1. National Property Management Association Lost Reports Barbara A. Finnegan, CPPM CF 1

2. National Property Management Association Lost Report Agenda A.Why Lost Reports B.Requirements C.Preparation Lost/LTTD Reports D.Question and Answers 2

3. National Property Management Association Lost Report The presentation will cover the Contractual and Federal Acquisition Requirements regarding Lost (Lost Theft, Damage, Destruction (LTDD)) reports and the minimum required elements for a complete and accurate report. The discussion will also address Corporate/institutional requirements for reporting losses to be compliance with Sarbanes Oxley therefore have complete and accurate set of financials. 3

4. National Property Management Association Lost Reports Contractors have a contractual and corporate requirement to report losses, damages, theft or destruction to government and company property. The Contractual requirements involve the following contract clauses: FAR 52.245-1 Government Property 2007-2011 (vi) “The contractor shall have a process to create and provide reports of discrepancies; loss, theft damage or destruction; physical inventory results; audits and self-assessments; corrective actions; and other property related reports as directed by the Contract Officer.” ( A) “Loss, theft damage or destruction. Unless other wise directed by the Contractor shall investigate and promptly furnish a written narrative of the all incidents of loss, theft, damage or destruction to the property administrator as soon as the facts become know or when requested by the government.” (B) The reports shall at a minimum contain the following information: Nomenclature; date of incident, costs cause and corrective action. 4

5. National Property Management Association Lost Reports FAR 52.245-1 Government Property April 2012 (a) Definitions New “Loss of government property” – “ means unintended, unforeseen or accidental loss, damage or destruction to Government property that reduces the government’s expected economic benefits of the property. Loss of Government property does not include purposeful destructive testing, obsolescence, normal war and tear or manufacturing defects. Loss of Government property includes, but is not limited to— (1) items that cannot be found after a reasonable search; (2) Damage resulting in unexpected harm to property requiring repair to restore the item to usable condition; or (3) Destruction resulting from incidents that render the item unless for its intended purpose or beyond economical repair” 5

6. National Property Management Association Lost Reports FAR 52.245-1 Government Property April 2012 (vi)“Reports- “The contractor shall have a process to create and provide reports of discrepancies, loss of government property, physical inventory results, audits and self-assessments, corrective actions, and other property-related reports as directed by the Contracting Officer” (vii)“Relief of stewardship responsibility and liability. The Contractor shall have a process to enable the prompt recongnition, investigation, disclosure and reporting of loss of Government property, including losses that occur at subcontractor or alternate site locations.” (A)“This process shall include the corrective actions necessary to prevent recurrence.” (B)“Unless otherwise directed by the Property Administrator, the Contractor shall investigate and report to the Government all incidents of property loss as soon as the facts become known. Such reports shall, at a minimum, contained the following information nomenclature; date of incident, costs cause and corrective action.” 6

7. National Property Management Association Lost Reports 7 FAR 52.245-1 Government Property April 2012 (vii) (C) “Unless the contract provides otherwise, the Contractor shall be relieved of stewardship responsibility and liability for property when- (1)Such property is consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract, including reasonable inventory adjustments of material as determined by the property Administrator; (2)Property administrator grants relief of responsibility and liability for loss of Government property (3)Property is delivered or shipped from the contractor’s plant, under Government instructions, except when shipment is to a subcontractor or other location of the Contractor, or (4)Property is disposed of in accordance with paragraphs (j) and (k) of this clause “ (j) Contractor Inventory Schedules (k) Abandonment of Government property”

8. National Property Management Association 8 Lost Reports DFAR 252.245-7002 Reporting Loss of Government property Feb 2011 (a) Definitions- Government Property Reference FAR 52,245-1 Definitions Loss of Government Property Reference 52.245-1 Definitions (b) “Reporting Loss of Government property *(1) Use the DCMA eTools software application for reporting losses (2) Unless other wise provided for in this contract, the requirements of Do not apply to normal and reasonable inventory adjustments. i.e., losses of low-risk consumable material such as common hardware, as agreed to by the contractor and the Government Property Administrator. Such losses are typically a product of normal process variation. The contractor shall ensure that its property management system provides adequate management control measures, e.g., statistical process controls, as a means of managing such variation” * Or as your GPA/Industrial Property Specialist Directs

9. National Property Management Association 9 Lost Reports DFAR 252.245-7002 Reporting Los of Government property Feb 2011 (b) “Reporting Loss of Government property (3) “The Contractor shall report losses of Government property outside normal process variation, e.g. losses due to-” (i) Theft; (ii) Inadequate storage; (iii) Lack of physical security; or (iv) “Acts of God” (4) This reporting requirement does not change any liability provisions or other reporting requirements that may exist under this contract

10. National Property Management Association Lost Reports 10 Each of the property clauses state that other reporting requirements that may exist under this contract which overrule the property clause. The following clauses especially in a Fixed Priced Contracting provide method of payments which consider financing by the Government therefore with each payment the Government has vested title in contractor acquired property and the Contractor has full Liability. Remember the contract rules Fixed Price Environment: FAR 52.232-32 Performance Based Payments (f) Title – “Title to the property described in this paragraph (f) shall vest in the Government. Vestiture shall be immediately upon the date of the first performance-based payment under this contract, for property acquired or produced before that date.” (g) Risk of Loss- “Before delivery to and acceptance by the Government, the contract shall bear the risk of loss for property, the tile to which vest in the Government under this, except to the extent Government expressly assumes the risk.”

