B-15804, APRIL 22, 1941, 20 COMP. GEN. 664

B-15804: Apr 22, 1941

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CONTRACTS - COST-PLUS - EVIDENCE IN SUPPORT OF PAYMENTS ORIGINAL SIGNED RECEIPTS ACKNOWLEDGING PAYMENT ARE REQUIRED AS PRIMARY EVIDENCE IN SUPPORT OF VOUCHERS COVERING REIMBURSEMENT TO A WAR DEPARTMENT COST-PLUS-A-FIXED-FEE CONTRACTOR FOR PURCHASES FROM ITS VENDORS. THE PURCHASE ORDER ISSUED BY THE PRIME CONTRACTOR HAS A "TEAR-OFF" SLIP WHICH IS SIGNED AND RETURNED BY THE VENDOR AND WHICH. SINCE ORIGINAL INVOICE RECEIPTS ARE REQUIRED. THE GENERAL ACCOUNTING OFFICE WILL NOT OBJECT TO THE FURNISHING OF TRUE COPIES OF THE INVOICES. WHERE PAYMENTS TO EMPLOYEES OF THE CONTRACTOR ARE WITNESSED BY GOVERNMENT AGENTS. THE GENERAL ACCOUNTING OFFICE WILL ACCEPT THE CONTRACTOR'S CERTIFIED TRUE COPIES OF THE PAY ROLLS.

B-15804, APRIL 22, 1941, 20 COMP. GEN. 664

CONTRACTS - COST-PLUS - EVIDENCE IN SUPPORT OF PAYMENTS ORIGINAL SIGNED RECEIPTS ACKNOWLEDGING PAYMENT ARE REQUIRED AS PRIMARY EVIDENCE IN SUPPORT OF VOUCHERS COVERING REIMBURSEMENT TO A WAR DEPARTMENT COST-PLUS-A-FIXED-FEE CONTRACTOR FOR PURCHASES FROM ITS VENDORS, BUT THE RECEIPT NEED NOT APPEAR ON THE INVOICE, A SEPARATE RECEIPT IDENTIFIED WITH THE PARTICULAR INVOICE INVOLVED BEING EQUALLY ACCEPTABLE. ORIGINAL PURCHASE ORDERS ISSUED BY WAR DEPARTMENT COST-PLUS-A-FIXED FEE CONTRACTORS TO VENDORS NEED NOT BE FURNISHED IN SUPPORT OF GOVERNMENT REIMBURSEMENT PAYMENTS TO PRIME CONTRACTORS. HOWEVER, WHERE, IN THE ABSENCE OF A MORE FORMAL CONTRACT, THE PURCHASE ORDER FORMS A PART OF THE WRITTEN CONTRACTUAL AGREEMENT, REQUIRED BY THE PRIME CONTRACT TO BE REDUCED TO WRITING WHEN IN EXCESS OF $2,000, THE WRITTEN BID OR PROPOSAL OF THE VENDOR AND A CERTIFIED COPY OF THE PURCHASE ORDER ISSUED IN ACCEPTANCE THEREOF SHOULD BE FURNISHED. WHERE A WAR DEPARTMENT COST-PLUS-A-FIXED-FEE CONTRACT REQUIRES THAT CONTRACTUAL AGREEMENTS OF THE PRIME CONTRACTOR WITH VENDORS BE REDUCED TO WRITING WHEN IN EXCESS OF $2,000, AND THE PURCHASE ORDER ISSUED BY THE PRIME CONTRACTOR HAS A "TEAR-OFF" SLIP WHICH IS SIGNED AND RETURNED BY THE VENDOR AND WHICH, TOGETHER WITH A COPY OF THE PURCHASE ORDER, CONSTITUTES THE ONLY EVIDENCE OF THE AGREEMENT, THE ORIGINAL SIGNED "TEAR-OFF" SLIP AND A COPY OF THE PURCHASE ORDER SHOULD BE FILED WITH THE GENERAL ACCOUNTING OFFICE IN SUPPORT OF GOVERNMENT REIMBURSEMENT PAYMENTS TO THE PRIME CONTRACTOR WHERE THE AMOUNT INVOLVED EXCEEDS $2,000. ORIGINAL INVOICES OF VENDORS SHOULD BE FURNISHED, GENERALLY, IN SUPPORT OF CLAIMS BY A CONTRACTOR FOR REIMBURSEMENT UNDER A WAR DEPARTMENT COST- PLUS-A-FIXED-FEE CONTRACT, BUT WHEN IMPRACTICABLE TO FURNISH SUCH ORIGINALS, AND SINCE ORIGINAL INVOICE RECEIPTS ARE REQUIRED, THE GENERAL ACCOUNTING OFFICE WILL NOT OBJECT TO THE FURNISHING OF TRUE COPIES OF THE INVOICES. ORDINARILY ORIGINAL SIGNED PAY ROLLS SHOULD BE SUBMITTED IN SUPPORT OF REIMBURSEMENT VOUCHERS UNDER WAR DEPARTMENT COST-PLUS-A-FIXED-FEE CONTRACTS, BUT WHEN IMPRACTICABLE, AND WHERE PAYMENTS TO EMPLOYEES OF THE CONTRACTOR ARE WITNESSED BY GOVERNMENT AGENTS, THE GENERAL ACCOUNTING OFFICE WILL ACCEPT THE CONTRACTOR'S CERTIFIED TRUE COPIES OF THE PAY ROLLS, PROVIDED THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE MAKES A SIMILAR CERTIFICATE ON THE PAY ROLL COPIES INCLUDING A STATEMENT THAT ORIGINAL SIGNED PAY ROLL RECEIPTS HAVE BEEN EXAMINED AND SUPPORT THE FACTS RECITED ON THE CERTIFIED COPY. SINCE THE INVOLVED WAR DEPARTMENT COST-PLUS-A-FIXED-FEE CONTRACT CONTEMPLATES ONLY REIMBURSEMENT TO THE CONTRACTOR FOR ACTUAL, AS DISTINGUISHED FROM ANTICIPATED, EXPENDITURES FOR WAGES, ETC., A REIMBURSEMENT VOUCHER SHOULD BE SUBMITTED FOR THE NET AMOUNT OF THE PAY ROLL AFTER VARIOUS DEDUCTIONS SUCH AS OLD AGE BENEFITS, GARNISHEES, ETC., AND AN ADDITIONAL REIMBURSEMENT VOUCHER FOR SUCH DEDUCTIONS WHEN THE AMOUNT THEREOF HAS BEEN EXPENDED FOR THE PURPOSES OF THE DEDUCTIONS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, APRIL 22, 1941:

