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Government and People
|OIG Number 9830-09
OF THE DISTRICT OF COLUMBIA
REVIEW OF CONTROLS OVER TELECOMMUNICATIONS SYSTEM WITHIN GOVERNMENT OF THE DISTRICT OF COLUMBIA
TABLE OF CONTENTS
The Office of the Inspector General (OIG) reviewed the financial and operational internal controls of the Government of the District of Columbia's (District's) telecommunications1 system. The overall objective of this audit was to determine whether the telecommunications system was adequately controlled in terms of administrative oversight; whether monies were efficiently spent on the system; and whether usage of this system was for of ficial purposes. This audit was conducted because of previous indications that proper controls may not have been in place. This audit report is the first in a series that will be issued on the telecommunications systems.
Our review showed that (1) the Fiscal Year 1997 budget for telecommunications services was exceeded by $10 million, or 45 percent; (2) controls over payments for telecommunications services were practically nonexistent; and (3) payments that were made for telecommunications services were delinquent. As a result, the District is paying more than it should for telecommunications services. There appear to be an inadequate enforcement authority and organizational structure of the agency responsible for the management of the telecommunications system and an absence of clearly defined accountability for control of telecommunications expenditures.
We are recommending that District management thoroughly reevaluate the telecommunications systems' financial and operational processes with an emphasis on internal controls that will reasonably ensure efficient operations. Management of the District's more than 28,000 telecommunications lines and related equipment will require extensive administrative oversight and increased staffing. Because of this, the District may wish to consider, as an alternative, the outsourcing of either all or portions of the management of the District's telecommunications functions to an entity that specializes in managing and controlling telecommunications lines and equipment.
The District of Columbia Automatic Data Processing Act of 1984 (D. C. Law 5-168) hereafter referred to as "the Law" placed responsibility over the District's Information Systems (IS) and Information Technology (IT) with the Mayor. This included the telecommunications services for the District. Section 4 of the Law authorized the Mayor to delegate to one or more District agencies the authority to manage the District's IS and IT resources. The Mayor's Order 86-150, dated September 1, 1986, delegated the authority to carry out the provisions of the Law to the Department of Administrative Services (DAS). The DAS formed the Information Resource Management Administration (IRMA) to handle the administration and management of the District's IS and IT resources. However, over the years, the District's fiscal problems forced IRMA to consolidate functions, reassign employees, and understaff many key areas. This resulted in IRMA being crippled and rendered ineffective in successfully managing its programs.
During the Fiscal Year 1998, DAS underwent massive organizational changes. Specifically, the agency formerly known as DAS was dismantled and restructured into four new and distinct agencies. These agencies are (1) the Office of Contracting and Procurement (OCP); (2) the Of fice of the Chief Technology Of ficer (OCTO); (3) the Department of Property Management (DPM), and (4) the Of fice of Finance and Resource Management (OFRM). The OFRM, which was formerly known as the Office of Audit, Administration and Finance (OAAF), is the result of the newest organizational structural change associated with the dismantling of DAS.
The District's current telecommunications system is comprised of equipment and lines for voice, data, local area networks, and wide area networks. The system has over 28,000 lines, with a budget of over $22 million in 1997. However, expenditures for the system amounted to more than $32 million for the same period. OCTO, under the Office of the Chief Management Officer, has primary management responsibility for the District's telecommunications systems. The OFRM processes most2 telecommunications services bills centrally for all District agencies, except for those agencies classified as independent.
III. SCOPE, OBJECTIVES AND METHODOLOGY
Our review focused on the internal controls of the operational and financial processes and/or functions of the District's telecommunications systems.
The audit objectives were to determine if:
Our methodology for accomplishing the above objectives included the evaluation of telecommunications charges for the billing periods January 4, 1998 through March 4, 1998. We reviewed financial and budgetary information posted to the Financial Management System (FMS). We also reviewed telecommunications policies and procedures, interviewed responsible management personnel within the District and at Bell Atlantic, the District's provider for telecommunications services, and visited selected agencies to evaluate the effectiveness of the internal controls over telecommunications at field locations.
We did not cover issues concerning the District's telecommunications infrastructure (building, wiring, routers, etc.). These were reviewed and reported on by MAXIMUS, a consulting firm that evaluated these items previously.
Our audit was performed in accordance with generally accepted audit standards as promulgated by the Comptroller General of the United States.
IV. FINDINGS AND RECOMMENDATIONS
1. Fiscal Year 1997 Telecommunications Services Budget Was Exceeded by $10 Million
Our review of the final FMS report for the fiscal year ended September 30, 1997, revealed that total District-wide expenditures for telecommunications services were $32,475,1963. These expenditures were $10,010,230 over the budgeted $22,464,966 for telecommunications expenditures. We were unable to identify the telecommunications expenditures by category, i.e., voice services, data services, telecommunications equipment purchases, and maintenance services, because FMS did not provide for postings by service category. Therefore, it is possible that expenditures made could have included those for unbudgeted purchases of telecommunications equipment and/or unplanned maintenance charges. However, without a detailed analysis of the expenditures, no definitive conclusion can be drawn. The practice of allowing expenditures to exceed forecasts could contribute to a violation of the Anti- Deficiency Act, the Home Rule Act, and Resource Management Guidance No. 96-01.
The Anti-Deficiency Act provides that, "... An officer or employee of the United States government or of the District of Columbia government may not (A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation.... " The Home Rule Act provides that, "... No amount may be obligated or expended by any officer or employee of the District of Columbia government unless such amount has been approved by Act of Congress, and then only according to such Act... ".
The Resource Management Guidance No. 96-01 states, "... Agencies will work with the Budget Office to prepare annual obligation plans to reflect quarterly spending requirements.... Agencies may not enter into obligations without making the appropriate clue diligence checks in FMS to assure fund availability to support the obligation.... Obligating funds in excess of apportionment limits is a violation of the Anti-Deficiency Act... ".
OFRM personnel informed us that their organization is now responsible for providing the Budget Of fice and the agencies with the forecasts of telecommunications services expenditures. Previously, IRMA developed the projections for telecommunications expenditures. OFRM stated that the forecasts are based on prior year expenditures. They further stated that during previous years, the agencies were requested to transfer the funds to DAS at the beginning of the fiscal year. If an agency did not have sufficient funds transferred to DAS for payment of their telecommunications services for the entire fiscal year, a journal entry was prepared and submitted to the Controller's Office to charge the agency's object class directly. At the year-end closing, the Controller's Office also directly charged an agency's object class to close the books. The Budget Office determined how funds were collected from agencies when, during year-end closing, agencies did not have sufficient funds in their budgets to cover the incurred telecommunications charges.
