Office of the Inspector General (OIG)

OIG Semi-Annual Report to Congress:
October 1, 2003 - March 31, 2004


Table of Contents


Foreword

When I was selected as the Inspector General in the fall of 1999, I committed to the Archivist that under my direction, the OIG would focus our efforts on two key areas. First, we would work to strengthen all facets of NARA's information technology program. Likewise, we would work diligently to bring financial accountability to this agency. Nearly five years later, as the Archivist prepares to leave NARA, I believe that the work we have performed during this time-span has resulted in significant and positive change in these critical areas. Our work products and both formal and informal counsel have helped NARA chart a course with the ultimate goal being a highly effective and efficient organization. An organization that can manage and protect its resources in an optimal manner, and measure results and make timely decisions based upon sound empirical data, is one that is best suited to fulfill its mission and meet customer expectations. I believe that upon arrival, the next Archivist will find NARA to be an agency that is well on the path to being that type of entity.

However, not all paths are easily traveled. Some paths are fraught with challenges to be met and overcome in order to claim success. The next Archivist will find NARA to be an agency with a huge volume of physical records, many of which command value to collectors. In this age of online auctions and interest in our national history, the demonstrated risk exists that our holdings are being exploited for personal gain to the detriment of our nation's history. Likewise, the challenge of capturing, preserving, protecting, and providing appropriate accessibility to electronic records is unique and daunting in scope. The success of the evolving Electronic Records Archive (ERA) program is critical to our mission and to the nation.

It is my hope that we have served this Archivist well and, in so doing, the American public as a whole. We look forward to working with the new Archivist in a professional and highly constructive manner.

Paul Brachfeld
Inspector General

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Executive Summary

This is the 31st Semiannual Report to the Congress summarizing the activities and accomplishments of the National Archives and Records Administration (NARA) Office of Inspector General (OIG). A summary of NARA's top challenges is provided under the section titled "Top Ten Management Challenges." The highlights of our major functions are summarized below.

Audits

In this reporting period, the Audit Division focused resources on examining the integrity of NARA's financial information and security of NARA's Information Technology (IT) programs. This work had significant positive impact upon agency operations and related controls in these critical areas. We also directed significant audit resources toward the evaluation of such NARA programs and functions as the Transit Benefit Program and Interagency Agreements function and contract issues. Recommendations directed to NARA officials will, upon adoption, translate into increased levels of security and control over our financial assets and programs and operations.

We issued the following audit reports during the reporting period:

  • Assessment of the Controls and Security of NARA Classified Systems. The objective of this assessment was to determine whether NARA classified systems were adequately managed and secured. Our review revealed that NARA has not developed or implemented a classified IT systems security program including updated guidance pertaining to the technical security of classified systems. NARA also has not created a complete classified computer systems inventory listing. Consequently, we found numerous security weaknesses in one classified system that was examined as part of our audit fieldwork. As a result, NARA does not have the needed assurance that its classified information systems are adequately protected against loss, misuse, and unauthorized disclosure or modification, and that appropriate security measures have been implemented on all of NARA's classified systems. Thus, NARA's accessioned classified records categorized at the "top-secret" level are at risk. (Audit Report #04-10, dated March 31, 2004. See page 13.)
  • Audit of a Subcontractor's Proposal for Archives I Stack Lighting. Our review of a subcontractor's proposal for correcting electrical and lighting problems in the stacks at the National Archives Building in Washington, DC, noted several concerns. As a result of our examination, we questioned $2,000,243 of the total proposed cost of $5,103,119. A review of the subcontractor's overhead revealed some costs that were unallowable, including bonus costs, pension costs, contribution costs, traffic tickets, and entertainment expenses. We found that some of the material included in the Bill of Material was not listed at the price that the subcontractor paid for the material. In addition, we questioned portions of the subcontractor's proposed supervision cost, labor hours, bond cost, and insurance and taxes costs. We were not able to determine the reasonableness of a $884,242 material quote submitted by the subcontractor, because these costs were not supported. (Audit Report #04-05, dated December 23, 2003. See page 13)
  • Audit of the National Archives Records Center Revolving Fund Fiscal Year 2002 Financial Statements. PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Records Center Revolving Fund balance sheets, as of September 30, 2002 and 2001, and the related statements of net cost, and of changes in net position, for the years then ended. The auditors' found that, except for the omission of a statement of budgetary resources and statement of financing, the financial statements presented fairly, in all material respects, the financial position of the Records Center Revolving Fund at September 30, 2002 and 2001, and its net cost of operations and changes in net position for the years then ended in conformity with accounting principles generally accepted in the United States. In addition, PwC noted certain matters involving Revolving Fund internal controls and their operation that were considered to be reportable conditions, one of which was considered to be a material weakness. The auditors' found that a material weakness existed with internal controls because the annual financial statement preparation process did not adequately track manual adjusting entries; improvements were needed in the accounting for obligations; controls to protect information needed to be strengthened; a systems development lifecycle methodology needed to be fully implemented; and plans for maintaining continuity of operations needed to be completed and fully tested. (Audit Report #04-06, dated December 16, 2003. See page 14.)
  • Audit of the National Archives Trust Fund Fiscal Year 2002 Financial Statements. PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Trust Fund balance sheet, as of September 30, 2002 and 2001, and the related statements of net cost, and changes in net position, for the years then ended. The auditors' found that, except for the omission of a statement of budgetary resources and statement of financing, the financial statements presented fairly, in all material respects, the financial position of the Trust Fund at September 30, 2002 and 2001, and the related statements of net cost of operations and changes in net position for the years then ended in conformity with accounting principles generally accepted in the United States. In addition, PwC noted certain matters involving Trust Fund internal controls and their operation that were considered to be reportable conditions, one of which was considered to be a material weakness. Specifically, a material weakness existed with internal controls because the annual financial statement preparation process did not adequately track manual adjusting entries; improvements were needed in the internal controls surrounding cash and carry transactions; monthly reconciliations between the Order Fulfillment and Accounting System (OFAS) and the National Electronic Accounting and Reporting System (NEAR) were not completed in a timely manner; controls to protect information needed to be strengthened; a systems development lifecycle process needed to be fully implemented; and plans for maintaining continuity of operations needed to be completed and fully tested. (Audit Report #04-03, dated November 14, 2003. See page 15.)
  • Audit of the National Archives Gift Fund Fiscal Year 2002 Financial Statements. PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Gift Fund balance sheets, as of September 30, 2002 and 2001, and the related statements of net cost, changes in net position, budgetary resources, and financing for the years then ended. The auditors' found that the financial statements presented fairly, in all material respects, the financial position of the Gift Fund at September 30, 2002 and 2001, and the related statements of net cost of operations and changes in net position, budgetary resources, and financing for the years then ended in conformity with accounting principles generally accepted in the United States. In addition, PwC noted certain matters involving Gift Fund internal controls and their operation that were considered to be a material weakness. Specifically, as part of their testing of undelivered orders, PwC auditors' noted that improvements were needed in the accounting for obligations. (Audit Report #04-02, dated November 14, 2003. See page 16.)
  • Audit of NARA's Interagency Agreements. Our review disclosed that NARA is not adequately reviewing and consistently deobligating funds for interagency agreements in a timely manner. As a result, NARA is not maximizing the use of funds allocated to the agency by Congress. Our audit also identified that NARA contract officials did not maintain, nor have ready access to, the underlying contract on which the interagency agreement was based. It is essential that persons with contract authority have familiarity with and accessibility to the contract in order to exercise appropriate control over the performance and delivery of contractual goods and services. (Audit Report #04-11, dated March 26, 2004. See page 16.)
  • Audit of the Transit Benefit Program. Our review revealed that NARA lacked internal controls necessary to ensure that participants who were receiving transit benefits did not abuse the Public Transit Subsidy Program. Specifically, certain NARA employees at the Washington National Records Center (NWMW) in Suitland, Maryland, were receiving these benefits at the same time they were provided parking passes to park for free at the facility in violation of NARA Directive 701 "Public Transit Subsidy Program and Qualified Transportation Fringe Benefits." NARA Directive 701 requires NARA employees to relinquish their parking permit before receiving a transit subsidy. Furthermore, there was no mechanism by which NARA program officials acted to validate that participants receiving transit benefits met the eligibility standards. The NARA OIG was made aware of five employees receiving transit benefits who were ineligible to do so. Additional analysis indicated that this condition may have extended to other employees on the NWMW staff. (Audit Report #04-07, dated March 31, 2004. See page 17.)
  • Review of Contractor Compliance with Government Auditing Standards for the Audit of the National Archives Trust Fund and Gift Fund Fiscal Year 2002 Financial Statements. Our review found that the work performed by PwC, for its audit of fiscal year (FY) 2002 National Archives Trust Fund and Gift Fund financial statements, complied with generally accepted government auditing standards. We also noted that the inability of NARA Trust Fund officials to provide accurate and complete financial statements to the PwC auditors' for the audit contributed to additional costs to fund a "special project" by the PwC auditors' ; late delivery of the audit reports to NARA management; and the expression of a "qualified opinion" on the Trust Fund financial statements. (Audit Memorandum #04-08, dated January 29, 2004. See page 17.)
  • Review of Contractor Compliance with Government Auditing Standards for the Audit of the National Archives Records Center Revolving Fund Fiscal Year 2002 Financial Statements. Our review disclosed that the work performed by PwC, for its audit of fiscal year 2002 National Archives Records Center Revolving Fund financial statements, complied with generally accepted government auditing standards. We also noted that the inability of NARA Records Center Revolving Fund officials to provide accurate and complete financial statements to the PwC auditors' for the audit contributed to additional costs to fund a "special project" by the PwC auditors' ; late delivery of the audit reports to NARA management; and the expression of a "qualified opinion" on the financial statements. (Audit Memorandum #04-09, dated January 29, 2004. See page 18.)
  • Evaluation of NARA's Fiscal Year 2003 Management Control Program.Our review disclosed no material weaknesses in NARA's management control program for FY 2003 that required reporting in the agency's assurance statement to the President. NARA identified computer security as a material weakness in the Archivist's FY 2000 assurance statement, and collections security as a material weakness in the Archivist's FY 2001 assurance statement. The Archivist's FY 2003 assurance statement still lists both of these as material weaknesses and describes the agency's current and planned efforts to address these issues. We found that NARA's assurance statement was adequately supported. In addition, all financial subsystem evaluations appeared to be performed in accordance with OMB Circular A-127, and no material weaknesses were identified. (Audit Memorandum #04-12, dated March 2, 2004. See page 19.)