BY INDORSEMENT OF MARCH 26, 1941, FILE FAR 67/311063 ( SAVAGE ARMS CORPORATION), FROM OFFICE OF THE CHIEF OF FINANCE, MY DECISION IS REQUESTED WITH RESPECT TO THE EVIDENCE TO BE FURNISHED IN SUPPORT OF PAYMENTS TO THE SAVAGE ARMS CORPORATION UNDER CONTRACT W-ORD-470, THERE BEING SUBMITTED WITH THE REQUEST UNPAID VOUCHERS BRI-3-10, BRI-1-15, BRI-3 -19, AND BRI-3-21, ON WHICH THE SAVAGE ARMS CORPORATION CLAIMS PAYMENT UNDER THE SAID CONTRACT AS FOR EXPENDITURES MADE, THE CONTRACT BEING ON A COST-PLUS-A-FIXED-FEE BASIS AS AUTHORIZED UNDER THE ACT OF JULY 2, 1940, PUBLIC, NO. 703, SEVENTY-SIXTH CONGRESS, 54 STAT. 712.

THE UNPAID VOUCHERS, STANDARD FORM NO. 1034, REVISED, HAVE BEEN DULY EXECUTED AND ARE SUPPORTED WITH SIGNED INVOICES BEARING THE CAPTION " ORIGINAL SAVAGE ARMS CORPORATION, UTICA, NEW YORK, ACCOUNTS PAYABLE VOUCHER RECEIPT FOR U.S. GOVERNMENT," BEARING CERTAIN CERTIFICATES AND HAVING ATTACHED THERETO UNCERTIFIED COPIES OF PAY ROLLS, INVOICES, ETC., AND AS TO VOUCHER BR1-3-19, SIGNED EXPLANATIONS OR STATEMENTS, ONE DATED MARCH 13, 1941, COVERING " METHOD USED IN COMPILING B" GUN PORTION OF SAVAGE PAY ROLLS" AND THE OTHER DATED MARCH 15, 1941, COVERING " "B" GUN PAY-ROLL EXTENSIONS.'

THERE WAS TRANSMITTED WITH THE REQUEST FOR DECISION A LETTER OF MARCH 18, 1941, FROM THE SAVAGE ARMS CORPORATION TO MAJ. R. H. COOMBS, ORDNANCE DEPARTMENT, AS FOLLOWS:

CONTRACT NO. W-ORD-470--- BROWNING MACHINE GUN

A DIFFERENCE OF OPINION HAS ARISEN IN THE INTERPRETATION OF CERTAIN CLAUSES OF CONTRACT W-ORD-470, DATED SEPTEMBER 6, 1940, RELATIVE TO THE ACCOUNTING AND DOCUMENTARY EVIDENCE REQUIRED BY YOUR OFFICE TO SUPPORT THE REIMBURSEMENT VOUCHERS ( FORM 1034) COVERING PURCHASES UNDER TITLES I AND III OF SAID CONTRACT. THIS PROBLEM IS FURTHER COMPLICATED BY THE DECISIONS OF THE COMPTROLLER GENERAL'S OFFICE. IN ORDER THAT EVERYONE INTERESTED MAY UNDERSTAND WHY OUR ORIGINAL ACCOUNTING DOCUMENTS CANNOT BE ATTACHED TO REIMBURSEMENT VOUCHERS ( FORM 1034), WE SUBMIT THE FOLLOWING EXPLANATION:

1. ARTICLE V-A, PAGE 22, OF CONTRACT W-ORD-470 READS IN PART AS FOLLOWS: "* * * AND THE CONTRACTOR SHALL PRESERVE FOR A PERIOD OF THREE YEARS AFTER COMPLETION AND TERMINATION OF THIS CONTRACT ALL THE BOOKS, RECORDS, AND OTHER PAPERS HEREIN MENTIONED.'

WE CANNOT UNDER THE FOREGOING SURRENDER OUR ORIGINAL RECORDS, PAPERS, AGREEMENTS, ETC., AND STILL RETAIN THEM FOR A PERIOD OF THREE YEARS AFTER THE COMPLETION OF SAID CONTRACT.

2. WE WERE NOT INFORMED AT THE TIME THE CONTRACT WAS NEGOTIATED THAT WE WOULD BE REQUIRED TO FURNISH ORIGINAL DOCUMENTS, SUCH AS ORIGINAL INVOICES, PAY ROLLS, AND PAY-ROLL RECEIPTS. IF WE HAD BEEN SO INFORMED, WE WOULD NOT HAVE CONSENTED TO SUCH A PROCEDURE AS THESE DOCUMENTS ARE REQUIRED TO SUPPORT THE DISBURSEMENTS OF THE FUNDS OF OUR COMPANY, WHICH ARE SUBJECT TO QUARTERLY AUDIT BY INDEPENDENT AUDITORS.

