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Contents
Office of The Inspector General
United States Nuclear Regulatory Commission
Washington, D.C. 20555
September 8, 1995
| Memorandum To: | James M. Taylor Executive Director for Operations |
| From: | Thomas J. Barchi Assistant Inspector General for Audits |
| Subject: | Improvements Needed in NRC's Oversight of Parking Garage Management Services |
Attached is the Office of Inspector General's (OIG) report entitled "Improvements Needed in NRC's Oversight of Parking Garage Management Services."
On August 21, 1995, the Deputy Executive Director for Nuclear Materials Safety, Safeguards and Operations Support responded to our draft report. He agreed with our recommendations and provided us with details of corrective actions taken to date as well as other observations. We responded to these comments and made appropriate changes as warranted to the report.
Attachment:
As stated
| cc: | H. Thompson, EDO J. Milhoan, EDO K. Cyr, OGC J. Hoyle, SECY D. Rathbun, OCA J. Blaha, EDO R. Scroggins, OC P. Norry, ADM G. Cranford, IRM R. Bangart, OSP W. Russell, NRR E. Jordan, AEOD D. Morrison, RES C. Paperiello, NMSS J. Funches, ICC W. Beecher, OPA T. Martin, Region I S. Ebneter, Region II H. Miller, Region III L. Callan, Region IV OPA-Region I OPA-Region II OPA-Region III OPA-Region IV OPA-RIV Walnut Creek |
The Nuclear Regulatory Commission (NRC) currently has a contract with TECOM, Inc. to manage the agency's Headquarters facilities. Parking garage management is one of several requirements included in NRC's contract with TECOM. The Office of the Inspector General has reviewed NRC's oversight of the parking garage management services under the facilities contract. We also audited TECOM's billings to NRC for these services in the first year of operations.
Our review disclosed that NRC did not effectively manage the financial aspects of parking garage management services. Specifically, NRC did not adequately review and approve TECOM's collections from sales of parking permits and contractor fees for managing the garage. Furthermore, NRC did not modify or clarify pertinent contract requirements. These conditions led to unreported monthly permit sales, inconsistent and uncollected daily charges, and inaccurate contractor fees.
We also found that TECOM failed to establish adequate financial controls for the parking aspects of the contract. Our audit of TECOM billings disclosed unreported monthly permit sales of $9,314, uncollected daily charges of up to $4,000, and unassessed penalties of as high as $12,000. Due to unclear contract terms, however, we believe that NRC will find it difficult to recover amounts due for daily charges and penalties.
Our report contains three recommendations for improving NRC's oversight of parking garage management services and for determining if additional monies are due NRC.
The Office of the Inspector General (OIG) has reviewed the U.S. Nuclear Regulatory Commission's (NRC) oversight of the parking garage management services under the Contract No. NRC-10-94-141 with TECOM, Inc. In addition, we audited TECOM's billings to NRC for garage management services for the period March 22, 1994 through March 31, 1995.
In a memorandum dated April 14, 1995, NRC's Division of Contracts (DC), Office of Administration, requested that OIG conduct an audit of the parking garage management services. DC requested the audit because of its concerns with TECOM's reporting of parking garage collections in March 1995. Appendix I contains a detailed description of our objectives, scope, and methodology.
The parking garage management services are part of NRC's overall contract that provides commercial facilities management services to One White Flint North (OWFN) and Two White Flint North (TWFN). This firm fixed price contract began on March 7, 1994 and provides for facility and parking management, custodial requirements, and maintenance. The contract for basic services in the base year and four option years is valued at about $10.7 million. Section C.3.7 of NRC-10-94-141 contains the contractual requirements for parking garage management services.
