1. Office of Inspector General (OIG)
Understanding the Auditor’s Role in the MAS
Procurement Process
James M. Corcoran, CPA
Deputy Assistant Inspector General for Contract Audits
General Services Administration
May 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

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 & 71 Examination of Records by GSA
FAR Audit and Records – Negotiation
FAR 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
Independence
Do 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?

16. Contract Audits Results:

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 services
Must cover large and small dollar contracts
Must have mix of types of schedules
Don’t audit same contractors w/o reason
Eliminate duplicates selections
Ensure 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 Objectives
To 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) 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. MAS Preaward Process (cont.)
Notification to Vendors (cont.)
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. MAS Preaward Process (cont.)
Notification to Vendors (cont.)
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 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. MAS Preaward Process (cont.)
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. MAS Preaward Process (cont.)
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. MAS Preaward Process (cont.)
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. MAS Preaward Process (cont.)
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. Typical Preaward Findings (cont.)
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. Typical Preaward Findings (cont.)
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 address to
address is transmitted to FraudNet Hotline officer
Telephone
1 (800) (Toll free)
(202) (Washington DC metropolitan area)

36. Questions?