4
Handbook for
o
t*.
Reviewing Contractor
Property Control Systems
How to review written property control systems
^ and conduct compliance reviews
(V
United States
Environmental Protection Agency
May 1990
en
2 HEADQUARTERS LIBRARY
- ENVIRONMENTAL PROTECTION AGENCY
>? WASHINGTON, D.C. 20460
-------
t .-^
0.0 ,w..isi ;:.-<
-------
Contents
< Introduction
Purpose and scope of the handbook vii
Contents in brief vii
About the handbook vii
Section one. Program criteria
* Chapter!.Policies
Approach 3
Written property control systems 3
Compliance reviews 4
Section two. Written property control systems
<ģ Chapter 2. Reviewing a written system
Assessing contract data 11
Applying the criteria 12
Notifying die contractor 13
Section three. Site compliance reviews
* Chapter 3. Preparing for a review
Introduction 21
Determine sites and dates 21
Select the team 22
Notify the contractor 22
Finalize the dates 22
Make travel arrangements 25
Plan the review ' 25
Prepare for the sample invert ories 26
* Chapter 4. Conducting or iew
Introduction 27
Hi
-------
Contents
Entrance interview , . .27
Sample inventories . . .28
Acquisition 35
Receiving 36
Identification and records 37
Storage and movement 38
Property consumption 39
Utilization 40
Maintenance and calibration 41
Physical inventory 43
Subcontract administration 44
Reporting 45
Disposal 46
Contract completion or termination 47
Closing the review 50
Exit interview 52
* Chapter 5. Reporting the findings
Report features 53
Preparing and submitting the report .54
<ģ Chapter 6. Follow-up procedures
Approach 55
Informal telephone follow-up 55
Scheduled written follow-up 55
Follow-on review 56
Section four. Desk reviews
<* Chapter 7. Conducting a desk review
Introduction 59
Plan the review 59
Notify the contractor 59
-------
Conduct the review 60
Document the findings 62
Appendix
* A. Random sampling
Definition 65
Application 65
Selecting the sample items 65
Random Number Table 1 70
Random Number Table 2 71
* B. Selected sampling
Definition 72
Application 72
Selecting the items 72
* C. Categories of property control
Definitions 74
* D. Sensitive Hems list
Dollar value from $300 to $999 76
+ E. Property administrator addresses
Addresses 77
-------
Contents
1
2
3
4
5
6
7
8
Figures
Sample Compliance Review Schedule 8
Summary of Compliance Review Steps 20
Organizing the Review 23
Overview: Conducting the Review 29
Physical Inventories 30
Records to Review 33
Optional Records Review Form 34
Inventory Analysis Form 69
CAP
FAR
GFP
M&TE
PCMD
RTP
Acronyms
Contractor-acquired property
Federal Acquisition Regulation
Government-furnished property
Measuring and test equipment
Procurement and Contracts Management Division
Research Triangle Park, NC
vi
-------
Introduction
Purpose and scope of the handbook
This handbook was developed to standardize and detail the pro-
cedures for reviewing contractors' written property control sys-
tems and conducting compliance reviews. It establishes criteria
for the compliance review program, defining policies and stand-
ards. The handbook also serves as a hands-on guide that can be
used as a training manual, reference document, or a workbook.
Contents in brief
The handbook is made up of four sections and an appendix. The
sections consist of program criteria, written property control sys-
tems, site compliance reviews, and desk reviews.
In the appendix, you will find a description of random sampling
and selected sampling procedures and a list of sensitive item
categories. The addresses and telephone numbers of the con-
tract property administration offices are also provided for quick
reference as well as the definitions of the 12 categories of proper-
ty control.
About the handbook
If you have any comments about tins handbook, or if you want
additional copies, please contact the Chief, Property Manage-
ment Section (Security and Property Management Branch,
Facilities Management and Services Division) at FTS-382-2144
or by mail at PM-215, Headquarters.
ou
-------
-------
Section one. Program criteria
Policies
Chapter 1
Approach
The property control system review program has been estab-
lished to ensure that contractor-held government property is
being adequately cared for and controlled by EPA contractors.
The policies described in this handbook will be in effect begin-
ning in Fiscal Year 1991 for new contracts and existing con-
tracts with at least two years remaining under the contract
period (using the maximum expiration date).
All EPA contractors with government property under their
contracts, regardless of the dollar value of that properly, are
required to have property control systems in place (48 CFR
45.104). EPA is required to approve or disapprove all property
control systems. The approval of a contractor's property control
system is based on an evaluation of the contractor's written sys-
tem or the contractor's operating procedures.
Written property control systems
A written property control system is required of each contractor,
unless the property administrator determines that maintaining
a written system is unnecessary. The property administrator
should consider the following factors to determine the need for a
written system:
Dollar value of property
Number of property items
Contractor's scope of work
Complexity of system required to control property
Anticipated future acquisitions
If a written system is deemed unnecessary, the property admin-
istrator must prepare a written justification for the file. All con-
tractors controlling property valued at $500,000 or more are
required to submit written property control systems.
-------
Chapter 1. Policies
Program administration
For each contractor possessing government property, the EPA
contract property administration office that administers the
highest dollar value of property for that contractor is designated
as the lead office. The lead office is responsible for reviewing
and approving the contractor's written system.
Before approving a contractor's system, the lead office should
notify the other offices (secondary offices) administering proper-
ty for that contractor. It is the responsibility of the secondary
offices to review the contractor's written system for unique
requirements dictated by their contracts and to submit com-
ments to the lead office before the system review date. The lead
office should send the secondary offices copies of all correspon-
dence concerning the contractor's property control system.
Property control system register. To facilitate coordination
among the offices, a central property control system register will
be maintained by the Headquarters Property Management Sec-
tion. At a minimum, the register will list all EPA contractors,
contract numbers, dollar value of property, number of property
items, approval status of the property control system, and the
responsible contract property administration office. The register
will be updated quarterly and distributed to the contract proper-
ty administration offices.
Compliance reviews
Compliance reviews are required to verify that contractors are
complying with FAR and contract requirements, and are operat-
ing in accordance with their written property control systems
(when applicable). A compliance review may be a site review
(conducted at a contractor's facility/site) or a desk review
(records are reviewed at the reviewer's office and telephone
interviews of contractor staff may be conducted).
Authority
The authority for the compliance review program is established
in 48 CFR 45.511, stated below.
The Government may audit the contractor's property con-
trol system as frequently as conditions warrant. These
audits may take place at any time during contract perfor-
4 Compliance reviews
-------
Section one. Program criteria
mance, upon contract completion or termination, or at any
time thereafter during the period the contractor is required
to retain such records. The contractor shall make all such
records and related correspondence available to the
auditors.
Scope
Compliance reviews must be conducted of all EPA contractors in
possession of government property authorized under an EPA
contract. The reviews will cover the following areas of property
control:
Acquisition Maintenance and calibration
Receiving Physical inventory
Identification and records Subcontract administration
Storage and movement Reporting
Property consumption Disposal
Utilization Contract completion/termination
This handbook presents the Tninim^m requirements for evaluat-
ing a contractor's operating procedures. A review need not be
limited to the points listed in each category of property control
(in chapter 4). The contractor's scope of work will determine
whether additional areas should be examined, such as motor
vehicle management, reporting of leased property, and installed
property.
Approach
It is the responsibility of the property administrator designated
in the contract to ensure that compliance reviews are conducted
in accordance with the policies and procedures described in this
handbook. To ensure consistent treatment by the Agency, it is
important that EPA property administrators approach com-
pliance reviews in the same manner. This handbook should be
used as the guide for establishing a compliance review program
and for conducting the reviews.
The process should be kept as simple as possible, adhering at all
times to the bottom line: are the contractor's operating proce-
dures adequate to ensure the proper care and control of govern-
ment property? Are they within the boundaries of the FAR,
contract requirements, and sound business practices?
-------
Chapter 1. Policies
The Government establishes the minimum requirements on
which contractors base their procedures. Determining how to
meet those requirements is the contractor's responsibility; in
other words, how they do it is their business, as long as they are
meeting the nrnniTrmm requirements.
Criteria
The criteria for conducting compliance reviews are described in
this section.
Contractors subject to review. Compliance reviews will be
conducted of all EPA contractors in possession of government
property, subject to the limitations outlined in this section of the
handbook. Reviews are required whether the Government or the
contractor maintains the official property records, and regard-
less of the approval status of the contractor's property control
system.
Frequency of reviews. Standards for the frequency of reviews
have been established based on the dollar value of property, as
outlined below.
High dollar value ($500,000 and greater). Annual compliance
reviews must be conducted of contractors in possession of
government property valued at $500,000 and greater. A site
review must be conducted once every two years, and a desk
review must be conducted every other year, (on the off year)
when a site review is not conducted. A site review may be con-
ducted more frequently than every other year if conditions war-
rant, at the property administrator's discretion.
Low dollar value (less than $500,000). For contractors with less
than $500,000 in government property, a site compliance review
or a desk review must be conducted once every three years. If
the contractor does not have an approved property control sys-
tem, the review must be conducted in the first year of the con-
tract. The property administrator should consider the following
factors when determining the frequency and type of review: dol-
lar value of property, number of property items, complexity of
system, risk to the Agency, and past performance such as
contractor's responsiveness to reporting requirements and infor- ĢL | _
maticn requests.
