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Report No. D2007-102 May 22, 2007
Air Force Host and Tenant Agreements Between the 50th Space Wing, the
Joint National Integration Center, and Tenants
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Acronyms
AFI Air Force Instruction FAR Federal Acquisition RegulationJFCC Joint Functional Component Command JNIC Joint National Integration CenterJTAAS Joint National Integration Center Technical Advisory and
Assistance Services LAN Local Area Network R&D Research and Development U.S.C. United States Code
INSPECTOR GENERAL DEPARTMENT OF DEFENSE
400 ARMY NAVY DRIVE ARLINGTON, VIRGINIA 22202-4704
May 22, 2007
MEMORANDUM FOR DIRECTOR, MISSILE DEFENSE AGENCY COMMANDER, 50TH SPACE WING, AIR FORCE SPACE
COMMAND
SUBJECT: Report on Air Force Host and Tenant Agreements Between the 50th Space Wing, the Joint National Integration Center, and Tenants (Report No. D-2007-102)
We are providing this report for review and comment. The 50th Space Wing did not respond to the draft report; however, we considered comments from the Missile Defense Agency when preparing the final report.
DoD Directive 7650.3 requires that all recommendations be resolved promptly. As a result of management comments we revised Recommendation I. The Missile Defense Agency comments were partially responsive. We request additional comments for recommendations I and 2.a, 2.b, and 2.c. We request the Missile Defense Agency and the 50th Space Wing provide comments on the Recommendations by July 23, 2007.
Ifpossible, please send management comments in electronic format (Adobe Acrobat file only) to [email protected]. Copies of the management comments must contain the actual signature of the authorizing official. We cannot accept the / Signed / symbol in place of the actual signature. If you arrange to send classified comments electronically, they must be sent over the SECRET Internet Protocol Router Network (SIPRNET).
We appreciate the courtesies extended to the staff. Questions should be directed to Amy Frontz at (303) 676-7392 (DSN 926-7392) or Mr. John Furutani at (303) 676-7513 (DSN 926-7513). See Appendix C for the report distribution list. The team members are listed inside the back cover.
By direction of the Deputy Inspector General for Auditing:
~~~-Pat . Granetto, CPA
Assistant I1 pector General & Director Defense Financial Auditing Service
Department of Defense Office of Inspector General
Report No. D-2007-102 May 22, 2007 (Project No. D2006-D000FD-0064.000)
Air Force Host and Tenant Agreements Between the 50th Space Wing, the Joint National Integration Center, and Tenants
Executive Summary
Who Should Read This Report and Why? DoD and Air Force staff involved with host and tenant support agreements are the intended audience for this report. It discusses the appropriateness of the cost allocation methodologies the Joint National Integration Center and the 50th Space Wing used to assess tenants for support costs.
Background. The 50th Space Wing of the Air Force Space Command operates Schriever Air Force Base in Colorado Springs, Colorado. The 50th Space Wing makes available by permit two buildings on the base’s real property records, 720 and 730, to the Joint National Integration Center, a Component of the Missile Defense Agency. The Joint National Integration Center resides as a tenant, serves as a host to other tenants, and contracts forservices. As part of its host duties, the Joint National Integration Center assesses charges forservices provided based on the amount of square footage each tenant occupies in the two buildings. The Joint National Integration Center estimates and collects these charges (reimbursements) in advance through military interdepartmental purchase requests.
Results. In assessing their tenants’ operating and support charges, the Joint NationalIntegration Center and the 50th Space Wing used cost allocation methodologies that did not comply with DoD guidance on what constitutes reimbursable costs under support agreements. The Joint National Integration Center was also assessing nonreimbursable charges and miscalculating utility charges. As a result, the Joint National Integration Centerand other tenants paid an inappropriate share of operations and support costs—amounting to more than $350,000—from February 2005 to January 2006. The Joint National IntegrationCenter and the 50th Space Wing need to review their methodologies to ensure they accurately reflect the costs of support provided and comply with DoD Instruction 4000.19. In addition, the Joint National Integration Center needs to review its procedures fordetermining which costs are properly reimbursable (incremental direct costs) from tenants and correct the utility calculation used to allocate costs to the Joint Functional Component Command. Finally, the Missile Defense Agency should review charges paid by tenants inprevious years to verify that it did not collect more than the actual expenses for each fiscal year. If the Missile Defense Agency collected more than actual expenses, it should either refund excess funds to the tenants or deposit those funds in the U.S. Treasury throughmiscellaneous receipts and, if it lacks sufficient budget authority, it should report an Antideficiency Act violation.
Management Comments and Audit Response. The Executive Director, Missile Defense Agency concurred with one of the recommendations and partially concurred with three recommendations. The Executive Director, MDA, did not concur that the cost allocation methodology used by JNIC resulted in fund augmentation. She stated MDA was operatingunder the statutory authority of the Economy Act which allows for estimates. We agree
estimates may be used; however, the Economy Act requires that estimates be adjusted to reflect actual costs. In addition, DoD policy requires that intragovernmental support agreements adjust the estimated amounts paid in advance by the receiving party. JNIC did not attempt to determine if funds were collected in excess of actual direct costs.
The Executive Director stated the cost methodology used by JNIC is consistent with DoD guidance and all reimbursable costs identified in the agreements are incremental direct costs. We disagree that all costs had a direct link to the tenants. We also disagree that JNIC should include the common-use infrastructure as part of the square footage when multiplying it by the rate per square foot to arrive at the total utility cost to the tenant.
We request the Executive Director, Missile Defense Agency reconsider her position, and 50th Space Wing Commander provide comments on the final report by July 23, 2007. See the Finding section of the report for a discussion of management comments, and the Management Comments section of the report for the complete text of the comments.
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Table of Contents
Executive Summary i
Background 1
Objectives 1
Finding
Cost Allocation Methodologies and Assessment of Host and Tenant Charges 2
Appendixes
A. Scope and Methodology 13 B. Overcharges 14 C. Report Distribution 16
Management Comments
Missile Defense Agency 19
Background
This report discusses the cost allocation methodologies used by the Joint National Integration Center (JNIC) and the 50th Space Wing to assess operating and support charges to tenants, and questions the appropriateness of specific charges.
Owner-Host-Tenant Relationship. The 50th Space Wing, Air Force Space Command operates Schriever Air Force Base in Colorado Springs, Colorado. The 50th Space Wing makes available by permit two buildings on Schriever’s real property records, 720 and 730, to JNIC, a Component of the Missile Defense Agency.1 JNIC resides as a tenant, serves as a host to other tenants, and contracts for services necessary to carry out its mission and perform interior building operations and maintenance. JNIC serves as host to the following tenants: theSpace Innovation & Development Center, the Center for Research Support, Cheyenne Mountain Training Systems, the Air Force Operational Test and Evaluation Center, and the Joint Functional Component Command (JFCC).
Costs Incurred and Assessed. The 50th Space Wing provides services to the occupants of buildings 720 and 730 as defined in a support agreement with JNIC. These services cover maintenance of grounds and building exteriors and provision of utilities, refuse collection, and communications services. JNIC is responsiblefor operation and maintenance costs of building interiors. JNIC considers utilities, refuse collection, and communications services reimbursable by tenants. These reimbursable services are calculated and allocated based on square footage basis. Before each fiscal year begins, tenants provide funds through military interdepartmental purchase requests to JNIC for the charges assessed.2 JNIC also charges some tenants for certain services based on use, such as copies exceeding a base amount, local area network (LAN) lines, and JNIC Technical Advisory and Assistance Services (JTAAS).
Objectives
Our audit objective was to determine the extent to which charges assessed under host and tenant agreements involving the Air Force as either host or tenant complied with DoD guidelines. However, the complexity of the issues identified at Schriever Air Force Base led us to reduce our scope to include only thatinstallation. We looked at the charges assessed under host and tenant agreements between the 50th Space Wing, JNIC, and tenants. Although we announced ourintention to review the management internal control program as it related to the overall objective, we discontinued the review when we limited the scope to Schriever Air Force Base. See Appendix A for a discussion of our scope andmethodology and Appendix B for a discussion of potential overcharges.
1 By law, only military Services may own real property; therefore, DoD agencies must use real property assets through a permit, lease, or support agreement.
2 JNIC uses “reimbursement” as an equivalent term for a “charge”—a cost incurred and passed on.
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Cost Allocation Methodologies andAssessment of Host and Tenant Charges JNIC and the 50th Space Wing methodologies did not comply with DoD guidance for determining and allocating reimbursable support costs. JNIC charged tenants for support costs that could not be attributed to orinfluenced by the tenants. Tenants were improperly charged because JNIC:
• charged them for nonreimbursable costs,
• used an inappropriate methodology to assess specific charges, and
• incorrectly calculated reimbursable charges.
As a result, tenants were overcharged by $313,761 from February 1, 2005, to January 31, 2006, for support costs not measurable and directly attributable. During the same period, a tenant was overcharged $36,975 because of a utility miscalculation. Consequently, if JNIC used the samemethodology to assess charges to tenants in prior years, the Missile Defense Agency, the JNIC parent organization, through reimbursement collections by JNIC, may have augmented its research and development (R&D) appropriation, possibly resulting in an Antideficiency Actviolation.
Criteria
DoD Instruction. DoD Instruction 4000.19, “Interservice and Intergovernmental Support,” August 9, 1995, prescribes the nature and details of various supportagreements among Military Services, DoD Components, other Federal agencies, and non-Federal entities. The key requirement is to identify and charge only for incremental direct costs associated with the services obtained under the agreement.
