State Dept. blows more than $4M on unsupported, unallowable contractor expenses: audit report

This week's Golden Horseshoe is awarded to the State Department for over $4 million in unallowable expenditures related to the U.S. mission in Somalia, according to a watchdog report.

In an unclassified report, the Office of Inspector General of the State Department detailed millions in unallowable or unsupported costs incurred due to lax financial oversight by the department, including the tardy submission and review of contractor financial reports. 

"OIG reviewed four awards granted to Bancroft Global Development (Bancroft), the United Nations Office of Project Services, Valar, and the International Development Law Organization," according to the report. The audit found that the award recipients did not always submit financial reports by required deadlines and that the department did not always review the reports once they were submitted.

"Without timely submissions and reviews of required financial reports, the Department has limited insight into whether Federal funds are spent as intended and in accordance with the terms and conditions of the awards," the watchdog found. 

The IG audit found that State allowed one contractor, Bancroft Global Development, to keep $3.78 million to pay its employees incentive compensation unauthorized in the terms and conditions of the award, as well as another $321,599 in unallowed expenditures related to travel, lodging, prepaid calling cards, fuel, meals and other expenses.

The report said the company provided handwritten lists and Excel spreadsheets for personnel instead of check-in and check-out documentation for lodging expenses. 

Included among Bancroft's unallowed expenses detailed by the OIG were: prepaid calling cards purchased for $22,511; fuel costs totaling $92,600; and $176,268 for meals with "guests, mentees and business partners."

The watchdog also found cash advances, salary payments, supplies and other unallowable expenses by the contractor.

When questioned about the meal expenses, "Bancroft personnel stated that they incurred meal expenditures for guests in meetings because 'that was part of the business,'" the OIG reported.

"OIG determined that these expenses should not have been paid, in part, because the Grants Officer and the Grants Officer Representative (GOR) did not conduct a site visit until 2 years and 8 months after issuing the award and did not request additional supporting documentation from Bancroft on its financial transactions despite having noted potential concerns with Bancroft's financial activities in the pre-award risk assessment.”

Bancroft, a D.C.-based 501c3 organization, had its records seized by the FBI and ICE for alleged violations regarding the unauthorized removal or retention of classified material, and the IRS audited its 2008-2010 tax returns. The NGO's principals sued the federal government over its seizure of documents. The nonprofit was also the focus of news stories in outlets including the Wall Street Journal and the New York Times.