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AUDIT AND EVALUATION RESOLUTION AND FOLLOW-UP
Number: DAO 213-5
Effective Date:  2015-05-22

SECTION 1.  PURPOSE.

.01       This Order prescribes the policies and procedures to be used in resolving and implementing audit, inspection and evaluation recommendations contained in performance audit, inspection and evaluation reports; audit reports of Department of Commerce (the Department) grants, cooperative agreements, loans and loan guarantees; and post-award audits of Department contracts.  This Order also specifies the roles of the organizational units, Agency Follow-up Official, and the Inspector General with regard to audit, inspection and evaluation resolution and follow-up, and prescribes policies and procedures for recording receivables resulting from audit resolutions.

.02       This revision incorporates definitions and semiannual reporting requirements of the Inspector General Reform Act of 2008; implements provisions of OMB Circular A-50, "Audit Follow-up;” changes the title of the Order; and generally updates the language of the Order to reflect current organization structure and responsibilities.

SECTION 2.  SCOPE.

.01       This Order applies to all Department organizational units involved in monitoring and resolving audit, inspection, and evaluation recommendations, establishing audit-related debts due the Government, and implementing agreed-upon audit, inspection, and evaluation recommendations as a result of final audit, inspection, and evaluation reports issued by or under the supervision of the Office of Inspector General (OIG).  Audit, inspection, and evaluation reports circulated in draft for the purpose of obtaining comments are not subject to this Order.  Post-award contract audit reports are subject to this Order only to the extent of monitoring Contracting Officer actions, since such reports generally are resolved by negotiation or a contracting officer's decision and as such are not subject to the six-month time frame set forth in this Order.  This Order does not apply to audits conducted by the Government Accountability Office but does encompass Single Audit Act reports and any type of program-specific audits.

.02       This Order is intended to aid the internal management of the Department, and is not intended to create any right or benefit enforceable at law by a party against the Department or its officers.

SECTION 3.  POLICY.

.01       Audit, inspection and evaluation follow-up is an integral function of management and is a shared responsibility of the Department and OIG management.  Department and OIG officials will act promptly to resolve audit, inspection, and evaluation findings and recommendations and to implement corrective actions.  A unified Department decision on resolution of audit, inspection, and evaluation recommendations will be made within six months of the issuance of the audit, inspection, or evaluation report.  Timely action to implement accepted audit, inspection, and evaluation recommendations by responsible management officials is an integral part of the Department's audit, inspection, and evaluation system, and is the key to its effectiveness.  Monitoring of the implementation actions on resolved audit, inspection, and evaluation recommendations ensures that final actions are actually taken.

.02       The heads of the organizational units to which audit, inspection, and evaluation findings and recommendations pertain, have primary responsibility for prompt and proper audit, inspection, and evaluation resolution and implementation.

.03       If the OIG does not agree with the proposal of the responsible Agency Action Official for handling a recommendation contained in a performance audit, inspection, or evaluation report; loan or loan guarantee audit report; or a financial assistance award audit report, every attempt will be made by agency management officials and OIG officials to resolve the issues.  If this fails, the OIG or the Agency Action Official may elevate resolution of the matter to the Agency Follow-up Official in accordance with the procedures set forth in Section 6 of this Order. 

.04       In the case of post-award contract audit reports, the contracting officer is responsible for giving full consideration to, and documenting the disposition of, the audit recommendations.  The contract follow-up system is structured in consonance with the independent role of the contract auditor.

SECTION 4.  DEFINITIONS.

.01       Agency Action Official.  An individual designated by the Agency Liaison to ensure timely responses to all audit, inspection, and evaluation findings and implementation of accepted recommendations for a specific audit, inspection, or evaluation report.  For performance audit, inspection, and evaluation reports, the Agency Action Official should be the responsible program official for the audited, inspected, or evaluated area.  For contract post-award audit reports, the Agency Action Official should be the responsible Contracting Officer.  For financial assistance audit reports, the Agency Action Official should be the official responsible for providing financial assistance administration of the grant or cooperative agreement.  For single audits where the Department is the cognizant/oversight agency, the Agency Action Official will be the official assigned by the appropriate organizational unit.  For all other audit reports, the Agency Action Official should be the responsible program official for the audited, inspected, or evaluated area.

.02       Agency Action Plan.  A plan with target dates for completion, and where applicable, intermediate milestones for implementation of each performance audit, inspection, or evaluation recommendation, and each loan, or loan guarantee audit recommendation. (See Exhibit 6 of this Order.)

.03       Agency Follow-Up Official.  A high-level management official designated by the Secretary, pursuant to OMB Circular A-50, to be responsible for audit follow-up for the Department.  The Agency Follow-up Official is also responsible for inspection and evaluation follow-up under this Order.  The designated Agency Follow-up Official for the Department is the Assistant Secretary for Administration.

.04       Agency Liaison.  An individual designated, pursuant to DAO 213-3, "Inspector General Auditing, Evaluations, and Inspections” by the head of the organizational unit to centrally manage and coordinate all audit, inspection, and evaluation reports and monitor implementation of audit, inspection, and evaluation recommendations.

.05       Agency Resolution Council.  A group of Department management officials convened by the Agency Follow-up Official (Assistant Secretary for Administration) to discuss the differences and determine the course of action when resolution cannot be reached between OIG and organizational unit officials on audits, inspections, and evaluations, other than post-award contract audits.  The council will consist of the Assistant Secretary for Administration, the Inspector General, and the head of the appropriate audited organizational unit. 

