Called to Account

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Grant Taylor

Over the past five years, agencies increasingly have left the General Services Administration's Federal Technology Service holding the bag'a very large bag of money.

Since fiscal 2000, agencies have allowed more than $2 billion of unused money to build up in FTS' IT Fund, which for years has let agencies extend the use of funds beyond the fiscal year. Now FTS is trying to figure out how so much money was left unaccounted for, and if agencies can continue using it. Funds for some projects may be expired, leaving agencies scrambling to make up the difference.

Whether the situation resulted from lax interpretation of the rules or illicit behavior by agency or FTS sales and contracting employees, GSA now is more strictly enforcing how customer agencies use the revolving fund. FTS will require departments to do a better job of planning how'and when'they will spend their money, experts said.

'I've been telling people that Aug. 1 is the new Sept. 1,' said Deidre Lee, the Defense Department's director of procurement policy, referring to the extra time it will take to get procurements into the pipeline. 'It is not as simple as it used to be, nor should it be. We will ask them what the acquisition strategy is, and all those questions that ensure good business decisions.'

DOD accounts for as much as 80 percent FTS's business and has more than $1.4 billion of unused money in the IT Fund. The fund could be merged with the General Supply Fund to create an Acquisition Services Fund under GSA reorganization legislation passed by the House last month. But it's not likely the legislation will become law before Sept. 30, because it does not have a Senate sponsor. The Brooks Act of 1965 created the IT Fund, and the 1996 Clinger-Cohen Act extended it. Under the rules set up by the two laws, agencies can put money into the fund if they have a bona-fide need.

The fund consists of obligated but unspent money that agencies sign over to GSA along with a plan on how they will spend the money. FTS manages the fund and buys IT products and services at the agencies' behest.
The payoff for GSA, experts say, is the 2 percent to 4 percent fee FTS charges for its services.


'Parking' money


Most of the money does get used'21 agencies spent $8.7
billion in fiscal 2003'but a large cache of unused funds has built up through
the years.


Especially during the past decade, as buying IT became big
business, GSA officials promoted the ability of agencies to 'park' money in
the IT Fund to extend its life beyond the end of the fiscal year, GSA and other
agency procurement officials say. Depending on the strings Congress attaches to
the dollars, agencies typically have to spend their appropriated funds before
Oct. 1'the beginning of the fiscal year.


GSA has since quashed the promoting of and the actual
'parking' or 'banking' of money by agencies in FTS' IT Fund'severely
limiting a well-liked and often-used benefit of FTS.


Part of its appeal was where the fund went awry: Agencies
could park money in the IT Fund when they did not have'and GSA did not enforce
the need for'a well-defined plan on how to use the money.


'There may have been a misinterpretation of how the IT
Fund worked,' said Kathleen Turco, GSA's chief financial officer, who is
leading the effort to improve how the fund works. 'Through the Get It Right
program, we are ensuring the financial policies and procedures are clear as they
need to be for all contracting folks.'


This misinterpretation resulted in money building up over
the years, and now GSA is telling agencies to identify how they plan to use the
money. For instance, agencies could continue to use the funds for an ongoing
contract that cannot be stopped, such as for software development. But other
funds will have to be returned to the Treasury Department because their
authorizations have expired or they are not for ongoing work, Turco said.


'We were not as vigilant with the closeout of contracts
as we should have been,' Turco said, referring to GSA's obligation to return
unspent money to agencies. 'We are making the adjustments and taking unfilled
customer orders off our books so the agencies can de-obligate funding.'


While GSA is moving to clear the backlog of unused funds,
officials also are developing policy letters on how the IT Fund should be used
this year and on when FTS will no longer accept new work, in order to make sure
all the orders get obligated before Oct. 1, said an agency official who
requested anonymity.


'We will not take work from customer agencies that we
cannot execute in a reasonable time frame,' the official said. 'How long is
reasonable? I'm not sure. But five years is not reasonable, we all can agree
on that.'


This policy follows a series of other policy announcements
from GSA last summer and fall, detailing how the fund would work this year.


Current and former GSA officials, both on and off the
record, maintain that employees who were promoting the ability to park money in
the fund did not understand the intent of the rules.


But others called some of the employees' acts borderline
illegal.


'Parking and dumping where an agency has a need for $1
million worth of IT, but puts in the account $3 million or $5 million'that is
illegal,' said Steven Tomanelli, a procurement lawyer who travels the country
consulting and training GSA and other agency civilian acquisition workers.
'The IT Fund is a well-conceived idea, but there [have] been some
violations.'


The question of legality comes into play when agencies ask
FTS contracting employees to spend funds left over from an initial purchase on
new projects.