During our site visits and interviews, District agency personnel informed us that they did not receive sufficient information on telecommunications expenditures during the year. Furthermore, the only time they received anything from DAS was when they were requested to transfer additional funds for telecommunications services charges, but they never received the money back at the end of the fiscal year for excess funds transferred to DAS.
The OFRM stated that through July 1997, each Agency Head received a monthly Summary Report of Balance Sheet Account, which contained summary information on each utility account4. The report listed budgeted forecast amounts, advances received, current month expenditures, year-to-date expenditures, and variances. This summary information was attached to a memorandum requesting that the agency review the information and forward a journal entry for any negative variance.
According to OFRM, DAS issued contract advisements5 on a test basis to selected agencies at the beginning of the fourth quarter of Fiscal Year 1997. DAS requested that the agencies transfer funds to cover the projected expenditures for the remainder of the fiscal year. At the beginning of Fiscal Year 1998, contract advisements were issued to all agencies having telecommunications service bills paid by OFRM.
The practice of directly charging an agency that does not have sufficient funds available to cover telecommunications services payments at year-end could contribute to a violation of the Anti Deficiency Act, the Home Rule Act, and Resource Management Guidance No. 96-01.
OFRM personnel stated that this practice of direct charges stopped at the beginning of Fiscal Year 1998 when OFRM started issuing contract advisements. However, the budgeting process should be able to eliminate or reduce the need for requesting agencies to transfer additional funds to cover shortages. Agencies should be provided with sufficient expenditure information to allow them to forecast their telecommunications services charges and projected equipment purchases for submission to the Budget Office.
The OIG recommended that:
The OFRM commented that it has requested that a more detailed accounting structure be established to capture telecommunications cost in the new FMS. However, the OFRM took exception to the methodology used by the OIG to determine that the Fiscal Year 1997 telecommunications services budget was exceeded by $ 10 million. The OFRM believes that the figures used by the OIG are inaccurate because "agencies have historically charged telecommunications services to accounts other than object 308". The OFRM further stated that "The OIG findings imply that all agency accounts are paid through the central payment process. OFRM does not make telecommunications payments on behalf of the University of the District of Columbia and the D.C. Housing Authority. It is suggested that their costs be viewed separate from the general District government report."
The OIG maintains the soundness of using the FMS reports to obtain total District-wide expenditures for telecommunications expenditures for Fiscal Year 1997. The $32,475,196 we reported were District-wide expenditures for telecommunications services as reflected in the FMS as of September 30, 1997, for Object Class 308, "Telephones & Etc."
During discussion with OFRM accounting and budget personnel, we were provided with a report entitled, DAS Balance Sheet Summary for FY 1997, District-Wide Forecast, Advances, and Expenditures, as of September 30, 1997 (Final). This report indicated that in FY 1997, OFRM processed $20,747,045 in telephone payments. This $20,747,045 amounts to approximately 64 percent of the District-wide telecommunications expenditures of $32,475,196 as reported in the FMS.
The OIG agrees that the integrity of the financial reporting is compromised when agencies do not code transactions to appropriate object class. The OIG maintains that issues relating to incorrect coding of transactions are separate issues and should have been addressed by OFRM. However, the FMS Object Class 308 is defined to capture telecommunications expenditures, and if the figures reflected under the object class cannot be relied upon, then there appears to be a much larger problem with the District financial reporting.
Although details of OFRM's request for the establishment of a detailed FMS accounting structure to capture telecommunications cost in the new FMS were not provided, the OIG believes that the planned corrective actions by the OFRM are adequate. The OIG will conduct a follow-up review to determine whether the corrective action was implemented within the new FMS.
The OFRM concurred in our second recommendation and stated that, "In FY 1999, agencies will receive and must review all telecommunications charges for the previous month and submit any discrepancies to OFRM for payment adjustment prior to the next billing cycle." Additionally, in a memorandum dated July 23, 1998, discussing the Telecommunications/Utility $20,747,045 Audit Initiative, OFRM stated, "...OFRM negotiated with the telephone and utility companies to mail to each agency a copy of the agency's monthly service bill.... Having copies of the telecommunications and utility bills will provide all agencies the opportunity to promptly review for service costs and questionable activity."
We concur with the corrective actions proposed by OFRM. We will conduct a follow-up review to determine whether the agencies are receiving monthly telecommunications service bills.
The OCTO agreed with our recommendation for revision of the budgetary forecasting process of telecommunications expenditures. The OCTO stated that it was coordinating future budgetary forecasts with OFRM. Specifically, the OCTO stated that, "... OFRM has taken a first step by coordinating an audit jointly conducted by them [OFRM] and Bell Atlantic. An accurate statement of total revenues paid to Bell Atlantic and others (Total Bill Revenue) is critical to future, successful forecasts. Once completed, the basis for a new forecast can be derived. OCTO will work with OFRM and the Agencies to determine new figures....
The OIG believes that the planned corrective actions by the OCTO and OFRM will improve the budget forecasting process. However, since no specific implementation dates or planned procedures were provided with the OCTO's comments, the OIG will conduct a follow-up review to ensure that corrective actions are implemented.
2. Internal Controls Over Payments for Telecommunications Services Were Practically Nonexistent
Our review showed that internal controls over payments for telecommunications services were practically nonexistent. Telephone bills were paid without agency review and certification, there was no available inventory of telephone lines and equipment to determine what assets were on hand, and the policies and procedures governing telecommunications services needed to be updated. As a result, the District paid for unneeded services when phones no longer in use were not disconnected, for unauthorized telephone usage by District employees, and for services used by persons not employed by the District. We believe that the excessive expenditures in telecommunications costs were the result of nonexistent controls.
Telephone Bills Were Paid Without Review and Certification
Telecommunications bills were being paid without review and certification by the agencies that incurred the charges. This has resulted in payments for unneeded services, undetected fraudulent activity, and abuse of telephone privileges by employees. The OCTO and OFRM staffs which have the responsibility of managing the procurement, maintenance, and payment of telecommunications services were too short of staff to provide adequate management and support of the District's telecommunications systems.