There are approximately 1,100 available spaces in the White Flint Garage Complex for monthly and daily parking. TECOM collects monies from sales of monthly and hourly/daily parking permits and prepares Daily Parking Logs and Monthly Parking Logs to support collections. In accordance with contract terms, TECOM prepares a Monthly Parking Collection Statement reflecting actual sales of monthly and daily permits less the contractor's monthly fee for parking garage management services. The Monthly Parking Collection Statement along with the net proceeds are provided to NRC early the following month. Total collections, fees, and net proceeds from parking garage management services from March 22, 1994 through March 31, 1995 were:
| Collections: | |
|---|---|
| From sale of monthly permits | $678,264 |
| From sale of daily permits | 34,510 |
| Total Collections | $712,774 |
| TECOM's Fee | -88,971 |
| Net Proceeds to NRC | $623,803 |
NRC's Contracting Officer is responsible for negotiating and awarding the contract on behalf of NRC, making changes and amendments to the contract, making final settlements on all invoices, and imposing payment deductions (penalties) for unsatisfactory performance. NRC's Project Officer is responsible for monitoring contract performance, inspecting and accepting services, reviewing contractor invoices and performance reports, and providing technical direction to the contractor. NRC's Administrative Service Center (ASC) is responsible for providing 1) lists of approved applicants for monthly parking and 2) lists of individuals who may park without charge.
Overall, we found that inadequate NRC oversight of the contractor's financial controls, coupled with unclear contract terms regarding parking requirements, unnecessarily exposed the Government to potential fraud, waste, and abuse. As a result, thousands of dollars were either uncollected or not properly remitted to NRC. Although an investigation into monthly parking fees did not disclose fraud, we found that $9,314 was not properly reported. Our audit also disclosed daily parking fees of up to $4,000 that were not collected during the four-month period ending July 31, 1994.
We found that NRC failed to adequately review daily and monthly permit sales, and TECOM's fee as claimed on the contractor's Monthly Parking Collection Statements. Unlike other portions of the contract, such as for custodial service, TECOM is not required to prepare and submit an invoice for parking garage management services. As such, NRC does not review the Collection Statements in accordance with Management Directive (MD) 11.3, "NRC Review of Contractor Invoices." In discussions with NRC staff, we found no basis for this lack of formal review. We believe this is a fundamental weakness and that NRC should review and approve the Monthly Parking Collection Statements as it does all invoices. Review and approval, through MD 11.3 procedures or a more tailored review process, is particularly important to ensure the Government's interest is adequately protected.
Although NRC staff told us they did some limited reviews, such as determining which NRC employees purchased monthly permits, we found no evidence that any such reviews were made or that the results were communicated to TECOM prior to March 1995. This general lack of NRC review and inadequate TECOM financial controls resulted in unreported monthly permit sales, inconsistent and uncollected daily charges, and inaccurate contractor fees.
Sales of monthly permits usually begin on the 20th of the previous month. TECOM charges NRC employees $60 each, but only if the employee's name appears on an approved authorization list prepared by ASC. When an individual purchases a monthly permit, TECOM completes the ASC authorization list by noting the permit number, purchase date, and sales amount. The monthly permit sales for each day are subsequently recorded on the Daily Parking Log and the Monthly Parking Collection Statement. TECOM also inputs the monthly parking transactions into its data base to provide NRC with a Monthly Parking Log.
In our review of monthly permit sales we found numerous cases where daily collections for monthly permit sales (reported on the Monthly Parking Collection Statements) were inconsistent with the amounts reported on the Daily Parking Logs. We also found cases of missing permit numbers and breaks in permit number sequences on the Monthly Parking Logs. Furthermore, we could not reconcile Monthly Parking Collection Statements with amounts shown on Monthly Parking Logs.
Because we could not directly compare TECOM's Monthly and Daily Parking Logs with the Monthly Parking Collection Statements, we requested TECOM to reconcile its bank deposits with amounts reported to NRC. TECOM's bank deposit reconciliation revealed that additional funds should have been remitted to NRC. We subsequently performed an independent bank deposit analysis for the period March 1994 through March 1995 and determined that the unreported sales were $9,314. TECOM agreed that these funds were owed NRC. Due to the nature of the discrepancies between the bank deposit analysis and the amounts reported to NRC, we referred the issue to OIG's investigative staff for follow-up. The subsequent investigation did not disclose fraud and was therefore closed.
From an NRC standpoint, the agency conducted no reconciliations between the Monthly Parking Collection Statements and the Monthly Parking Logs. In addition, NRC staff did not verify that the permit numbers sold were in sequence and that the destruction of unused permits had occurred. Similarly, TECOM did not track permit number sequence, nor document breaks in the sequence or destruction of unused permits. In response to our concerns that monthly permits must be safeguarded and accounted for since they represent potential revenue, TECOM has subsequently developed a monthly parking ticket distribution log. The log will track the beginning and ending monthly permit number sold each day. TECOM has also proposed a procedure to document the destruction of unused parking permits. Although these procedures should lessen concerns about whether all parking receipts are properly reported, we believe NRC should reconcile Monthly Parking Collection Statements with the Monthly Parking Logs to ensure that all revenues due are received. We also believe such reconciliation would require minimal effort on the part of NRC's staff.