11. National Property Management Association Lost Reports 11 Fixed Price Environment: FAR 52.232-16 Progress Based Payments (d) Title – “Tile to the property described in this paragraph (f) shall vest in the Government. Vestiture shall be immediately upon the date of the first performance-based payment under this contract, for property acquired or produced before that date.” (e) Risk of Loss- Before delivery to and acceptance by the Government, the contract shall bear the risk of loss for property, the tile to which vest in the Government under this, except to the extent Government expressly assumes the risk.”

12. National Property Management Association Lost Reports The contractor shall report all loses of Government Property while in their possession or control Report all cases of Loss as soon as it be comes know at the Prime and Subcontractor level. If during a system analysis the Property Administrator discovers the following Unreasonable consumption Unreported Loss or damage The property administrator may prepare a statement and present it to the contractors for investigation or allow the contractor to correct the issue at the time of the analysis. 12

13. National Property Management Association Lost Reports Types of Lost Reports: 1. Report Results of Inventories in accordance with 52.245-1 (f) (iv) Physical Inventory. 2. Report of theft 3. Damage 4. Destruction 13

14. National Property Management Association Lost Reports 1.Physical Inventory Lost Report a. Will include a listing that identifies all discrepancies, acquisition cost and cost of replacements if required. b. Shall include statement that physical inventory of all or certain classes of government property was completed on a given date and that the official property records were found to be in agreement except for the discrepancies c.Statement of root cause and c.Corrective Action 14

15. National Property Management Association Lost Reports 2. Theft Report a. Will include a listing that identifies all missing items including Acquisition Cost and replacement cost. b. Security and/or Police report; c.Statement of root cause, and d. Corrective Action 15

16. National Property Management Association Lost Reports 3. Damage/Destruction Report a. Will include a listing that identifies all Damaged or destroyed items; b. Acquistion, Repair or Replace costs; c. Statement of root cause, and d. Corrective Action accompanied by supporting documentation 16

17. National Property Management Association Lost Reports 52.245-1 (f) (vii) (B) Elements of a Lost Report All Lost Reports will include the following elements at a minimum: 1.The Date of the Report and Incident 2.Contract Name and Number 3.Description of the Loss and circumstances 4.Description of the property a.Name b.Part, Serial, and Tag number as appropriate c.Cost of the property or d.Unreasonable consumption or e.Cost of repairs in instances of damage (use reasonable) 5.Date, time (if pertinent), cause or origin of loss or consumption 6.State if the lost property is in part or whole 7.Report if there is any insurance that covers the property or part of the property 17

18. National Property Management Association Lost Reports Elements of a Lost Report -continued 8.Provide a statement on the actions taken to find, save or repair property 9.Provide a statement of the route of the incident 10.Provide a statement of corrective action and actions to prevent future loses and prevent repeat of similar instances. 11.Include facts or circumstance relevant to the determination of liability and responsibility for repair or replacement. Prepare Contract Letter to report loss to be accompanied by the Lost Report and supporting documentation. The Property administrator or customer representative will investigate the incident to the degree required to reach a valid and supportable conclusion as to (1) the contractor’s liability for the loss, damage, destruction, or unreasonable consumption under the terms of the contract, and (2) the course of action required to conclude the adjustment action. 18

19. National Property Management Association Lost Reports Corporations, Institutions, Organizations etc. all have Policies and procedures that govern the control and management of company property. These polices and procedures are based on Cost Account, Voluntary Consensus Standards, Industry Best Practices and requirements of Sarbanes Oxley. The methods for reporting loss, damage, destruction or theft of company property is basically the same as reporting Government property. The difference is the reports go to Finance or internal audit for investigation and review. Upon completion of review and investigation the records are updated. 19

20. National Property Management Association Lost Reports If the government property administrator (GPA) concludes that the contractor should be liable for the loss, damage, destruction or unreasonable consumption of government property, the administrator shall forwarded the complete file with his or her conclusions and recommendations to he contracting officer for review and determination along with supporting documentation.shall The Contracting Officer will issue a contracts letter with their determination supported by the appropriate documentation. 20

21. National Property Management Association Quetsions 21