The Mayor's Administrative Instruction, dated July 27, 19816, Title 2400 Communications Management, Section 2420.6, Payment of Telephone Bills, provides that "...All service bills will be audited to insure that agencies are billed only for what was ordered. Discrepancies should be brought to the attention of the agency and the vendor.... Monthly bills will be transmitted promptly to the appropriate department.... "
District agency personnel informed us that they did not receive supporting information regarding their monthly telecommunications services charges. Personnel at the D.C. Public Schools, the Department of Public Works (DPW), the Department of Human Services (DHS) and St. Elizabeth's Hospital expressed their dissatisfaction with the current centralized payment process because they did not receive monthly information from OFRM on their telecommunications charges. The Telephone Coordinator for the Metropolitan Police Department (MPD) stated that the MPD had not received supporting telephone bill information in almost two years.
OFRM officials confirmed this situation by stating that supporting information for telecommunications charges is not transmitted to agencies. OFRM receives a monthly Power Bill7 Compact Disk (CD) from Bell Atlantic along with the supporting paper bills for each agency's account. OFRM also receives telecommunications bills that are not part of the Power Bill from other carriers. The paper bills that support the Power Bill consist of hundreds of pages of detailed supporting information for monthly usage and service charges.
Although the Power Bill and supporting paper bills provide detailed information of telecommunications charges by Billing Agency Codes (BACs)8, OFRM has only one employee assigned to break down the information by BACs. This employee is attempting to do the work that five employees were assigned to do previously.
A drawback to using the Power Bill as a tool to automate the process is that it requires a high performance personal computer to process the thousands of lines of data. Printing the data in a usable format is time consuming and requires a large amount of paper. Additionally, the information contained in the CD is not easily understood and requires vendor training.
We met with Bell Atlantic Customer Service Representatives for the District to obtain explanations of the codes and rates contained in the Power Bill. Based on the information we obtained, we performed a limited review of Power Bills with billing dates January 4, February 4, and March 4, 1998. (Each Power Bill contains thousands of data lines.) Our review resulted in the discovery of irregularities that could have been detected had the agencies been required to review and certify telecommunications services charges before payments were made. Some of the irregularities found were:
Some examples are:
The OFRM centralized payments process of recurring fixed monthly charges such as rent is reasonable. However, there are serious internal control weaknesses in the process when payments for services, based on usage, are made without obtaining an agency's review and certification prior to payment. The detection of fraud and abuse of the telecommunications systems resources should be at the agency level where the charges are incurred. The OFRM does not have the resources to detect unusual trends or to be aware of charges that are for services that were not received.
The OIG recommended that:
The OFRM stated that it is working with the OCTO to develop and implement new procedures for acquiring and managing telecommunications service requests.
The OCTO responded that "...there are measures in place to safeguard the phone system including:
The OIG believes that neither the OFRM nor the OCTO adequately responded to our recommendation. However, the response received from the Chief Management Of ficer addressed the problem of blocking 900 numbers from being dialed from any District telephone (see Attachment I). Neither the OFRM nor the OCTO provided sufficient details on the development of policies and procedures that covered the specifics or our recommendation. The OCTO's response that a blanket policy blocking 900 numbers from being dialed from any District telephone is in place, and the requirement that any District telephone requiring long-distance access must be authorized in writing by the requesting agency is a step in the right direction. However, the OIG does not believe that these measures are comprehensive enough to adequately reduce the threat of telephone abuse.
The OIG will conduct a follow-up review to determine whether adequate corrective actions were implemented.
The OFRM responded that "Internal controls are now in place to improve the financial process of the monitoring and payment of the district's telecommunications costs...."
The OFRM did not provide details of the internal controls and procedures that would improve the financial process of the monitoring and payment of the District's telecommunications costs. The referenced internal controls and procedures would have had to be implemented after our audit, because we found no evidence of policies and procedures that require agencies to review supporting documentation and prepare the FMS voucher along with certification of the receipt of services.
The OIG will conduct a follow-up review to determine whether adequate corrective actions were implemented.
The OCTO responded that "The OCTO is in the process of hiring a Chief Telecommunications Officer to oversee all telephone operations in the District, including architecture, operations, purchasing, and maintenance. One of the first priorities will be to organize and train agency phone coordinators in all aspects of telephone operations, including cost identification and capture...." Additionally, the OCTO stated that "...a new Bell Atlantic billing system... will allow the OCTO/OFRM to redesign the bill to District requirements and send the bills to multiple addresses in a legible, understandable format.... Bell Atlantic anticipates the new system will be implemented in the District by year's end...."
The OIG believes that the planned corrective actions by the OCTO and OFRM in the planned training and the proposed redesigned telephone bill to suit District requirements will provide adequate telecommunications billing information to the agencies for review and certification.
The District Does Not Maintain an Inventory of Telephone Lines and Equipment
There is no reliable inventory of telecommunications equipment or telecommunications lines throughout the District. This has resulted in payments for telecommunications lines that are no longer in use or needed, loss of equipment, and unneeded procurement of telecommunications equipment. The District of Columbia Code, Section §1-1135(a)(6), orders agencies to "...Establish and maintain an inventory of all...telecommunications equipment.... "
We requested from the OCTO an inventory of telecommunications lines and equipment and a network diagram that identified the locations of the lines and equipment. We were informed that there was no inventory of lines and equipment, and that a network diagram of the District's telecommunications systems had not been developed.
The Telecommunications Coordinators at MPD, DPW, DHS, and the D.C. Public Schools were unable to verify the accuracy of the line counts because the Telecommunications Coordinators had nothing against which to validate the data. They informed us that no inventory of telecommunications lines or equipment had been taken. However, the Telecommunications Coordinators at St. Elizabeth's, MPD, and the D.C. Public Schools stated that they did receive Customer Service Records (CSRs) from Bell Atlantic in 1997, but they had not verified the information contained in the CSRs.
We were informed by the District's Bell Atlantic Customer Representative that Bell Atlantic can provide CSRs that contain detailed information on each line and the features connected to these lines. However, the report only provides the general location of the lines. For example, the CSR would list all lines and their features at Location Group 340 (Ballou High School, 3401 4TH Street SE). Additionally, in order for the CSRs to be useful for inventory purposes, a detailed knowledge of the codes used throughout the report would be required. Bell Atlantic representatives further stated that unless a customer informs them that a line is no longer in use and should be removed, they will continue to bill the customer for the line.
