TIRNO-95-D-0067, TIRNO-95-D-00048, and TIRNO-98-R-00001

Report on Examination of Direct and Indirect Costs and Rates for Fiscal Year Ended December 24, 1999

 

October 2002

 

Reference Number:  2003-1C-009

 

 

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.

 

October 30, 2002

 

 

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-0067, TIRNO-95-D-00048, and TIRNO-98-R-000 Report on Examination of Direct and Indirect Costs and Rates for Fiscal Year Ended December 24, 1999 (Audit #200310002.002)

 

The Defense Contract Audit Agency (DCAA) has examined the contractor’s United States Federal Government Group’s October 31, 2001, certified final indirect cost rate proposal and related books and records for reimbursement of Fiscal Year 1999 incurred costs.  The purpose of the examination was to determine the allowability and allocability of direct and indirect costs and recommended Contracting Officer determined indirect cost rates for December 19, 1998, through December 24, 1999.  The proposed rates apply primarily to flexibly-priced contracts.

 

The DCAA questioned claimed labor overhead and general and administrative (G&A) expenses.  The questioned costs are the results of the contractor not removing identified unallowable costs from the overhead pool and overstating indirect labor overhead allocations and home office allocations within the G&A pool.  Also, the DCAA applied an upward adjustment to the G&A base.  This upward adjustment is the result of the contractor understating overhead and commercial costs that are part of the G&A base.

 

The DCAA stated that except for the qualification discussed below, the contractor’s proposed indirect rates are acceptable as adjusted by their examination.  Additionally, claimed direct costs are acceptable and are provisionally approved pending final acceptance.

 

The DCAA has not received the results of assist examinations for subcontract costs.  Therefore, the DCAA qualified its audit report because these examinations may disclose additional questioned costs.

 

The information in this report should not be used for purposes other than that intended without prior consultation with the Treasury Inspector General for Tax Administration regarding its 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 USC 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.