Investigation of Contractor’s Inflated Indirect Cost Rates and Ineligible Direct Costs

An OIG investigation found that The Aerospace Corporation (TAC), a California-based company under contract with the U.S. Geological Survey (USGS), mischarged $29,702 to a USGS contract. The company self-reported the error and reimbursed the contract for the full amount.

 

In addition to our investigation, our office of Audits, Inspections, and Evaluations also conducted an audit of the contract in question, which identified $91,372 in ineligible costs. The questioned amount included the $29,702 mischarge—an issue we considered resolved—so we investigated the remaining $63,172. 

 

We reviewed public vouchers TAC submitted, and found that the $63,172 in ineligible costs resulted from inflated indirect cost rates billed by TAC. TAC openly reported the cost rates it was billing; USGS inadvertently approved and paid the vouchers, even though the rates exceeded those listed in the contract. TAC admitted that it improperly calculated the rates and offered to reimburse the contract for $63,172.