The Bell Atlantic Power Bill can be used to produce a Line Count by the Billing Agency Code (BACs) Report9. We used the Power Bill to obtain line counts for the entire District for the billing periods ending January 4, February 4, and March 4, 1998. We specifically obtained line counts and telephone usage data for the BACs of D.C. Public Schools, DPW, DHS, and MPD. However, no determination can be made as to the amount of telecommunications equipment the District has without a complete physical inventory.
The OIG recommended that the OCTO:
The OCTO concurred with our recommendations and has planned or is taking the following corrective actions:
The OIG believes that the planned corrective actions by the OCTO will provide the District with an accurate inventory of telecommunications lines and equipment and a tool to maintain the integrity of the inventory and reduce telecommunications costs.
Policies and Procedures Governing the Management and Use of the District's Telecommunications System are Outdated
Policies and procedures covering telecommunications services have not been updated, which has contributed to employee abuse and/or misuse of telephone privileges. The effective management of the District's large telecommunications network cannot be attained without current policies and procedures.
The District of Columbia Code, Section §1-1135(b)(1), provides that the Mayor must "... establish, maintain, and provide to all departments and agencies...: Consistent policies, principles, standards, and guidelines for the acquisition, utilization, operations, and maintenance of... telecommunications equipment...."
During our audit, we requested that OCTO provide us with all current policies and procedures covering telecommunications. We received a copy of The Mayor's Administrative Instructions (MAI), dated July 27, 1981, entitled TITLE 2400 Communications Management, CHAPTER 2420 Telephone Communications. The document contained a policy establishing " ... guidelines and standards that will produce economies, [and] lead to the discontinuance of unneeded services, while ensuring efficient operation at the least possible cost...."
The objectives of the MAI were to:
A review of the contents of the MAI to determine the applicability to our current telecommunications environment revealed outdated, impractical and unenforceable standards and guidelines. Some examples:
The MAI also includes procedures for payment of telephone service bills. Under these procedures, "All monthly telephone bills will be forwarded by the Chesapeake and Potomac Telephone Company to the Communications Division, Department of General Services. All service bills will be audited to insure that agencies are only billed for what was ordered...." The MAI further states that "...Each agency should compare the billing on long distance services against the call tickets provided monthly by the Communications Division, to ascertain which calls were made properly." According to the D.C. Office of Documents, the MAI has not been updated since it was issued in 1981.
Additionally, the most recent D.C. Government Telephone Directory was published in October 1993 and contains information that is now inaccurate. There are agencies listed at incorrect locations, and names and telephone numbers of employees who no longer are employed by the District. A listing of telecommunications coordinators that we obtained from the OCTO also contained incorrect names, BACs, telephones numbers and addresses.
Without updated telecommunications policies and procedures for a system that reflects the latest technology, there can be no effective management of the 28,000 plus telecommunications lines and their associated equipment.
The OIG recommended that the OCTO:
The OCTO concurred with our recommendations and has planned or is taking the following corrective actions:
Although the OCTO did not provide details of the planned initiatives, we believe the ones outlined by the OFRM are a good first step. The OIG will conduct a follow-up review to determine whether the planned corrective actions were taken.
3. Payments for Telecommunications Charges Were Delinquent
The District was delinquent in its payments to Bell Atlantic for telecommunications charges. Bell Atlantic informed us that, as of May 15, 1998, the District had an outstanding obligation of $6.5 million for telecommunications charges. After we brought this to the attention of OFRM, on May 26, 1998, payment vouchers amounting to $6.1 million were processed for bills that were received from October 1997 to March 1998. The dates of these bills indicated that the payments were delinquent under the Quick Payment Provision of the D.C. Code. Under this provision, the District would have owed Bell Atlantic an additional $65 thousand in interest, or 1 percent, on the accumulated $6.5 million on the past due amount. However, Bell Atlantic did not request payment of this interest
OFRM's Accounts Payable Manager told us that the bills were not paid because some of the charges were for long distance services by Carriers other than AT&T. He had been informed that such charges were to be paid only for AT&T long distance services. Because of the amount owed to other carriers (which amounted to less than $10 thousand), the payment was held up pending resolution of these charges. Previously, payments were made to Bell Atlantic for all long distance carriers. In addition, we found no documentation requiring that long distance payments be made only to AT&T. When asked about attempts to resolve this issue, the Accounts Payable Manager stated that he did not have the staff or a plan to address the issue.
In those instances where amounts are in dispute, OFRM should hold up the payments only for those disputed amounts. In this case, where the disputed amount was less than $10 thousand, it was not an efficient decision to withhold the entire $6.5 million payment. The interest cost alone of $65 thousand exceeded the disputed amount over sixfold.
The Quick Payment Provision of the District of Columbia Code provides that, "In accordance with rules arid regulations issued by the Mayor of the District of Columbia (Mayor), each agency of the District of Columbia (District) under the direct control of the Mayor, which acquires property or services from a business concern but which does not make payment for each complete delivered item of property or service by the required payment date shall pay an interest penalty to the business concern in accordance with this section or. the amount of the payment which is due.
"Interest penalties on amounts due to a business concern under this subchapter shall automatically be paid to the business concern for the period beginning on the day after the required payment date and ending on the date on which payment of the amount due is made.... Interest computed at a rate of no less than 1 percent, shall be determined by the Mayor by regulation. "
The Mayor's Order 92-142, dated November 17, 1992, Policy and Standards for Agency Bill Paying Activities "...Requires that payments are processed consistent with the time lines established for various commodities in the 'District of Columbia Quick Payment Act of 1984...."'
We believe that payments on the delinquent bills were made only after we notified OFRM that it had a delinquent balance. We notified OFRM of the District's outstanding obligation of $6.5 million on May 26,1998. Subsequently, in early June we were provided with payment vouchers that were entered into the FMS Checks were issued for the bills totaling $6.1 million to Bell Atlantic between May 28 and June 8, 1998.
The District needs to ensure that payments for these bills are made when they are due because interest charges for delinquent payments are unnecessary arid can be substantial.
