Rule2022-23275
Defense Federal Acquisition Regulation Supplement: Requirement for Firms Used To Support Department of Defense Audits (DFARS Case 2019-D010)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 28, 2022
Effective
October 28, 2022
Issuing agencies
Defense DepartmentDefense Acquisition Regulations System
Abstract
DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2019, as amended by a section of the National Defense Authorization Act for Fiscal Year 2020, that requires accounting firms that provide financial statement auditing or audit remediation services in support of the Financial Improvement and Audit Remediation Plan to provide to DoD a statement setting forth the details of any disciplinary proceedings with respect to the accounting firm or its associated persons before any entity with the authority to enforce compliance with rules or laws applying to audit services offered by the accounting firm. DoD policy extends this requirement to firms other than accounting firms.
Full Text
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[Federal Register Volume 87, Number 208 (Friday, October 28, 2022)]
[Rules and Regulations]
[Pages 65500-65502]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-23275]
[[Page 65499]]
Vol. 87
Friday,
No. 208
October 28, 2022
Part IV
Department of Defense
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Defense Acquisition Regulations System
48 CFR Parts 212, 237, and 252
Defense Federal Acquisition Regulation Supplement: Requirement for
Firms Used To Support Department of Defense Audits (DFARS Case 2019-
D010); Final Rule; Quick-Closeout Procedures Threshold (DFARS Case
2021-D001); Undefinitized Contract Actions (DFARS Case 2021-D003):
Proposed Rule
Federal Register / Vol. 87, No. 208 / Friday, October 28, 2022 /
Rules and Regulations
[[Page 65500]]
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DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 237, and 252
[Docket DARS-2021-0021]
RIN 0750-AK47
Defense Federal Acquisition Regulation Supplement: Requirement
for Firms Used To Support Department of Defense Audits (DFARS Case
2019-D010)
AGENCY: Defense Acquisition Regulations System, Department of Defense
(DoD).
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to implement a section of the
National Defense Authorization Act for Fiscal Year 2019, as amended by
a section of the National Defense Authorization Act for Fiscal Year
2020, that requires accounting firms that provide financial statement
auditing or audit remediation services in support of the Financial
Improvement and Audit Remediation Plan to provide to DoD a statement
setting forth the details of any disciplinary proceedings with respect
to the accounting firm or its associated persons before any entity with
the authority to enforce compliance with rules or laws applying to
audit services offered by the accounting firm. DoD policy extends this
requirement to firms other than accounting firms.
DATES: Effective October 28, 2022.
FOR FURTHER INFORMATION CONTACT: Mr. David E. Johnson, telephone 202-
913-5764.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 86 FR
59947 on October 29, 2021, to implement section 1006 of the National
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L.
115-232), as amended by section 1011 of the NDAA for FY 2020 (Pub. L.
116-92). Section 1006 applies to accounting firms that provide
financial statement auditing to DoD in support of the audit under 31
U.S.C. 3521 or audit remediation services in support of the Financial
Improvement and Audit Remediation Plan described in 10 U.S.C. 240b.
Such firms, when responding to a solicitation or awarded a contract for
the acquisition of covered services, must disclose to DoD before any
contract action (including award, renewals, and amendments) the details
of any disciplinary proceedings with respect to the accounting firm or
its associated persons before any entity with the authority to enforce
compliance with rules or laws applying to audit services offered by the
accounting firm. DoD, as a matter of policy to provide a level playing
field between firms that provide audit services to support certain DoD
audits, is extending this requirement to firms other than accounting
firms that provide such services. Section 1011 amended section 1006 to
require any disclosures to be treated as confidential to the extent
required by the court or agency in which the proceeding occurred and to
be treated in a manner consistent with any protections or privileges
established by any other provision of Federal Law.
There were no public comments submitted in response to the proposed
rule. There are no changes made to the final rule.
II. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Services and Commercial Products,
Including Commercially Available Off-the-Shelf (COTS) Items
Consistent with the determinations that DoD made with regard to
application of the requirements of section 1006 of the NDAA for FY
2019, as amended by section 1011 of the NDAA for FY 2020, DoD is not
applying the requirements of section 1006 of the NDAA for FY 2019 to
contracts at or below the SAT; however, DoD is applying the rule to
contracts for the acquisition of commercial items, excluding COTS
items.
III. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is not a significant regulatory action and, therefore, was not
subject to review under section 6(b) of E.O. 12866, Regulatory Planning
and Review, dated September 30, 1993.
IV. Congressional Review Act
As required by the Congressional Review Act (5 U.S.C. 801-808)
before an interim or final rule takes effect, DoD will submit a copy of
the interim or final rule with the form, Submission of Federal Rules
under the Congressional Review Act, to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States. A
major rule under the Congressional Review Act cannot take effect until
60 days after it is published in the Federal Register. The Office of
Information and Regulatory Affairs has determined that this rule is not
a major rule as defined by 5 U.S.C. 804.