6 Compliance reviews
-------
Section one. Program criteria
Follow-on reviews may be conducted when the Agency's assets
are significantly at risk.
Contractors with multiple contracts. If a contractor has
more than one contract with EPA, the contractor's overall sys-
tem is reviewed if that contractor has a centralized organiza-
tion. If the contractor's organization is decentralized, however, a
compliance review should he conducted for each contract. It is
the property administrator's responsibility to determine the
nature of the contractor's organizational structure.
Contractors with multiple sites. When a contractor has more
than one site under a contract, the property administrator must
decide which locations to visit. (For example, some Superfund
contractors have a central office, regional office, and multiple
sites.) The property administrator should do what is simplest,
most cost effective, and still ensures the control of government
property. Considerations include the location and dollar value of
the property, access to the site (some sites are at remote loca-
tions), and the company's organizational set-up (where the
property is located vs. where the contact person and tile records
are located).
Program administration. Each contract property administra-
tion office should prepare a compliance review schedule on a
quarterly basis, projecting the schedule for the next six-month
period. In other words, the current quarter's schedule is updated
every quarter and the next quarter's projected schedule is
added. Figure 1 on the next page provides a sample schedule.
The lead office is responsible for conducting the required com-
pliance reviews. Secondary offices should provide any comments
or input before the review is conducted. Copies of all reports and
correspondence with the contractor concerning the compliance
review should be sent to the secondary offices.
In both reviewing contractors' written property control systems
and conducting compliance reviews, it is essential that the con-
tract property administration offices communicate with each
other to ensure the effective control of government property being
held by contractors.
Section two. Written property control systems
Reviewing a written system
Chapter 2
This chapter presents a set of criteria for the evaluation of a
contractor's written property control system, as well as guidance
for applying the criteria. The purpose is to provide standards
that will allow the consistent evaluation of written systems by
EPA property administrators.
-------
Figure 1
58
II
8
1
I
CO
< m o < m o <
S3 Ģ, ^ S 8 8
o
X
5 5
ģ Ģ a 5
J
I
8 S S
°
o
<.
ca O
§
Q
o
&5 o
* it* "Ģr
I
8
I
o co Ģe o o
.1
3K
S
mil
* K Ģ
Chapter 2. Reviewing o written system
If the property administrator determines ttiat a written system
is not required, a written justification must be prepared for the
file, outlining the reasons for the determination.
Applying the criteria
The criteria are provided in checklist form on page 14 in this sec-
tion of the handbook. The checklist was designed to allow the
reviewer to check off items that are covered by the system, and
to reference the page number if desired.
-------
Section two. Written property control systems
Does this meet the nniiitTn\iTn requirements that are outlined
intheFAR?
Notifying the contractor
EPA is required to notify the contractor in writing of the
approval of the property control system. After reviewing a
contractor's system, send a letter advising the contractor of the
following:
Approval status, such as:
Changes must be made before approving the system.
Approval is contingent on specific conditions.
System is approved (state the basis for the approval-
review of written system and compliance review, for
example).
General and specific comments about the system.
Due date for completion of revisions to the system. Remem-
ber to follow up with an approval letter after the revisions
are submitted and the system is approved.
Use the following general guidelines when commenting on a
contractor's system.
D Focus on substance. Limit your comments to the substance of
the system. Avoid editorial or grammatical comments such
as typo's, organizational problems, or wording (unless there
is an impact on the control of government property).
O Don't tell the contractor what to say. State the deficiency and
identify the requirement. Example: Don't simply tell the con-
tractor to add a phrase (such as, add "and resolve discrepan-
cies with the vendor.") Re-word the comment so that you are
stating the deficiency and identifying the requirement: "Your
system does not identify follow-up measures for discrepant
shipments. Your procedures must enable you to track and
resolve discrepancies with the vendor."
D If a contractor includes more detail in the system than is
required, you must comment on any erroneous information.
(Example: the contractor includes a glossary of terms, with
" I incorrect definitions of "sensitive item" and "accountable
property." Even though these definitions are not required by
our criteria, you must comment on the incorrect information.)
13
-------
Chapter 2. Reviewing o written system
Criteria for reviewing written property control systems
Acquisition
Pg.# O The acquisition of accountable property, whether purchased,
furnished, or leased for more than 60 days, is authorized.
Pg. # Š Existing government equipment on-hand is screened before
submitting requisitions.
Receiving
Pg.# O Property received is inspected for content accuracy and
condition.
Pg.# Š Receiving report adequately describes property and is
prepared and distributed to appropriate offices.
Pg.# Š If quantity, condition, or description differs from that shown
on the shipping document, the discrepancy is documented in
writing. Follow-up actions are documented and annotated on
receiving document.
Identification and records
[Hj pg.# O Equipment received is promptly classified and labeled with
EPA property decal.
Pg.# Š Auditable inventory control and financial records are estab-
lished and maintained for the property.
Pg. # Š Basic information is contained in the records, as outlined in
the FAR (see Guide, pages 27 - 29).
Storage and movement
Pg.# Š An adequate system to control movement and location of
property is maintained.
Pg.# Š Property in storage is protected, preserved, and inspected to
prevent loss, damage, and deterioration.
Pg # Š Adequate safeguards are provided for securing government
property.
Š A first in/first out system is established for stored items sub-
ject to age deterioration and warranty expiration.
14 Criteria
-------
Section two. Written property control systems
Property consumption
O Pg.# _ Ž Property is consumed only under contract performance.
pg.# _ @ Stock record system is maintained for consumable items.
Utilization
pg.$ _ O Methods are established to ensure that government property
is utilized only for purposes authorized by the contract.
pg.# _ > Contractual authorization is obtained to use property for
other than its original authorized purpose.
pg.# _ Š A system is established to review and identify government
property for release when it is no longer required for contract
performance.
pg.# _ O Criteria are established and retention of idle equipment is
documented and justified by the program manager.
Maintenance and calibration
pg.# _ O A scheduled maintenance program is established, consisting
of a systematic written procedure for servicing and inspect-
ing equipment to ensure safe, efficient, and economical opera-
tion of government equipment.
pg.# _ __ > A calibration control system is designed for all measuring
and test equipment (M&TE) to provide control of the evalua-
tion, calibration, maintenance, repair, and use of M&TE.
Pfl.# _ @ Records are kept of maintenance and calibration performed,
including cost and date.
O Maintenance and caUbration are performed by technically
qualified personnel.
pg_# _ 0 System is capable of identifying high maintenance costs for
review; corrective action is taken by management and is
documented.
Physical Inventory
pg.# _ O Physical inventories are conducted at the start of the con-
tract, annually on the anniversary of contract award, on a
special basis if directed by the Government, and upon con-
tract completion or termination.
Pg.# _ Š Physical inventories are conducted using the floor-to-records
approach.
15
-------
Chapter 2. Reviewing a written system
Pg.# Š Physical inventory results are promptly reconciled with
properly records.
pg.# Š Inventory results and discrepancies are promptly reported to
the property administrator.
Subcontract administration
pg.# O Procedures and controls are established to assure that
government property in a subcontractor's possession is ade-
quately protected.
Pg.# Š Subcontractor is aware of contractual property provisions.
Pg.# Š Subcontractor will report property transactions to the prime
contractor for notification of die properly administrator.
Reporting
Pg,# O Inventory reports are provided to the property administrator
on the anniversary date of contract award.
Pg.# Š EPA Form 1730-1 is submitted for all accountable contractor-
acquired property to include purchased, leased (if leased for
more than 60 days), and installed property; receipt of
government-furnished property is reported to the properly
administrator when the property is received.
CU pg.# Š Any loss of or damage to government property is immedi-
ately reported to the properly administrator.
pg.# 0 Government property excess to the contract requirements is
promptly reported to the properly administrator.
pg.# Š Retention of government property with low utilization rate is
justified and annually documented in writing. Must be jus-
tified by the project officer.
Disposal
pg.# Š Disposition instructions provided by the property admin-
istrator are carried out as directed.
pg.# Š In accordance with instructions, the disposal of property is
properly documented.
Pg.# Š A decontamination certification is prepared for all properly
subject to disposal actions.
*. ~
16 Criteria
-------
Section two. Written property control systems
D Pg.#.
D Pg.i
Contract completion or termination
O Residual property is reviewed for appropriate action (such as
decontamination or repair) before transfer or disposal of
property.
Š A full accounting is effected of all government property (to
include nonexpendable property regardless of cost and
expendable supply items and materiel not consumed during
contract performance) in posession of the prime contractor
and the subcontractor. The final inventory report is sub-
mitted promptly so that disposal of the property may be
carried out in an orderly fashion.
i ģ
17
-------
* i
-------
Section three. Site compliance reviews
Preparing for a review
Chapter 3
Introduction
Preparing for a compliance review is a process consisting of a
series of steps:
Determine sites and dates
Select the team
Notify the contractor
Finalize the dates
Make travel arrangements
Plan the review
Prepare for the sample inventories
Determine sites and dates
On a quarterly basis, the property administrator prepares a com-
pliance review schedule, projecting review dates and locations
for a six-month period. During the planning process, the prop-
erty administrator considers the following elements in selecting
the specific sites.
O Dollar value of properly
O Location of property and records
D Accessibility of site(s)
To set the review dates, consideration is given to the factors
listed below.
