Small Business Conference San Diego Regional Innovation Cluster February 25, 2014

Transcription

1 Small Business Conference San Diego Regional Innovation Cluster February 25, 2014 The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations

2 Agenda 8:00-8:05 Introductions - Lou Kelly, Chairman, SDRIC 8:05-8:45 Meet the DCAA Managers - Ron Reichel, DCAA Senior Financial Liaison Advisor, Camp Pendleton 8:45-9:45 DCAA Pre-award Accounting System Audits - Chiho Ly, Senior Auditor, San Diego Branch Office 9:45-10:00 Break 10:00-11:00 DCAA Provisional Billing Rates/Public Vouchers Crystal Arnote, Auditor, San Diego Branch Office Coral Schuster, Senior Auditor, San Diego Branch Office 11:00-11:55 DCAA Incurred Cost Submissions - John Doherty, Regional Audit Manager, Western Region Office 11:55-12:00 Wrap Up - Lou Kelly, Chairman, SDRIC

3 DCAA Organization Meet the Managers Overview DCAA Initiatives/Changes Affecting Small Business DCAA Internet Resources/Tools Elevating Concerns Subject Matter Presentations

4 Department of Defense (DoD) Organization Secretary of Defense Deputy Sec of Defense Department of Army Department of Navy Department of Air Force Under Secretary (A T & L) Under Secretary (Comptroller) Inspector General Procurement Procurement Procurement DCMA DCAA

5 Defense Contract Audit Agency Approximately 5,000 employees located at over 300 offices throughout the United States and overseas Responsibilities and Duties: Perform all needed contract audits for DoD Provide accounting and financial advisory services to DoD (and civilian when requested) acquisition and contract administration components during all contract phases: Pre-award Contract execution Settlement (contract closing)

6 Internal Review Angela Janysek DCAA Organization Director Patrick Fitzgerald Deputy Director Anita Bales Executive Officer Joe Garcia General Counsel Defense Legal Service Susan Chadick Assistant Director, Operations Tom Peters Assistant Director, Policy & Plans Don McKenzie Assistant Director, Resources Philip Anderson Assistant Director, Integrity & Quality Assurance Gary Spjut Headquarters Regions Central Region Vacant Martha McKune Eastern Region David Johnson Vacant Northeastern Region Ron Meldonian William Adie Mid-Atlantic Region Ken Saccoccia Chris Andrezze Western Region Donald Mullinax Steve Hernandez Field Detachment Karen Cash Terry Schneider

7 Financial Liaison Advisor DCAA's FLAs are auditing professionals assigned to buying commands and are DCAA's principal point of contact at the commands. The FLA's duties range from expediting advisory audit reports to on-thespot consultation on complex financial and accounting matter related to contract costs.

8 San Diego Audit Management Trish Lee - Regional Audit Manager (RAM) Western Region Office Linda Jung - Branch Manager San Diego Branch Office Terry Allen Supervisory Auditor San Diego Branch Office

9 San Diego Audit Management John Doherty Regional Audit Manager Western Region Office Incurred Cost Dave Hazlett Branch Manager San Diego North Incurred Cost Branch Elizabeth Reynaga Branch Manager San Diego South Incurred Cost Branch David Ortiz Supervisory Auditor San Diego South Incurred Cost Branch

10 DCAA Initiatives/Changes Affecting Small Business DFARS threshold changes for proposal audits (DFARS PGI (c)) Pre-award financial condition & forward pricing rates transferred to DCMA Incurred cost backlog initiative Dedicated audit teams Low risk sampling SF1408 Checklist implementation

11 DCAA Initiatives/Changes Affecting Small Business Small Business Outreach Initiative Website presentations for small business Website tools (Checklists, ICE, Etc.) Coordination w/ small business contacts at major buying commands (FLAs) Participation in seminars/workshops NDIA/SBTC joint DCAA/DCMA committee meetings quarterly to discuss small business issues

12 DCAA Initiatives/Changes Affecting Small Business Small Business Outreach Initiative (cont.) Mandatory auditor small business audit training to Include: Background on importance of small business General guidance when beginning audit of small business Communicating with small business Auditing small business focus on differences between large and small business

13 Small Business Focal Point The small business focal point advises the Agency Director on policy issues related to small business concerns, serves as the primary point of contact and source of information, and collects and monitors relevant data regarding the Agency's conduct of audits. The small business focal point's duties are segregated from ongoing audits in the field or any activities that could compromise the independence of the Agency or undermine compliance with applicable audit standards. Headquarters, Defense Contract Audit Agency Attn: Operations, Small Business Focal Point 8725 John J. Kingman Road, Suite 2135 Fort Belvoir, VA Chief, Operations Audit Liaison (937) or DCAA-

14 DCAA Internet Resources Audit Process Overview Information for Contractors Manual DCAA Pre-award Accounting System Checklist DCAA Contract Proposal Adequacy Checklist DCAA Forward Pricing Rate Adequacy Checklist DCAA Incurred Cost Adequacy Checklist Incurred Cost Electronically (ICE) Model EZ-Quant - Suite of three statistical applications Links to Acquisition Regulations

15 Additional DCAA Internet Resources Small Business Presentations: Accounting System Requirements Real-time Labor Evaluations Incurred Cost Submissions Contract Briefs Provisional Billing Rates Public Vouchers Monitoring Subcontracts

16 Elevating Concerns If you cannot resolve disagreement or misunderstanding of auditor findings with the auditor and wish to elevate your concerns, we strongly encourage that you do so through the DCAA chain of command. First, the supervisor Branch Manager Regional Audit Manager Regional Director

17 Elevating Concerns SB focal point cannot change results or direct the audit offices to do anything. Focal point will refer the issue to the Regions for resolution with contractor. Director will not change results - Regional Directors have oversight of the Regions. So resolve concerns at lowest level possible Then the ACO is the deciding official.

