DCAA Our Role. Laura Cloyd-Hall, CPA, MBA John D. Mollohan II, CPA, CFE. Page 1. DCAA : Celebrating 50 Years of Excellence

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1 DCAA Our Role Laura Cloyd-Hall, CPA, MBA John D. Mollohan II, CPA, CFE DCAA : Celebrating 50 Years of Excellence Page 1

2 Topics About DCAA Typical DCAA Audits for Small Businesses Basic Roles of DCAA, DCMA, and DFAS Page 2

3 About DCAA DCAA provides audit and financial advisory services to Department of Defense (DoD) and other federal entities responsible for acquisition and contract administration. DCAA operates under the authority, direction, and control of the Under Secretary of Defense (Comptroller)/Chief Financial Officer Page 3

4 Page 4

5 About DCAA Page 5

6 Guidance Page 6

7 Checklists and Tools Page 7

8 Typical DCAA Audits of Small Businesses Procurement Related Accounting System and Proposal Audits Provisional Billing Rates Incurred Cost Audits Page 8

9 Procurement Requirements Determination of accounting system adequacy FAR (b) states, no contract shall be entered into unless the [CO] ensures all requirements of law, executive orders, regulations, and all other applicable procedures, including clearance approvals, have been met. FAR states CO is Government official charged with making responsibility determinations. FAR (e) states a contractor must have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them to be considered responsible. FAR states only offerors with accounting systems adequate to determine contract-specific costs can receive costtype contracts Page 9

10 Accounting System Review Types Pre-Award Accounting System Survey Performed to identify if the contractor s accounting system is suitably designed for award of a prospective contract in accordance with the criteria contained in FAR (f) This audit does not incorporate tests of system operation, only system design Post-Award Accounting System Audit Performed after award of a cost-type contract Includes tests of operational capability of the accounting system as well as related billing processes and procedures The audit procedures are currently being revised to include testing for compliance with criteria set forth in DFARS May be performed prior to award of a cost-type contract if risks have been identified in current cost-type billings Page 10

11 Audit Requirements for Proposals In accordance with DFARS, PGI (c), effective September 17, 2010: The contracting officer should consider requesting audit assistance from DCAA for Fixed-price proposals exceeding $10 million; Cost-type proposal exceeding $100 million. The contracting officer should not request DCAA audit assistance for proposed contracts or modifications in an amount less than that specified in paragraph (c)(i) of this subsection unless there are exceptional circumstances explained in the request for audit. DCMA has been tasked with providing pricing support for proposals below the auditable thresholds (exceptions may apply for classified or high visibility efforts) DCAA performs audits on subcontracts which are part of proposals meeting the above criteria Page 11

12 Provisional Billing Rates Provisional Billing Rates FAR provides that the ACO or auditor responsible for determining final rates shall usually be responsible for determining billing rates Provisional billing rates (PBRs) are proposed by the contractor for reimbursement of indirect costs on interim vouchers to prevent substantial over/under run of actual costs They are established to approximate the contractor s final year end rates They are used for interim purposes until settlement is reached on the final indirect rates for a fiscal year PBRs are established on the basis of information resulting from recent reviews, previous rate audits or experience, or similar reliable data/contracting activities Page 12

13 Incurred Cost Audit Auditable Dollar Volume (ADV) greater than $250M, incurred cost audit is mandatory for every contractor fiscal year. ADV less than $250M, incurred cost audit can be performed on a sample basis if risk is determined to be low. Risk is determined based on several factors including: Amount of Questioned Costs in the last completed incurred cost audit Opinion on accounting system Previous experience with the contractor Page 13

14 Basic Roles of DCAA, DCMA, and DFAS DCAA performs the previously discussed audits; provisionally approve public vouchers and are often responsible for establishing provisional billing rates and final indirect rates. DCMA administers most of the DoD contracts and can be responsible for negotiation of provisional billing rates and final indirect rates. DFAS is responsible for the finances for DoD to include paying public vouchers. Page 14

15 Questions? Page 15