Redstone Government Consulting Blog (61)

Is your purchasing system ready for a DCMA Contractor Purchasing System Review?  Time to dust off those policies and procedures, and make sure your employees are trained on FAR and DFARS requirements.

DCMA has been hard at work reviewing contractor purchasing systems, making several updates in 2016 to the CPSR Guidebook, the most recent being January 18, 2016.  In addition, in October 2016, the Director of DCMA issued a Class Deviation from FAR 44.302(a), increasing the CPSR threshold from $25 million to $50 million.  Questions remain on how this will impact contractors whose contracts include FAR 44.3 and who are on DCMA’s review schedule.  The threshold can be lowered if the ACO determines a contractor’s risk level warrants a review.  We have already seen the lower threshold enforced in the early part of 2017 for a couple of our clients.

What is a Program Control analyst and do I need one? These questions are often asked by small business who might not understand the role of a Program Controller. Program (or Project) Controllers are most frequently financial managers who oversee project revenues and expenditures to ensure programs are on schedule and within budget. Program Control Analysts bridge the gap between the program manager and the accounting department and support the needs of both organizations. Program Managers typically manage the technical aspects of a program, while the accounting department manages payroll, accounts payable, accounts receivable, and compliance with generally accepted accounting principles. Program Control Analysts provide a link between the technical elements of program management and the compliance elements of cost accounting. Program control personnel generally have a business background in accounting, finance, business administration or economics which allows them to assist the program manager with decisions which are compliant with business policy and are in accordance with contract terms.

For most small businesses - and especially for those in the early stages of their life cycle - Quickbooks is an excellent option and an almost fundamental starting point when considering an accounting software from which to grow your company. It is cost effective, easy to use, and given its popularity and presence in the market, training resources are readily available. But is it a viable option for Government Contractors?

Accounting for independent research and development costs and bid and proposal costs are found in Far 31.205-18 and Cost Accounting Standards 420. Because FAR 31.205-18 incorporates CAS 420, it does not matter if your company has revenue of $50 million or under $5 million; if you have IR&D and B&P costs, this Cost Accounting Standard (CAS) provides the criteria for accumulation and allocation of those costs.

We often hear the following statement and question: “My proposal (the government solicitation) calls for a compliant accounting system (SF 1408) and I’ve never been audited.  What do I do?”.

Virtually all government contractors and anyone else hoping for regulatory relief from the new administration is aware of the Executive Order (EO) requiring a 2 for 1 reduction in agency regulations for each new regulation. In an effort to show that DCAA is politically savvy and much more positive and proactive than most agencies (who are less than enthusiastic about this EO), DCAA has begun to vet some “similar to” audit strategies. The following are some of the highlights of a DCAA Press Conference to announce a broad range of “2 for 1 reductions”.

With a Presidential Memorandum halting all proposed federal regulations that have not yet taken effect and pausing the Department of Labor’s (DOL) appeal of the nationwide injunction on the overtime rule which would double the minimum salary for exempt status, we are curious how the new administration will impact employer responsibilities, particularly those of federal contractors. While we certainly hope for some respite, we won’t speculate on what might happen, and we continue to encourage employers to be diligent in compliance with those regulations which have recently taken effect as well as those that employers have been slow to tackle.

Since most incurred cost proposals (ICPs) are due June 30, it is a good time for contractors to review the DCAA criteria for audit selection in order to minimize (where possible) the potential that their ICP will be selected for audit. All ICPs with an auditable dollar volume (ADV) greater than $250 million are automatically selected for audit. ICPs with an ADV between $100 million and $250 million of ADV that have not been audited in the last 3 years are also automatically selected for audit. ADV is determined by the amount of cost reimbursable, i.e. cost type and T&M, contract revenue for the fiscal year.

To the uninformed, there may be little or no distinction between the three adjectives which could apply to a contractor (or potential contractor) accounting system. To those dealing with the terminology in government solicitations, there may appear to be no significant distinction because the words seem to be used interchangeably. For example, an Air Force solicitation may have a prerequisite for an adequate accounting system, in contrast to Navy solicitation which substitutes the words acceptable accounting system. Then a third alternative could be a solicitation which gives competing bidders points for approved systems; i.e. 500 points for having an approved accounting system. In most cases, the solicitation links the accounting system status (adequate, acceptable or approved) to an action (written opinion or written determination) by a federal government agency or, less frequently, an opinion by an independent third party such as a CPA or consultant. There is a fourth alternative, an accounting system which has never been reviewed by any independent party (government or otherwise). In this case, a contractor (or a potential contractor) may have an accounting system awaiting its first test, so to speak.

Whether you are new to government contracting or have been “in the game” forever, it’s not unusual for employees to get caught up in the events of the day and overlook the importance of obtaining and maintaining adequate supporting documentation in the support of pricing proposals (pre-contract award) and actual costs – both direct and indirect (post-contract award).  In a perfect world, employees are properly trained on adequate supporting documentation and documenting the appropriate files accordingly. But we aren’t living in a perfect world, and we even debate over what adequate supporting documentation entails.