18 DCAA Audits Through Various Phases of a Pre-Award Contract Throughout Contract Life Contract Completed Accounting System Estimating System Proposal Review - Labor Rates - Indirect Rates - Materials - ODC Annual Incurred Cost Reviews Real Time Labor Provisional Billing Rates Progress Payments Vouchers Accounting System Contract Closing

19 Contact Information DoD Office of Small Business Programs DCAA

20 Preaward Accounting System Audits SDRIC Conference February 25, 2014 The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations 20

21 Overview Purpose of the Preaward Accounting System Audit Preaudit Activity SF 1408 Step-by-Step Exit Conference Common Deficiencies DCAA Tools for Contractor Use Questions and Answers

22 Purpose of the Preaward Accounting System Audit Prior to the award of a Government contract, FAR Part requires prospective contractors to have: adequate financial resources adequate accounting system

23 Purpose of the Preaward Accounting System Audit (cont.) An examination before contract award requested by the Procuring Contracting Officer (PCO) or cognizant Administrative Contracting Officer (ACO) Gain an understanding of the design of the prospective accounting system DCAA will complete a SF 1408

24 Purpose of the Preaward Accounting System Audit (cont.) Based on our audit, DCAA will opine as to whether or not the design of the accounting system is suitable for the award of a prospective contract in accordance with FAR (f), Standard Form 1408 (SF 1408), Preaward Survey of Prospective Contractor Accounting System

25 Preaudit Activity DCAA or Buying Command will request contractor complete Accounting System Checklist

26 Preaudit Activity (cont.) Important because: You will become aware of the requirements of an acceptable accounting system You are prepared for the audit Faster turn around Less rework by contractor and auditor Quicker contract award

27 Preaudit Activity (cont.) Contractor should be prepared to demonstrate how accounting system satisfies SF 1408 criteria at the walkthrough

28 Preaudit Activity (cont.) DCAA will request contractor Policies and Procedures DCAA will request information to complete an Internal Control Questionnaire (ICQ)

29 SF 1408 Step-by-Step

30 1. Generally Accepted Accounting Principles Accrual basis accounting system? General ledger (G/L) to post costs to? Ability to generate financial reports?

31 2.a. Proper Segregation of Direct Costs from Indirect Costs Policies and Procedures Chart of Accounts Demonstrate entering a direct cost and an indirect cost into accounting system

32 2.b. Identification and Accumulation of Direct Costs by Contract Will request: Profit & Loss (P&L) by Job, Contract, Delivery Order or Contract Line Item Number (CLIN) Chart of Accounts Contractor s proposal

33 2.c. Allocation of Indirect Costs Contractor proposal Indirect rate sheets Documented bases and pools Written Policies and Procedures

34 2.d. Accumulation of Costs under G/L Control Can the P&L by Job reconcile to the G/L control accounts? How often are costs posted to the G/L? Policies and Procedures

35 2.e. Timekeeping System Policies and Procedures Timekeeping document (paper or electronic timecards) Timecards completed and certified by the employees Timecards approved by the employees supervisors. When are timesheets filled out Reconcilable labor cost distribution records Who monitors the timekeeping system and how often

36 2.f. Labor Distribution System Policies and Procedures Labor Distribution Payroll Register Labor Distribution P&L by Job Who Monitors and How Often

37 2.g. Interim Determination of Costs What is the process for posting costs? Responsible personnel Frequency

38 2.h. Unallowable Costs Policies and Procedures What is an unallowable cost FAR Part How will unallowable costs be identified AND excluded Who and how often will unallowable costs be monitored Chart of Accounts which identifies unallowable accounts

39 2.i. Costs by Contract Line Item Contractor s proposal Who creates new jobs in the system How is the level of contract information communicated to the person creating the new job in the system

40 2.j. Segregation of Preproduction Costs from Production Costs Policies and Procedures Chart of Accounts with unique preproduction project numbers Can costs be accumulated for a specific timespan

41 3.a. Limitation of Costs Policies and Procedures Proposal s rate calculation sheet Procedure for contract briefs Billing template Who and how often are total contract expenditures monitored against contract limitations

42 3.b. Billings Policies and Procedures Invoice example with current and cumulative amounts How will invoice reconcile to the P&L by Job or G/L by cost elements Timing of vendor and subcontractor payments

43 Exit Conference Results of Audit Yes Yes, with a recommendation that a follow on accounting review be performed after contract award No

44 Common Deficiencies Narrative on the Accounting System Checklist Incomplete or uses simple definitions without the how (who, what, when) No written pool and base descriptions Excel timecards which are changeable, unsigned, and uncertified

