Inspector says improper payment made to MCI

Certification of a DOD Payment for Telecommunications Services

The Defense Department's inspector general has accused the Defense Information Systems Agency of directing one of its agencies to improperly certify a $16.6 million lump payment to MCI (formerly WorldCom Inc.) for telecommunications services in fiscal 2001.

An IG report issued today says the Defense Information Technology Contracting Organization (DITCO), which falls under DISA's control, made a $16.6 million disbursement on the Federal Telecommunication Service 2001 contract that "had the effect of avoiding" federal rules on acquisition and DOD requirements on financial management.

"At the direction of DISA management, [DITCO] certified the payment without researching and validating that 17,030 invoices that supported it," the report says. "Additionally, DITCO did not offset the disbursement with $12.8 million of credits the government had earned."

As a result, the IG asserts, DITCO certified overpayments of at least $6.3 million, and possibly more.

DISA claims the disbursement was a legal settlement of a contractor dispute.

A disagreement between DITCO and MCI over the need to provide service order completion notices resulted in thousands of unpaid invoices during the contract's first two years. In June 2001, the General Services Administration determined that although the lack of accurate and timely notices was a contractual issue, MCI's nonperformance was not significant enough to withhold payment.

Following GSA's decision, DISA headquarters entered into discussions with MCI to resolve the disagreement about the backlog of unpaid invoices. The discussions culminated in DISA's paying a $16.6 million lump sum payment for the unpaid invoices, according to the report.

The IG said DISA officials advised DITCO that the payment should be made prior to ensuring the invoices were authorized and accurate.

"We believe that DISA management made the settlement payment prematurely without properly verifying the supporting documentation and recovering approximately $10.1 million in credits still owed to DOD," the report says.

DISA management informed the Defense Finance and Accounting Service that the invoices would be researched by DITCO later to verify that services were provided and the charges were valid. To facilitate the payment to MCI, DISA management overrode the DITCO internal control that would have normally prevented the invalid or duplicate payment of invoices.

DISA officials disagreed with the assertion that it improperly paid MCI, saying they believed they were heading off a worse situation by making the payment quickly and avoiding any interest charges that may have been building. The payment came after more than 18 months of negotiations over what MCI was required to provide for almost 150,000 invoices, Frank Chase, DISA's acting IG, said in a statement.

DISA has said it is putting policies in place to ensure premature payments are not again made on the FTS contract.