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GSA Federal Supply Schedule Contracting: Best Practices for Surviving GSA OIG Audits. Breakout Session # 606 Presenters: Tony Fuller and Bill Bressette Date: Tuesday, July 20, 2010 Time: 4:00 – 5:15 pm. 1. Objectives.

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gsa federal supply schedule contracting best practices for surviving gsa oig audits
GSA Federal Supply Schedule Contracting: Best Practices for Surviving GSA OIG Audits

Breakout Session # 606

Presenters: Tony Fuller and Bill Bressette

Date: Tuesday, July 20, 2010

Time: 4:00 – 5:15 pm

1

objectives
Objectives

Understand the types of reviews and audits associated with GSA Schedule contracts and the difference between each

Learn about recent trends in pre- and post-award audits

Understand common data requests and areas of government focus

Learn best practices to ensure that you are adequately prepared for an audit or review when it’s your turn

agenda
Agenda

Introduction to GSA OIG

Types of Audits and Reviews

Contractor Assistance Visits

Pre- and Post-award Audits

General Trends

What to Expect

How to Prepare

Managing an Audit – Best Practices

Closeout – Next Steps

Recent Settlements, Fines and Penalties

Mandatory Disclosures

Questions

introduction to gsa oig overview
Introduction to GSA OIGOverview

General Services Administration (GSA) Office of Inspector General

Mission: To promote economy, efficiency, and effectiveness within GSA and to prevent and detect fraud, waste, and abuse in the agency's programs and operations. 

Conduct pre- and post-award audits

Authorized by the Inspector General Act of 1978

Conduct independent audits and investigations

Prevent and identify fraud, waste and abuse

Promote economy, effectiveness and efficiency

introduction to gsa oig audit authority
Introduction to GSA OIGAudit Authority

Two clauses in your GSA Schedule contract provide audit authority:

Pre-award Audit Authority

FAR 52.215-20 – “By submission of an offer in response to this solicitation, the Offeror grants the Contracting Officer or an authorized representative the right to examine, at any time before initial award, books, records, documents, papers, and other directly pertinent records to verify the pricing, sales and other data related to the supplies or services proposed in order to determine the reasonableness of price(s).”

introduction to gsa oig audit authority7
Introduction to GSA OIGAudit Authority

Two clauses in your GSA Schedule contract provide audit authority:

Post-award Audit Authority

EXAMINATION OF RECORDS BY GSA (GSAR 552.215-71) – The Contractor agrees that the Administrator of General Services or any duly authorized representative shall have access to and the right to examine any books, documents, papers and records of the Contractor involving transactions related to this contract for over billings, billing errors, compliance with the Price Reduction clause and compliance with the Industrial Funding Fee and Sales Reporting clause of this contract. This authority shall expire 3 years after final payment. The basic contract and each option shall be treated as separate contracts for purposes of applying this clause.

types of audits and reviews overview
Types of Audits and ReviewsOverview

Contractor Assistance Visit (CAV)

Cursory compliance assessment intended to identify potential administrative and compliance issues (NOT considered an audit)

Pre-award Audit

Intended to verify that the contractor’s pricing disclosures are current, accurate and complete and that controls are sufficient to ensure compliance

May occur prior to initial contract award or at option extension

Post-award Audit

Designed to help contracting officials administer contracts and ensure that the Government gets what it pays for

Reviews for compliance in several key areas:

Price Reductions Clause (PRC) compliance

72A Sales Reporting and Industrial Funding Fee (IFF) remittance

Others including labor mapping compliance, contract scope, etc.

contractor assistance visits cav overview
Contractor Assistance Visits (CAV)Overview

CAV’s are performed by Industrial Operations Analysts (IOA) generally two times for every five year contract period

Documentation request may include:

GSA Contract

Final Proposal

CSP Format

Contract Modifications

Current and Historical Pricelists

Key areas of focus:

72A Sales Reports and IFF Remittance

Scope of Contract

Pricelist and GSA Advantage!

