DFARS Business Systems Review Redstone Government Consulting

Contractors who have analyzed the proposed rule released July 15, 2014, which places the responsibility on contractors to support the adequacy of certain business systems via utilization of Independent Public Accounting (IPA) CPA organization audits, have mixed reactions to the rules requirements: reactions ranging from total agony due to added and redundant audit oversight plus administrative strife in dealing with those redundancies, to a real opportunity to achieve some control over obtaining a reasonable and objective analysis of their systems the outcomes of which just might be completed timely. 

Certainly there is a high probability that IPA audits will be completed within a reasonable period after the audits have commenced, beating DCAA’s miserable track record of taking up to three years to perform the audit, the results of which are often outdated by the time a DCAA report was issued.

This author has communicated only with one client to obtain his thinking on the new rule—will there be inherent benefits to government contractors or does the rule only complicate the process with long-term consequences of placing contractor professionals under medication therapy and psychiatric care?  Here are a few thoughts the client passed along (excluding certain vulgar commentary):

  • Contractors should have a leg up if allowed to choose its own IPA firm, at least in ensuring that the firm’s employees are qualified to perform the work, will maintain objectivity, produce a reasonable outcome that is supported fact-based findings, and will be completed timely—professional standards of which DCAA has been unable to demonstrate.
  • Not surprisingly, this client considers the authority of government auditors (DCAA) to not only evaluate the CPA audit plan, but also to second-guess the outcome of the IPA report, to produce delays and likely disputes with ACOs.  Nonetheless, the company believes such DCAA objectives can be more easily overcome with ACOs—after all, government auditors did not do the work, and therefore a thinking that ACO’s will more likely brush off DCAA second guessing motives.
  • Government access to the CPA’s audit plan and working papers will be a problem; hence, concern that choosing IPA firms to perform these reviews will be a rigorous task.
  • Increase expense to the company, not only to engage IPA auditors, but also internal administrative effort to overcome problems raised government auditor review of audit plans and work product. 

Bottom line for this client:  Client believes the IPA approach is more beneficial and cumbersome.  Client sees more control in choosing qualified professionals to certify business systems, and therefore circumventing a never-ending DCAA audit of internal controls, reducing possibility of unsupported “significant” deficiencies, and mitigating possibilities of delayed government contract awards until alleged such deficiencies were corrected.  

Written by Darryl Walker

Darryl Walker Darryl Walker is a Emeritus Advisor for Government Compliance with Redstone Government Consulting, Inc., and formerly served as an Owner and Technical Director for the Beason & Nalley Government contract consulting group for over ten years. He provides content for our Government Insights Newsletter, provides training courses to government contractor and business community leaders, and consults with government contractors regarding a vast range of issues including cost proposals and presentations, internal controls, proposal preparation, compliance with the FAR and Cost Accounting Standards, litigation support, specialized claims, defective pricing issues, liaison with procurement and DCAA audit officials, and accounting and management systems compliance. Prior to joining Redstone Government Consulting, Darryl worked with the Defense Contract Audit Agency (DCAA) for almost 34 years in a variety of technical and management capacities. During his tenure with DCAA, Darryl provided audit services to a wide range of government agencies, including the Department of Defense, NASA, Department of Energy, Department of Interior, General Services Administration, and Department of Justice. During his experience with DCAA, Darryl audited over 3,000 government contractors throughout the Southeastern United States, Europe, and the Middle East. Education Darryl is a graduate of Texas Wesleyan College with a major in accounting and minor in economics.

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Contracts & Subcontracts Administration, DFARS Business Systems, DCAA Audit Support