Redstone Government Consulting Blog (68)

The simple English Wikipedia encyclopedia defines a Tsunami as “a series of fast moving waves in the ocean caused by powerful earthquakes or volcanic eruptions”. Arguably one can equate negative DOD Inspector General Reports to powerful earthquakes or volcanic eruptions at least to those organizations in the path of these Government oversight tidal waves. What tidal waves you may ask? Well, let’s look at two recent reports from the DOD IG very critical of DCMA; Report No. DODIG-2015-139 and Report No. DODIG-2016-001.  

DFARS 252.242-7006(c)(8) specifically requires management reviews or internal audits of the system to ensure compliance with the contractor’s established policies, procedures.

One of the first things a DCAA auditor looks at when auditing a contractor’s accounting system is its policies and procedures. Policies and procedures represent control activities that are essential for an adequate system of internal controls. Good policies and procedures help ensure consistent operations in accordance with management objectives. DCAA cites policy and procedure inadequacies or the failure to comply with policies and procedures in virtually every deficiency report it issues related to internal controls.

As we approach Halloween and the night of tricks or treats, we’ve done some exhaustive research (more accurately hypothesizing) as to the trending costumes (favored by DCAA or DCMA). Some of the favorites:

A question we are frequently asked is “Do small contractors really need written policies and procedures in place to pass....”   This is finished with many types of audit - pre-award accounting system, post award accounting system, or even purchasing system?

The Foreign Corrupt Practices Act prohibits payments made directly or through intermediaries to foreign government officials to assist in obtaining business, retaining business, or directing business to any person.

The Foreign Corrupt Practices Act (FCPA) continues to be a high priority of enforcement for the Securities Exchange Commission (SEC) and the Department of Justice (DOJ). The U.S. Government’s aggressive approach to transactional bribery of foreign government officials will be anything but relaxed as companies and business people can expect a continued prioritization of FCPA cases. The DOJ has added more prosecutors and more resources than ever before. Additionally, U.S. regulators have stated that penalty amounts are not going down.

As a follow-up to our June 2015 blog on the now really infamous OPM computer hack of 2015 (which might actually date back to 2013 based upon the fact that OPM’s story continually changes) we now know that approximately 21 million personnel records have been compromised.  However, we can all sleep better at night knowing that the action was technically not a cyber-attack because there was purportedly no attempt to take over the systems; hence, “merely” infiltrating (hacking) the systems to gain access to sensitive data including that related to background investigation.

Just a follow-up to our July 13, 2015 blog and a reminder that effective October 1, 2015 a number of FAR dollar-thresholds will be updated in accordance with 41 U.S.C. Section 1908, which requires the inflation adjustment of dollar thresholds every five years. The upcoming changes were posted in July within Federal Register Vol. 80 No. 127; however, the impact of these changes is minimal with most commonly used dollar thresholds being increased around 6-7%. A detailed list of the most frequently used thresholds and their changes are noted below.

On June 30, 2015, the U.S. Department of Labor (DOL) increased the McNamara-O’Hara Service Contract Act (SCA) Health & Welfare benefits from $4.02 to $4.27. A notice is not sent directly to contractors and unfortunately for them the importance of this change lies with timing. For those contractors that are currently working diligently on preparing cost proposals, this increase will directly affect you. According to the DOL memorandum that put this change into effect, “all invitation for bids opened, or other service contracts awarded on or after June 30, 2015, must include an updated SCA WD issued in accordance with the regulatory health and welfare (H&W) fringe benefit determination methodology.” So if you have recently submitted a proposal subject to the SCA, we suggest that you ensure that your H&W meets the SCA H&W requirement of $4.27.

DCAA has had MMAS (Material Management and Accounting System) audit cognizance or review responsibility for DOD contractors since the advent of the DFARS Business Systems Rule in 2012. DCAA’s scope of audit is to determine if a contractor’s MMAS complies with the ten criteria or standards set forth in DFARS 252.242.7004.

In an Executive Orders (EO) issued on Labor Day, President Obama continued to display his willingness to manage the personnel policies of government contractors. This latest EO, one of many directed solely at Government contractors, will require contractors to provide up to seven days paid sick leave (annually) for employees. The EO comes with the typical unsupported rhetoric that “we’ve seen that many companies, including small businesses, support these policies because they understand it’s helpful with recruitment and retention” and a separate assertion “that paid sick leave will improve contractor performance”. Perhaps unintended, but it is noteworthy that the White House did not state that many companies support the notion that paid sick leave will “improve contractor performance”; by implication, the White House could not find any companies which were sufficiently naive to buy-in to that highly speculative and wholly unsupported assertion.