3. TITLE IV-B, SUBPARAGRAPH I, PAGE 19, OF CONTRACT W-ORD-470 READS IN PART AS FOLLOWS:

"THE GOVERNMENT WILL CURRENTLY REIMBURSE THE CONTRACTOR FOR EXPENDITURES MADE IN ACCORDANCE WITH ARTICLE IV-A UPON CERTIFICATION TO AND VERIFICATION BY THE CONTRACTING OFFICER OF THE ORIGINAL CERTIFIED PAY ROLLS FOR LABOR, OR THE ORIGINAL PAID INVOICES, OR OTHER ORIGINAL PAPERS FOR ANY PROPER EXPENDITURE INCURRED IN THE PROSECUTION OF THE WORK * *

IT WAS OUR UNDERSTANDING THAT WE WOULD CARRY ON THE SAME ACCOUNTING ROUTINE AND CONTROLS AS WERE OPERATIVE ON OUR COMMERCIAL OPERATIONS, AND ALL THAT WE HAD TO DO IN ADDITION WAS TO SATISFY THE GOVERNMENT FIELD AUDITOR THAT THE DISBURSEMENTS WERE MADE LEGITIMATELY, AND REIMBURSEMENTS WOULD THEN BE IN ORDER. ALL THE ABOVE-MENTIONED PAPERS HAVE BEEN, AND STILL ARE, IN OUR FILES AND AVAILABLE FOR CERTIFICATION.

4. WE ISSUE OUR PURCHASE ORDERS IN SUFFICIENT COPIES TO MEET THE REQUIREMENTS OF OUR OPERATING ROUTINE AND FINANCIAL CONTROL. THE ORIGINAL COPY OF EVERY PURCHASE ORDER IS FORWARDED TO THE VENDOR, AND HE RETURNS TO US THE TEAR-OFF STRIP ATTACHED TO THE BOTTOM OF THE PURCHASE ORDER AS AN ACKNOWLEDGMENT OF THE RECEIPT OF THE ORDER. A COPY OF THE PURCHASE ORDER, TOGETHER WITH THE TEAR-OFF SLIP SIGNED BY THE VENDOR, CONSTITUTES THE ONLY EVIDENCE OF A CONTRACT BETWEEN OURSELVES AND THE VENDOR. COPIES OF ALL PURCHASE ORDERS ARE FORWARDED TO ALL DEPARTMENTS INTERESTED, AND TWO COPIES ARE FORWARDED TO YOU. YOU CAN APPRECIATE FROM THE FOREGOING THAT IT IS IMPOSSIBLE FOR US TO ATTACH THE ORIGINAL PURCHASE ORDER TO THE REIMBURSEMENT VOUCHER, AND WE CANNOT SURRENDER THE TEAR-OFF ACKNOWLEDGMENT SLIP, AS IT IS AN IMPORTANT ELEMENT IN OUR FINANCIAL CONTROL OF EXPENDITURES.

5. WHEN THE INVOICES ARE RECEIVED, THEY ARE CHECKED WITH A COPY OF THE ORIGINAL PURCHASE ORDER FOR PRICE, QUANTITIES, SPECIFICATIONS, ETC., AND WITH THE RECEIVING REPORT FOR QUANTITIES RECEIVED. THESE ORIGINAL INVOICES BECOME PRIME RECORDS, AND IF ATTACHED TO REIMBURSEMENT VOUCHER ( FORM 1034), WE WOULD HAVE NO EVIDENCE IN OUR FILES SUPPORTING OUR PAYMENT OF SAID INVOICES EXCEPT THE CANCELED CHECKS.

IN THE INTEREST OF SIMPLIFICATION, EXPEDIENCY, AND ECONOMY, WE RESPECTFULLY SUBMIT THE FOLLOWING RECOMMENDATIONS RELATIVE TO THE PROCEDURE TO BE FOLLOWED IN THE SUBMITTING OF REIMBURSEMENT VOUCHERS:

1. WE RECOMMEND THAT YOU ELIMINATE THE REQUIREMENT THAT WE ASK EACH VENDOR TO AFFIX A CERTIFIED STATEMENT TO EACH ORIGINAL INVOICE OF THE VENDOR TO THE EFFECT HE HAS RECEIVED PAYMENT IN FULL FOR THE AMOUNT STIPULATED ON THE FACE OF THE INVOICE. WE FEEL THAT THIS RECOMMENDATION IS JUSTIFIED BY THE FOLLOWING:

A. IT IS NOT A REQUIREMENT OF CONTRACT W-ORD-470.

B. IT DELAYS THE PREPARATION AND SUBMISSION OF REIMBURSEMENT VOUCHERS.

C. IT IS NOT CONSISTENT WITH SOUND COMMERCIAL PRACTICE, AS IT NECESSITATES THE INSTALLATION OF A CONTINUOUS AND COSTLY FOLLOW-UP SYSTEM TO SECURE THE PROMPT RETURN OF THE RECEIPTED INVOICES.

D. IT IS NOT NECESSARY AS WE INSERT THE FOLLOWING CERTIFICATE ON EACH REIMBURSEMENT VOUCHER.

" I CERTIFY THAT THE FOREGOING EXPENDITURES HEREON LISTED HAVE BEEN MADE BY THE SAVAGE ARMS CORPORATION, AND WERE REQUIRED FOR THE WORK UNDER CONTRACT W-ORD-470, AND THAT ALL PROVISIONS OF SAID CONTRACT PERTAINING TO SAID EXPENDITURES HAVE BEEN COMPLIED WITH, AND THE SIGNATURE APPEARING BELOW ACKNOWLEDGES THIS CERTIFICATION.'