Management Letters
  • Vulnerability of NARA E-mail to Unauthorized Access. We issued one management letter this period in which we brought to the Archivist's attention that information both of a personal and business nature created and maintained by NARA employees (and those communicating with them) was vulnerable to compromise and exploitation. Specifically, NARA employees were not routinely establishing Novell GroupWise passwords, and the security settings for GroupWise were set at the "low" setting. Thus, these controls could be readily defeated and user accounts accessed and manipulated. (Management Letter #04-01, dated October 17, 2003. See page 20.)
Investigations

During the reporting period, the Investigative Staff received 21 allegations, initiated 17 investigations, referred 2 allegations, and closed 28 investigations. We received 730 hotline contacts, which resulted in 5 investigations, the referral of 530 contacts outside the OIG, and the closing of the remaining 195 contacts.


The investigative staff completed the following investigations:

  • NARA cashier stealing money from customers
  • Improper use of government purchase card (split purchasing)
  • Misuse of Internet by NARA employees
  • Failure by NARA employee to properly account for money found at NARA facility
  • Alleged contract violation by NARA contractor
  • Misuse of Government purchase card (unauthorized purchases)
  • Bomb threat by NARA employee
  • Fraud involving transit benefits
  • Recovery of a stolen NARA computer
  • Time and attendance abuse

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Management Assistance

In our management assistance activities this reporting period, we

  • assisted management in reviewing cost data, assessing methodology, and defining, interpreting, and using Federal accounting standards for IT hardware and software, deferred maintenance, and heritage assets for financial statement presentation to comply with the Accountability of Tax Dollars Act of 2002
  • commented that the draft NARA Notice titled "Capitalization Policy for NARA Assets," needed to include amortization in every place that depreciation is mentioned and needed to include a discussion on amortization life schedule for leases/leasehold improvements
  • commented that a draft notice on Internet usage needed to be worded more forcefully and include a statement that persons identified as potentially violating NARA Internet usage policy will be referred to the OIG for investigation and subject to administrative penalties ranging from at a minimum, suspension to termination

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Introduction

About the National Archives and Records Administration

Mission
The National Archives and Records Administration ensures, for the Citizen and the Public Servant, for the President and the Congress and the Courts, ready access to essential evidence.

Background
NARA, by preserving the nation's documented history, serves as a public trust on which our democracy depends. It enables citizens to inspect for themselves the record of what the Government has done. It enables officials and agencies to review their actions and helps citizens hold them accountable. It ensures continuing access to essential evidence that documents the rights of American citizens, the actions of Federal officials, and the national experience.
Federal records reflect and document America's development over more than 200 years and are great in number, diverse in character, and rich in information. NARA's archival holdings amount to 2.7 million cubic feet of records, while its nontextual archival holdings amount to 3.9 billion items. These holdings include more than 1.8 million microforms; 23.7 million cartographic and architectural records; 92,000 motion pictures, 183,000 sound recordings, and 24,000 video recordings; more than 10 million still pictures; 3.8 billion electronic records; as well as graphic records. Additionally, NARA's Presidential library holdings consist of 411 million pages; 51,000 microform rolls; 24 million still pictures; 14.5 million feet of film; over 100,000 hours of videotape, audiotape, and audiodiscs; and 506,010 museum objects.
NARA involves millions of people in its public programs, which include exhibitions, tours, educational programs, film series, and genealogical workshops. NARA publishes the Federal Register and other legal and reference documents that form a vital link between the Federal Government and those affected by its regulations and actions. Through the National Historical Publications and Records Commission, NARA helps to preserve and publish non-Federal historical documents that also constitute an important part of our national heritage. NARA also administers the Nixon Presidential Materials Project, Clinton Presidential Materials Project, and 10 Presidential libraries, which preserve the papers and other historical materials of all past Presidents since Herbert Hoover.

Resources
In 2004, NARA was appropriated an annual budget of approximately $316 million and 2,855 Full-time Equivalents (FTEs). The $316 million included appropriations for operations, the Electronic Records Archive (ERA) program, repairs and restoration of facilities, and grants. NARA operations are spread throughout 35 facilities nationwide.

About the Office of Inspector General (OIG)

The OIG Mission
The OIG's mission is to ensure that NARA provides the American people with ready access to essential evidence by providing high-quality, objective audits and investigations and serving as an independent, internal advocate for economy, efficiency, and effectiveness.

Background
The Inspector General Act of 1978, as amended, established the OIG's independent role and general responsibilities. The Inspector General reports to both the Archivist of the United States and the Congress. The OIG evaluates NARA's performance, makes recommendations for improvements, and follows up to ensure economical, efficient, and effective operations and compliance with laws, policies, and regulations. In particular, the OIG:

  • assesses the effectiveness, efficiency, and economy of NARA programs and operations
  • recommends improvements in policies and procedures to enhance operations and correct deficiencies
  • recommends cost savings through greater efficiency and economy of operations, alternative use of resources, and collection actions
  • investigates and recommends legal and management actions to correct fraud, waste, abuse, or mismanagement

Resources
The FY 2004 OIG budget is approximately $1.6 million for operations. The OIG now has 14 FTEs. During the period, the OIG filled the Assistant Inspector General for Investigations position. At full staffing, in addition to the Inspector General and support staff, 7 FTEs are devoted to audits, 3 to investigations, and 1 to a Counsel to the Inspector General. Currently, there are 2 vacancies in the OIG; an Attorney-Advisor position and an IT Auditor position.

