Office of Inspector General (OIG)

U.S. General Services Administration

Office of Inspector General (OIG)Office of Inspector General (OIG)

Understanding the Auditor’s Role in the MAS Procurement Process

Understanding the Auditor’s Role in the MAS Procurement Process

James M. Corcoran, CPADeputy Assistant Inspector General for Contract AuditsGeneral Services AdministrationMay 6, 2010

2

Presentation Topics

The OIG’s Organizational Structure

Types of OIG Audits

The Auditor’s Role in Conducting MAS Contract Examinations

The Preaward MAS Audit Process

Common MAS Audit Findings

3

4

OIG Offices and Functions Office of Audits

The Office of Audits, an evaluative unit staffed with auditors and analysts who provide comprehensive coverage of GSA operations through program performance reviews, internal control assessments, and financial and mandated compliance audits. It also conducts external reviews in support of GSA contracting officials to ensure fair contract prices and adherence to contract terms and conditions.

The Office of Audits performs external reviews of FAS vendors.

5

OIG Offices and Functions (cont.)

Office of Investigations The Office of Investigations, an investigative unit that

manages a nationwide program to prevent and detect illegal and/or improper activities involving GSA programs, operations, and personnel.

Office of Audits and Office of Investigations Have two different and distinct responsibilities/functions

6

Multiple Award Schedules Program Provides Federal agencies with a simplified

process for obtaining commercial supplies and services at prices associated with volume buying.

Awards indefinite quantity/indefinite delivery contracts to provide supplies and services at fair and reasonable prices.

7

Types of MAS Reviews Conducted by the OIG

Preaward Examinations Take place either before an initial contract is

awarded or before exercising an option

Provide the CO with vital and current information for contract negotiations

Postaward Examinations Examine the contractor’s adherence to

contract terms and conditions, including IFF

8

Preaward Examinations

A review of a company’s proposal/offer

Submitted in response to a solicitation or contract

modification

For the delivery of goods and/or services

At offered prices, terms and conditions

For a specified period of time

9

Preaward Examination (cont.)

Are conducted prior to negotiation and award

Majority of the OIG preawards are conducted for contract extensions

10

Postaward Examinations Conducted during the contract period or after the

award of the contract Findings identify any aspects of the contractor’s

noncompliance with: Billing proper prices and terms and

conditions Passing on price reductions Reporting of all sales The negotiated terms and conditions

of the contract

11

Postaward Examinations (cont.)

Two types of Postaward MAS Reviews

Full postaward

Limited scope postaward

12

OIG’s Authority to Conduct MAS Contract Examinations

Contract Clauses GSAR 552.215-70 & 71 Examination of

Records by GSA FAR 52.215-2 Audit and Records – Negotiation FAR 15-404-2 Information to Support Proposal

Analysis Inspector General Act of 1978

Audit Authority is Incorporated within the Act Provides for Subpoena Authority

13

OIG Auditor’s Role: To assist the contracting officers in fulfilling their

responsibilities Support –

Examine the books and records of the vendor

IndependenceDo not make contracting decisions

Do not negotiate contracts

Office of Management and Budget (OMB) Recognition of increasing dollar value of GSA contract

activities and limited OIG resources Provided the OIG additional financial support to increase work

in this area

14

Auditor’s Function vs. IOA Function IOA provides a ‘quick and dirty’ look at the

vendor’s compliance with a limited number of contractual requirements IFF, Reported Sales, Trade Agreements Act Typically performed in a limited timeframe

Auditors conduct a detailed analysis of the contractor’s proposal and the systems in place to ensure compliance with many contractual requirements

Could take as long as six to eight weeks at the site

15

MAS Contract Audits

How many MAS contract are audited?

How is a MAS contract selected for audit?

Contract Audits Results:

16

17

How is an MAS Contract Selected for Audit?

OIG takes the list of all MAS contracts and:

Develops a list of potential MAS contracts to be audited

Coordinates with the OIG staff and the Federal Acquisition Service (FAS) staff to select contracts for possible audit

18

How Does An MAS Contract Get Selected for Audit?

OIG develops the “final selection” of examinations to be performed Ensure adequate coverage

Must have mix of products and servicesMust cover large and small dollar contractsMust have mix of types of schedulesDon’t audit same contractors w/o reasonEliminate duplicates selectionsEnsure resources available for other audits

Final list is based on the results of this analysis and available audit resources

19

The Preaward MAS Review Process

20

Preaward Review ObjectivesTo determine whether: The Commercial Sales Practices

(CSP) information submitted by the company is current, accurate and complete

The company’s sales monitoring and billing systems ensure proper administration of the price reduction provisions and billing terms of the contract

21

Preaward Review Objectives (cont.)