.06       Agency Resolution Determination.  A letter prepared by the Agency Action Official.  In financial assistance audits, it is used to inform the Auditee of the results of the resolution (see Exhibit 8 of this Order).  In the event a payment is found to be due, the Agency Resolution Determination serves as the first notice to the Auditee of the debt.  The Agency Action Official shall consult with the Office of General Counsel and the organizational unit’s Finance Office to ensure that the Agency Resolution Determination satisfies the requirements for a demand letter under the Federal Claims Collection Standards, the Department of Commerce Debt Collection Regulations, other applicable laws and Departmental requirements.

.07       Agency Resolution Officer.  A senior-level individual designated by the head of the organizational unit to have explicit authority to resolve audit, inspection, and evaluation findings and recommendations for each bureau.  If resolution is not reached at the Agency Action Official level, the designated individual will be responsible for attempting to resolve audit issues with the appropriate OIG Assistant Inspector General prior to elevation to the Agency Follow-up Official.

.08       Agency Resolution Proposal.  A memorandum prepared by the Agency Action Official and addressed to the OIG official responsible for the financial assistance audits.  It proposes the resolution actions to be taken on audit recommendations (see Exhibit 7 of this Order).

.09       Allowed Costs.  The amount of costs that were questioned by the auditors but subsequently determined during audit resolution, or during negotiations by a Contracting Officer, to be allowable project costs.

.10       Audit, Inspection, and Evaluation Resolution.  The process by which the Department reaches an effective management decision in response to audit, inspection, and evaluation reports.

.11       Auditee.  The subject of an audit, inspection, or evaluation (e.g., Department organizational unit or facility, contractor, recipient of financial assistance).

.12       Claimed Costs.  Costs claimed by the contractor, grant, or cooperative agreement recipient as expenditures made in carrying out the project.

.13       Disallowed Costs.  The amount of costs that were questioned by the auditors or the Agency Action Official and subsequently determined during audit resolution, or during negotiations by a Contracting Officer or Grants Officer that should not be charged to the Government.

.14       Final Action.  The completion or implementation of all actions agreed to by the OIG and the organizational unit (in the Agency Action Plan or Agency Resolution Determination or through the Agency Resolution Council) or decided by the Deputy Secretary during the audit, inspection, or evaluation resolution process.  In the case of contract audits where no debt has been established, final action means the final decision by the Contracting Officer, and occurs when the Contracting Officer prepares the written determination.

.15       Financial Assistance Agreements.  As used in this Order, all grant and cooperative agreement awards.  For the purpose of this Order, loans and loan guarantee agreements will not be included whenever the term financial assistance is used.

.16       Finding.  A written description of a problem area or an area which can be made more efficient, economical, or effective as disclosed by audit, inspection, or evaluation.  The finding sets forth the condition(s), cause(s), and effect(s) of the areas discussed.  A finding serves as the basis for an audit, inspection, or evaluation recommendation.

.17       Management Decision.  Final decision by management on audit, inspection, or evaluation findings and recommendations including action to be taken.

.18       Organizational Unit.  For purposes of this Order, a Secretarial or Departmental office or a primary operating unit in the Department, including the Office of the Assistant Secretary for Administration when appropriate, charged with carrying out specified substantive functions (i.e., programs) of the Department.  The heads of some organizational units are Program Secretarial Officers; in other cases, they are separate officers who report and are responsible to a Program Secretarial Officer, or directly to the Secretary or Deputy Secretary. 

.19       Performance Audits, Evaluations, and Inspections.  Reviews conducted by the OIG of the programs, operations, and activities of the Department to determine:

a.         whether they are being carried out in compliance with laws, regulations, and sound accounting procedures;

b.         whether they are being administered efficiently and economically, with adequate internal controls in place; and

c.         whether they are effective.

.20       Post-Award Contract, Financial Assistance, and Loan Audits.  Reviews of the Department's contracts, grants, cooperative agreements, loans, and loan guarantees may be conducted by the OIG, by other federal audit agencies on a reimbursable basis, by State and local government audit units, or by independent public accounting firms hired by the OIG or by Auditees to assess the:

a.         adequacy of accounting and internal controls;

b.         allowability of costs;

c.         compliance with laws, regulations, and terms of the award; and

d.         degree to which the project will achieve or has achieved desired results.

.21       Post-Award Contract Audit Report.  The contract auditor's written recommendation to a Contracting Officer advocating specific action on the part of the Contracting Officer or contractor and/or including highly qualified or adverse opinion and/or information.  An audit report could include amounts questioned, exceptions to a contractor's system or operations, recommended price adjustments, or notification of a contractor non-compliance with cost accounting standards.

.22       Price Negotiation Memorandum.  A memorandum prepared in accordance with the Federal Acquisition Regulations (FAR) by the Contracting Officer at the conclusion of each negotiation of an initial or revised price.  The memorandum includes details on variances from the audit report recommendations.

.23       Questioned Costs.  A claimed or proposed federal cost that is recommended for disallowance because of:

a.         an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of funds;

b.         a finding that, at the time of the audit, such cost is not supported by adequate documentation; or

c.        a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.

.24       Recommendation.  The OIG's proposed action to correct the cause and/or remedy the effect of an audit, inspection, or evaluation finding.  Recommendations also include questioned costs.

