B-100489, MAR 9, 1951

B-100489, MAR 9, 1951

PRECIS-UNAVAILABLE

THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO LETTER DATED DECEMBER 29, 1950, FROM THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), REQUESTING FAVORABLE CONSIDERATION OF A PROCEDURE WHEREBY CONTRACTORS WOULD BE RELIEVED OF THE REQUIREMENT TO FURNISH TO THE GOVERNMENT FOR ITS RETENTION AND EVENTUAL DISPOSITION, CERTAIN SPECIFIED TYPES OF DOCUMENTS IN SUPPORT OF THE CONTRACTORS' REQUESTS FOR REIMBURSEMENT UNDER COST-REIMBURSEMENT TYPE CONTRACTS.

SUCH DOCUMENTS INCLUDE, AMONG OTHER THINGS, ORIGINAL RECEIPTED VENDORS' INVOICES RENDERED TO THE CONTRACTOR SHOWING QUANTITIES FURNISHED AND AMOUNTS PAID FOR MATERIALS, PAY ROLLS LISTING NAMES OF EMPLOYEES WITH RATES OF PAY AND AMOUNTS PAID TO EACH, PURCHASE ORDERS ISSUED TO SUBCONTRACTORS, AND RECEIPTS. IT IS PROPOSED IN THE LATTER THAT IN LIEU OF FURNISHING SUCH DOCUMENTS, THE CONTRACTORS BE REQUIRED BY THE TERMS OF THEIR CONTRACTS TO MAINTAIN ADEQUATE FILES OF SUCH DOCUMENTS AVAILABLE FOR INSPECTION AND AUDIT BY AUTHORIZED AGENCIES OF THE GOVERNMENT DURING THE ACTIVE LIFE OF THE CONTRACT AND FOR A SPECIFIED PERIOD OF YEARS (TO BE STATED BY THIS OFFICE) AFTER COMPLETION OF THE WORK CALLED FOR BY THE CONTRACT, AND TO PRODUCE SUCH DOCUMENTS AS MAY BE REQUIRED IN LITIGATION OR SETTLEMENT OF CLAIMS AND ACCOUNTS BY THE GOVERNMENT DURING THAT PERIOD.

IT IS POINTED OUT IN THE LETTER THAT THERE IS INVOLVED NOT ONLY THE COST OF FURNISHING SUCH DOCUMENTS TO THE GOVERNMENT, INCLUDING THE MAKING OF DUPLICATES FOR THE CONTRACTORS' RECORDS, WHICH ARE REIMBURSABLE ITEMS OF COST UNDER THE CONTRACTS, BUT ALSO THE COST OF RETENTION AND MAINTENANCE OF THE RECORDS THEREAFTER BY THE GOVERNMENT. THE ASSISTANT SECRETARY STATES THAT HE BELIEVES THE PROPOSAL NOT ONLY WOULD REDUCE AUDITING AND CLERICAL EXPENSES, BUT WOULD LEAD TO BETTER RELATIONS BETWEEN THE GOVERNMENT AND THE CONTRACTORS, THUS EXPEDITING DEFENSE WORK WITHOUT IMPAIRING THE QUALITY OF CONTRACT AUDITING. ALSO, IT IS SUGGESTED IN THE LETTER THAT THE DOCUMENTATION REQUIREMENTS OF THIS OFFICE MAY BE ELIMINATED WITHOUT JEOPARDY TO THE INTERESTS OF THE GOVERNMENT BECAUSE THE DOCUMENTS ARE NOW BEING AUDITED AT THE SITE BY THIS OFFICE.

