2018_CCC_FS_Part_8_SSJ_Redacted.pdf

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

FAR Part 8.405-6 (a)(1)(i)(c) In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule order provided that the original order was placed in accordance with the applicable Federal Supply Schedule ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures.

Content: FY2018 Commodity Credit Corporation Financial Statement Audit

1. Identification of the agency and the contracting activity

Agency Office of Budget and Finance Sherry Laws, Chief Accountant

USDA/FSA/OBF/FMD

355 E Street SW, WDC

Contracting Activity:

Acquisition Management Division Jeremiah Keenan, Conracting Officer

USDA/FSA/AMD

355 E Street SW, 12th Floor Washington, DC 20024

2. The nature and/or description of the action being approved.

To acquire KPMG services beginning March 1, 2018 (period of performance 3/1/2018 – 12/31/2018), in the amount of of FFP Labor and for travel costs) to conduct a single year, full scope financial audit of the U.S. Department of Agriculture’s (USDA) Commodity Credit Corporation’s (CCC) Consolidated financial statements as of and for the fiscal year (FY) ended September 30, 2018, to include the auditor reports on the: Principal statements and related footnote disclosures, significant deficiencies related to internal controls, and compliance with laws, regulations, and Government-wide policy requirements.

3. A description of the supplies or services required to meet the agency’s needs (including the total estimated value).

CCC a wholly-owned Government corporation, created by Congress in 1933, helps;

stabilize, support, and protect farm income and prices; maintain balanced and adequate supplies of agricultural commodities, including foods, feeds, and fibers; and aid in their orderly distribution. CCC activities and programs are administered through approximately 2120 Farm Service Agency (FSA) field offices, State Offices, FSA Headquarters located in Washington, D.C., Financial Operation Center in

Kansas City, Kansas City Commodity Operations (KCCO), and other farm associations. CCC also administers export sales and domestic farm programs and carries out much of the Public Law (P.L.) 480 program.

From FY 2002 to 2014, CCC received unqualified/unmodified opinions on its consolidated financial statements. However, in FY 2015 the contract auditors issued a disclaimer of opinion on CCC's consolidated financial statements, finding that CCC was unable to provide adequate evidential matter in support of a significant number of transactions and account balances, as presented in the CCC consolidated financial statements as of and for the year ended September 30, 2015, due to inadequate processes and controls to support transactions and estimates, inadequate records to support the accounting for transactions in accordance with generally accepted accounting principles and financial management systems limitations. KPMG reported that the financial statement line items impacted by the lack of evidential matter included, but were not limited to, recoveries of prior year unpaid obligations, spending authority, obligations incurred, direct loans and loan guarantees, accrued liabilities, deposit and trust liabilities, resources payable to Treasury, environmental and disposal liabilities, other liabilities, and gross costs.

In FY 2016 CCC management determined the best course of action was to focus on its Balance Sheet in an effort to remediate the issues noted in the previous year’s audit. Management began extensive efforts to address its internal control weaknesses. In FY 2016 CCC received an unmodified opinion on Consolidated Balance Sheet as of September 30, 2016. In FY 2017 CCC planned to move to a full scope audit, however encountered challenges that resulted in a change in scope to a Balance Sheet only audit. In FY 2017 CCC again received an unmodified opinion on the Consolidated Balance Sheet as of September 30, 2017.

However, KPMG continued to identify deficiencies in financial reporting.

Specifically, KPMG identified weaknesses in CCC accounting for budgetary transactions and accounting estimates. KPMG considered both of these deficiencies to be material weaknesses. Additionally, KPMG’s tests disclosed instances of noncompliance with FFMIA.

Services required to perform a full scope financial statement audit of the Commodity Credit Corporation for fiscal year 2018 at FSA offices at a total cost of These services require that an audit be performed on Commodity Credit Corporation’s (CCC) financial statements as of and for the fiscal year ended September 30, 2018. This will allow CCC to meet the requirements of an annual financial statement audit as prescribed by the Office of Management and Budget (OMB) Bulletin 17-03, Audit Requirements of Federal Financial Statements.

