Federal False Claims Act by Jamestown Electric
Look at the uploaded picture from the book, then follow these instructions:
1) Post a 1 – 2 paragraph response to exercise 24 (a)
2) Analyze and post a response to a classmate’s post to 24(b)
Classmate’s post to 24(b):
The main issues in this case revolve around a possible infringement of the Federal False Claims Act by Jamestown Electric. Specifically, the accounting issues involve determining whether or not there have been overcharges for power services to the government agency. Other issues in this case include determination of appropriate costing in the contract, reasonable timing of costs and revenues under the contract, and the necessary accounting procedures and policies that should apply. The potential damages for this case are the losses that the government agency has experienced from overpayments of power services to Jamestown. The estimated monetary damages would be based on the difference of what the agency was overcharged based on what the necessary charge should have been. The potential damages would also include the alleged profits earned by Great Plains. It was stated that Great Plains had earned a profit of $1.2 million per year over the life of the contract, earning roughly 40% of this profit from sales to Jamestown. If the allegation does in fact turn out to be fraud, this would mean that the profits earned by Great Plains were therefore valued incorrectly and would have a direct impact on the monetary damages that the government agency has experienced.
As the forensic accountant, I would request to see several documents for this case. First, I would want to obtain a copy of the official contract with the government agency. The contract states that power will be “provided at the lowest reasonable cost without compromising safety.” A review of this contract would be necessary in determining if there was an appropriate cost/price model included to support this statement. I would also want to obtain information regarding the cost of the coal and the pricing that it is being sold to Jamestown for. The pricing of the power services that are offered to the government agency would need to be determined as being appropriate based on the original cost of the coal, and the price that Jamestown is buying it for. Other documents that I would want to acquire would be the income statements of both Jamestown and Great Plains. This would be necessary to analyze the costs and revenues of each company, and therefore compute the associated damages. The ultimate basis for the opinion depends on whether or not Jamestown can prove that the power was being provided at a price that would otherwise compromise safety if it were lowered. The determination for this should be impacted by the quality of coal that they are being supplied with, and the relative pricing that follows.