The federal government could save hundreds of millions of dollars a year if agencies would follow up on their own auditors' findings that contractors and grant recipients improperly charge the government for items or services, Office of Management and Budget director James T. McIntyre said.
McIntyre said that a soon-to-be-released General Accounting Office report shows agencies have failed to pursue $4.3 billion of such disputed charges turned up by audits of government contracts and grants, and many of those disputes will be resolved in the government's favor, either in whole or in part.
He told reporters that he has ordered department and agency heads to tighten their systems for reviewing followups of their audits and has told them to appoint a special representative to discuss the situation with OMB.
Most of the disputed charges already have been paid out by the government and arise when a government auditor thinks a contractor or grant recipient has spent more in an area than was authorized, or used government funds in areas that were not specified in the terms of the contract or grant.
In some situations, such as in defense contracts, a company may allocate a certain amount of overhead to the cost of the contract, while the government auditor thinks it should have been allocated to the general overhead ofthe firm itself.
McIntyre said each agency is supposed to have a process of adjudication for such "unresolved audit findings," but said that agencies often delay taking action for too long or that officials waive any recoveries even without proper authority to do so.
"The problem is that there is no incentive for these officials to go out and try to recover the money. The incentive is to get the grants and contracts out, not to go after money that has already been spent."
There is no evidence of criminal fraud on the part of either the grant recipients or the contractors, McIntyre said, merely bad management practices on the part of the government.
He said a bill passed by Congress and signed last week by the President that puts a presidentially appointed inspector general in 12 major agencies should help speed the process.
He said agencies and departments must establish procedures for resolving contract and grant disputes and should adopt some sort of "tickler" file to ensure that they stay on top of the disputes.
Ten years ago OMB issued a circular to government officials ordering them to resolve all disputes in a "timely" manner, and that memo was strengthened earlier this year.
According to the GAO report, McIntyre said, a detailed study of six major agencies - the departments of Defense; Commerce; Housing and Urban Development; Health, Education and Welfare, and Labor and the Environmental Protection Agency - showed that it took an average of a year and a half to resolve disputes and often as long as five years.
He said the GAO report "also found that agency officials often resolved valid findings in the grantee's or contractor's favor without adequate explanation, allowing them to claim and keep 62 percent of the amount which auditors reported as questionable. Further, even when officials agreed with the auditors, they actually collected less than half the amount due to government."
McIntyre said the GAO report discovered that it is often the same official who administered a program who has the last word on whether disputed finding should be pursued. These officials "find the task of resolving audit findings onerous and therefore of low priority," McIntyre said.
The move to tighten up audit follow-ups is one of several management improvements the Office of Management and Budget has developed in recent months that have saved or will save the government hundreds of millions of dollars, McIntyre said.
Last May, OMB tightened many of the government's cash management procedures that it claims will save about $187 million a yeaer and ordered a 20 percent reduction in travel costs in fiscal 1979 that should save about $75 million.
OMB also ordered agencies to improve their efforts to recover for the government money that grant recipients have not used and is instituting changes in the way the government buys many of its goods and services.