RCGI-Worst Disclosure Statement SurprisesThere are many presents one may enjoy receiving this holiday season. However, one present you do not want during the holiday season is a CAS Disclosure Statement (DS) surprise.  There are several surprises related to DS’s you can receive:

  • You have to submit a Disclosure Statement almost immediately
  • You don’t know if you need to submit a Disclosure Statement almost immediately
  • You are now subject to all of the CAS standards
  • You don’t have documented the answers to the Disclosure Statement questions
  • You don’t know the answers to the Disclosure Statement questions
  • You are in noncompliance with one or more CAS standard
  • You must submit Disclosure Statements for your home office or intermediate home offices

BAD DISCLOSURE STATEMENT NEWS CAN COME WITH LARGE CONTRACTS

One of the worst surprises a government contractor can receive is to find out a Disclosure Statement is required in a very short time frame.  This can happen two ways:

  • Bid on a CAS covered contract in excess of $50M
  • Have CAS-covered sales in excess of $50M in the previous fiscal year

Many contractors are surprised when they look at an RFP to find out that they must submit a Disclosure Statement WITH their proposal if it exceeds $50M.  It must be submitted prior to award of the contract.  I once had a company tell me that it wasn’t a big deal – they were going to lock themselves in a building on a Friday night, with plenty of beer and pizza, and not come out until it was written!  I never got a chance to see how that worked for them, but I doubt they really understood the magnitude of the problem. 

DETAILED RECORDS REDUCE THE SURPRISES

Another surprise is not having the information available to determine if your company had over $50M of CAS-covered sales in the previous year.  Many companies do not have an adequate universe of CAS-covered contracts.  If you already know you are subject to modified CAS coverage, it is important that you keep an accurate record of which contracts are CAS-covered to ensure you don’t late find out that you reached the $50M threshold and must submit a D/S.

DISCLOSURE STATEMENT PREPARATION

An additional complication is that the requirement to file a Disclosure Statement is often accompanied by becoming fully CAS-covered.  Therefore, the proposal should be prepared in a manner that is in accordance with the CAS standards or run the risk of being subject to a price adjustment due to a cost accounting practice change. 

Once you have begun preparing the actual DS, you may find that you don’t have documentation that answers all the DS questions; it is even worse if you don’t know the answers to the questions.  There may be questions related to situations you have not yet encountered, but you know they are forthcoming.  You then must design the answer, answer the question and (hopefully) document the answer in your policies and procedures to ensure you follow it.

Often CAS non-compliances are discovered during preparation of the initial Disclosure Statement and changes to the accounting system must be made. 

Finally, you should also be aware that any home office or intermediate home office that allocates cost to the covered business entity will have to submit a Disclosure Statement.

DISCLOSURE STATEMENT SUCCESS

Planning is key to successful Disclosure Statement preparation.  If your company is thinking about bidding on a contract over $50M or are approaching cumulative $50M if CAS covered contracts in a fiscal year, and don’t have a Disclosure Statement in place, you should begin planning now.  First, look at the questions asked in the Disclosure Statement.  If it is Greek to you, it is time to call Redstone to help get you on track before one of these surprises costs you an award.

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Written by Cheryl Anderson

Cheryl Anderson Cheryl Anderson is a Director with Redstone Government Consulting, Inc. She provides Government Contract Consulting services to our government contractors primarily related to equitable adjustment claims, terminations, and DCAA audit expectations. Prior to joining Redstone Government Consulting, Cheryl served in a number of capacities with DCAA for over thirty-five years. Upon her retirement, Cheryl was a regional audit manager with DCAA. Cheryl began her DCAA career in 1977 as an auditor-trainee with the Ingalls Resident Office in Pascagoula, Mississippi. After instructing at the Defense Contract Audit Institute for four years, she returned to the Eastern Region in 1990, holding various audit positions before ultimately becoming a Regional Audit Manager in August 2005. She had overall management responsibility for audits performed by approximately 200 employees. During Cheryl’s tenure with DCAA, she was involved in conducting or managing a variety of compliance audits, to include cost proposals incurred cost submissions, systems, Cost Accounting Standards, claims, defective pricing, financial capability and agreed-upon procedures. She directly supported the government litigation team on a contract dispute and has prepared and presented various lectures and seminars to DCAA staff. In addition, she has served as an instructor for the Government Audit Training Institute for over 20 years. She currently specializes in preparing clients for more complex DCAA audits, providing advice on FAR cost principles and contracts regulatory provisions, and assisting clients in anticipating and addressing audit. Education Cheryl has a BS Degree in Accounting from Auburn University at Montgomery and a Masters of Business Administration from Wichita State University. Cheryl also completed courses at OPM’s management and executive development centers and at the Federal Executive Institute and is a Georgia Certified Public Accountant.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Contracts Administration, Defense Contractors