Internal controls for financial management of the State Department’s Nonproliferation and Disarmament Fund (NDF), which operates within the Bureau of International Security and Nonproliferation (ISN), were “designed and implemented effectively,” according to a newly released third-party audit. However, the review, released yesterday, also found several control areas that need improvement. ISN requested the audit, which was conducted by independent auditing firm Kearney & Co. “Specifically, NDF did not have a process to periodically review its organizational structure to ensure appropriate supervision and authority exists; did not have a formal process for preparing and approving language in Memorandums of Understanding (MOU) relating to NDF projects; did not identify and document the specific provisions for which it used its ‘notwithstanding authority’; and did not have processes to evaluate the cost effectiveness of using contractors to perform project management and administrative functions,” the audit states.
NDF funds and executes previously unanticipated or unbudgeted nonproliferation opportunities in coordination with the requesting federal governmentagency. To remedy the discovered issues, Kearney issued seven recommendations, including periodical reviews of NDF’s lines of authority, responsibility, and reporting; performing a cost analysis study to compare the cost of equivalent contractor and government jobs; and implementing a “standard process” for developing MOUs, to require, “at minimum,” the approval of the NDF director and comptroller.
ISN agreed with all of the report’s recommendations, and on May 12 emailed its employees the initial requirements “which will be further developed and detailed,” according to a letter from NDF Director Steven Saboe to Assistant State Department Inspector General for Audits Norman Brown.