THE FOREGOING STATEMENT CAN BE VERIFIED BY YOU BY REFERENCE TO:

1. THE DUPLICATE COPY OF THE CHECK ON FILE IN OUR OFFICE.

2. THE DAILY CASH REPORT, A COPY OF WHICH YOU RECEIVE, AND WHICH LISTS ALL DISBURSEMENTS.

3. THE DISBURSEMENT LEDGER WHICH LISTS ALL PAYMENTS.

E. THE SUPPORTING EVIDENCE OF PAYMENT ATTACHED TO THE VOUCHER ( FORM 1034) IS SUFFICIENT FOR ALL PRACTICAL PURPOSES, AS WE FURNISH COPIES OF THE INVOICES, THE DATES WE MADE PAYMENTS, AND ALSO THE CHECK NUMBERS, AND IF THE FOREGOING IS NOT SUFFICIENT EVIDENCE OF PAYMENT, THE CANCELED CHECKS CAN BE VERIFIED.

F. WE HAVE BEEN IN BUSINESS FOR OVER TWENTY-FIVE YEARS, AND WE HAVE ESTABLISHED A RECORD OF HONESTY AND FAIR DEALING OF WHICH WE ARE JUSTLY PROUD, AND WE WOULD NOT UNDER ANY CIRCUMSTANCES MAKE CLAIMS FOR REIMBURSEMENT FOR FUNDS WE HAD NOT DISBURSED, AND THUS JEOPARDIZE OUR REPUTATION.

2. WE RECOMMEND THAT YOU ELIMINATE THE REQUIREMENT THAT WE SUBMIT OUR ORIGINAL PURCHASE ORDER WITH EACH REIMBURSEMENT VOUCHER ( FORM 1034). THIS RECOMMENDATION IS JUSTIFIED BY THE FOLLOWING REASONS:

A. THE ORIGINAL PURCHASE ORDER REMAINS IN THE POSSESSION OF THE VENDOR AT ALL TIMES, AND, AS HERETOFORE OUTLINED, WE RECEIVE AND RETAIN THE TEAR-OFF SLIP SIGNED BY THE VENDOR, AND THIS TEAR-OFF SLIP ATTACHED TO THE DUPLICATE COPY OF THE ORDER CONSTITUTES THE ONLY WRITTEN CONTRACT BETWEEN THE VENDOR AND OURSELVES. WE ARE REQUIRED UNDER CONTRACT W-ORD-470 TO HOLD THESE TEAR-OFF SLIPS AS OUR SUPPORTING EVIDENCE FOR A PERIOD OF THREE YEARS AFTER THE COMPLETION OF SAID CONTRACT.

B. WE HAVE ISSUED TO DATE APPROXIMATELY 15,000 PURCHASE ORDERS, AND AS 90 PERCENT OF ALL PURCHASES UNDER TITLE I AND 75 PERCENT OF ALL PURCHASES UNDER TITLE III HAVE BEEN MADE, WE FEEL THAT TO GO BACK OVER THESE PURCHASE ORDERS AND SECURE PHOTOSTATIC COPIES OF THE ORIGINAL PURCHASE ORDERS WHICH EXCEED $2,000 IN ADDITION TO INVOLVING ADDITIONAL EXPENSE WOULD SERVE NO USEFUL PURPOSE.

C. WE DO FURNISH YOU WITH TWO COPIES OF EACH AND EVERY PURCHASE ORDER WHICH WE ISSUE UNDER CONTRACT W-ORD-470. WE UNDERSTAND ONE COPY IS BEING USED BY YOUR PROPERTY SECTION AS A PERMANENT RECORD, AND THE OTHER COPY IS DELIVERED TO YOUR FIELD AUDITOR TO CHECK VENDORS' INVOICES.

3. WE RECOMMEND THAT YOU ELIMINATE THE REQUIREMENT THAT WE ATTACH THE VENDOR'S ORIGINAL INVOICE TO THE REIMBURSEMENT VOUCHER. THIS RECOMMENDATION IS JUSTIFIED FOR THE FOLLOWING REASONS:

A. IT IS NOT REQUIRED UNDER CONTRACT W-ORD-470.

B. CONTRACT W-ORD-470 STIPULATES THAT WE MUST KEEP ALL ORIGINAL RECORDS, DOCUMENTS, ETC., FOR A PERIOD OF THREE YEARS AFTER THE COMPLETION OF THE CONTRACT.

C. WE MUST RETAIN IN OUR OWN FILES ALL ORIGINAL DOCUMENTS TO SUPPORT DISBURSEMENTS WE MAKE, AS THE DISBURSEMENTS ARE AUDITED BY INDEPENDENT AUDITORS.

D. DUPLICATE COPIES OF THE INVOICES CONTAINING THE SAME INFORMATION AS THE ORIGINAL WILL BE FURNISHED, AND IF THERE IS ANY QUESTION ABOUT THE AUTHENTICITY OF THE DUPLICATE, YOUR FIELD AUDITOR CAN ALWAYS CHECK IT WITH THE ORIGINAL INVOICE, WHICH IS ALWAYS AVAILABLE FOR AUDIT AND REVIEW.

4. WE RECOMMEND THAT YOU ELIMINATE THE REQUIREMENT THAT WE SUBMIT WITH PAY ROLL REIMBURSEMENT VOUCHERS PAY-ROLL RECEIPTS SIGNED BY THE EMPLOYEES. THIS RECOMMENDATION IS JUSTIFIED FOR THE FOLLOWING REASONS:

A. IT IS NOT REQUIRED UNDER CONTRACT W-ORD-470.

B. CONTRACT W-ORD-470 STIPULATES THAT WE MUST PRESERVE ALL BOOKS, RECORDS, AND OTHER PAPERS FOR A PERIOD OF THREE YEARS AFTER THE COMPLETION OF THE CONTRACT.

C. OUR ORIGINAL, OR PRIME RECORDS, MUST BE RETAINED IN OUR FILES FOR AUDIT BY INDEPENDENT AUDITORS.

D. WE DO CERTIFY THE PAY ROLL AS BEING A TRUE AND CORRECT STATEMENT OF PAYROLL DISBURSEMENTS, AND IF THERE IS ANY QUESTION ABOUT THE DISBURSEMENTS, YOUR FIELD AUDITOR CAN CHECK THE AMOUNTS AS SHOWN ON THE PAY ROLL WITH THE RECEIPTS, AND THE SIGNATURES ON THE RECEIPTS WITH THE SIGNATURE FILED BY THE EMPLOYEE AT THE TIME HE WAS HIRED.