O Number of days needed to conduct the review (one or two
individuals should be able to conduct a review within
three days)
D Travel time
D Proximity to other review sites
To keep costs at a minimum, reviews are scheduled by location,
not by contractor. For example, assume ABC Company and XYZ
Associates each have offices in Chicago that must be reviewed.
ABC also has a site to review in Kansas City. To reduce costs,
the two Chicago offices would be reviewed in one week, while
-------
Chapters. Preparing for a review
the Kansas City trip might be scheduled for a week when .
another contractor is being reviewed in the Kansas City area.
Select the team
The property administrator selects the review team, which is
usually made up of two people, and designates a team leader.
Ideally, the team members are familiar with the contractor's
property control system, scope of work, and the status of prop-
erty under the contract.
Notify the contractor
A letter from the property administrator to the contractor's
point of contact serves as formal notification of the compliance
review. The letter is sent six weeks before the scheduled review
and covers the information outlined below.
H Review dates.
H Brief explanation of the purpose of the review.
EI Scope of the review.
33 Description of the files and documentation that should be
available for review.
H Names and positions of the review team members.
EI Request for the name, telephone number, and location of a
contact point for the review.
H Request for a copy of the most recent inventory by location
(specify the due date for receipt of the inventory listing).
H Name and telephone number of EPA representative to con-
tact regarding the review.
Hotel and airline/train reservations may be made at this point.
Do not finalize the reservations, however, until the dates have
been confirmed.
Finalize the dotes
The dates for the review may be finalized by calling the contrac-
tor for confirmation if a letter has not been received. Be sure the
Note: A contractor's failure to submit the inventory listing does not
result in the review's cancellation.
U.S.
HAIL
D
22 Finalize the dotes
-------
Figure 3
Organizing the Review
vvvvvvv
Determine sites
and dates
Select review
team
NEWS
Notify contractor
Finalize review
dates
Plan site
visit
Review team
coordination
- *
416935 -I .
638IS1 ,l\ -I
749262
74926B I
Prepare random
sample
-------
It ._
-------
Section three. Site compliance reviews
contractor submits the requested inventory listing before the
review date.
Make travel arrangements '
As soon as the review dates are confirmed, travel arrangements
are finalized. The team leader is responsible for ensuring that
travel arrangements are made in the most efficient, cost effec-
tive manner. Whenever possible, the review team travels on the
same flight and stays in the same hotel. Arrangements need to
be made for.
* Hotel
4- Airline or train reservations
> Rental car, if needed
Plan the review
Planning. The property administrator determines which
categories of the contractor's system to focus on, taking the fol-
lowing factors into consideration:
Types and dollar value of property
Complexity of contractor's written property control system
Risk to the Government
Past judgments of the adequacy of the system
Preparation. To prepare for the review, the team examines the
contract files and any related documents pertinent to the con-
tract under review. It is important to look over these materials
in order to determine what is required for the contractor to
protect and control government property under an EPA con-
tract. The review team examines the materials listed below.
Written property control system
Contract (property clauses and scope of work)
Contract modifications
Delivery orders
Subcontracts
Most recent inventory
25
-------
Chopter 3. Preparing tor a review
Pending property actions (such as contract modifications,
property justifications, and transfers)
Correspondence with the contractor
Before the review, the property administrator ensures that the
following objectives are met.
Each team member has access to background materials and
has received a copy of this handbook.
Team members understand the purpose of conducting a com-
pliance review and understand their roles during the review
process.
The inventory listing submitted by the contractor has been
reconciled with the PPAS records.
The random sample (records-to-floor) inventory form is com-
pleted before the review.
Travel plans are coordinated and confirmed.
Prepare for the sample inventories
One of the methods for collecting information during the review
is a records-to-floor inventory of randomly selected accountable
property items. The inventory may be recorded on an inventory
analysis form which is completed before the review. You may
also conduct a selected sample inventory of other than account-
able items. The forms should be completed before the review.
Please turn to the appendix for instructions and an explanation
of these processes.
** Remember to take the completed records-to-floor inventory
analysis form with you on the review, as well as blank forms
for the floor-to-records inventory. A copy of the form is
provided in appendix A.
26 Prepare for the sample Inventories
-------
Section three. Site compliance reviews
Conducting a review
Chapter 4
Introduction
This chapter provides a detailed description of the steps for con-
ducting a site compliance review. The chapter is organized in sec-
tions, presented in the basic sequence that should be followed
while conducting the review,
Entrance interview
The team leader hosts the entrance interview with designated
contractor staff and review team members present. The agenda
for the meeting follows. (If this is a repeat review with the same
contractor staff, you may want to condense the entrance inter-
view, skipping over some of the agenda items.)
Make introductions among contractor staff and review team.
If the review team is made up of government and contractor
personnel, include this information during the introductions.
Cite authority for conducting the review:
FAR requirement
Designated representative of the contracting officer
Explain purpose of review: to determine if the contractor is
meeting the mimiTnim requirements to control and care for
government property under the contract. Stress that you are
not there to tell the company how it should operate.
Provide overview of what you will be doing:
Sample inventories
Records review (ask them to make records available)
Exit interview
Summarize the 12 categories of property control (see appen-
dix C. Contractor may refer to page 10 of the Contractor's
Guide for Control of Government Property for more informa-
tion.)
Discuss logistics: who will accompany team during inven-
tories and when the inventories will be conducted.
"27
-------
Chapter 4. Conducting a review
Request tour of facilities following entrance interview. Also
ask for information about:
Number and locations of sites under the contract
Storage facilities
Subcontracts
Discuss any discrepancies found in the inventory listing
which the contractor submitted before the review.
Ask for work space during review.
Wrap-up:
Any questions?
Exit interview will be held at end of review to discuss the
findings.
At the conclusion of the entrance interview, read the next section,
then conduct the sample inventories.
Sample inventories
The first step in reviewing the contractor's operations is conduct-
ing the sample inventories. Two types of inventories are con-
ducted, described below.
Records-to-floor inventory. 'TJecords-to-floor" means you select
the inventory items from the records and verify the information
in the records by physically locating the items. The inventory
items were selected before tile review using the random sample
procedures described in appendix A and, if applicable, the
selected sample procedures described in appendix B.
Floor-to-records inventory. "Floor-to-records" means you select
items at random as you see them, and verify that the records
are accurate for the selected items. Items are visually selected
at random in a variety of locations.
Conducting the inventories
While conducting inventories, be on the look-out for idle govern-
ment property which is obviously not being used (for example:
monitors stacked in a corner or a typewriter on top of a five-foot
file cabinet). Make a note of any idle property you see and ask
tile contractor about it. (Use this information later to help
evaluate the utilization and reporting categories.)
28 Sample Inventories
.
-------
Figure 4
O
o
Q.
c
o
(Q
O
a <
-------
Figure 5
8
o
o
QJ
Ģ
2
I
PŖ
ta
Inventory
t3
^5 fi
co &Q
l-H
fl ^**
5 -°
*3 co
1=1
cd
1
1
1
D
S
>v
inventory anal;
form
1
,>*
i
n
*
information wi
CO
B
O
o
v
1
1
(D
N
!
D
2
inventory resu]
-------
Section three, ate compliance reviews
The next section describes the procedures for conducting the
records-to-floor random sample inventory.
Records-to-floor Inventory
The records-to-floor random sample inventory is conducted by a
review team member accompanied by a contractor employee.
Using the completed inventory analysis form (be sure to circle
"Records-to-floor" on each form), follow the steps described
below to conduct the inventory. Use the same approach to con-
duct a selected sample inventory, if applicable.
Tell the contractor which items you are looking for.
When an item is located, ask the contractor to read out the
information by looking at the item (description, decal num-
ber, manufacturer, model number, and serial number). If an
item is located at another facility or site, look at the locator
or other records for documentation, and note this on the form.
Verify what the contractor reads out with the information
recorded on the form.
^ If there is a discrepancy, make a note of the correct infor-
mation.
^ Look at the item and assess its condition, making a nota-
tion on Hie form in the appropriate box.
While you are conducting the records-to-floor inventory, make a
note of any items you may want to select for the floor-to-records
inventory.
Floor-to-records Inventory
Conduct the floor-to-records inventory accompanied by a contrac-
tor employee. If possible, select the same number of items as
were selected for the records-to-floor inventory. Do not select
any items that were included in the records-to-floor inventory.
Randomly select the items, choosing a variety of locations and
types of property.
As you select an item, point it out to the contractor, and ask
the contractor to read out the information by looking at the
item (description, decal number, manufacturer, model num-
ber, and serial number).
Note: When recording the inventory results, be sure to write legibly
so you can read your own writing later.
31
-------
Chapter 4. Conducting Q review
^ Record the information on an inventory analysis form (be
sure to circle "Floor-to-records").
^ Look at the item and assess its condition, making a nota-
tion on the form in the appropriate box.
Once the inventory is completed, verify the information
recorded on the form with the PPAS records.
^ If there is a discrepancy, make a note of the correct infor-
mation.
Analyze the results
After completing the inventories, analyze the results. Turn to ap-
pendix A and consult the random sample chart to determine if
additional inventories are required.
After completing the sample inventories, use the remainder of
this chapter as a guide for conducting the review. ^Please read
the following information before beginning the records review:
D For organizational purposes, the procedures described in the
next section are grouped by property control element, begin-
ning with acquisition and ending with contract comple-
tion/termination. While conducting the review, procedures in
the categories will overlap. For example, when you review
the maintenance records, you are looking at the areas of
maintenance and calibration, utilization, and possibly dis-
posal (looking for cannibalization) at the same time. Figure 6
on the next page lists the records to be reviewed and the cor-
responding element of properly control.