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Office of Inspector General Activities

Involvement in the Inspector General Community

President's Council on Integrity and Efficiency (PCIE) and Executive Council on Integrity and Efficiency (ECIE) Presidential Meeting on 25th Anniversary of the IG Act
On October 14, 2003, the President of the United States, George W. Bush, met with the Inspectors General to honor and recognize the 25th anniversary of the passage of the IG Act. Mr. Bush applauded the IGs for their dedication to their mission of combating fraud, waste, and abuse to make programs work better for the taxpayers. He also commended the community's vigilance to remain "agents of positive change." On December 1, 2003, President Bush signed a joint congressional resolution commending the IGs for their efforts to prevent and detect waste, fraud, abuse, and mismanagement, and to promote economy and effectiveness in the Federal Government during the past 25 years.
Inspectors General 2004 Annual Retreat
From March 22 to 24, 2004, the Inspector General attended the IGs 2004 Retreat with the working title "Returning America's Investment in the IGs." The three-day retreat focused on methods by which OIGs could increase operational effectiveness and efficiency while dealing with the challenges that face our agencies, community, and nation.
PCIE and ECIE Legislation Committee
The IG served as one of two ECIE representatives to the Legislation Committee. The Legislation Committee assists the PCIE to effectively carry out its duties as specified in Executive Order 12085. In particular, these ECIE responsibilities are to identify, review, and discuss areas of weakness and vulnerability in Federal programs; conduct operations to uncover fraud, waste, and abuse; and develop plans for coordinated, Government-wide activities that address these problems and promote economy and efficiency in Federal programs and operations. The focus of the Committee in this reporting period was the crafting of what is known as the "Model Bill." The content of this bill is to put forth recommendations to Congress and the Executive Branch for strengthening the OIGs in this the 25th year since the ratification of the IG Act.
Assistant Inspectors General for Investigations Annual Conference
The Assistant Inspector General for Investigations attended the annual conference in Baltimore, Maryland. The focal topic of discussion included the role of the OIGs in homeland security.
PCIE Government Performance Results Act (GPRA) Round Table
The Assistant Inspector General for Audits (AIGA) and various OIG personnel attended several roundtable meetings to discuss issues such as: best practices for implementing cost accounting in OIGs, the relationship of the Office of Management and Budget's (OMB's) Performance Assessment Rating Tool (PART) to the IG mission, and rating and ranking the agencies on performance reporting.
Federal Audit Executive Council (FAEC)
The AIGA continued to serve as an ECIE representative to the FAEC. During the period, the AIGA attended FAEC's meeting to discuss financial statement audit oversight issues and accelerated financial reporting challenges and opportunities.
FAEC Contract Language and Audit Program Workgroups
The OIG's Financial Statement Auditor participated as a member of the FAEC's Financial Statement Audit Network (FSAN) working on the Contract Language and Audit Program workgroups. These workgroups were established to ensure consistency throughout the Federal Government. The objective of the Contract Language workgroup is to develop a statement of work that can be used by any OIG when contracting for audit services. The objective of the audit program workgroup is to develop audit programs based on guidance in the GAO Financial Audit Manual (Section 650) that can be used by all OIG offices.
Review of Proposed Legislation and Regulations

We reviewed the following regulation during the period:

  • A draft proposed rule on Records Center Facility Standards - NARA proposed to modify its facility standards for records storage facilities that house Federal records, to clarify requirements relating to design or certification of multiple story facilities and fire detection and protection systems; to revise certain requirements relating to fire ratings of roofs, building columns, and fire barrier walls; and to clarify the application of other requirements. NARA proposed these changes to address records center industry concerns identified in the 2003 Report to Congress on Costs and Benefits of Federal Regulations. This proposed rule will affect commercial records storage facilities that store Federal records, and applies to all agencies, including NARA, that establish and operate records centers, and to agencies that contract for the services of commercial records storage facilities. The OIG generally concurred with the proposed rule.

Other Activities

OIG Peer Review of the Farm Credit Administration (FCA)

During the period, as requested by the Peer Review Committee of the ECIE, the NARA OIG conducted an external quality control review of the Farm Credit Administration OIG audit operations. The objectives of the review were to determine whether the FCA OIG internal quality control system is adequate, in place, and operating effectively; and that established policies, procedures and applicable auditing standards are being followed by the FCA OIG in its audit work. Our review disclosed that the system of quality control for the audit function of the FCA OIG has been designed in accordance with the quality standards established by the PCIE and was being complied with to provide the OIG with reasonable assurance of conforming with professional standards in the conduct of its audits(Audit Report #04-04, dated January 26, 2004.)

OIG Briefing of NARA Regional Deputy Directors

On March 25, 2003, the OIG participated in the NARA Deputy Directors Administrative Training Conference. The OIG briefed the Deputy Directors on recent OIG activity involving fraud, waste, and abuse in NARA programs and operations. The IG answered questions and reiterated management's responsibility to report fraud, waste, and abuse to the OIG.

OIG Consolidated Financial Statement Contract

During the period, with the assistance of the NARA Procurement Staff, the OIG initiated and completed the procurement process to select a contractor for NARA's FY 2004 consolidated financial statement audit. The Accountability of Tax Dollars Act of 2002 requires that small Federal agencies prepare and submit annual audited financial statements to the OMB and Congress. This act complements the Chief Financial Officer's Act (CFO) of 1990 that mandates this requirement for the 24 major departments and selected Federal agencies.

OIG Audit Directive 1201

As part of NARA's effort to revise its internal directives to make them more useful and up-to-date for staff, and to comply with "plain language" mandates, the OIG revised and issued its audit directive and is in the process of revising its directive concerning investigations.

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Audits

Overview

This period, we issued

  • 8 final audit reports
  • 3 audit memorandums
  • 1 management letter

We completed fieldwork on the following assignment:

  • an evaluation of NARA's computer incident response capability, to evaluate NARA's ability to respond to computer security-related incidents such as computer viruses, unauthorized user activity, and serious software vulnerabilities, in an efficient and timely manner
  • a follow-up review of NARA's process for investing and managing IT projects to determine whether NARA implemented recommendations from a prior report to improve and enhance its ability to invest in and management IT projects
  • an assessment of NARA's efforts to comply with new facility regulations outlined in 36 CFR 1228, Subpart K, Facility Standards Records Storage Facilities, by 2009

We also continued work on the following assignments:

  • an evaluation of NARA's network to determine if the operation and management of the network is adequate to effectively and efficiently satisfy the agency's communication needs
  • an assessment of NARA's cell phone program to determine the efficiency and effectiveness of management controls over cell phones
Audit Summaries

Assessment of the Controls and Security of NARA Classified Systems

The overall objective of the assessment was to determine whether NARA's classified systems were adequately managed and secured. Our review disclosed that NARA has not developed or implemented a classified IT systems security program including updated guidance pertaining to the technical security of classified systems. NARA has also not created a complete classified computer systems inventory listing. Consequently, we found numerous security weaknesses in one classified system that was examined as part of our audit fieldwork. As a result, NARA does not have the needed assurance that its classified information systems are adequately protected against loss, misuse, and unauthorized disclosure or modification, and that appropriate security measures have been implemented on all of NARA's classified systems. Thus, classified accessioned records categorized at the "top-secret" level by NARA are at risk.

The OIG recommended that NARA ensure that its classified computer systems are centrally managed by technically qualified personnel, by 1) redesignating responsibility for these systems from NA to NH; 2) developing a NARA Classified IT Systems Security Program in accordance with the requirements set out by the Committee on National Security Systems, Director of Central Intelligence Directives, and Department of Defense; 3) identifying all existing NARA classified systems and keeping the inventory up-to-date; and 4) completing and periodically updating an initial certification and accreditation for each NARA classified system, including a risk assessment, systems security plan, security controls testing and vulnerability analysis, and contingency planning. Management agreed with the report and concurred with the findings and recommendations. (Audit Report #04-10, dated March 31, 2004)

Audit of a Subcontractor's Proposal for the National Archives Building Stack Lighting

We performed an audit of a change order proposal under Phase 2 of the National Archives Building Renovation Project. This change order was for work to correct existing deficiencies in the stack power panels and to replace the existing stack lighting with modern lights and ballasts at the National Archives Building. The existing power panels are obsolete and pose a fire hazard due to changes in the fault protection in the building. Additionally, the lights and ballasts are obsolete and do not provide adequate coverage throughout the stacks, nor do they permit the lights to be turned off easily.

