the ultimate compliance test: understanding gsa oig audits · 2020-02-10 · • your contract is...

The Ultimate Compliance Test:

Understanding GSA OIG Audits

Jennifer Aubel and Hope Lane | April 5, 2017

http://blogs.aronsonllc.com/fedpoint/

2 © 2017 | www.aronsonllc.com | www.aronsonllc.com/blogs |

About Aronson LLC

Aronson LLC provides a comprehensive platform of assurance, tax,

and consulting solutions to today’s most active industry sectors and

successful individuals. For more than 50 years, we have purposefully

expanded our service offerings and deepened our industry specialties

to better serve the needs of our clients, people, and community. From

startup to exit, we help our clients maximize opportunity, minimize risk,

and unlock their full potential.

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About Aronson LLC

• Thinking ahead for clients for more than 50 years

• 225+ professionals located in Rockville, MD

• 80+ professionals dedicated to supporting government contractors

• Aronson helps clients rethink the way they approach their business

through innovative, industry-specific services and advice:

– Audit, Assurance and Tax

– Deltek Systems and Outsourcing

– Financial and Contract Compliance

– GSA Schedules

• www.aronsonllc.com/blogs/fedpoint/ – News and trends and insight

for today’s savvy government contractor






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Awards / Accolades / Affiliations

The Gazette of Politics & Business Exceptional 53 Business Award

In 2012, Aronson received the PB53 award for the third year in a row. The program

acknowledges the top businesses and organizations in Maryland based on criteria that

includes the company’s annual revenue, employee growth, noteworthy product or service

innovations, community service efforts and more.

Accounting Today Top Firm

In 2013, Aronson was once again named to Accounting Today’s list of the top 100 firms in

the country. Accounting Today is a leading provider of online business news for the tax and

accounting community.

Washington Business Journal Top 25

Aronson is ranked #12 on the Washington Business Journal’s Top 25 Accounting Firms in

the DC Metropolitan area.

INSIDE Public Accounting Top 100

Once again, Aronson has earned a spot in the top 100 of this prestigious list, released by

INSIDE Public Accounting. This is the longest running, most comprehensive and accurate

independent analysis focusing on management and operations of America’s large local,

regional and national firms.

Washington Business Journal Best Places to Work

Aronson has been recognized five times as one of the Metro area’s “Best Places to Work.”

The award recognizes a company’s achievements in creating a positive work environment

that attracts and retains employees through a combination of employee satisfaction, working

conditions and company culture.

Montgomery County Chamber Corporate Social Responsibility Award

In 2010, Aronson was honored to receive the MCCC’s Corporate Social Responsibility Award

based on the depth and breadth of the company’s energetic commitment to support young people,

in the areas of education, housing and health.







Jennifer Aubel is a principal consultant in Aronson LLC’s Government

Contract Services Group. She works with clients to tailor GSA

Schedule solutions that meet organizational needs by developing

scope and pricing strategies, maintaining compliance, providing audit

support, and improving the profitability and versatility of the GSA

Schedule contract. Additionally, Jennifer frequently speaks on GSA

Schedule topics at both Aronson and industry-sponsored events and

is an active member of the National Contract Management

Association (NCMA).

Jennifer has 20 years of experience in the federal contracting market,

working for contractors and as a consultant to GSA Schedule contract

holders. Prior to working with Aronson, she managed a multi-million

dollar GSA program for a mid-tier integrator.

Jennifer graduated summa cum laude from the University of Maryland

University College with a bachelor’s degree in Legal Studies.

Principal Consultant, Government Contract Services Group

301.231.6253

[email protected]

Jennifer N. Aubel







Hope A. Lane, CPA, leads Aronson LLC's Government Contract Consulting practice. With more than 20 years of broad-based experience in the government contracting arena, she is well-known as one of the industry's most knowledgeable thought leaders in contract-related financial compliance and contract administration.

Exclusively focused on government contracting, Hope possesses in-depth understanding and hands-on expertise. Prior to joining Aronson, she served in financial management positions with several regional federal contractors. Often described by her peers as forward-thinking, Hope is able to go beyond what a client asks for to deliver precisely what they need.

As an avid advocate for the government contracting industry, Hope is a guest speaker and lecturer for associations and industry trade groups and a featured speaker at Aronson's executive briefings. She also serves as editor-in-chief of Aronson's Fed Point blog. As a leader in the firm, Hope advocates for continuous growth and mentorship and encourages others in the practice to innovate for the benefit of their clients.

Hope earned her bachelor's degree in accounting from the University of North Carolina at Charlotte and is actively involved in professional organizations like the Professional Services Council, National Contract Management Association and Women Impacting Public Policy.