45 Common Deficiencies (cont.) Not routinely posting to books of account (at least monthly) Lack of process to monitor Lack of understanding of what is unallowable FAR Part

46 Common Deficiencies (cont.) Billing the Government for cost when payment to subcontractor or vendor will NOT be made in accordance with terms and conditions of the subcontract or invoice and ordinarily within 30 days of the contractor s payment request to the Government. No process to brief contracts

47 Common Deficiencies (cont.) Chart of Accounts with numbers only and no account description Invoices do not show both current and cumulative amounts Unable to create P&L at level of detail required by RFP

48 DCAA Tools for Contractors SF 1408 Preaward Checklist Information for Contractors FAR Part Unallowables Preaward Accounting Audit Program Contract Audit Manual (CAM)

49 DCAA Public Website

50 What NOT to Do!

51 DCAA Public Website

52 DCAA Public Website

53 DCAA Public Website

54 Participant Questions How to schedule a preaward audit? What is the cost of a preaward audit? How long does the preaward audit last? My company did not receive a pre-audit verification even though we paid an accounting firm a great deal of money.

55 Participant Questions If a small business has not been tasked does the audit expire? Is providing payroll data to DCAA related to a proposal count as an audit? We just won our Seaport-e IDIQ contract. Does DCAA plan on auditing our accounting system?

56 Participant Questions The current pre-award accounting system audit covers 12 of the 18 criteria for a business system audit as required by DFARS (c). When can a covered contractor expect to have a DCAA audit the remaining 6 criteria? With all the new auditors, will DCAA enhance its training?

57 Provisional Billing Rates and Public Vouchers SDRIC Conference February 25, 2014 The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations

58 Overview Provisional Billing Rates (PBRs) Procedures for Establishing PBRs When & What to Submit DCAA Review Monitoring Public Vouchers Contractor Responsibilities Wide Area Workflow (WAWF) Common Deficiencies Frequently Asked Questions 58

59 Provisional Billing Rates 59

60 Establishing Billing Rates FAR (b) The contracting officer (or cognizant Federal agency official) or auditor shall establish billing rates on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities. In establishing billing rates, the contracting officer (or cognizant Federal agency official) or auditor should ensure that the billing rates are as close as possible to the final indirect cost rates anticipated for the contractor s fiscal period, as adjusted for any unallowable costs. When the contracting officer (or cognizant Federal agency official) or auditor determines that the dollar value of contracts requiring use of billing rates does not warrant submission of a detailed billing rate proposal, the billing rates may be established by making appropriate adjustments from the prior year s indirect cost experience to eliminate unallowable and nonrecurring costs and to reflect new or changed conditions. 60

61 Purpose of PBRs Used for interim billing during the contractor s fiscal year Established to approximate the contractor s final yearend rates Billings should be reconcilable to the cost accounts for both current and cumulative amounts claimed and comply with contract terms Note: PBRs are ONLY for use in provisional billing. They are NOT for use in bidding/forward pricing or final indirect rates. 61

62 Reasons for Contractor Submission Contractors are STRONGLY encouraged to submit a billing rate proposal to assist the responsible official in establishing rates Opportunity to present and explain expected changes Note: Vouchers and progress payments may be REJECTED if submitted without using properly established billing rates 62

63 When to Submit? PBRs should be submitted at least annually PRIOR to the BEGINNING of contractor fiscal year AND When established billing rates no longer represent expected final year end rates due to unforeseen events/circumstances Note: The PBR submissions should represent the contractor s entire fiscal year 63

64 What Should Be Provided? Letter stating the proposed rates and period covered Proposed billing rate calculations (Pool and Base) with brief rationale Prior fiscal year (FY) pool and base Current FY to date pool and base Pool and base projection for remainder of current FY Upcoming FY budget pool and base, if available Comparative analysis with explanation of any significant differences 64

65 DCAA Review DCAA may perform the following procedures: Compare proposed pool and base to prior year and year-to-date pool and bases Compare proposed pool/base/rates to those submitted on incurred cost submission Review trend of questioned costs in relevant incurred cost audits and consider an adjustment for unallowable expenses in calculating current year provisional billing rates 65

66 Contractor Self-Monitoring Periodically throughout the year Throughout the year Immediately after year-end Upon submission of the final indirect rate proposal PBRs may be adjusted by either party at any time to prevent substantial under or over payment FAR (c). If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly 66

67 Adjustment Submit a letter with new rates, an explanation as to what caused the change, and with supporting data If DCAA/DCMA has NOT issued a memo: Begin using the new rates immediately If DCAA/DCMA HAS issued a memo: Continue using the rates as listed on the memo unless you receive a new memo from DCAA/DCMA Please contact your cognizant office if you have concerns NOTE: If PBRs are adjusted, use the new rate on the current year cumulative expenses 67

68 Common Deficiencies Waiting until completion of the final indirect rate proposal to submit proposed PBR Unable to support proposed significant rate changes Delayed response to DCAA information requests 68

69 Common Deficiencies Consistent over/under estimations Using PBR as proposal rates for potential contracts Not using correct PBRs on vouchers If a contract outlines a set of maximum indirect rates a PBR MUST still be established 69

70 Common Deficiencies Failure to remove unallowable costs from the billing rate projections Failure to adjust provisional billing rates based on actual experience: Before year end, if there are known or reasonably anticipated significant variances After year end once actual rates, net of unallowable expenses, are calculated 70