E. WE REQUIRE THESE RECEIPTS FOR OUR SOCIAL SECURITY INSURANCE RECORDS TO CONFIRM THE DEDUCTIONS MADE FROM THE EMPLOYEES' PAY ENVELOPES.

F. WE REQUIRE THESE RECEIPTS FOR FUTURE USE IN CONFIRMING OR DENYING THE PRESENCE OF CERTAIN EMPLOYEES IN OUR PLANT WHO FILE COMPENSATION CLAIMS SOMETIMES A YEAR OR TWO AFTER AN ACCIDENT OCCURS.

5. WE RECOMMEND THAT YOU ELIMINATE THE REQUIREMENT THAT WE FILE REIMBURSEMENT VOUCHERS FOR THE NET AMOUNT OF THE PAY ROLL AFTER VARIOUS DEDUCTIONS, SUCH AS OLD AGE BENEFIT, COMMUNITY CHEST PAYMENTS, GARNISHEES, ETC., AND AN ADDITIONAL REIMBURSEMENT VOUCHER FOR THE DEDUCTIONS. THIS RECOMMENDATION IS JUSTIFIED FOR THE FOLLOWING REASONS:

A. TIME AND EXPENSE WILL BE SAVED BY PREPARING ONE REIMBURSEMENT VOUCHER.

B. THE TOTAL AMOUNT OF THE PAY ROLL IS CHARGEABLE TO THE CONTRACT.

C. IF ANY QUESTION ARISES AS TO THE DEDUCTIONS, THE PAY-ROLL RECORDS ARE ALWAYS AVAILABLE FOR YOUR FIELD AUDITOR'S REVIEW.

6. WE RECOMMEND THAT THE FINAL AUDITING AND APPROVAL OF DISBURSEMENTS, FOR REIMBURSEMENT PURPOSES, BE CONTINUED AT UTICA BY YOUR FIELD AUDITING STAFF. THIS RECOMMENDATION IS JUSTIFIED FOR THE FOLLOWING REASONS:

A. ALL THE ORIGINAL RECORDS WILL BE MAINTAINED BY US FOR THREE YEARS AFTER THE COMPLETION OF THE CONTRACT, AND THE EMPLOYEES WHO PREPARED THE VOUCHERS WILL BE AVAILABLE DURING THE LIFE OF THE CONTRACT TO ANSWER ANY QUESTIONS THAT MAY ARISE RELATIVE TO SAID DISBURSEMENTS. WE DO NOT FEEL THAT HAVING PREPARED THE REIMBURSEMENT VOUCHERS IN THE FORM REQUIRED, AND AFTER HAVING MADE AVAILABLE ALL THE INFORMATION IN OUR POSSESSION FOR AUDIT AND REVIEW BY YOUR FIELD STAFF, AND THEN HAVING RECEIVED REIMBURSEMENT FOR SAID VOUCHERS, WE SHOULD BE CALLED UPON, SAY, SIX MONTHS, ONE YEAR, OR TWO YEARS FROM NOW TO DEFEND THE EXPENDITURE. FEEL THAT THE AUDITING PROCEDURE SHOULD BE SO DEVELOPED THAT NO ONE INSIDE OR OUTSIDE OUR ORGANIZATION COULD REASONABLY CRITICIZE THE EXPENDITURES.

B. THE PROCEDURE, AS NOW DEVELOPED, ANTICIPATES THE FILING OF THE ORIGINAL SUPPORTING EVIDENCE IN OUR FILES; THE DUPLICATE SUPPORTING EVIDENCE IS FURNISHED WITH THE ORIGINAL REIMBURSEMENT VOUCHER, AND THE TRIPLICATE SUPPORTING EVIDENCE IS ATTACHED TO DUPLICATE COPY OF THE REIMBURSEMENT VOUCHER. THE ORIGINAL AND DUPLICATE REIMBURSEMENT VOUCHERS ARE FORWARDED TO THE FINANCE OFFICER AT WATERVLIET, NEW YORK, AND AFTER THE REIMBURSEMENT CHECK IS ISSUED, HE FORWARDS THE ORIGINAL REIMBURSEMENT VOUCHER TO WASHINGTON AND RETAINS THE DUPLICATE REIMBURSEMENT VOUCHER FOR HIS FILES. THE TRIPLICATE COPY OF THE REIMBURSEMENT VOUCHER, ATTACHED TO WHICH IS THE QUADRUPLICATE COPY OF THE SUPPORTING EVIDENCE, IS RETAINED IN YOUR FILES FOR FUTURE REFERENCE. WE SINCERELY BELIEVE THAT THE APPROVAL OF THE FOREGOING RECOMMENDATIONS WILL:

1. SPEED UP THE DELIVERY OF VOUCHERS TO YOU FOR REIMBURSEMENT.

2. REDUCE THE COST OF THE PERSONNEL REQUIRED TO PREPARE THE VOUCHERS, AND THUS REDUCE THE ULTIMATE COST OF THE GUNS TO BE PRODUCED UNDER CONTRACT W- ORD-470.

3. PERMIT US TO ABIDE BY THE TERMS OF THE CONTRACT WHICH STIPULATES THAT WE SHALL PRESERVE ALL BOOKS, RECORDS, AND OTHER PAPERS FOR A PERIOD OF THREE YEARS AFTER THE COMPLETION OF SAID CONTRACT. 4. PROVIDE YOU WITH SUFFICIENT SUPPORTING EVIDENCE, AND MAKE AVAILABLE SUCH OTHER RECORDS AS WILL MAKE A PROPER AUDIT OF ALL REIMBURSEMENT VOUCHERS POSSIBLE.