Partner at Aronson LLC, Government Contract Services Group

301.231-6266

[email protected]

Hope A. Lane, CPA






http://blogs.aronsonllc.com/fedpoint/


AGENDA

1. The “Audit” You Know

2. Common OIG Audit Findings

3. Why Me? Risk Factors for Audit Selection

4. What’s Actually Being Audited?

5. What Data does the Auditor Request?

6. The Audit Process

7. Trickledown Impacts on Contractor Assessments

8. Best Practices







The “Audit” You Know







Contractor Assessment

Contractor Assessment

Timing Annual and end-of-term

Scope Process review and spot checks

Duration Short assessment and quick turnaround (days-weeks)

Focus Review of many compliance areas

Goal Educate

Legal No subpoena power







Contractor Assessment vs. OIG Audit

OIG Audit Contractor Assessment

Timing Pre-award or post-award Annual and end-of-term

Scope Complete review of

transactions

Process review and spot

checks

Duration Lengthy data collection and

analysis (months-years)

Short assessment and quick

turnaround (days-weeks)

Focus Compliance issues relevant to

pricing

Review of many compliance

areas

Goal Identify contractual issues Educate

Legal Subpoena power No subpoena power







Common OIG Audit Findings







Most Frequent OIG Audit Findings

• Commercial Sales Practices (CSP) information was not current,

accurate, or complete

• Price Reductions Clause protections were negated by ineffective

basis of award customers

• Proposed labor rates were overstated

• Schedule customers were overbilled for unqualified employees

• Contractor did not have adequate controls to properly accumulate

and report schedule sales for IFF purposes

• GSA schedule sales were underreported







Why Me?

Risk Factors for Audit Selection







Why Me?

• Your contract is up for renewal

• High sales volume

– In the Top 20 of contractors up for renewal under the Schedule

– 40-50 pre-award audits annually

• OIG Audit Plan Schedule Emphasis (Schedule 70)

• Serious issues identified during Contractor Assessment

From April 1 – September 30, 2016, the OIG performed pre-award

audits of 37 contracts with an estimated value of almost $9.5 billion

and recommended over $324 million of funds be put to better use







Fiscal Year OIG Audit Plan

• FY Audit Plan and FY Audit Reports

– 2017: Approximately 35 potential Pre-award Audits

– 2016: Approximately 50 Pre-award Audits

– 2015: Approximately 50 Pre-award Audits

• Settlements in excess of $280 million over the past three fiscal years

(FY14-FY16)







What’s Actually Being Audited?







Elements Being Audited

• Commercial Sales Practices disclosed as part of the option renewal

package

• Determine if contractor’s:

– Commercial Sales Practices disclosures (CSP-1) are current, accurate

and complete

– Pricing controls properly identify commercial transactions that trigger

the Price Reduction Clause (PRC)

– Proposed prices are “fair and reasonable” prior to exercise of the

pending option period







Elements Being Audited

Determine if contractor is:

• Offering schedule customers the contract price or lower and

extending all negotiated discounts

• Accurately identifying and reporting GSA schedule sales

• Providing qualified personnel (both employee and subcontractor)

under its GSA labor categories

• Selling products that comply with the Trade Agreements Act (TAA)

• Offering rebates, concessions, etc.







What Data does the Auditor

Request?







What Can the Auditor Ask For?

• Examination of records clause included in GSA Schedule solicitations

(552.215-71) does not give auditors carte blanche access

• GSA 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:

– Overbillings,

– Billing errors,

– Compliance with Price Reduction clause, and

– Compliance with Industrial Funding Fee and Sales Reporting clause

• If you feel the auditor is overstepping, you should consult with a

GSA-focused attorney







The Audit Data Request: General Requirements

• 12 months of sales data that ties to audited financial statements

• All commercial and government price lists in effect during the GSA

contract period

• Support for reported GSA schedule sales

• Identification of the basis of award customer(s) and Price

Reductions clause triggering mechanism / discount relationships

since start of contract

• List of top volume non-GSA government customers and commercial

customers, along with corresponding volume for each during the

audit period







The Audit Data Request: General Requirements

• Current written policies and procedures for:

