REPORT OF AUDIT - THE CIA'S CONTRACT SETTLEMENT PROCESS

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 06636477
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 26
• Document Creation Date: January 30, 2024
• Document Release Date: October 18, 2023
• Case Number: F-2016-02264
• Publication Date: December 23, 2013

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CENTRAL INTELLIGENCE AGENCY
Office of Inspector General
(U) REPORT OF AUDIT
(U//F 0) The CIA's Contract Settlement Process
Report No. 2012-0016-AS
23 December 2013
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Table of Contents
(U) EXECUTIVE SUMMARY 1
(U) BACKGROUND
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(U) Objectives, Scope, and Methodology Exhibit A
(U) Recommendations Exhibit B
(U) Audit Team Exhibit C
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(U) Report of Audit
(UHFOU0) The CIA's Contract Settlement Process
(U) EXECUTIVE SUMMARY
(U) The objectives of this audit were to determine whether:
� (U) Contracts are settled in a timely manner.
� (U) Funds remaining on completed contracts are properly
managed and recorded.
� (U) The contract settlement process is administered in compliance
with applicable laws, regulations, policies, and procedures.
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(U) BACKGROUND
(U) The settlement process for a contract begins when the contractor has delivered all
goods and/or provided all services required by the terms of the contract.' Federal
Acquisition Regulation (FAR) 4.804-4, Physically Completed Contracts, prescribes that a
contract is completed when:
� (U) The contractor has completed the required deliveries and the
Government has inspected and accepted the supplies;
� (U) The contractor has performed all services and the Government
has accepted these services; and
� (U) All option provisions, if any, have expired; or
� (U) The Government has given the contractor a notice of contract
termination.
The contract settlement process continues through a number of tasks and ends when all
required contractual actions have been performed and all contract administration
activities have been successfully completed.' Contract settlement requirements vary with
the contract type, dollar value, and complexity of the contract.
(U) FAR 1.602-2, Responsibilities, prescribes that contracting officers (COs) are
responsible for ensuring performance of all necessary actions for effective contracting,
ensuring compliance with the terms of the contract, and safeguarding the interests of the
United States in its contractual relationships. A CO's responsibility for a contract does not
end until final acceptance, payment, and settlement. When settling a contract, the CO�
with the assistance of other personnel�must ensure that a variety of administrative tasks
are accomplished depending on the contract type, contract amount, and whether property
was provided to or acquired by the contractor. The administrative tasks may include:
� (U) Preparing the contractor performance report (CPR).
� (U) Obtaining property clearance.
� (U) Settling indirect cost rates.
� (U) Completing the contract audit.
� (U) Reviewing contract funds and deobligating excess funds.
� (U) Obtaining the level-of-effort hours certification and adjusting
fee, if necessary.'
(UHFOU0) For the purpose of our report, the term contract refers to a base contract, task order, and blanket
purchase agreement order.
2 (U) Contract settlement is also referred to as "contract close out."
3 (U) FAR 4.804-5, Procedures for Closing Out Contract Files;
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The FAR states that quick-closeout
procedures should be used, when appropriate, to reduce administrative costs and to
expedite the deobligation of excess funds obligated on contracts.2'
FAR 42.708, Quick-closeout procedure, states that the CO will negotiate the settlement
of direct and indirect costs on a contract, in advance of the determination of final direct
costs and indirect rates, under the following circumstances:
� (U) The total unsettled direct costs and indirect costs to be allocated to the
contract do not exceed the lesser of $1 million or 10 percent of the total
contract amount.
� (U) The contracting officer performs a risk assessment and determines that
the use of quick-closeout procedures is appropriate.
� (U) An agreement can be reached with the contractor on the total
settlement amount.
21(U) FAR 4.804-1, Closeout by the office administering the contract.
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Exhibit A
� (U) Objectives, Scope, and Methodology
(U) The objectives of this audit were to determine whether:
� (U) Contracts are settled in a timely manner.
� (U) Funds remaining on completed contracts are properly
managed and recorded.
� (U) The contract settlement process is administered in compliance
with applicable laws, regulations, policies, and procedures.
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(U) We conducted this performance audit from April 2012 to December 2012 in
accordance with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
(U) Comments on a draft of this report were provided by
and were considered in preparing the
final report.
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Exhibit B
(U) Recommendations
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Exhibit C
(U) Audit Team
(C) This audit report was prepared by the
Inspector General.
Exhibit C is CONFIDENTIAL.
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Audit Staff/Office of
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