The OIG recommended that OFRM:
The OFRM did not respond with specific actions planned or taken on our recommendations. However, the OFRM did state that equipment and software were purchased, and training was conducted, to make full use of the Bell Atlantic Power Bill.
The OIG maintains that detailed procedures for the prompt payment of any undisputed portion of telecommunications charges and resolving disputed telecommunications charges must be developed and implemented.
GOVERNMENT OF THE DISTRICT OF COLUMBIA
OFFICE OF THE CHIEF TECHNOLOGY OFFICER
TO: E. Barrett Prettyman, Jr.
FROM: Suzanne Peck
DATE: August 10, 1998
SUBJECT: Re: Draft Report, "Review of Controls Over the Telecommunications System Within the Government of the District of Columbia"
The draft report "Review of Controls Over the Telecommunications System Within the Government of the District of Columbia" details operational and billing difficulties with the District's phone system, and discusses the imputed overspend, during FY1997, of the $22 MM telephone budget by $10 MM, to a total spend of $32 MM. Appreciation of the responses of both the CTO and the CFO to this report requires l) a short historical perspective on telephone organization and procedures in the District in 1997, and 2) a determination, in terms of cost overruns, of where and if the telephone overspends actually occurred.
Historically, annual spends on phones in the District were consistently in the $22-24 MM range. This expenditure was for the expense line. "phones," an undifferentiated category which included purchases of phones, phone services, equipment, usage charges, and maintenance.
District-wide phone organization, procedures and reporting in 1997 were sloppy, fragmented and undermanaged.
An example of this is budgetary overruns. Analysis of the reported (appropriated fund) telephone overspends in 1997 reveals that 85 % of the $10 MM overspend occurred in just three of over 100 department accounts. Department of Human Services (DHS) overspent by $4.5 MM; Department of Public Works (DPW) overspent by $3.5 MM; Department of Administrative Services (DAS) overspent by nearly $1.0 MM. Conversely. other agencies reported substantial underspends in 1997.
The Deputy CFO, in her response to this report, maintains that there was actually $1.8 MM phone underspend in 1997. This analysis is from the same data sources utilized by the Inspector General to impute the $10 MM telephone overspend in 1997.
It is unlikely that DHS, DPW, and DAS actually incurred annual phone charges over double their normal and expected rates. What is more likely, and is now being ins investigated, is that telephone capital expenses, or large, unpaid phone bills from the past, or costs unrelated to telecommunications were incorrectly recorded to the phone account.
Unfortunately, reconstruction of charge recording policies and activities during 1997 is nearly impossible.
Neither the principal Deputy CFO responsible for recording charges to the phone accounts in 1997 (the Audit Administration and Finance Officer), nor the principal Technology Officer (the Information Resources Management Administrator) responsible for these accounts in that year are still employed by the District.
During 1997, phone billing analysis procedures were non-existent. The District received a single monthly bill from Bell Atlantic. This bill was, Bell Atlantic now acknowledges, "illegible and unreadable." Because of the poor quality of Bell phone information, the CEO was unable to provide individual departments with monthly bill detail, or even to provide them with monthly summary-level accounting. Consequently, no effective monitoring of the phone bills took place at a departmental level in 1997.
With the above background as context, the Office of the Chief Management Officer (OCMO) and the Office of The Chief Technology Officer (OCTO) appreciate the efforts of the Office of the Inspector General (OIG) regarding telecommunications expenditures as well as the opportunity to respond to its report.
The OCTO has in place or planned several activities that address the phone review:
The Telecommunications Czar
The OCTO is in the process of hiring a Chief Telecommunications Officer or "czar" to oversee all telephone operations in the District, including architecture, operations, purchasing, and maintenance. One of the first priorities will be to organize and train agency phone coordinators in all aspects of telephone operations, including cost identification and capture. The OCTO will also encourage agencies to place phone coordinators under their Chief information Officer functions.
A changing area of telecommunications expense for the District government is data communications. Currently. the District has an unknown number (estimated in the thousands) of individual circuits connecting dumb terminals to the District's mainframe centers. One of the missions of the OCTO is to reduce this number to near zero by building the Wide Area Network (WAN) to every District agency. A Chief of Data Communications will be hired who will spearhead this work, already well underway through consultant staff.
New "expressTRAK" Billing
Bell Atlantic has recently unveiled a new billing system that promises to be far superior to the old one, which had been little changed for 45 years. The old PowerBill did little more than provide in a CD ROM format which was originally supplied on paper. The new system will allow the OCTO/OPRM to redesign the bill to District requirements and send the bills to multiple addresses in a legible, understandable format.
According to Bell Atlantic, several formats will be permitted, including various summaries. The bill will give more detail when required and will be easier to read. OCTO/OCFO are projected to begin the new bill design on August 20, 1998. Bell Atlantic anticipates the new system will be implemented in the District by year's end. Although the full capabilities of this new billing system are unknown, the system is expected to provide a much better tool to manage communications expenses and utilization. If the new system is as good as promised, data will be received by the OCTO, OFRM and the agencies in a format that requires no further manipulation and can be easily understood and verified.
Billing and Maintenance Support
The District and ell Atlantic are exploring the possibility of centralizing many Bell Atlantic services. especially maintenance, in a newly proposed Network Operations Center. This proposed center will centrally manage several District network activities including data networks, help desk services, voice mail, email, and telephone service. Bell Atlantic and other contractors will be located in the Center to coordinate their activities. Bell Atlantic has tentatively pledged that these personnel will be provided no cost to the District. Help Desk software and/or third-party packages designed for enterprise phone systems can produce several metrics that can he used to monitor response times a~ trends, as well as verify maintenance charges. Maintenance requirements consolidation is expected to significantly reduce or eliminate individual service charges.
The District government has tens of different phone systems including Private Branch Exchange (PBX), "key" systems, and Centrex service. This has resulted in the District contracting separately with a variety of vendors for different types of maintenance. The District-wide implementation of lSDN/analog will significantly simplify identifying costs associated with telephone service. The District will begin using the Bell Atlantic MAXSTAR system to decrease charges for moves, adds, and changes.
Teaming with OFRM
The OCTO has read and supports the listed actions in the response from The OFRM, OCFO, as well as initiatives started since the relatively recent appointment of the OFRM CFO.
