BY THE TIME WE HELD THE FIRST INTERAGENCY WORKING GROUP MEETING ON OCTOBER 24, MY STAFF HAD PREPARED A DRAFT AUDIT GUIDE REGULATIONS. CERTAIN RESPECTS, WE CHALLENGED THE AUDITORS TO RESEARCH THE NEED FOR BETTER REGULATIONS. THE INTERAGENCY GROUP HAS MET FOUR TIMES. THEY HAVE ADOPTED AN AUDIT GUIDE AND AGREED TO AUDIT OBJECTIVES INCLUDING: (1) EVALUATION OF ADEQUACY OF AGENCY ADMINISTRATIVE (2) WE ASKED EACH OF THE REPRESENTATIVES TO DO AN INDEPENDENT AUDIT OF ITS AGENCY. WE DID THIS FOR SEVERAL REASONS IN ADDITION TO THE FACT THAT EACH INSPECTOR GENERAL HAS INDEPENDENT AUDIT AUTHORITY. WE FELT THAT THERE MAY BE SO MANY DIFFERENT PRACTICES FROM AGENCY TO AGENCY THAT ONLY GENERAL GUIDANCE WOULD APPLY. WE ALSO FELT THAT EACH AGENCY WOULD KNOW BEST HOW TO ALLOCATE RESOURCES AND TAILOR THE AUDIT TO THE PARTICULAR NEEDS OF THAT AGENCY. ALTHOUGH WE ARE STARTING WITH 18 INDEPENDENT AUDITS, WE PLAN TO CONTINUE MEETING AS A GROUP TO DEFINE COMMON PROBLEMS AND SOLUTIONS. WE HAD ORIGINALLY PLANNED TO COMPLETE THE AUDIT BY ONE OF THE COMMON PROBLEMS WE ARE ADDRESSING IS THE MATTER OF BUYING OF NEW LINES OF FURNITURE TO REPLACE CONVENTIONAL FURNITURE. WHILE CONDUCTING THE AUDIT IN GSA, WE OBSERVED THAT GSA HAS PROMOTED NEW LINES CALLED "OFFICE EXCELLENCE FURNITURE" AND "SYSTEMS FURNITURE." THE IDEA IS THAT THE NEW LINES ARE WORTH BUYING BECAUSE THEY SAVE SPACE. WE QUESTION WHETHER OVERALL SPACE SAVING HAS RESULTED FROM FURNITURE PROCUREMENT. WE ALSO QUESTION WHAT THE GOVERNMENT IS GOING TO DO WITH GOOD, CONVENTIONAL FURNITURE AFTER IT HAS REPLACED IT WITH SYSTEMS FURNITURE. WE ARE NOW ABOUT HALF WAY INTO THE AUDIT AND THE RESULTS, SO FAR, ARE ABOUT AS ANTICIPATED. I DO NOT HAVE MANY DETAILS ABOUT THE OTHER AGENCIES FINDINGS, BUT I CAN ANSWER GENERAL QUESTIONS ABOUT THE INTERAGENCY REVIEW. Senator CHILES. Our next witness will be Mr. Jerome Stolarow, Director of Procurement and Systems Acquisition Division of GAO, and he is accompanied by Mr. Edward Tomchick. [Whereupon, Jerome Stolarow and Edward Tomchick, having been first duly sworn, were called as witnesses herein, and were examined and testified as follow:] TESTIMONY OF JEROME STOLAROW, DIRECTOR, PROCUREMENT AND SYSTEMS ACQUISITION DIVISION, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY EDWARD TOMCHICK Senator CHILES. Gentlemen, you understand the time constraints that we are working under. I think we are going to have three votes on Chrysler, and they are probably going to be back to back, so it is going to be very difficult once those votes start. So I ask you to insert your statement in the record, if you will, and then if you can brief that for me. Mr. STOLAROW. I will try, Senator. You have asked us to testify about some ongoing work that the General Accounting Office is doing in a related area dealing with moving and storage contracts in this local are, particularly about a situation that we have found at the Department of Energy. I think in summarizing the situation we find some very serious mismanagement and abuse of Government regulations and disregard for the interests of the Government in the way the Department of Energy has been contracting for and administering contracts for moving services and storage of furniture and related items. Particularly, one contract for moving services was awarded to Edwards Trucking Co., Inc., at an estimated cost of over $600,000 a year. First of all, we feel that this figure is probably excessive. We really can't find out why the Department of Energy is estimating moving expenses for a 1-year period at about $600,000 but, in effect, even though the cost was estimated at $600,000, the total cost may well run to about $2 million for a year. But what we find has been happening is that there has been an abuse of this contract. While it was for moving services, we find that under the contract the Department of Energy has been using contractor employees to provide other services to the agency. For example, people under contract to this particular contractor are working in the Department of Energy self-service stores. We found one working as a secretary for the Department. Now, this, of course, is a circumvention of congressionally mandated personnel ceilings and possibly violation of civil service type regulations, but we really can't Senator CHILES. How would that relate in regard to what they are paying, overtime-that's what's running up the cost of that contract? Mr. STOLAROW. That would partly account for running the cost up. Another area we find is that this type of contract is supposed to be used for small moves, a couple of people, a couple of desks. Senator CHILES. One where you just sort of make an overall estimate on how