AFTER CAREFUL CONSIDERATION OF THE PROPOSED CHANGE IN PROCEDURE, THE CONCLUSION HAS BEEN REACHED THAT IT MAY BE EFFECTED, WITH DUE REGARD TO SAFEGUARDING THE INTERESTS OF THE GOVERNMENT, WHERE SITE AUDITS ARE OR WILL BE PERFORMED, SINCE IT IS CONSISTENT WITH THE SPIRIT OF THE BUDGET AND ACCOUNTING PROCEDURES ACT OF 1950, PUBLIC LAW 784, APPROVED SEPTEMBER 12, 1950, 64 STAT. 835, SECTION 111(E) OF WHICH PROVIDES THAT EMPHASIS SHOULD BE PLACED, AMONG OTHER THINGS, ON THE ELIMINATION OF THOSE ACCOUNTING AND AUDITING REQUIREMENTS WHICH INVOLVE DUPLICATION OR WHICH DO NOT SERVE A PURPOSE COMMENSURATE WITH THE COSTS INVOLVED. INSOFAR AS THE GENERAL ACCOUNTING OFFICE IS CONCERNED CONTRACTORS AFFECTED BY THE CHANGE IN PROCEDURE SHOULD BE REQUIRED TO RETAIN ALL SUCH DOCUMENTS FOR A PERIOD OF NOT LESS THAN SIX YEARS AFTER THE COMPLETION OF THE CONTRACT, AND TO RETAIN ANY SUCH DOCUMENTS WHICH INVOLVE PAYMENTS TO WHICH EXCEPTIONS WERE TAKEN IN THE AUDIT OR WHICH INVOLVE LITIGATION OR SETTLEMENT OR CLAIMS EITHER AGAINST OR IN FAVOR OF THE GOVERNMENT UNTIL THE EXCEPTIONS ARE REMOVED OR THE CLAIMS OR SUITS ARE SETTLED. PROVISION SHOULD ALSO BE MADE FOR TURNING ALL DOCUMENTS OVER TO THE GENERAL ACCOUNTING OFFICE AT THE END OF THE SIX YEAR PERIOD IN ANY SPECIFIC INSTANCE IN WHICH REQUESTED TO DO SO. THE SIX YEAR PERIOD IS CONDITIONED UPON THERE BEING OBTAINED A RELEASE FROM THE CONTRACTORS PRIOR TO THE DISPOSITION OF THE DOCUMENTS SINCE CLAIMS AGAINST THE GOVERNMENT COGNIZABLE BY THIS OFFICE ARE NOT BARRED UNTIL THE EXCEPTIONS ARE REMOVED OR THE CLAIMS OR SUITS ARE SETTLED. PROVISION SHOULD ALSO BE MADE FOR TURNING ALL DOCUMENTS OVER TO THE GENERAL ACCOUNTING OFFICE AT THE END OF THE SIX YEAR PERIOD IN ANY SPECIFIC INSTANCE IN WHICH REQUESTED TO DO SO. THE SIX YEAR PERIOD IS CONDITIONED UPON THERE BEING OBTAINED A RELEASE FROM THE CONTRACTORS PRIOR TO THE DISPOSITION OF THE DOCUMENTS SINCE CLAIMS AGAINST THE GOVERNMENT COGNIZABLE BY THIS OFFICE ARE NOT BARRED UNTIL THE EXPIRATION OF TEN YEARS AFTER THE DATE SUCH CLAIMS FIRST ACCRUE. IN THE ABSENCE OF SUCH RELEASES IT WILL BE NECESSARY FOR CONTRACTOR TO RETAIN THE RECORDS FOR A PERIOD OF TEN YEARS. OBVIOUSLY, THE CONTRACTORS WILL BE REQUIRED TO PROVIDE THE NECESSARY SPACE AND FACILITIES FOR AUDIT AT THE SITE, AND TO SERVICE THE DOCUMENTS AND MAKE AVAILABLE OR FORWARD THEM TO THE GENERAL ACCOUNTING OFFICE UPON REQUEST FOR USE IN THE PERFORMANCE OF ITS AUTHORIZED FUNCTIONS, INCLUDING THE SETTLEMENT OF ACCOUNTS AND CLAIMS AND THE RENDERING OF DECISIONS. INCIDENTAL EXPENSES RELATING TO THE RETENTION, MAINTENANCE AND SERVICING OF THE DOCUMENTS AFTER COMPLETION OF THE CONTRACTS WILL HAVE TO BE BORNE BY THE CONTRACTORS.

THE PROPOSED PROCEDURE IS APPROVED UPON THE FOREGOING BASIS. THE CHIEF OF THE AUDIT DIVISION, GENERAL ACCOUNTING OFFICE, WILL MAKE SUCH FURTHER DETAILED ARRANGEMENTS WITH YOUR REPRESENTATIVES AS MAY BE NECESSARY.