.25       Recommendation that Funds be put to Better Use.  A recommendation that funds could be used more efficiently if management took action, including:

a.         reductions in outlays;

b.         deobligation of funds from programs or operations;

c.         withdrawal of interest subsidy costs on loans or loan guarantees, insurance, or bonds;

d.         costs not incurred by implementing recommended improvements related to the operations of the establishment, a contractor or grantee;

e.         avoidance of unnecessary expenditures identified in reviews of contracts or grant agreements; or

f.          any other savings which are specifically identified.

.26       Resolved Audit, Inspection, or Evaluation Report.  A performance audit, inspection, or evaluation report, or a financial assistance, loan or loan guarantee audit report for which the Agency Action Official (or higher level organizational unit official) and the OIG have agreed upon, or the Deputy Secretary has decided upon, the actions to be taken on all recommendations in the report.  The Inspector General Reform Act of 2008 refers to this as a management decision.  Audit, Inspection, or Evaluation Resolution is the means by which the Department reaches a management decision.  The management decision for contract audits is made by the Contracting Officer. 

.27       Single Audits.  Audits performed pursuant to the Single Audit Act of 1984, as amended, and 2 C.F.R. part 200, Subpart F, which require that all non-Federal entities (as defined in 2 C.F.R. § 200.69), including State, local and tribal governments, institutions of higher education and non-profit entities expending $750,000 or more in federal assistance during its fiscal year have a single financial and compliance audit each year.  One federal agency is assigned to be the cognizant/oversight agency and oversees the auditing of federal funding.

.28       Unsupported Cost.  A cost that at the time of the audit was not supported by adequate documentation.  This is also included under Questioned Costs.

.29       Written Determination.  A decision by the Agency Action Official on actions to be taken on audit, inspection, or evaluation recommendations.  The written determination for management audits, inspections, and evaluations, and loan, and loan guarantee audits is the Agency Action Plan (see Exhibit 6 of this Order).  The written determination for financial assistance audits is drafted as an Agency Resolution Determination when agreement has been reached (see Exhibit 8 of this Order).  The written determination for post-award contract audits may include a Price Negotiation Memorandum, contract modification, other appropriate documents, or a Contracting Officer's final decision prepared in accordance with FAR 33.211.

SECTION 5.  RESPONSIBILITIES.

.01       Organizational units will do the following:

a.         Develop and maintain operating procedures to comply with policies set forth in this Order, including guidelines for receiving and handling appeals of Agency Resolution Determinations.

b.         Designate an Agency Liaison and ensure that controls are developed to provide timely, accurate and complete responses to audit, inspection, and evaluation reports.

c.         Designate a senior official as the Agency Resolution Officer.

d.         Within the time frame specified by the OIG (30 to 75 calendar days depending on the complexity of the audit issues) after a final management audit, inspection, or evaluation report, or a financial assistance, or loan audit report is issued:

1.         Designate an Agency Action Official to ensure responses to all audit, inspection, and evaluation findings and implementation of resolved recommendations.

2.         Review thoroughly the issued audit, inspection, or evaluation report and Auditee responses, if any, consider carefully each finding and recommendation, and determine whether the recommendations can and should be implemented.

3.         Ensure that a written Agency Action Plan (see Exhibit 6 of this Order) or Agency Resolution Proposal (see Exhibit 7 of this Order) is prepared, specifying concurrence or nonconcurrence with each recommendation.  The written Agency Action Plan should include appropriate target dates for implementing all accepted recommendations.

4.         In cases involving legal issues, obtain concurrence of the organizational unit's legal office prior to submitting an Agency Action Plan or Agency Resolution Proposal.

e.         After submitting the Agency Action Plan or Agency Resolution Proposal:

1.         Prepare or ensure preparation of one of the following, as appropriate:

(a)        the Agency Resolution Determination (see Exhibit 8 of this Order);

(b)        the Price Negotiation Memorandum in accordance with FAR requirements;

(c)        a Contracting Officer's final decision prepared in accordance with FAR 33.211; or

(d)       other contract documents which document final resolution of the audit.

2.         Prepare the Accounting Notice of Agency Resolution Determination (see Exhibit 9 of this Order) or as appropriate, the necessary contract modification, demand for payment (which may be a part of a Contracting Officer's final decision), or other contract documents, for notifying the responsible finance officer of all accepted audit recommendations resulting in financial actions, including amounts due the Government or amounts to be withheld from payment by the Government; and ensure that all information necessary for the establishment of accounting and collection controls for amounts due the Government is transmitted within 10 working days of resolution, to the office responsible for recording the accounts receivable and billing the Debtor.

f.          Ascertain whether the corrective actions decided upon by management on accepted recommendations have in fact been satisfactorily implemented.

g.         Submit quarterly status reports to the Assistant Secretary for Administration on the status of actions taken to implement resolved audit, inspection, and evaluation recommendations.

