Final Thoughts on Hotline Posters

This week we've been discussing the DoD proposal to expand the requirement to display hotline posters and how such a display fits into a company's overarching internal control structure. It seems such an easy task to display a hotline poster - tack it up on the breakroom bulletin board or somewhere else in the work area. It is our sense however that many contractors are in noncompliance. We've been to many contractor facilities and haven't seen many posters. Is this one of those requirements without teeth? Are there any consequences to a contractor for not displaying the required poster? The short answer to the latter question is 'yes', there certainly could be consequences.

Failure to comply with FAR 52.203-13 (Contractor Code of Business Ethics and Conduct) and FAR 52.203-14 (Display of Hotline Poster) will be viewed by the Government as an internal control deficiency and could lead to an audit opinion that a contractor's accounting system is inadequate for Government contracting purposes. This could result in a 10 percent withhold on all billings to the Government until fixed under a new DoD proposal and potentially jeopardize the award of or selection for new contracts.

Every time an experienced Government auditor comes into a contractor facility, he/she is observing things. The auditor may be coming in to evaluate a price proposal, or review incurred costs, or to interview employees about their time charges (floorchecks) but they are constantly aware and alert for other things as well. They'll be looking for that hotline poster. They'll be looking to see if there is any idle capacity or idle facilities. They'll be sensing indications of inefficient, uneconomical, or ineffective activities. They might take note of Ferrari's in the company parking lot. They'll take note of vague position titles or positions that are not commensurate with the company size - especially for family members (This is my son, the Vice President of Marketing for our five employee company). These observations may not be followed up or acted upon at the time but neither will they be forgotten. All such observations are documented on "audit lead sheets" and filed for later use during the appropriate audit. If significant enough or considered to be high risk, the auditor may very well initiate a new audit.