Guidance on Reporting Suspected Contractor Irregularities to Investigative Agencies

(Editor’s Note. We have been seeing incidences where individual DCAA auditors have been referring contractors to governmental investigation agencies for possible criminal or fraud investigations when they have concerns about a contractor’s cost allocation or screening of unallowable cost practices identified during an audit. We are particularly concerned about these because we have seen little DCAA management review of such referrals.)

DCAA issued an audit alert reminding their auditors of agency policy to report suspected contractor fraud and other contractor irregularities encountered in the performance of their audits. Suspect contractor fraud and irregularities should be reported promptly using DCAA Form 2000 in accordance with the DCAA Contract Audit Manual 4-700 and DCAA Instruction No. 7640. Auditors are told, in bold letters, “There is no requirement for the auditor to prove the existence of fraud or other contractor irregularity in order to submit a DCAA Form 2000.” The guidance also states that DCAA management reviews of Form 2000 prior to formal submission “should be limited to that necessary to ensure clarity. No attempt should be made to dissuade an auditor from completing and submitting a DCAA Form 2000.” Examples of irregularities cited in the guidance includes labor mischarging, submitting false claims, repeated overbilling, falsifying labor charges, improper transfers of costs between contracts and bribes/kickbacks. Any other suspected irregularity may be referred (09-OTS-004(R)).

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