.02       Office of Inspector General will do the following:

a.         Prepare audit, inspection, and evaluation reports with findings and recommendations and transmit copies of audit, inspection, and evaluation reports as required by this Order and DAO 213-3, "Inspector General Auditing, Inspections, and Evaluations."

b.         Determine the appropriate Commerce organizational unit for each single audit report on which the Department is the cognizant/oversight agency.  An Agency Action Official will be designated in accordance with Section 4.01

c.         In conjunction with the Office of the Secretary, maintain a management information system which tracks all audit, inspection, and evaluation findings and recommendations until recommendations are resolved and the final actions have been taken to implement the recommendations.

d.         Evaluate the adequacy of written determinations for performance audits, inspections, and evaluations, and for financial assistance and loan audits, and obtain legal review of cases which involve a legal dispute or of proposed resolutions which appear inappropriate or could result in litigation.

e.         Designate the appropriate Assistant Inspector General to attempt to resolve audit, inspection, and evaluation issues with organizational unit Agency Resolution Officers prior to elevation to the Agency Resolution Council.

f.          Inform the Agency Follow-up Official when major disagreements with organizational units cannot be resolved within 45 calendar days of receipt of proposed Agency Action Plan or Agency Resolution Proposal.

g.         Participate in meetings of the Agency Resolution Council.

h.         Report to the Assistant Secretary for Administration semi-annually on the status of audit, inspection, and evaluation resolution.

i.          Provide the audit liaison with quarterly data on unresolved audit, inspection, and evaluation recommendations and overdue written determinations.

j.          Provide the Assistant Secretary for Administration with copies of all Agency Action Plans which are agreed to by the organizational unit and the OIG, including modifications to previously approved Agency Action Plans.

k.         Perform selective follow-up reviews to determine if the Agency Follow-up Official has adequately monitored the implementation of corrective actions.

l.          Perform periodic performance audits, inspections, and evaluations of organizational units audit, inspection, and evaluation resolution activities, including the implementation and effectiveness of significant recommendations.

m.        Forward the Inspector General Semiannual Report to the Agency Follow-up Official, no later than April 30 and October 31 of each year, to review and prepare the Report on Final Action.

.03       Assistant Secretary for Administration (Agency Follow-up Official) will do the following:

a.         Ensure that Department wide systems of audit, inspection, and evaluation follow-up, resolution, and implementation (final action) are documented and in place; timely responses are made to all audit, inspection, and evaluation reports; disagreements are resolved; corrective actions are taken; and semi-annual reports are provided to the Secretary on status of all unresolved audit reports over 6 months old.

b.         Inform the Deputy Secretary when major disagreements between organizational units and the OIG have not been resolved through negotiations between the parties or by the Agency Resolution Council.  Prepare a presentation of the issues including both the IG's and the organizational unit's arguments for the Deputy Secretary's decision. The presentation should include any OIG and/or organizational unit position paper submitted within 10 calendar days of the Agency Resolution Council meeting.  For recommendations concerning programs which the OIG has identified as “high risk,” the Agency Follow-up Official will determine whether appropriate final action has been taken.

c.         Review quarterly progress reports from organizational units on the status of actions taken to implement audit, inspection, and evaluation recommendations.

d.         When appropriate final action has been taken, inform organizational units that no further reporting is required.

e.         Perform selected quality assurance reviews of implemented recommendations to ensure they conform to the requirements of the Agency Action Plan.  If the review reveals that the action taken does not conform to the requirements of the Agency Action Plan, the organizational unit will be notified and required to resume reporting on the recommendation.

f.          In conjunction with the OIG, maintain a management information system which tracks all resolved audit, inspection, and evaluation recommendations until the Auditee has successfully implemented corrective actions and all audit-related debts, if any, are collected, offset, or written off.

g.         Establish Department wide policies and procedures for controlling and accounting for monetary disallowances in audit reports.

h.         Monitor Department wide collections of the Department audit-related debts owed to the Government.

i.          Report on Final Action.  No later than May 31 and November 30 of each year, prepare a report on final actions taken on the audit, inspection, and evaluation reports for the Secretary to transmit to the head of the appropriation committees or subcommittees of the Congress along with the Inspector General's Semiannual Report.  The OIG will be provided with an information copy of the report.  According to the Inspector General Reform Act of 2008, the report on final action must contain the following:

1.         Any comments the Secretary deems appropriate;

2.         Statistical tables showing the total number of audit reports, inspection reports, and evaluation reports, and dollar value of disallowed costs for which:

(a)        Final action had not been taken by the beginning of the reporting period.

(b)        Management decisions were made (audits, inspections, and evaluations resolved) during the reporting period.

(c)        Final action was taken (recommendations implemented) during the reporting period showing:

(1)        The dollar value of disallowed costs that were recovered by management through collection, offset, property in lieu of cash, or otherwise; and

(2)        The dollar value of disallowed costs that were written-off by management.

(d)       No final action has been taken by the end of the reporting period.

3.         Statistical tables showing the total number of audit reports, inspection reports, and evaluation reports and the dollar value of recommendations agreed to during audit resolution that funds be put to better use, for which:

(a)        Final action had not been taken by the beginning of reporting period.

(b)        Management decisions were made during reporting period.

(c)        Final action was taken during reporting period showing dollar value of recommendations actually implemented and dollar value of recommendations that management subsequently concluded should not or could not be implemented or completed.

(d)       No final action has been taken by end of reporting period.

4.         For all reports where management decisions have been made but final action has not been taken within one year of the Report on Final Action, the Secretary must:

(a)        List all such reports and date each was issued within the preceding year.

(b)        Show the dollar value of disallowed costs for each report.

(c)        Show the dollar value of recommendations that funds be put to better use for each report.

(d)       Provide an explanation of reasons final action has not been taken with respect to each such report.

