Redstone Government Consulting Blog | DCAA Audit Support (5)

Current FAR Requirements

Federal Acquisition Regulations (FAR) 42.101 provides that normally, “the Defense Contract Audit Agency (DCAA) is the responsible Government audit agency.” While DCAA’s website states “DCAA provides audit and financial advisory services to DoD and other federal entities responsible for acquisition and contract administration.” DCAA only has appropriated funds to provide services to the Department of Defense (DoD). All other federal agencies must pay for DCAA services. This can make a decision related to the necessity of an audit service a budget-based decision. Today, DCAA is current on the required incurred cost audits of contractors with DoD contracts, but contractors with mostly National Aeronautics and Space Administration (NASA) contracts are years behind in their required incurred cost audits. If, as the FAR states, “DCAA is the responsible Government audit agency,” why is it not a Federal audit agency (dare we say – FCAA)? This would make things much easier for NASA and other federal agencies that need their contracts audited. However, given that this isn’t the case, DCAA is not the only option for federal agencies. Many agencies other than DoD have contracted with third-party CPA firms to get necessary audits performed.

Topics: Incurred Cost Proposal Submission (ICP/ICE), DCAA Audit Support, Government Regulations, Grants & Cooperative Agreements (2 CFR 200)

Cost Accounting Standard (CAS) 408 was put in place to provide consistency in the measurement and allocation of vacation, sick leave, holiday, and other compensated personal absences. Today, many contractors refer to all paid time off as “PTO.”

Topics: Compliant Accounting Infrastructure, Contracts & Subcontracts Administration, DCAA Audit Support, Government Regulations, Cost Accounting Standards (CAS)

Government regulations can be complex and perhaps even confusing. For those of you experienced in Government contracts and even contract audits, you have heard of the Federal Acquisition Regulation or FAR and, FAR Part 31, Contract Cost Principles and Procedures. The scope of this part describes the applicability of the cost principles and procedures in pricing and accounting for costs on contracts, subcontracts, and modifications whenever cost analysis is needed. There is a lot there, but what’s really important? Well, I will not try to duplicate what can be at least a day course within this blog, but I will highlight three areas that are really important.

Topics: Compliant Accounting Infrastructure, Contracts & Subcontracts Administration, DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

Last year, we wrote about the Department of Defense (DoD) proposing a change to the Defense Federal Acquisition Regulation Supplement (DFARS) that would possibly simplify Government property clauses by consolidating four clauses into a single management clause. This became a reality in December 2023 when the DoD issued a final rule consolidating the four clauses into DFARS 252.245-7005, Management and Reporting of Government Property. The new clause had an effective date of January 22, 2024.

Topics: DFARS Business Systems, DCAA Audit Support, Government Regulations, Government Property Management, Federal Acquisition Regulation (FAR)

If you have Government contracts, you probably heard of the Federal Acquisition Regulation, or FAR, but how much do you know of its parts? Why is it important to know? How could it possibly impact me?

Topics: Compliant Accounting Infrastructure, Contracts & Subcontracts Administration, DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

Our friendly DCAA auditors have taken up the government requirement to calculate and publish annually the new compensation cap as provided for in Section 702 of the Bipartisan Budget Act of 2013 (BBA; Pub. L. 113-67), dated December 26, 2013. The 2024 cap amount is $646,000. Below, we have provided the compensation caps going back to 2016.

Topics: Employee & Contractor Compensation, Incurred Cost Proposal Submission (ICP/ICE), DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

So, you have a contract with the clause FAR 52.230-2 Cost Accounting Standards, subject to full CAS coverage. If you receive allocations from a home office, the home office must comply with CAS 403, Allocation of home office expenses to segments. A home office has the responsibility for directing or managing two or more segments of an organization and includes intermediate home offices or a corporate office.

Topics: Compliant Accounting Infrastructure, Proposal Cost Volume Development & Pricing, Contracts & Subcontracts Administration, DCAA Audit Support, Government Regulations, Cost Accounting Standards (CAS)

Current and accurate timekeeping is one of the most important responsibilities of a contractor and its employees when they have Government cost reimbursement and time and material/labor hour contracts. Direct labor is one of the significant elements of cost incurred and billed on Government contracts. FAR 16.301-3(a)(3) requires contracting officers to ensure a contractor has an adequate accounting system, which includes a timekeeping system, before award of a cost reimbursable contract. While there is no specific reference to an adequate timekeeping system for T&M/Labor hour contracts, FAR 52.232-7 requires the contractor to be able to support the hours and labor qualifications of the employees charged to the contract. Auditors will request documentation to support employee qualifications and labor hours on T&M/Labor hour contracts. An adequate timekeeping system includes having a written timekeeping policy and procedure to ensure the accuracy and integrity of direct labor costs charged and billed to Government contracts.

Topics: Compliant Accounting Infrastructure, Government Compliance Training, DFARS Business Systems, DCAA Audit Support

On August 9, 2023, DCAA issued guidance to its auditors revising the real-time labor and material testing requirements. DCAA historically referred to these procedures as Mandatory Annual Audit Requirements (MAARs) 6 and 13. DCAA states in its guidance what its auditors need to know is that “[l]abor and material are two of the most significant cost elements billed under government contracts. As such, one of the primary reasons … [DCAA] audit[s] labor and material costs incurred is to determine the accuracy of the charges. The real-time verification of these costs as they are incurred provides valuable confirmation of the accuracy of the charges and can only be accomplished during the accounting period to which they apply.” I cannot really argue with this statement.

Topics: Compliant Accounting Infrastructure, Small Business Compliance, Contracts & Subcontracts Administration, Government Compliance Training, DCAA Audit Support, Human Resources

In August of 2023, the Defense Contract Audit Agency (DCAA) changed what is used to refer to as Mandatory Annual Audit Requirements (MAARS) 13 audits to Real-Time Audits of Purchase Existence and Consumption. This change was to eliminate the mandatory part of the requirement and introduce greater flexibility based on the auditor’s risk assessment of the contractor.

Topics: Compliant Accounting Infrastructure, Small Business Compliance, Contracts & Subcontracts Administration, Government Compliance Training, DCAA Audit Support, Human Resources