Air Force Instruction (AFI). AFI 25-201, “Support Agreement Procedures,” May 1, 2005, is the Air Force policy implementing the requirements of DoD Instruction 4000.19. AFI 25-201 provides detailed guidance on agreements, functional area responsibilities, documentation, and processing and review procedures.
AFI 65-601, volume 1, chapter 7, “Support Guidance,” March 3, 2005, provides financial management guidance for planning and executing support transactions, including respective roles and tasks, between Component organizations of the Air Force and other Air Force activities, Component organizations of other DoD agencies, and Component organizations of non-DoD departments and agencies.
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Reimbursable Costs Charged to Tenants
The cost allocation methodology JNIC used to calculate tenant charges is not compliant with DoD guidance on what constitutes reimbursable costs under support agreements. The underlying assumption for JNIC cost methodology is that all costs billed under the contract are a direct cost to JNIC and are thus used to determine reimbursable costs assessed to tenants.3 This assumption is unwarranted because all these costs cannot be directly attributed to, or influencedby, tenants and thus are not “incremental direct costs” as defined in DoD guidance. As a result, JNIC overcharged tenants $313,761 for the periodFebruary 1, 2005, to January 31, 2006. The calculations showing thenonreimbursable costs are summarized in Appendix B.
DoD Instruction 4000.19 identifies reimbursable support as that which:
. . . increases the support supplier’s direct costs (i.e. incremental direct costs). Costs associated with common use infrastructure are nonreimbursable, except for support provided solely for the benefit of one or more tenants. Support costs that are charged to a support receiver (i.e. reimbursable cost) must be measurable and directly attributable to the receiver.
An example of an incremental direct cost is the cost for electricity used by tenants leasing and occupying host-office space.
DoD Instruction 4000.19 also provides the following guidance:
. . . whether support service is reimbursable must be based on local conditions in accordance with subsection 4.6. of the main body of this Instruction. Recurring interservice and intragovernmental support is reimbursable to the extent that provision of the specified support to a receiver increases the support supplier’s direct costs and that cost is measurable and attributable to the support receiver. Support services that are operated for the supplier’s benefit and that also benefit other activities without increasing the cost to the supplier are not reimbursable.
JNIC Cost Basis. JNIC had an R&D contract with Northrop Grumman Mission Systems (contractor) from February 1, 2005, through January 31, 2006. As partof the contract, JNIC created an environmental task order directing the contractor to provide services and to operate and maintain buildings 720 and 730. Task order costs are defined in the task order elements. The task order elements follow:
• task order administration,
• interior operation and maintenance,
• reproduction services,
3 Federal Acquisition Regulation (FAR), Part 2, Subpart 2.1, “Definitions,” February 2, 2006, defines a direct cost as “any cost that is identified specifically with a particular final cost objective.”
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• facility engineering (renovation planning and designing),
• facility services,
• mail distribution,
• custodial services,
• supplies, and
• property management.
In addition to payment for the services mentioned above, an award fee for performance for elements containing labor costs (facility engineering, for example) was included as part of the estimated total cost. We identified elements currently used for tenant-related costs that are nonreimbursable and should not be charged to tenants. These elements are discussed below.
Administration. This task element included requirements such as program management, schedule management, and delivery order coordination. These subtasks are general requirements of the contractor and would be incurred by JNIC regardless of tenant presence; therefore, they did not meet the definition of incremental direct costs. The entire cost associated with the task was not specifically linked to one or more tenants. Therefore, administration costs are not incremental direct costs suitable for reimbursement.
Award Fee. JNIC applied a 12-percent award fee to the labor cost foreach task order element in calculating the reimbursement basis for tenants. This practice was not consistent with DoD guidance because the award fee was notalways tied to a tenant-specific activity, and award fees are associated withsubtasks not directly linked to tenant service needs. Tenants could not control or influence the award-fee costs, nor did the award fee benefit them directly; thus, the award fee was not an incremental direct cost suitable for reimbursement.
Methodologies for Charging Tenants JNIC and the 50th Space Wing used square footage as a basis to charge tenants for services and other costs although other bases were more appropriate and more accurately reflected costs associated with tenant activity. The total operating andsupport costs being shared by JNIC and its tenants for buildings 720 and 730 were$29,286,443 (JNIC pays $27,554,525 and tenants pay $1,731,918). Figure 1shows the cost allocation between JNIC and building tenants, and Table 1identifies the cost allocation methodologies used by the 50th Space Wing and JNIC to charge their tenants.
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Figure 1. Cost Allocation Between JNIC and Building Tenants
Table 1. How Host Determined Tenant Charges
Charge Host
50th Space Wing JNIC Utilities Water Square footage Square footage
Sewer Square footage Square footage Electric Square footage Square footage Gas Square footage Square footage
Communication services Cellular service Cell phone Cell phone Local dial tone Lines Square footage Cable television Receivers Square footage
Refuse collection Containers Square footage Environmental task order4 Square footage JNIC communication costs Square footage LAN Number of units JTAAS Number of support
personnel
Because they were assessed charges based on square footage, some tenants were paying an inappropriate share for these services. Until JNIC and the 50th SpaceWing use appropriate methodologies to determine costs, tenants will continue to pay an inappropriate share.
JNIC and the 50th Space Wing could use alternative data to identify and track tenant-related costs. JNIC could use the database maintained by the operation and maintenance subcontractor, Lockheed Martin, which tracks activity by action requests. These requests contain data fields such as submitter and submitter location and can identify direct, measurable costs tied to tenants. The data fields can also be used to estimate a percentage of total labor cost related to tenant activity when such estimates are relevant and desirable.
The inappropriate cost assumptions and allocations include:
• Mail Distribution. The category “other direct costs/material” (for example, stamps) was a reimbursable cost charged to tenants based on square footage with the assumption that each organization used the same
4 The environmental task order includes the following task elements: task order administration, interior operations and maintenance, reproduction services, facility engineering, facility services, mail distribution, custodial services, supplies, and property management.
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amount of postage. However, JNIC kept a log of the amount of postage used by each tenant. Even though JNIC had data identifying the actualdirect costs of mail distribution used by each tenant, it used square footage as the methodology to allocate and assess these costs.
• Reproduction Services. JNIC calculated the cost of reproductionservices as labor plus 50 percent of the cost of white copy paper. This cost was then allocated to tenants by square footage. The copy center hadthe ability to track the actual copying done for each tenant using a jobrequest form. The form provided type and number of copies, along with the name of the requesting organization. The form provided a direct link to each organization and its use of reproduction services—a more appropriate measure than square footage.
• Supplies. Specifically, the contractor was supposed to identifyrequirements for, order, provide control over, and warehouse JNIC administrative supplies and spares. The cost was calculated as a percentage of total labor cost on the assumption that each person received the same supply services. The subtask language indicated work isprimarily for the benefit of JNIC. There is no direct link to the presenceor requests of tenants.
• Facility Engineering. The Government project manager for the environmental task order adjusted the amount allocated to this task, which involved planning and design for building renovations, based on estimates of reimbursable costs provided by the contractor. The project manager assessed tenants 50 percent of labor costs based on tenants’ projectedbenefits from this service. Because these costs were based on an estimate for services of a general nature, not tied to a specific task or project (forexample, remodeling of tenant space), the charge cannot be directly attributed to a specific tenant.
• 50th Space Wing Utilities. The 50th Space Wing used square footage to charge tenants for water and sewer. Because water and sewer costs were based on meter measurements, which in turn were based on actual amounts used, a headcount for each tenant would have provided a better measure of associated direct costs.
As a result of our analysis, JNIC is crediting tenants $22,442 in FY 2007. This credit stems from JNIC reducing its FY 2006 “supply support” assessment to tenants by $0.18 per square foot, from $15.51 to $15.33. However, this adjustment does not fully respond to the methodological concerns raised in this report.
Calculation Error
In addition to the incorrect methodology used, we noted a utility calculation error affecting one tenant—JFCC—resulting in an overcharge of $36,975 for utilities
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from February 1, 2005, through January 31, 2006. The calculation error is summarized in Appendix B.
As a result of our analysis, JNIC is adjusting its utility calculation to arrive at the same utility cost per square foot as used by the 50th Space Wing. However, the application of the rate to common area square footage is still not consistent with the requirements of DoD Instruction 4000.19, as discussed in Appendix B under the heading, “Utility Charges.”
Fund Augmentation
As a consequence of JNIC collecting an excess $350,736 of revenues fromnonreimbursable charges ($313,761) and utility miscalculation from tenants ($36,975); the Missile Defense Agency may have augmented its appropriation and committed an Antideficiency Act violation. Augmentation may have occurred when funds collected from tenants exceeded actual costs incurred and the excess funds were not refunded to the tenants or deposited in the U.S.Treasury, as required by 31 U.S.C. § 3302.5
Fund augmentation may have occurred because:
• Tenant charges were based on an estimated task order cost for future service. The contractor provided estimated costs for each task order element. JNIC subsequently adjusted these costs, included the award fee, derived a cost per square foot, and billed tenants by requesting reimbursements in advance.
• JNIC did not determine whether it had collected excess funds from tenants by comparing collections with actual expenses or costs and then returning these excess funds to either the tenants or the Treasury.
• The funds collected from tenants were used to offset the estimated costs of the environmental task order, freeing Missile Defense Agency funds for other purposes.
