The Federal Civil Penalties Inflation Adjustment Act of 1990 established annual reporting requirements for civil monetary penalties assessed and collected by Federal agencies. Civil penalties are defined as any non-criminal penalty, fine or other sanction for which a given dollar amount or maximum amount is specified by Federal law, and which is assessed or enforced by an agency as a result of an administrative proceeding or civil action in the Federal courts. The Department has assessed fines on individuals and companies for exporting defense materials without required approvals and for misrepresenting facts on an export application.
September 30, 2007
September 30, 2008
|SPACE SYSTEMS/LORAL, INC.||Violating the express terms and conditions of the Department’s munitions licenses and exporting defense services without a munitions license or other authorization to the People’s Republic of China.||1/9/2002||$14,000,000||$3,371,428||$—||$1,685,714||$1,685,714|
|HUGHES ELECTRONICS CORP. & BOEING SATELLITE SYSTEMS||Violating the terms and conditions of the Department’s munitions licenses and exporting defense services without munitions licenses or other authorizations (and conduct relating to two failed launches of rockets carrying spacecraft) to the People’s Republic of China.||3/4/2003||12,000,000||1,500,000||—||—||1,500,000|
|GENERAL MOTORS CORPORATION||Exporting defense articles and services (to foreign person employees of proscribed countries) in violation of the terms or conditions of other approvals that were provided by the Department.||11/1/2004||8,000,000||3,000,000||—||1,500,000||1,500,000|
|Violating the terms and conditions of the Department’s munitions and licenses by agreeing to sell defense articles (Radome Measurement System – AL8098/AL8099) to the People’s Republic of China||08/29/05||500,000||166,666||—||—||166,666|
|GOODRICH CORPORATION||Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department’s International Traffic in Arms Regulations (ITAR).||03/28/06||1,250,000||500,000||1,750,000||250,000||2,000,000|
|L-3 COMMUNICATIONS||Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department’s International Traffic in Arms Regulations (ITAR).||02/28/06||2,000,000||—||2,000,000||500,000||1,500,000|
|THE DIRECTTV GROUP INC. & HUGHES NETWORK SYSTEMS INC.||Exporting unauthorized defense articles and services (to foreign person employees of proscribed countries) in violation of the terms and conditions of the Department’s International Traffic in Arms Regulations (ITAR).||1/26/2005||5,000,000||1,500,000||—||1,000,000||500,000|
|LOCKHEED MARTIN (SIPPICAN) CORPORATION||Exporting unauthorized classified and unclassified technical data and defense articles and services in violation of the terms and conditions of the Department’s International Traffic in Arms Regulations (ITAR).||12/12/06||3,000,000||2,000,000||—||1,000,000||1,000,000|
|SECURITY ASSISTANCE INTERNATIONAL, INC. & HENERY L. LAVERY III||Violating the terms and conditions of the Department’s munitions licenses and exporting defense services without munitions licenses or other authorizations to the People’s Republic of China.||12/12/2006||75,000||75,000||—||—||75,000|
|ITT SPACE SYSTEM||ITT Corporation has entered into a consent agreement to settle 208 violations of the AECA and ITAR in connection with the unauthorized export of defense articles and technical data.||6/11/2007||20,000,000||4,000,000||16,000,000|
|NORTHROP GRUMMAN (ELECTRONIC SYSTEMS)||Northrop Grumman Corporation has entered into consent agreement to settle 110 violations of the AECA and ITAR in connection with the unauthorized export of defense articles and defense services.||3/14/2008||10,000,000||3,000,000||7,000,000|
|LOCKHEED MARTIN (MISSILE & FIRE CONTROL DIV.)||Lockheed Martin Corporation has entered in a consent agreement to settle 8 violations of the AECA and ITAR in connection with export of classified technical data.||2008||3,000,000||2,000,000||1,000,000|
|BOEING (MCDONNELL AIRCRAFT & MISSILE DIV.)||The Boeing Company has entered in a consent agreement to settle 40 violations of the AECA and ITAR in connection with the valuation of manufacturing license agreements.||6/9/2008||3,000,000||1,000,000||2,000,000|
|GOVERNMENT OF ISRAEL||The details of the violations were not yet available.||500,000||500,000||—|
|DIRECT TV GROUP||The details of the violations were not yet available.||2,500,000||2,500,000||—|
Outstanding debt from non-federal sources (net of allowance) increased from $32.5 million in FY 2007 to $55.3 million in FY 2008.