O Records are reviewed in detail for the sample items from the
records-to-floor inventory. You may use the form presented
in Figure 7 to keep track of the results of the records review.
D "Characteristics of an effective system" outlines the mini-
mum requirements for a property control system. Some of
these characteristics may not apply to every contract. Use
your knowledge of the contractor's scope of work and your
common sense to decide which characteristics apply.
O "What to look for" provides tips for checking the contractor's
compliance with the TTIITIITTIIUTI requirements. It is not an all-
inclusive list of what to do.
32 Sample Inventories
-------
o
2.
a
s.
m
5
CO
S
S-
8
§.'
I
u
i
-------
rigure /
|
i
p
-------
Section three. Site compliance reviews
Acquisition
Definition: the process of acquiring government property either
through requisition or transfer from government sources, or
through purchase or lease, including those made from contrac-
tor stores.
Scope: covers the process of acquiring property; does not include
reporting acquisitions to EPA (that is part of the reporting
category). Do not address the competitive bid process or the
requirement for a lease vs. purchase analysis. These areas are
part of the contractor's procurement system and are covered in
depth during procurement system reviews performed by
Procurement and Contracts Management Division (PCMD).
Characteristics of an effective system
The acquisition of accountable property, whether purchased,
furnished, or leased for more than 60 days, is authorized by
the contract or a modification.
Existing government equipment on-hand is screened before
submitting requisitions.
Requesting documents and purchase orders are prepared
and processed.
Records to review
To review the acquisition category, you need the following
documentation (when applicable):
Procurement requests (requesting documents for CAP)
Purchase orders (ordering documents for CAP)
Contract modifications
Propertyjustifications
Transfer documents for GFP
Original GFP listing in contract
What to look for
If an item is not authorized, check for pending property jus-
tifications.
Adequate paper trail from initiation of the request to comple-
tion of the purchase order.
On purchase orders, make sure only EPA items are charged
to EPA.
A means of identifying items listed on purchase orders (it.,
they must match up with the actual items).
35
-------
Chapter 4. Conducting a review
Review the files and documentation to determine if the
contractor's operating procedures meet the minimum require-
ments outlined in "Characteristics of an effective system." Keep
track of the findings by writing down the facts about discrepan-
cies or problem areas; make a note of good characteristics as well.
Receiving j __
Definition: the process of government property initially entering
into a contractor's custody.
Scope: covers the contractor's system for receiving property;
does not include decaling procedures (decaling is part of the
identification and records category) or the addition of tax and
freight charges to the acquisition cost of the item (this is an iden-
tification and records function).
Characteristics of an effective system
Receiving process includes inspection for content accuracy
and condition.
Receiving document adequately describes property and is
prepared and distributed to appropriate offices. The docu-
ment is signed and dated.
If quantity, condition, or description differs from that shown
on the shipping document, the discrepancy is documented in
writing. Follow-up actions are documented and annotated on
receiving document (e.g., completion of a partial shipment).
Misdirected or incorrect shipments are segregated and ade-
quately controlled, pending resolution of discrepancy.
Records to review
To review the receiving category, you need the following
documentation, when applicable:
Receiving documents (to include packing slips, shipping docu-
ments, and receiving reports)
Transfer documents (EPA Form 1700-7 for GFP)
What to look for
Consistent system for signing, dating, and annotating receiv-
ing slips.
Documentation that what was ordered was received and
accepted.
Adequate system for inspecting incoming shipments and con-
trolling partial deliveries.
36 Receiving
-------
Section three. Site compliance reviews
Compare the purchase documents with the receiving slips. .
Review the documentation to determine if the contractor's operat-
ing procedures meet the minimum requirements outlined in
"Characteristics of an effective system." Keep track of the findings
by writing down the facts about discrepancies or problem areas;
make a note of good characteristics as well.
Identification and records
Definition: the identification of government property and the
official accounting and inventory control records maintained by
a contractor to show property status and to control government
property.
Scope: includes decaling government property and the accuracy
and completeness of documentation kept by the contractor. Does
not include submitting the information to the Agency.
Characteristics of an effective system
Property received is promptly classified and labeled with
EPA property decal.
Auditable inventory control and financial records are estab-
lished and maintained for government property.
The records contain the basic information outlined in the
FAR (see Guide, pages 27 - 29).
Records to review
To review the identification and records category, you need the
following documentation (when applicable):
Inventory control records (to include stock records for expend-
able items)
Vehicle records
What to look for
System for decaling components, to ensure consistency (e.g.,
components are always decaled or only the main unit is de-
caled).
Note: Look for consistency in nomenclature. For example, HNU
(manufacturer) photoionization detectors are sometimes catted
HNUs rather than photoionization detectors (actual item descrip-
tion). Referring to them as HNUs is acceptable as long as the use
is consistent in the records.
37
-------
Chapter 4. Conducting o review
Unit cost of property items includes tax, shipping, and instal-
lation. Look for a basis for determining the acquisition cost
(i.e., basis for apportioning costs when multiple items are
listed on one invoice).
All items listed on invoices and charged to EPA contract are
listed on the contractor's inventory.
Records must be auditable; in other words, you must be able
to track an item through the records to the actual item.
Appropriate records are maintained for vehicles (mainte-
nance logs, sign-out sheets).
Review the files and documentation to determine if the
contractor's operating procedures meet the minimum require-
ments outlined in "Characteristics of an effective system." Keep
track of the findings by writing down the facts about discrepan-
cies or problem areas; make a note of good characteristics as well.
Storage and movement
Definition: the process of storing and moving all types of govern-
ment property, including protection during storage and move-
ment.
Scope: Covers the internal movement of property necessary to
carry out the scope of work (e.g,, from the main office to a site or
from one site to another). It does not include movement result-
ing from the transfer of accountability to another entity, such as
the return of property to the program office (that's part of the
disposal category). Nor does it cover movement from one con-
tract to another even for the same contractor (that's a transfer
which must be coordinated with the property administrator and
approved by both contracting officers).
Characteristics of an effective system
An adequate system to control movement and location of
property is maintained.
Property in storage is protected, preserved, and inspected to
prevent loss, damage, and deterioration,
Adequate safeguards are provided for securing government
property.
A first in/first out system is established for stored items sub-
ject to age deterioration and warranty expiration.
Government property is segregated from contractor property.
38 Storage and movement
-------
Section three. Site compliance reviews
Records to review
You will need the following documentation (when applicable):
Movement orders (internal forms used by the company to
document the movement of property under the contract)
Locator system files
What to look for
A system that permits the contractor to locate equipment
within two days (e.g., logs by day, site or equipment). Note:
the two-day period applies to the system's ability to locate
property during contract performance (see Guide, page 9).
Documentation of the movement of properly (e.g., logs, hand
receipts, movement orders).
The contractor's procedures for physically moving property
(property is transported in the back of a pick-up truck or by a
moving company). Determine whether property is adequate-
ly protected during movement.
Government property items in storage are properly pro-
tected, secured, and segregated from contractor property.
Review the contractor's storage facilities, observing security
measures for the storage area. Ask questions about the security
procedures for other areas where government property is located
(e.g., offices locked at night, restricted access). Examine the files
to help determine if the contractor's operating procedures meet
the minimum requirements outlined in "Characteristics of an
effective system," Keep track of the findings by writing down the
facts about discrepancies or problem areas; make a note of good
characteristics as well.
Property consumption
Definition: the process of incorporating property into an end
item or otherwise consuming it in performance of a contract.
Scope: the property consumption category primarily covers the
use of supplies and materials acquired under the contract.
Characteristics of an effective system
Property is consumed only under contract performance.
Stock record system is maintained for consumable items.
39
-------
Chapter 4. Conducting a review
Excesses are promptly returned to stores and returns are
recorded.
Quantities consumed are reasonable.
Records to review
To review the property consumption category, you need the fol-
lowing documentation:
Stock records
What to took for
Supply levels seem reasonable.
Ask the contractor about re-order points for supplies and general
rates of consumption. Ask about access to supplies. Review the
stock records to help determine if the contractor's operating proce-
dures meet the minimum requirements outlined in "Charac-
teristics of an effective system." Keep track of the findings by
writing down the facts about discrepancies or problem areas;
make a note of good characteristics as well.
Utilization
Definition: tile process of using equipment and materials for
their authorized purpose.
Characteristics of an effective system
Methods are established to ensure that government property
is utilized only for purposes authorized by the contract.
Contractual authorization is obtained to use property for
other than its original authorized purpose.
A system is established to review and identify government
property for release when it is no longer required for contract
performance.
Criteria are established and retention of idle equipment is
documented and justified by the project officer.
Records to review
To review the utilization category, you need the following
documentation (when applicable):
Maintenance logs/records
Equipment logs
Calibration records
Sign-out logs
40 Utilization
-------
Section three. Site compliance reviews
What to look for
Turn-around time for newly acquired items: for how long are
they held in the receiving department or stored before being
* put to use?
Methods that may help you determine if property is being
properly utilized:.
Check maintenance, equipment, calibration, and sign-out
records for usage.
Check the DOS directory in a personal computer to see the
last time it was used. You may briefly review the file
names to identify personal use.