– Reporting sales under the GSA contract

– Order processing and billing systems

– Price reductions monitoring

– Pricing practices in effect during audit period, and to-date

– Ensuring employees assigned to GSA orders meet the experience and

educational qualifications in the GSA contract*

• List of Blanket Purchase Agreements (BPA), Teaming Arrangements,

and subcontractor agreements in effect during audit period

• Chart of Accounts and relevant organizational charts







• Customer Information

• Contract Number and Type

• Order Number and Date

• Invoice Number and Date

• Item Description

– Part number

– Labor category title

– Travel and living, ODCs

– Labor rate type

• List and Sale Price

• Quantity Billed

• Extended Price

• Net Discount

• Additional Charges and Offsets

– Sales tax

– Freight

– Rebates

– Promotions

• Employee/Subcontractor Name

• Payment Terms

• Payment Date

• Applicable SIN

The Audit Data Request: Sales Transaction Data







The Audit Data Request: Services Requirements

• Summary of task orders under the GSA contract for audit period

• Summary of task orders for all other federal, as well as commercial

and state and local government customers, for audit period

• Mapping of corresponding GSA labor categories to any non-GSA

title labor categories on GSA task order billings







The Audit Data Request: Services Requirements

• Detailed data of billable labor rates by individual for all personnel

working on services and related contracts during the audit period

• List of internal labor categories and related descriptions, as well as

experience and education qualification requirements

• Copies of any DCAA audit reports or letters over the last two years

covering billing, ordering, accounting systems, direct labor, and

indirect rate reviews, etc.







The Audit Process







Data Sampling

• Upon receipt of initial data submission, GSA’s audit team will chose

a representative sample of transactions to look at more closely

• Contractor should expect to produce additional documentation

related to its:

– Largest orders of all types (commercial, GSA, and federal)

– Most sold products and labor categories / services

– Blanket Purchase Agreements (BPA)

– Subcontractor agreements

– Reseller or dealer agreements







The Audit Site Visit

• Site visit is generally scheduled for one week. Auditors may return

for additional days later in the process

• Visit begins with entrance conference and concludes with exit

conference

• As a best practice, provide auditors with their own work area that is

as segregated from the rest of the office as possible

• Be aware of government limitations on gifts – most auditors will not

even be comfortable accepting a cup of coffee







Audit Trend: Cost Build-Up Price Analysis

• In every professional services audit Aronson has supported in the

past four years, the auditors have tried to move their pricing analysis

to a cost build-up methodology

• In many cases, this is the auditor’s default position, regardless of the

contractor’s volume of commercial sales

• If the contractor uses an accounting system that generates indirect

rates, even if the system and the rates have not been audited, it will

be very difficult to convince the auditors to rely on commercial rates







The Waiting Game

• Try to establish a good rapport with the auditors, they may give you

a “preview” of any findings they plan to report

• Expect to receive a few more questions and requests for additional

documents here and there

• This can be the hardest part of the process – waiting for the draft

audit report

• Don’t read into how long it takes to issue the audit report







After the Audit Report is Released

• Once the audit report is issued to your Contracting Officer, you are

entitled to request a copy

• It is important to remember that the auditor can only make

recommendations; ultimately, all decisions are made by the

Contracting Officer

• If you disagree with any of the findings on the audit report, prepare a

detailed response and submit it to the Contracting Officer







After the Audit Report is Released

• Audit report is primarily a tool for the Contracting Officer to use in

negotiating the option period renewal

• Expect that Contracting Officer will seek to lower contract rates;

prepare a negotiation strategy







Trickledown Impacts on

Contractor Assessments







Impacts on Contractor Assessments

• Résumé reviews on GSA task orders

• Significant increase in the amount of sales data being requested,

especially on virtual assessments

• Continued emphasis on validating GSA sales reporting and IFF

remittance

• More frequent assessments for contractors with higher sales







Best Practices for Navigating

an OIG Audit







Audit Best Practices – Before Data Submission

• Dedicate the resources to prepare for and respond to audit

• Do NOT submit the option renewal package or CSP before

completing a detailed analysis of the sales data you will be

submitting to the auditors

• Understand what the data says before submitting to the auditors







Where are the bodies buried?

• GSA Schedule policies and procedures – do you have them? do you

follow them?

• High dollar value GSA and non-GSA contracts

• Highest sales concentrations of products, services / labor categories

• Utilization of subcontractors

• Insufficient pricing controls

• Non-standard discounting practices

• Labor qualifications

• Identifying and reporting GSA sales







Audit Best Practices – After Data Submission

• Questions can be a good indicator of potential trouble spots you

should be prepared to address during the site visit

• As a best practice, keep a log of all additional documents requested

by the auditor and questions

• Note the date and content of all responses

• Remember, it is up to the Contracting Officer to act on any findings

from the audit report

• Know when to consult outside counsel







QUESTIONS







301.231.6253

Contact Jennifer Aubel / Aronson LLC

[email protected]

www.linkedin.com/in/jnaubel

www.twitter.com/jnaubel






mailto:[email protected]

http://www.linkedin.com/in/jnaubel

https://twitter.com/jnaubel


301.231.6266

Contact Hope Lane / Aronson LLC

[email protected]

https://www.linkedin.com/in/hopelanecpa

https://twitter.com/hlanemd






mailto: [email protected]





the ultimate compliance test: understanding gsa oig audits · 2020-02-10 · • your contract is...

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