Report on Audit of Forward
Pricing Indirect Rates and Facilities Capital Cost of Money Factors
February 2004
Reference
Number: 2004-1C-050
This report has cleared the Treasury Inspector
General For Tax Administration disclosure review process and information
determined to be restricted from public release has been redacted from this
document.
February 18, 2004
MEMORANDUM FOR DAVID A. GRANT
DIRECTOR OF PROCUREMENT
INTERNAL REVENUE SERVICE
FROM: Daniel R. Devlin /s/ Daniel R. Devlin
Assistant Inspector General
for Audit (Headquarters Operations and
Exempt Organizations Programs)
SUBJECT: Report on Audit of Forward Pricing
Indirect Rates and Facilities Capital Cost of Money Factors (Audit #20041C0219)
The
Defense Contract Audit Agency (DCAA) examined the contractor’s November 3,
2003, proposal for indirect forward pricing rates for Fiscal Years (FY) 2004
through 2006 and facility capital cost of money factors for FY 2004. The purpose of the examination was to
determine if the contractor’s proposed forward pricing rates and factors are
reasonable.
The
DCAA made adjustments to the contractor’s indirect expense rate forecast for
additional labor dilution, legal expenses, audit fees, and internal growth
assumptions. However, the DCAA did not
adjust the contractor’s proposed facility capital cost of money factors.
The
DCAA opined, subject to the qualification noted below, that the cost or pricing
data submitted by the contractor are inadequate in part. The inadequacies are considered to have
limited impact on the subject proposal.
The proposal was not prepared in all respects in accordance with
applicable Cost Accounting Standards (CAS) and appropriate Federal Acquisition
Regulation provisions. However, the impact
of the noncompliance is considered relatively insignificant. Because the noncompliances and inadequacies
are considered insignificant, the DCAA believes the proposal is an acceptable
basis for negotiation of fair and reasonable indirect forward pricing rates and
facility cost of money factors.
The
DCAA qualified its audit report because it was unable to determine the impact
that a CAS 409 noncompliance would have on both cost of money calculations and
projected depreciation. This CAS 409
noncompliance relates to the lack of studies concerning useful lives and
residual values on capitalized assets.
The
information in this report should not be used for purposes other than those
intended without prior consultation with the Treasury Inspector General for Tax
Administration regarding their applicability.
If you have any questions, please
contact me at (202) 622-8500 or John R. Wright, Director, at (202) 927-7077.
Attachment
NOTICE:
The Office of Inspector General for Tax Administration has
no objection to the release of this report, at the discretion of the
contracting officer, to duly authorized representatives of the contractor.
The contractor information contained in this report is
proprietary information. The
restrictions of 18 U.S.C. § 1905 must be followed in
releasing any information to the public.
This report may not be released without the approval of
this office, except to an agency requesting the report for use in negotiating
or administering a contract with the contractor.
The TIGTA seal was removed due
to its size.