B-231496.1, Jan 13, 1989

B-231496.1, Jan 13, 1989

APPROPRIATIONS/FINANCIAL MANAGEMENT - Claims by Government - Past due accounts - Debt collection - GAO authority MISCELLANEOUS TOPICS - Federal Administrative/Legislative Matters - Audits - Payments DIGEST: Subject to the conditions set forth below, the GAO Office of Financial Management is advised that no legal objection will be raised to its compliance with the request of the Accounting and Financial Management Division (AFMD) to reduce the amount assessed against the Pennsylvania Avenue Development Corporation (PADC) as reimbursement for GAO's audit (pursuant to section 301 of the Government Corporations Control Act, 31 U.S.C. Sec. 9105 (1982)) of PADC financial records for the year ended September 30, 1985. This advice is predicated upon AFMD's representation that the initial assessment against the PADC included amounts stemming from unwarranted inefficiencies, and that AFMD's final assessment was calculated to include the otherwise appropriate, "full" costs of GAO's audit, consistent with B-207203 O.M., June 4, 1982. Pennsylvania Avenue Development Corporation B-231496.1.

Director, OFM - Charles J. Costello:

This responds to your memorandum of May 13, 1988 regarding GAO's claim against the Pennsylvania Avenue Development Corporation (PADC). Under the Government Corporations Control Act, 31 U.S.C. Sec. 9105 (1982), GAO's Accounting and Financial Management Division (AFMD) conducted an audit of PADC financial transactions for the year ended September 30, 1985. Although AFMD originally estimated the cost of this audit at $75,000, its final bill to PADC totalled $110,656. Your office has been attempting to recover the later amount from PADC on AFMD's behalf. However, PADC has resisted payment of much more than the amount originally estimated by AFMD.

Subsequent to your submission of this matter to us, AFMD advised you (in a memorandum of November 2, 1988) that, upon reconsideration of its records in this matter, AFMD has concluded that "unwarranted inefficiencies" occurred in the conduct of this audit. In AFMD's view, the PADC audit should not reasonably have cost much more than the amount originally estimated, and it is inappropriate to charge PADC for such serious inefficiency.

Consequently, AFMD instructed you to reduce PADC's bill to the amount already paid by PADC (which approximates the amount of AFMD's original estimate). In view of this, you want to know whether we would object if your office complied with AFMD's instructions on this point.

GAO is required by the Government Corporations Control Act to bill PADC for the "full cost" of its audit. B-2072030.M., June 4, 1982 (citing original language and history of section 301, Government Corporations Control Act, Pub.L. No. 248, 59 Stat. 597, 601 (1945)). Under the Act, "full cost" includes those amounts "which normally would be passed onto a corporation by a private firm doing the san work." Id. We do not doubt that a reputable private firm would decline to pass on to its clients as "actual" or "full" costs any charges which stem from unwarranted inefficiencies such as AFMD advises were present here. Consequently, to the extent that (a) AFMD has concluded that its prior assessments against PADC included such amounts, and (b) that AFMD's final assessment was calculated to include the otherwise appropriate, "full costs" of its audit, we would not object to the reduction of PADC's bill to the amounts already paid.