Kenneth Leventhal's Billings for Due Diligence Services Under Contract 700-90-0014, Letter Agreement Dated January 6, 1993

Kenneth Leventhal's Billings for Due Diligence Services Under Contract 700-90-0014, Letter Agreement Dated January 6, 1993

(Audit Report No. 98-074, July 31, 1998)

Summary

The FDIC Office of Inspector General (OIG) has completed an audit of Kenneth Leventhal and Company's (KL) billings to the Resolution Trust Corporation (RTC) under basic ordering agreement (BOA) 700-90-0014 for bulk sales valuation services and a letter agreement dated January 6, 1993. This report is the second of our audits of KL's due diligence contract billings to RTC. The objective of our audit was to determine whether billings by KL under contract 700-90-0014 were allowable, adequately supported, and in accordance with the contract terms.

Of KL's $5,586,619 in invoices to RTC that we reviewed under contract 700-90-0014, we questioned $3,358,922 (60 percent) as being unallowable or inadequately supported. We questioned $1,651,610 because KL billed an incorrect number of loans, used improper fixed fees per loan, marked up amounts paid to its subcontractor, and did not provide support for the number of loans billed. We questioned $1,353,418 because the charges were duplicative of costs included in fixed fee billings, unallowable or unsupported. In addition, we questioned $353,894 because the costs were not authorized by RTC.

Recommendations

We recommended that the Associate Director, Acquisition Services Branch, Division of Administration, disallow the following questioned costs for task order 700-004:

(1) Disallow $1,651,610 (questioned cost, $1,579,425 of which is
unsupported) that KL billed as fixed fees for incorrect numbers of
loans, marked-up amounts paid to a subcontractor, and
unsupported costs.
(2) Disallow $1,353,418 (questioned cost, $19,023 of which is unsupported)
that KL billed as additional hourly labor fees for core tasks included in
the fixed fees per loan or unsupported costs.
(3)Disallow $353,894 (questioned costs) that KL billed as out-of-pocket
expenses for normal and usual costs which, according to the contract,
were to be assumed by KL.

Management Response

On July 22, 1998, the Associate Director, Acquisition Services Branch, provided a written response to a draft of this report. The response agreed with the recommendations and provided the requisites for management decisions on each of the three recommendations.

Based on the audit work, the OIG will report questioned costs of $3,358,922 ($1,598,448 of which is unsupported) in its Semiannual Report to the Congress.

Last Updated 03/27/01