B-225475, Dec 21, 1987, Office of General Counsel

B-225475: Dec 21, 1987

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The General Accounting Office advises that requiring contractors to have property accounting systems for government property which are equivalent to such systems for their own property will not by itself overcome basic problems relating to accounting for government property which are due to inadequate agency surveillance and inadequate agency verification systems. This is FAR case No. 87-36. Question whether the proposed change alone will achieve that goal. While internal controls maintained by contractors over government property have been consistently weak. Government surveillance of contractor management of such property is frequently inadequate and many government agencies do not presently have financial accounting systems in place which would enable independent verification of contractor records.

B-225475, Dec 21, 1987, Office of General Counsel

PROCUREMENT - Contract Management - Federal Procurement Regulations/Laws - Revision - Government Property - Use DIGEST: In response to a proposed change to section 45.505 of the Federal Acquisition Regulation (FAR), the General Accounting Office advises that requiring contractors to have property accounting systems for government property which are equivalent to such systems for their own property will not by itself overcome basic problems relating to accounting for government property which are due to inadequate agency surveillance and inadequate agency verification systems.

Ms. Willis:

This responds to your request for our comments on a proposal to amend Federal Acquisition Regulation (FAR), Sec. 45.505, which concerns records and reports of government property in the possession of contractors. This is FAR case No. 87-36.

The proposed change would establish that, at a minimum, the contractor's system of records maintenance for government property shall be equivalent to and maintained in the same manner as the contractor's system for maintaining records of contractor-owned property.

We agree with the goal of obtaining current, auditable information with respect to government property in the possession of contractors, but question whether the proposed change alone will achieve that goal. The experience of our Office has been that, while internal controls maintained by contractors over government property have been consistently weak, government surveillance of contractor management of such property is frequently inadequate and many government agencies do not presently have financial accounting systems in place which would enable independent verification of contractor records. Until these deficiencies are remedied, we believe that problems in accounting for government property in the possession of contractors will persist.