71 Public Vouchers 71

72 Overview Cost type contracts provide for interim payments for costs on a cost voucher. DCAA will perform voucher reviews based on risk. Fixed price contracts are subject to FAR Part 32 financing methods (progress payments). 72

73 Contractor Responsibilities Contact cognizant DCAA office after contract award Ensure DCAA has the necessary information to process contract billings current provisional billing rates copy of contract brief (include special contract provisions) Maintain adequate billing system internal controls Maintain adequate support for amounts billed Submit timely incurred cost proposals and final vouchers in accordance with FAR

74 Adequate Billing System Adequate accounting system Established billing rates with timely adjustments to reflect year end allowable costs Vouchers must be based on established billing rates Contracts are briefed by contractor to ensure vouchers accurately reflect special cost limitations and other contract restrictions 74

75 Adequate Billing System Interim vouchers prepared directly from cost accounting records Adequate incurred cost proposals are submitted timely Maintains a Cumulative Allowable Costs by Contract worksheet Final vouchers submitted in accordance with FAR

76 Preparation of Vouchers Contractor is responsible for preparing and submitting claims for reimbursement according to the terms of the contract Vouchers should not be submitted more than once every two weeks Public voucher claims for reimbursement must be submitted via Wide Area Workflow (WAWF): First voucher on a contract is an interim voucher, as are all subsequent vouchers prior to the final voucher Final voucher will not be submitted until all contract work is completed 76

77 Wide Area Workflow (WAWF) DFARS REQUIRES the use of WAWF as the primary system for submission and processing of payment requests. 77

78 Wide Area Workflow (WAWF) Includes a voucher sampling approach that replaces the direct bill program DFARS gives DCAA authority to: Approve interim vouchers selected using sampling methodology for provisional payment and forward to the disbursing office ALL provisionally approved interim vouchers are subject to a later audit of actual costs incurred Review final vouchers and send to the Administrative Contracting Officer (ACO) 78

79 Submission of Interim Vouchers Vouchers must be prepared and submitted in accordance with the terms of the contract, including any special billing/payment instructions All vouchers should be submitted in WAWF unless contract terms require submission of hard copy vouchers Guidance/training for completing cost vouchers can be found on the WAWF website: In WAWF, the Cost Voucher is the equivalent of the SF 1034 Data equivalent to the SF 1035 must be included in an electronic file and uploaded to WAWF 79

80 Submission of Interim Vouchers Required information and examples can be found in DCAA Manual , Information for Contractors, pages at: Required information includes: Contract Number and Delivery/Task Order Contract Costs and Fixed Fee Identify Fee Withholding Threshold 80

81 Submission of Interim Vouchers Required information includes (cont.): Current and Cumulative Costs Billed Breakdown by Major Cost Element (i.e., Labor, Materials, Overhead) Fee Earned And Due Total Claimed Amount Adjustments (i.e., Withheld Fee, Excess Costs Incurred) Total Voucher Amount 81

82 Submission of Adjusting Vouchers Adjusting voucher: Addresses changes to billing rates during or after year-end Can be on a separate voucher or combined with interim voucher 82

83 Submission of Final Vouchers Last voucher to be submitted on a contract A separate completion voucher will be submitted for each individual project or task order for which a separate series of public vouchers has been submitted In accordance with FAR (d)(5). 83

84 Common Deficiencies Billing to incorrect DODAAC Math errors Billed costs not allowed per the contract terms (e.g., overtime) Not billing in accordance with contract terms: Fixed-fee Funding & Cost Ceilings 84

85 Common Deficiencies Incorrect provisional billing rates (indirect costs) Billing rates not adjusted to year-end actual rates Inability to provide sufficient supporting documents in a timely manner 85

86 Frequently Asked Questions Question: How do I know what DCAA office is my cognizant office? Response: Visit search by CAGE Code, DUNS Code, or ZIP Code. 86

87 Frequently Asked Questions Question: Do I submit the Provisional Billing Rate Proposal to the ACO or DCAA Office? Response: FAR states the office responsible for final indirect cost rates also establishes provisional billing rates 87

88 Frequently Asked Questions Question: Can I just use the most recent FY end rates for provisional billing purposes? Response: No 88

89 Frequently Asked Questions Question: Once provisional billing rates are established with DCAA or the ACO, do I need to submit proposed changes based on new information? Response: Yes 89

90 Frequently Asked Questions Question: Is there any general guidance for how a contractor should be inputting information into WAWF? Response: Yes wawfra/vendor/documentcreate.xhtml 90

91 Frequently Asked Questions Question: When information is incorrect on a voucher, can the contractor recall/correct the voucher or does a new voucher have to be submitted? Response: Contractors cannot correct the following fields on submitted vouchers: contract number, delivery order number, Cage Code, document type, shipment number/date, and voucher number/date. Recalling or Resubmitting Invoices Quick Reference guide: mit.pdf 91

92 Participant Questions What is the process a new contractor should follow to obtain DCAA approved PBRs? What marketing/business development activities are allowed in the rate computation? 92

93 Participant Questions How does the progress invoice type work in WAWF? How does the MOCAS information sharing work? How do I submit the portion of the invoice that was not accommodated for in the original submission? 93

