Equitable Adjustment Claimed by Bannum, Inc., for Federal Bureau of Prisons Community Corrections Center Contracts

Report No. GR-60-05-002
November 2004
Office of the Inspector General

Executive Summary

The Office of the Inspector General, Audit Division, has completed an audit of equitable adjustments claimed by Bannum, Inc. (Bannum), totaling $801,559 for 16 Federal Bureau of Prisons (BOP) contracts. The contracts were for the provision of residential Community Corrections Center (CCC) services for federal offenders. The purpose of our audit was to determine the allowability and accuracy of all costs included in Bannum's equitable adjustment claims and verify that costs were supported by adequate documentation.

Our audit was conducted at the request of the BOP. The BOP requested that we review Bannum's equitable adjustment claims for specific performance periods. There is a pending lawsuit related to Bannum's equitable adjustment claims for prior performance periods that were audited by the Defense Contract Audit Agency and were not included in our audit. The scope of our audit included the following contracts for the specified periods:

  1. Beaumont, Texas - Contract No. J200c-336 (November 1, 2000, through April 30, 2003);

  2. Charleston, West Virginia - Contract No. J200c-343 (November 1, 2000, through April 30, 2003);

  3. Clarksburg, West Virginia - Contract No. J200c-338 (October 15, 2000, through January 31, 2003);

  4. Corpus Christi, Texas - Contract No. J200c-361 (February 1, 2001, through May 31, 2003);

  5. Fayetteville, North Carolina - Contract No. J200c-332 (September 1, 2000, through August 31, 2002);

  6. Florence, South Carolina - Contract No. J200c-370 (February 1, 2001, through May 31, 2003);

  7. Greensboro, North Carolina - Contract No. J200c-377 (March 1, 2001, through October 31, 2003);

  8. Jackson, Mississippi - Contract No. J200c-325 (August 1, 2000, through July 31, 2002);

  9. Laredo, Texas - Contract No. J200c-375 (January 1, 2001, through July 31, 2003);

  10. Laredo, Texas - Contract No. J200c-433 (December 1, 2001, through December 31, 2002);

  11. Montgomery, Alabama - Contract No. J200c-397 (October 1, 2000, through September 30, 2001);

  12. Reno, Nevada - Contract No. J200c-365 (November 1, 2000, through April 30, 2003);

  13. Savannah, Georgia - Contract No. J200c-310 (June 1, 2000, through November 30, 2003);

  14. Tallahassee, Florida - Contract No. J200c-376 (September 15, 2000, through March 14, 2004);

  15. Tupelo, Mississippi - Contract No. J200c-306 (April 1, 2001, through September 30, 2003);

  16. Wilmington, North Carolina - Contract No. J200c-373 (April 7, 2001, through April 30, 2003).

Based on our review of Bannum's payroll transactions supporting its equitable adjustment claims totaling $801,559, we found that Bannum may be entitled to $779,379. However, we identified costs included in Bannum's claim that were not allowable resulting in funds to better use of $22,180. Specifically, we found that:

  • The hours reported by Bannum in support of increased wages (including sick, vacation, holiday, and overtime), health and welfare and the associated Federal Insurance Contributions Act (FICA), Worker's Compensation Insurance, Federal Unemployment Tax Act (FUTA), and State Unemployment Tax Act (SUTA) were not always calculated correctly or were not supported by the payroll check register.

  • Incorrect rates were used to calculate some of Bannum's increased costs for health and welfare, Worker's Compensation Insurance, and SUTA.

These audit results are described in detail in the Findings and Recommendations section of this report. Our audit objectives, scope and methodology appear Appendix I of this report.