Look for items that are obviously not being used such as
monitors stacked in a corner, terminals in a closet, sealed
boxes of items, or property in storage. Remember: if there
is authorization to have these items stored in the closet,
etc., there is no "inadequate" finding.
Use the methods described above and consult the sample inven-
tory results to help determine if the contractor's operating proce-
dures meet the minimum requirements. Keep track of the
findings by writing down the facts about problem areas; make a
note of good characteristics as well.
Maintenance and calibration
Definition: the process of providing the care necessary to obtain
a high quality of production and the most useful life of govern-
ment property.
Scope: this category focuses on the contractor's system for main-
taining and calibrating government property as needed. Even if
the contractor's equipment has not required maintenance, there
must be a plan for how maintenance will be handled. The
contractor's plan may be to call a vendor for service in the event
of equipment malfunctions; written service agreements are not
required. The key is that the contractor select the most efficient,
cost effective method to care for government property.
Characteristics of an effective system
Government property is maintained in a safe, efficient, and
economical manner.
A scheduled maintenance program is established, consisting
41
-------
Chapter 4. Conducting a review
of a systematic written procedure for servicing and inspect-
ing equipment.
A calibration control system is designed for all measuring
and test equipment (M&TE) to control the evaluation,
calibration, maintenance, repair, and use of M&TE.
Records are kept of maintenance and calibration performed,
including cost and date.
Maintenance and calibration are performed by technically
qualified personnel.
System is capable of identifying high maintenance costs for
review; corrective action is taken by management and is
documented.
Records to review
To review the maintenance and calibration category, you need
the following documentation (when applicable):
Maintenance logs
Calibration logs
Vehicle maintenance records
Maintenance plan (for new contracts with no history of main-
tenance)
What to took for
Condition of government property, including vehicles. For
vehicles, check the tires, oil level (you may ask the contractor
to show you the oil level on the dip stick), appearance of the
vehicle's interior. For other than vehicles, notice the overall
appearance of government property.
Maintenance and calibration should be performed in accord-
ance with the manufacturer's suggested procedures.
For health and safety equipment and for vehicles, there
might be separate maintenance plans. You may want to look
at these manuals.
Look at the maintenance history records; are there high-
maintenance items that might need to be replaced?
If the government program office keeps the maintenance
records, contact that office to review the contractor's records. If
you find that the Government is not keeping adequate main-
tenance records for the contractor, you may require the contrac-
tor to keep the records (a required action in the report of
findings).
42 Maintenance and calibration
-------
Section three. Site compliance reviews
Consult the sample inventory results and look at the condition of
government equipment as you walk through the contractor's
facilities. Review the files and ask questions to help determine if
the contractor's operating procedures meet the minimum require-
ments. Keep track of the findings by writing down the facts about
problem areas; make a note of good characteristics as well.
Physical inventory
Definition: the process of physically locating and counting
government property, recording the results and comparing the
findings to the records. The process includes posting findings
and adjustments.
Scope: covers the process of taking the inventory, recording the
results and reconciling them; does not include reporting the
inventory results to EPA (that's part of the reporting category).
Focus on how the contractor conducts the inventory (who does
it, approach, procedures) and how the results are reconciled.
Characteristics of an effective system
Physical inventories are conducted at contract start-up,
annually on the anniversary of contract award, on a special
basis if directed by the property administrator, and upon con-
tract completion or termination.
Inventories are conducted by personnel other than those
having custody of the property or control of the records.
Inventories are conducted using the floor-to-records
approach.
Physical inventory results are promptly reconciled with
property records.
Records to review
To review the physical inventory category, you need the follow-
ing documentation:
Inventory control records (could be copies of EPA Forms
1700-7 and 1730-1, locator system records, computerized
inventory listing).
Inventory work sheets, if available. If work sheets are not
available, interview the person who conducted the inventory.
What to look for
Physical inventory procedures that comply with the above
standards and ensure accurate results.
43
-------
Chapter 4. Conducting o review
Review the files, reading over the inventory work sheets if avail-
able, and ask questions to determine if the contractor's inventory
procedures meet the minimum requirements outlined in "Charac-
teristics of an effective system." Keep track of the findings by writ-
ing down the /acts about discrepancies or problem areas; make a
note of good characteristics as well.
Subcontract administration
Definition: the contractor's system to ensure a subcontractor's
compliance with the requirements for the control and care of
government property.
Scope: the prime contractor must submit consolidated reports
for all government property under the contract, to include sub-
contractor property. The prime communicates with the sub-
contractor and is the property administrator's only contact for
government property.
Characteristics of an effective system
Procedures and controls are established to assure that
government property in a subcontractor's possession is ade-
quately protected.
Subcontractor is aware of contractual property provisions.
Subcontractor will report government property transactions
to the prime contractor for notification to the property ad-
ministrator.
(I)
Records to review
To review the subcontract administration category, you need the
following documentation (when applicable):
Inventory control records (could be copies of EPA Forms
1700-7 and 1730-1, locator system records, computerized in-
ventory listing)
What to took tor
Evidence that the prime contractor keeps track of subcontrac-
tor property (subcontractor property is included in prime's
inventory records, subcontractor property reports are sub-
mitted to prime, reports of missing or damaged subcontrac-
tor property)
44 Subcontract administration
-------
Section three. Site compliance reviews
Review the files and documentation to determine if the
contractor's operating procedures meet the minimum require-
ments in "Characteristics of an effective system." Keep track of
the findings by writing down the facts about discrepancies or
problem areas; make a note of good characteristics as well.
Reporting
Definition; the preparation and submission of reports showing
the status of government property as required by the FAR and
the contract.
Scope: this category covers the accuracy, completeness, and
timeliness of reports the contractor is required to submit to the
property administrator. The contractor's rating in this category
is based upon knowledge of the requirements and performance
in submitting reports.
Characteristics of an effective system
Inventory reports are provided to the property administrator
at the start of the contract, annually on the anniversary date
of contract award, on a special basis as requested, and upon
contract completion or termination.
EPA Form 1730-1 is submitted for all accountable CAP and
accountable property leased for more than 60 days; receipt of
GFP is reported to the property administrator when the
property is received.
Any loss or damage to government properly is immediately
reported to the property administrator (details are provided
in the Guide).
Government property no longer required for the performance
of the contract is promptly reported to the property admin-
istrator.
Retention of government property with low utilization rate is
justified and annually documented in writing. Must be jus-
tified by the project officer.
Records to review
You will need the following documentation (when applicable):
Copies of EPA Forms 1730-1 and 1700-7
Inventory records
Missing, stolen, or damaged property reports
Reports of excess property
Vouchers
45
-------
Chapter 4. Conducting a review
What to took for
Lag time between the receipt of property and reporting it on
EPA Form 1730-1 and 1700-7 (if used to report receipt of
GFP).
V* Compare the findings from your sample inventories with the
contractor's inventory records.
Contractor's reporting history (e.g., annual inventories al-
ways late, incomplete data submitted for acquisitions,
reports submitted on time with complete information).
Both CAP and GFP are reported as part of contractor's inven-
tory.
Review the vouchers and supporting documentation; look for
equipment that may be included in "Other Direct Costs" sub-
listings and in "Subcontracts."
Evidence that idle property is identified and promptly
reported to property administrator.
Review the files, documentation and the contractor's reporting
history to determine if the contractor is meeting the minimum
reporting requirements outlined in "Characteristics of an effec-
tive system." Keep track of the findings by writing down the facts
about discrepancies or problem areas; make a note of good char-
acteristics as well.
Disposal
Definition: the process of requesting and receiving disposition in-
structions and effecting the disposal of government property as
directed by the property administrator.
Characteristics of an effective system
The quantity, condition code, and location are reported accu-
rately for property items requiring disposition.
Disposition instructions provided by the property admin-
istrator are carried out as directed.
In accordance with instructions, the disposal of property is
properly documented.
A decontamination certification is included in the final inven-
tory report at the conclusion of the contract.
Property is cannibalized only after receipt of the contracting
officer's approval and written instructions from the property
administrator.
46 Disposal
-------
Section three. Site compliance reviews
Records to review
To review the disposal category, you need the following
documentation (when applicable):
Copies of disposition instructions
Documentation of disposal actions
What to look for
Documentation should include the signature of the individ-
ual who receives the property after it leaves the contractor's
possession.
There is authorization on file for every disposal action.
Disposal actions are taken within a reasonable time period
after receiving disposition instructions.
When appropriate, proceeds are credited to the Government.
To check for cannibalization, look through maintenance
records for entries describing the removal or installation of
parts. Look at property as you walk through the facility, espe-
cially in the storage area; ask to see the area where excess
property is stored. For example, if you see a three-legged
chair, ask where the other leg is. It may have been used to
repair another chair. Be sure the contractor has obtained
authorization to cannibalize government property.
Review the files and documentation to determine if the contrac-
tor's operating procedures meet the minimum reporting require-
ments outlined in "Characteristics of an effective system." Keep
track of the findings by writing down the facts about discrepan-
cies or problem areas; make a note of good characteristics as well.
Contract completion or termination
Definition: procedures to be followed by the contractor upon can-
tract completion or termination.
Scope: When you review contract completion, in some cases you
will review contracts that have been completed, and in other
instances you will be reviewing the contractor's plans for future
dose-out.