.04       Office of General Counsel (OGC) will do the following:

a.         Provide legal advice or assistance to organizational units upon request for legislative or regulatory interpretation.

b.         Upon request of an organizational unit, review Agency Resolution Proposals which will result in the establishment of a debt or other adverse action against the Auditee, including but not limited to, denial of claimed costs, reduction in award amount, suspension, and termination.  OGC review and clearance is required for all Audit Appeal Determinations.  OGC review is also required for position papers prepared by an organizational unit and for issues presented by the Agency Follow-up Official to the Deputy Secretary for a final decision.

c.         Provide in writing the legal basis, when applicable, for organizational unit decisions not agreeing with an audit, inspection, or evaluation recommendation.

d.         Concur in agency claim referrals to the Comptroller General or the Department of Justice.

SECTION 6.  PROCEDURES FOR RESOLUTION OF AUDIT, INSPECTION, AND EVALUATION RECOMMENDATIONS.

.01       Audit, Inspection, and Evaluation Resolution Timeline.  Appendix A provides an overview in calendar days of the audit, inspection, and evaluation resolution process and its key milestones.  The timeline is consistent with the statutory requirement to report to Congress audit recommendations unresolved in excess of 180 calendar days from issuance of the OIG's final audit, inspection, or evaluation report.

a.         Where entities or former entities being audited or the subject matter being audited is part of an OIG investigation, the OIG may choose to suspend the resolution process, terminate the resolution process, or take any other action deemed necessary to ensure the integrity of OIG investigations.  Each decision with be made on a case-by-case basis for each impacted audit, inspection, and evaluation report.

.02       Performance Audits, Inspections, and Evaluations and Loan and Loan Guarantee Audits.  Procedures for resolution of performance audit, inspection, and evaluation reports, and loan and loan guarantee audit reports are as follows:

a.         The OIG will transmit copies of final audit, inspection, and evaluations reports to the audited organization's management and appropriate Agency Liaison (see Exhibit 1 of this Order) and the Agency Follow-up Official.  When appropriate, the OIG will transmit copies of the reports to other senior Department management officials concerned.

b.         The OIG will indicate in the transmittal letter of the report the amount of time the organizational unit will have to prepare an audit, inspection, or evaluation report action plan.  The time allotted will range from 30 to 60 (maximum) calendar days depending on the complexity of the audit, inspection, or evaluation issues.  The organizational unit's head may submit to the OIG a written request for an extension of this deadline by explaining the circumstances that will require more time.  The OIG will approve or disapprove the request in writing within 5 working days of receipt.  Organizational units, however, should assume that the original deadline will stand until notified otherwise by the OIG.

c.         The organizational unit's Agency Liaison will coordinate assignment of an Agency Action Official.

d.         The Agency Action Official will prepare an Agency Action Plan (see Exhibit 6 of this Order) and provide the plan to the Agency Liaison who will forward the approved plan to the OIG.  If the audited organization disagrees with an audit recommendation, it will provide the rationale, criteria, and/or legal basis for rejection of the recommendation.

e.         Upon receipt of the Agency Action Plan, the OIG has 15 calendar days to review the plan and notify the organization of its agreement or disagreement.  If the OIG concurs with the proposed actions, the OIG will return signed copies of the plan to the Agency Liaison and the Agency Follow-up Official.  The OIG will retain a copy of the plan for its files.  If the OIG disagrees with the proposed actions, the notification should include reasons for disagreement.

f.          During the 45 calendar day period following timely submission of the Agency Action Plan, the appropriate OIG Assistant Inspector General and the organizational unit's Agency Resolution Officer will attempt to resolve any disagreements.  If no resolution has been reached at the end of 45 calendar days, the OIG or the Agency Resolution Officer may elevate the resolution of the matter to the Agency Follow-up Official in accordance with the procedures set forth in Section 6.05 of this Order.

.03       Financial Assistance Audits.  Procedures for resolution of financial assistance audit reports, not including loan and loan guarantee audit reports, are as follows:

a.         The OIG will transmit final financial assistance audit reports to the appropriate parties (see Exhibits 2 through 4 of this Order).  When appropriate, the OIG will transmit copies of the reports to senior Department management officials concerned.

b.         The Auditee has 30 calendar days from the report transmittal date to send a response to the Agency Action Official.

1.         Except as provided in subparagraph 2. below, financial assistance audits that result in or may result in the establishment of a debt and/or other adverse action against the Auditee, shall provide the Auditee at least two opportunities to comment upon the findings and recommendations in the audit report and to submit additional documentary evidence to support the Auditee's positions.  First, the Auditee is given 30 days from the transmittal of the draft audit report in which to submit written comments and documentary evidence to the Agency Action Official.  Based on review of the comments, arguments, and evidence available at the expiration of this time period, the Department will make a decision on the findings that will be included as part of the final audit report.  The second opportunity for the Auditee to provide written comments and documentary evidence to the Agency Action Official is within 30 calendar days from transmittal of the final audit report.

