Coast Guard CFO takes blame for $138M in misspending

The Coast Guard’s chief financial officer is taking sole responsibility for the apparent misuse of $138 million despite federal auditors’ assertion that other Coast Guard officers and executives also ought to be considered responsible, according to a report issued today.

Rear Adm. Keith Taylor is taking full blame for the Coast Guard’s policy of improperly using maintenance funds to make up for a severe funding gap in construction and acquisition funds of shore facilities from 2003 to 2007.

The Coast Guard has acknowledged those actions were an apparent violation of the Anti-Deficiency Act, which requires that federal agencies spend appropriations only from the authorized accounts, according to today’s report from Anne Richards, assistant inspector general for audits at the Homeland Security Department.

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Violations of that law must be reported to the president, Congress and and the U.S. Comptroller General. According to Richards, the guard’s report on its apparent violations should include the names of the official responsible for the policy, the obligating official and certifying officer responsible for payment.

However, Taylor, in his response to Richards, wrote that he is the only one responsible.

“The Coast Guard asserts that the responsible official is solely the USCG Chief Financial Officer, who was responsible for the promulgation of financial policy,” Taylor wrote in an Oct. 29 memo to Richards in response to the audit.

Richards recommended that the guard submit a report of the 317 apparent violations that includes the names of the several officers involved. However, because of the disagreement over whether the CFO is solely responsible, the audit states that the recommendation is “open and unresolved.”

The guard’s Anti-Deficiency Act problems arose because of severe underfunding of the acquisition and construction accounts, the audit indicated.

“We identified a funding gap of approximately $511 million ... over the 4-year period,” Richards wrote. “We reported the Coast Guard improperly used maintenance funds to upgrade or expand its shore facilities to compensate for this gap.”

The guard estimated that it is likely that $131 million was improperly drawn from maintenance funds to augment acquisition, construction and upgrades to its shore facilities. Richards raised the estimated amount involved to $138 million.

The guard changed its policies in fiscal 2008 by getting authority from Congress to expend maintenance funds for minor shore construction projects not exceeding $1 million in total cost at any location. The service is seeking permanent legislation for this appropriation. The audit found no additional Anti-Deficiency Act violations in fiscal 2009 and 2010.

Richards made four other recommendations:

• Review fiscal 2008 maintenance projects and report any Anti-Deficiency Act violations found.
• Obtain a legal opinion from Coast Guard counsel.
• Release clarifying guidelines for current policies.
• Continue to pursue permanent legislation for appropriations for minor shore construction projects not exceeding $1 million in total cost at any location.

Coast Guard officials agreed with those recommendations.