Audit of DIRM Operating Expenses

(Audit Report No. 98-080, September 15, 1998)

The Office of Inspector General (OIG) has completed an audit of the Federal Deposit Insurance Corporation's (FDIC) Division of Information Resources Management (DIRM) operating expenses. This audit evaluated the adequacy of control procedures supporting specific DIRM operations, specifically hardware maintenance, on-line information services, and training.

Improvements are needed in adhering to existing control procedures and strengthening the controls that support the three operations. DIRM did not forward all purchase requests for on-line services to the Library Service Unit (LSU), Division of Administration (DOA), for review and approval as required by DIRM Circular 1330.2. The Circular's purpose is to take advantage of LSU's experience and expertise in identifying the most effective and cost-beneficial sources of information services. Based on our discussions with DIRM and DOA during the fieldwork, DIRM provided LSU all on-line service requests thereby allowing LSU the ability to review all the Corporation's on-line service needs. This resulted in cost savings based on either LSU consolidating existing contracts or converting contracts to less costly, fixed fee payment terms. DIRM and LSU worked together to initiate the conversions resulting in cost savings to the Corporation of $965,000 per year. Additionally, during the fieldwork, we provided LSU with information for contracts not yet awarded resulting in a yearly cost savings of $15,000 per year.

Concerning training expenses, we concluded DIRM did not take advantage of 20 percent discount coupons offered by one major training vendor. The Asset Servicing Branch's (ASB) advised DIRM not to purchase the discount coupons because of the vendor's unique requirement that FDIC pay for the training coupons in advance and then apply these coupons to specific courses at a later date. However, based on a request by our office, ASB revisited its decision and determined that the purchase of these coupons was appropriate. Based on 1997 expenditures to the training vendor, we concluded DIRM could have saved approximately $7,000 and the Corporation could have saved approximately $27,000 by using the discount coupons. Additionally, DIRM was not processing training payment forms in a timely manner or adequately tracking payments for completed training. DIRM control procedures did not require oversight managers to retain copies of hardware maintenance agreements. Without these agreements, oversight managers and DIRM operating staff could not adequately determine whether preventive maintenance work was performed as stated in the contract, specific components were covered under the contracts, and quality and timeliness met contract standards.

We recommended that the Director, Division of Administration, take the following actions:

We recommended that the Director, Division of Information Resources Management, take the following actions:

On September 1, 1998, the Director, Division of Information Resources Management (DIRM), provided a written response to the draft report. On September 10, 1998, the Director, Division of Administration (DOA), provided their written response. DIRM and DOA management agreed with our recommendations and has either initiated or will initiate adequate corrective action.

As a result of our audit, we will report funds put to better use of $1,007,000 in our Semiannual Report to the Congress.