18F finances in disarray, watchdog warns

A new report says 18F has lost $36 million to date, "repeatedly overestimated revenue" and pushed back its projected break-even date to 2020.

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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.