Characteristics of an effective system
Residual property is/will be reviewed for appropriate action
(such as decontamination or repair) before transfer or dis-
posal of property.
47
-------
Chapter 4. Conducting o review
A full accounting is/will be effected of all government proper-
ty (to include nonexpendable property regardless of cost, and
expendable supply items and materiel not consumed during
contract performance) in possession of the prime contractor
and the subcontractor. The final inventory report is/will be
submitted promptly.
Pending issues are/will be resolved, such as inventory adjust-
ments and determinations of liability, before contract closure.
The property administrator is/will be notified when all pend-
ing actions on property-related issues are completed.
Records to review
To review the contract completion/termination category, you
need the following documentation (when applicable):
Final inventory records
Disposition instructions
Documentation of disposal actions
Written procedures for close-out, if applicable
What to took for
Disposition of government property has been/will be properly
carried out and documented.
Adjustment documents, including request for relief from
responsibility, have been/will be processed.
Proceeds from disposals or other properly transactions, in-
cluding adjustments and purchase credits, have been/will be
credited to the contract or paid to the Government as
directed by the contracting officer.
All questions about title to property fabricated or acquired
under the contract have been/will be resolved and docu-
mented.
Review the files and documentation to determine if the contrac-
tor's operating procedures meet the minimum reporting require-
ments outlined in "Characteristics of an effective system." If the
contract has not closed out, talk to the contractor about close-out
to determine if the contractor understands the basic require-
ments. Keep track of the findings by writing down the facts about
discrepancies or problem areas; make a note of good charac-
teristics as well
48 Contract completion or termination
-------
Section three. Site compliance reviews
Did you review all of the applicable categories of properly
control?
Acquisition
Receiving
Identification, and records
Storage and movement
Properly consumption
Utilization
Maintenance and calibration
Physical inventory
Subcontract administration
Reporting
Disposal
Contract completion or termination
49
-------
Chapter 4. Conducting a review
Closing the review
When the review procedures have been completed, the team
leader should hold a meeting with the review team to discuss
the findings. The next section provides general guidance for
evaluating the findings.
Evaluation guidelines
The evaluation of the adequacy of a contractor's operating proce-
dures is based on the facts that were established during the
review. The findings establish the facts on which conclusions
are founded. When you evaluate the adequacy of the contrac-
tor's system, use the following questions as your guide:
Are the contractor's operating procedures adequate to ensure
the proper care and control of government property?
Do the procedures meet the minimum requirements?
Do the operating procedures conform with the contractor's
written property control system?
Adequate or inadequate? To determine whether the contractor's
operations in each area are adequate or inadequate, measure
the findings against the standards. The standards consist of
"Characteristics of an effective system" in each section, contract
and FAR requirements, as well as general principles of good
business practice. Consider the contractor's scope of work (for
example, sign-out logs are essential for contractors with multi-
ple sites, but not for a contractor whose government equipment
consists of computers located at one permanent site). Use your
judgment to determine whether a deficiency represents an aber-
ration or whether the deficiency points to a flaw in the system.
Look at the big picture. Be sure to look at the big picture. For
example, if a monitor is found in a closet, consider all the factors
before rating the utilization category. If the contractor has never
reported excess property and a monitor is found in a closet, you
would probably rate that category as inadequate. On the other
hand, if the contractor has consistently reported items that are
no longer needed, you might include a recommended action
about reporting excess property, but rate the category as ade-
quate. Ultimately, the adequate vs. inadequate decision is a
Note: Avoid "double jeopardy."Don't write up the same deficiency
in more than one category.
50 Closing the review
-------
Section three. Site compliance reviews
judgment call which must be based on the review team's evalua-
tion of the facts.
Exercise caution when reviewing a "problem" contractor. Be
sure to stick to the facts that were established during the
review. Don't turn the findings into proof of pre-conceived ideas.
Team meeting
The purpose of the team meeting is to evaluate each category
and organize the information gathered during the review for
presentation to contractor staff during the exit interview. The
level of detail for the discussion depends on how much time is
available. (Note: if you have access to a laptop computer, you
may be able to prepare the final report and deliver it to the con-
tractor during the exit interview.) The agenda for the meeting
follows.
Summary of findings for each category: discuss the findings
for each category reviewed. Be sure to include positive
aspects of the contractor's operating procedures. Determine
whether the contractor's operations for each category are
adequate or inadequate. Review the notes you made in your
handbook as well as the inventory analysis forms. Use the
guidelines outlined in this section to help in the
decision-making process.
Summary of the contractor's overall system: you must rate
the overall system as either adequate or inadequate. If all of
the categories reviewed were adequate, then the overall
system will be rated as adequate. If any of the categories
were found to be inadequate, however, then the overall
system must be rated as inadequate (even one inadequate
category means there is a deficiency in the operation of the
property control system).
Required actions: determine what actions are necessary for
the contractor's operating procedures to meet the minimum
requirements. Remember: you may identify deficiencies, but
you may not tell the contractor how to operate. (Example:
let's say the storage and movement category was found to be
Note: Be careful about recommending actions because of the pos-
sibility of additional cost to the Government. Remember that you
can't require the contractor to do something just because it will
make your life easier (e.g., marking the decal number on all the
back-up documentation).
51
-------
Chapter 4. Conducting a review
inadequate because the contractor could not specify the
location of equipment being used in the field. Identify the
deficiency and state that a locator system is required, but do
not tell the contractor to set up a specific type of log system.)
Determine whether a milestone schedule for completing the
actions will be needed. Will the contractor need to report the
status of required actions on a scheduled basis?
Recommended actions: you may recommend actions that
would improve the contractor's operations, but that are not
necessary for the system's compliance with the minimum
requirements.
When the information has been assembled, the exit interview
may be conducted.
Exit interview
The review team leader should conduct the meeting with the
review team and key contractor staff in attendance. The sug-
gested agenda for the exit interview follows.
Thank the contractor staff for their cooperation and support.
Briefly describe how the review was conducted.
Explain the structure you are using to present the findings:
general summary of findings, findings in each category,
recommended actions, and required actions.
Using the notes taken during the team meeting, present the
findings.
Explain the next step in the review process: final report will
be submitted in approximately one month.
Discuss the schedule for implementing the required actions:
advise the contractor that it is the contractor's responsibility
to implement all required actions, once they are finalized.
Discuss the schedule for the contractor to report the status of
corrective actions (if applicable).
Close the meeting.
Note: When making suggestions to the contractor about how to do
something, don't give away confidential information about
another contractor's operations.
52 Exit Interview
-------
Section mree. Site compliance reviews
Reporting the findings
Chapters
Report features
The report presents the review findings, recommended actions,
and required actions. The suggested format of the report follows.
Introduction
Identify the following information in an opening paragraph.
O Name of contractor
n Location of review
D Dates of review
D Compliance review team: names and titles
D Contractor staff involved in review: names and titles
D Brief statement about the contractor's scope of work
Summary of findings
State whether the contractor's working property control system
is adequate or inadequate. If any of the twelve categories were
found to be inadequate, then the overall system must be rated
as inadequate. In this case, explain the rating; avoid presenting
the review findings in a totally negative light. You might sum-
marize the number of categories reviewed: # adequate, # inade-
quate, # not applicable.
Methodology
Describe the procedures that were used to conduct the review.
Example: records-to-floor and floor-to-records inventories were
conducted using random sampling techniques; records were ex-
amined to determine compliance with the contractor's property
control system, the contract, and applicable federal regulations.
Findings
Briefly describe the findings in each category. Remember that
the findings are limited to the facts. Example: (in the utilization
category) The equipment sampled in the records-to-floor inven-
Note: Don't say "the overall review ofXYZ was inadequate." Ŗ:?y
"the review found XYZ's overall property control system tc ?
inadequate" or "the overall system of control is inadequate to...
53
-------
Chapter S. Reporting the findings
tory is being utilized for the intended purpose of the contract.
However, the floor-to-records sample revealed the following: one
monitor not being utilized, one monitor with a Supernind decal
not being used for Superfund work, and three PC shadow ter-
minals not being used."
When you describe the findings in a category that was rated in-
adequate, such as the example just cited, be sure to distinguish
the good characteristics from the bad. The language in the pre-
vious example makes it clear that the first statement is a "good"
characteristic, while the latter findings are "bad."
Required actions
Last the required actions which were determined at the close of
the review. Required actions are the actions necessary for the
contractor's operating procedures to meet the minimum require-
ments. Keep in mind that in terms of specific techniques or sys-
tems to use, you may not tell the contractor how to operate.
Recommended actions
This section permits you to recommend actions that would im-
prove the contractor's operations, but that are not necessary for
compliance with the minimum requirements. This section is use-
ful for recommending actions to contractors with an adequate
property control system.
ing and submitting the report
It is the team leader's responsibility to see that a draft report of
findings is prepared within one week after completing the
review. All team members should review the draft. The final
report should be ready for the property administrator's approval
within one week of the review's completion. Additional levels of
approval may be required, depending on your organization's in-
ternal operating procedures.
Submit a copy of the report accompanied by a cover letter to the
contractor no later than one month after the review's comple-
tion. Forward copies of the report to the contracting officer and
project officer.
54 Preparing and submitting ihe report
-------
Section three, ate compliance reviews
Follow-up procedures
Chapter 6
Approach
The purpose of establishing follow-up procedures is to ensure
that action is taken by the contractor to correct the deficiencies
identified during a compliance review. It is the contractor's
responsibility to implement required actions following a review.