2.         If the Inspector General or the organizational unit of the Department determined that it was not in the best interest of the Government to provide the Auditee with the draft audit report for comment, such determination shall be provided in writing to the Agency Action Official in the transmittal for the final report.  If the report will result in the establishment of a debt, a copy of the final report will be provided to the Auditee for comment and submission of evidence in support of its position.  If the report will result in other adverse action against the Auditee, the transmittal for the final report will notify the organizational unit that the Auditee must be provided the appropriate due process before final action can be taken.

c.         When transmitting the audit report to the organizational unit, the OIG shall indicate the due date of the Agency Resolution Proposal (see Exhibit 7 of this Order).  The time allotted will range from 30 to 75 (maximum) calendar days depending on complexity of the audit issues and whether the Auditee has been asked to comment.  If a response is not received from the Auditee by the 30th day after the transmittal of the audit report, the Agency Action Official is still required to provide the OIG with an Agency Resolution Proposal based on the available information by the due date.

d.         The Agency Action Official will prepare an Agency Resolution Proposal (see Exhibit 7 of this Order) and provide the proposal to the Agency Liaison who will forward the approved proposal to the OIG.  If the organizational unit disagrees with an audit recommendation, it shall provide the rationale, criteria, and/or legal basis for rejection of the recommendation.

e.         The organizational unit's head may submit a written request to the OIG for an extension of the Agency Resolution Proposal deadline by explaining the circumstances that will require more time.  The OIG will approve or disapprove the request in writing within five working days after receipt.  Organizational units, however, should assume that the original deadline will stand until notified otherwise by the OIG.

f.          Upon receipt of the Agency Resolution Proposal, the OIG has 15 calendar days to review the plan and notify the organization of its agreement or disagreement.  If the OIG concurs, the OIG will return the signed proposal to the Agency Action Official.  If the OIG disagrees, the notification will include reasons for disagreement.

g.         During the 30 calendar day period following timely submission of the Agency Resolution Proposal, the appropriate OIG Assistant Inspector General and the organizational unit's Agency Resolution Officer will attempt to resolve any disagreements.  If no resolution has been reached at the end of that period, the OIG or the Agency Resolution Officer may elevate the resolution of the matter to the Agency Follow-up Official in accordance with the procedures set forth in Section 6.05 of this Order.

h.         The Agency Action Official has 10 working days after receipt of signed (agreed to) Agency Resolution Proposal to prepare an Agency Resolution Determination (see Exhibit 8 of this Order) and an Accounting Notice of Agency Resolution Determination (see Exhibit 9 of this Order).  The Agency Action Official will forward the Agency Resolution Determination to the Auditee and the Accounting Notice of Agency Resolution Determination to the appropriate accounting office, with information copies of both to the OIG and the Department's Agency Follow-up Official.

.04       Post-award Contract Audits.  Procedures for resolution of post-award contracts audit reports are as follows:

a.         The OIG will transmit copies of post-award contract audit reports to the appropriate Contracting Officer, who is the Agency Action Official (see Exhibit 5 of this Order).  If appropriate, the OIG also will transmit a copy of the report to responsible Agency Liaison.

b.         The Contracting Officer will notify the OIG of his final decision on the audit issues by providing a copy of the Price Negotiation Memorandum required by the Federal Acquisition Regulation or memorandum.  The Contracting Officer’s action is the final decision; there is no provision for elevation of audit issues on contract audits.

c.         The OIG will track all recommendations.  The Contracting Officer is encouraged to consult with the auditors during negotiations.

.05       Elevation of Audit, Inspection, and Evaluation Issues to the Agency Resolution Council.  Procedures for elevation of audit issues (other than contract audits) which cannot be resolved at the organizational unit level are as follows:

a.         If the OIG and the organizational unit cannot reach agreement within 105 calendar days from issuance of the final audit, inspection, or evaluation report, or as provided in Sections 6.02.f. and 6.03.g. of this Order, the OIG or the Agency Resolution Officer may notify the Agency Follow-up Official.  The OIG, or the Agency Resolution Officer, will provide a written explanation of the issues in dispute with its notification to the Agency Follow-up Official and will contemporaneously provide a copy of such notification and written explanation of the issues to the other party.  The other party (i.e., the party that did not notify the Agency Follow-Up Official) will then have 15 calendar days from its receipt of the notification and written explanation of the issues to provide a detailed written response to the Agency Follow-up Official, with a contemporaneous copy to the party that originally notified the Agency Follow-Up Official.    

b.         If the matter has not been resolved by the OIG and the organizational unit within 30 calendar days after initial notification to the Agency Follow-up Official, the Agency Follow-up Official shall convene the Agency Resolution Council to discuss the differences in position between the OIG and the organizational unit, and to attempt to facilitate a resolution of the unresolved issues.

c.         If the Audit Resolution Council does not reach a consensus agreement, OIG and the organizational unit will each submit position papers on the issues in dispute to the Assistant Secretary for Administration within 10 calendar days following the last meeting of the Agency Resolution Council.  The position papers must be in the format provided in Exhibit 10 or in such other format as determined by the Agency Follow-up Official and should include any necessary legal opinions.  The positions papers must be signed by the head of the organizational unit and by the Inspector General, as appropriate.

d.         Within 10 calendar days after receipt of the OIG’s and the organizational unit’s Position Papers, the Agency Follow-Up Official will submit a Decision Package to the Deputy Secretary.

e.         Within 10 calendar days after receipt of the Decision Package, the Deputy Secretary will issue the final management decision. The preceding time frames are designed to make a final management decision within the 180-calendar day statutory reporting requirements.  After the Deputy Secretary's final decision, the involved organizational unit will implement the decision in the same manner provided by this Order as it would for any other resolved audit, inspection, or evaluation report.

f.          When the involved unit head is the Assistant Secretary for Administration, an Agency Resolution Council will not be convened.  In this case, the Assistant Secretary for Administration and the Inspector General will prepare position papers in the format specified by Exhibit 10.  The position papers should reference their most recent attempt at resolution, and should be submitted directly to the Deputy Secretary for a final management decision.