The objective of our audit was to determine if the proposed costs were fair and reasonable and followed applicable government regulations. As a result of our examination, we questioned, $2,000,243 of the total proposed cost. Of the amount questioned, there was $884,242 in unsupported costs. A review of the contractor's overhead rate revealed some costs that were unallowable, including bonus costs, pension costs, contribution costs, traffic tickets, and entertainment expenses. We adjusted the rate by excluding these costs. We found that some of the material included in the Bill of Material was not listed at the price that the contractor paid for the material. Accordingly, we adjusted the material costs from the Bill of Material to reflect the prices actually paid by the contractor. In addition, we questioned portions of the contractor's proposed supervision cost, labor hours, bond cost, and insurance and tax costs. We were not able to determine the reasonableness of an $827,400 material quote submitted by the contractor, because these costs were not supported. We also questioned a portion of the contractor's bond costs. (Audit Report #04-05, dated December 23, 2003)

Audit of the National Archives Records Center Revolving Fund Fiscal Year 2002 Financial Statements

PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Records Center Revolving Fund balance sheets as of September 30, 2002 and 2001, and the related statements of net cost, changes in net position for the years then ended. The objective of the audit was to provide reasonable assurance that the agency's accounting transactions were properly reflected in the financial statements, agency management had adequate information with which to formulate and execute the budget, and effective control was maintained over funds, property, and other assets.

The auditors' found that, except for the omission of a statement of budgetary resources and statement of financing, the financial statements presented fairly, in all material respects, the financial position of the Records Center Revolving Fund on September 30, 2002 and 2001, and its net cost of operations and changes in net position for the years then ended in conformity with accounting principles generally accepted in the United States of America.

In addition, PwC noted certain matters involving Revolving Fund internal controls and their operation that were considered to be reportable conditions, one of which was considered to be a material weakness. The auditors' found that (a) a material weakness existed with internal controls because the annual financial statement preparation process did not adequately track manual adjusting entries; (b) improvements were needed in the accounting for obligations; (c) controls to protect information needed to be strengthened; (d) a systems development lifecycle methodology needed to be fully implemented; and (e) plans for maintaining continuity of operations needed to be completed and fully tested.

The auditors' recommended that NARA management officials (1) ensure that all prior year manual entries are correctly posted to the general ledger, edit checks are performed on the financial statements, and a less manually intensive solution be considered for financial statement preparation; (2) perform reviews of all open items reports at least quarterly; (3) complete the implementation of NARA 804, IT Security Handbooks, throughout the agency: (4) develop procedures to ensure that all departments follow NARA 805, Systems Development Lifecycle Handbook and Guidelines; and (5) oversee and ensure the creation of the NARA-wide business continuity plan, as prescribed in NARA 804, and update the NARA-wide Disaster Recovery Plan. (Audit Report #04-06, dated December 16, 2003)

Audit of the National Archives Trust Fund Fiscal Year 2002 Financial Statements

PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Trust Fund Balance Sheet, as of September 30, 2002 and 2001, and the related statements of net cost, and changes in net position, for the years then ended. The objective of the audit was to provide reasonable assurance that the agency's accounting transactions were properly reflected in the financial statements, agency management had adequate information with which to formulate and execute the budget, and effective control was maintained over funds, property, and other assets.

The auditors' found that, with the exception of the omission of a statement of budgetary resources and statement of financing, the Trust Fund financial statements presented fairly, in all material respects, the financial position of the Trust Fund on September 30, 2002 and 2001, and the related statements of net cost of operations and changes in net position for the years then ended in conformity with accounting principles generally accepted in the United States of America.

In addition, PwC noted certain matters involving Trust Fund internal controls and their operation that were considered to be reportable conditions, and one that was considered to be a material weakness. Specifically, (a) a material weakness existed with internal controls because the annual financial statement preparation process did not adequately track manual adjusting entries; (b) improvements were needed in the internal controls surrounding cash and carry transactions; (c) monthly reconciliations between the Order Fulfillment and Accounting System (OFAS) and the National Electronic Accounting and Reporting System (NEAR) were not completed in a timely manner; (d) controls to protect information needed to be strengthened; (e) a systems development lifecycle process needed to be fully implemented; and (f) plans for maintaining continuity of operations needed to be completed and fully tested.

The auditors' recommended that management (1) ensure that all prior year manual entries are correctly posted to the general ledger, edit checks are performed on the financial statements, and a less manually intensive solution be considered for financial statement preparation; (2) NATF personnel to improve controls surrounding cash collections; (3) implement policies and procedures to perform detailed monthly reconciliations between the OFAS and Pegasys, NATF's new general ledger application for FY 2002; (4) complete the implementation of NARA 804, IT Security Handbooks, throughout the agency; (5) develop procedures to ensure that all departments follow NARA 805, Systems Development Lifecycle Handbook and Guidelines; and (6) oversee the creation of the NARA-wide business continuity plan and update the NARA-wide Disaster Recovery Plan. (Audit Report #04-03, dated November 14, 2003)

Audit of the National Archives Gift Fund Fiscal Year 2002 Financial Statements

PricewaterhouseCoopers LLP (PwC), a public accounting firm, examined and reported on the National Archives Gift Fund balance sheets, as of September 30, 2002 and 2001, and the related statements of net cost, changes in net position, budgetary resources, and financing for the years then ended. The objective of the audit was to provide reasonable assurance that the agency's accounting transactions were properly reflected in the financial statements, agency management had adequate information with which to formulate and execute the budget, and effective control was maintained over funds, property, and other assets.

The auditors' found that, the financial statements presented fairly, in all material respects, the financial position of the Gift Fund on September 30, 2002 and 2001, and its net cost of operations and changes in net position for the years then ended; and the budgetary resources and financing for the years ended September 30, 2002 and 2001, in conformity with accounting principles generally accepted in the United States of America.

In addition, PwC noted that improvements were needed in the accounting for obligations. Specifically, as part of their testing of undelivered orders, PwC noted 4 of 10 obligations reviewed should have been partially or fully de-obligated. Because a review and related adjusting entries were not performed prior to year-end, expired obligations remained in the Gift Fund's undelivered orders. Not de-obligating these funds resulted in an overstatement of undelivered orders in the financial statements.

The accounting firm recommended that NARA management perform reviews of all open items reports at least quarterly (Audit Report #04-02, dated November 14, 2003).

Audit of NARA's Interagency Agreements

The objective of our audit was to determine if (1) NARA's use of interagency agreements (IAAs) complied with the requirements of the NARA Procurement Guide and the Federal Acquisition Regulation (FAR), and (2) IAAs were properly managed and controlled by NARA. Our audit revealed that NARA is not adequately reviewing and consistently de-obligating funds for IAAs in a timely manner. As a result of this deficiency, NARA is not maximizing the use of funds allocated to the agency by Congress. Our audit also identified that NARA contract officials did not maintain, nor have ready access to, the underlying contract on which the IAA was based. It is essential that persons with contract authority have familiarity and accessibility to the contract, to exercise appropriate control over the performance and delivery of contractual goods and services.

We recommended that management establish necessary policies, procedures, and controls to ensure that funds obligated under IAAs are de-obligated in a timely manner. We also recommend that NAA maintain a copy of, or link to, each contract for which NARA is party under an IAA. Management agreed with our recommendations and initiated corrective action. (Audit Report #04-11, dated March 26, 2004)

Audit of NARA's Transit Benefit Program

The objective of this audit was to determine whether NARA had adequate internal controls in place for ensuring that the Public Transit Subsidy Program (PTSP) was not being abused. NARA management requested that the OIG review the transit benefit program to determine if employees with parking permits at Washington National Record Center (NWMW) located in Suitland, Maryland, were receiving transit benefits. We did not examine the validity of transit expenses claimed by employees in the program.

NARA lacks internal controls necessary to ensure that participants who were receiving transit benefits did not abuse the PTSP. Specifically, certain NARA employees at NWMW were receiving these benefits at the same time they were provided parking passes to park for free at the facility, in violation of NARA Directive 701 "Public Transit Subsidy Program and Qualified Transportation Fringe Benefits." NARA Directive 701 requires a NARA employee to relinquish their parking permit before receiving a transit subsidy. Furthermore, there was no mechanism by which NARA program officials acted to validate that participants receiving transit benefits met the eligibility standards. In March 2003, the NARA OIG was made aware of five NWMW employees receiving transit benefits who were ineligible to do so. Additional analysis by OIG auditors' indicated that this condition may have extended to others on the NWMW staff.