Basis of Award (BOA) customer(s) tracking and PRC compliance

Economic Price Adjustments (EPA)

Trade Agreements Act (TAA)

contractor assistance visits cav contractor report card
Contractor Assistance Visits (CAV)Contractor Report Card

Ratings

Exceptional

Very Good

Satisfactory

Marginal

Serious Concerns Exist

Question Categories

Category 1: Critical (10 questions/topics)

Failure to meet any 1 results in a rating of “Serious Concerns Exist”

Category 2: Mandatory (11 questions/topics)

Category 3: Above and Beyond (6 questions/topics)

pre and post award audits general trends
Pre- and Post-award AuditsGeneral Trends

GSA OIG audit activity is on the rise:

Pre-award audits of 115 contracts in FY09 covering $11.8 billion in estimated value (vs. 68 conducted in FY07) – majority conducted at contract extension

75 criminal and 23 civil case referrals to the Department of Justice (not limited to MAS program)

The lines have become blurred between pre- and post-award audits

Inconsistent interpretations of the PRC and price/discount relationship

Inconsistent definitions of commerciality

An area of focus for GSA OIG will be to determine if Acquisition Centers are consistently identifying the commerciality of items offered under Multiple Award Schedules

pre and post award audits what to expect
Pre- and Post-award Audits:What to Expect

Notification letter or email from GSA OIG

Generally advance notice of several weeks to months

Initial data request

Commercial Sales Practice (CSP) format, disclosures and pricelist

Company profile

Organizational chart

Most recently audited financial statements

Policies, procedures and process flowcharts

Segment line, product line and service offering descriptions

pre and post award audits what to expect15
Pre- and Post-award Audits:What to Expect

Initial data request (cont.)

Sales data spanning the period of time cited in the CSP Format

Include a data dictionary of contents including all codes and abbreviations

Reconciliation of the sales data to the firm’s audited financial statements

List of all commercial, state and local government, GSA and other Federal Government contracts

Summaries that identify all task orders with corresponding values and dollar amounts placed under the GSA contract

Photocopy of at least one annotated invoice to show where recorded sales data appears

pre and post award audits before the audit how to prepare
Pre- and Post-award Audits:Before the Audit - How to Prepare

Upon receiving notification of an audit or review, ask for the auditor’s information request as soon as possible

Perform an internal, pre-audit to identify potential issues in advance of the review or audit

Attempt to address any issues before start of fieldwork – develop internal policy if necessary

Have originals pulled and ready for review

Make copies of requested documents for the auditors to take (may limit time spent onsite)

Be prepared for management involvement or escalation process should auditors be adamant about examining unnecessary documents

pre and post award audits managing the audit best practices
Pre- and Post-award Audits:Managing the Audit – Best Practices

Entrance Conference

Request an entrance conference to agree upon the audit scope and objectives, establish a request protocol, and introduce the team

Ensure that the audit scope is well defined

Limit access to company facilities and employees

Clearly establish expectations

Communication

Control communications and audit requests by designating a single POC

Get all requests/questions in writing; limit constant flow of questions by asking auditors to collect and provide once or twice daily

Introduce some sort of PM tool to track outstanding requests

Consider daily/weekly status updates

BE RESPONSIVE

pre and post award audits managing the audit best practices18
Pre- and Post-award Audits:Managing the Audit – Best Practices

Document Management

Ensure that all relevant documents are available to auditors

Save all communications with auditors

Do NOT destroy audit documents even if part of a routine document management plan

Employee Interviews

Review questions that will be asked at the interview before it occurs

Ensure management is present at employee interviews

Exit Conference

Request an exit conference upon completion of the audit/review to formally close out the audit/review process and ensure that all requests have been adequately addressed

Request a high-level explanation of any auditor concerns to begin proactively addressing these issues

Determine when the audit report will be issued and whether or not the company will be granted the opportunity to review the draft report

pre and post award audits closeout next steps
Pre- and Post-award Audits:Closeout - Next Steps

Next steps

Government should present a draft audit report – if not, request to receive a copy

Management should be afforded the opportunity to respond to any findings

Respond to findings in a timely fashion

Begin addressing any issues and notify the auditors of the steps being taken to do so ( e.g. remediation plan w/ well-defined steps, milestones and estimated completion)

Going forward, perform periodic (semi-annual / annual) internal reviews to mitigate future compliance risk.

pre and post award audits settlements fines and penalties
Pre- and Post-award AuditsSettlements, Fines and Penalties

Recent examples:

NetApp (formerly Network Appliance) has agreed to pay $128 million to settle a lawsuit alleging that it violated the False Claims Act (FCA), by failing to offer the Government its best commercial pricing in violation of the terms of its General Services Administration (GSA) schedule contracts. (4/15/2009)