Any and all funds received that cannot be identified as incremental direct costs associated with tenants are an apparent fund augmentation in violation of 31 U.S.C. § 3302, and may be an Antideficiency Act violation according to 31 U.S.C. § 1341 a. 1. (A.). The Missile Defense Agency should determine whether an augmentation of its funding occurred and either refund excess funds to the tenants or deposit these funds to the Treasury as required under31 U.S.C § 3302. The Missile Defense Agency should determine whether any
5 United States Code (U.S.C.). 31 U.S.C. § 3302 (b) “Custodians of Money,” January 19, 2004, provides legal requirements for custodians of money: “An official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim.”
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Antideficiency Act violations have occurred, and if so, the Missile DefenseAgency should report the violations.
Recommendations, Management Comments, andAudit Response
Revised Recommendation. As a result of management comments, we revised draft Recommendation 1. to include the Comptroller General decision to allow agencies to refund excess funds to tenants or deposit the funds to the Treasury asrequired by 31 U.S.C § 3302 (b).
1. We recommend the Director, Missile Defense Agency review prior fiscal year cost allocations to tenants, identify fund augmentations when they occurred, and either refund excess funds to the tenants per ComptrollerGeneral decision or deposit the funds to the Treasury as required by31 United States Code § 3302 (b). If the Missile Defense Agency determinesthat Antideficiency Act violations have occurred, the Missile Defense Agencyshould report these as required by 31 U.S.C. § 1341 (a)(1)(A).
Management Comments. The Executive Director, Missile Defense Agency(MDA) partially concurred with the recommendation, agreeing to review its methods of calculating the cost allocations charged to the tenants. However, the Executive Director, MDA did not concur that the cost allocation used by JNICresulted in fund augmentation or a potential Antideficiency Act violation. She stated DoD Instruction 4000.19 requires interservice support costs to beincremental direct costs, measurable, and attributable to the receiver. She stated that the JNIC services are provided by its prime contractor; the tenants are a large proportion of the infrastructure and other costs of this contract; and excesssupport provided for the benefit of those tenants is measurable and directly attributable to the receivers. She added that the word “measurable” does not always mean an exact number and that it can mean estimating or determining based on some criteria. Furthermore, nothing in the instruction or law requires exact cost figures, and she maintained that MDA can base its charges to the tenants on estimates.
The Executive Director further stated that MDA was operating under the statutoryauthority of the Economy Act, 31 U.S.C. § 1535 versus the 31 U.S.C. § 3302 cited in the report. She stated that the Economy Act allows for estimates, thus statutory authority exists to make and collect charges from tenants. She also stated that 31 U.S.C. § 1535 (b) allows for adjustments of amounts paid by tenants as agreed by the heads of agencies on the basis of actual costs. She said the Economy Act encourages the return of excess of funds, but does not require it unless agreed upon by the agencies. She indicated that the MDA and Air Force did not desire to alter support agreement provisions after the fact; in turn, no legal basis exists to require additional reimbursement or refunding for past years’ charges. Furthermore, MDA did not directly benefit from any excess charges and any identified differences in estimated and actual costs resulted in credits to future tenant costs.
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Audit Response. Comments from the Executive Director, MDA, are not responsive. The Executive Director stated that, under the Economy Act, cost estimates are a sufficient basis for allocating and assessing tenant charges. We agree estimates may be used to assess costs but not to the exclusion of actual cost data when that is available. The contractor provided an estimate of task order costs to JNIC for the coming year. JNIC subsequently revised the data incalculating tenant charges per square foot. There was no subsequent capture ofactual cost data and adjustment to tenant charges via reimbursements or additional collections. The contractor must have an adequate cost accounting system in order to segregate and record contract costs. Data pertaining to direct,tenant-related costs were available and were the basis for the contractor’s estimate of future costs. An estimate can serve as the basis for a charge to a tenant. However, subsequent adjustment of the estimate to reflect actual cost is implicit in both DoD policy and the Economy Act.
Paragraph 4.6 of DODI 4000.19 states that interservice and intragovernmental support is reimbursable to the extent that provision of the specified support for a receiver increases the support supplier’s direct costs (that is, incremental direct cost). Both the Economy Act, 31 U.S.C. § 1535(b), and Paragraph 030502,Volume 11A, Chapter 3 of DOD Financial Management Regulation DOD 7000.14-R state:
Proper adjustment of amounts paid in advance shall be made as agreed to by the heads of the agencies or units on the basis of the actual cost of goods or services provided.
MDA has not indicated that any adjustment of estimated amounts that were paid in advance by JNIC tenants was attempted or that any agreement was made with the tenants to adjust the estimated amounts paid in advance by the tenants. If adjustments were made to the estimates reflecting the actual costs incurred by JNIC in rendering services to the tenants, JNIC would be in a position to creditthe tenant for amounts overpaid by the tenant or collect from the tenant additional charges when the services rendered exceeded the amount paid by the tenant.6
The Comptroller General noted that, under an Economy Act transaction, the ordering agency may advance funds to the performing agency for services, but the performing agency must return excess advanced funds to the ordering agency once actual costs of services are determined.7 The Comptroller General has also indicated that any retention of amounts in excess of actual costs called for in an
6. See Economy Act Payments After Obligated Account is Closed, B-260993, 1996 U.S. Comp. Gen. LEXIS 318; 96-1 Comp. Gen. Proc. Dec. P287 (June 26, 1996).
7 See National Archives and Records Administration Records Center Revolving Fund--Advance Payments, B-306975, 2006 U.S. Comp. Gen. LEXIS 44 (February 27, 2006).
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Economy Act agreement would result in an improper augmentation of appropriations.8 The Comptroller General specifically stated:
The Economy Act requires the ordering agency to pay the performing agency its actual cost of performance. When an agreement is funded by advances, the advances are usually deposited to a special fund against which the performing agency charges costs and makes payments to carry out the agreement. Any advances remaining after the performing agency reconciles its actual costs must be returned to the ordering agency.9
The Comptroller General separately determined that Economy Act transactions involving funding and provision of services and facilities from one agency Component to another involve the application of standards for cost determination similar to that of a DoD agency to other Government departments and agencies. Therefore, 31 U.S.C. § 3302 (b) is applicable to the MDA support agreements.
Furthermore, the Comptroller General has mandated that one performing agency refund overpayments to an ordering agency (amounts advanced in excess of the actual cost incurred) under an Economy Act agreement even though 12 years had elapsed since the completion of the Economy Act agreement.10
We believe funds were collected for services that were not of direct benefit to or associated with tenants. The fund augmentation may have also occurred in prior years, because MDA used a similar cost methodology for tenant costs. As such, refunds or credits to tenants may not obviate existing legal requirements for fund augmentation and Antideficiency Act violations.
2) We recommend the Deputy Director, Joint National Integration Center implement DoD Instruction 4000.19, “Interservice and IntergovernmentalSupport” by taking the following actions.
a. Charge tenants only for incremental direct costs attributable totenant presence and use of services.
b. Use a more appropriate and accurate methodology to determinereimbursable charges.
c. Review the utility cost calculation error and the nonreimbursable cost charges, identify any subsequent adjustments, and adjust tenant chargesaccordingly.
8 See Bureau of Land Management--Disposition of Water Resources Council Appropriations Advanced Pursuant to the Economy Act, B-250411, 72 Comp. Gen. 120; 1993 U.S. Comp. Gen. LEXIS 478 (March 1, 1993).
9 See Economy Act Payments After Obligated Account is Closed, B-260993, 1996 U.S. Comp. Gen. LEXIS 318; 96-1 Comp. Gen. Proc. Dec. P287 (June 26, 1996).
10 See Bureau of Land Management--Disposition of Water Resources Council Appropriations Advanced Pursuant to the Economy Act, B-250411, 72 Comp. Gen. 120; 1993 U.S. Comp. Gen. LEXIS 478 (March 1, 1993).
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Management Comments. The Executive Director, MDA, concurred with recommendation 2.a. and partially concurred with recommendations 2.b and c. The Executive Director stated that the cost methodology used by JNIC is consistent with DoD guidance and all reimbursable costs identified in the Host Tenant Support Agreements are considered incremental direct costs. She stated the task order element “administration costs” includes acquisition and contract administration services directly attributable to tenants. She added that the award fee is associated with labor costs benefiting tenants and that the tenants have anopportunity to evaluate the contractor’s performance and have input to the Award Fee Review Board. However, she did indicate the methodology will be revised for certain task elements to more accurately capture incremental direct costs.
The Executive Director says that MDA will process a credit to the JFCC-IMD inthe amount of $1,289 based on actual utility use in FY06 by March 30, 2007. She added MDA will work closely with the 50th Space Wing to ensure proper capture and charges for utility costs. However, she stated the tenants are a large part ofthe infrastructure and other costs of the contract, and the excess of supportprovided for the benefit of those tenants is measurable and directly attributable to the receivers, including common space.
Audit Response. Although the Executive Director, MDA concurred or partiallyconcurred with the recommendations, we do not consider the comments responsive. JNIC’s cost methodology is not consistent with DoD guidance because officials did not attempt to determine if funds were collected in excess of actual direct costs. The tasks associated with “Administration,” as defined in the task order, would be performed regardless of tenant presence. Tenant costs based on an award fee may be overstated or may not even be valid based on task order elements with no direct link to tenant-specific services. Without such a link, an award fee does not inherently indicate an incremental direct cost attributable to tenant presence or use of services. MDA should clearly demonstrate a direct tie to tenant presence or services on tenants’ behalf to allocate such costs forreimbursement. MDA also stated tenants have input into the contractor’sperformance during the award fee period. However, the full amount (12 percent) is estimated as awarded, with no subsequent adjustment for what is actually awarded. Without a process in place to refund the difference between the estimated and actual award fee costs determined by the Award Fee Review Board, the tenants may be overcharged by an award fee amount they feel is unwarranted.