Besides monthly parking, TECOM charges $6.00 for daily parking. NRC visitors may park in the garage at no charge. In accordance with contract terms, ASC must approve these visitors in advance. The contract also provides for hourly parking at a prorated fee. TECOM is responsible for issuing hourly/daily parking permits, collecting parking fees, and preparing Daily Parking Logs. Copies of the Daily Parking Logs are submitted to NRC the following working day.
In our review of the Daily Parking Logs from March 1994 through July 1994, we questioned over 900 individual entries, or about 20 percent of the logs. We found inconsistent and inaccurate charging of fees and free parking for NRC employees and contractors. TECOM responded by stating that most entries in question occurred because of lack of NRC guidance regarding hourly rates and free parking. Details of our findings are discussed later in this report under "Unclear Contract Terms."
Although NRC staff told us they reviewed Daily Parking Logs, we found no evidence of such reviews. Because NRC did not document review of the logs and identify and communicate problems to TECOM for corrective action, charging problems continued throughout the audited period. Another area of concern is missing permit numbers. By not reviewing Daily Parking Logs, NRC could not ensure that TECOM had implemented adequate financial controls to account for all permit numbers. As with monthly permits, hourly/daily permits should have been safeguarded and accounted for properly. During our review, TECOM developed procedures for tracking hourly/daily permit numbers and explaining discrepancies. Although these procedures should lessen concerns whether all daily sales have been reported, NRC still needs to review Daily Parking Logs to ensure that TECOM's charging practices are accurate, financial controls are in place, and all permit numbers are accounted for.
TECOM's fees for parking garage management services are stipulated in the contract. However, we found that TECOM had not billed fees in accordance with contract terms. While the overall impact for the period March 22, 1994 through March 31, 1995 was a net overbilling of $195 to NRC, we found that TECOM incorrectly calculated its fee for four separate months.
From NRC's standpoint, it did not document review of TECOM's fee calculation. Although fees were specified in the contract, they varied during the phase-in period for TWFN and between the base and option years. We found confusion between NRC and TECOM as to the start date for managing the TWFN garage. NRC Announcement Number 40, dated April 26, 1994, stated that effective May 2, 1994, the two garages at White Flint would be managed as one facility. We used this date (which was confirmed by the Project Officer), in our calculation of the fee, contrary to TECOM's current position that it started managing TWFN on March 22, 1994. We believe a documented review by NRC was necessary to guarantee that dates of actual parking garage management services and changing fee terms were appropriately factored into TECOM's billings.
We found that the agency did not provide sufficiently clear contract terms and adequate guidance for TECOM to carry out contract requirements. These conditions led to unsubstantiated parking rates, unsupported free parking, and improper prorations of monthly parking fees. Based on criteria of what NRC and TECOM thought the charging requirements were, we determined that daily parking fees of up to $4,000 were not collected by TECOM during the four-month period ending July 31, 1994, and penalties totaling as much as $12,000 were not assessed by NRC. Due to the extensive number of entries questioned in our test period, we did not conduct a similar review of entries from August 1994 through March 1995. However, these months should be reviewed by NRC prior to a satisfactory contract settlement with TECOM. Unclear contract terms may impact NRC's ability to hold TECOM accountable for parking discrepancies and to negotiate contract adjustments.
The contract states that parking fees will be set by NRC. For the daily/hourly parking rates, we found various guidance but none was generated by NRC's Contracting Officer, Project Officer, or ASC contacts. As of June 14, 1995, NRC had not provided TECOM with formal direction on setting daily/hourly parking rates. Lack of formal direction led to unsubstantiated daily/hourly parking rates and inconsistent charging practices during the audited period. Although we computed the amount of lost revenue from daily collections based on criteria of what NRC and TECOM thought the charging requirements were, lack of formal NRC direction will make recovery of this revenue more difficult.