Non-federal receivables consist of debts owed to the International Boundary and Water Commission, Civil Monetary Fund, and amounts owed for Repatriation Loans, medical costs, travel advances, and other miscellaneous receivables.
Of the delinquent receivables over 365 days old, $6.9 million is for the Repatriation Loan Program. These are loans given to destitute American citizens stranded overseas to allow them to return to the United States. The loans are given only if the individual cannot obtain funds from relatives, friends, employers, or another source. The Department acts as the lender of last resort. The loan becomes delinquent 60 days after repatriation to the United States. Due to their poor economic situation, most of these individuals are unable to repay the loans on time.
The Department uses installment agreements, salary offset, and restrictions on passports as tools to collect its receivables. It also receives collections through its cross-servicing agreement with the Department of the Treasury. In 1998, the Department entered into a cross-servicing agreement with the Department of the Treasury for collections of delinquent receivables. In accordance with the agreement and the Debt Collection Improvement Act of 1996 (Public Law 104-134), the Department referred $1,644,602 to Treasury for cross-servicing in FY 2008. Of the current and past debts referred to Treasury, $821,775 was collected in 2008.
|FY 2008||FY 2007||FY 2006||FY 2005|
|Number of Accounts||864||884||1,044||772|
|Amounts Referred (In Thousands)||$1,645
The Prompt Payment Act (PPA) requires Federal agencies to pay their bills on time or an interest penalty must be paid to vendors. In FY 2008, the Department made 728,596 payments subject to prompt payment regulations; 620,473 of these payments were paid overseas and 108,123 were paid domestically. The Department paid 692,808 or 95% of its payments on time. Presented below is a table that reflects the timeliness of the Department’s payments from FY 2006 through FY 2008.
|FY 2006||FY 2007||FY 2008|
During FY 2008, the Department paid $5.4 million in accrued interest penalties, compared to $1.4 million the previous year, a 286 percent increase. The increase in Prompt Payment penalties was primarily due to domestic payment delays caused by the transition to a new accounting system in FY 2007. The Department averaged $736 in interest penalties per million dollars of prompt payments made in FY 2008.
|Interest Paid ($000)||5,411||1,420||405|
|Interest Under $1 Not Due ($000)||—||—||—|
|Interest Due But Not Paid ($000)||—||—||—|
|Number of Procurement Card Transactions|
|FY 2006||$ 30,367||$ 26,563||$ 30,482||$ 32,598||$ 42,127||$ 39,555||$ 17,065||$ 14,821||$ 34,235||$ 43,183||$ 28,675||$ 65,543|
|FY 2007||$ 35,855||$ 29,878||$ 83,164||$ 54,741||$ 57,348||$ 48,789||$ 97,066||$ 17,775||$222,313||$314,724||$110,402||$312,144|
Ninety percent of total domestic and overseas payments were made through electronic funds transfer (EFT). EFT payments made for the Domestic operations were 95 percent of the total domestic payments. EFT payments for overseas operations were 87 percent of the total number of overseas payments. Fewer payments are made overseas due to the complexities of banking operations in some foreign countries
|Checks Subtotal|| 316,500
The Improper Payments Information Act of 2002 (IPIA), Public Law No. 107-300, requires agencies to annually review their programs and activities to identify those susceptible to significant improper payments. OMB Circular A-123 Appendix C, Requirements for Effective Management and Remediation of Improper Payments, defines significant improper payments as annual improper payments in a program that exceed both 2.5 percent of program annual payments and $10 million. Once those highly susceptible programs and activities are identified, agencies are required to estimate and report the annual amount of improper payments. Generally, an improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, and administrative or other legally applicable requirement.
Based on a series of internal control review techniques, the Department determined that none of its programs are risk-susceptible for making significant improper payments at or above the threshold levels set by OMB. These reviews were conducted in addition to audits under the Single Audit Act, the CFO Act, GAO reviews, and reviews by the Department’s Office of Inspector General. The Department also conducted risk assessments of programs exceeding $35 million in annual outlays. These risk assessments showed that the Department is at low risk for making significant improper payments at or above the threshold levels set by OMB. The Department’s future plans include developing a process to integrate risk assessment efforts between reviews conducted to meet compliance requirements with OMB Circular A-123 Appendix A and C, as well as with our FMFIA program.