much? You don't bid each job. You just have an estimate based on number of hours worked, or something? Mr. STOLAROw. At an hourly rate. Senator CHILES. What was the hourly rate? Mr. TOMCHICK. The hourly rate for helpers was $8 an hour, for supervisors it was $3 an hour, and for a truck and driver it was $15 an hour. Senator CHILES. But some of those same hourly rate people would be working in the self-service store, is what you are saying? Mr. STOLAROW. That is correct. The biggest misuse of the contract, we feel, was for the major moves. As you know, the Department of Energy is a consolidation of several other agencies and they have had to move people from different locations, and the major type moves that are done over a weekend where a whole organization is moved from one location to another are usually done under GSA contracts where they bid the individual move at a package price. This type of contract that we were originally talking about is not intended to be used for those Senator CHILES. Was it, in fact, used for major moves? Mr. STOLAROW. That's right. Senator CHILES. There is no way in the world of holding down that kind of thing if you are paying somebody by the hour. It is not like a job. The inducement is there to put as many men on and work as many hours as you possibly can. Mr. STOLAROw. That is correct. And we estimate that over the period of the contract at least $250,000 in excess payments, because of overtime and premium rates, could be paid to make major moves for DOE instead of contracting on a move basis. Senator CHILES. Well, that would be in violation of GSA's reguations? Mr. STOLAROW. That is correct. Senator CHILES. How did they get away with it? Mr. STOLAROW. They just did it. As I mentioned when I started, we found gross mismanagement and abuse of Government regulations in the handling of these contracts. Senator CHILES. Who was responsible for that? Mr. STOLAROW. We have a number of people who were responsible for these contracts, Mr. Gene Fleming, the Director of the Office of Administrative Services, Mr. James Sampson, a former Acting Director of the Property, Mail and Transportation Division, and Mr. Robert Lavalle, former Acting Chief of the Property and Supply Management Branch, and Mr. James Altman, Acting Chief, Property Supply Management Branch, and a Mr. Charles Cook, Chief Supply Section, Property and Supply Management Branch. All of these people had some hand in the award and administration of these contracts. Senator CHILES. What has the Department of Energy said in reply to your report? Mr. STOLAROW. We have not yet issued this report to the Department of Energy and have not gotten their official comments. This review is very current and is still going on. I would like to go on to several other problems that we found, particularly relating to storage contracts. They have a number of contracts that involve the storage of furniture and material, and we find that in essence they have relied on the contractors to take the inventories, maintain the inventory records, and to prepare billings based on those types of records so that there were no controls by the Department of Energy. They had no idea of how much furniture they had and what the value was. Senator CHILES. They had no inventory themselves. Mr. STOLAROW. No inventory. No way of knowing. Senator CHILES. No way to audit and determine whether they were charged correctly or incorrectly. Mr. STOLAROW. That is correct. One serious result of this problem is that they had furniture in a warehouse without a contract, without a formal contract, and there was a fire. There is an estimate that about $180,000 of DOE furniture I was lost in that fire. At this point in time they have not been able to recover from the warehouse operator, from the contractor, because the insurance carrier for the contractor claims it has no liability under the conditions that we have found. This matter still has to be resolved. Senator CHILES. And they really don't know that they had in there for sure? Mr. STOLAROW. No. Senator CHILES. There is an estimate of $180,000? Mr. STOLAROW. Correct. Senator CHILES. And they haven't been able to make recovery as yet? Mr. STOLAROW. Not as yet. Those are the highlights of my statement. We have several other items that are of note, but in the interest of time I will pass over them. Senator CHILES. Well, I thank you very much for that because we are pressed for time and we would have your statement in full in the record, and we would like to have a followup from you when you get some reply from the Department of Energy in regard to your findings. Mr. STOLAROW. Yes. [The prepared statement of Mr. Stolarow follows:] |