IG Examines DOJ IT Cost Management Practices

In September 2022, the Department of Justice (DOJ) Inspector General (IG) issued a report with findings from an audit done on the DOJ Justice Management Division’s (JMD) enterprise IT cost infrastructure. The report found several faults within JMD management of department-wide IT services and costs.

The DOJ Office of Chief Information Officer (OCIO) resides under the JMD and is responsible for providing enterprise IT services, opportunities, and administrative support with its own funding. This entity is separate from the OCIOs that reside under each DOJ component agency. The OCIO is also responsible for managing the department’s working capital fund (WCF), including delivering WCF services, monitoring WCF budgets and acting as a point of contact for WCF inquiries. According to the IG report, DOJ IT spending in FY 2021 was $3.2B, with 20% of that total funded by the WCF and JMD appropriations.  

In its review of JMD and WCF functions, the IG observed inefficiencies in the IT management structure, inequitable cost allocations among DOJ components, and inadequate documentation and transparency in DOJ IT portfolio cost methodologies. The IG’s findings is summed up among five key areas.

Coordination between JMD and WCF Board. The WCF Board is responsible for the oversight and assessment of WCF cost and allocations. However, the IG found differing opinions by WCF board members on the transparency of information given to them by JMD to understand estimated costs, as well as the amount of time given to approve a WCF operating plan.

Defined WCF Centralized Services. In reviewing the centralized services billed by the JMD, the IG found high-level and vague descriptions on what constitutes as central services provided by the WCF. Specifically, the IG found that DOJ components were billed for JMD corporate-type expenses under the auspices of WCF centralized services. The IG concluded that a clear definition for centralized services and other services that JMD provides is needed to appropriate and bill WCF funds.

Supported, Equitable and Transparent Cost Allocations. In FY 2019, JMD transitioned WCF financial operations to the Unified Financial Management System (UFMS) and updated WCF administrative practices. Such updates include providing certain WCF services through individual reimbursable agreements, or through a rate memorandum (memo) – a compilation of multiple WCF services billed at estimated amounts to DOJ components based on a JMD-developed formula. In its investigation of WCF operations, the IG found that the JMD mandated the rate memo among all components, regardless of use or purchase of the services under it. Specifically, the IG found that not all components used the following two services under the rate memo: Justice Security Operations Center (JSOC) and Security Analytics Service.  Additionally, the IG found that the weighted average formula for allocating rate memo costs did not accurately reflect precise assignment of costs among components, ultimately with larger DOJ components paying the larger share of costs and again, regardless of use. The IG concluded that JMD should reassess its reimbursable agreement and rate memo procedures to reflect a consistent and accurate approach to billing centralized services.

WCF Board and CIO Council Operational Challenges. DOJ IG found that principles in a handbook outlining the responsibilities of the WCF Board and CIO Council have not been followed at the department. This has resulted in a lack of consistent WCF Board meetings, lack of transparency to decisions made on WCF IT services portfolio, and missing CIO Council meeting minutes. The IG also found that there should be enhanced coordination between the WCF Board and the OCIO Council in high-cost IT initiatives.

Lack of Coordination among JMD and DOJ Components. In its review, the IG found that JMD did not provide detailed cost estimate descriptions to DOJ components, with nearly all component OCIOs admitting to not completely understanding JMD charges and costs. Furthermore, the IG found that JMD delayed many financial agreements by DOJ components beyond set due dates, and JMD invoices were not transparent or timely. These actions put DOJ components at risk for violating federal laws, including the Anti-deficiency Act.

Accordingly, the IG made 11 recommendations to JMD to address the above concerns. While the recommendations were agreed upon by JMD, based on a recent IG report, the recommendations have not yet been acted on.  

1. Create a policy with criteria for the inclusion of a service within the WCF and reassess current services to meet documented criteria
2. Review and update OCIO cost allocation methodology to ensure the sensibility and equity of component cost allocations
3. Update policy to identify “basic activities” under the Rate Memo and reevaluate current OCIO Rate Memo to align with new criteria
4. Implement internal processes to ensure WCF Board and CIO Council governing documents are followed
5. Implement a formal process for the CIO Council and WCF Board to improve collaboration and information sharing on financial and service provisions in IT initiatives
6. Provide components with sufficient information to evaluate associated costs for IT services, allowing time for feedback on any discrepancies
7. Improve OCIO process in facilitating timely and accurate reimbursable agreements
8. Ensure the billing process is completed on time and customers receive detailed information on changes
9. Update or develop guidance to ensure all expenses are tracked to the IT services they support and develop a mechanism to provide DOJ components with total costs of WCF-related IT services
10. Ensure JMD and the OCIO meet the requirements of the WCF handbook
11. Evaluate the administrative operations of the OCIO, and enhance the financial management structure to produce clear and complete WCF IT service information

Implications

JMD will need software and IT service support to update its current IT cost infrastructure, as well as develop new processes to address IG concerns. If achieved, DOJ is likely to see cost savings across enterprise IT services. Nonetheless, transparent and modernized enterprise IT cost practices can also lead to the identification of IT service gaps, often translating to forthcoming opportunities for contractors.