JNIC had previously miscalculated the cost per square foot for utilities charged to JFCC-IMD. In the process of our audit, JNIC officials concluded that thecalculation of the cost per square foot for utilities needed to be changed. After they concluded the calculation was incorrect, they issued a credit. Although theJNIC changed the cost per square foot, the new calculation included an indirectcost of common space for a higher overall square footage allocation to JFCC-IMD. JNIC includes the common area infrastructure as part of JFCC-IMD square footage. The DoD Instruction 4000.19 states that the use of common-use infrastructure is typically non-reimbursable. We believe JNIC should not include the common-use infrastructure as part of JFCC-IMD square footage when multiplying it by the cost per square foot to arrive at the total utility cost to JFCC-IMD.
11
We request that the Executive Director, MDA reconsider MDA’s position on the recommendation, and provide final comments to the report by July 23, 2007.
3. We recommend the Commander, 50th Space Wing adjust the costallocation for sewer and water to reflect actual tenant usage.
Management Comments. The Commander, 50th Space Wing did not comment on a draft of this report. Therefore, we request that the Commander provide comments on the final report.
12
Appendix A. Scope and Methodology
We performed this audit at Schriever Air Force Base, Colorado, from November 2005 through March 2006 in accordance with generally accepted government auditing standards.
Our original audit scope was to determine whether appropriate charges and methodologies were being used to assess costs to tenants. However, because of the issues raised at Schriever Air Force Base, we limited our scope to only that installation. Our focus was on the methodologies the 50th Space Wing and JNIC used to assess charges to tenants. The scope of our audit was further limited in that we did not review JNIC’s management control program.
We reviewed DoD Instruction 4000.19, “Interservice and Intergovernmental Support.” We examined JNIC support costs and the methodology for calculating charges to its tenants. To ensure an accurate understanding of the methodology, we requested that JNIC review our summary and add pertinent comments and revisions. We reviewed the process Northrop Grumman used to develop the task order cost proposal. This review included the relevant contract documents and task order requirements. In addition, we verified the nature and amount of charges to JNIC by the 50th Space Wing under the support agreement. To obtain their understanding of the cost allocation methodology and its rationale and components, we interviewed all tenants in buildings 720 and 730; JNIC; Northrop Grumman Missile Systems; Lockheed Martin; and numerous offices of the 50th Space Wing—Security, Real Property, Civil Engineering, Support Agreement Manager, and Financial Management.
Use of Computer-Processed Data. We did not rely on computer-processed data to perform this audit.
Government Accountability Office High-Risk Area. The Government Accountability Office has identified several high-risk areas in DoD. This reportdoes not identify a high-risk area.
Prior Coverage
During the last 5 years, no audits have been conducted of Air Force host andtenant support agreements between JNIC and Schriever Air Force Base.
13
Appendix B. Overcharges
JNIC overcharged tenants $350,736 as a result of including nonreimbursable costs ($313,761) and making an error in calculating utility charges ($36,975). The $313,761 overcharge resulted because JNIC included nonreimbursable costs—administration costs incurred under the first task and award fees for the entire task order.
Table B-1. Calculation of Tenant Overpayment
Tenant reimbursable costs (non-storage) Amounts Environmental task order $4,874,250
Less: Administration $730,437 Award fee 450,765
Facility support cost $3,693,048Add: Other $398,289
Total reimbursable occupancy costs $4,091,337
Operational square footage 339,835
Reimbursable cost per square foot ($4,091,337 / 339,835)
($12.04 X 88,717)
$12.041
Tenant square footage (nonstorage) 88,717 Tenant (nonstorage) reimbursable costs $1,068,080
Tenant reimbursable costs (storage) Reimbursable costs per square foot 2 $7.851
Storage square footage 1,799 Tenant (storage) reimbursable costs ($7.85 X 1,799) $ 14,129
Tenant overpayment Costs reimbursable from tenants $1,395,970
Less: Tenant (nonstorage) reimbursable costs $1,068,080 Tenant (storage) reimbursable costs 14,129 Tenant reimbursable costs $1,082,210Total overpayment by tenants $ 313,761
1 Reimbursable costs per square foot are rounded. 2 No custodial, reproduction, JNIC communications, or 50th Space Wing support agreement costs were
included in the storage reimbursable costs per square foot.
14
Utility Charges
As a result of a calculation error, JNIC overcharged one of its tenants, JFCC, by$36,975. The calculation error resulted when JNIC improperly excluded square footage associated with common space in the calculation of utility costs per square foot. The miscalculation resulted in an erroneous cost of $5.00 per square foot, as opposed to $2.65.
Utility costs are determined by meter readings. Costs are apportioned by the 50thSpace Wing based on square footage as a cost to JNIC. Prior to assessing theseutility costs to JFCC, JNIC recalculated the costs by excluding common area square footage, deducting Air Force tenant square footage, and dividing the fullutility cost by the remaining square footage, yielding a revised rate of $5.00 per square foot.
However, the 50th Space Wing previously calculated the cost of utilities for both buildings by combining mission and common area square footage. From this total, square footage specific to Air Force tenants was excluded, resulting in anallocation of $2.65 per square foot.
JNIC removed common area square footage to avoid inclusion in the utilities calculation but did not reduce total square footage by a similar amount. This approach is consistent with DoD Instruction 4000.19, which specifies that costsfor common-use infrastructure are typically non-reimbursable. Thus, the rate is artificially inflated by $2.35, resulting in an overcharge of $36,975. Table B-2 shows details of the utility miscalculation.
Table B-2. Utility Calculation Error
Utilities JNIC calculation Correct calculation Difference Total utility cost $1,324,563 $1,324,563 Utility square footage 263,9891 499,8352 235,846 Utility cost per square foot3 $ 5.004 $ 2.65 $ 2 .35 JFCC square footage 15,734 15,734 JFCC utility cost5 $ 78,670 $ 41,695 $36,975
1 JNIC and JFCC mission area. 2 Total mission and common area. 3 Total utility cost divide by Utility square footage. 4 The Utility cost per square foot should be $5.02, but JNIC used $5.00 per square foot for their
calculation. 5 Utility cost per square foot multiplied by JFCC square footage.
15
Appendix C. Report Distribution
Office of the Secretary of Defense Under Secretary of Defense (Comptroller)/Chief Financial Officer
Deputy Chief Financial OfficerDeputy Comptroller (Program/Budget)
Director, Program Analysis and Evaluation
Department of the Army Auditor General, Department of the Army
Department of the Navy Naval Inspector GeneralAuditor General, Department of the Navy
Department of the Air Force Assistant Secretary of the Air Force (Financial Management and Comptroller) Auditor General, Department of the Air Force Commander, 50th Space Wing Air Force Space Command
Other Defense Organizations Director, Missile Defense AgencyDeputy Director, Joint National Integration Center
Non-Defense Federal Organization Office of Management and Budget
16
Congressional Committees and Subcommittees, Chairman andRanking Minority Member
Senate Committee on Appropriations Senate Subcommittee on Defense, Committee on Appropriations Senate Committee on Armed Services Senate Committee on Homeland Security and Governmental Affairs House Committee on Appropriations House Subcommittee on Defense, Committee on Appropriations House Committee on Armed Services House Committee on Oversight and Government ReformHouse Subcommittee on Government Management, Organization, and Procurement,
Committee on Oversight and Government ReformHouse Subcommittee on National Security and Foreign Affairs, Committee on
Oversight and Government ReformHouse Subcommittee on Technology, Information Policy, Intergovernmental
Relations, and the Census, Committee on Government Reform
17
Missile Defense Agency Comments
DEPARTMENT OF DEFENSE MISSILE DEFENSE AGENCY
7100 DEFENSE PENTAGON WASHINGTON, DC 20301-7100
MAR 1 8 2007
MEMORANDUM FOR PROGRAM DIRECTOR, DEFENSE FINANCIAL AUDITING SERVICE
SUBJECT: Draft of a Proposed Report on Air Force Host and Tenant Agreements Between the50th Space Wing, the Joint National Integration Center, and Tenants, (Project No. D2006-D000FD-0064.000), February 28,2007
Reference: DoD Inspector General Memorandum. Subject: "Report on Air Force Host and Tenant Agreements Between the50th Space Wing, the Joint National Integration Center, and Tenants, February 28, 2007
The Missile Defense Agency (MDA) appreciates the opportunity to review and provide comments on the subject report We strongly disagree with the audit conclusion that the Agency may have improperly augmented its appropriation or that there is a potential Antideficiency Act violation. MDA is compliant with the guidance of DoD[ 4000.19 and the provisions of the Economy Act that authorize support to Joint National Integration Center (JNIC) tenants, The JNIC employs an appropriate and reasonable methodology to assess reimbursable costs for tenant support. MDA does agree, however, that the JNIC maybe able to improve its methodology for calculating reimbursable costs charged to tenants for mail distribution, reproduction services, supplies and facility engineering.