94 Resources Information regarding WAWF is available on the Internet at Additional Information and Links: WAWF Training & Practice: Help guides: DFAS (To check invoice payment status): myinvoice: Information for Contractors Manual (Enclosure 5): 94

95 Incurred Cost Submissions SDRIC Conference February 25, 2014 The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations

96 Incurred Cost Submissions Due Dates of Submissions Delinquent Submissions Adequacy Review Audit Requirements Required Submission Schedules ICE Model Penalties Frequently Asked Questions 96

97 Due Dates of Submissions Incurred cost claims are due six months after completion of the contractor s fiscal year end. Per the Allowable Cost and Payment Clause (FAR (d)(2)) Allowable cost and payment clause applies to cost-reimbursement type contracts (FAR ) 97

98 Delinquent Submissions If submissions are six months delinquent, DCAA will recommend a decrement factor and for the CO to make a unilateral determination. (FAR (c)(2)) 98

99 Incurred Cost Adequacy Review We check for the schedules listed FAR (d)(2)(iii) Any missing or unreconcilable schedule could cause us to report the submission as inadequate. Recommend self-assessment 99

100 Audit Requirements FAR (d) Requires contractors to maintain records and supporting documentation to demonstrate allowability and allocability of costs. FAR also requires specific documentation to demonstrate the allowability of certain cost elements 100

101 Examples of Specific Documentation Under FAR FAR , Professional and Consultant Service Costs, requires the following evidential matter: Details of all agreements (e.g., work requirements, rate of compensation, and nature and amount of other expenses, if any) with the individuals or organizations providing the services and details of actual services performed; Invoices or billings submitted by consultants, including sufficient detail as to the time expended and nature of the actual services provided; and Consultants work products and related documents, such as trip reports indicating persons visited and subjects discussed, minutes of meetings, and collateral memoranda and reports. 101

102 Examples of Specific Documentation Under FAR FAR , Travel Costs indicates costs shall be allowable only if the following information is documented: Date and place (city, town, or other similar designation) of the expenses; Purpose of the trip; and Name of person on trip and that person s title or relationship to the contractor 102

103 ICE MODEL ICE is an EXCEL spreadsheet that provides contractors with a standard user-friendly electronic package to assist in preparing timely and adequate incurred cost submissions. It should result in less time being spent in: Submission preparation. Supporting the audit. 103

104 ICE BENEFITS User Friendly It includes all schedules required for an adequate submission per FAR Updates are performed electronically and the linking feature updates all impacted schedules. ICE creates an inventory of electronic files that can be used in subsequent years to compare costs and facilitate submission preparation. The submission of an adequate proposal may expedite contract closings. 104

105 Required Information in Incurred Cost Submission FAR (d)(2)(iii) (referenced to ICE model) Schedule A Summary of Indirect Expense Rates Schedule B, C, D Indirect Cost Pools Schedule E Claimed Allocation Bases Schedule F Cost of Money Schedule G Booked and Claimed Direct Costs Schedule H Direct Costs by Contract at Claimed Rates Schedule H-1 Government Participation by Pool Schedule I Cumulative Allowable Cost Worksheet Schedule J Subcontract Information Schedule K Hours and Amounts on T&M Contracts Schedule L Payroll Reconciliation Schedule M Accounting/Organization Changes Schedule N Certificate of Indirect Costs Schedule O Contract Closing Information 105

106 Schedule A Summary of Indirect Expense Rates 1 0 6

107 Schedule B, C, D Indirect Cost Pools

108 Schedule E Claimed Allocation Bases PER G/L, F/S PER G/L Overhead & TRIAL BAL/FSADJUSTMENTS CLAIMED Overhead Pool $ 543,522 $ (32,912) $ 510,610 Overhead Base: Total Contract Labor $ 633,012 $ 633,012 IR&D Labor 14,287 14,287 B&P Labor 9,525 9,525 Total Overhead Base $ 656,824 $ - $ 656,824 Overhead Rate 82.75% 77.74% Overhead Base* - Straight time direct labor dollars of all contracts and projects including labor costs of IR&D/B&P projects. PER G/L, F/S PER G/L & TRIAL BAL/FSADJUSTMENTS CLAIMED G&A Pool $ 280,502 $ (9,479) $ 271,023 G & A Base: Contract Labor $ 633,012 Contract Travel 34,563 Contract Material 842,981 Other Direct Costs 172,105 Subcontracts 944,841 Subtotal = DIRECT COSTS $ 2,627,502 General Ledger Overhead (before adjustments) 543,522 Less: IR&D/B&P O/H transferred to G & A pool. IR &D O/H (at G/L rate) (11,822) B&P O/H (at G/L rate) (7,882) Other Misc Adjustments to G&A Base (provide detailed support) - G&A Base - Total Cost Input (exludes IR&D/B&P and COM) $ 3,151,320 G&A Rate 8.60% 108