The OCTO has begun to coordinate joint strategy with with OFRM. OFRM. discussed include the appointment of a dedicated OFRM resource to the OCTO and the determination of a method to more accurately forecast and categorize costs. ISDN dial tone, analog service, message units, long distance, credit cards, cell/digital service, pagers, shared data lines, individual data lines, and video-teleconferencing circuits are examples of services that tend to stay consistent. Services such as moves, adds, and changes tend to be less predicable.
Crosswalk to OIG Recommendations In the Draft Report
(Each Inspector General recommendation is referenced to the draft report followed by the OCTO proposed action in italics.)
1. (See above) The DAS revise the budgetary forecasting process of telecommunications expenditures to require agency management to develop budgetary forecasts based on historical data and planned expenditures, with justifications [or any budget variances. The DAS should only be involved in an advisory capacity.
This recommendation is specifically addressed in the paragraph, "Teaming with the OFRM." OFRM has taken a first step by coordinating an audit jointly conducted by them and Bell Atlantic. An accurate statement of total revenues paid to Bell Atlantic and others (Total Bill Revenue) is critical to future successful forecasts. Once completed, the basis for a new forecast can he derived. OCTO will work with OFRM and the Agencies to determine new figures. The accuracy of the FY 98 and 99 estimates will not only depend on the audit results and bill posting procedures. hut may also be affected by the phone installation project as well as changes to the WAN and network connections.
2. (See above) The OCTO/DAS revise its policies and procedures covering the review and agency certification for the payment of telecommunications bills. These policies and procedures should:
This has been and will continue to be the policy of the OCTO. Currently, there are measures in place to safeguard the phone system including:
3. (See above) The OCTO obtain training for all agency telecommunications coordinators on the use of PowerBill as a tool to assist them in their management of telecommunications charges.
This recommendation is discussed in the paragraphs "The Telecommunications Czar" and "Billing and Maintenance Support."
4. (See above) Oversee an inventory of all District telecommunications lines and equipment and have the results of the inventory certified by each agency head.
Bell Atlantic has stated that it cannot easily identify all District phone lines and circuits using its current billing system The task force in the OCFO will be addressing this problem. Also, Bell Atlantic assured the District that its new billing system will rectify this problem. The new billing system is expected to be installed by December 1998. The incoming Chief of Telecommunications will be required to provide and implement an inventory standard operating procedure within 90 days of assuming the position.
5. (See above) Oversee the development of a network diagram of the District's telecommunications system and require that the diagrams be maintained to reflect periodic changes.
Additional guidance is requested regarding the technical level of this schematic. It is anticipated that this task will be accomplished by October 31, 1998.
6. (See above) Have all excess telecommunications equipment that cannot be repaired disposed of in accordance with District regulations.
A process will be developed to allow this task to be accomplished by September 30, 1998.
7. (See above) Issue policies that require periodic analysis of line utilization and have all underutilized or unneeded lines disconnected.
This recommendation will be best achieved as a function of the new billing system. Completion of this task is dependent upon implementation of the new system. and a projected date for completion ton is 90 days after implementation of the now system. Should the new billing system not facilitate a method to disconnect unused lines (as stated by Bell Atlantic representatives), an alternate methodology will be instituted.
8. (See above) Update the District's telecommunications policies and procedures to reflect changes in organizational structures and technology.
This will be one priority of the aforementioned Chief of Telecommunications Officer. All procedures from long distance services to maintenance and voice mail are included This task will be completed by December 31, 1998.
9. (See above) Oversee the development and maintenance of an accurate District agency and employee telephone directory.
The OCTO has a replacement system in the planning stages. Fielding of the initial capability is planned for 1st Qtr FY 99.
GOVERNMENT OF THE DISTRICT OF COLUMBIA
OFFICE OF FINANCE AND RESOURCE MANAGEMENT (DAS)
441 4th STREET, N.W. EIGHTH FLOOR
TO: E. Barrett Prettyman, Jr.
FROM: Barbara Jumper, Deputy CFO
DATE: July 27, 1998
SUBJECT: Response to Draft Report, "Review of Controls Over the Telecommunications System Within the Government of the District of Columbia (OIG No. 9830-09)
The Office of Finance and Resource Management (OFRM) has and continues to be cooperative and thorough in its efforts to provide the OIG agents with the best and most accurate information available. OFRM appreciates the opportunity to respond to the draft audit. Outlined below is the OFRM response which will consist of the following parts:
PART 1. BACKGROUND
During this fiscal year (FY 1998), the Department of Administrative Services has undergone massive organizational change. Specifically, the agency formerly known as DAS was dismantled and restructured into four new and distinct agencies.
Prior to receiving the new name (OFRM), there was a change in administration. Specifically, in February l998, a new Management Team was installed and mandated to address and resolve longstanding financial and budgetary concerns which plagued the former Department of Administrative Services.
A primary part of this new Management Team's mission, was the payment and reconciliation of massive vendor payment backlogs, including telecommunications. In the first quarter of this team's assignment, a significant amount of time and effort was devoted to the payment of aged payables. During the first three (3) months alone (Feb.Apr.), over $22.6 million in vendor payments were processed and paid. The majority of these payments were for invoices submitted for the period covering October 1997 through January l998. The newly formulated Team launched an aggressive initiative to bring accounts current and to attempt to repair the tattered image of DAS in the eyes of the suppliers of goods and services.
While the Management Team focused on obtaining current status with its vendors, it equally recognized the need to establish a comprehensive Strategic Plan. This Plan was completed in April 1998. One of the first initiatives was to implement fundamental changes to existing methods of forecasting, verification, and billing of all central service utility and telecommunication accounts. As a consequence, a citywide Audit Plan (details of which will be later articulated) was formulated by OFRM.
PART 2. RESPONSES TO ISSUES RAISED
Issue #1. There is a need to clearly reflect the organizational and procedural disconnect between OCTO and OFRM
OFRM concurs with some of the observations cited. It is believed that the loss of dedicated personnel in the area of telecommunications within the OCTO, OFRM and the agencies and the lack of training, over recent years have contributed to weaknesses in the infrastructure. As the former Department of Administrative Services (DAS) was dismantled, it appears that the OCTO had not as yet fully assumed the full scope of what was previously managed by IRMA. The need for addressing major information system problems may have overshadowed the need to devote time to the operational management of telecommunications.