5.REDUCE TO A MINIMUM OUR ADVANCE PAYMENT REQUIREMENTS.

6.BRING THE PROCEDURE IN LINE WITH THE UNDERSTANDING AND INTENT OF THE CONTACTING PARTIES AT THE TIME THE CONTRACT WAS SIGNED.

ATTACHED HERETO ARE REIMBURSEMENT VOUCHERS BRI-3-10, BRI-3-19, BRI 3-21, AND BRI-1-15 PREPARED IN THE FORM TO MEET THE APPLICABLE RECOMMENDATIONS HERETOFORE LISTED. FOLLOWING ARE EXPLANATORY COMMENTS RELATIVE TO THE SUPPORTING EVIDENCE ATTACHED TO THESE VOUCHERS:

BRI-3-10--- DATED, 3/18/41--- AMOUNT, $908.00--- WEEKLY PAYROLL

ATTACHED TO VOUCHER 1034 ARE THE FOLLOWING PAPERS:

A. FORM 1035 COVERING THE GROSS AMOUNT OF THE PAY ROLL $908.00.

B. FORM B-3 A SUMMARY OF THE PAY ROLL SHOWING THE GROSS AMOUNT, THE NET AMOUNT, AND THE DEDUCTIONS. ALSO A STATEMENT SIGNED BY OUR AUDITOR EXPLAINING THE DISPOSITION OF THE DEDUCTIONS. THIS FORM ALSO LISTS THE CHECK NUMBERS AND THE DATES PAID.

ATTACHED TO THIS FORM ARE DUPLICATE COPIES OF THE PAY ROLLS, BEARING A CERTIFICATE TO THE EFFECT THAT THE SALARIES LISTED WERE PAID TO THE EMPLOYEES WHOSE NAMES ARE LISTED THEREON. THERE IS ALSO A STATEMENT SIGNED BY A REPRESENTATIVE OF YOUR OFFICE CERTIFYING THAT HE WITNESSED THE PAYING OFF OF THE EMPLOYEES WHOSE NAMES ARE LISTED.

YOU WILL NOTE WE HAVE ASKED FOR REIMBURSEMENT FOR THE GROSS AMOUNT OF THE PAY ROLL, AND WE HAVE DETAILED THE DEDUCTIONS RATHER THAN PREPARE TWO SEPARATE VOUCHERS; ONE FOR THE NET AMOUNT OF THE PAY ROLL AND ONE FOR DEDUCTIONS.

WE HAVE FURNISHED YOU A DUPLICATE COPY OF THE PAY ROLL, AND WE HAVE NOT FURNISHED THE ORIGINAL PAY RECEIPTS SIGNED BY EACH EMPLOYEE. BRI-3 19--- DATED, 3/18/41--- AMOUNT, $1,342.08--- LABOR FURNISHED BY

SAVAGE COMMERCIAL DEPARTMENT

ATTACHED TO VOUCHER 1034 ARE THE FOLLOWING PAPERS:

A. FORM 1035 FOR $1,342.08.

B. FORM WHICH LISTS THE EXPENDITURES BY WEEKS, AND BEARS CERTIFICATION AS BEING A TRUE AND CORRECT STATEMENT OF DISBURSEMENTS BY THE SAVAGE ARMS CORPORATION.

YOU WILL FIND ATTACHED TO THE TRIPLICATE COPY OF THE REIMBURSEMENT VOUCHER, WHICH IS KEPT IN YOUR FILES, A LIST OF THE NAMES OF THE EMPLOYEES AND THE AMOUNT OF MONEY EACH EMPLOYEE RECEIVED. THIS STATEMENT IS CERTIFIED BY OUR PAY-ROLL SUPERVISOR.

BRI-3-21--- DATED, 3/18/41--- AMOUNT, $16.80--- TRAVELING EXPENSE

ATTACHED TO VOUCHER 1034 IS FORM B-3 WHICH CLASSIFIES THE NATURE OF THE EXPENDITURES, THE DATE PAID, AND THE CHECK NUMBER. THIS FORM ALSO BEARS A STATEMENT SIGNED BY OUR AUDITOR THAT THE EXPENSES WERE INCURRED FOR CONTRACT W-ORD-470, AND THEY WERE NOT IN EXCESS OF THE ORDINARY ALLOWANCE AUTHORIZED BY SAVAGE ARMS CORPORATION FOR ITS OWN EMPLOYEES IN THE NORMAL CONDUCT OF ITS REGULAR BUSINESS.

ATTACHED TO THE TRIPLICATE COPY OF THE VOUCHER, WHICH REMAINS IN YOUR OFFICE IN ADDITION TO THE FOREGOING, IS A DETAILED ANALYSIS OF THE DAY-BY- DAY EXPENDITURES. BRI-1-15--- DATED, 3/18/41--- AMOUNT, $33,778.00--- EXPENDITURES FOR

MACHINERY

ATTACHED TO VOUCHER 1034 IS FORM B-3 WHICH LISTS THE VENDOR'S NAME, THE AMOUNTS OF THE INVOICES, THE DATES PAID, AND THE CHECK NUMBERS. ALSO COPIES OF THE INVOICES COVERING SAME.

ATTACHED TO THE TRIPLICATE COPY OF VOUCHER 1034, IN ADDITION TO THE FOREGOING, ARE COPIES OF THE ORIGINAL PURCHASE ORDERS. THE TRIPLICATE COPY OF VOUCHER 1034 REMAINS IN YOUR POSSESSION FOR FUTURE REFERENCE.

YOU WILL NOTE THAT WE DID NOT FURNISH THE VENDOR'S ORIGINAL INVOICES, OR A PHOTOSTATIC COPY OF THE ORIGINAL PURCHASE ORDER, AND WE HAVE NOT FURNISHED YOU WITH A RECEIPT SIGNED BY THE VENDOR ACKNOWLEDGING RECEIPT OF PAYMENT.