The Department of State, Bureau of Resource Management, has established a two-tiered erroneous payment monitoring and review program that supplements the formal account receivable process. The Global Financial Services (GFS), Office of Claims, has integrated erroneous payment identification and collection as key functions of the accounts payable process and the paying office’s operations. The claims office has established an internal debt management unit, whose primary mission is the identification and collection of erroneous payments, coordinating with the Accounts Receivable Division (ARD) as necessary. In addition, the GFS Office of Oversight Management & Analysis conducts a monthly query of all domestic payments, focusing on identifying potential erroneous and duplicate payments. The GFS approach has incorporated various manual and automated data analysis techniques and processes to identify, validate and collect erroneous payments, including use of data mining software, manual sampling of internal payment records, U.S. Treasury taxpayer identification number matching, and sampling of vendors.
In fiscal year 2008, the GFS domestic claims debt management process identified and validated 501 actual duplicate/erroneous payments, totaling $15 million, out of 129,504 total payments, totaling $4.8 billion. The claims office has collected or recovered 466 of the 501 erroneous payment debts, totaling $14 million (93 percent). The primary reasons for these improper payments and debts continues to be the use of wrong vendor payment records in the funding of the awards and/or authorization of payment on submitted claims.
The GFS duplicate or erroneous payment program has proven to be a cost effective tool (the program operates at an annual cost of $100 thousand) to supplement the ARD domestic commercial debt management and recovery. Identified debts not collected by the office of claims are transferred to ARD for follow-up collection. Since fiscal year 2005, this GFS program has identified 1,284 duplicate/erroneous payments ($30 million), and collected 1,197 identified debts ($29 million or a collection rate of 95 percent).
Review for CY Reporting
Reviewed and Reported
Identified for Recovery
Identified for Recovery
Identified for Recovery
(CY + PY)
(CY + PY)
|Amount||$4.8 billion||$4.8 billion||$15.4 million||$14.3 million||$14.63 million||$30.03 million||$28.53 million||$1.5 million|
Although the Department does not have programs determined risk-susceptible for making significant improper payments at or above the threshold levels set by OMB, the Department performed elective procedures to determine if improper payments were made in association with business class travel. The Department’s mission is conducted throughout the world and requires extensive travel, sometimes of a significant duration. Because of the high volume of travel, the Department has made concerted efforts to determine if official travel has adhered to government-wide and Department regulations for premium class travel.
In March 2006, GAO issued a report that identified shortcomings in the Department of State’s authorization and administration of business class travel. In response to the report, the Department instituted additional measures to strengthen internal controls over the approval and use of business class travel. The GAO report recommended that the Secretary of State conduct regular reviews of the Department’s use of business class travel and report the findings to senior management. In response to this recommendation, the Department incorporated the review of business class travel into the ongoing reviews conducted in accordance with the IPIA, the GAO guide, and other guidelines for evaluating and testing controls over sensitive payments.
During fiscal years 2006, 2007, and 2008, a random sample was selected by a statistician to yield an estimate with a 90 percent confidence level and interval of approximately 2.5 percent. There were no instances where evidence was found that a business class travel payment was unapproved and needed to be recovered. For 2008 there were no instances where the travelers flying business class were found to be ineligible, though there was one error found that stemmed from weaknesses where supporting documentation was not readily available. This was projected to an overall error rate of 1% or $5,385. The FY 2006 review’s error rate was 24 percent or $348,567 and the FY 2007 error rate was 4 percent or $17,038. The improvement shown in the sampling results demonstrates that the additional controls the Department put in place in 2006 have been effective in ensuring improper payments were not made for business class travel.
Secretary’s List of Culturally Significant Properties:
The residence of the U.S. Ambassador to Japan, with its spacious reception rooms and large garden, offers serenity in the center of downtown Tokyo. In 1925, the U.S. government acquired the land from the Japanese government for $115,000 after an earthquake and fire had destroyed a former Prince’s residence there and the adjacent U.S. Embassy buildings. This residence, a blend of Moorish and Asian styles with colonial overtones, was one of the first projects of the new Foreign Services Building Commission established by President Herbert Hoover. Dubbed “Hoover’s Folly” at the time, the chancery and residence with imported Georgia walnut panels and Vermont marble flooring were completed during the Depression for $1.25 million.
During World War II, the compound was under the protection of the Swiss government. From 1945 to 1951, General Douglas MacArthur lived in what his staff called “The Big House.” On September 27, 1945 Emperor Hirohito came to the residence to speak with MacArthur and the next day a now-famous photograph of their meeting in the living room was on the front page of every newspaper in Japan. Department of State/OBO