Redstone Government Consulting Blog | Compliant Accounting Infrastructure (15)

On August 14, 2018 the U.S. General Services Administration (GSA) released the Fiscal Year 2019 travel per diem rates, taking effect October 1, 2018. These represent the maximum reimbursable amounts allowed for expenses incurred by federal employees. Making adjustments based on the current economy is important, as well as taking into consideration local price variations  in what is termed “Non-Standard Areas.”

Quite often, in practice, we see contractors classifying too much cost as IR&D or more commonly, B&P expense.  In a proposal setting, experts from across your company support the development of a compliant proposal.  The question we see frequently is: “Who should be charging to B&P Projects?”  While a business may want to capture the total cost of a proposal effort, including administrative support from G&A staff, it is not wise to have these personnel charge to a B&P project where their labor will absorb overhead. 

The Department of Labor’s Wage & Hour Division has announced a new pilot program expected to launch next month. This initiative, referred to as the Payroll Audit Independent Determination (PAID) program, will allow employers the opportunity to voluntarily correct employee pay and accounting errors which violate the requirements of the Fair Labor Standards Act (FLSA).  Though an official launch date has not been announced, the program is set to run for an initial 6 months and is open to all FLSA-covered employers who have not already been sued and/or who are not currently being audited by the Department of Labor (DOL). Eligible employers may enroll online shortly after the launch date (see “How to Enroll” below) and participate in the PAID program through the end of the pilot.

Organizational Conflicts of interest have increasingly gained attention from the Government and Government contractors.  Organizational Conflicts of Interest (OCI) are discussed in the Federal Acquisition Regulation (FAR) subpart 9.5.  OCI rules are meant to prevent conflicting roles or unfair competitive advantage in government contracting.  Assessment of OCI is very fact specific, and mitigations should be sculpted to fit your contracts and situation. 

We have received a number of inquiries from clients related to cost allowability for Employee Stock Ownership Plans (ESOPs). In this Part II, we focus on the cost allowability rules and regulations for government contractors (Part I provided a more general description of ESOPs).

Many small and medium sized companies wonder if having an Employee Stock Ownership Plan (ESOP) is right for their company’s compensation and ownership structure.  Studies show that employee-owned companies benefit from higher worker productivity and certain tax advantages which ultimately result in improved cash flow.  These and other potential advantages could apply to government contractors; however, if you are considering implementing an ESOP, consider engaging someone (or an entity) familiar with ESOPs, as well as someone familiar with the cost allowability (regulations) and DCAA interpretations.

As we (Redstone Government Consulting, Inc.) began to plan our September 21, 2017 Redstone Edge, we sought out speakers and potential attendees from government agencies, including those from DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency). In both cases, their potential speakers had a list of questions which seemed to be unnecessary, but related to OGE (Office of Government Ethics) regulations and interpretations, to identify and otherwise prohibit anything which might be an illegal (or at least unethical) gratuity. Although we might not be a “government contractor”, for those who are, there is another regulation in play; FAR 52.203-3 prohibits government contractors from offering gratuities to government employees.

Companies that incur significant costs for training and education of their workforce should have formal policies and procedures in place to ensure reimbursement on their government contracts and subcontracts.  As with all types of costs, there are three major components to consider: allowability, allocability and reasonableness.

Wage Determination Fact Finding

In ASBCA Case No. 61040, 61101, Sonoran Technology appeals their claim for an equitable adjustment due to an increase in the Service Contract Act Wage Determination after contract award.  The solicitation that controlled this contract award included a SCA wage determination and a Collective Bargaining Agreement (CBA). The bidders were required to use the current SCA wage determination (at the time of the bid) in the formulation of their proposals submitted to the Government.  For future increases in SCA wages and/or benefits, the FAR and the contract have provisions/clauses which cover a contract price change for a wage determination for a multi-year contract.  The issue here whether a new wage determination, incorporated into the contract, prompted a responsibility for the government to adjust the contract price to compensate Sonoran for a corollary increase in its state gross receipts taxes.

The objectives of a timekeeping system are to ensure that labor costs are accurately and timely identified as either direct or indirect in the accounting system.  For certain contract types (e.g. cost-type), these accumulated labor costs are reported and billed to the customer.  It is the contractor’s responsibility to ensure that the labor costs posted in the timekeeping system are proper and reliable.