OFRM is the central payment entity for most District Government accounts and is driven by the actions first taken by the OCTO. Decisions made by this Office which may ultimately impact the cost and terms of telecommunication services for the government must be conveyed and factored into the OFRM payment process. This disconnect in the exchange of information between OFRM and the OCTO has had some negative financial implications. Coordination of services is crucial to the management of both the operational and financial aspects of telecommunications.
Multiple shifts in leadership within the OCTO have resulted in priority shifts. Remarkable improvement in communication combined with a strong commitment on the part of the current Chief Technology Officer suggests that problems with coordination, and involvement of OFRM in matters which directly impact the financial telecommunications standings will not be a continued practice.
It is suggested that the Audit report reflect the functional reality of the present Agency configurations and address responsibilities and internal control structures separately.
Issue #2. References to deficiencies and weaknesses in the Telecommunication Management structure
Throughout the audit numerous conclusions were drawn outlining deficiencies or weaknesses in the Telecommunication management structure. It is suggested that since there is not a single "Structure", these deficiencies and weaknesses are temporary in nature and are a result of the restructuring of DAS.
Issue # 3. Audit report does not address the issue that the Powerbill was not operational and the role it can play in improving the operational efficiency of the Agency.
The new Management Team has recognized that the processing of telecommunications bills had been a nightmare for AAAF. It is estimated that the volume of paper (approx. 150 cartons per year) being received, sorted, distributed and processed by one staff member does not contribute to a timely and error free environment. It should be noted that at the end of FY97, approximately $1.5 million was put in retainage to cover recorded liabilities for telecommunications from prior years. This is an indication that the management of telecommunication has been a problem for some time.
Powerbill is an automated billing process made available to commercial accounts by Bell Atlantic. The former AAAF initiated the use of Powerbill in FY 1997. The early stages of this process have been problematic. Powerbill has just recently begun to prove beneficial to OFRM by improving and streamlining the accounts payable process for the District. OFRM, continues to work with Bell Atlantic to perfect the database to ensure that all billing, compatible with Powerbill, are added to the CD-ROM. With proper utilization of this technology, more time will be made available to OCTO and OFRM to scrutinize agency billing on a monthly basis to detect overcharges or potential fraud and abuse.
OFRM entered into discussions with Bell Atlantic in early February 1998 requesting access to the MACSTAR system, an online dial-in systems which allows OFRM/OCTO to suspend/ deactivate telephone lines that appear to show no activity or reflect some notable problems. It provides large Bell Atlantic consumers with the capability to directly adjust, control and better monitor the services provided by Bell Atlantic. Unfortunately, it has taken Bell Atlantic an inordinate amount of time to provide both access and training on this system. Although, OFRM finally received training on the use of the system, it still awaits connectivity to the on-line system.
It is suggested that some mention be made of this issue to enhance the audit report.
PART 3. RESPONSES TO SPECIFIC FINDINGS AND RECOMMENDATIONS
Our report showed that (1) the fiscal year 1997 budget for telecommunications services was exceeded by $10 million, or 45 percent.
OFRM requested and received a copy of the documentation upon which the financial findings were structured. After receiving and reviewing the OIG finding the outcome of OFRM's analysis is as follows:
Prior to FY 1998 the District paid all central service expenditure through a balance sheet account. The process is as follows:
The OIG findings imply that all agency accounts are paid through the central payment process. OFRM does not make telecommunication payments on behalf of the University of the District of Columbia and the D.C. Housing Authority. It is suggested that their costs be viewed separate from the general District government report.
As it relates to accounts paid through the central payment process, our FMS records reveal that $22.5 million were budgeted for FY 1997. The District's balance sheet account shows $20.7 million in actual expenditures for all of FY 1997. These figures indicate that the Department of Administrative Services do not incur any budget deficit but in fact had a $1.8 surplus. This does not include telecommunication expenditures for UDC and DC Housing Authority.
We are recommending that District management thoroughly reevaluate the telecommunications systems' financial and operational processes with an emphasis on internal controls that will reasonably ensure efficient operations.
The OIG audit team was provided with a detailed overview of how OFRM was already taking extensive measures to improve operational and financial processes for reevaluating telecommunication systems. Examples include:
Management of the District's more than 28,000 telecommunications lines and related equipment will require extensive administrative oversight and increased staffing. Because of this, the District may consider, as an alternative, the outsourcing of either all or portions of the management of the District's telecommunications functions to an entity that specializes in managing and controlling telecommunications lines and equipment.
Internal controls are now in place to improve the financial process for the monitoring and payment of the District's telecommunication costs We do not believe the outsourcing any portion of this process is necessary nor would it improve upon the strides already taken by OFRM.
The District's current telecommunications system is comprised of equipment and lines for voice, data, local area networks, and wide area networks, The system has over 28,000 lines, with a budget of over $22 million in 1997, However, expenditures for the system amounted to more $32 million for the same period.
See OFRM's previously stated responses to the finding in Part 3, RESPONSE TO SPECIFIC FINDINGS AND RECOMMENDATIONS: Our report showed that (1) the fiscal year 1997 budget for telecommunication services was exceeded by $10 million, or 45 percent.
PART 4. ADDITIONAL INITIATIVES UNDERTAKEN BY OFRM
#1. Citywide utility audit initiative.
As indicated earlier, OFRM recognized the need to improve its capacity to account for and justify expenditures in the areas of Energy consumption, Water and Telecommunications. As a consequence, meetings were held with Bell Atlantic, Pepco, Washington Gas and WASA . Included in the Audit process would be representatives from the utility companies, representatives from the Agencies and OFRM The Audit Initiative is driven by these specific objectives.
The utility Companies have supported our initiative and audit work is scheduled to begin in August 1998.
#2. Established mechanisms for the use of Powerbill. Improved OFRM's capacity to review and audit telephone accounts.
OFRM took action to make full use of Powerbill. Equipment and software were purchased, training was conducted and final installation should be complete by July 31, 1998. This would impact on 80% of our Telecommunications workload and ensure our capacity to process our work in a current mode. In addition, OFRM has established a mechanism to ensure that those accounts, which are not currently on the Powerbill, are added. It is important to stress that Powerbill technology will eliminate the need to sort and process approximately 12 cartons of invoices monthly.
#3. Increased staff dedicated to the processing of Telecommunications bills.
