On July 21, 2023, Booz Allen agreed to settle the U.S. Department of Justice’s (DOJ) civil investigation into highly technical elements of the company’s government cost accounting and indirect cost charging practices, covering the time period of 2011 through 2021, for $377.5 million. Booz Allen has always believed it acted lawfully and responsibly in this matter, and the settlement contained no admission of wrongdoing. The claims resolved by this settlement were allegations only. There was no determination of any liability.
Here are the key facts of the investigation and settlement:
- In 2011, Booz Allen re-entered the global commercial market. Every year, the company discloses its cost accounting practices and rates, including the treatment of costs associated with its commercial activity, to the government.
- The government has granted Booz Allen provisional approval to bill according to these disclosures each year, including the period in question, subject to customary annual incurred cost audits, which serve as annual reconciliations conducted by the Defense Contract Management Agency (DCMA) and Defense Contract Audit Agency (DCAA).
- At the time, the government was several years behind in its audits across industry. These audits, which optimally occur one to two years after rates are submitted, are the forum where any issue the government has with a specific charge or accounting practice likely would have been raised and resolved.
- Prior to the commencement of the DOJ investigation in 2017, Booz Allen’s incurred cost audits for the years covering its re-entry into the global commercial market had not been completed. Therefore, the company had not received any indication that the government had concerns with these practices it had disclosed beginning in 2011.
- The U.S. government is Booz Allen’s largest and most important client. From the onset, government officials were aware of Booz Allen’s commercial and international work, often encouraged the company to do this work, and recognized the positive impact on their missions.
- Years later, an employee supporting the company’s finance team raised questions about the company’s disclosed government cost accounting and indirect cost charging practices, specifically regarding cost allocation related to its work that supported commercial and international contracts.
- Booz Allen promptly facilitated meetings for the employee with its financial, compliance, and accounting teams, as well as external finance and legal experts, to hear and consider her concerns. Over the next year, these experts repeatedly affirmed that the company’s practices were lawful and compliant.
- In August 2016, the employee left the company and subsequently filed a sealed lawsuit under the False Claims Act, alleging that the company falsely claimed that the government should pay certain costs. The company did not receive the sealed lawsuit from the government until May 2023.
- In June 2017, the DOJ informed the company that it had opened criminal and civil investigations—which the company later learned stemmed from allegations the former employee made in her sealed lawsuit—into the company’s indirect cost accounting practices, specifically how it allocated costs between its commercial and government clients, covering the time period of 2011 through 2021.
- For the next six years, Booz Allen fully cooperated with the government to reach a resolution, turning over gigabytes of documents and other information, and providing access to numerous experts on the topic, all of whom validated the company’s methodology and stated that it had acted correctly.
- The DOJ’s investigations further froze the customary auditing process with DCMA and DCAA, creating a decade-long audit backlog, forestalling the ability to raise and resolve issues through the normal course audit process, and forcing whatever the company typically would have owed during that process to accumulate.
- In November 2017, the Securities and Exchange Commission (SEC) notified the company of an inquiry related to the matters the DOJ was investigating.
- In May 2021, the DOJ closed its criminal investigation without taking action, thereby resolving the core allegations in the sealed lawsuit.
- The civil investigation continued for another two years, with the company continuing to cooperate fully with the DOJ to reach a resolution.
- In July 2023, the company reached a settlement with the government to end the remaining civil investigation. As the DOJ stated in its announcement, the claims the settlement resolved are allegations only and there has been no determination of civil liability. The settlement covers ten years, from 2011 through 2021.
- The company settled the civil investigation for pragmatic business reasons to avoid the delay, uncertainty, and expense of protracted litigation. The company did not want to engage in what likely would have been a years-long court fight with its largest client, the U.S. government, on an immensely complex matter.
- Within days of the settlement, the SEC informed the company that it had closed its inquiry without any action.
- The company continues to work with its regulators at the DCMA and DCAA and it appreciates and respects the important role of these agencies in the industry.
- Booz Allen is proud of its legacy of positive impact to government missions stretching back to World War II. Booz Allen’s work strengthens how the government serves the American public—keeping the nation safe and helping it solve the most critical and complex global challenges.
