Friday, July 5, 2019

Employee Falsifies Timecard - Government is Overbilled by $220 Thousand

Here's an example of what can happen when Government contractors and subcontractors do not effectively oversee work performed by their employees. The Justice Department press release on which this post is based, pins blame on the employee who charged the Government for more hours than he actually worked. We believe that his employer is also to blame for not implementing adequate internal controls over timekeeping. This story gets a little convoluted because the Government agency involved, NSA (National Security Agency) doesn't want to name its contractors and subcontractors.

NSA awarded two contracts to a contractor (Contractor A) for information technology (IT) services. Contractor A, in turn, awarded two subcontracts, one for each of their prime contracts. These were awarded to Subcontractor 1 and Subcontractor 2. Kyle Smego was an employee of both subcontractors 1 and 2. That's a little peculiar but not unheard of. Someone may work full time for one employer and 'moonlight' with another. The problem here is that Mr. Smego wasn't working the number of hours that he claimed to be working for either subcontractor.

The subject matter of these subcontracts involved classified information and required that Mr. Smego be physically present at his assigned duty location to perform his work. Between February 2016 and May 2018, Mr. Smego reported to Subcontractor 1 that he worked 3,289 hours on their subcontract and reported to Subcontractor 2 that he had worked 797 hours on their subcontract. What Mr. Smego failed to realize however that since the work had to be performed within classified work locations, it was an easy matter to correlate timecard information with key card information. And that's what NSA did. They compared Mr. Smego's timecards with key card information and found major discrepancies - 40 percent of the hours charged were not supported by access records and he did not even show up for 119 days in which he claimed to work an average of 8 hours per day.

These 'falsified' hours were billed by Subcontractors 1 and 2 to Contract A, who in turn billed NSA. The impact was calculated at $220 thousand. Once presented with the evidence, Mr. Smego plead guilty to submitting false claims and agreed to pay restitution and forfeit any assets derived from or traceable to the offense. He also faces a possibility of prison when sentencing occurs this coming October.

There should be more to this story. What about Mr. Smego's supervisor who signed off on the timecard? What about the two subcontractors who passed the charges on to the prime contractor? Where were their internal controls over timekeeping, labor distribution, and billing?

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