3 GSA Trends in the Office of Inspector General Audits and Investigations

At a Glance:

• The main takeaway: The expansion of the GSA’s Transactional Data Reporting (TDR) program has significantly reduced the number of Multiple Award Schedule (MAS) contractors selected for Office of Inspector General (OIG) contract audits.
• The impact on your business: While the number of audits has decreased, the most frequent findings have not changed. These findings will continue to impact MAS contractors through Contractor Assessments.
• Next steps: Penalties for contract violations impact profitability substantially less than recommendations for go-forward rate reductions. Let Aprio’s GSA Consultants guide you through your OIG audit.

Schedule a consultation with Aprio’s GSA Consultants for help quantifying risk and implementing corrective actions to address common audit issues.

The full story:

The growth of the Transactional Data Reporting (TDR) program has had far-reaching impacts, not the least of which is on the GSA Office of Inspector General (OIG) contract audit program. Contractors participating in the TDR program are not required to submit Commercial Sales Practice (CSP) disclosures and are exempt from the dreaded Price Reductions Clause (PRC). Since the preaward audit work program largely centers on the CSP, the OIG was not auditing TDR-covered contracts until a new work program is finalized. With over half of MAS contractors holding at least one TDR-covered SIN, the population of auditable contracts has plummeted.

MAS Contract Audits have Decreased Precipitously in the Last Five Years

According to the OIG’s Semiannual Reports to the Congress, the number of MAS contract audit reports has fallen 25% in the last five fiscal years (FY). Audit reports are a lagging indicator because they are issued 9-to-12 months after an audit begins. What is more telling, is that the OIG’s FY 2024 Audit Plan only budgets for 21 contract audits.

Consistent with the reduction in audits is a reduction in recoveries. From FY 2018 to FY 2023, funds recommended to be put to better use (i.e., go-forward pricing reductions) decreased by 19.8%, and questioned costs (i.e., actual compliance violations) fell by a staggering 88.8%. If you wondered why the OIG struggles TDR so much, this is a major reason.

The massive difference between the funds recommended for better use and questioned costs is an important distinction to understand. When a contractor is under an OIG audit, they are understandably nervous that past compliance failures will result in serious penalties. Nobody wants that to happen, but the reality is that “per audit” rates, or the recommended pricing for the next option, are much more impactful to the bottom line. Contractors who don’t understand how the OIG calculates per audit rates are in for a shocking surprise when the audit report is issued. In FY 2023, the value of rate reductions was more than 30 times that of compliance damages.

Major Findings in MAS Preaward Audits and Why they Matter

In the current environment, only a tiny percentage of MAS contractors will be audited, so it is easy to wonder why audit findings matter. Well, audit findings matter because they inform Contractor Assessment program objectives. Every MAS contractor will be subject to an assessment, often annually. GSA analysts now utilize audit-like sampling methods and review labor qualifications, GSA pricing, and sales reporting at every assessment. They also review commercial pricing practices for PRC purposes at the end-of-term assessment. The table below compares major audit findings for FY 2018 versus FY 2023. The changes are generally proportional to the overall decrease in audits; however, there were increases in the number of contractors found to be using unqualified labor and not following other contract terms and conditions. Expect to see continued scrutiny of these areas in future Contractor Assessments.

Suspension, Debarment, and Subpoenas, Oh My!

In addition to contract audits, the GSA OIG is responsible for a myriad of audit, investigation, and inspection activities to identify fraud, waste, and abuse. The OIG has subpoena power and may work with the Department of Justice (DOJ) and other federal agencies to resolve criminal and civil matters. Like MAS contract audits, OIG’s investigative activity decreased from FY 2018 to FY 2023. Criminal penalties were comparable, but civil settlements decreased by 74.2%. It’s important to note, the total OIG staff decreased from 303 to 249 employees during the period in question, but the agency’s budget increased from $65.0 million to $74.6 million.

More detailed statistics follow in the tables below:

The bottom line

Traditionally, the OIG had a significant influence on GSA’s compliance priorities, but the growth of the TDR program has reduced auditors’ enforcement reach over the last five years. Participating in TDR relieves some, but not all, of the most onerous MAS compliance requirements. Managing labor qualifications, order pricing, and other contract terms is critical to avoid liability.

Risk doesn’t only exist in OIG audits. Contact Aprio’s GSA Consulting team for help navigating MAS audits, investigations, mandatory disclosures, and contract maintenance service to ensure ongoing compliance.

Related Resources/Assets/Aprio.com articles/pages

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GSA Plans to Expand TDR Draws Fire from Inspector General