IG warns CBP to strengthen controls over ACE contract

DHS IG report

With more than $760 million already paid to vendors building the Automated Commercial Environment (ACE) cargo inspection system, the Homeland Security Department’s inspector general has warned that current controls may not be enough to prevent incorrect invoicing and payments.

The Bureau of Customs and Border Protection (CBP) awarded the 10-year ACE development contract in 2001 to a coalition led by IBM, and it expects to pay $3 billion by ACE’s completion.

However, an IG audit found that controls for review and approval of invoices were inadequate. In particular, the IG said in a report, written guidance describing review procedures was not sufficiently detailed, reviewers did not always document the activities they performed and CBP did not sufficiently research the causes for issues identified during the reviews.

The IG mostly blamed this on the written direction CBP provided.

Standard operating procedures for the verification of five major cost elements, for example, did not provide reviewers with sufficiently detailed guidance for them to effectively and consistently verify the accuracy, reliability and completeness of invoices.

The weakness in internal controls increases the risk of improper payments on the ACE contract, the IG said, adding that CBP needs to improve written procedures, better monitor the process, document the review activities performed and research the cause of the discrepancies.

CBP agreed with the IG’s conclusions and has already reviewed IBM’s statement for costs incurred during the 2004 contract year. Earlier this year it updated its invoice review and approval process, along with its review checklists.

On the positive side, the IG said, CBP’s internal controls over the process for evaluating contractor performance and related award and incentive fee payments are adequate.