Moreover, obtaining  knowledge of current requirements and usage, as well as developing  forecasts of users’ future telecommunication needs, would assist Navy  acquisition planning to ensure those future needs can be met in a more  cost-effective manner. Navy Sites Lacked Controls Needed to Ensure Appropriate Oversight and Payment of Telecommunication Services

Although DOD established a policy in 1991 requiring that DOD components  biennially review and revalidate their local and long-distance  telecommunication requirements, none of the four Navy locations we  visited or DITCO Scott had established effective review and revalidation  programs to ensure that they were not paying for capacity or services they  no longer needed or they were not paying too much for the needed services  used. In addition, the Navy did not have policies to ensure the cost-effective  purchase and use of cell phone services. Finally, we found that the Navy does not have policies addressing the  administration and management of calling cards. Consequently, approving  officials at these sites failed to detect inappropriate and irregular  telecommunication charges, which allowed overpayments and duplicate  payments to be made to vendors. However, some of the  Navy sites we audited were unaware they owned calling cards. For this one card alone, between April and June of 2003,  the Navy paid over $17,000 in long-distance charges. However, because no  one was monitoring the activity on this card regularly, the unit was  unaware of the excessive charges. Instead, it was not until the vendor’s  fraud unit raised questions about more than $11,000 in charges during the  first 6 days of July 2003 that the card was suspended. We further recommend that the Secretary of the Navy direct the CNO to  establish comprehensive policies and guidance governing the purchase and  use of: cell phone services, which should include (1) the use of prenegotiated or  centrally negotiated rates and (2) periodic assessment of cell phone  usage to determine if plan packages provide the most cost-effective  means to satisfy the Navy’s usage requirements; and calling card services, which should include policies about  accountability, the proper review of invoices, and the prohibition of  sharing of calling cards. Specifically, we were asked to evaluate the effectiveness of  DOD’s management oversight and controls of payments to its vendors. Our objectives were to determine (1) whether the Navy has the basic cost  and inventory information needed to oversee and manage its purchases  from telecommunication vendors and (2) whether selected Navy sites have  adequate controls to provide reasonable assurance that telecommunication  goods and services are purchased cost effectively and payments are made  only for valid telecommunication charges.
Why GAO Did This Study

Problems with management oversight and control of DOD's purchase card program led to concerns that similar issues exist for DOD's vendor payments. As a result, this report focuses on the Navy's telecommunication program and whether (1) the Navy has the basic cost and inventory information needed to oversee and manage these purchases and (2) selected Navy sites have adequate control to provide reasonable assurance that goods and services are purchased cost effectively and payments are made only for valid charges.

What GAO Found

The Navy did not know how much it spent on telecommunications and did not have detailed cost and inventory data needed to evaluate spending patterns and to leverage its buying power. Obtaining knowledge of current requirements and usage, as well as developing forecasts of future telecommunication needs, would assist Navy's acquisition planning to ensure future needs were met in a more cost-effective manner. At the four case study sites we audited, management oversight of telecommunication purchases did not provide reasonable assurance that requirements were met in the most cost-effective manner. For local and long-distance services, these sites did not follow policies to biennially review and revalidate these requirements. As a result, they paid for services no longer required. Also, the Navy lacks policies to provide assurance that cell phone requirements are met in the most cost-effective manner. Cell phone usage at three sites was not monitored to determine whether plan minutes met users' needs. Consequently, these sites overpaid for cell phone services. Also, none of the sites had adequate controls over review of invoices to provide assurance of payments for only valid charges. These sites failed to detect erroneous charges and potentially improper use of these services. In addition, the Navy lacks specific policies and processes addressing the administration and management of calling cards. Consequently, some sites did not know they owned and were being billed for calling cards. Other sites allowed calling cards to be shared and were unable to determine the legitimacy of the calls, and thus paid for potentially fraudulent or abusive long-distance charges. On one card alone, in a 3-month period, the Navy paid over $17,000. However, because no one was regularly monitoring the activity on this card, the unit was unaware of potentially fraudulent charges. Not until the vendor's fraud unit raised questions about more than $11,000 in charges incurred during the first 6 days of July 2003 was the card suspended.