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Sunday, December 25, 2011

Putting "potent" back in "potential"

Government contractors beware: 2012 may be the year of the government audit.
Government contractors have always faced an abundance of potential audits.

Financial scrutiny of contractors is expected to rise as the government expands its auditing workforce and the contracting pie shrinks. Agencies are coming under greater congressional scrutiny, and public pressure is mounting to ensure the taxpayer is getting the best deal.

One indicator came in a Nov.15 directive from Office of Management and Budget Director Jacob J. Lew, who ordered federal agencies to put more resources and emphasis into their suspension and disbarment programs.

Lew referenced a recent Government Accountability Office study which, he said, found that “more than half of the 10 agencies it [GAO] reviewed lacked the characteristics common among active and effective suspension and debarment programs: dedicated staff resources, well-developed internal guidance and processes for referring cases to officials for action.”

While no two audits are the same, government auditors are likely to place a greater emphasis on internal controls during 2012.

They will review your stated policies and procedures to determine the strength of your control environment, then typically make a random selection of transactions (for example, vendor invoices, employee time cards, travel vouchers) and scrutinize supporting documentation.

The auditors are looking to determine if the contractor’s policies and procedures were followed, approvals documented and internal controls enforced.

In addition, there are now many prospective government contracts that will be awarded only after rigorous assessments of the adequacy of the contractor’s business systems and internal controls. Contractors now will simply pass or fail, rather than possibly passing with certain deficiencies. All deficiencies must be addressed successfully before the contractor’s system is deemed adequate, and the contract awarded.
As always, read the linked articles for more.

PIGGYBACKING: Rather than a new post, below is another article, from Bloomberg, in the same vein, albeit noticed a couple of days later.

Fraud Fight Has U.S. Seeking to Ban Record Number of Suppliers
Federal agencies have proposed blocking 1,006 companies and individuals from contracting so far this year, as well as asking a judge to ban a unit of food-processing giant Cargill Inc. of Minneapolis, in a process known as debarment.

U.S. agencies are under pressure after a series of congressional hearings and reports from inspectors general and the Government Accountability Office faulted procurement officials for failing to keep unqualified or ineligible vendors out of the $500 billion-a-year federal market.

Contractors can be proposed for debarment for poor performance as well as a variety of ethical issues, including overbilling or falsely claiming a company is owned by a disabled veteran in order to win special awards. In some cases, debarment is automatic, such as when a contractor is convicted of violating the Clean Air Act or Clean Water Act. Debarment typically lasts three years.

The number of contractors suspended from winning work has also surged, to 1,044 so far this year, up 40 percent from last year’s 747 and the most of any year since at least 2000, according to the GSA data. Suspensions are typically for short periods and can be initiated with less evidence than proposed debarments because they are designed to protect the government while investigations are occurring.

The Small Business Administration has expanded its efforts to ban contractors by looking across agencies for companies that misrepresent their size or ownership status to win work reserved for small vendors or companies owned by disadvantaged groups, said John Klein, the agency’s acting director for government contracting and associate general counsel for procurement law. “The mission is to make sure that legitimate small businesses benefit from our program,” Klein said.

Some contractor advocates say the government may be too aggressive in pursuing debarment in some cases, since even proposing a company for debarment means it won’t be able to win new contracts until the situation is resolved.

After a company has been proposed for debarment, it can take a year or more before a final decision is made, said Robert Burton, a former acting administrator of the Office of Federal Procurement Policy during the Bush administration who is now a partner at Venable LLP in Washington.

Moira Mack, a White House Office of Management and Budget spokeswoman, said the agency provides due process to all contractors facing suspension or debarment.

“For too long, the government failed to use suspension and debarment, even in the face of egregious conduct by contractors,” Mack said in an e-mailed statement. “That’s why this administration has been pushing for tougher oversight of contractors, and we’ve seen results.”

Read more: Fraud Fight Has U.S. Seeking to Ban Record Number of Suppliers
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