We recommended that management verify that, staff collecting transit benefits meet the eligibility requirements of NARA 701, ensure that NARA is reimbursed the full dollar amount of the transit benefits received by the ineligible employees, and ensure that adequate documentation is obtained, kept, and used to determine if employees receiving transit benefits meet the eligibility requirements of NARA 701. Management concurred with our recommendations and agreed to take corrective action. (Audit Report #04-07, dated March 31, 2004)

Review of Contractor Compliance with Government Auditing Standards for the Audit of the National Archives Records Center Revolving Fund Fiscal Year 2002 Financial Statements

In September 2000, NARA awarded a contract to PricewaterhouseCoopers LLP (PwC) to perform financial and compliance audits of the National Archives Records Center Revolving Fund financial statements. Under terms of the contract, PwC is required to conduct an examination of, and report on, the Revolving Fund principal financial statements as defined by OMB Bulletin 01-09, Form and Content of Agency Financial Statements.

The General Accounting Office (GAO) Government Auditing Standards pertain to auditors' ' professional qualifications, the quality of audit effort, and the characteristics of professional and meaningful audit reports. Federal legislation requires that the Federal IGs comply with the Comptroller General's standards for audits of Federal organizations, programs, activities, and functions. The legislation further states that the IGs are to ensure that non-Federal auditors' comply with these standards when they audit Federal organizations, programs, activities, and functions.

To fulfill this requirement, we reviewed PwC's compliance with the Government Auditing Standards. To accomplish our objectives, we (1) evaluated the qualifications of the PwC auditors' performing the Revolving Fund audit, reviewed the previous government auditing experience of the audit team members, examined their training records, and reviewed the results of the accounting firm's last external quality control review; (2) evaluated the planning accomplished for the Revolving Fund audit, reviewed PWC's methodology for preparing working papers, and reviewed the auditors' ' working papers to determine if they adequately supported the auditors' conclusions and recommendations and were reviewed by an audit supervisor; and (3) reviewed and evaluated the "draft" audit reports prepared by PwC.

We found that the work performed by PwC, for its audit of FY 2002 National Archives Records Center Revolving Fund financial statements complied with generally accepted government auditing standards. We also noted that the inability of NARA Records Center Revolving Fund officials to provide accurate and complete financial statements to the PwC auditors' for the audit contributed to additional costs to fund a "special project" by the PwC auditors' , late delivery of the audit reports to NARA management, and the expression of a "qualified opinion" on the financial statements. (Audit Memorandum #04-09, dated January 29, 2004).

Review of Contractor Compliance with Government Auditing Standards for the Audit of the National Archives Trust Fund and Gift Fund Fiscal Year 2002 Financial Statements

In September 2000, NARA awarded the contract to PricewaterhouseCoopers LLP (PwC) to perform financial and compliance audits of the National Archives Trust Fund and Gift Fund financial statements. Under terms of the contract, PwC is required to conduct an examination of, and report on, the Trust Fund and Gift Fund principal financial statements, as defined by OMB Bulletin 01-09, Form and Content of Agency Financial Statements.

The GAO Government Auditing Standards pertain to auditors' professional qualifications, the quality of audit effort, and the characteristics of professional and meaningful audit reports. Federal legislation requires that the Federal IGs comply with the Comptroller General's standards for audits of Federal organizations, programs, activities, and functions. The legislation further states that the IGs are to ensure that non-Federal auditors' comply with these standards when they audit Federal organizations, programs, activities, and functions.

To fulfill this requirement, we reviewed PWC's compliance with the Government Auditing Standards. To accomplish our objectives, we (1) evaluated the qualifications of the PwC auditors' performing the Trust Fund and Gift Fund audit, reviewed the previous government auditing experience of the audit team members, examined their training records, and reviewed the results of the accounting firm's last external quality control review; (2) evaluated the planning accomplished for the Trust Fund and Gift Fund audit, reviewed PWC's methodology for preparing working papers, and reviewed the auditors' working papers to determine if they adequately supported the auditors' conclusions and recommendations and were reviewed by an audit supervisor; and (3) reviewed and evaluated the "draft" audit reports prepared by PwC.

We found that the work performed by PwC, for its audit of FY 2002 National Archives Trust Fund and Gift Fund financial statements, complied with generally accepted government auditing standards. We also noted the inability of NARA Trust Fund officials to provide accurate and complete financial statements to the PwC auditors' for the audit contributed to additional costs to fund a "special project" by the PwC auditors' , late delivery of the audit reports to NARA management, and the expression of a "qualified opinion" on the Trust Fund financial statements. (Audit Memorandum #04-08, dated January 29, 2004)

Evaluation of NARA's FY 2003 Management Control Program

The purpose of our evaluation was to determine the extent to which there is sufficient evidence that NARA complied with the requirements of the Financial Management Financial Integrity Act (FMFIA), OMB Circulars A-123 and A-127, and NARA 114, to support the Archivist's fiscal year 2003 assurance statement to the President and Congress. Specifically, our objectives were to assess management's management control plan for reviewing critical areas and programs; assess whether management is continually and consistently reviewing critical areas; and whether the information in the assurance statements of NARA office heads and staff directors is accurate and sufficient.

Our review revealed that NARA's assurance statement was adequately supported and complied with the intentions of FMFIA and OMB Circular A-123. Pursuant to Section 4 of the Integrity Act, the financial subsystems of NARA generally conformed with the objectives detailed in OMB Circular A-127, revised. Although three systems (Order Fulfillment Accounting System; Trust Fund-Gift Fund Financial Review, Analysis, and Reporting System; and Records Center Revolving Fund financial management systems) were not in complete conformance with Circular A-127 because they failed to meet the financial management system requirements, the nonconformances were not deemed material. (Audit Memorandum #04-12, dated March 2, 2004)

Management Letter

Vulnerability of NARA E-mail to Unauthorized Access

The purpose of this management letter was to bring to management's attention a situation that we believed put NARA at great risk and could impact the agency's ability to accomplish its mission.

Specifically, the OIG determined that information, both of a personal and business nature created and maintained by NARA employees (and those communicating with them) was vulnerable to compromise and exploitation over a multiyear period. NARA employees were not routinely establishing Novell GroupWise passwords, and the security settings for GroupWise were set at the "low" setting. Thus, these controls could be readily defeated and user accounts accessed and manipulated. Documentation and testimony obtained by the OIG reflects that NARA contractors were aware of this condition and notified appropriate NARA officials over an extended period of time without result.

auditors' , using judgmental sampling, reviewed 173 NARA employees and contractors who had active GroupWise accounts and who were identified as occupying positions of high sensitivity within NARA. Of these, 35 (20 percent) were found not to have established a GroupWise password. This included certain senior-level employees (e.g., two Assistant Archivists), one who has direct oversight of contracting and security for NARA. Had we intended to do so, we could have read all their e-mail and related attachments, and disseminated messages unbeknown to them to embarrass them; established a trusted relationship with others to gather additional information; or used their e-mail for whatever other purpose we might choose.

The failure of NARA employees to establish a GroupWise password was a direct violation of NARA 802, Appropriate Use of NARA Office Equipment, and NARA 804, Information Technology Systems Security, and directly exposed this agency to unacceptable risk. Therefore on October 17, 2003 we brought this matter to the attention of the Archivist of the United States. ((Management Letter #04-01, dated October 17, 2003)

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Investigations

Investigative Case Summaries
NARA Cashier Pockets Money Received from Customers

The OIG received multiple complaints that an employee was stealing money from NARA's Pacific Region, Laguna Niguel facility. The employee allegedly took payments from NARA customers, pushed the "no sale" button on the register, handwrote a receipt when necessary, then pocketed the money. A controlled purchase disclosed that the employee received payment for copies of documents and provided a receipt. The employee pushed a button on the cash register and placed the money in the cash register. At close of business, the employee completed a register closeout form that indicated a significantly lower amount of cash received in her register. When confronted, the employee admitted to stealing approximately $645 over a six- month period. The United States Attorney for the Central District of California declined prosecution of this case. The employee subsequently resigned.