The JNIC developed and applied methodology consistent with DoDI 4000.19, Interservice and Intergovernmental Support, specifically the guidance cited in Paragraph 4.6., regarding reimbursable costs under support agreements. In accordance with the guidance in this paragraph, the JNIC allocated incremental direct costs to each tenant based on resource consumption that would otherwise not have been incurred by the JNIC. The JNIC executes tenant support through a prime contract and uses this vehicle as a determinant to assess reimbursable support costs, All reimbursable costs identified in the Host Tenant Support Agreements are considered Incremental Direct Costs.
DoD] 4000.19, Paragraph E6.1.3, states that "Incremental direct costs should be associated with units of support (e.g., $5 per square foot) to simplify calculation of reimbursable charges and to use practical types of units to define the required support." The JNIC"primarily used this methodology la assess reimbursable costs based on the percentage of square feet occupied by each tenant. The JNIC methodology minimizes the effort and associated increased costs required to collect and report reimbursement by-using the simplified calculations and practical methods prescribed in DoDI 4000.19.
19
The JNIC, as hostfor tenant support, strives to provide cost efficient support through open communications to its tenants:. The methodology used bythe JNIC for determiningreimbursable costs for services is coordinated to gain concurrence of each tenant activity prior to implementation. The JNIC has employed prudent concepts and procedures consistent with DoD guidance to provide equitable reimbursable costing of services for its tenants. The attached matrix provides detailed comments indicating MDA's concurrence/non-concurrence with each recommendation, actions taken and future planned actions.
My point of contact for this action is Mr. MirzaBaig, Assistant Director, Program Liaison, at (703) 692-6538.
PATRICIA SANDERS
Executive Director
Attachment AS stated
20
21
Mis
sile
Def
ense
Age
ncy
Co
mm
ents
on
DoD
IGD
raft
Rep
orto
n "A
ir F
orce
Hos
t an
d Te
nan t
A
gree
men
ts
Bet
wee
n th
e50t
h Spa
ce W
ing, t
he Join
t Na
tio
na
l In
teg
ratio
n C
en
ter,
and
Te
na
nts
",
Pro
ject
N
o.
D-2
006-D
000F
D-0
064.0
00
DO
D I
G R
ecom
men
dati
on
MD
A C
omm
ents
Pro
vide
d in
Resp
onseto
the
Dra
ft
Rep
ort
1. T
he D
irec
tor,
Mis
sile
Def
ense
Age
ncy r
ev
iew
pri
or
Part
iall
y C
oncu
r fi
scal
yea
r co
st a
lloc
atio
ns t
o te
nant
s,
identi
fy fu
nd
augm
enta
tion
s w
hen
they
occ
urre
d, a
nd d
ep
osi
t the
A
ctio
ns T
aken
. Th
eJN
IC ha
s re
view
ed t
he f
isca
l ye
ar c
ost
Rev
ised
fu
nds
toth
e T
reas
ury
as r
equi
red
by 3
1 U
nite
d S
tate
s al
loca
tions
to
tena
nts
and
docs
not
fin
d au
gmen
tati
ons a
s C
ode
3302
(b)
. If
the
Mis
sile
Def
ense
Age
ncy
dete
rmin
es
indi
cate
d in
the
rep
ort f
ind
ing
s. E
ven
if th
ere
had
been
an
that
A
ntid
efic
ienc
y A
ct v
iola
tion
s ha
ve o
ccur
red,
the
ov
erch
arge
aug
men
tati
on,
how
ever
, th
e re
med
y w
ould
be
a re
fund
M
issi
le D
efe
nse
Age
ncys
ho
uld
repo
rt t
hese
as
requ
ired
to
the
serv
iced
age
ncy,
not
a d
epos
it to
the
Tre
asur
y.
MD
A o
ffer
s by
31
U.S
.C.
1341
(a
)(1)
(A).
th
e fo
llow
ing
expl
anat
ion:
Fina
l R
epor
t R
efer
ence
DoD
Ins
truc
tion
4000
.19
rest
rict
s re
imbu
rsem
ent
of
inte
rser
vice
su
ppor
t to
inc
reas
es i
n th
e su
ppor
t su
ppli
ers
dire
ct c
osts
(i.e
. in
crem
enta
l dir
ect c
ost)
. C
osts
ass
ocia
ted
wit
h co
mm
on
use
infr
astr
uctu
re a
re n
on-r
eim
burs
able
exc
ept f
or s
uppo
rt p
rovi
ded
sole
ly f
or t
he b
enef
it of
one
or
mor
e te
nant
s. U
nder
the
In
stru
ctio
n su
ch c
osts
mus
t be
mea
sura
ble
and
dire
ctly
at
trib
utab
le t
o th
e re
ceiv
er.
Th e
wor
d m
easu
rabl
e ha
s va
riou
s m
eani
ngs,
but
one
of t
hose
is
to e
stim
ate
or a
ppra
ise
by a
cr
iter
ion.
Thu
s, t
he w
ord
mea
sura
ble
does
not
alw
ays
mea
n an
ex
act
num
ber
it ca
n m
ean
esti
mat
ing
or d
eter
min
ing
base
d on
so
me
crite
ria.
Th
at i
s pr
ecis
ely
wha
t M
DA
did
at
the
JNIC
to
dete
rmin
e ch
arge
s to
be
paid
by
tena
nts
for
serv
ices
pro
vide
d to
th
em.
MD
AJN
IC se
rvic
es a
re m
ostly
pro
vide
d by
its
pri
me
cont
ract
or.
Nor
thro
p-G
rum
man
und
er a
ser
vice
s co
ntra
ct u
nder
whi
ch
serv
ices
are
pro
vide
d by
tas
k or
del
iver
y or
der
base
d on
the
am
ount
of s
ervi
ces
requ
ired
. In
thi
s in
stan
ce,
as t
enan
ts a
re a
la
rge
prop
ortio
n of
the
infr
astr
uctu
re a
nd o
ther
cos
ts o
f th
is
cont
ract
(ap
prox
imat
ely
31%
of t
he p
erso
nnel
res
idin
g in
the
JNIC
fa
cili
ties
are
ten
ants
), e
xces
s su
ppor
t pr
ovid
ed f
or t
he
bene
fit
of th
ose
tena
nts
are
mea
sura
ble
and
dire
ctly
att
ribu
tabl
e to
th
e re
ceiv
ers,
The
y m
ay n
ot b
e m
easu
rabl
e to
an
exac
t dol
lar
figur
e be
caus
e yo
u ca
nnot
div
ide
up t
he p
reci
se n
umbe
r of
bodi
es
Att
achm
ent:
1 of
9
Mis
sile
Def
ense
Age
ncy C
omm
ents
on D
oD I
G D
raft
Rep
ort
on "
Air
For
ce H
ost
and
Ten
ant
Agr
eem
ents
Bet
wee
n th
e 50
th S
pace
Win
g, t
he J
oint
Nat
iona
l In
tegr
atio
n Cen
ter,
and
Ten
ants
",
Pro
ject
No.
D
-2006-D
000F
D-0
064.0
00
prov
ided
by
Nor
thro
p-G
rum
man
ne
cess
ary
to d
o a
part
icul
ar
job,
bu
t th
ey
are
mea
sura
ble
as c
ompa
red
to t
he a
mou
nt o
f se
rvic
es
bein
g pr
ovid
ed b
y th
e co
ntra
ctor
tha
t wou
ld n
ot h
ave
been
pr
ovid
ed h
ad t
he t
enan
ts n
ot b
een
in t
he
faci
liti
es.
Thu
s, v
ario
us
met
hods
(in
clud
ing
squa
re f
oota
ge o
f use
able
spa
ce)
can
be a
nd
have
bee
n us
ed o
ver t
he y
ears
to
mea
sure
the
se c
osts
and
whi
le
diff
eren
ces
of o
pini
onm
ay
resu
lt as
to
whi
ch m
easu
re i
s ul
tim
atel
y th
e m
ost a
ccur
ate,
the
re c
an b
e no
dis
pute
tha
t al
l suc
h m
easu
res
wer
e do
ne i
n go
od f
aith
and
wit
h a
reas
onab
le a
ttem
pt
to d
ocum
ent t
he b
est
poss
ible
est
imat
e fo
r th
ose
cost
s.
We
also
be
liev
e th
ey w
ere
acco
mpl
ishe
d co
nsis
tent
wit
h th
e la
w a
nd
regu
latio
ns a
ppli
cabl
e to
suc
h ac
tivi
ties
.
Not
hing
in
the
DoD
Ins
truc
tion
or i
n th
e la
w re
quir
es t
hat
exac
t co
st f
igur
es b
e de
term
ined
and
ref
unde
d fo
r in
ter-
agen
cy s
ervi
ce
supp
ort
in a
ccor
danc
e w
ith
som
e la
ter
defi
ned
cost
sta
ndar
d,
exce
pt w
here
the
fun
ds r
ecei
ved
have
not
oth
erw
ise
been
util
ized
, in
whi
ch c
ase
they
sho
uld
be r
etur
ned
(DoD
I 40
00.1
9, p
arag
raph
4.
6.2)
. Fu
rthe
rmor
e, i
n ac
cord
ance
wit
h Pa
ragr
aph
E.6
.1.3
DoD
I 40
00.1
9 In
crem
enta
l di
rect
cos
ts s
houl
d be
ass
ocia
ted
wit
h un
its
of su
ppor
t (e
.g.,
$5 p
er s
quar
e fo
ot)
to s
impl
ify
calc
ulat
ion
of
reim
burs
emen
t ch
arge
s an
d to
use
pra
ctic
al t
ypes
of u
nits
to
defi
ne t
he r
equi
red
supp
ort.
