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At a Glance

Why We Did This Audit

We conducted this audit to
determine whether the U.S.
Environmental Protection
Agency (EPA) is timely
receiving adjustment vouchers
and credits from contractors
based on sustained Defense
Contract Audit Agency
(DCAA) audit results.

Background

DCAA performs audits of
final indirect cost rate
proposals that impact EPA
contracts. After negotiations
with the contractor, EPA
establishes final indirect cost
rate agreements. Once the
final indirect cost rate
agreement is established,
contractors are required to
submit adjustment vouchers to
EPA within 60 days of the
agreement date. These
vouchers adjust contractor
billings for the differences
between billed indirect costs
and the indirect costs resulting
from the application of the
negotiated indirect costs rates
for the period specified.

For further information,
contact our Office of
Congressional, Public Affairs
and Management at
(202) 566-2391.

To view the full report,
click on the following link:
www.epa.qov/oiq/reports/2010/
20100308-10-P-0075.pdf

Catalyst for Improving the Environment

EPA Does Not Always Receive
Adjustment Vouchers from Contractors

What We Found

EPA does not always receive adjustment vouchers from contractors for
final negotiated indirect cost rates. The final indirect cost rate agreements
provide the contractor 60 days to submit a voucher for any billing
adjustments. For 17 of the 20 DCAA audit reports in our sample, EPA did
not timely receive an adjustment voucher on at least one or more EPA
contracts. The 20 audit reports impacted 52 EPA contracts, for which EPA
did not receive adjustment vouchers for 33. Seven adjustment vouchers
were received late. The only nine vouchers that were received timely all
involved EPA owing the contractor money.

EPA does not have an effective system to ensure required adjustment
vouchers are received. As a result, EPA allowed contractors to keep
government funds and provided them with interest-free loans in those cases
where the contractor owed EPA money. In some cases, contractors kept
money owed the government for years. For example, one contractor that did
not submit adjustment vouchers during the life of two 4-year contracts owed
the government $207,494. As a result of our review, EPA received a credit
of $4,713 from one contractor and $263,193 from another contractor, for a
total of $267,906.

We recommend that the Assistant Administrator for Administration and
Resources Management require its Office of Acquisition Management to
track receipt of adjustment vouchers and monies owed EPA for final
negotiated indirect cost rates. We also made recommendations to identify
agreements where adjustments have not been made, require financial
administrative contracting officers to provide needed information to
contracting officers, and increase contracting officer and projects officer
awareness of their responsibilities related to indirect cost rate agreements
and adjustment vouchers. EPA agreed with our recommendations or took
alternate corrective actions that we considered satisfactory.

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