Until a final decision is reached by the Department of Defense, the task force recommends that no further changes be made and existing methods of overhead settlement be retained at contractor sites. The Pentagon January 5, 1976 PROCEDURE FOR PROVIDING VISIBILITY TO OSD ON SIGNIFICANT AUDIT FINDINGS NOT SUSTAINED I. BACKGROUND The task force was requested to develop a procedure which would provide visibility to OSD on significant cost decisions involving disagreements between contract auditors and contracting officers. II. PURPOSE The procedure set forth below is designed to enhance audit effectiveness, provide appropriate internal controls within DoD, and insure that OSD and the appropriate offices in the military departments are knowledgeable of significant costs questioned by auditors but allowed by contracting officers. The procedure provides for reporting on an after-the-fact basis so that contracting officer decisions and related procurement actions will not be delayed. This procedure requires special reports on significant problem areas or controversial situations arising from contract audits. Significant problem areas or controversial situations are defined as costs questioned exceeding $100,000 or costs allocable to Government contracts exceeding $50,000 which are questioned by auditors but reinstated by contracting officers without mutual agreement on the principles involved or the underlying rationale. These dollar thresholds are to be used as a guide and are not intended to preclude the reporting of lesser amounts of reinstatements involving significant cost principles or procurement policy. Prior to submission of an item under this procedure, the field audit office should make an attempt to resolve differences with the cognizant contract administration or procurement office before they become matters requiring reporting to higher levels. DCAA regional offices will review reports submitted by field audit offices, discuss and resolve differences with its procurement counterpart, where possible, and where the regional manager considers further reporting by DCAA Headquarters is appropriate, such recommendation will be included in the forwarding report. Headquarters DCAA will maintain a complete listing of all submissions and determine whether the report justifies submission to the OSD level. This determination will be based on the significance of the principle involved, the dollar amount involved, and the sensitivity of the subject. Prior to submitting an item to OSD, DCAA Headquarters will discuss and resolve, if possible, the matter with its procurement level counterpart. In those cases where DCAA Headquarters refers an audit finding to Office of the Assistant Secretary of Defense (Comptroller), a copy of the referral will be provided to the Assistant Secretary of Defense (Installations and Logistics) and to the appropriate office of the military department involved in the report. B. Office of the Assistant Secretary of Defense (Comptroller) Audit findings referred under this procedure will be reviewed to determine if the matter is of such significance that it should be brought to the attention of the Secretary of Defense. Periodically, as merited by the volume of activity under this procedure, DCAA will prepare a report to the Assistant Secretary of Defense (Comptroller) Summarizing the number, type, cost element (s) involved and final disposition of all reports received by DCAA Headquarters under this procedure. A copy will be provided to the Assistant Secretary of Defense (I&L). ESTALLATIONS AND LOGISTICS OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE 1 0 NOV 1975 MEMORANDUM FOR Chairman, ASPR Committee SUBJECT: Retainer Fees for Professionals and....Consultants Discussion by the "Task Force to Enhance the Audit of Contractors", chaired by Assistant Secretary McClary, indicates that it is the view of the group that fees paid to professionals and consultants must represent actual services provided, and that fees paid in the form of retainers for potential services or for stand-by in anticipation of possible services should be unallowable. In addition, they believe this should be considered a "CWAS-NA" item in all cases. As a cost item, such a fee is specifically covered in 15-205.31(c), but other cost principles to which such a fee might be allocated may be involved. It is requested that the ASPR Committee consider the views of the Task Force and the necessary action to accomplish them unless there are compelling reasons for not doing so. If there are strong reasons for not designating retainer fees as unallowable, I should be advised promptly and provided with the specific reasons or rationale. It will be necessary for me to discuss this matter further with the Task Force if action is not taken to make the cost unallowable. Please make this a high priority matter, and advise me as soon as possible of the time schedule for accomplishment, if that course of action is feasible. It would appear that a DPC item would be appropriate to publish the results, if action is taken. |