4. The statutory authority permitting other than full and open competition.

The statutory authority permitting other than full and open competition is 41 U.S.C.253(c)(1)(or 10 USC 2304(c) (1)) as implemented by the Federal Acquisition Regulation (FAR) Part 8.405-6 (a)(1)(i)(c)- In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply

Schedule order provided that the original order was placed in accordance with the applicable Federal Supply Schedule ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures.

5. A demonstration that the proposed contractor’s unique qualifications or the nature of the action require use of the authority cited.

KPMG has been providing audit support for the past three years and their contract was scheduled to continue for two more option years. This contract was not exercised in time and as a result, KPMG was unable to finish the work they had started. At this time, they have all of the needed information for the FY18 audit and passing this information to another vendor is not realistically feasible given the internal processes that were done to gather the information. Additionally, based on the size and complexity of CCC programs and its recent audit history KPMG is uniquely qualified to provide these services to CCC based upon the following:

a. In addition to KPMG being a well-established audit firm that has successfully performed federal financial statement audits for USDA agencies for over 10 years, they have specifically performed CCC’s financial statement audit for the past three years and as a result have gained essential institutional knowledge of CCC, its programs and its operations. In addition, KPMG is extensively knowledgeable of the accounting challenges CCC has faced and the corrective actions CCC has taken to correct its weaknesses thus far. KPMG’s team includes specialists in credit reform, accounting and cash flow valuations, which are imperative to the review of CCC’s complex credit reform program.

KPMG has also gone through thorough time intensive background checks and have obtained the necessary security clearances required to perform this work.

b. The Government Corporation Control Act requires the annual preparation and audit of wholly owned Government corporations. Additionally, agencies are required to submit their final financial statements, including audit results to OMB, GAO and the Congress, by November 15th of each year. KPMG is uniquely positioned based on their extensive experience performing CCC’s financial statements to help CCC meet these mandatory requirements.

6. A description of efforts to ensure that offers were solicited from as many potential sources as is practicable, including whether a notice was or will be publicized as required by Subpart 5.2 and, if not, which exception under 5.202 applies.

The intent is to issue a follow-on contract to continue the support that had been planned over the option year that was not exercised, as described in section 5.

After this period, the USDA will issue a full and open solicitation for continued audit support.

7. A determination by the contracting officer that the anticipated cost (including the cost of options) to the Government will be fair and reasonable.

This award will be made against the contractor’s GSA Federal Schedule contract. As stated in FAR 8.404, Use of Federal Supply Schedules, (d) Pricing, GSA has already determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, under schedule contracts to be fair and reasonable. Ordering activities are not required to make a separate determination of fair and reasonable pricing.

This acquisition represents best value since it provides the greatest overall benefit in response to the requirement and results in the lowest overall cost alternative considering price, special features, administrative costs, etc., to meet the Government's needs.

8. A description of the market research conducted (per FAR Part 10) and the results or a statement of the reason market research was not conducted.

Market research was done for the initial award. This award is issued as a follow-on to complete the work that was started. For future audit support after this contract action, market research and a full and open solicitation will be issued.

9. Any other facts supporting the use of other than full and open competition, such as:

None.

10. A listing of any sources that expressed a written interest in the acquisition.

None.

11. A statement of the actions, if any, the agency may take to remove or overcome any barriers to competition, before any subsequent acquisition for the supplies or services are required.

This is a follow-on contract and full and open solicitation will be issued for future audit support. This will remove barriers to competition.

Certification

Requisitioner:

I certify that the facts and representations under my cognizance, which are included in this justification and which form a basis for this justification, are complete and accurate.

Sherry Laws Date Signature

Contracting Officer:

I certify that this justification is accurate and complete to the best of my knowledge and belief.

Jeremiah Keenan Date Signature

Head of Contract Activity

I have reviewed this justification and find it to be accurate and complete to the best of my knowledge and belief.

Steve Peterson Date

FSA HCA