[Federal Register: March 20, 1997 (Volume 62, Number 54)]
[Notices]
[Page 13382-13383]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr97-77]
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FEDERAL DEPOSIT INSURANCE CORPORATION
Statement of Policy on Contracting With Firms That Have
Unresolved Audit Issues With FDIC
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Statement of policy.
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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: Michael J. Rubino, Associate Director,
Acquisition Services Branch, at (202) 942-3076, Peter A. Ziebert,
Counsel, Contracting Law Unit, at (202) 736-0742, or William S. Jones,
Counsel, Legal Operations Section, at (202) 736-3055.
SUPPLEMENTARY INFORMATION: 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.
[[Page 13383]]
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 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
| Last Updated 04/25/1997 | regs@fdic.gov |