The company adequately accumulates and reports schedule sales for Industrial Funding Fee (IFF) payment purposes Were all GSA sales reported and

the correct IFF paid?

22

Preaward Review Objectives (cont.)

NOTE: The following objectives apply only to services reviews

Employees assigned to work on GSA task orders are qualified for the billable positions

The company has an adequate accounting system for the segregation and accumulation of labor hours, materials, and other direct costs (ODCs) on time and material task orders

23

MAS Preaward Process (cont.)Notification to Vendors

210 days prior to the contract expiration, the contracting officer notifies vendor of intent to exercise contract option and impending preaward review

Timeliness of the 210 letter is critical

Procurement Information Notice (PIN) 2006-02 lists items to be included in the letter

24

MAS Preaward Process (cont.)

Notification to Vendors (cont.)

Vendor must contact the auditor within 7 days

The Office of Audits sends the vendor a written request for information

Information copy is sent to the contracting officer

Vendor has 60 days to provide the requested information

Request letter is a preliminary list of information necessary to begin the review

25



Request letter includes vendor’s electronic commercial sales data

ALL sales data related to ALL classes of customer are requested

Not only basis of offer or basis of award customers

Any class of customer could be MFC customer

Basis of award could be changed if not MFC

Allows verification that all GSA sales were reported and IFF paid

Allows tie in to financial statements and verification that no transactions were omitted

26



This is where the delays often begin

Vendors often delay providing the information necessary to begin the review

Audit staff will attempt to work with the vendor to obtain the information

If unsuccessful, will contact the contracting officer for assistance

PIB 2006-02 outlines contracting officer’s actions

If vendor delays the process - OIG suggests limited temporary extensions as leverage

Our perspective is - long extensions at current pricing encourages delays

Contracting officer assistance is key to successfully obtaining required information and not delaying the audit and therefore the award process

27


After receipt of vendor’s information and initial office evaluation of this data, the Office of Audits Makes a preliminary selection of

commercial transactions to review Contacts the vendor to set up an

entrance conference to commence the on-site work

Fieldwork takes anywhere from two to six weeks on site

28


Why does it take so long? Large size of MAS contracts requires examination of

substantial amounts of data Vendors often do not provide timely responses to audit

requests Negative incentive for the vendor to provide the requested

information and explanations

Significance and number of audit findings are often a factor All reviews are performed in accordance with Generally

Accepted Government Auditing Standards (GAGAS) And OIG Policies and Procedures

Audit staff issues – Leave, other commitments, etc.

29


What happens next? After the fieldwork is completed, audit team continues

analysis of data in the office Continues to ask questions and obtain clarification of information

Summarizes workpapers, develops conclusions and drafts report

All work is reviewed by a supervisor All reports are “referenced” before they are released in final red

cover form

Throughout the process, auditor should be in communication with the contracting officer

CO can request preliminary audit information Understand info can be revised based on supervisory review and

referencing

30


Issuance of ‘red cover’ preaward report Issued to the contracting officer Contracting officer develops the negotiation position Contracting officer negotiates the contract

31

Typical Preaward Findings CSP is inaccurate and/or incomplete

Government not offered MFC pricing despite comparability to commercial MFC

Full range of commercial discounts, terms and conditions more favorable than those offered to GSA not disclosed

32

Typical Preaward Findings (cont.)

Inadequate controls and procedures to properly monitor the price reduction and billing provisions of the contract resulting in overcharges to GSA schedule users (Postaward Implications)

Failure to identify and report all GSA schedule sales (Postaward Implications)

33


Services Reviews findings: Employees do not meet the education and work

experience for the labor positions billed (Postaward Implications)

Commercial price list used as the basis of award is not used by the vendor

MAS labor categories do not map to the vendor’s labor categories used on other projects

Cost buildup does not reflect vendor’s cost data Industry averages used

34


Services Reviews findings (cont.):

Substantial subcontract work on MAS task orders is not reflected in the proposed labor rates

Vendor does not bill actual hours, instead bills monthly at 1/12 of annual rate

35

What Should You Do?

A hotline report can be submitted via: FraudNet Form

Avoids disclosure of email address

Email to [email protected]

Email address is transmitted to FraudNet Hotline officer

Telephone 1 (800) 424-5210 (Toll free) (202) 501-1780 (Washington DC metropolitan area)

36

Questions?

Documents

Office of Inspector General (OIG)