Inde
ed,
unde
r th
e D
oD F
inan
cial
M
anag
emen
t Reg
ulat
ion,
Vol
ume
11 A
. Cha
pter
I,
para
grap
h 10
203.
E,
"Con
trac
ts c
osts
inc
urre
d fo
r co
ntra
cts
awar
ded
as p
art
of a
reim
burs
able
agr
eem
ent s
hall
be b
ille
d to
the
ben
efit
ing
orga
niza
tion
."
Bec
ause
of t
he n
atur
e of
the
MD
A's
co
ntra
ct w
ith
Nor
thro
p-G
rum
man
a
dete
rmin
atio
n of
the
cont
ract
's in
crem
enta
l co
st i
ncre
ases
wer
e ba
sed
on g
ood
faith
and
rat
iona
l es
tim
ates
and
bi
lled
to t
he b
enef
itin
g or
gani
zati
on c
onsi
sten
t w
ith
this
and
oth
er
DoD
Reg
ulat
ions
.
The
fact
tha
t in
hin
dsig
htso
me
othe
r met
hod
mig
ht h
ave
been
ut
iliz
ed t
o de
term
ine
wha
t som
e m
ay p
erce
ive
as a
bet
ter
met
hod
to d
eter
min
e ac
tual
cos
ts,
does
not
tra
nsla
te t
he o
rigi
nal
acti
ons
Atta
chm
ent:
2 of
9
23
Mis
sile
Def
ense
Age
ncy C
om
men
ts on
DoD
IG
Dra
ft R
epor
ton
"Air
For
ce H
ost
andT
en
an
t Agr
eem
ents
Bet
wee
n th
e5
0th
Spa
ceW
ing, t
he J
oin
t N
ati
on
al
Inte
gra
tion
Ce
nte
r, a
nd
Tenants
",
Pro
ject
No.
D
-20
06
-D0
00
FD
-00
64
.00
0
into
an
agen
cy; a
ugm
enta
tion
.
The
Gov
ernm
ent
Acc
ount
abil
ity
Off
ice
(GA
O),
in
its P
rinc
iple
of
App
ropr
iati
on L
aw, C
hapt
er6,
stat
es t
hat:
"As
a ge
nera
l pr
opos
ition
, an
age
ncy
may
not a
ugm
ent
its a
ppro
pria
tion
s fr
om
outs
ide
sour
ces
wit
hout
spe
cifi
c st
atut
ory
auth
orit
y."
As
stat
ed
else
whe
re i
n th
is r
espo
nse
to t
heIG
Dra
ft,
MD
A d
id n
ot c
alcu
late
te
nant
cha
rges
in
an u
nrea
sona
ble
man
ner
or i
ncon
sist
ent
wit
h D
oD r
egul
atio
ns i
n an
y in
stan
ce d
eali
ng w
ith
its
tena
nts
at t
he
JNIC
. T
hus,
it i
s M
DA
's v
iew
tha
t no
aug
men
tati
on i
ssue
s ex
ist
or e
xist
ed i
n th
is s
itua
tion
.
But
, eve
n ifan
augm
enta
tion
que
stio
n di
d ex
ist,
a re
view
of
the
augm
enta
tion
rul
es is
nec
essa
ry t
o de
term
ine
if a
vio
lati
on m
ay
have
occ
urre
d Th
e st
atut
ory
auth
ority
cit
ed to
sup
port
an
alle
gati
on o
f aug
men
tatio
n in
thi
s in
stan
ce i
s 31
US
C 33
02.
Tha
t st
atut
e ap
plie
s to
sit
uati
ons
whe
re t
he g
over
nmen
t re
ceiv
es m
oney
fr
om a
n ou
tsid
e so
urce
and
no
othe
r st
atut
ory
auth
ority
' all
ows
it
to u
se t
he f
unds
rec
eive
d.
Nor
mal
ly t
his
has
to d
o w
ith
fund
s re
ceiv
ed f
rom
pri
vate
or
othe
r so
urce
s fo
r w
hich
Con
gres
s di
d no
t co
ntem
plat
e a
part
icul
ar a
genc
y's
bene
fiti
ng f
rom
the
ir r
ecei
pt.
Spec
ific
ally
, th
e st
atut
e st
ates
at
para
grap
h (a
):
"Exc
ept
as:
prov
ided
by
anot
her
law
, an
off
icia
l or
age
nt o
f the
Uni
ted
Stat
es
Gov
ernm
ent
havi
ng c
usto
dy o
r po
sses
sion
of p
ubli
c m
oney
sha
ll ke
ep t
he m
oney
saf
e w
itho
ut
(1 )
lend
ing
the
mon
ey
(2)
usin
g th
e m
oney
(3
) dep
osit
ing
the
mon
ey i
n a
bank
: and
(4
) exc
hang
ing
the
mon
ey
for o
ther
am
ount
s."
Firs
t, 31
US
C 33
02 i
s in
appl
icab
leto
this
si
tuat
ion.
T
here
was
, in
deed
, sp
ecif
ic s
tatu
tory
aut
hori
ty p
rovi
ded
by a
noth
er l
aw f
or
MD
A t
o re
ceiv
e an
d "use
" the
se f
unds
. In
the
even
t of a
n A
tta
chm
en
t:
3 o
f 9
Mis
sile
Def
ense
Age
ncy C
omm
ents
on D
oD I
G D
raft
Rep
ort
on "
Air
For
ce H
osta
nd
Ten
ant
Agr
eem
ents
Bet
wee
n th
e
50th
Spa
ce W
ing,
the
Join
t N
atio
nal
Inte
gra
tion C
ente
r, an
d T
enants
",
Pro
ject
No.
D
-2006-D
000F
D-0
064.0
00
ov
erch
arge
, M
DA
bel
ieve
s th
e ap
prop
riat
e re
med
y w
ould
be
a re
fund
or
cred
it to
the p
ayin
g ag
ency
, no
t a d
epos
it to
the
T
reas
ury
(See
aga
in,G
AO
Prin
cipl
es o
f A
ppro
pria
tion
Law
, ch
apte
r 6)
.
In t
his
case
the
age
ncy
(MD
A)
was
ope
rati
ng u
nder
the
sta
tuto
ry
auth
ority
of t
he E
cono
my
Act
, 31
USC
153
5, re
ceiv
ing
O&
M
fund
s vi
a M
IPR
fro
m t
he A
ir F
orce
to
purc
hase
ser
vice
s on
the
ir
beha
lf v
ia d
irec
t fu
nd c
ites
plac
ed o
n M
DA
ser
vice
con
trac
ts.
The
Eco
nom
y A
ct s
peci
fica
lly p
rovi
des
that
ord
ers
for
serv
ices
m
ay b
e pl
aced
wit
h ot
her
agen
cies
, an
d th
at e
stim
ated
or
actu
al
cost
as
dete
rmin
ed b
y th
e ag
ency
fill
ing
the
orde
r ca
n be
use
d to
de
term
ine
the
cost
s to
be
char
ged
to t
he r
eque
stor
. T
hus,
es
timat
ed c
osts
are
sta
tuto
rily
aut
hori
zed
to b
e ut
iliz
ed i
n th
ese
inst
ance
s.
Add
itio
nal s
tatu
tory
auth
orit
y, 3
1 U.S
.C. l
536
and
10
U.S
.C. 2
205
auth
oriz
es t
he d
epos
it of
suc
h fu
nds
to A
genc
y 2
4
appr
opri
atio
ns.
Furt
herm
ore,31
U.S
.C. 1
535(
b)
stat
es i
n pa
rt t
hat
"Pro
per
adju
stm
ents
of a
mou
nts
paid
in
adva
nce
shal
l be
mad
e as
agr
eed
to b
y th
e he
ads
of th
e ag
enci
es o
r un
its
on t
he b
asis
of t
he a
ctua
l co
st o
f goo
ds o
r ser
vice
s pr
ovid
ed."
T
he A
ct c
onte
mpl
ates
the
us
e of
est
imat
es a
nd a
dvan
ce p
aym
ents
, an
d, w
hile
it m
ay
enco
urag
e it
, do
es n
ot m
anda
te r
etur
n of
exc
ess
fund
s if
any
exi
st,
unle
ss o
ther
wis
e ag
reed
upo
n by
the
two
agen
cies
. 'th
is s
tatu
te
reco
gniz
es t
hat
som
e fle
xib
ilit
y is
nece
ssar
y to
enc
oura
ge c
ost
savi
ngs
via
serv
ices
bei
ng p
rovi
ded
by o
ther
age
ncie
s ra
ther
tha
n ha
ving
to
dupl
icat
e co
sts
and
expe
nses
by
usin
g ot
her
tool
s an
d th
at fl
exib
le l
angu
age
is i
nclu
ded
in t
he F
MR
(V
ol.
11 A
, C
h. 3
. pa
ra 030502).
In t
his
inst
ance
the
tena
nts
wou
ld h
ave
had
to
obta
in s
igni
fica
nt f
undi
ng t
o b
uy,
leas
e, o
r bu
ild
othe
r fa
cili
ties
an
d co
ntra
ct f
or o
ther
sup
port
ser
vice
s, h
ad t
he J
NIC
fac
ilit
ies
no
t be
en a
vail
able
.
