Think GSA Schedules are Audit-Proof? Think Again.

By By Hope A. Lane , Aronson & Company

GSA Schedule sales are approaching $40 billion and many contractors are thriving on the successes of this phenomenal program. But, with success comes scrutiny. We’ve all heard about the allegations of misuse that led to investigations and the “Get It Right” campaign.

The current “audit friendly” environment is the result of several factors. Government reports issued this past summer illustrated an alarming decrease in the number of audits conducted on GSA Schedule contracts. According to the report, pre-award audits dropped by 70% and the resulting cost savings dropped 80% over the last decade. As a result, GSA Office of Inspector General (OIG) is significantly increasing their audit staff and the number of audits going forward. OIG estimates selecting 125 contractors for audit in FY06. That’s a 300% increase over the 40 audits completed in FY04.

You may think that number is insignificant and the odds are in your favor. But, if you are selected, favorable odds are meaningless. While there are no published audit selection criteria, we’ve observed several factors that may increase your likelihood of audit:

High sales volume - the curse of success!
Professional services contractors – services represent the majority of GSA sales
Original GSA pricing awarded based on a build up of costs instead of price comparisons
Inconsistent or missing data in your contract file at GSA
Changes in ownership resulting from acquisition
Significant findings in audits of other industry players

There is an increasingly strong probability that your contract will be audited. Over the upcoming months and years, you may be audited for any of the following reasons:

Industrial Funding Fee (IFF) reporting and payment
Trade agreements and Buy America Act compliance
Pre-award of option period renewal
Post-award of original contract
Ordering agency task order scope

Thus far, your only GSA “audit” experience may have been visits by a GSA Industrial Operations Analyst (IOA) who reviewed your IFF reporting and payment. Since these visits are relatively short and painless, you may be thinking GSA audits are a breeze. Be warned, IOA visits are not audits and in no way compare to the level of scrutiny involved in a GSA OIG audit.

As more contractors submit contract renewal packages at the end of their five-year base period or option period, the likelihood of selection for audit increases. For service companies, these audits of may include reviewing commercial sales practices to determine current “Most Favored Customer,” looking for price reductions, confirming the use of qualified personnel, analyzing the use of “spot discounts” on GSA task orders, and looking for misuse of scope and excessive “Open Market” items on GSA task orders.

Few will escape an OIG audit unscathed, but as they say, “a best offense is a good defense.” By being prepared for what may come before it comes, you can mitigate your risk and save time and money in the long run.

8 Ways to Ace Your Audit :
1	Know who’s coming and why . You need to know the purpose of their visit and if they’re coming to review, audit or investigate.
2	Be responsive. Gather data and provide clarifications promptly. Get them in and out quickly.
3	Review and organize the data. Understand what you’re giving the auditors and keep a copy for yourself.
4	Know your skeletons. Identify areas of inquiry and be prepared to provide clarification.
5	Dedicate resources. Consistency and availability of resources throughout the entire process is critical to a timely resolution.
6	Have policies and procedures. Having GSA policies and procedures, and being able to demonstrate adherence to them, tops the GSA auditors list.
7	Test your internal controls. Identify internal controls and test them routinely.
8	Take the advice of professionals. There are a number of firms and individuals who have years of experience dealing with GSA contract issues. They can be an important ally in achieving your objectives or responding to a GSA auditor. The professionals in Aronson & Company’s GSA Schedules Practice are dedicated to the success of our GSA Schedule clients. Our services include helping clients establish GSA policies and procedures, testing internal controls and supporting them through OIG audits.

Hope A. Lane is an Officer at Aronson & Company; where her team specializes in implementing the GSA Schedule strategy of their government contracting clients .

She can be reached at (301) 231-6266 or hlane@aronsoncompany.com.

The Government Contractors Council Report is a monthly newsletter distributed by the Northern Virginia Government Contractors Council, an initiative of the Fairfax County Chamber of Commerce for Washington, DC metropolitan area government contractors.

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