For the monthly parking rates, it should be noted that as a result of our audit, the monthly fees have been addressed by NRC in Contract Modification Number 9, effective May 19, 1995. Daily/hourly rates were not addressed in the modification. Although monthly parking rates have been set, NRC needs to fulfill contract terms by setting daily/hourly rates.
The contract specifies that ASC will provide TECOM with a list of individuals who are allowed to park at no charge. TECOM staff told us that most of the free parking approval was authorized verbally by NRC. However, neither TECOM or ASC kept complete records of these approvals. This lack of written approval and record keeping resulted in many instances of unsupported free parking.
During our review, we requested ASC to provide us with its criteria for free daily parking. ASC provided us with a listing of visitors who are not to be charged, but this listing was never provided to TECOM. Although we used the ASC visitor criteria to review the daily parking logs, NRC needs to formally clarify the inconsistency between the contract terms and ASC's visitor listing. Similar to the situation with unregulated parking rates, NRC will find it difficult to recoup uncollected fees and related penalties.
We also found that TECOM issued free monthly parking permits every month to six company employees. The contract states that the NRC will make available six spaces but does not explicitly designate these spaces to be at no charge. Another section of the contract allocates TECOM two parking spaces and specifies that if additional parking spaces are required, the contractor is responsible for applying for its own parking permits with the ASC. NRC needs to clarify how many parking spaces should be provided to TECOM and whether any of these spaces should be at no charge.
Contrary to contract terms, we found that TECOM has been prorating monthly permit fees. In response to our concerns, TECOM stated it followed NRC direction and relied on ASC to provide monthly listings of individuals who were authorized to pay a reduced rate. Usually the reduced rate was based on less than a full month being available to an employee, such as a newly-hired employee who started with NRC in the middle of a month.
On May 19, 1995, as a result of our concerns and TECOM's subsequent refusal to prorate without formal NRC notification, the Contracting Officer modified Contract No. NRC-10-94-141 to allow proration. We believe this action corrected the condition we found in our review.
In our review, we found numerous problems in TECOM's collecting and reporting of parking fees under Contract No. NRC-10-94-141. In our opinion, these problems were caused by lack of adequate NRC oversight and unclear contract terms regarding the financial aspects of the parking garage management services. NRC did not adequately review and approve TECOM's collections and remittances. Additionally, because contract terms were unclear, TECOM established parking fee requirements without formal NRC approval. Specific NRC deficiencies included the failure to: (1) perform regular, systematic reviews of TECOM reports, (2) confirm adherence to contract terms, (3) assure NRC received all monies due, and (4) establish, clarify, and modify pertinent contract requirements.
TECOM failed to establish adequate financial control procedures to assure accountability for all procedural and financial aspects of the contract. During our audit, TECOM recognized the need for and established improved financial controls, that when fully implemented, should provide significantly improved accountability for funds due NRC. Overall our audit of TECOM billings to NRC disclosed unreported monthly permit sales of $9,314, uncollected daily charges of up to $4,000, and unassessed penalties of as high as $12,000. Because of unclear contract terms, however, NRC will find it difficult to recover amounts due for daily charges and penalties. Based on our work, we believe that the Government has been unnecessarily exposed to the potential for fraud, waste, and abuse.
To ensure that NRC effectively manages the financial aspects of the parking management portion of the TECOM contract, we recommend that the agency:
Require formal review and approval of all TECOM's remittances for its net parking garage collections. Review should include reconciling TECOM's performance reports with Monthly Parking Collection Statements, identifying missing permit numbers for follow-up, ensuring that TECOM's charging practices conform with established NRC requirements, and determining whether contractor fees are in accordance with contract terms.
Update and clarify contract terms and conditions by either executing necessary modifications or issuing other formal guidance to TECOM concerning daily/hourly rates and free parking.
Complete the review of Daily Parking Logs for the period August 1994 through March 1995 to determine if additional monies are due NRC. NRC's focus should be on only those parking issues which have a reasonable likelihood of recovery.
On August 21, 1995, the Deputy Executive Director for Nuclear Materials Safety, Safeguards and Operations Support responded to our draft report. He agreed with our three recommendations to more effectively manage the financial aspects of the contract, and he provided us with corrective actions to date on Recommendations 1 and 2. We believe these actions will bring much needed discipline to NRC's oversight of the contract and will add clarity to contract terms.