Eco
nom
y A
ct o
rder
s w
ithi
n D
oD ty
pica
lly
are
exec
uted
thr
ough
A
tta
chm
en
t:
4 o
f 9
25
Mis
sile
Def
ense
Age
ncy
Com
men
ts
on D
oDIG
Dra
ft R
epor
ton
"Air
For
ce H
ost
and T
en
an
t Agr
eem
ents
Bet
wee
n th
e5
0th
Spa
ceW
ing, t
heJo
int N
ati
on
al
Inte
gra
tion C
ente
r, a
nd
Te
na
nts
",
Pro
ject
No.
D
-200
6-D
000F
D-0
064.
000
MIP
R's
. A
ddit
iona
lly,
the
R
egul
atio
n pr
ovid
es th
at w
ritt
en
dete
rmin
atio
ns
unde
r th
e E
cono
my
Act
are
not
req
uire
d, e
xcep
t vi
a th
e D
D F
orm
114
4, I
SSA
Agr
eem
ents
. JN
IC u
tili
zed
both
the
M
IPR
and
the
FO
RM
114
4 pr
oces
ses
to i
mpl
emen
t th
e su
ppor
t se
rvic
es o
rder
s to
the
Air
For
ce.
The
JNIC
did
not
hav
e an
agr
eem
ent
in i
ts I
SS
As
to a
djus
t th
e es
tim
ates
to l
ater
det
erm
ined
act
uals
, be
caus
e to
do
so w
ould
hav
e be
en i
mpr
acti
cal:
it w
as a
dmin
istr
ativ
ely
cum
bers
ome,
dif
ficu
lt to
det
erm
ine,
and
, du
e to
the
cos
t pl
us a
war
d fe
e na
ture
of
its
cont
ract
wit
h N
orth
rop-
Gru
mm
an,
prob
ably
not
eve
n po
ssib
le f
or
man
y ye
ars-
unti
l co
ntra
ct c
lose
out w
hen
fina
l la
bor
and
othe
r co
sts
are
veri
fied
.
In a
ddit
ion,
due
to
the
diff
icul
ty o
f cal
cula
ting
exa
ct c
osts
for
the
se
rvic
es b
eing
pro
vide
d, a
nd t
he u
nder
stan
ding
and
agr
eem
ent (
its
a re
sult
of
disc
ussi
ons
each
yea
r be
twee
n th
e pa
rtie
s re
gard
ing
the
esti
mat
ed c
osts
to
be c
harg
ed-g
ener
ally
the
prev
ious
yea
rs'
adju
sted
fig
ure
s plu
s co
ntra
ctua
lly
man
date
d in
flat
ion
type
cos
t in
crea
ses
for
the
upco
min
g ye
ar),
the
Air
For
ce a
nd t
he M
DA
did
no
t de
sire
or
need
to
ente
r in
to p
rovi
sion
s re
-ope
ning
the
sup
port
ag
reem
ents
aft
er t
he f
act.
Bec
ause
the
y di
d no
t hav
e re
-ope
ning
pr
ovis
ions
, an
y po
ssib
le la
ter d
eter
min
atio
ns o
f ot
her
met
hods
to
ca
lcul
ate
mor
e ac
cura
te d
eter
min
atio
ns o
f ove
r o
r un
der
char
ges,
di
d no
t, by
law
, re
quir
e a
reim
burs
emen
t o
r ad
diti
onal
bil
l to
the
se
rvic
ed o
rgan
izat
ion.
T
hey
mig
ht s
ugge
st c
hang
es f
or f
utur
e bi
llin
gs,
but
not
for p
ast
ones
.
Furt
herm
ore,
MD
A d
id n
ot d
irec
tly
bene
fit f
rom
any
subs
eque
ntly
de
term
ined
bet
ter
met
hods
to
calc
ulat
e th
ese
cost
s si
nce
the
fund
s w
ere
dire
ctly
pl
aced
on
the
cont
ract
and
exp
ende
d fo
r th
e se
rvic
es
prov
ided
to
the
tena
nts.
M
DA
did
not
buy
or
buil
d an
ythi
ng f
or
its o
wn
bene
fit w
ith
thes
e fu
nds.
A
nd.
in th
ose
inst
ance
s w
here
di
ffer
ence
s in
est
imat
es a
nd a
ctua
ls w
ere
iden
tifi
ed, c
redi
t w
as
give
n to
the
tena
nt in
sub
sequ
ent y
ears
. T
hus,
the
ques
tion
is n
ot
Att
ach
me
nt:
5 o
f 9
26
Mis
sile
Def
ense
Age
ncy C
omm
ents
onD
oD
IG D
raft
Rep
ort
on "
Air
For
ce H
osta
nd
Ten
ant
Agr
eem
ents
Bet
wee
n th
e
50th
Spa
ce W
ing,
the
Join
t N
atio
nal
Inte
gra
tion C
ente
r, a
nd T
enants
",
Pro
ject
No.
D
-2006-D
000F
D-0
064.0
00
on
e of
augm
enta
tion
but
shou
ld b
e th
e re
ason
able
ness
of
the
gove
rnm
ent's
cal
cula
tion
s of
est
imat
ed c
osts
. If
ther
e w
ere
othe
r or
eve
n be
tter
way
s to
cal
cula
te t
he e
stim
ated
cos
ts,
MD
A c
an
revi
sit
its m
etho
ds o
f cal
cula
ting
thos
e co
sts,
and
we
have
agr
eed
to d
o th
at,
but t
hat
does
not
tran
slat
e in
to a
n au
gmen
tati
on o
r po
tent
ial
Ant
i-D
efic
ienc
y A
ct v
iola
tion
.
In v
iew
ofth
e Ec
onom
y Act
aut
hori
ty, t
he a
ppro
pria
te a
nd
reas
onab
le i
mpl
emen
tati
on o
f it
by t
heJN
IC an
d th
e A
F,
no
im
prop
er F
und
Aug
men
tati
on o
ccur
red.
2.
The
Dep
uty
Dir
ecto
r, J
oint
Nat
iona
l In
tegr
atio
n C
oncu
r w
ith
Com
men
t C
ente
r im
plem
ent
DoD
Ins
truc
tion
400
0.19
, "I
nter
serv
ice
andI
nte
rgover
nm
enta
l Su
pp
ort
" by
tak
ing
The
JNIC
fully
com
plie
s w
ith
the
prov
isio
ns o
f D
oDI-
4000
.19.
th
e fo
llow
ing
acti
ons:
A
ll r
eim
burs
able
cos
ts i
dent
ifie
d in
the
I lo
st T
enan
t Su
ppor
t
Agr
eem
ents
are
Inc
rem
enta
l D
irec
t C
ost.
The
JNIC
exe
cute
s •A
. Ch
arg
e te
nant
s on
ly f
or i
ncre
men
tald
ire
c t c
osts
te
nant
sup
port
thr
ough
a p
rim
e co
ntra
ct a
nd u
ses
this
veh
icle
as
a at
ttri
buta
ble
to t
enan
t pr
esen
ce a
nd u
se o
f se
rvic
es.
dete
rmin
ant t
o as
sess
rei
mbu
rsab
le s
uppo
rt c
ost
IAW
DoD
I 40
00.1
9. p
ara
4.1.
IA
W D
oDI
4000
.19,
par
a E
2.1.
5 'In
crem
enta
l D
irec
t C
ost
is t
he c
ost
of re
sour
ces
dire
ctly
con
sum
ed b
y an
in
divi
dual
act
ivit
y th
at w
ould
not
hav
e be
en c
onsu
med
if t
he
indi
vidu
al a
ctiv
ity
wer
e no
t pe
rfor
med
. A
cos
t th
at i
s sp
ecif
ical
ly
iden
tifi
ed w
ith
a si
ngle
co
st o
bjec
t.""
The
prim
e co
ntra
ct
used
for
re
imbu
rsem
ent
calc
ulat
ion
is f
or "
Faci
lity
Sup
port
" w
hich
in
clud
es th
e di
sput
ed c
ateg
orie
s o
f:
- T
ask
Ord
er A
dmin
istr
atio
n (R
ef D
oDI
4000
.19,
par
a E
6.1.
4.42
, Pu
rcha
sing
and
Con
trac
ting
Ser
vice
s).
litis
re
imbu
rsab
le ta
skin
g inc
lude
s co
st a
ssoc
iate
d w
ith
acqu
isit
ion
and
cont
ract
adm
inis
trat
ion
serv
ices
. D
ue to
the
vo
lum
e of
tena
nt p
opul
atio
n (3
1% )
and
spac
e al
loca
ted
(26%
) of
the
JNIC
's
tota
l; co
sts
asso
ciat
ed w
ith
Tas
k O
rder
A
dmin
istr
atio
n is
dir
ectl
y at
trib
utab
le t
o te
nant
pre
senc
e an
d us
e of
ser
vice
s.
- A
war
d Fe
e:
Aw
ard
fee
is c
alcu
late
d at
12
% o
f la
bor
cost
s.
Atta
chm
ent:
6 of)
Mis
sile
Def
ense
Ag
en
cy C
om
me
nt s
on
Do
DIG
. Dra
ft R
epor
ton
"Air
Fo
rce H
osta
nd
Tena
nt A
gre
em
en
ts B
etw
ee
n
the5
0th
Spa
ceW
ing, t
he Jo
int N
atio
na
l Inte
grat
ion C
ente
r, a
nd T
enants
",
Pro
ject
N
o. D
000F
D-0
064.
000
Lab
or c
osts
that
ar
e ne
goti
ated
for
eac
h ta
sk o
rder
dire
ctly
su
ppor
t the
res
pect
ive
tena
nt.