EMC Corporation announced it will pay $87.5 million to the government to settle lawsuits alleging the company provided kickbacks to business partners and misrepresented its pricing practices during negotiations with the U.S. General Services Administration (GSA). (5/5/2010)

Oracle agreed to pay $98.5 million to settle allegations of defective MAS contract pricing disclosures by PeopleSoft prior to its acquisition by Oracle.4 The PeopleSoft disclosures allegedly understated the discounts it provided to commercial customers. (10/10/2006)

mandatory disclosures
Mandatory Disclosures

Final Rule Effective December 12, 2008

Amends FAR 3.10, 9.4, 52.203-13 to require:

Ongoing business ethics and compliance program and internal control system within 90 days of contract award (not required for small business or commercial item contracts)

Mandatory disclosure if principal has credible evidence of:

Criminal law violations involving fraud, conflict of interest, bribery, or gratuity violations

Civil False Claims Act violations

Significant overpayments

Suspension or debarment for knowing failure to timely disclose

mandatory disclosures22
Mandatory Disclosures

Who is affected:

Applies to all contracts over $5M and >120 days

Applies in the U.S. and overseas

Must be flowed down to subcontracts that meet the same size and duration thresholds

What to disclose:

Information sufficient to identify the nature and extent of the offense and the individuals responsible

A description of the overpayment, including the circumstances of the overpayment, affected contract number, affected line item and contractor point of contact

To whom do you disclose:

Agency’s Office of Inspector General

Contracting Officer

mandatory disclosures23
Mandatory Disclosures

Risks of non-compliance:

Risk of Prosecution

Existing DOJ guidelines that address corporate prosecution standards, while certainly not providing amnesty, suggest that if a company discloses such violations, the prosecution will be of the individuals responsible for the violation, not the entire organization

Risk of Debarment

It is unlikely that any contractor would be suspended or debarred absent the determination that a violation had actually occurred. Present responsibility is the ultimate basis of suspension or debarment

Federal Register Vol. 73, No. 219

about baker tilly
About Baker Tilly

Founded in 1931 as a certified public accounting firm

Currently operate in six states with over 1,400 professionals

Member of Baker Tilly International, the world’s 8th largest network of accounting firms

Headquartered in Chicago

East Region is located in Washington, D.C. with over 275 professionals

East Region provides a range of professional services including:

Financial statement audit

Tax planning and compliance

Consulting services to private and publicly traded companies across many industries

Government contract and grant consulting

Forensic and litigation services

Mergers and acquisitions

Technology management

speakers
Speakers

Tony Fuller, Principal

Tony leads the Government Contractor Advisory Services practice in the East Region of Baker Tilly. He has over 17 years experience providing a broad range of business consulting services to government contractors in many industries. Tony has helped government contractors with accounting, financial and contract compliance issues in many areas of their government business operations. He has deep expertise in all aspects of commercial item acquisition and GSA Schedule contracting, including pricing analysis, proposal preparation, contract administration, compliance and audit support, and he has authored numerous articles and frequently speaks on GSA related matters.

Tony is an active member of several professional organizations, and currently serves on the advisory board for BNA’s Federal Contracts Report. He also serves as Vice Chair of the Commercial Products and Services Committee of the ABA’s Section of Public Contract Law.

Tel: (703) 923 8688, tony.fuller@bakertilly.com

speakers27
Speakers

Bill Bressette, Principal, CPCM

Bill has over 13 years experience in government contracting and corporate compliance including contract analysis and administration, rate development and analysis, development and management of contracts and compliance organizations, corporate policies and procedures, organizational risk management, cost estimating and proposal development. Bill has extensive experience helping contractors with virtually all aspects of GSA Schedule contracting, including feasibility assessments, strategic pricing analysis, proposal preparation, contract administration, compliance and audit support. He has both consulting and industry experience in these areas, has authored many articles, and speaks often on matters related to contract compliance.

Bill is a NCMA Fellow, President-Elect of the Board of Directors for the Tysons Chapter, and he is Vice Chair of the Commercial Products and Services Committee of the ABA’s Section of Public Contract Law.

Tel: (703) 923 8624, bill.bressette@bakertilly.com

appendix
Appendix

Sample Contractor Report Card:

https://vsc.gsa.gov/reportcard/reportcard.pdf