V. Regulatory Flexibility Act
A final regulatory flexibility analysis (FRFA) has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.
The FRFA is summarized as follows:
This final rule is necessary to implement section 1006 of the
National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019, as
amended by section 1011 of the NDAA for FY 2020, and DoD policy.
Section 1006 applies to accounting firms that provide financial
statement auditing to DoD in support of the audit under 31 U.S.C. 3521
or audit remediation services in support of the Financial Improvement
and Audit Remediation Plan described in 10 U.S.C. 240b. Such firms,
when responding to a solicitation or awarded a contract for the
acquisition of covered services, must disclose to DoD before any
contract action (including award, renewals, and amendments) the details
of any disciplinary proceedings with respect to the accounting firm or
its associated persons before any entity with the authority to enforce
compliance with rules or laws applying to audit services offered by the
accounting firm. DoD policy extends this requirement to firms other
than accounting firms, in order to provide a level playing field in
competitive acquisitions.
DoD received no public comments in response to the initial
regulatory flexibility analysis in the proposed rule.
DoD estimates there are 12 respondents that submit offers and 10
respondents that receive award of a contract covered by this rule. Of
the estimated 12 respondents, DoD further estimates that only two of
these respondents are small entities.
This rule adds a provision and a clause that require reporting
details of any disciplinary proceedings with respect to the firm or its
associated persons before any contract action on a covered contract in
support of certain DoD audits. There are no other reporting or
recordkeeping requirements.
There are no significant alternatives that would meet the intent of
the
[[Page 65501]]
statutes. The rule could be applied to only accounting firms, but that
would not be fair to accounting firms competing against other than
accounting firms. Applying the rule to other than accounting firms does
not create a significant burden for small entities.
VI. Paperwork Reduction Act
This rule contains information collection requirements that have
been approved by the Office of Management and Budget under the
Paperwork Reduction Act (44 U.S.C. chapter 35). This information
collection requirement has been assigned OMB Control Number 0750-0006,
entitled Defense Federal Acquisition Regulation Supplement (DFARS) Part
237 Clauses 252.237-7025 and 252.237-7026.
List of Subjects in 48 CFR Parts 212, 237, and 252
Government procurement.
Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 237, and 252 are amended as follows:
0
1. The authority citation for parts 212, 237, and 252 continues to read
as follows:
Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 212.301 by adding paragraphs (f)(xiv)(C) and (D) to
read as follows:
212.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
* * * * *
(f) * * *
(xiv) * * *
(C) Use the provision at 252.237-7025, Preaward Transparency
Requirements for Firms Offering to Support Department of Defense
Audits--Representation and Disclosure, as prescribed in 237.270(e)(3),
to comply with section 1006 of the National Defense Authorization Act
for Fiscal Year 2019 (Pub. L. 115-232) and section 1011 of the National
Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116-92).
(D) Use the clause at 252.237-7026, Postaward Transparency
Requirements for Firms that Support Department of Defense Audits, as
prescribed in 237.270(e)(4), to comply with section 1006 of the
National Defense Authorization Act for Fiscal Year 2019 (Pub. L. 115-
232) and section 1011 of the National Defense Authorization Act for
Fiscal Year 2020 (Pub. L. 116-92).
* * * * *
PART 237--SERVICE CONTRACTING
0
3. Amend section 237.270 by--
0
a. Redesignating paragraph (d) as paragraph (e);
0
b. Adding a new paragraph (d); and
0
c. Adding paragraphs (e)(3) and (4).
The additions read as follows:
237.270 Acquisition of audit services.
* * * * *
(d) Transparency requirement for firms used to support DoD audits.
(1) This paragraph (d) implements the requirements of section 1006
of the National Defense Authorization Act for Fiscal Year 2019 (Pub. L.
115-232) and section 1011 of the National Defense Authorization Act for
Fiscal Year 2020 (Pub. L. 116-92) for transparency of accounting firms
used to support DoD audits; and extends the statutory requirement, as a
matter of DoD policy, to firms other than accounting firms in order to
ensure consistent availability of data for contracting officer
evaluation and appropriate use.
(2) This requirement applies to solicitations and contracts for--
(i) Financial statement auditing required under 31 U.S.C. 3521(e);
or
(ii) Audit remediation services in support of the Financial
Improvement and Audit Remediation Plan described in 10 U.S.C. 240b.