The Deputy Executive Director also included additional observations and supporting documentation on daily parking issues. The supporting documentation was used to mitigate the amount of uncollected revenue and unassessed penalties we reported. Although we requested but were not furnished some of this documentation during our audit, we have made changes to our report where appropriate.
The Deputy Executive Director's response also indicated that NRC's prior practices were acceptable regarding verbal direction to TECOM and written direction by staff other than the Contracting Officer, Project Officer, or ASC. Despite the agency's position, we maintain that any verbal direction to TECOM should have been confirmed in writing and that only appropriate personnel should have issued written direction. We are encouraged that NRC's recent corrective actions now cover both issues by controlling key financial criteria through contract modifications issued by the Contracting Officer.
The objectives of our audit were to review the U.S. Nuclear Regulatory Commission's (NRC) oversight of the parking garage management services and related TECOM, Inc. billings to NRC under Contract No. NRC-10-94-141.
Our audit was conducted in accordance with generally accepted Government auditing standards during the months of April and May 1995. We interviewed NRC Headquarters staff in the Office of Administration's Division of Contracts and Division of Facilities and Property Management. We also conducted interviews with TECOM's local staff in Rockville, Maryland and its corporate staff in Austin, Texas.
We reviewed NRC's contract with TECOM, correspondence between NRC and TECOM, the Federal Acquisition Regulation, and NRC's procurement Management Directives. We also examined TECOM's reports relating to daily and monthly parking collections and contractor fee charges for the period March 22, 1994 through March 31, 1995.
We reviewed NRC's management controls, as well as TECOM's internal controls, as they apply to the financial aspects of parking garage management services.
United States Nuclear Regulatory Commission
Washington, D.C. 20555-0001
August 21, 1995
| Memorandum For: | Thomas J. Barchi Assistant Inspector General for Audits |
| From: | Hugh L. Thompson, Jr. Deputy Executive Director for Nuclear Materials Safety, Safeguards, and Operations Support |
| Subject: | Draft Report on Improvements Needed in NRC's Oversight of Parking Garage Management Services |
This responds to the July 12, 1995, memorandum transmitting the subject draft audit report and reflects recent discussions that Patricia Norry and her staff had with you regarding this report.
With respect to your specific recommendations, I submit the following:
Recommendation 1
Require formal review and approval of all TECOM's remittances for its net parking garage collections. Review should include reconciling TECOM's performance reports with Monthly Parking Collection Statements, identifying missing permit numbers for follow-up, ensuring that TECOM's charging practices conform with established NRC requirements, and determining whether contractor fees are in accordance with contract terms.
Response
Agree. The terms and conditions for parking management are currently outlined in several areas of the $22.9($10.7 million stated in the IG report) million Commercial Facilities Management contract; specifically, Section C.3.7. and Exhibits 9, 10, 11, 12, 13, and 14. We agree that these provisions could be more clearly defined. We therefore have consolidated and updated these procedures into one central document. This document will replace Exhibits 9 through 14 of the contract. Section C.3.7 has been revised accordingly. A copy of the procedure and the revised Section C.3.7 of the contract are attached.
Completion date: Completed
Recommendation 2
Update and clarify contract terms and conditions by either executing necessary modifications or issuing other formal guidance to TECOM concerning daily/hourly rates and free parking.
Response
Agree. See the above response.
Completion date: Completed
Recommendation 3
Complete the review of Daily Parking Logs for the period August 1994 through March 1995 to determine if additional monies are due NRC. NRC's focus should be on only those parking issues which have a reasonable likelihood of recovery.
Response
Agree. We plan to review the daily parking logs for the remaining months (August 1994 through March 1995) of the first year of the contract. We also plan to pursue recovery of any monies due the NRC for uncollected revenues and penalties identified in this response to the IG's findings.
Completion date: September 15, 1995
Additional Observations
To properly address your draft report and the revenues due NRC, we reviewed the "Summary of Audit Results" provided by your office, which identifies uncollected daily charges of $4,000(* These figures were rounded by the IG) and unassessed penalties of $13,000* referenced in the report. Based on this review, we concluded that $12,491.50 of the $17,181 identified in the summary as uncollected revenues and penalties should not be characterized as such. A summary of our review relative to your findings follows:
IG FINDING: "Based on criteria of what NRC and TECOM thought the charging requirements were, we determined that daily parking fees of at least $4,000 were not collected by TECOM during the four-month period ending July 31, 1994, and penalties totaling about $13,000 were not assessed by NRC."
