Federal Deposit Insurance Corporation
Office of Inspector General
Federal Deposit Insurance Corporation - Office of Inspector General

Payments to Pragmatics, Inc.

Monday, December 10, 2018

Payments to Pragmatics, Inc.

The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) issued an audit report involving information technology (IT) application support services that a contractor, Pragmatics, Inc., and an associated subcontractor provided to the FDIC.  The FDIC relies extensively on contractors to maintain its portfolio of IT applications.  These IT applications support mission-critical functions, such as the supervision of insured financial institutions and the resolution of failed financial institutions.  Between May 2013 and March 2018, the FDIC spent nearly $192 million on IT application support services.  As of March 1, 2018, the FDIC had awarded seven task orders to Pragmatics, Inc.  for such services, valued at $18.5 million.  

The audit was conducted in response to a complaint received through the OIG Hotline.  The complainant alleged that an employee working for a subcontractor of Pragmatics, Inc. billed the FDIC for labor hours that the employee did not actually work.  The complainant also alleged that Pragmatics and one of its subcontractors may have inappropriately billed contractor employee labor hours.  

The objective of our audit was to determine whether certain labor charges paid to Pragmatics were adequately supported, allowable under the contract, and allocable to their respective task orders.  

We questioned costs of approximately $47,500 (about 10 percent of the labor charges we reviewed), because they were either not adequately supported or unallowable:

• About $7,500 was unsupported because the employees who billed the hours did not access the FDIC’s network or facilities on the days they charged the hours, and the nature of the work required access to the FDIC’s network. 

• The remaining amount of approximately $40,000 was unallowable because the work was performed off site (away from FDIC facilities).  The FDIC’s contract with Pragmatics required the contractor to perform all work at the FDIC’s facilities, absent a site visit and approval by the FDIC to perform the work at an alternate location.  

All of the labor charges we reviewed were properly allocated to their respective task orders.  

Our report notes that FDIC personnel did not maintain documentation regarding the outcome of a site visit (July 2013), including whether the FDIC had approved Pragmatics personnel to work at the off-site location.  Further, the FDIC did not identify the place of performance for services in the associated task orders.    

We recommended that the FDIC determine the portion of the nearly $47,500 in unsupported or unallowable costs that should be disallowed and recovered; determine whether other labor charges billed by Pragmatics are unsupported and should be disallowed and recovered; document the results of the Pragmatics site visit and remind contracting personnel of the requirement to document such visits; and ensure that all contracts for IT application support services identify the place of performance.  The FDIC expects to complete actions to address all seven of our recommendations by March 29, 2019.

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