As a result of desk audits conducted during the month of May 1998, it was decided to recruit an additional staff member totally dedicated to the timely processing of Telecommunications bills. Mr. Kipling Ross started work on June 22,1998.
Please be informed that our response to the Audit report was shaped by the twin factors of cooperation and full disclosure. We are however buoyed by the realization that the structural issues have been addressed and that most of these problems identified in this report will be resolved in FY 99.
Thank you again for the opportunity to respond to this draft report. We would be pleased to meet again to discuss the specifics of our responses at your convenience.
GOVERNMENT OF THE DISTRICT OF COLUMBIA
TO: Dr. Camille Cates Barnett
FROM: E. Barrett Prettyman, Jr.
DATE: July 15, 1998
SUBJECT: Management Alert Letter on Employee Calls to Numbers With the 900 Prefix
The Office of the Inspector General (OIG) has prepared this management alert letter to advise you of the costly abuse of telephone privileges by employees who are making calls to numbers with the 900 prefix. A review of the Department of Human Services' (DHS) June 4, 1998, Bell Atlantic telephone bill for approximately one and one-half months revealed that charges for calls made to numbers with the 900 prefix amounted to $11,376.73 for that agency alone. This represents a substantial increase of approximately $10,000 over each of the three prior months' bills (January, February, and March 1998). This was found during our ongoing review of the Government of the District of Columbia's Telecommunications System.
Calls to numbers with the 900 prefixes are not official calls. They represent calls to lines that offer entertainment such as horoscopes, and "adult" dialogue, and are typically billed from $1.99 and up per minute.
We reported in our Draft Report, "Review of Control Over the Telecommunications System Within the Government of the District of Columbia," dated July 8, 1998, that we found calls to 900 numbers from phones assigned to District employees. We also reported that policies and procedures governing management and use of the District's telecommunications are outdated. However, due to this substantial increase in calls to numbers with the 900 prefix, the OIG has determined that urgent management and administrative action should be taken to eliminate this abuse of telephone usage.
The Mayor's Administrative Instructions (MAI), dated July 1981, entitled TITLE 2400-Communications Management, CHAPTER 2420-Telephone Communications, §2420.4.A, states, "Use of Official Telephone Service. Official telephones will be used for official purposes for both outgoing and incoming calls, except in cases of emergency.... "
The District Personnel Manual (DPM), Chapter 16, Adverse Actions and Grievances, §1603.1 states, "A corrective or adverse action under this chapter may not be taken against any employee except for cause. As specified in D. C. Code §1-617. 1 (d) (1981), cause shall be defined as follows: ... (f) Dishonesty.... "
Section 1618 of the DPM provides a Table of Appropriate Penalties: Corrective and Adverse Actions. Item 6.d. of the Table defines Dishonesty as "Misuse, whether or not for personal gain, of government funds or property.... "
We reviewed the June 4, 1998, Bell Atlantic Power Bill for unusual telephone activity. We discovered that during the period April 8, 1998 through May 29, 1998, employees of the DHS placed 244 calls to various 900 numbers. The calls resulted in $11,376.73 in service charges billed to the District. The following is a breakdown of calls made by originating telephone number:
See Appendix for details on time of calls, dates, duration (minutes) and cost per call.
We did not determine the exact locations of these telephones. However, we did determine that the numbers are located within the DHS.
The Inspector General recommends that the Office of the Chief Technology Officer:
The subject matter discussed in this management alert is still under review. Accordingly, you are requested to provide its contents only to those persons within the Government of the District of Columbia responsible for commenting on the area discussed. The contents of this management alert letter should not be given out to the public without the consent and approval of the Inspector General. Please inform this Office, in writing, of the action you have taken, or plan to take, concerning this matter by July 31, 1998.
Should you have any questions about information contained in this management alert, please call John N. Balakos, Assistant Inspector General for Audits, at (202) 727-9749.
Office of the Chief Management Officer
Date : July 22, 1998
To : E. Barrett Prettyman, Jr.
From : Dr. Camille Cates Barnett
Subj: Management Alert Letter on Employee Calls to Numbers With the 900 Prefix
I appreciate the advance notification of this information related to telephone abuse within the District of Columbia government. This letter serves to inform you of the action I have directed my staff to take within the next ten business days to immediately address this management problem. The actions outlined in this letter are consistent with your recommendations.
The Office of the Chief Technology Officer (OCTO) was directed to confirm that all District numbers beginning with the area code 900 and any other area code which has been designated for pay per call numbers are blocked. Although initial investigations show that these numbers are blocked, we are reconfirming the information.
Apparently, the 900 numbers identified in your memorandum in the Department of Human Services (DHS) are located in the Child and Family Services Administration, 609 H Street, N.E., which is currently under receivership. Since this administration is not officially a part of DHS, we are following up on this information with the appropriate people.
My office is in the process of drafting a District-wide policy stating that employees are prohibited from making any calls to 900 numbers and/or other pay per call numbers. Any violations of this policy will be subject to disciplinary actions. The policy will contain both implementation procedures and procedures to collect reimbursement from employees that make unauthorized calls. We will provide your office a copy of this policy prior to its release.
Please direct any questions to Cheryl Dotson, Interim Deputy Management Officer, at (202) 727-3432.
cc: Suzanne Peck, Chief Technology Officer
1. Telecommunications is the transmission of voice/data through a medium by means of electrical impulses.
2. OFRM does not process telecommunications services payments for The University of the District of Columbia, D.C. General Hospital, D.C. City Council, Washington Convention Center, D.C. Housing Authority, and D.C. Water and Sewer Authority.
3. In the FMS, all telecommunications expenditures are posted to the object name "Telephone, Teletype, Telegrams, Etc." (Object Code 308).
4. Utility accounts consist of lubricants, natural gas, electricity, telephone, rentals, fuel oil, and steam.
5. An advisement is an FMS document that reserves funds for payment of goods or services after a vendor has been identified.
6. According to the MAI, Title 2400 - Communications Management, Chapter 2420.
7. The Power Bill contains detailed monthly billing information from Bell Atlantic, AT&T, MCI, Sprint, and other service providers.
8. Billing Agency Codes (BACs) are numeric codes assigned to identify agencies or components of an agency for billing purposes.
9. Line Count by Billing Agency Code Report displays a detailed breakdown of the number of telephones, circuit, and WATS lines comprising the account.
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