NARA Employee Splits Purchases with Government Credit Card to Exceed Purchase Authority

The OIG received information that a NARA employee routinely "split" single purchases on their Government Purchase Card (GPC) into multiple transactions to order to pay invoices without exceeding their monetary purchase authority. Our investigation revealed that a NARA contractor independently created invoices with billable amounts below the purchase authority threshold of the employee's GPC, after being informed of the threshold amount by the employee. The contractor'said they took this action without the knowledge or consent of the employee. Additionally, we found that on at least one occasion a NARA Director instructed and authorized the employee to split purchases on their GPC without approval from the NARA Acquisitions Services Division, and with the knowledge that this action was in violation of both the FAR and NARA policy directives.

Misuse of Internet by NARA Employee

NARA OIG auditors' discovered that certain NARA employees visited pornographic web sites on a recurring basis from government computer workstations. The matter was referred to the Office of Investigations. Some of the web sites visited had indicators of child pornography content. The audit report identified one of these workstations as a NARA computer located at the Franklin D. Roosevelt Presidential Library. The OIG investigation revealed that the workstation in question was assigned to an employee and accessed pornographic web sites a total of 1,222 times. OIG documentation also reflected that this workstation accessed a web site containing apparent child pornography on three occasions. Forensic analysis of this computer did not reveal any images or web accesses. It appeared that all the files had been deleted and the media overwritten with random data, rendering previous data unrecoverable, in preparation for its disposal. Additionally, the government-owned laptop at the employee's residence did not contain any images. The employee provided a written statement that he viewed adult web sites on his former government computer. The employee was terminated.

FNARA Employees Fail to Report Money Found at Presidential Library

An employee at the Harry S. Truman Presidential Library inquired into a $100 bill that was reportedly turned over to Security. Security verified that no one turned in a $100 bill. Our investigation revealed that another employee found a $100 bill at the admissions counter. The employee sealed the $100 bill in an envelope and waited a couple weeks to see if anyone reported the money missing. When no one did, the employee split the money with a co-worker.

Alleged Misuse of Government Vehicles

The OIG received information alleging that NARA motor vehicle operators were using government-owned vehicles (GOVs) for personal business. We provided investigative attention to this matter but were unable to establish any specific violation of law or regulation. Our investigation did, however, identify weaknesses in management controls regarding GOV accountability. We recommended that NARA install Global Positioning Systems on all motor pool GOVs at the National Archives at College Park.

Theft of Personal Checks from NARA Facility by NARA Contractor

The Maryland State's Attorney's Office contacted the OIG concerning a NARA investigation that occurred in 1997. A NARA contractor had stolen two checks from a NARA employee. One of the checks was allegedly cashed by the contractor and the other by a non-employee. Charges against the contractor were nolle prossed in August 2000. The non-employee's case was set for trial. On March 9, 2004, the charges against the non-employee were nolle prossed.

Train Derails Carrying IRS Records in NARA's Possession; Contractor Found to be in Violation of Ccontract

The OIG received information from the Office of Regional Records Services (NR) that a train transporting Internal Revenue Service (IRS) records from one of NARA's records centers to another derailed. NR was concerned that the contractor violated the terms of the contract during shipment. Specifically, under the terms of the contract, records were to be shipped by truck, and not by rail. The contractor'said that they were not advised verbally of this requirement and they did not read this requirement in NARA's documentation. The contractor'shipped by rail and charged NARA for rail shipment. NARA ultimately sent a letter to the contractor disputing payment for one of the two shipments.

Misuse of Government Credit Card

We received an allegation that an employee had misused her supervisor's government charge card to pay for her son's tuition at a local community college. To conceal the charges, the employee had obtained authorization to attend courses herself, and she later made false entries into the NARA's financial management system to make the charges appear legitimate. The employee was provided the opportunity to resign prior to issuance of a termination letter. The subject provided a written statement admitting to the misuse. The case was presented to the U.S. Attorney's Office in Maryland and was accepted for prosecution. The subject resigned from her position with NARA and was criminally charged with three counts of theft (misdemeanor). The case will be adjudicated in May of 2004.

Employee Bomb Threat Results in Termination and Criminal Conviction

An employee had called in a bomb threat to her facility. The employee was charged with making terrorist threats. She was terminated in January 2004 and pled guilty in March 2004 to the misdemeanor charge. She was fined $250.

Fraud Involving Transit Benefits

The OIG received allegations that an employee at the John F. Kennedy Library was collecting transit benefits while also having access to the parking facility. Subsequent to the OIG investigation, the employee returned several of the original subsidy checks and wrote a check to NARA for $170 for the outstanding vouchers.

Recovery of Stolen NARA Computer

The OIG received information from NARA's Pacific Region that the Fremont, CA, Police Department recovered a laptop computer belonging to NARA. The laptop was recovered during an ID theft ring raid. A list of personnel who had access to the storeroom where the computer was stored was matched against a list of suspects in the ID theft ring case. No one was identified.

Employee Disciplined for Time and Attendance Abuse

The OIG received an allegation that a NARA employee was forging their timecard. After investigating this matter, it was referred to NARA Human Resources for administrative handling. The employee was administratively disciplined with a one-day suspension without pay for failing to adhere to NARA policy regarding time keeping.

External Investigative Referrals

U.S. Postal Inspection Service/Internal Revenue Service

In this reporting period, the Inspector General began receiving a significant amount of mail from individuals across the country providing courtesy (cc) copies of Acceptance for Value notices along with tax lien notices. The mailings were typically sent by Express or USPS Priority Mail and were primarily addressed to the IRS. They contained nonsensical legal citations and purported to extinguish the tax debt upon acceptance, or receipt, of the letter. We concluded that the mailings were possibly fraudulent in nature, and we contacted one of the senders. We learned the identity of the individual who was advising taxpayers about this scheme and who suggested that the NARA OIG be copied on the process. We concluded that the OIG was copied on the mailings to give the appearance of legitimacy to the scheme. We referred the matter to the U.S. Postal Inspection Service as a possible consumer mail fraud scheme. We also referred the matter to the IRS, Criminal Investigations Division, as a possible tax fraud scheme.

Internal Revenue Service

The OIG received a tip from a confidential source that an individual may have submitted a false claim on a NARA construction contract. We reviewed the information and concluded that the information was more likely a tax violation. The information was referred to the Criminal Investigative Division, IRS.



OIG HOTLINE

The OIG Hotline provides a prompt, effective, and confidential channel for reporting fraud, waste, abuse, and mismanagement to the OIG. In addition to receiving telephone calls at a toll-free Hotline number and letters to the Hotline post office box, we also accept email communication from NARA's internal network or the Internet through the Hotline email system.

Operational controls protect the identity of Hotline sources. OIG special agents promptly and carefully review calls, letters, and email to the Hotline. We investigate allegations of suspected criminal activity or civil fraud and conduct preliminary inquiries on non-criminal matters to determine the proper disposition. Where appropriate, referrals are made to the OIG Audit Staff or to NARA management.

The following table summarizes Hotline activity for this reporting period:

Cases Opened* 5
Cases Referred Outside the OIG 530
No Action Necessary 195
Total Hotline Contacts 730

*Cases included in investigative workload statistics.

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Top Ten Management Challenges

Under the authority of the Inspector General Act, the NARA OIG conducts and supervises independent audits, investigations, and other reviews to promote economy, efficiency, and effectiveness and prevent and detect fraud, waste, and mismanagement. To fulfill that mission and help NARA achieve its strategic goals, we have aligned our programs to focus on areas that we believe represent the agency's most significant challenges. We have identified those areas as NARA's top ten management challenges. These challenges are listed below.

1. Electronic Records Archives (ERA)

NARA, in research and development collaboration with national and international partners, is building an Electronic Records Archives (ERA) with the goal of ensuring the preservation of, and access to, Government electronic records. The pace of technological progress makes formats in which the records are stored obsolete within a few years, threatening to make them inaccessible even if they are preserved intact.

ERA is to be a comprehensive, systematic, and dynamic means of preserving virtually any kind of electronic record, free from dependence on any specific hardware or software. The ERA system is targeted to make it possible for Federal agencies to transfer any type or format of electronic record to the National Archives so that citizens can locate records of interest and the National Archives can deliver these materials in a usable format.