Follow-up actions should be consistent with the nature of the
review findings. For contractors with minor problems, only mini-
mal follow-up will be necessary. Formal follow-up procedures
should be developed, however, for contractors with significant or
extensive weaknesses.
Informal telephone follow-up
For contractors with minor problems, make a follow-up tele-
phone call four to six weeks after the report has been finalized.
The purpose of the call is to inquire about the status of imple-
menting the required actions.
Scheduled written follow-up
An option for following up required actions with contractors that
have major deficiencies is through formal written follow-up.
Depending on the nature of the problem and whether Hie con-
tractor has reported the follow-up actions, you may want to
schedule a date to send a follow-up letter (establish a tickler sys-
tem for this).
In the initial letter, reference the review and the required
actions, and request a written response from the contractor
reporting the status of implementing the required actions.
Specify a deadline for the response (two to four weeks after
receipt of letter).
If no response is received, send a second letter. If a third letter
is needed, it should be elevated to a higher level of manage-
ment. The property administrator may want to discuss the issue
with the contracting officer and the project officer.
-55
-------
Chapter 6. Follow-up procedures
Follow-on review
A follow-on review may be conducted when the Government's
assets are significantly at risk. In this instance, a follow-on
review should be scheduled as soon as the contractor has imple-
mented required actions. The purpose of a follow-on review is to
ensure that corrective actions have been taken to safeguard the
Government's assets. The guidelines for conducting the review
and reporting the findings should be followed.
56 Follow-on review
-------
Section four. Desk reviews
Conducting a desk review
Chapter?
Introduction
This chapter provides guidance for conducting desk reviews of
contractor property control systems. A desk review is defined as
a compliance review that is conducted at the reviewer's desk.
. The purpose of a desk review is to ensure that the contractor is
making only authorized purchases or leases, that purchases or
leases are reported as required, and that government property
is being properly cared for, controlled, and utilized.
The methods used to conduct a desk review will vary, depending
on factors specific to the contract/contractor being reviewed. The
property administrator must exercise judgment to determine
the procedures to follow, considering the following factors: value
of properly, number and type of property items, complexity of
system, risk to Hie Agency, and past performance. The review
should focus on known or suspected areas of vulnerability.
Plan the review
To plan the review, you must determine the areas on which to
focus. Examine past review findings to pinpoint areas of vul-
nerability. If this is the first review being conducted, examine
your files to obtain information about the contractor's reporting
history. Select review methods that will focus on vulnerable
areas.
Notify the contractor
A letter from the property administrator to the contractor's
point of contact serves as notification of the desk review. The let-
ter should cover the following information:
a Brief explanation of the purpose of the review
ta Scope of the review
H Bequest for copies of documentation required
H Statement that the contractor will be notified of the findings
59
-------
Chapter 7. Conducting a desk review
Conduct the review
Outlined below are procedures which may be used to conduct a
desk review. The property administrator may use these proce-
dures, or other appropriate methods that focus on vulnerable
areas. The review will cover records for the time period since the
date of the most recent review.
Examine documentation
You may examine any of the records described in the following
section.
Contract file in your office. Examine your contract files:
Are annual inventory reports submitted promptly?
Is EPA Form 1730-1 submitted for accountable CAP?
Is receipt of GFP reported?
Is loss of or damage to government property reported?
Is government property excess to contract requirements
reported?
Call the contractor's point of contact for more information or to
ask questions. A list of sample questions is provided later in this
section.
Contractor's records. When deciding which records to request
from tile contractor, select only those records required for the
review. Do not place an unreasonable burden on the contractor
(i.e., don't require the contractor to make copies of 1,000 pages
of logs).
You may focus on one particular area only, for instance, you
may examine all movement records for the last one-year period.
Or you may take a different approach and select several items of
accountable property and request copies of all records pertain-
ing to those items, verifying that an audit trail exists.
Copies of the following types of documents may be requested.
Movement logs
Sign-out logs
Maintenance logs
Calibration logs
Procurement requests
60 Conduct the review
-------
Section four. Desk reviews
Purchase orders
Payment vouchers
When you review payment vouchers, select representative
vouchers and look for reimbursement requests for property
items that have not been reported on EPA Form 1730-1. You
may need to request back-up documentation from the contractor
to identify costs. Look at several categories: equipment, miscel-
laneous under other direct costs, subcontracts, and sub-listings
under equipment such as repair, rentals, supplies, and shipping.
You might request copies of rental agreements to look for
renewals and credits.
Interview contractor
You may call the contractor's point of contact to gather informa-
tion concerning the contractor's property control procedures.
Use the following questions as a starting point. Be sure to ask
open-ended questions that require explanations rather than
"yes/no" questions.
D What steps are taken when government property is needed?
D Under what circumstances do you report leased property?
D What is your receiving process for government property?
O What are your procedures for decaling property?
O What records do you maintain for government property,
including vehicles?
D How is government property stored?
D How is the movement of government property documented?
O How do you ensure that government property is utilized fully
and only for purposes authorized by the contract?
D How do you identify government property that is no longer
required for contract performance? What do you do if you no
longer need an item of government property?
D What are your maintenance procedures for government
property? What records do you keep?
D How do you conduct a physical inventory? Who conducts the
inventory?
D What property transactions do you report to EPA?
D What do you do when an item is missing?
61
-------
Chopter 7. Conducting a desk review
D What do you do when you are ready to dispose of government
property?
Document the findings
After completing the review, notify the contractor in writing of
the findings. The letter should cover the following information:
H Method used (e.g., a review of movement documentation or a
telephone conversation with [person's name]).
H Findings: contractor's procedures are adequate or inade-
quate. If inadequate, state the specific deficiencies.
H Required actions: if appropriate, identify required actions.
If the findings indicate that the Government's assets may be at
risk, the property administrator has the discretion to conduct a
site review.
62 Document the findings
-------
Appendix
Random sampling
Appendix A
Definition
Random sampling is a statistical measure used to analyze large
groups of objects or persons by examining a portion of the group
and generating results that are viewed as a reliable repre-
sentation of the group as a whole.
Application
Random sampling will be used to select accountable property
items for a records-to-floor inventory which will provide the in-
formation needed to assess some of the categories of property
control. (For inventories of other than accountable property, see
Appendix B.) The inventory analysis form for the records-to-
floor inventory will be completed at the home office before begin-
ning the compliance review. To randomly select the property
items that will be included in the inventory, you will need the
following.
D Contractor's inventory listing
D Random sample chart, located in this appendix
D Random number table
D Inventory analysis form (copy in this appendix)
Selecting the sample Items
Selecting the items for the sample records-to-floor inventory con-
sists of a three-step process, listed below. These steps are com-
pleted at the home office before conducting the review.
O Determine the sample size (if you are reviewing more than
one contract, the sac.pie will consist of the combined
inventories of accountable property for all contracts being
reviewed).
Note: If the contractor fails to submit the requested inventory
listing, use the most current inventory available (if the contractor
does not fax or express-mail the listing to you.)
65
-------
Appendix A. Random sampling
@ Choose the column and number patterns for the sample
selection.
Š Record the selected items on the inventory analysis forms.
O Determine the sample size
Use the inventory listing submitted by the contractor. If the con-
tractor did not submit an inventory as requested, use the most
recent inventory listing on file.
Using a copy of the inventory listing, number each accountable
property item consecutively, beginning with "1." Look at the
random sample chart on page 68 and locate the range that corre-
sponds to the total number of items in the contractor's inventory.
EXAMPLE: There are 92 items of accountable property in the
contractor's inventory. Based on the range of numbers in the ran-
dom sample chart, 25 items will be sampled (how: 92 falls be-
tween 91 -150 items, thus, the sample inventory will consist of
25 items).
@ Choose the column and number patterns
The random number tables that appear on pages 70 and 71 con-
sist of eight columns and 30 lines of six-digit number sequences.
These numbers have been randomly generated using a com-
puter. (If you have access to a computer program which
generates random numbers, you may use that instead.)
Select a column or a pattern of sequences (e.g., every third se-
quence or every sequence), then decide which digits from each
sequence you will use to select the item numbers. You may
choose the first, middle, or last digits in the sequence. Each
sequence you select will correspond with a numbered item on
the contractor's inventory listing. (If you use the random num-
ber tables in this appendix, vary your column and sequence pat-
terns for each review to ensure a random sample.)
EXAMPLE: You have decided to use the first two digits in the se-
quences from column 4 on random number table 1, beginning at
the bottom of the column, to select items for your sample. You
must choose two digits from each sequence because there are 92
items (a two-place number) in the contractor's inventory.
66 Selecting ttie sample Items
-------
Appendix
> Record the selected item numbers
Now that you have selected the sequence pattern you will be
using, you are ready to select the items for the random sample
and record the selections on the inventory analysis form (circle
"Records-to-floor" on the top of each form you use). The steps are
described below, continuing with our example.
Ž Select the first sequence from the column you have chosen to
use. (You have decided to use the first two digits in each sequence
in column 4, beginning with the last sequence. Look at random
number table 1: the last sequence in column 4 is 529028.)
-------
Appendix A. Random sampling
Random Sample Chart
Number
of items'
1-18
19-50
51-90
91-150
151-400
401
-10,000
10,001
-35,000
35,001
-100,000
100.000
and more
Sample
size!