THE ORIGINAL SUPPORTING EVIDENCE OF PAYMENT APPLICABLE TO EACH OF THE ABOVE VOUCHERS, SUCH AS ORIGINAL INVOICES, ORIGINAL PAY ROLLS, ORIGINAL PAY-ROLL RECEIPTS, ETC., ARE IN OUR FILES, AND ARE AVAILABLE TO YOUR FIELD AUDITOR FOR CERTIFICATION AND VERIFICATION.

WE RESPECTFULLY REQUEST EARLY CONSIDERATION AND ACTION ON THE RECOMMENDATIONS CONTAINED IN THIS LETTER.

THERE HAVE BEEN NOTED THE COMMENTS MADE ON THE ABOVE LETTER BY MAJOR COOMBS IN HIS LETTER OF MARCH 21, 1941, AND BY THE CHIEF OF ORDNANCE IN FIRST INDORSEMENT OF MARCH 25, 1941. THE SIX RECOMMENDATIONS OF THE CONTRACTOR WILL BE DISCUSSED HEREIN SERIATIM.

1. WITH RESPECT TO FURNISHING ORIGINAL RECEIPTED INVOICES BY VENDORS, IT MAY BE STATED THAT THIS OFFICE HAS NOT INSISTED THAT THE RECEIPT NECESSARILY APPEAR ON THE INVOICE. A SEPARATE RECEIPT IDENTIFIED WITH THE PARTICULAR INVOICE INVOLVED WOULD BE EQUALLY ACCEPTABLE. HOWEVER, AN ORIGINAL SIGNED RECEIPT IS REQUIRED AS PRIMARY EVIDENCE IN SUPPORT OF THE VOUCHER ( FORM 1034) COVERING REIMBURSEMENT TO THE PRIME CONTRACTOR.

2. WITH RESPECT TO THE RECOMMENDATION FOR ELIMINATING THE REQUIREMENT FOR ORIGINAL PURCHASE ORDERS, IT IS SUFFICIENT TO STATE THAT IT IS NOT A REQUIREMENT OF THIS OFFICE THAT THE ORIGINAL PURCHASE ORDER BE FURNISHED, IT BEING UNDERSTOOD TO BE THE GENERAL PRACTICE THAT THE ORIGINAL OF SUCH PURCHASE ORDERS IS FORWARDED TO AND RETAINED BY THE VENDOR CONCERNED.

HOWEVER, WHERE, IN THE ABSENCE OF A MORE FORMAL CONTRACT, THE PURCHASE ORDER FORMS A PART OF THE WRITTEN CONTRACTUAL AGREEMENT, WHICH IS REQUIRED UNDER ARTICLE VI-A 1 (C) OF THE PRIME CONTRACT TO BE REDUCED TO WRITING BECAUSE IN EXCESS OF $2,000, THE WRITTEN BID OR PROPOSAL OF THE VENDOR AND A CERTIFIED COPY OF THE PURCHASE ORDER ISSUED IN ACCEPTANCE THEREOF SHOULD BE FURNISHED IN SUPPORT OF VOUCHERS CLAIMING PAYMENT THEREUNDER. IN THE PRESENT INSTANCE IT IS INDICATED THAT THE PURCHASE ORDER ISSUED BY THE PRIME CONTRACTOR TO THE VENDOR HAS A "TEAR-OFF" SLIP WHICH SLIP IS SIGNED AND RETURNED BY THE VENDOR TO THE PRIME CONTRACTOR. IN SUCH CASES THE ORIGINAL SIGNED "TEAR-OFF" SLIP AS WELL AS A COPY OF THE PURCHASE ORDER SHOULD BE FILED HERE AS BEING ESSENTIAL PARTS OF THE WRITTEN AGREEMENT WHERE THE AMOUNT INVOLVED EXCEEDS $2,000.

3. WITH RESPECT TO THE RECOMMENDATION THAT THE VENDOR'S ORIGINAL INVOICE BE NOT REQUIRED IN SUPPORT OF FORM 1034, IT MAY BE STATED THAT THE ORIGINAL INVOICE IS THE BEST EVIDENCE OF THE FACTS RECITED THEREON AND, GENERALLY, SHOULD BE FURNISHED IN SUPPORT OF CLAIMS FOR REIMBURSEMENT. YOUR LETTER OF DECEMBER 14, 1940, QUOTED IN DECISION OF JANUARY 2, 1941, B -14020, 20 COMP. GEN. 341, IT IS INDICATED THAT, GENERALLY, THE WAR DEPARTMENT DOES NOT ANTICIPATE DIFFICULTY IN OBTAINING ORIGINAL INVOICES AND, CONSEQUENTLY, IT IS ASSUMED THEY WILL BE OBTAINED WHERE REASONABLY PRACTICABLE. HOWEVER, WHEN IT APPEARS IMPRACTICABLE TO OBTAIN SUCH ORIGINAL INVOICES THIS OFFICE WILL NOT OBJECT TO THE FURNISHING OF TRUE COPIES THEREOF, AS RECOMMENDED, HAVING REGARD FOR THE FACT THAT ORIGINAL INVOICE RECEIPTS, WHICH SHOULD BEAR APPROPRIATE REFERENCE TO THE INVOICES, ARE REQUIRED TO BE FURNISHED AS STATED HEREINBEFORE WITH RESPECT TO THE CONTRACTOR'S FIRST RECOMMENDATION.