Reprogram funds


Tomanelli and others say spending extra money goes against
appropriations law and possibly the Anti-Deficiency Act, which basically says
agencies are not to spend money they don't have.


'Trying to hide dollars from the Hill is what the IT Fund
lends itself to,' said William Shook, a partner with
Preston

, Gates and Ellis LLP, a

Washington


law firm. 'Agencies should just ask Congress to reprogram funds.'


Tomanelli and other experts point to FTS' culture of
courting business from other agencies and its bonus structure, under which GSA
rewards employees with cash bonuses for sales. 'There was a large amount of
blind acceptance by GSA buyers,' he said.


One former GSA official who requested anonymity said the
agency is not trying to figure out who was right or wrong, but wants to go
forward with a clear definition of how to use the IT Fund.


'There is a lot of controversy to whether the belief of
parking money was wrong from the beginning, or whether times have just
changed,' the former official said.


Alan Chvotkin, senior vice president and general counsel
for the Professional Services Council, an

Arlington

,
Va.


, trade association, said his members are concerned about possible task orders
that will be cancelled for lack of funds.


But Jeffrey Westerhoff, senior vice president of
governmentwide acquisition contracts for SRA International Inc. of

Fairfax

,
Va.


, and chairman of the GSA subcommittee for the Information Technology
Association of America, an

Arlington

,
Va.


, trade association, said agencies will find money to pay for projects that may
be affected by FTS' actions.


Meanwhile, agencies also have to be aware of the extra
planning they will have to do.


'We need to do the follow-through and make sure this is
not a recurring issue,' Lee said. 'We are asking program managers to answer
some simple questions before sending money over to GSA.'




(Continued)


'We were not as vigilant with the closeout of contracts as we should have been,' Turco said, referring to GSA's obligation to return unspent money to agencies. 'We are making the adjustments and taking unfilled customer orders off our books so the agencies can de-obligate funding.'

While GSA is moving to clear the backlog of unused funds, officials also are developing policy letters on how the IT Fund should be used this year and on when FTS will no longer accept new work, in order to make sure all the orders get obligated before Oct. 1, said an agency official who requested anonymity.

'We will not take work from customer agencies that we cannot execute in a reasonable time frame,' the official said. 'How long is reasonable? I'm not sure. But five years is not reasonable, we all can agree on that.'

This policy follows a series of other policy announcements from GSA last summer and fall, detailing how the fund would work this year.

Current and former GSA officials, both on and off the record, maintain that employees who were promoting the ability to park money in the fund did not understand the intent of the rules.
But others called some of the employees' acts borderline illegal.

'Parking and dumping where an agency has a need for $1 million worth of IT, but puts in the account $3 million or $5 million'that is illegal,' said Steven Tomanelli, a procurement lawyer who travels the country consulting and training GSA and other agency civilian acquisition workers. 'The IT Fund is a well-conceived idea, but there [have] been some violations.'
The question of legality comes into play when agencies ask FTS contracting employees to spend funds left over from an initial purchase on new projects.

Reprogram funds

Tomanelli and others say spending extra money goes against appropriations law and possibly the Anti-Deficiency Act, which basically says agencies are not to spend money they don't have.
'Trying to hide dollars from the Hill is what the IT Fund lends itself to,' said William Shook, a partner with Preston, Gates and Ellis LLP, a Washington law firm. 'Agencies should just ask Congress to reprogram funds.'

Tomanelli and other experts point to FTS' culture of courting business from other agencies and its bonus structure, under which GSA rewards employees with cash bonuses for sales. 'There was a large amount of blind acceptance by GSA buyers,' he said.
One former GSA official who requested anonymity said the agency is not trying to figure out who was right or wrong, but wants to go forward with a clear definition of how to use the IT Fund.
'There is a lot of controversy to whether the belief of parking money was wrong from the beginning, or whether times have just changed,' the former official said.
Alan Chvotkin, senior vice president and general counsel for the Professional Services Council, an Arlington, Va., trade association, said his members are concerned about possible task orders that will be cancelled for lack of funds.

But Jeffrey Westerhoff, senior vice president of governmentwide acquisition contracts for SRA International Inc. of Fairfax, Va., and chairman of the GSA subcommittee for the Information Technology Association of America, an Arlington, Va., trade association, said agencies will find money to pay for projects that may be affected by FTS' actions.

Meanwhile, agencies also have to be aware of the extra planning they will have to do.
'We need to do the follow-through and make sure this is not a recurring issue,' Lee said. 'We are asking program managers to answer some simple questions before sending money over to GSA.'

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