NARA's challenge is to build a system that will accommodate historical, current, and future formats of electronic records. To mitigate the risks associated with development and acquisition of an advanced electronic archival system, Congress directed NARA to reassess the ERA project schedule based on estimates of the amount of work and resources required to complete each task. Beginning on October 1, 2002, NARA was required to submit to Congress a quarterly report on the status of the project's schedule, budget, and expenditures as measured against a reported baseline; a prioritization of project risks and their mitigation efforts; and corrective actions taken to manage identified schedule slippage, cost overruns, or quality problems that might occur. By 2007, NARA plans to have initial operating capability for ERA with incremental improvements that will eventually result in full system capability. The challenge will be to deliver and maintain a functional ERA system that will preserve electronic records for as long as needed.

2. Electronic Records Management (ERM)

NARA directs one of 24 Government-wide initiatives, the Electronic Records Management (ERM) initiative. The ERM initiative will provide guidance to agencies in managing and transferring to NARA, in an increasing variety of data types and formats, their permanent electronic records. For many years, Federal records were created on paper and stored in files and boxes with NARA. Now, electronic records are created by Government agencies at an astounding rate, challenging NARA to find ways to manage and preserve them. In 2002, NARA became a key player in E-Government and managing partner for the E-Government ERM initiative. E-Government is part of President Bush's management agenda aimed at making it easier for citizens to obtain high-quality service from the Federal Government while reducing the cost of delivering those services. During 2002, NARA enlisted partner agencies, developed a detailed plan for accomplishing its objectives, and issued the first guidance on transferring email records to NARA.

NARA and its Government partners are challenged with trying to figure out how to manage electronic records in an electronic manner in order to make ERM and E-government work more effectively.

3. Improving Records Management

NARA's mission is to ensure that Federal officials and the American public have ready access to essential evidence. One way NARA addresses its mission is by assisting agencies with the management of their records from the time that those records are created. Without effective records management, records needed to document citizens' rights, actions for which Federal officials are responsible, and the historical experience of our nation will be at risk of loss, deterioration, or destruction. According to the NARA Strategic Plan, to minimize these risks, NARA will work in active partnership with the Administration, Federal officials, the Congress, and Federal courts to help them create, identify, appropriately schedule, and manage record material. This will enable the Government to preserve records as long as they are needed to protect rights, ensure accountability, document the national experience, and to destroy records as soon as it is practical to do so when they are no longer needed.

NARA must work with Federal agencies to make scheduling, appraisal, and accessioning processes more effective and timely. The challenge is how best to accomplish this component of our overall mission and identify and react to agencies with critical records management needs.

4. Information Technology Security

Since FY 2000, the Archivist has identified computer security as a material weakness in his assurance statements to the President. While corrective steps have been taken, some actions have not been completed, and the agency continues to work on additional measures to strengthen NARA's overall information technology (IT) security posture. The authenticity and reliability of our electronic records and information technology systems are only as good as our IT security infrastructure. Each year, the risks and challenges to IT security continue to evolve. NARA must ensure the security of its data and systems or risk undermining the agency's credibility and ability to carry out its mission.

IT security becomes even more critical as NARA increases its visibility through the implementation of E-government initiatives that expand online services to the public. The more NARA increases electronic access to its services and records, the more vulnerable the agency is to intrusions, viruses, privacy violations, fraud, and other abuses of its systems. The risk related to IT security is endemic to all Federal agencies and has been identified by the GAO as one of its top ten high-risk challenges.

5. Expanding Public Access to Records

In a democracy, the records of its archives belong to its citizens. NARA's challenge is to more aggressively inform and educate our customers about the services we offer and the essential evidence to which we can provide access. NARA envisions expanding opportunities for individual citizens, educational institutions, and Federal agencies to make use of those records. New technologies are making it easier to reach all users in their homes, schools, and workplaces. NARA must increase partnerships with government agencies at all levels and with universities and corporate communities to take advantage of new means to bring the holdings of the National Archives to people no matter where they are located.

Mastering this challenge requires that NARA listen to its customers, and improve access to records in ways that meet customer needs and customer service standards. This will require NARA to enhance activities such as creating comprehensive catalogs and indexes for our holdings so that users can find the records they need; make documentary material available through the Internet; improve reference service; and help Presidents at the beginning of their administrations plan for public access to their records in Presidential libraries.

6. Meeting Storage Needs of Growing Quantities of Records

NARA-promulgated regulation, 33CFR, Part 1228, "Disposition of Federal Records," Subpart K, "Facility Standards for Records Storage Facilities," requires all facilities that house Federal records to meet defined physical and environmental requirements by fiscal year 2009.

Specifically, in January 2000, NARA revised the regulations for public and private facilities that store Federal records to (1) improve the environment and safeguards for Federal records by incorporating stricter facility standards and advances in sprinkler technology; (2) reflect building design measures that may prevent or minimize fire and water damage to records; and (3) ensure uniform facility standards for all records centers, both public and private, that store and protect Federal records. NARA's challenge is to ensure compliance with these regulations internally as well as by other agencies that house Federal records.

7. Preservation Needs of Records

NARA cannot provide public access to records, to support researchers needs, unless it can preserve them for as long as needed. Providing public access to records for future generations requires that NARA assess the preservation needs of the records, provide storage that retards deterioration, and treat or duplicate and reformat records at high-risk for deterioration. NARA must preserve paper records and motion pictures, audio recordings, videotapes, still photography, aerial photography, microfilm and other microforms, and maps and charts in a variety of formats in our holdings. NARA must ensure that its risk management program adequately identifies and addresses all records needing preservation in a timely manner.

As in the case of our national infrastructure (bridges, sewer systems, etc.), NARA holdings grow older daily and are degrading. NARA is challenged to address the following questions: are we effectively identifying those holdings that are both most at risk and most important in terms of priority. Who makes this determination, upon what criteria is it based, and is it being soundly and properly applied? Are resources and the technology available and sufficient to meet the preservation needs of these records?

8. Improving Financial Management

By inclusion under the Accountability of Tax Dollars Act of 2002, NARA is required to prepare audited financial statements in compliance with prescribed standards subject to independent audit. This will present a challenge to NARA, especially as the Office of Management and Budget accelerates the due date for submitting consolidated audited financial statements and other performance reports into a combined Performance and Accountability Report.

The Federal Government has a stewardship obligation to prevent fraud, waste, and abuse; to use tax dollars appropriately; and to ensure financial accountability to the President, the Congress, and the American people. Timely, accurate, and useful financial information is essential for making day-to-day operating decisions; managing the Government's operations more efficiently, effectively, and economically; meeting the goals of the Federal financial management reform legislation (Chief Financial Officers Act); supporting results-oriented management approaches; and ensuring accountability on an ongoing basis.

In identifying improved financial performance as one of its five Government-wide initiatives, the President's Management Agenda (PMA) stated that a clean financial audit is a basic prescription for any well-managed organization, and recognized that "most federal agencies that obtain clean audits only do so after making extraordinary, labor-intensive assaults on financial records." Further, the PMA stated that without sound internal controls and accurate and timely financial information, it is not possible to accomplish the President's agenda, to secure the best performance and highest measure of accountability for the American people.

The agency will be challenged in its ability to comply with the newly issued Accountability of Tax Dollars Act of 2002 much as Chief Financial Officer (CFO) agencies were challenged in the initial year following the passage of the CFO Act.

9. Physical Security

NARA must maintain adequate levels of physical security over our facilities and holdings to ensure the safety and integrity of persons and holdings within our facilities. This is especially critical in light of the new realities that face this nation post-September 11, and the risk that our holdings may be pilfered by persons for a variety of motivations, defaced, or destroyed by fire or other natural disasters.

The Archivist has identified security of collections as a material weakness under the Financial Manager's Financial Integrity Act (FMFIA) reporting process. Our facilities hold records that serve to document the rights of citizens, the actions of Government officials, and the national experience. They also hold a new class of records identified as Records of Concern (ROC). These are records that could be useful to individuals or entities in the planning and conduct of hostile acts against this nation.

Three primary challenges facing NARA are to (1) provide quality service to our customers while instituting reasonable internal controls to prevent theft and to maintain documentation to support recovery of disenfranchised holdings and subsequent prosecution of those who would steal from NARA, (2) take every reasonable appropriate measure possible to limit access to ROC and act expeditiously in coordinating efforts with appropriate law enforcement entities as warranted and appropriate, and (3) protect and safeguard our facilities themselves and the employees who work in our facilities and to mitigate the potential for damage and destruction through both natural and deliberately precipitated acts.

