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FSA's Controls Over Its Contract Closeout Process

OIG evaluated FSA’s and FPAC-BC’s administration and oversight of the contract closeout process.

Audit Report: 03601-0003-41
Published: 03/27/2020
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Fast Facts


The Farm Service Agency’s (FSA) mission is to equitably serve all farmers, ranchers, and agricultural partners through the delivery of effective, efficient agricultural programs for all Americans. With 50 state offices and 2,124 county offices, including offices in U.S. territories, FSA administers farm programs and farm loans to farmers and ranchers across the country. To accomplish its mission, FSA contracts for products and services to support its overall management of these programs. In fiscal years (FY) 2016–2018, FSA obligated over $508 million for various product and support services, such as information technology, aerial photography, and other management support services.

In May 2017, the Department of Agriculture (USDA) established a new mission area called Farm Production and Conservation (FPAC). The purpose of the new mission area was to make FPAC the Department’s focal point for the Nation’s farmers, ranchers, and other stewards of private agricultural lands and non-industrial private forest lands. Three USDA agencies were realigned under the FPAC mission area: FSA, the Risk Management Agency, and the Natural Resources Conservation Service. To accomplish FPAC’s overall mission, USDA established a business center within FPAC (FPAC-BC) to carry out the consolidated administrative functions for the three agencies. The administrative functions consolidated within FPAC-BC for the three agencies included acquisition management. FPAC-BC became operational in October 2018, at which time FSA transferred responsibility for most of its contracts, along with the staff that administered them, to FPAC-BC.

Federal agencies must ensure that all awarded contracts comply with the contracting regulations outlined in the Federal Acquisition Regulation (FAR). The FAR identifies the four phases of the contracting process as:
1. preaward;
2. award;
3. contract administration; and
4. contract closeout.

For service contracts, contract closeout occurs when the contractor has completed the required contracting actions and the Government has accepted all services. The FAR requires contracting officers to ensure all contract actions are completed and to verify that the file is ready for closeout.

Contracting officers are responsible for overseeing the contract closeout process with assistance from the contracting officer representative (COR) or technical representative. The contracting officer must ensure applicable reports are completed and request that the contractor submit required closeout documents for the contract. If Government property was furnished under the contract, contracting officers must coordinate with the COR to verify the contractor’s inventory of Government property is accurate and ensure that the contractor properly disposes of the property. Contracting officers must also ensure the contractor is paid for all work performed and that any outstanding balances the contractor owes the Government are collected in a timely manner. Lastly, contracting officers must ensure that the contract is closed out properly, contract files are retained for storage for the required period, and the contractor’s performance evaluation is finalized in the Contractor Performance Assessment Reporting System (CPARS), if applicable.

As part of the contract closeout process, the contracting officer must also determine if any remaining funds on the contract, which were not used, should be deobligated. Deobligated funds regain availability following cancellation and may be reobligated within the period of the appropriation’s availability. The contracting officer should review the contract to see if any unliquidated funds remain under the contract or order and confirm that the contractor is paid for all accepted work. If a determination is made to deobligate the funds, the contracting officer must promptly issue a deobligation modification to remove the funds from the contract.


Our objective was to evaluate FSA’s administration and oversight of the contract closeout process. Specifically, our objective was to determine whether FSA had adequate controls in place to ensure service contracts were timely and correctly closed out and funds were properly deobligated.

We subsequently expanded the scope of our audit to include FPAC-BC, which assumed responsibility for most of FSA’s contracts in October 2018. Since FPAC-BC is now responsible for the contracts, all recommendations in this report will be addressed to FPAC-BC.