Brian Bradley
NS&D Monitor
9/18/2015
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 on Monday, also found several control areas that need improvement. “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,” according to the assessment requested by ISN and conducted by independent auditing firm Kearney & Co.
NDF funds and executes previously unanticipated or unbudgeted nonproliferation opportunities in coordination with the requesting federal government agency. Kearney audited the fund – which is part of ISN’s Nonproliferation Program, one of three major ISN programs – from January to April.
Kearney offered seven recommendations to address the discovered issues, including periodical reviews of NDF’s lines of authority, responsibility, and reporting; performing a cost analysis study to compare the expense 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 released alongside the audit.
The review also found that NDF did not comprehensively enter final financial obligation amounts in its Project and Information Management System (PIMS), project managers failed to input required information in their certifications of the receipt of goods and services, the agency did not always record expenses in its digital system, and the fund had no formal process for crafting and documenting its yearly budget request. PIMS’ main purpose is to ensure project expenses do not exceed amounts outlined in mandatory notifications to Congress.
“I would like to thank the audit team for their diligent work, thoughtful insights and continued professionalism while examining [NDF’s] management controls…and contracting processes,” Saboe stated. “I am pleased to know that most of the controls were designed and implemented effectively….Upon further review of current practices and requirements, the NDF will begin development and implementation of the remaining six recommendations soonest.”