4. THE CONTRACTOR'S FOURTH RECOMMENDATION IS THAT IT NOT BE REQUIRED TO SUBMIT PAY-ROLL RECEIPTS SIGNED BY ITS EMPLOYEES BUT THAT THERE BE ACCEPTED, IN LIEU THEREOF, A COPY OF THE PAY ROLL CERTIFIED TO BE TRUE AND CORRECT. AS HAVING A BEARING ON THIS MATTER IT WAS STATED IN THE DECISION OF JANUARY 2, 1941, B-14020, TO YOU, THAT---

IT WILL BE SATISFACTORY TO THIS OFFICE IF PAYMENTS BY THE CONTRACTOR, EITHER BY CASH OR BY CHECK ARE EVIDENCED BY A RECEIPT OF THE PAYEE, IN WHICH CASE CITATIONS TO CHECKS ISSUED BY THE CONTRACTOR IN PAYMENT OF INVOICES, TOGETHER WITH A RECONCILIATION OF THE CONTRACTOR'S DEPOSITORY ACCOUNT NEED NOT BE FURNISHED. YOUR LETTER OF DECEMBER 14, 1940, WHICH FORMED THE BASIS FOR SAID DECISION INDICATED NO DIFFICULTY HAD BEEN EXPERIENCED OR WAS ANTICIPATED BY THE WAR DEPARTMENT IN OBTAINING ORIGINAL PAY ROLLS. IT IS ASSUMED, THEREFORE, THAT ORDINARILY ORIGINAL SIGNED PAY ROLLS CAN AND WILL BE OBTAINED. HOWEVER, IN THE PRESENT CASE THE CONTRACTOR OBJECTS TO FURNISHING EMPLOYEES' RECEIPTS, OR RECEIPTED PAY ROLLS, AS BEING IMPRACTICABLE--- AND THE REASONS ADVANCED THEREFOR BY THE CONTRACTOR ARE NOT ENTIRELY WITHOUT MERIT. HAVING REGARD THEREFOR, AND IN VIEW OF THE FACT THAT PAYMENTS TO EMPLOYEES OF THE CONTRACTOR ARE WITNESSED BY AGENTS OF THE GOVERNMENT, AS STATED IN THE LETTER OF MAJ. R. H. COOMBS, DATED MARCH 21, 1941, REFERRED TO ABOVE, THIS OFFICE WILL ACCEPT CERTIFIED COPIES OF SUCH PAY ROLLS, AS RECOMMENDED BY THE CONTRACTOR, PROVIDED THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE MAKES A SIMILAR CERTIFICATE ON THE COPIES OF PAY ROLLS, INCLUDING A STATEMENT THAT ORIGINAL SIGNED PAY-ROLL RECEIPTS IN THE POSSESSION OF THE CONTRACTOR HAVE BEEN EXAMINED AND SUPPORT THE FACTS RECITED ON THE CERTIFIED COPY. IN THIS CONNECTION COMPARE THE DECISION TO YOU, DATED FEBRUARY 25, 1941, B-14830, 20 COMP. GEN. 477, INVOLVING A SITUATION WHEREIN THE CONTRACTOR PAYS ITS EMPLOYEES IN CASH AND DOES NOT REQUIRE RECEIPTS THEREFOR.

5. THE CONTRACTOR'S FIFTH RECOMMENDATION IS THAT THERE BE ELIMINATED THE REQUIREMENT THAT A REIMBURSEMENT VOUCHER BE SUBMITTED FOR THE NET AMOUNT OF THE PAY ROLL AFTER VARIOUS DEDUCTIONS SUCH AS OLD AGE BENEFIT, COMMUNITY-CHEST PAYMENTS, GARNISHEES, ETC., AND THAT AN ADDITIONAL REIMBURSEMENT VOUCHER BE SUBMITTED FOR SUCH DEDUCTIONS WHEN THE AMOUNT THEREOF HAS BEEN EXPENDED FOR THE PURPOSES OF THE DEDUCTIONS. THE ELIMINATING OF THIS REQUIREMENT WOULD MEAN, OF COURSE, THAT THE CONTRACTOR COULD BE PAID THE GROSS AMOUNT OF ITS PAY ROLL EVEN THOUGH THE AMOUNT SHOWN THEREON AS DEDUCTIONS HAD NOT YET BEEN DISBURSED OR EXPENDED BY THE CONTRACTOR. IN OTHER WORDS, TO THAT EXTENT THE CONTRACTOR WOULD BE PAID, AS FOR REIMBURSEMENT, IN ADVANCE OF EXPENDITURES. SINCE THE CONTRACT CONTEMPLATES ONLY REIMBURSEMENT FOR EXPENDITURES ACTUALLY MADE AS DISTINGUISHED FROM ANTICIPATED EXPENDITURES, THE CONTRACTOR'S RECOMMENDATION IN THIS RESPECT CANNOT BE APPROVED.

6. THE CONTRACTOR'S RECOMMENDATION NO. 6 WITH RESPECT TO FINAL AUDIT AT ITS PLANT APPEARS TO BE DIRECTED TO THE WAR DEPARTMENT RATHER THAN TO THIS OFFICE, AND, OF COURSE, IS NOT A MATTER PROPERLY FOR ADVANCE DECISION BY THIS OFFICE. THE CONTRACT MAKES PROVISION WITH RESPECT TO FINAL PAYMENT TO THE CONTRACTOR IN ARTICLE IV-B-5 THEREOF, BUT A FINAL PAYMENT TO THE CONTRACTOR MADE PURSUANT THERETO OR A FINAL FIELD AUDIT BY THE WAR DEPARTMENT WOULD NOT, OF COURSE, BE CONTROLLING ON THIS OFFICE IN THE SETTLEMENT OF THE ACCOUNTS OF THE DISBURSING OFFICER MAKING THE PAYMENTS.

IN VIEW OF THE FOREGOING THE UNPAID VOUCHERS ARE RETURNED HEREWITH AND PAYMENT THEREON IS NOT AUTHORIZED UNTIL THEY ARE SUPPORTED BY EVIDENCE AS INDICATED HEREIN.