(3) Any firm responding to a solicitation or awarded a contract for
the acquisition of the services described in paragraph (d)(2) of this
section is required to represent with regard to whether it has been
subject to disciplinary proceedings within the last 3 years and, if the
offeror represents that it has, to disclose to DoD before any contract
action (including award, renewals, and modifications)--
(i) The details of any disciplinary proceedings, with respect to
the firm or its associated persons (including principals and
employees), before an entity with the authority to enforce compliance
with rules or laws applying to audit services or audit remediation
services offered by accounting firms or firms other than accounting
firms; and
(ii) For subsequent contract actions after contract award, whether
there has been any change with regard to previously reported
disciplinary proceedings since the last contract action.
(e) * * *
(3) Use the provision at 252.237-7025, Preaward Transparency
Requirements for Firms Offering to Support Department of Defense
Audits--Representation and Disclosure, in solicitations, including
solicitations using FAR part 12 procedures for the acquisition of
commercial items, that include the clause at 252.237-7026, Postaward
Transparency Requirements for Firms that Support Department of Defense
Audits.
(4) Use the clause at 252.237-7026, Postaward Transparency
Requirements for Firms that Support Department of Defense Audits, in
solicitations and contracts, including solicitations and contracts
using FAR part 12 procedures for the acquisition of commercial items,
that--
(i) Exceed the simplified acquisition threshold; and
(ii) Are for the acquisition of financial statement auditing or
audit remediation services as described in paragraph (d)(2) of this
section.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
252.237-7000 [Amended]
0
4. Amend section 252.237-7000 introductory text by removing
``237.270(d)(1)'' and adding ``237.270(e)(1)'' in its place.
252.237-7001 [Amended]
0
5. Amend section 252.237-7001 introductory text by removing
``237.270(d)(2)'' and adding ``237.270(e)(2)'' in its place.
0
6. Add section 252.237-7025 to read as follows:
252.237-7025 Preaward Transparency Requirements for Firms Offering to
Support Department of Defense Audits--Representation and Disclosure.
As prescribed in 237.270(e)(3), use the following provision:
Preaward Transparency Requirements For Firms Offering To Support
Department of Defense Audits--Representation and Disclosure (OCT 2022)
(a) Representation. The Offeror represents that within the 3-
year period preceding this offer, the Offeror and/or any of its
principals or employees have [ ] have not [ ] been the subject of
disciplinary proceedings before an entity with the authority to
enforce compliance with rules or laws applying to audit services or
audit remediation services offered by the Offeror, that--
(1) Are not yet fully adjudicated or settled; or
(2) Were fully adjudicated or settled against the Offeror and/or
its principals or employees.
(b) Disclosure. If the Offeror checked ``have'' in the
representation in paragraph (a) of this provision, the Offeror
shall, at a minimum, disclose for each such proceeding--
[[Page 65502]]
(1) The entity hearing the case;
(2) The case or file number; and
(3) The allegation or conduct at issue and, if fully adjudicated
or settled, a brief description of the outcome.
(c) Treatment of the statements. The Government will safeguard
and treat as confidential all statements provided pursuant to this
provision where the statement has been marked ``confidential'' or
``proprietary'' by the Offeror. Statements so marked will not be
released by the Government to the public pursuant to a request under
the Freedom of Information Act, 5 U.S.C. 552, without prior
notification to the Offeror and opportunity for the Offeror to claim
an exemption from release. The Government will treat any statement
provided pursuant to this provision as confidential to the extent
required by any other applicable law.
(End of provision)
0
7. Add section 252. 237-7026 to read as follows:
252.237-7026 Postaward Transparency Requirements for Firms that
Support Department of Defense Audits.
As prescribed in 237.270(e)(4), use the following clause:
Postaward Transparency Requirements for Firms That Support Department
of Defense Audits (OCT 2022)
(a) Prior to each contract action under this contract (including
renewal or modification), the Contractor shall disclose the details
of any disciplinary proceedings, with respect to the firm and/or its
principals or employees, before an entity with the authority to
enforce compliance with rules or laws applying to audit services or
audit remediation services offered by the Contractor, and whether
there has been any change with regard to previously reported
proceedings since the last contract action.
(b) The disclosure shall, at a minimum, include--
(1) The entity hearing the case;
(2) The case or file number; and
(3) A brief description of the allegation or conduct at issue
and, if fully adjudicated or settled, a brief description of the
outcome.
(c) The Government will safeguard and treat as confidential all
statements provided pursuant to this clause where the statement has
been marked ``confidential'' or ``proprietary'' by the Contractor.
Statements so marked will not be released by the Government to the
public pursuant to a request under the Freedom of Information Act, 5
U.S.C. 552, without prior notification to the Contractor and
opportunity for the Contractor to claim an exemption from release.
The Government will treat any statement provided pursuant to this
clause as confidential to the extent required by any other
applicable law.
(End of clause)
[FR Doc. 2022-23275 Filed 10-27-22; 8:45 am]
BILLING CODE 5001-06ep-P
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