Eac
h te
nant
rec
eive
s a
bene
fit
from
th
ese
labo
r ho
urs.
T
here
fore
, w
e di
sagr
ee t
hat
awar
d fe
es a
re n
ot a
lway
s ti
ed to
a t
enan
t-sp
ecif
ic ac
tiv
ity o
r th
at
awar
d fe
es a
ssoc
iate
d w
ith
subt
asks
are
not d
irec
tly
link
ed
to t
enan
t ser
vice
nee
ds.
We
also
dis
agre
e th
at t
enan
ts
cann
ot c
ontr
ol o
r in
flue
nce
the
awar
d fe
e co
sts.
Th
e aw
ard
fee
proc
ess
prov
ides
for
sub
ject
ive
eval
uati
on o
f a
cont
ract
or's
per
form
ance
and
JN
IC p
rogr
am m
anag
ers
and
tena
nts
have
equ
al o
ppor
tuni
tyto
prov
ide
inpu
t on
this
ev
alua
tion
thr
ough
the
Aw
ard
Fee
Rev
iew
Boa
rd.
Whi
le t
he
Fee
Det
erm
inin
g O
ffic
ial
exer
cise
s di
scre
tion
in
mak
ing
the
over
all
awar
d fe
e de
cisi
on,
it is
bas
ed o
n th
e A
war
d Fe
e R
evie
w B
oard
rec
omm
enda
tion
. T
his
prac
tice
is
cons
iste
nt
acro
ss a
ll t
ask
orde
r ac
tivi
ty u
nder
the
con
trac
t. Fi
nall
y, w
e di
sagr
ee th
at
tena
nts
do n
ot b
enef
it di
rect
ly f
rom
aw
ard
fee
27
co
sts.
Fe
e is
a s
tand
ard
and
allo
wab
le c
ompo
nent
of
any
cost
rei
mbu
rsab
le
cont
ract
. A
t the
JN
IC,
we
util
ize
an
awar
d fe
e arr
ange
men
t to
inc
enti
vize
th
e co
ntra
ctor
to
perf
orm
and
del
iver
qua
lity
serv
ice.
A
s pr
evio
usly
sta
ted.
aw
ard
fee
is c
alcu
late
d ba
sed
on l
abor
cos
ts.
Sinc
e te
nant
s di
rect
ly b
enef
it fr
om t
hese
lab
or c
osts
, w
e be
liev
e th
at
awar
d fe
e is
app
ropr
iate
.
2h.
Us e
a m
ore
appr
opri
ate
and
accu
rate
met
ho
do
log
y to
P
arti
ally
C
oncu
r de
term
ine
reim
burs
able
cha
rges
. Th
e m
etho
dolo
gy t
he J
NIC
us
edfo
r the
cal
cula
tion
of
reim
burs
able
cha
rges
is c
ompl
iant
wit
h DoD
I 400
0.19
, pa
nt
E6.
1.3.
In
crem
enta
l di
rect cost
s are
ass
ocia
ted
wit
h un
its o
f su
ppor
t to
sim
plif
y ca
lcul
atio
nof
reim
burs
emen
t cha
rges
. T
he
cost
met
hodo
logy
use
d to
det
erm
ine
theb
asi
s of
reim
burs
emen
t an
d th
e qu
anti
ty
of su
ppor
t pr
ovid
ed i
s fu
rnis
hed
to t
he te
nant
in a
ti
mel
y (a
nnua
lly
)and
coo
pera
tive
man
ner.
T
he m
etho
dolo
gies
ar
c jo
intl
y re
view
ed f
or a
ppro
pria
tene
ss a
nd a
ccur
acy.
A
fter
the
m
etho
dolo
gies
and
cos
ts a
rc a
gree
d up
on,
the
Supp
ort
Agr
eem
ent
Att
ac
hm
en
t:
7 o
f 9
9
Mis
sile
Def
ense
Agency
Co
mm
en
ts o
n D
oD I
G D
raft
Rep
ort
on "
Air
Fo
rce
Hos
t an
d Tenant A
gre
em
en
ts B
etw
een
the
50th
Spa
ce W
ing,
the
Join
t N
atio
na
l In
tegra
tion C
ente
r, a
nd T
enants
",
Pro
ject
No.
D
-2006-D
000F
D-0
064.0
00
is
sign
ed b
y bo
th p
artie
s
Act
ions
Pla
nned
: Th
e JN
IC w
ill w
ork
in c
oope
rati
on w
ith
the
tena
nts
to i
mpr
ove
the
met
hodo
logy
use
d to
asc
erta
in
reim
burs
emen
t co
sts
asso
ciat
ed w
ith
mai
l dis
trib
utio
n,
repr
oduc
tion
ser
vice
s, s
uppl
ies,
and
faci
lity
engi
neer
ing.
E
xam
ples
of c
ost
calc
ulat
ion
impr
ovem
ents
inc
lude
: T
rans
ferr
ing
serv
ice
to t
he T
enan
t spe
cifi
c co
ntra
ct v
ehic
le,
and
acce
ssin
g co
st
per
unit
basi
s.
Met
hodo
logy
im
prov
emen
ts t
hat
coul
d m
ore
prec
isel
y ca
ptur
e in
crem
enta
l dir
ect
cost
wou
ld m
ost
like
ly d
rive
ad
diti
onal
cos
ts i
n tr
acki
ng a
nd r
epor
ting
. C
oord
inat
ion
to b
e co
mpl
eted
by
Oct
ober
200
7.
2c.
Rev
iew
the
uti
lity
cos
t ca
lcul
atio
n er
rora
nd
the
Par
tial
ly C
oncu
r no
nrei
mbu
rsab
le
cost
cha
rges
, id
enti
fy a
ny
subs
eque
nt
adju
stm
ents
, an
d ad
just
ten
ant
char
ges
acco
rdin
gly.
. T
he J
NIC
no
n-co
ncur
s wit
h th
e al
lega
tion
of a
cos
t ca
lcul
atio
n er
ror.
The
est
imat
ed u
tili
ty c
osts
cha
rged
to
the
JFC
C-I
MD
was
$7
8,67
0 an
d th
e ac
tual
uti
lity
cos
ts (
as c
alcu
late
d by
the
50t
h SW
on9
Mar
07)
is
76,1
22.7
9.
The J
NIC
has
alre
ady
prov
ided
a
cred
it to
the
JFC
C-I
MD
of $
1,25
9 on
20
Sep
06 o
n pr
ojec
ted
esti
mat
es.
The
JNIC
non-
conc
urs
that
Ten
ants
wer
e ch
arge
d fo
r no
nrei
mbu
rsab
le c
osts
. T
he a
ssum
ptio
n th
at t
he J
NIC
Ten
ants
ha
ve l
ittle
im
pact
on
the
com
mon
use
inf
rast
ruct
ure
and
is
ther
efor
e no
nrei
mbu
rsab
le i
s in
corr
ect
MD
A J
NI C
se
rvic
es a
re
mos
tly
prov
ided
by
its
prim
e co
ntra
ctor
, N
orth
rop-
Gru
mm
an
unde
r a s
ervi
ces
cont
ract
und
er w
hich
ser
vice
s ar
e pr
ovid
ed b
y ta
sk o
r de
live
ry o
rder
bas
ed o
n th
e am
ount
of
serv
ices
req
uire
d.
In t
his
inst
ance
, as
ten
ants
are
a l
arge
pro
port
ion
of t
he
infr
astr
uctu
re
and
othe
r co
sts
of th
is c
ontr
act
(app
roxi
mat
ely
31%
of
the
pers
onne
l re
sidi
ng i
n th
eJN
IC fa
cili
ties
are
ten
ants
), ex
cess
su
ppor
t pr
ovid
ed f
or th
e be
nefi
t of
thos
e te
nant
s ar
c m
easu
rabl
e an
d di
rect
ly a
ttri
buta
ble
to t
he r
ecei
vers
.
Att
ach
me
nt:
8
of
28
29
Mis
sile
Def
ense
Ag
en
cy C
om
me
nts
on
DoD
IG
Dra
ft R
epor
t o
n "A
ir F
orce
Ho
sta
nd
Tenant
Ag
ree
me
nts
Be
twe
en
the
50"'
Spa
ce W
ing,
the
Join
t N
ati
on
al
Inte
gra
tio
n C
en
ter,
and
Te
na
nts
",
Pro
ject
No.
D
-200
6-D
000F
D-0
064.
000
Act
ion
s ta
ken/
Pla
ned:
1
) T
he J
NIC
w
ill
proc
ess
a cr
edit
to th
e JF
CC
-IM
D
in t
he a
mou
nt o
f $1,
289
base
d on
the
act
ual u
tility
us
age
in F
Y0
6 by
30
Mar
07.
2)
The
JN
IC
will
wor
k cl
ose
ly w
ith
the
50
th S
pace
Win
g t
o en
sure
we
are
prop
erly
cap
turi
ng a
nd
chan
ging
u
tilit
y co
sts.
C
oo
rdin
atio
n to
be
com
plet
ed b
y O
cto
be
r 20
07.
Attach
ment:
9 o
f 9
Team Members The Department of Defense Office of the Deputy Inspector General for Auditing, Defense Financial Auditing Service prepared this report. Personnel of the Department of Defense Office of Inspector General who contributed to the report are listed below.
Paul J. Granetto Patricia A. Marsh Amy J. Frontz Jeffrey T. HunterJohn C. Furutani Abby R. BrakefieldAllison Tarmann
