DHS Inspector General: Coast Guard Acquisition Personnel Violated Law (UPDATED)

By Stew Magnuson

The Coast Guard has spent unauthorized monies totaling $7 million to modernize its fleets of response boats, the Department of Homeland Security inspector general’s office said June 21.
The service ran afoul of the Anti-Deficiency Act 20 times from 2004 to 2009, the IG said. The act prohibits the unauthorized spending of federal funds, and can result in large fines and jail time for workers convicted of willfully violating the law.
In 2009, the Coast Guard initiated a review of the response boat-medium project. The IG identified potential violations of the act totaling $7.8 million, prompting the Coast Guard to request an audit. The IG noted corrections already taken by the Coast Guard and found an additional 20 ADA violations resulting from a “lack of Coast Guard acquisition policies, procedures and training, which resulted in unallowable use of appropriations for design changes.”
The service made corrections and issued a stop-work order in 2010, reducing the initial amount of money spent by $800,000.
The inspector general found that design changes were made to the program in 2006 after the contract to begin constructing the boats was initiated and were charged to appropriations not related to the original contract. The audit found the changes were “incorrectly charged to current year funding rather than to appropriations used for the original boat delivery order,” the report said.
The latest report of mismanagement comes as the Coast Guard has been attempting to build up its acquisition work force in the wake of problems with the Deepwater Integrated System program. The Coast Guard was forced to reorganize Deepwater in 2007 after delays and cost overruns plagued the effort to modernize its ships and boats for several years. Government watchdogs found that the service had turned over too much of the project’s oversight to the lead contractor, Integrated Coast Guard Systems LLC, a Lockheed Martin-Northrop Grumman joint venture. Since then, the Coast Guard has attempted to hire personnel who have experience overseeing shipbuilding contracts.
In its written response to the report, the Coast Guard said it has made appropriations law training mandatory for its acquisition staff, funds managers and contracts officers to ensure they understand the guidelines and requirements for appropriations. It also revised its process for contract administration, which requires a secondary review of large acquisitions by its office of resource management. Finally, it updated its procedure on determining future liabilities so the policy is consistent for future acquisitions.
Despite making changes, the audit reported that the Coast Guard does not have funding available to correct the $7 million in deficiencies and still owes one of the contractors approximately $1 million for work completed before it issued the stop-work order.
The acquisition project for response boat-medium was initiated in 2002 to replace the Coast Guard’s aging fleet of 41-foot utility boats. The new boats promised higher speeds and greater ranges for search and rescue, security and drug and migrant interdiction missions at an approximate cost of $2 million each.
The first boat was received March 31, 2008. The plan was to acquire 180 new boats. Fifty-nine have been delivered.
The Anti-Deficiency Act states that an officer or employee who expends or obligates the government to pay in excess or advance of an appropriation can be subject to duty without pay or removal from office. If the act is performed willfully or knowingly, an officer or employee can be fined up to $5,000 and imprisoned for two years.
-- Reporting by David C. Ake
CORRECTION: An earlier version of this story misidentified the response boat medium as the "fast response boat medium" and stated that the program was part of the Integrated Deepwater System. The $1 million owed to the contractor has since been dispersed, according to a Coast Guard spokesman.

Topics: Homeland Security, Deepwater

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