U.S. Department of State Fiscal Year 2019 Agency Financial Report

Monitoring and Documenting Contractor Performance The Department continues to face challenges in properly overseeing contractor performance. Oversight personnel must monitor and document performance, confirm that work has been conducted in accordance with the terms of a contract, hold contractors accountable for nonperformance, and ensure that costs are effectively contained. Our FY 2019 work found several examples of deficiencies in the performance of these duties. Moreover, we often find that these issues overlap with another Department challenge: workforce management. Inexperienced and untrained oversight personnel, staff rotations that promote inefficiency, and complex programs and contracts that simply require more oversight are often at the root of contract oversight deficiencies. For example, we found that officials from the Bureau of Near Eastern Affairs did not consistently nominate Contracting Officer’s Representatives (CORs) and other oversight personnel with the required certification level and technical expertise to oversee contracts in Iraq. Moreover, oversight personnel did not always possess sufficient technical expertise relative to the contract’s subject matter. Once appointed, the bureau also failed to effectively evaluate the performance of the CORs. On a related point, the same audit found that COR files on contracts in Iraq, with a total value of more than $3 billion, were often incomplete. 12 Although the Department has recognized issues with its COR workforce, the challenge to nominate CORs with the requisite level of technical expertise persists. Ensuring Proper Invoice Review and Approval Processes Proper invoice review and approval processes help the Department ensure that it receives the benefit of its contracts and that it can take appropriate steps if contractors are not performing in accordance with the terms of a contract. 12 OIG, Audit of the Bureau of Near Eastern Affairs Selection and Management of Contract Oversight Personnel in Iraq (AUD-MERO-19-10, November 2018). 13 OIG, Audit of the Bureau of Diplomatic Security’s Expenditures for Third-Party Contractors and Personal Services Contractors Supporting the Office of Training and Performance Standards (AUD-SI-19-30, June 2019). 14 OIG, Lessons Learned from Office of Inspector General Audits Concerning the Review and Payment of Contractor Invoices Supporting Overseas Contingency Operations (AUD-MERO-19-19, April 2019). When the Department has focused on this issue, it has been successful in improving the accuracy and efficiency of these important processes. For example, one report noted that the Department’s Bureau of Diplomatic Security (DS), Training Directorate, Office of Training and Performance Standards (TPS) had an effective system of internal controls in overseeing expenditures. Such oversight included contract monitoring; records management; and an automated system for review, approval, and timely payment of contractor invoices. Collectively, the internal controls TPS employed helped ensure funds expended to third-party contractors were done so in accordance with Federal regulations and guidance and therefore reduced the risk of unallowable or unsupported transactions. 13 Nonetheless, room for improvement remains. In a review of four previous audit reports that assessed invoice review processes and procedures, we sought to determine common challenges faced by bureaus that rely heavily on contracted support to conduct their missions in Afghanistan and Iraq. Our review noted that none of the four bureaus had an internal quality control function to check the accuracy of CORs’ invoice reviews to ensure the Department paid for services it received. As a result, we recommended that the Bureau of Comptroller and Global Financial Services (CGFS) advise all relevant Department bureaus of the potential benefits of its invoice review quality control program. Taking advantage of this best practice could help the bureaus recover improper payments, address weaknesses, and improve the overall invoice review process. 14 Overseeing Construction Contracts The Department continues to experience problems with the oversight of construction contracts, which are often long- term, complex, and of high value. There are obvious financial consequences to inadequate management and oversight of these contracts, but more importantly, insufficient oversight of the building process can lead to the construction of 114 | U nited S tates D epartment of S tate 2019 A gency F inancial R eport OTHER INFORMATION | INSPECTOR GENERAL’S STATEMENT ON THE DEPARTMENT’S MAJOR MANAGEMENT AND PERFORMANCE CHALLENGES