109 Schedule F Facilities Cost of Money Computing COM Rate: Treasury Rate Mos. COM Rate Apr - Jun % % Jul - Dec % % Jan - Mar % % 5.157% Months percentage added for demonstration purposes - adjust as needed NBV BASES 1. Applicable 2. Accumulation 3. Allocation of 4. Total Net 5. COM for Cost 6. Allocation 7. Facilities Company 1 Cost of Money & Distribution of Undistributed Book Value Accounting Base For Capital COM Cost Accounting Period 20xx Rate NBV Period Period Factors Recorded 5.16% 69,761 (Basis Of Allocation)(Column 2+3) (Column 1*4) In units (Column 5/6) Business Leased Property 162,290 of measure Unit Corporate/Group (Note 1) Facilities Total 232,051 Capital Undistributed 193,290 Distributed 38,761 Overhead Cost of Money Overhead 30, , ,507 10, , Pools Unused Unused Unused Unused Unused LESS: COM on IR&D/B&P Labor: Cost of Money Overhead (371) (23,812) Unused Unused Unused Unused Unused Subtotal 9,866 G&A G & A 8,416 25,128 33,544 1,730 Expense Pools ADD: COM on IR&D/B&P Labor 371 Subtotal: 2,101 3,151, TOTAL 38, , ,051 11,967 Note 1 Allocation Bases (Refer to Schedule E for details) Overhead COM: Straight time direct labor dollars of all contracts and projects including labor costs of IR&D/B&P projects. G&A COM: Total cost input (excluding G&A, B&P, and Cost of Money) 109

110 Schedule G Booked and Claimed Direct Costs 110

111 Schedule H Direct Costs by Contract at Claimed Rates Total Claimed Direct G&A Claimed O/H G & A JOB Prime SUBCONTRACT Labor Total Sub- Direct O/H Costs Plus Base G &A Total COM COM Total Grand ORDER CONTRACT NUMBER NUMBER O/H Labor Travel Material ODC Contracts Costs O/H O/H (TCI) Applied Costs Applied Applied COM Total A. COST TYPE(no entry on title line) 1201 N C Claimed 122, ,113 5, ,068 43,630 87, ,954 94, , ,885 40, ,209 1, , ,427 Not Claimed (note 1) - 1,687 3,183 4,870-4,870 4, , , N C ,387 16, ,212 15,341 34,088 12,739 46,827 46,827 4,027 50, , Subcontract-Clark Inc. 8,973 8, , ,888 27,267 6,976 34,243 34,243 2,945 37,188 (Note 2) (Note 2) - 37,188 A. TOTAL COST TYPE: 147, ,473 7, ,067 48, , , , , ,825 47, ,540 2, , ,047 B. OTHER FLEXIBLY PRICED (Note 3) 1205 N C , ,312 8,932 38,643 59,613 89, , , , ,729 49, ,812 3, , , B. TOTAL OTHER FLEXIBLY PRICED 210, ,312 8,932 38,643 59,613 89, , , , ,729 49, ,812 3, , ,473 C.. VAR. TIME & MAT'L 1301 N D Task Order No. 1 5,300 5, ,000 6,682 4,120 10,802 10, , ,821 Task Order No. 2 2,882 2, ,803 2,240 6,043 6, , , F D Task Order No. 1 2,911 2, ,832 2,263 6,095 6, , ,668 C.. TOTAL VAR. TIME & MAT'L 11,093 11, , ,317 8,623 22,940 22,940 1,973 24, ,101 D. VAR-FIXED PRICE 99,819 99,819 5,338 16,724 12, , ,113 77, , ,712 30, ,647 1, , , D. TOTAL VAR-FIXED PRICE 99,819 99,819 5,338 16,724 12, , ,113 77, , ,712 30, ,647 1, , ,444 E. VARIOUS COMMERCIAL WORK 164, ,315 11, ,297 50, ,650 1,483, ,738 1,611,399 1,611, ,580 1,749, ,749, E. TOTAL VARIOUS COMMERCIAL WORK 164, ,315 11, ,297 50, ,650 1,483, ,738 1,611,399 1,611, ,580 1,749, ,749,979 TOTAL CONTRACT COSTS 633, ,012 34, , , ,841 2,627, ,103 3,119,605 3,119, ,286 3,387,891 7, ,153 3,396,044 IR & D 14,287 14, ,232 24,011 11,107 35,118 B& P 9,525 9, ,156 16,010 7,405 23,415 TOTAL IR & D/B & P 23,812 23, ,388-40,021 18,512 58,533 GRAND TOTAL 656, ,824 35, , , ,841 2,667, ,

112 Schedule H-1 Government Participation Overhead Overhead G&A Contract Type Base Amount % Base Amount % Cost-Type 147, % 554, % Flexibly Priced 210, % 570, % T&M 11, % 22, % Fixed Price 99, % 359, % Commercial 164, % 1,611, % IR&D/B&P 23, % - 0.0% Total 656, % 3,119, % Note: The purpose of this schedule is to present a general overview of the extent that cost-type and flexibly priced contracts participate in the absorption of indirect expenses 112

