18F finances in disarray, watchdog warns

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The General Services Administration's 18F development and consulting shop has lost $36 million since its inception in FY 2014, according to a new review released by the agency's Office of Inspector General Office.

The OIG's Office of Inspections and Forensic Auditing initiated the study in December, based on concerns expressed "by several senior GSA officials about the management of 18F."

The long-rumored report, released Oct. 24, found the group's plan to reach full cost recovery status has been hampered because of inaccurate financial projects, increased staffing and the amount of time staff spent on "non-billable activities."

Those non-billable activities included extensive outreach and promotion activities. 18F staff reportedly spent 13,989 hours (valued at roughly $2.34 million) "promoting their projects and accomplishments through blog posts, websites, social media accounts, and speaking events," and spent 727 hours (worth just over $140,000), "developing the 18F brand."

The report states that, "18F managers have repeatedly overestimated revenue" and "with the support of the Administrator's office, hired more staff than revenue could support." 18F managers, according to the report, recently pushed the projected break-even date from 2019 to 2020.  

GSA funds18F under a Memorandum of Agreement between its Federal Acquisition Services and Office of Citizen Services and Innovative Technologies (OCSIT), using FAS's Acquisition Services Fund, a revolving fund fed by the revenue generated from FAS' business lines.

That mechanism continued after 18F and OCSIT became GSA's Technology Transformation Service (TTS) last spring.

The OIG evaluation said it also found 18F staffers were working on projects before interagency agreements for the work were completed, before they had the proper signatures or outside of agree-upon performance periods.

It also found 18F had a manual billing process and "untimely timekeeping and expense recording" that resulted in inaccurate bills for its clients.  It said if the billing discrepancies are left unresolved, 18F's parent, GSA, could be left paying other agencies' augmented appropriations.

This isn't the first time 18F has found itself under scrutiny for financial concerns. A Government Accountability Office study last June also found issues with the unit's financing. That report said 18F lost more than $9 million in FY 2015 and said it was on track to lose $15 million in the current fiscal year, and more than $12 million in FY2017.

The OIG' report recommends that the agency put together a plan to achieve full cost recovery for the Acquisition Services Fund and ensure that  internal 18F projects have appropriate supervisory reviews.  It also urged 18F to implement controls over its reimbursable agreement process, so it doesn't stay outside the specified lines of work in an agreement. Additionally, the OIG concluded, 18F also must get a better handle on its billing processes, put reliable accuracy controls in place and retain billing records under GSA's records management standards.

The OIG evaluation has been in the works since Dec. 2015, in response to concerns from senior GSA officials about 18F financing.

In Oct. 21 reply comments included in the report, GSA CIO and acting TTS Commissioner David Shive wrote, "While 18F's value proposition is clear, we must continue to refine business operations to ensure the organization achieves full cost recovery, and we share your concern with certain activities to date."

Shive announced in his reply comments an updated financial plan for 18F, new management controls, a third-party review of financial processes and a new chief operating officer position at TTS.

Shive has been acting head of TTS since the departure of Phaedra Chrousos in July. The agency is looking for a permanent commissioner for the service, and for a new executive director for 18F, to replace Aaron Snow, who stepped down as 18F executive director earlier this month.

About the Author

Mark Rockwell is a senior staff writer at FCW, whose beat focuses on acquisition, the Department of Homeland Security and the Department of Energy.

Before joining FCW, Rockwell was Washington correspondent for Government Security News, where he covered all aspects of homeland security from IT to detection dogs and border security. Over the last 25 years in Washington as a reporter, editor and correspondent, he has covered an increasingly wide array of high-tech issues for publications like Communications Week, Internet Week, Fiber Optics News, tele.com magazine and Wireless Week.

Rockwell received a Jesse H. Neal Award for his work covering telecommunications issues, and is a graduate of James Madison University.

Click here for previous articles by Rockwell. Contact him at mrockwell@fcw.com or follow him on Twitter at @MRockwell4.

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Reader comments

Mon, Oct 31, 2016

Istfan--the Bureau is tied up on other more pressing matters, so the criminal investigation of the unit will have to wait. Meanwhile, we need to decide whether the Gen gal Servixes Administraiton should be entitled to knowingly lose money on projects. This could involve losing one's job in a private sector setting, and the same should be true here, right?

Wed, Oct 26, 2016 A-FED

While the report does offer insight into what appear to be startup issues that certainly need immediate attention, it (and this article) fail to really put it into perspective. The government can easily pay that much for enterprise software licenses at a single agency, or on attempting to develop colossal IT failures with a decade of "consulting" support from typical beltway company that is paid hourly and not for success. The system is broken at the core and requires a massive change. Many of these businesses have larger legal teams and business development teams than they do actual highly skilled technical people. In fact I bet a few of the posts above are from "industry".

Tue, Oct 25, 2016

GSA allowed the long time successful FEDSIM federal organization to become like a commercial entity. FEDSIM always ensured the client received the best value and project support at a reasonable cost.

Tue, Oct 25, 2016 Industry Professional D.C. Metro

Look, here's what everyone should honestly take from this situation:

1-18F's value to government remains clear, despite being established under the false pretense that they wouldn't compete against traditional industry.

2- Now. Despite their technical acumen, it's now been proven that the assertion by lovers of Silicon Valley that IT projects should be "cheap" and traditional providers at fat and wasteful, we can see that that has never been true.

GSA does need to testify on The Hill as regards how the 18F experiment does inadvertently demonstrate that pure commoditization of the IT business cannot be achieved in a way that allows for a profitable marketplace. And, if appropriated dollars continue to be used to subsidize project losses from 18F, Congress is essentially using taxpayer dollars to kill businesses - because we can't compete with 18F's ability to take a financial loss on its operations. Make no mistake... $36M of losses is. TON.

Tue, Oct 25, 2016

Why no comment from Phaedra GSA can't pretend this continuing problem, striking at the heart of this experiment, does not exist. Most companies would have terminated such money losing program that cannot keep control of its budgets and expenditures. Further, what agency customer is going to trust the bills generated by 18F?

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