These estimates consist of four categories, as discussed below:
a) revenue loss based upon incorrect assessment of daily/hourly parking fee
| Estimate of Uncollected Revenue | Estimate of Unassessed Penalties | ||
|---|---|---|---|
| IG | ADM | IG | ADM |
| $538 | $0 | $0 | $0 |
The IG based his estimate of uncollected revenues on the assumption that the contractor was required to collect in accordance with the May 18, 1994, Zotto letter. Our conclusion is that the contractor correctly relied upon article C.3.7.3B of the contract and Camille Kime's April 15, 1994, work request. Hence, the NRC experienced no uncollected revenues under this category.
b) revenue loss as a result of free parking for unapproved visitors and service contractors
| Estimate of Uncollected Revenue | Estimate of Unassessed Penalties | ||
|---|---|---|---|
| IG | ADM | IG | ADM |
| $3,370.00 | $1,016.50 | $11,740.00 | $3,580.00 |
The IG based his estimate on an assumption that TECOM was allowing visitors into the garage at no charge because of the lack of guidance from the NRC. In fact, in accordance with a June 14, 1994, memorandum from the NRC Project Officer to T. Zotto, effective on date of issuance, all visitors and service contractors were allowed to park in the garage at no charge. In addition, TECOM received other guidance from the Administrative Service Center (ASC) on this issue; e.g., work requests dated May 21 and August 18, 1994, and documents presented at a November 18, 1994, meeting with TECOM representatives called specifically to discuss and provide guidance on garage parking policy. ASC routinely issued verbal direction to TECOM regarding visitor parking within the context of this written guidance, copies of which are attached.
Based on this guidance, we reviewed each of the 587 parking entries questioned by the IG and determined that 408 entries were approved by ASC for free parking. Therefore, no collections were required and no penalties were appropriate to be assessed for these 408 entries.
c) no parking permits assigned
| Estimate of Uncollected Revenue | Estimate of Unassessed Penalties | ||
|---|---|---|---|
| IG | ADM | IG | ADM |
| $0 | $0 | $1,440.00 | $0 |
In its review, the IG was unable to determine that proper daily parking permits were issued on April 12 and 13, 1994, and therefore concluded that NRC should assess TECOM penalties. During our review, we located the permits actually issued which matched the logs for those days, copies of which are attached. We, therefore, have determined that TECOM should not be assessed a penalty under this category.
d) parking refunds not supported with "time out" entries in the log
| Estimate of Uncollected Revenue | Estimate of Unassessed Penalties | ||
|---|---|---|---|
| IG | ADM | IG | ADM |
| $93.00 | $93.00 | $0 | $0 |
IG FINDING: "For the daily/hourly parking rates, we found various guidance but none was generated by NRC's Contracting Officer, Project Officer, or ASC contracts. As of June 14, 1995, NRC had not provided TECOM with formal direction on setting daily/hourly parking rates. Lack of formal direction led to unregulated daily/hourly parking rates..."
NRC Work Request No. 03484 dated April 15, 1994, provided formal direction to TECOM regarding daily and hourly parking rates. This direction, a copy of which is attached, was acknowledged by TECOM by signature dated April 26, 1994.
Throughout the report, the IG assumes that verbal direction to TECOM, for example, with respect to approved visitor parking, is inappropriate and therefore resulted in "unsupported free parking." While we agree that most aspects of the TECOM contract should be managed through formal directives, we believe that within the overall context of a sound parking management program, verbal authorization to TECOM is efficient and necessary. Our revised procedures continue to allow verbal direction but, unlike previous practice, require these directions to be confirmed in writing.
In general, our examination of the facts contained in the IG's report did not lead us to the broad conclusions which the auditors reached regarding the effectiveness of ADM's administration of the parking provisions of the TECOM contract. The auditors' findings, however, are very useful and we expect implementation of the IG recommendations to result in a more efficient and better managed process.
Figure 1: The U.S. NRC Functional Organization Chart
Anthony C. Lipuma
Director, Program and Financial Audits
George T. Pourchot
Senior Auditor
Teresa A. Hayes
Auditor
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