10. Strengthening Human Capital

The General Accounting Office (GAO) has identified human capital as a Government-wide high risk. Strategic human capital managemen 'should be the centerpiece of any serious change management initiative or any effort to transform the cultures of Government agencies. Serious human capital shortfalls, however, continue to erode the ability of many agencies, and threaten the ability of others, to economically, efficiently, and effectively perform their missions. According to GAO, the major problem is the lack of a consistent strategic approach to marshaling, managing, and maintaining the human capital needed to maximize Government performance and ensure its accountability. People are an agency's most important organizational asset. An organization's people define its character, affect its capacity to perform, and represent the knowledge base of the organization. Agencies can improve their performance by the way that they treat and manage their people, and building commitment and accountability through involving and empowering employees.

NARA's challenge is to adequately assess its human capital needs in order to effectively recruit, retain, and train people with the technological understanding and content knowledge that NARA needs for future success. According to the NARA Strategic Plan, NARA must include preparation for training leaders for tomorrow in its plans. Further, NARA must help current staff members with traditional archival training to add skills necessary for working with new technologies. In addition, NARA must replace valuable staff members lost to retirement with staff able to deal with records in the electronic information age. Moreover, NARA must partner with universities and professional associations to determine educational requirements for the 21st century.

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Reporting Requirements

MANDATED BY THE INSPECTOR GENERAL ACT OF 1978, AS AMENDED
REQUIREMENT SUBJECT PAGE
Section 4(a)(2) Review of legislation and regulations 10
Section 5(a)(1) Significant problems, abuses, and deficiencies 13-24
Section 5(a)(2) Significant recommendations for corrective action 13-24
Section 5(a)(3) Prior significant recommendations unimplemented 37
Section 5(a)(4) Summary of prosecutorial referrals 33
Section 5(a)(5) Information or assistance refused 37
Section 5(a)(6) List of reports issued 34
Section 5(a)(7) Summaries of significant reports 13-24
Section 5(a)(8) Audit Reports Questioned Costs 35
Section 5(a)(9) Audits Reports Funds put to better use 36
Section 5(a)(10) Prior audit reports unresolved 37
Section 5(a)(11) Significant revised management decisions 37
Section 5(a)(12) Significant revised management decisions with which the OIG disagreed 37
STATISTICAL SUMMARY OF INVESTIGATIONS
Investigative Workload
Cases Pending 33
Allegations received this reporting period (2 proactive cases) 20

Cases opened this reporting period

18

Cases closed this reporting period

22

Cases carried forward this reporting period

29
Categories of Investigations

Fraud

10

Conflict of Interest

0

Contracting Irregularities

1

Misconduct

8

Larceny (theft)

6

Torts

0

Other

4
Investigative Results

Cases pending prosecutive action (from the previous reporting period)

1

Cases referred for prosecutive action

2

Cases where prosecutive action was declined

0

Indictments and Warrants (from the previous reporting period)

0

Convictions

1
Administrative Remedies

Employee(s) terminated

1

Employee(s) resigned in lieu of termination

2

Employee(s) suspended

3

Employee(s) given letter of reprimand or warnings

0

Employee(s) Counseled

0

Value of Funds or Property Recovered

$670

Summary of Prosecutorial Referrals

NARA Cashier Pockets Money Received from Customers

The OIG received multiple complaints that an employee was stealing money from NARA's Pacific Region, Laguna Niguel facility. The employee allegedly took payments from NARA customers, pushed the "no sale" button on the register, handwrote a receipt when necessary, then pocketed the money. A controlled purchase disclosed that the employee received payment for copies of documents and provided a receipt. The employee pushed a button on the cash register and placed the money in the cash register. At close of business, the employee completed a register closeout form that indicated a significantly lower amount of cash received in her register. When confronted, the employee admitted to stealing approximately $645 over a six- month period. The United States Attorney for the Central District of California declined prosecution of this case. The employee subsequently resigned.

Misuse of Government Credit Card

We received an allegation that an employee had misused her supervisor's government charge card to pay for her son's tuition at a local community college. To conceal the charges, the employee had obtained authorization to attend courses herself, and she later made false entries into the NARA's financial management system to make the charges appear legitimate. The employee was provided the opportunity to resign prior to issuance of a termination letter. The subject provided a written statement admitting to the misuse. The case was presented to the U.S. Attorney's Office in Maryland and was accepted for prosecution. The subject resigned from her position with NARA and was criminally charged with three counts of theft (misdemeanor). The case will be adjudicated in May 2004.

Employee Bomb Threat Results in Termination and Criminal Conviction

An employee had called in a bomb threat to her facility. The employee was charged with making terrorist threats. She was terminated in January 2004 and pled guilty in March 2004 to the misdemeanor charge. She was fined $250.

LIST OF REPORTS ISSUED - Requirement 5(a)(6)

Report No.

Title

Date

Questioned Costs

Unsupported Costs

Funds Put to Better Use

04-02

Audit of the National Archives Gift Fund FY 2002 Financial Statements

11/14/2003

0

0

0

04-03

Audit of the National Archives Trust Fund FY 2002 Financial Statements

11/14/2003

0
0
0

04-04

Peer Review of the Farm Credit Administration Office of Inspector General

01/26/2004

0
0
01

04-05

Audit of Subcontracor's Proposal for the National Archives Building Stack Lighting

12/23/2003

$2,000,243
$884,242
0

04-06

Audit of NARA's Records Center Revolving Fund FY 2002 Financial Statements

12/16/2003

0
0
0

04-07

Audit of the Transit Benefit Program

03/31/2004

0
0
0

04-08

Review of Contractor Compliance with Governement Auditing Standards on the National Archives Trust and Gift Funds for FY 2002 Financial Statements

01/29/2004

0
0
0

04-09

Review of Contractor Compliance with Governement Auditing Standards for NARA's Records Center Revolving Fund FY 2002 Financial Statements

01/29/2004

0
0
0

04-10

Assessment of the Controls and Security of NARA Classified Systems

03/31/2004

0
0
0

04-11

Audit of NARA's Interagency Agreements

03/31/2004

0
0
0

04-12

Evaluation of NARA's FY 2003 Management Control Program

03/02/2004

0
0
0


AUDIT REPORT(S) WITH QUESTIONED COSTS - Requirement 5(a)(8)

Category

Number of
Reports
DOLLAR VALUE

Questioned
Costs
Unsupported
Costs

A. For which no management decision has been made by the commencement of the reporting period

1

$236,335

$233,380

B. Which were issued during the reporting period

1

$2,000,243

$884,242

Subtotals (A + B)

2
$2,236,578
$1,117,622

C. For which a management decision has been made during the reporting period

0
0
0

(i) dollar value of disallowed cost

0
0
0

(ii) dollar value of costs not disallowed

0

0

0

D. For which no management decision has been made by the end of the reporting period

2

$2,236,578

$1,117,622

E. For which no management decision was made within 6 months

1

$236,335

$233,380

AUDITS REPORTS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE - Requirement 5(a)(9)
CATEGORY
NUMBER
DOLLAR VALUE

A. For which no management decision has been made by the commencement of the reporting period

1
$16,801

B. Which were issued during the reporting period

0
0

Subtotals (A + B)

1
$16,801

C. For which a management decision has been made during the reporting period

0
0

(i) dollar value of recommendations that were agreed to by management

0
0

Based on proposed management action

0
0

Based on proposed legislative action

0
0

(ii) dollar value of recommendations that were not agreed to by management

0
0

D. For which no management decision has been made by the end of the reporting period

1
$16,801

E. For which no management decision was made within 6 months of issuance

1
$16,801

REQUIREMENT

CATEGORY
SUMMARY

5(a)(3)

Prior significant recommendations unimplemented

None

5(a)(4)

Summary of prosecutorial referrals

None

5(a)(5)

Information or assistance refused

None

5(a)(10)

Prior audit reports unresolved

None

5(a)(11)

Significant revised management decisions

None

5(a)(12)

Significant revised management decisions with which the OIG disagreed

None

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