        in 01G's sample of 110 unpaid invoices remained actually unpaid .... The eFO will
        continue to work closely with FSe and rrograrn oflices to research these potentially




                                                 10

unpaid invoices, resolve them, bctter document the new processes, and ensure adequate
controls are deslgned and lmplemented."

OIG's Response

We are in agreement with the 23 invoices that the cro states are unpaid; however, there
were 3 additional invoices where CFS could not provide supporting documentation to
show that the invoices had been paid. Details regarding these three invoiccs were
submitted to CFS on February 28, 2011, separately fi·om this repOli.




                                       1I

         IV.     MAJOR CONTRIBUTORS TO THIS REPORT

Internal Andits Group

               , Auditor
                 Auditor
                  Auditor
                       Senior Team Leader
                    , Chief




                                            12

                                                                                      Appendix


                                                                          March L 2011


MEMORANDUM FOR PATRICK E. McFARLAND
               Inspector General

FRO tv!:                TINA B. McGUIRE
                        Director, Facilities. Security and Contracting

                        STEVEN J. AGOSTINI
                        Chief Financial Officer

                        KAY T. ELY
                        Associate Director, Human Resources Solutions

SUBJECT:                Consolidated Response to Audit ofOPM's Invoice Paymenr Process
                        (Report Number 4A-CF-00-I (1-023)

Thank you for the opponunity to review the Office of The Inspector General's (OIG) draf\ report
entitled "'Audit ofOPM', [nvoice Payment Process (Rcport Number4A-CF-OO-IO-023)."
Facilities. Security and Contracting (FSC). Human Resources Solutions (HRS) and the Chief
Financial Ol1lce ((TO) staffs have revicwed the draft repon. and havc included their
consolidated comments on that repon in this memo. In general, the draft rcport does a good job
highlighting the control issues sunoumling invoicc processing during the deployment of CHIS,
OPM new linancial system. We have vigorously addressed those issues as we have described
some of the steps we have taken in our comments below.

We submit the following comments to the specilic recommendations for your consideration.

Recommendation 1: We recommend that the FSC work with the program offices and
vendors to research the current status of the 69 unpaid invoices and process accordingly.

Concur with recommendation. We agree that many of the regular controls over the invoice
payment process broke down as the agency moved rapidly to deploy CBIS in FY 2010 and that
neither the CFO nor other OPM ofllces adequately monitored thesc unpaid invoices. That said,
CFO has provided information showing that only 2J uf the invoices in 0 IG's sample of 110
unpaid invoices remained actually unpaid. The CFO believes that most of these invoices were
unpaid either (I) because of transition issues and that purchase orders and other contract
documents may have been subsequently submitted by program offices which then resulted in
new invoices for the goods and services or (2) because program offices llsed purchase cards to
pay for the goods or services on smaller invoices. We offer the second alternative because 18 of
the 23 invoices still in question are for less than the small-purchase threshold of $3,000. The
CFO will furnish thc OIG details on the 23 remaining in\'oices separately. The CFO wilt
continue to work closely with FSC and program ofTices to research these potentially unpaid
invoices, resolve them, better document the new processes, and ensure adequate controls are
designed and implemented. To that end, an off-site meeting was held ll1 December 2010 that
was attended by all relevant parties. Groups have since been fOlmed to update the process nows
and address invoice issues in order to improve OPM's performance under the Prompt Pay Act.

In regards to the statement that" ... the office of the CFO set September 21, 2009. as the date by
which all current year's accounts payable ll1voices should have been processed." (page 3), the
CFO notes that whtle this was a goal, OPM had no way to prevent contractors from submitting
invoices near or after thc September 21 datc.

Recommendation 2: We recommend that internal controls are designed in the new
payment proeess to ensure that ongoing monitoring and tracking of vendor invoice
payments occurs during the normal eourse of operations.

Concur with recommendation CI'O generally agrees that there wcre inadequate controls over
invoices that were unpaid when transitioned hom GHS to CBIS. However, thousands of other
invoices were successfully paid throughout the period in question.

Further, in regards to the statement that "The program offices: CFS: and Facilities. Security, and
Contracting. Comlerly the Center for Contracting, Facilities, and Administrative Services
(CCFAS), did not communicate effectively to ensure vendor invoices were processed lor
payment" (page 3). HRS notes that the program offices, particularly CTS/TMA, held monthly
and sometimes weekly meetings with CFO staff to address outstanding invoice concerns. HRS
recognizes that gaps in lines of communications and subsequent follow-up were lacking.
CTS/TMA made a concerted effort to mitigate invoice processing gaps by working with the CFO
on a continuous invoice improvement proccss to centralize program processing functions and to
tighten management controls. especially timely front-cnd processing and tracking. FSC made
similar efforts with the CFO. Additionally. HRS suggested the creation of a cadre of specialized
program experts to improve etTiciency.

Finally, OPM has instituted a weekly war room to address any unpaid invoices and to
communicate process improvement solutions to meet Prompt Pay requirements.

Recommendation 3: We recommend that controls are implemented in the new invoice
payment system to ensure that financial data and reports arc accurate and reviewed
regularly in order to ensure payments are proeessed timely and recorded accurately in
eElS,

Concur with recommendation. This internal control risk is being addressed by the FSC"s new
invoice processing team and it provides management information reports to program offices for
immediate action on a daily basis. During the CBlS transition period and prior to the
establishment of this team. program offices did not have a repoli that captured the "three way
match" of funding. the invoice, and the receiving report and could not detemline which
documents were missing - an absolute prerequisite to coneeting lagging payments.
It is further important to note that guidance was in place during the CBIS transition process.

HRS had in place documented HRPS Invoice Payment Process Instructions, submitted during the

audit process, supporting the documented policies and procedures CTS/TMA used for invoice

processing, which is a sizable subset of the invoices.


HRS believes communication and accountability will improve for two reasons associated with

the implementation of CBIS. First, it introduces an automatic notification feature that alerts a

program official of the need to take action to approve an invoice for payment. Second, it

includes new critical management information reports.


We are now operating under a different process !low that includes new roles and responsibilities,

and our focus is timely resolution and payment of unpaid invoices.