Any company with a "Washington Office" is almost automatically a target for a lobbying review. In the auditor's view, why would a contractor have a Washington office if not for lobbying activities? There was a big push to perform comprehensive reviews of contractors' Washington offices several years ago. Look for that to happen again.
Here are some specific procedures that auditor will perform.
- Plan appropriate audit procedures to determine whether the contractor properly identified and excluded unallowable lobbying and related costs from submissions to the Government. Recall from a previous post that these costs must be separately identified in the General Ledger and cannot be commingled with other accounts.
- Determine whether the contract is a registrant under the Lobbying Disclosure Act and if so, obtain copies of the quarterly reports filed by the contractor.
- Reconcile the quarterly report with the contractor's incurred cost submission.
- Ensure the list of employees and specific lobbying issued disclosed in quarterly reports are consistent with the incurred cost submission.
- Perform procedures to ensure the contractor has included directly associated costs.
- Consult the OMB website for appropriations earmarks.
- Consult the Taxpayers for Common Sense (TCS) website for appropriations earmarks (this should leave no doubt that auditors will check non-governmental sources for audit leads).
- For significant earmarks, contractors should be queried to determine the procedures used to identify and remove the costs associated with supporting earmarks from forward-pricing and incurred cost proposals.
- Look for "supporting costs" which may include program management, contracting, public relations, consultants and technical personnel.
Any unallowable lobbying costs found in a contractor's incurred cost submission are probably going to be subject to penalty. Additionally, if a contractor does not have documented policies and procedures for accumulating and identifying lobbying costs in its accounting system, the auditor will issue a deficiency report to the appropriate contracting authorities.