SECTION 7.  PROCEDURES FOR RECORDING AND COLLECTING RECEIVABLE RESULTING FROM AUDIT RESOLUTION.

.01       Upon receipt of the Accounting Notice of Agency Resolution Determination (see Exhibit 9 of this Order) or the Contracting Officer’s demand for payment (see FAR 32.604, 32.605, and 33.211), the responsible finance officer shall record the appropriate amount as a receivable effective on the date specified in the Agency Resolution Determination or the Contracting Officer’s demand for payment.  The Agency Resolution Determination is the initial demand for payment of debts related to financial assistance awards and must meet the requirements of the Federal Claims Collection Standards (31 C.F.R. §§ 900-904) as adopted by the Department at 15 C.F.R. Part 19.  The Office of the Assistant General Counsel for Finance and Litigation is available to provide review and advice regarding debt collection matters upon request.  If payment is not received pursuant to the Agency Resolution Determination or the Contracting Officer’s demand, the accounting office will continue to bill the Auditee for the amount due in accordance with applicable Department regulations and procedures and, if necessary, refer the debt to the appropriate workout group. The accounting officer will provide the Agency Liaison with notification of this action.  Workout groups can attempt to collect seriously delinquent debts by negotiating payments in regular installments; by referring the debt to private sector debt collection agencies; by administrative offset; or by referral to the Department of Justice for litigation.  If after diligent efforts to collect the debt have failed and it is determined to be in the Government's best interest, the workout groups can also recommend compromise, suspension, and termination of collection activity in accordance with government wide and Departmental regulations and policies.

.02  Demands for payment and collection activities will comply with the applicable requirements in the Department's Cash Management Policies and Procedures Handbook; Department's Credit and Debt Management Operating Standards and Procedures Handbook; Department's Handbook of Accounting Principles and Standards; the Federal Claims Collection Standards (31 C.F.R. §§ 900-904), as implemented through Departmental policies, procedures, and regulations (15 C.F.R. Part 19); and FAR §§ 32.6 and 33.211 on demands for payment made by Contracting Officers.  If no payment is forthcoming or no authorized repayment arrangement is approved after the required number of demands are made, the accounting officer will refer the debt to the appropriate workout group in accordance with established Departmental procedures.  The accounting officer will provide the Agency Liaison with notification of this action.

.03       Decisions on whether to compromise a debt or to suspend or terminate collection action will be made solely on the basis of the applicable dollar amounts and other standards in 31 C.F.R. Parts 902 and 903, 15 C.F.R. Part 19, and documentation submitted by the debtor requesting or supporting compromise, suspension or termination, on any ground other than the legal validity of the debt.  The Office of the Assistant General Counsel for Finance and Litigation is available to provide review and advice regarding debt collection matters upon request.

.04       Each determination within the Department to terminate collection action on or compromise audit-related debts, unless made with Department of Justice concurrence, will be fully justified and documented by the official with responsibility for each such determination and in accordance with Departmental policy. See Credit and Debt Management Operating Standards and Procedures Handbook, Ch 10.  Copies of each such Determination (with copies of notices to the debtor, supporting justifications, explanations, clearances and approvals) will be forwarded to the Office of Inspector General and to the Agency Action Official within 10 working days of any such decision.

SECTION 8.  APPEALS OF FINANCIAL ASSISTANCE AUDIT DETERMINATIONS.

.01       Upon receipt of the Agency Resolution Determination, the Auditee has 30 calendar days to submit a written appeal of the Department's decision to the head of the organizational unit that provides financial assistance administration of the subject grant or cooperative agreement, with a copy to the Office of Inspector General.  To be valid the appeal must be received or postmarked within the 30-day period.  The Auditee must submit an explanation of its dispute with the Agency Resolution Determination and any new supporting documentation with the appeal.  As part of an audit appeal, an Auditee may reference previously submitted documentation in lieu of resubmitting such documentation.

.02       If the Deputy Secretary made the original Agency Resolution Determination under DAO 213-5, the Auditee's appeal will be addressed to the Deputy Secretary for his/her reconsideration of the determination.

.03       If a valid appeal is not received, the right to appeal is lost.  For purposes of judicial review, an unappealed Agency Resolution Determination will be the final decision of the Department with respect to the amounts and merits of the debt; the Auditee will have to go to court to continue its dispute of the legal validity of the debt.  The appeal procedure is the last opportunity for Auditees to furnish available evidence to support their dispute of a debt.

.04       An appeal does not prevent the establishment of the audit-related debt nor does it prevent the accrual of interest on the debt.  If the Agency Resolution Determination is overruled or modified on appeal, appropriate corrective action will be taken retroactively.

.05       If the debt established by the Agency Resolution Determination is subject to administrative offset, receipt of an appeal will stay the offset of funds owed by the Auditee against funds due to the Auditee.

.06       The appropriate organizational unit will acknowledge receipt of the appeal within five working days.  If the appeal was not submitted within the required 30 calendar day period, the Auditee will be notified that their appeal is denied.

.07       The decision on appeal of an audit-related debt will be made within 30 working days after receipt of the appeal and on the basis of the record existing at the expiration of the time limit for filing an appeal, excepting that the Determining official has the discretion to request and to consider subsequently produced documents and information.

