Defense Department Releases Audit On Naval Academy

ANNAPOLIS, Md. (AP) -- The U.S. Naval Academy wasted $3.5 million by improperly contracting for the production of a short film and six commercials, according to an audit by the Defense Department's inspector general's office released Thursday.

The military college also wrongly accepted more than $184,000 in gifts such as wine and fancy crystal from an alumnus between 2005 and 2007, as well as $343,208 in corporate sponsorship funds, the audit found.

The audit says the academy may have circumvented Congress by using non-appropriated funds for the film and commercial contract, and that it needed a better system for making sure that monetary gifts didn't come from prohibited sources such as entities doing business with the Navy.

The report was a follow up to a 2009 audit by the Navy's inspector general's office that led to the shortening of the tenure of Vice. Adm. Jeffrey Fowler, a former superintendent who stepped down in August 2010. The academy said Fowler's successor, Vice Adm. Michael Miller has been working to address the shortcomings cited in the initial audit.

"Our significant and dedicated efforts have led to zero discrepancies in our programs since the original Navy IG report," said Cmdr. William Marks, a spokesman for the academy. "The Naval Academy is confident that we have put processes and procedures in place to avoid future discrepancies."

The audit released Thursday adds details to the previous Navy report findings.

For example, it compares the money spent on the commercials in 2008 to ones produced just two years earlier that had the same purposes -- recruiting.

In 2006, the academy produced one 30-second commercial and one 60-second commercial for $14,000. A short motion picture for the academy's visitor's center was made for about $200,000.

The report described the $3.5 million expenditure as "careless and extravagant."

The new audit also found that the contract may have violated the Antideficiency Act, because the academy used money from outside sources that was not appropriated by Congress. By doing so, the academy in effect was spending more money than it was authorized to spend on the contract, which required appropriated funds.

"When an agency operates beyond its appropriated funding level with funds derived from another source, the agency is circumventing congressional budget controls," the report said. "By using (nonappropriated funds) instead of appropriated funds for the contract, USNA circumvented Congress's role and budget controls by obtaining excess funds without congressional approval."

Non-appropriated funds should only be used for the benefit of the military community, the report said.

The audit also lists more than $184,000 in gifts donated by an alumnus between 2005 and 2007 that were improperly accepted on the school's behalf by the academy's deputy for finance, who stepped down earlier this year. The gifts included Waterford crystal stemware and chandeliers, pottery, and Baccarat crystal glasses, vases and bowls. The gifts included about $3,600 in wine and nearly 500 bibles.

The audit also highlighted $343,208 in corporate sponsorship funds that were inappropriately received from the deputy for finance from the Naval Academy Athletic Association from April 2007 through March 2010. The audit noted that $189,265 was spent on activities that were not for the benefit of academy students.

Instead, the money was spent on catered tailgating events at football games, support for a superintendent's dinner, holiday parties and golf outings for academy employees.

Academy procedures did not require the United States Naval Academy Foundation, which accepts private contributions to help the academy, to provide the source of donations. As a result, the audit found, the foundation could act as a conduit for the academy by accepting gifts from prohibited sources.

"We identified 13 donors listed on the Foundation Donor Report as entities doing business with the Department of the Navy," the report said. "Therefore, these donors would be considered prohibited sources by USNA."

The audit was performed at the request of the Senate Armed Services Committee staff.

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