Basic Financial Requirements for Government Contracting 2014 National SBIR/STTR Conference The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations 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 Page 2 1
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) Page 3 DCAA Audits Through Various Phases of a Contract Pre-Award 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 Page 4 2
DoD SBIR/STTR Contracts Phase I (FFP up to $150,000) Preaward Accounting System Audit NOT required Proposal amount is under audit threshold amount Annual Incurred Cost Submission NOT required Phase II (Cost-Type up $1 million) Preaward Accounting System Audit required Proposal amount is under audit threshold amount Annual Incurred Cost Submission required Page 5 Accounting System Requirements Page 6 3
Solicitation FAR 16.301-3 requires prior to award of a cost reimbursement contract, the contractor s accounting system be adequate No FAR requirement that the accounting system already be audited and deemed adequate in order to submit a proposal Page 7 Prior to Contract Award Contracting Office or DCMA conducts Preaward Survey to consider responsibility of prospective contractor Design of the Accounting System is part of the Preaward Survey (SF 1408 Criteria) DCAA requested to evaluate design of Accounting System Page 8 4
Preaward Accounting System Audit Evaluates design of Accounting System to determine if it is acceptable for prospective contract DCAA or Buying Command will request contractor complete Preaward Accounting System Checklist Contractor should be prepared to demonstrate how accounting system satisfies SF 1408 criteria at initial meeting Page 9 Preaward Accounting System Checklist Based on SF 1408 criteria Generally used by contractors new to government contracting that the Government plans to award a cost type contract (cost reimbursement contracts, or for contractors that will receive progress payments based on cost) Assesses whether the requirements for an adequate accounting system have been met Page 10 5
Preaward Accounting System Compliance Requirements Generally Accepted Accounting Practices (GAAP) Proper Segregation of Costs Direct Costs by Contract Allocation of Indirect Costs Accumulation of Costs Under General Ledger Control Timekeeping System Labor Distribution Interim Determination of Costs Exclusion of Unallowables Costs by Contract Line Item Preproduction Costs Limitation of Costs Billings Adequate, Reliable Data Page 11 After the Audit is Complete Issue report to Contracting Officer with an opinion that the accounting system is or is not suitably designed, in all material respects, for award of a prospective contract Includes a completed SF 1408 An opinion that the system is not suitably designed means that the contractor cannot be awarded a cost type contract of the award will be delayed until corrective action is taken and a follow-up audit can be performed Page 12 6
Common Deficiencies Contractors not making interim (at least monthly) determination of costs charged through routine posting to books of account Failure to properly segregate direct and indirect costs Improper timekeeping Failure to exclude unallowable costs Page 13 Additional Requirements Yearly Incurred Cost Submissions Contract Briefs Provisional Billing Rates Public Vouchers Page 14 7
DCAA Internet Resources www.dcaa.mil Audit Process Overview Information for Contractors Manual DCAA Pre-award Accounting System Checklist DCAA Contract Proposal Adequacy Checklist DCAA Incurred Cost Adequacy Checklist Incurred Cost Electronically (ICE) Model Links to Acquisition Regulations Small Business Seminar Slides Page 15 Contact Information DoD Office of Small Business Programs www.acq.osd.mil/osbp DCAA dcaa-oal-smallbusinessfocalpoint@dcaa.mil Page 16 8