.08       Within 20 days of the receipt of the appeal, the appropriate organizational unit will prepare a decision on the appeal for the signature of the head of the organizational unit.  The decision must contain the same information as required for the Agency Resolution Determination.  If the original Department decision has been modified or overruled on appeal, the letter will explain the corrective action taken or to be taken by the Department.  The decision must be signed by the Inspector General or the OIG designee.  If the OIG does not concur with the decision, the organizational unit will inform the Auditee that the decision will be delayed.  The issue will be elevated to the Deputy Secretary for a final decision by the Department.

.09       If the OIG concurs with the decision, the organizational unit will send it to the Office of General Counsel for clearance.  If the clearance has not been received within five working days, the appropriate organizational unit will notify the Auditee that the decision will be delayed.  If the Office of General Counsel does not concur with the decision, the issue will be elevated to the Deputy Secretary for a final decision by the Department.

.10       If the Office of General Counsel concurs, the organizational unit will distribute the decision on the appeal to the Auditee and take immediate action to collect any funds due in accordance with applicable Government-wide and Department claims collection procedures--except that the Department will not accept any more documentary evidence from a debtor to support the debtor's continued dispute of the merits of the debt.  (Documents supporting other issues, such as inability to pay, may be accepted.)

SECTION 9.  PROCEDURES FOR MONITORING AUDIT RESOLUTION.

.01       Pursuant to DAO 213-3, each Secretarial Officer or head of an organizational unit will designate an individual to serve as Agency Liaison.

.02       The Agency Liaison is responsible for the central management and coordination of audit, inspection, and evaluation resolution and implementation actions within the organizational unit.  The Agency Liaison will oversee the timely submission of the agencies' written determinations and implementation status reports.  The Agency Liaison will coordinate appointment of an Agency Action Official for each audit report containing recommendations, and ensure that the Agency Action Official satisfactorily implements accepted recommendations in accordance with OMB Circular A-50 and this Order.  For performance audit, inspection, and evaluation reports, the Agency Action Official will be the responsible program official for the audited area.  For financial assistance audit reports, the Agency Action Official will be the responsible financial assistance officer.

.03       At least quarterly, the OIG will provide the Agency Liaison with data on all unresolved audit, inspection, and evaluation recommendations for use in monitoring audit, inspection, and evaluation resolution within individual offices in the organizational unit. 

.04       Quarterly, the OIG will provide the Agency Follow-up Official with data on the status of audit, inspection, and evaluation resolution and overdue written determinations.  The Agency Follow-up Official will report at least semiannually to the Secretary and Deputy Secretary on the status of audit, inspection, and evaluation follow-up.

.05       After an Agency Action Plan or Agency Resolution Proposal has been submitted and agreed upon, the OIG will return a signed copy of the Plan to the Agency Liaison, send a copy to the Department's Agency Follow-up Official, and retain a copy.

.06       The Agency Liaison will report quarterly (by the 15th of the month following the close of each fiscal quarter) to the implementation of the Plans and Proposals in his or her unit.  The format of the status reports will be determined by the Agency Follow-up Official.  The information submitted in these reports will be used to prepare management's semiannual reports to the Congress on final action.

.07       If necessary, the organizational unit can modify the Agency Action Plan.  If modifications are made, the OIG must be consulted and must approve the changes in writing in advance.  If the OIG does not believe modification of the Plan is warranted, this action will be discussed at higher levels of the organizational unit's and OIG's management.  If a satisfactory agreement is not reached, the Agency Follow-up Official will report the matter to the Deputy Secretary for a decision.

SECTION 10.  EFFECT ON OTHER ORDERS.

This Order supersedes Department Administrative Order 213-5, dated June 21, 1991.

 

Signed by: Inspector General

Signed by: Chief Financial Officer and Assistant Secretary for Administration

 

Approved by: Deputy Secretary of Commerce

 

Office of Primary Interest:
Office of Inspector General

Appendix A

 

 AUDIT AND EVALUATION RESOLUTION TIME LINE (In Calendar Days)

Corresponding Section 6.05 Subsection

ELAPSED TIME

PROGRAM AUDITS, EVALUATIONS, AND INSPECTIONS

FINANCIAL ASSISTANCE AUDITS

ELAPSED TIME

 

(0 days)

OIG Final Report Issued

(0 days)

 

 

30-60 days

30 days

 

 

 

 

Grantee Response

(30 days)

 

 

 

15 days

 

 

 

 

Program Office Comments

(45 days)

 

 

 

30 days

 

 

(60 days)

Organizational Unit Submits Audit Action Plan/Audit Resolution Proposal

(75 days)

 

 

15 days

15 days

 

 

(75 days)

OIG Notice to Organizational Unit of Agreement/Disagreement

(90 days)

 

 

30 days

15 days

 

 

(105 days)

OIG-Organizational Unit Decision on Attempts to Resolve

(105 days)

a.

 

15 days

 

(120 days)

OIG and Organizational Unit Notification to Assistant  Secretary for Administration

(120 days)

b.

 

30 days

 

(150 days)

Assistant Secretary for Administration Convenes Agency Resolution Council

(150 days)

c.

 

10 days

 

(160 days)

OIG and Organizational Unit Submit Position Papers to Assistant Secretary for Administration

(160 days)

d.

 

10 days

 

(170 days)

Assistant Secretary for Administration Submits Decision  Package to Deputy Secretary

(170 days)

e.

 

10 days

 

(180 days)

Deputy Secretary Final Management Division

(180 days)

 

 



              


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