113 Schedule I CACWS Unsettled/Claimed Direct Prior And Indirect Costs Using Subject Years Claimed Total Less Net Cumulative Billed (Manual Entry) To Settled Prior Year Current Year Cumulative Contract Cumulative Date Cost Over Physically Penalty Total Costs Costs Settled or Limitations Settled or Billed (Under) Complete Order Clause Costs FYE FYE Claimed Rebates/Cred Claimed PV No. Through Amount Billing Contract No. Subcontract No. No. Note (2) Note (3) Note (4) Note (4) Note (5) Note (6) (Note 7) SCHED H SCHED H Cost Type & Flexibly Priced: (note 1) N C Yes 126, , , , /28/ ,110 1,862 N C Yes 382,595 2,867,500 51,140 3,301,235 3,301, /31/2009 3,295,110 (6,125) Subcontract-Clark Inc , ,311 37, , , /31/ ,100 7,975 Yes N C Yes 591, , ,473 1,658,751 1,658, /31/2009 1,640,426 (18,325) Yes Subtotal-Cost & Flexibly Priced Contracts 6,550,359 6,550,359 6,535,746 (14,613) SCHED K SCHED K Time & Material N D ,601 10,601 10, /31/ , Yes N D ,950 5,950 5, /31/2008 5,000 (950) F D ,000 6,000 6, /31/2008 5,750 (250) Subtotal-Time & Material Contracts 22,551 22,551 21,598 (953) Total- Cost/Flexibly Priced and Time & Material Contracts 6,572,910 6,572,910 6,557,344 (15,566) 113

114 Schedule J Subcontract Information Cost-type subcontracts issued under flexibly priced prime contracts Yes _X No SUBCO NTRACTO R'S PO INT O F CO NTACT SUBCO NTRACT Performance Period INCURRED AWARD SUBCO NTRACT NO. PRIME CO NTRACT NO. NAME & ADDRESS AND PHO NE NO. VALUE From To IN FY 2009 TYPE Subcontracts Issued: P.O. #XYZ0998R N C-0873 Small Company Ms. Donna Charleston $110,500 3/16/2006 6/30/2009 $87,912 C PFF 1445 Southpark Blvd. Marketing Manager Buffalo, NY (716) X317 P.O. #XYZ0776R N C-0874 Tanza Enterprises Mr. Mike Tanza $895,000 4/20/ /2//2010 $15,341 C PFF 87B Executive Park President Fairfax, VA (703) P.O. #XYZ01032R Subcontract to Clark Inc. Argonautics, Inc. Mr. Ted Kessel $152,500 7/25/ /16/2011 $7,888 C PFF Prime N C Ocean Parkway Marketing Manager Anaheim, CA (714) X12 P.O. #XYZ1213R N C-0913 DSK Corporation Ms. Jane Matthews $236,135 10/12/2008 3/15/2009 $49,732 C PFF 3559 Vaulting Road Marketing York, PA (717) P.O. #XYZ0822R N C-0913 Aristeo Associates Mr.Vince Aristeo $100,000 5/14/2007 5/14/2008 $40,000 C PFF 546 Arroyo Drive President Carlsbad, NM (504)

115 Schedule K Hours and Amounts on Time and Material (T&M) Contracts This Schedule is linked to schedule A for the G&A rate. SCHEDULE K Any changes in data will affect Schedule I. ICE (version 2.0.1c) Other than G&A rate, only manual or externally imported entries Schedule A - Applied Overhead, G&A, & COM Rates XYZ Corporation NOTE: Hidden rows have been inserted that will allow for automatic adjustment of the column totals when additional rows are inserted Contract Labor Contract No D-0111 Contract No D-0111 Contract No D-0112 Contract No. Contract No. Category (1) Task: 001 Task: 002 Task: 001 Task: Task: LABOR Rate (2) Hrs Amount Rate (2) Hrs Amount Rate (2) Hrs Amount Rate (2) Hrs Amount Rate (2) Hrs Amount Program Manager $ ,500 $ ,250 $ , Senior Engineer $ ,000 $ ,750 $ , Engineer $ ,000 $ ,250 $ Analyst $ ,250 $ $ Technical Typist $ $ $ TOTAL 550 9, , , OTHER COSTS Material Costs (3) 1, Travel Costs (3) Sched A 8.60% (4) Subtotal 1,501 1,000 1, TOTAL 10,601 5,950 6, Task Ceilings 25,000 12,500 7,500 Explanatory Notes (1) Represents effort performed by the company. Any subcontract effort should be identified separately. (2) Represents rates specified in the contract which may be higher or lower than actual rates incurred. (3) Represents actual costs recorded in the cost records. (4) G&A applied at the claimed rate to Material (if not Value-added base) and Travel Costs. 11 5

116 Schedule L Payroll Reconciliation Reconciliation of Total Payroll per IRS form 941 to Total Labor Costs Distribution Fiscal Year End - 3/31/2009 NOTE: Hidden rows have been inserted that will allow for automatic adjustment of the column totals when additional rows are inserted NOTE: Links not established for indirect costs because they have to be linked to account numbers inserted by contractor. General Description Ledger Reference Direct Labor 656,824 Summary SCHED H General & Administrative: SCHED B Salaries 90,007 Holiday Wages 2,321 Vacation Wages 5,812 Sick Leave 987 Personal Absence 1,082 Overhead Pools: SCHED C (x) Wages 33,060 Holiday Wages 20,181 Vacation 25,440 Sick Leave 14,318 Severance Pay (in full) 32,419 Intermediate Pools: Occupancy Wages 23,280 SCHED D (x) Overtime Premium (in ODCs) 270 Overtime Premium - Other Adjustment to arrive at Total Payroll Distributed (Provide detailed support) - TOTAL LABOR DISTRIBUTION 906,