All
18
21
25
32
34
40
46
52
Sample 1
Acceptable
error range
0
0
0-1
0-2
0-3
0-3
0-4
0-5
0-6
Sample 2
Unacceptable
error range**
1 +
1 +
2+
3 +
4 +
4 +
5 +
6 +
7 +
Sample
size 2
^_
21
25
32
34
40
46
52
Acceptable
error range
^^
1
0-2
0-3
0-3
0-4
0-5
0-6
Unacceptable
error range
_--
2
3
4
4
5
6
7
ThU chart wu excoptad from the Armtd Soviets Procunmtia KttulatiaHt.
*ff you are reviewing more than one contract, this number will consist of the combined num-
ber of accountable items under all contracts being reviewed.
"If the records-to-floor inventory results are in the unacceptable error range, continue with
Sample 2 if time permits.
68 Random sample chart
-------
i
I
if
I
Figure 8
III
o
v^
I
W
Tl
-------
1 Appendix A, Random sampling
1 Random Number Table O
1 146868
1 991964
1 068575
1 024985
1 420183
1 471908
1 367201
1 135449
1 083932
1 795869
1 690966
1 148464
1 192683
1 741070
1 414750
1 911564
1 941624
1 725358
1 054053
1 912907
1 666572
1 807204
1 265006
1 281279
1 843967
1 685704
1 844360
1 786088
1 090875
1 700581
008690
600999
594659
906437
035928
368285
289453
113907
324883
627114
312064
435662
808537
798752
947038
394530
122998
007587
682045
216462
607501
081136
207883
830536
804403
550037
418471
868955
459188
648054
132396
969990
863824
585059
527965
036092
790941
263138
226102
332221
751522
872843
067504
515481
094077
329091
408496
258603
682742
562425
121024
249941
897277
519011
592663
193473
633070
160641
726611
808806
807333
711555
889357
248368
169179
198699
056022
950778
213997
241467
749593
343760
399186
254286
716530
880805
260267
229710
781418
593528
410889
738419
846967
091673
542823
929215
894012
563104
425968
529028
146135
434268
298374
424365
712570
057028
687291
072719
389272
548815
790909
837109
607762
501305
236057
254522
690183
896796
540192
252572
849303
108213
111395
149495
188515
899107
248372
654154
701839
423653
802307
963060
194752
171629
200566
680051
371673
484101
569570
232870
652824
916275
164570
552547
020016
875744
193939
023238
408186
223225
819176
482222
705396
272563
154905
219905
052832
790724
268875
979817
970189
031092
817621
766251
841841
645050
582263
098014
969903
666022
764876
437804
993901
487440
387797
311865
818986
268363
738990
012070
615935
933473
372045
595911
821149
173076
106175
886510
136654
443107
W
676440
027128 -
561594
559933 ~
582819
071116
257984
393489
281715
130369
712894
843079
162164
238453
979424 A
356333 ~
441330
757066
938799
709008
164502
376024
300369
004986
205091
113274 .
601612
676275
264636
314884 ^
70 Random numbers
-------
Appendix
Random Number Table Š
729493
837369
164985
832181
998409
485781
964613
701475
869735
422607
528700
570061
702724
979758
368116
340160
997255
129767
809137
554619
393829
485794
306493
396909
673576
301622
130318
691128
758248
471661
410855
667044
520465
312079
485206
263257
139965
182125
144821
399171
672549
601331
096120
519487
076200
615964
248649
772033
912025
975411
715080
007761
344259
132189
811206
780748
140259
241936
055951
348196
301129
464733
941691
831167
828091
424328
172351
011412
656217
048093
868664
116020
743392
360320
996329
927096
563128
400927
036669
242369
104559
225455
986632
875194
872447
905071
358791
654550
887177
526568
981512
773812
908346
842912
246553
067915
916103
754044
904345
367653
453513
723729
248223
173393
602974
791396
649646
563625
525006
574598
558200
194966
458259
269014
501595
302157
719504
648447
085665
698065
140454
866036
273918
226649
867597
275252
680021
243521
400382
762542
586040
800318
600016
599266
548495
613716
218328
447413
014529
791014
897776
359593
321911
830137
171440
779046
699034
619635
463027
539633
034480
997801
181961
958614
228752
567013
868160
806075
105235
624700
254598
625107
627940
750333
221523
971738
403679
976503
602310
855126
992388
788928
183456
737549
907128
126450
704587
534413
614087
381039
026219
472612
530103
965123
482641
708587
234770
726305
091530
714429
749559
479463
734599
375760
838994
743027
559188
343823
533227
801057
978260
035490
128035
703235
670404
633256
184820
264868
579835
085239
208126
483005
872801
655048
313639
513433
387373
136087
939999
183943
994266
088443
937183
239039
707517
170687
983292
751354
369290
369514
584551
121646
649872
999741
075310
078795
047678
704314
618046
679809
71
-------
Appendix B. Selected sampling
Selected sampling
Appendix B
Definition
Selected sampling is defined as a nonsrientific method of choos-
ing other than accountable property items for inventory, based
on the Government's degree of exposure to risk.
Application
The property administrator must exercise judgment to deter-
mine when a selected sample inventory is needed; selected
sampling will not be required in all cases. The following factors
are considerations:
D Government's susceptibility to loss or exposure to risk.
a Number of property items.
a Dollar value of property items.
D Adequacy/completeness of contractor's procedures
described in written property control system.
Selecting the items
Use your judgment to decide which items to include in the inven-
tory. Considering the Government's susceptibility to loss, select
a variety of items (including sensitive items). The number of
items you select is discretionary. Remember: the time you spend
on the inventory should be proportionate to the dollar value of
the property and the Government's vulnerability to loss.
One suggestion for deciding how many items to inventory is to
select half the number of items that were included in the ran-
dom sample records-to-floor inventory. Another suggestion is to
count the number of nonaccountable items, consult the random
sample chart on page 68 for the sample size, and inventory half
the sample size shown. Example: the sample size for an inven-
tory of 325 items is 32; you would include 16 items in your
inventory (half of 32).
72 Selecting the Items
-------
Appendix
Record the appropriate information on an inventory analysis
form. During the review, follow the instructions described in
chapter 4 for conducting a records-to-floor inventory.
73
-------
Appendix C. Categories of property control
Categories of property control
Appendix C
Acquisition
The process of acquiring government property either through
requisition or transfer from government sources, or through pur-
chase or lease, including those made from contractor stores,
Covers the process of acquiring property; does not include report-
ing acquisitions to EPA (part of the reporting category).
Receiving
The process of government property initially entering into a
contractor's custody. Covers the contractor's system for receiv-
ing property, does not include decaling procedures or the
addition of tax and freight charges to the acquisition cost of the
item (part of the identification and records category).
Identification and records
The identification of government property and the official ac-
counting and inventory control records maintained by a
contractor to show property status and to control government
property. Includes the decaling of government properly and the
accuracy and completeness of the documentation kept by the
contractor. Does not include submitting the information to the
Agency.
Storage and movement
The process of storing and moving all types of government
property, including protection during storage and movement.
Movement covers the internal movement of property necessary
to carry out the scope of work (e.g., from the main office to a site
or from one site to another). It does not include the movement of
government property resulting from the transfer of account-
ability to another entity, such as the return of property to the
program office or a transfer to another contract (that's part of
disposal).
Property consumption
The process of incorporating property into an end item or other-
wise consuming it in performance of a contract.
74 Definitions
-------
Appendix
Utilization
The process of using equipment and materials for the
authorized purpose.
Maintenance and calibration
The process of providing the care necessary to obtain a high
quality of production and the most useful life of government
property.
Physical Inventory
The process of physically locating and counting government
property, recording the results and comparing the findings to
the records. The process includes posting findings and adjust-
ments; does not include reporting the inventory results to EPA.
Subcontract administration
The contractor's system to ensure a subcontractor's compliance
with the requirements for the control and care of government
property.
Reporting
The preparation and submission of reports showing the status of
government property as required by the FAR and the contract.
Disposal
The process of requesting and receiving disposition instructions
and effecting the disposal of government property as directed by
the property administrator.
Contract completion or termination
Procedures to be followed by the contractor upon contract com-
pletion or termination.
75
-------
Appendix D. Sensitive Items list
Sensitive items list
Appendix D
Dollar value from $300 to $999
Group #
10
51
58
58
58
58
59
67
70
74
74
77
Class
All
All
05
20
35
36
65
All
All
20
50
30
Description
Weapons
Hand tools
Telephones/telephone equipment
Cameras, TV/radio equipment
Tape players, etc.
Video equipment
Microphones and speakers
Photographic equipment
ADP and support equipment
Calculators
Dictating/recording machines
Phonographs, radios and televisions
Nate: No ADP software or supplies will be entered into PPAS
76 Sanative Items
-------
Appendix
Property administrator addresses
Appendix E
Property Administrator
EPA Office of Administration and
Resources Management
26 W. Martin Luther King Drive
Room #293
Cincinnati, Ohio 45268
FTS-684-7262
Property Administrator
EPA Office of Administration and
Resource Management
MD-36
Research Triangle Park, North Carolina 27711
BTS-629-4352
Property Administrator
Property Management Section
401M Street, S.W.
PM-215
Washington, D.C. 20460
FTS-475-7712 _ _
-77
-------
J
------- |