Modis, Inc.

We performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Modis, Inc. (Modis) for contract-to-hire services within TVA's Technology and Innovation organization under Contract No. 16781. Modis was to provide recruiting, staff augmentation, and hiring services to supplement TVA's standard hiring processes in preparation for increased hiring. The contract provided for TVA to compensate Modis for its labor and related indirect costs by (1) reimbursing straight time and overtime wages paid in accordance with a schedule of defined job classifications and corresponding wage ranges and (2) payment of fixed salary burden rates (markups) for the recovery of payroll taxes, payroll-related insurance, fringe benefits, overhead, general and administrative costs, and profit. In addition, the contract provided TVA would pay a conversion fee if TVA converted a Modis recruited employee to full-time TVA employment within the first six months of their assignment.Our audit objective was to determine if costs were billed in accordance with the terms of the contract. Our audit scope included about $11.56 million in costs billed to TVA from January 31, 2022, through November 6, 2023.In summary, we determined:- Modis overbilled TVA $18,000 for an ineligible conversion fee.- Although the contract provided for TVA to reimburse Modis' actual labor costs plus a fixed markup, wage ranges and fixed labor markup rates were never established in the contract. Instead, Modis billed hourly labor rates that were not based on the contract's compensation provisions. As a result, TVA personnel approving invoices from Modis had no basis for validating the appropriateness of the rates that were billed.Based on limited pay rate information we reviewed, we determined the markups Modis included in its billing rates were substantially higher than markups TVA is paying under similar staff augmentation labor contracts. Based on this comparison, we estimated TVA paid between $1.6 million and $3.1 million more to Modis than it would have if actual wages and fixed markups similar to other staff augmentation contracts had been used for this contract.(Summary Only)