117 Schedule M Accounting/Organization Changes, etc. This schedule provides information to the auditor related to the following: Significant decisions, agreements or approvals (e.g. pension plan, billing rates or contract ceilings) Significant accounting or organization changes (e.g. changes to indirect pool structure or mergers and acquisitions) 11 7

118 Schedule N Certificate of Indirect Costs Certificate of Final Indirect Costs Fiscal Year End - 3/31/2009 This is to certify that I have reviewed this proposal to establish final indirect cost rates and to the best of my knowledge and belief: 1. All costs included in the proposal (identify proposal and date] to establish final indirect cost rates for (identify period covered by rate) are allowable in accordance with the cost principles of the Federal Acquisition Regulation (FAR) and its supplements applicable to the contracts to which the final indirect cost rates will apply; and 2. This proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements. Firm: Signature: Name of Certifying Official: Title: Date of Execution: FAR Part Certification of Final Indirect Costs. As prescribed in (f), insert the following clause: Certification of Final Indirect Costs (Jan 1997) (a) The Contractor shall -- (1) Certify any proposal to establish or modify final indirect cost rates; (2) Use the format in paragraph (c) of this clause to certify; and (3) Have the certificate signed by an individual of the Contractor's organization at a level no lower than a vice president or chief financial officer of the business segment of the Contractor that submits the proposal. (b) Failure by the Contractor to submit a signed certificate, as described in this clause, may result in final indirect costs at rates unilaterally established by the Contracting Officer. (c) The certificate of final indirect costs shall read as follows: (see above) 118

119 Schedule O Contract Closing Info Ready Level of Effort Performance Period To Contract Ceiling Cumulative Hours Contract No. Order No From To Close(1 Amount (2) Fee(3) Required Actual Notes Cost Type: Subcontract-Clark Inc. 2/16/05 2/28/09 Yes 1,000,000 60,000 15,000 14,588 N C /16/06 12/28/08 Yes 1,750, ,000 27,500 28,950 Time & Material N D /1/06 12/31/08 Yes 25,000 Preparation Notes: (1) Indicate whether the contract is ready to close based on all information available. If the contract is not ready to close (e.g., a contract modification is being pursued), the reasons why should be stated in a footnote: (2) Provide the overall contract ceiling amount before fee, for the type of contract. (3) Provide fee amount as provided by the contract. Include details of the fee computation for all flexibly priced incentive fee and level of effort type contracts, along with the contract modification used, in a footnote. 11 9

120 DCAA website 120

121 EXPLORING ICE MODEL ICE MANUAL.DOC Complete Instructions for Using the ICE Model 121

122 EXPLORING ICE MODEL Includes Two Excel Files : ICE_Model(2.0.1c).xls - Template for Use in Preparing Incurred Cost Proposal ICE_Demo(2.0.1c).xls Sample File with Data 122

123 Other Schedules Provided by ICE The ICE program provides the following additional Schedules: Computation of Allowable IR&D/B&P costs (usually only applicable to major contractors) Comparative Analysis by pool and account Reconciliation of claim to corporate income tax return Contract Brief Executive Compensation form 12 3

124 Penalties (FAR ): Penalties will be assessed if a contractor claims an expressly unallowable indirect costs (as noted in FAR 31.2) in an incurred cost submission Two levels of penalties 12 4

125 Common Deficiencies: Signed certification not included or not signed by at least a Vice President or CFO (schedule N) Lack of subcontractor information (schedule J) Not all intermediate allocations disclosed (sch. D) Unallowable costs not included in G&A base (sch. E) IR&D/B&P not fully burdened (sch. B) Physically complete contracts not shown on sch. I & O Government participation not calculated for all final indirect rates (schedule H-1) 12 5

126 Frequently Asked Questions: Do I have to use the ICE model? No, contractor may use any format; However, the ICE model does provide all the schedules required per FAR

127 Frequently Asked Questions: Can DCAA grant an extension for submitting my final incurred cost rate proposal? No. Extensions for submitting final rate proposals can only be granted by the administrative contracting officer per FAR and FAR (b)(1)(ii). To locate your responsible administrative contracting officer, please contact the Defense Contract Management Agency (DCMA). 12 7

128 Frequently Asked Questions: When will DCAA determine adequacy of my incurred cost submission and perform the incurred cost audit? Auditors should evaluate a contractor s incurred cost proposal upon receipt and immediately notify the contracting officer of significant deficiencies. It is DCAA policy that indirect submissions will be audited as promptly as possible after receipt. 12 8

129 Frequently Asked Questions: I m preparing my submission(s) (e.g. contract pricing proposal, forward pricing rates, incurred cost, etc.) and would like to ask the DCAA auditor some specific questions on my submission to make sure I m on the right track. Will the DCAA auditor give me some specific advice on how to prepare my submission? Answer: A DCAA auditor can answer general questions related to the acquisition regulations. For example, if a contractor asked advice on what the FAR requires in certain situations, a DCAA auditor would be able to provide that information. Auditors may also provide general advice on what constitutes an adequate submission. However, auditors are precluded from assisting contractors in preparing and developing the contractor s submission because doing so would create a significant threat to the auditor s independence. Contractors should look under the Guidance and Checklist and Tools tabs on DCAA s website for guidance about the adequacy of their specific submission. 12 9

130 Questions? 130