On March 24, 2014 the ‘OFCCP’ made effective numerous regulations relative to protected veterans and individuals with disabilities which are having effect on FDIC insured Bank’s with 50 or more employees, regardless of employment status. The ‘OFCCP’ has established rules which require specific clauses to be included in any new or renewal federal government contract with an effective date of March 24, 2014 or later. Guidance reveals as banks are insured by the FDIC, which is a government entity, banks in turn, must comply with the new requirements as Bank’s are considered a federal government contractor of the FDIC.
To satisfy the protected veteran requirement, new contracts or contracts renewed after March 24, 2014, must include a clause stating, “This contractor and subcontractor shall abide by the requirements of 41 CFR 60-300.5(a). This regulation prohibits discrimination against qualified protected veterans, and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified protected veterans.’
To satisfy the individuals with disability requirement, new contracts or contracts renewed after March 24, 2014, must also include a clause stating, “This contractor and subcontractor shall abide by the requirements of 41 CFR 60-741.5(a). This regulation prohibits discrimination against qualified individuals on the basis of disability, and requires affirmative action by covered prime contractors and subcontractors to employ and advance in employment qualified individuals with disabilities.’
This contract language requirement only pertains to contracts or subcontracts for certain dollar amounts or higher which the Bank has engaged with a vendor. The ‘OFCCP’ defines ‘subcontracts’ as agreements between the Bank and suppliers or service providers, which is generally almost any vendor which provides ongoing support services to a Bank or maintains any real personal property for the Bank, such as a building lease. Again, this only applies to FDIC insured banks with 50 or more employees, regardless of employment status. To satisfy the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) requirement, any contract or subcontract new or renewed after March 24, 2014 in the amount of $100,000 or above, must include the agreement clause specified about to satisfy the protected veteran requirement. To satisfy the Section 503, Individuals with Disability requirement, any contract or subcontract new or renewed after March 24, 2014, in the amount of $10,000 or above, must include the agreement clause specified above to satisfy the individuals with disability requirement.
Based on discussions and personal experience, this will place a good amount of stress on the vendor management responsible employees at banks, as this will require a review of each contract, new or renewed to ensure the appropriate language is included in relevant agreements. As banks engage with numerous vendors, this is anticipated to become a time consuming, but necessary task to ensure compliance with the Office of Federal Contract Compliance Programs.
To ensure compliance with this regulatory change, banks may consider reviewing vendor contracts to determine which third party vendors should include such clause in their agreement with the Bank, whether it be a newly signed contract with an effective date of March 24, 2014 or addendum to a current contract being renewed after this date. It should be noted it is the responsibility of banks to ensure such contracts include the required language, however banks are not responsible for ensuring third party vendors are complying with such contract language. From a regulatory review perspective, it has been advised that regulators are reviewing certain aspects of the ‘OFCCP’ regulatory updates as part of its’ Safety and Soundness Examination to satisfy FDIC obligations of federal government contracting. For further assistance on this recent regulatory update, please visit the Department of Labor Frequently Asked Questions webpage at: http://www.dol.gov/ofccp/regs/compliance/faqs/juristn.htm#Q1 and refer to the following FAQ: ‘Is a financial institution that is covered by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA) with deposit insurance subject to the Affirmative Actions Program (AAP) requirements under Executive Order 11246, as amended, the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), as amended, 38 U.S.C. 4212 and Section 503 of the Rehabilitation Act of 1973 (Section 503), as amended?’
Deposit, Operations and Branch Audit Team Leader
Mr. Burns leads the Deposit and Operations Audit Team and Branch Audit Team at P&G Associates, performing detailed and in depth audit procedures relative to these areas. He has obtained a wide range of audit, financial and banking compliance experience, including extensive knowledge experience in all aspects of operations and compliance at community financial institutions.