Redstone Government Consulting Blog | DCAA Audit Support (17)

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.”

The GSA Office of Inspector General (OIG) is actively investigating alleged fraudulent third-party activity in GSA’s System for Award Management (SAM). At this time, a limited number of entities registered in SAM are suspected of being impacted by this illegal activity. GSA has taken proactive steps to address this issue and has notified the affected entities.

As incurred cost audits are becoming more prevalent and voucher audits are taking off like wildfire, there is emphasis placed on the use of work authorizations by government contractors.  There is no specific regulatory authority that can be cited which requires work authorizations as a part of a contractor’s Labor/Timekeeping System.  This argument, although accurate, is not the rationale which will be used by a DCAA auditor when “disclosing” deficiencies in a contractor’s labor system and ultimately rendering an inadequate opinion with respect to the accounting system, when the work authorization process is absent. 

As we near the end of calendar year 2017, many will be thinking of some resolutions for the upcoming “Year of the Dog” (the 2018 animal per the Chinese Calendar). In fact, we’ve discovered that Government agencies sometimes consider similar resolutions, and in the case of DCAA (Defense Contract Audit Agency), we’ve accidentally been copied on one of the unofficial versions of its 2018 New Year’s resolutions (which are three months late, given the government fiscal year started October 1, 2017).

It seems like there are a lot of agencies being audited on what they are doing with DCAA audit findings. In September, the DoD-IG announced an audit of 26 contracts issued from FY 2014-2017 by Navy, DLA, Army and Air Force contracting officers. It’s stated objective is “to determine whether contracting officer actions during contract negotiations complied with acquisition regulations when contractor proposals were deemed inadequate by the Defense Contract Audit Agency (DCAA).”  At the same time, they announced an audit of DCMA with an audit objective “to determine the appropriateness of contracting officer actions to resolve and disposition compensation costs that the Defense Contract Audit Agency (DCAA) has questioned in audits of DoD contractor incurred cost claims submitted to the Government.

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).

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.