TIRNO-95-D-00066 and
TIRNO-00-D-00020, Incurred Costs Audit for Fiscal Year Ended June 30, 2002
May 2004
Reference
Number: 2004-1C-101
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.
May 20, 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: TIRNO-95-D-00066 and TIRNO-00-D-00020, Incurred Costs Audit for Fiscal Year Ended June 30, 2002 (Audit #20041C0227)
The
Defense Contract Audit Agency (DCAA) examined the contractor’s May 9, 2003,
certified final indirect cost rate proposal and related books and records for
reimbursement of Fiscal Year 2002 incurred costs. The purpose of the examination was to determine the allowability
of direct and indirect costs and to establish audit determined indirect cost
rates for July 1, 2001, through June 30, 2002.
The proposed rates apply primarily to flexibly priced contracts.
The
DCAA made an adjustment of the contractor’s claimed overhead pools to transfer
$15,020 of indirect labor expenses from cost center (CC) 10 to CC 69 and $7,426
of expenses from CC 70 to the contractor’s Technical Services Center. The DCAA also recommended a $1,334,979 upward
adjustment to the material handling allocation base for year-end accruals. Additionally, the DCAA questioned $27,182 of
general and administrative expenses due to unallowable legal expenses and Board
of Directors allocations that should have been reported as home office expenses
and allocated to all benefiting segments.
The
DCAA stated that the contractor’s proposed indirect rates are acceptable as
adjusted by their examination. The DCAA
believes that indirect costs questioned are subject to the penalties provided
in the Federal Acquisition Regulation (FAR) Part 42.
Additionally,
the DCAA stated that claimed direct costs, except for unresolved subcontract
costs, are acceptable as adjusted by their examination. The DCAA determined that the contractor’s
hardship travel pay policy is unreasonable and, therefore, unallowable under
FAR Part 31. The DCAA questioned
$12,196 of hardship travel pay expenses charged directly to government
contracts. Of this expense, $3,069 was
charged to an IRS contract. Direct
costs not questioned are provisionally accepted pending final acceptance.
The
DCAA considers subcontract costs for which they have not yet received assist
audit reports to be unresolved.
Therefore, the DCAA qualified the results of the audit to the extent
that subcontract costs may be questioned as a result of the assist audits.
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.