Agency:
Federal Deposit Insurance Corporation
Action:
Statement of Policy
Summary:
The Federal Deposit Insurance Corporation (FDIC) has adopted a
policy statement concerning contracting with firms that have
unresolved audit issues with FDIC. The policy statement sets forth
the procedures to be followed to provide proper notification to an
affected contractor or outside counsel when an audit report is
issued, and a management decision has been made on a respective
finding, in order to afford the firm an opportunity to respond. When
an FDIC audit identifies questioned costs and issues remain
outstanding or unresolved as a result of the firm’s failure to
cooperate with FDIC management in resolving issues associated with
identified disallowed costs, by for example: (1) failing to respond
timely to an FDIC request to produce documentation to support
claimed costs; or (2) otherwise failing to adequately document
claimed costs; or (3) by failing to remit the disallowed portion of
questioned costs identified in such audit reports, application of
the policy may result in a determination to refrain from soliciting
new business from that firm.
This policy statement applies to firms providing goods and services
to FDIC, including attorneys or law firms providing legal services
to FDIC.
Effective date:
This policy statement is effective
March 20, 1997.
For further information contact:
Ann Bridges Steely, Associate Director, Acquisition Services Branch,
at (202) 942-3010 Peter M. Somerville, Counsel, Contracting Law
Unit, at (202) 736-0110, or Carl A. Polvinale. Jr., Counsel, Legal
Operations Section, at (202) 736-0079.
Supplementary Informatio
:
The text of the Policy Statement follows:
1.
Background
The FDIC Office of the Inspector General (OIG) routinely audits
contracts with firms providing services to FDIC. These audits
frequently contain an analysis whereby certain contract costs are
questioned, as well as a recommendation that FDIC management
disallow and attempt to recover these costs. When the OIG transmits
the audit report and findings to the appropriate FDIC program
office, FDIC management then reviews such findings and
recommendation. This evaluation results in the issuance of a final
decision that may sustain all of the audit findings, or a portion
thereof. When FDIC management determines that certain questioned
costs should not be charged to the Corporation, such questioned
costs that are sustained are then deemed to be “disallowed” costs
within the meaning of the Inspector General Act.
Once a management decision has been made to disallow such costs,
active resolution efforts are undertaken by FDIC management to
recover funds paid without adequate documentation or otherwise
inappropriately paid to the firm during the course of the
engagement. In those circumstances where the FDIC requests that an
audited firm remit disallowed amounts and the contractor fails to do
so or fails to actively cooperate with FDIC management in its
efforts to resolve the issues associated with identified disallowed
costs, it is prudent business for FDIC to selectively refrain from
soliciting future services from the firm.
2. General Policy
To provide procedures whereby the FDIC may elect to refrain from
soliciting a firm for new business if:
(a) the results of an audit reflect potentially recoverable
disallowed costs and audit issues remain outstanding or unresolved
within the time period set forth in the notice letter sent by FDIC;
and
(b) the firm failed or declined to cooperate with resolution efforts
undertaken by FDIC management in response to the audit findings,
including the failure to adequately support its contract costs or
the failure to remit the disallowed portion of the questioned costs
identified in such audit report.
3. Definitions
(a) Disallowed cost means a questioned cost that management, in a
management decision, has sustained or agreed should not be charged
to the government.
(b) Management decision means the evaluation by FDIC management of
the findings and recommendations included in an audit report and the
issuance of a final decision by management concerning it response to
such findings and recommendations, including actions concluded to be
necessary.
(c) Questioned cost means a cost that is questioned in an audit by
the OIG or similar auditing agency because of:
(i) an alleged violation of a provision of a law, regulation,
contract, grant, cooperative agreement, or other agreement or
document governing the expenditure of funds;
(ii) a finding that, at the time of the audit, such cost is not
supported by adequate documentation; or
(iii) a finding that the expenditure of funds for the intended
purpose is unnecessary or unreasonable.
4. Procedures
Issued audit reports that identify questioned costs relating to
contractual engagements are assigned to the Division of
Administration, Acquisition Services Branch (ASB) staff, or the
Outside Counsel Unit, Legal Division (OCU), for resolution. In
implementing this policy statement, the following steps shall be
taken:
(a) Management decision. Once a management decision is made on a
respective finding, the matter is then assigned to ASB or OCU for
resolution. A copy of the relevant audit report shall be transmitted
to the firm under a cover letter which:
(i) identifies the ASB or OCU which is responsible for resolving the
audit issues;
(ii) identifies the ASB or OCU employee primarily responsible for
resolution and to whom all communications from the firm should be
sent;
(iii) requests that the firm respond to the findings contained in
the report within ten (10) business days of receipt of the letter,
or such other time as specified in the letter. Such responses should
include supporting documentation where appropriate.
(b) If the firm fails to respond to this request, or fails to remit
the disallowed portion of the questioned costs contained in the
audit report, or otherwise fails to adequately respond to the issues
raised in the report, the following procedures shall apply:
(i) with respect to audits of firms other than outside counsel, the
ASB employee identified in section 4(a)(ii) shall send a letter to
the firm advising the firm of its failure to cooperate, and which
advises the firm that unless it remits the requested repayment or
makes other arrangements satisfactory to the Associate Director who
is responsible for resolution of this audit (whose name shall be
provided to the firm) within ten business days of receipt of this
letter, the Director, Division of Administration may, effective as
of that date, make a determination that the FDIC refrain from
soliciting any future services from this firm until such time as all
issues identified in the subject audit report are resolved to the
FDIC’s satisfaction, and direct that notice to be sent to the firm
of this action.
(ii) with respect to audits of outside counsel, the Legal Division
employee identified in section 4(a)(ii) shall send a letter to the
outside counsel which advises such outside counsel that its failure
to cooperate constitutes a conflict of interest with the FDIC, and
which advises the outside counsel that unless it remits the
requested repayment or makes other arrangements satisfactory to the
Assistant General Counsel who is responsible for resolution of this
audit (whose name shall be provided to the contractor) within ten
business days of receipt of this letter, the matter will be referred
to the Outside Counsel Conflicts Committee for appropriate action,
which may include a determination that the FDIC refrain from
soliciting any future services from such outside counsel and/or
terminate FDIC’s existing engagements, until such time as all issues
identified in the subject audit report are resolved to the FDIC’s
satisfaction.
Dated at
Washington,
D.C. this 14th day of March, 1997
Federal Deposit Insurance Corporation
Robert E. Feldman
Deputy Executive Secretary
[FR Doc. 97-6995 Filed 3-19-97;
8:45 am]
BILLING CODE: 6714-01-P