Redstone Government Consulting Blog | DCAA Audit Support (6)

While it may be tempting to change the Project Account Group (PAG) in Deltek Costpoint, revenue and billing formulas, revenue and billing formula levels, or a combination of both, you must consider the risks and consequences accompanying this decision.

Comparison to FAR

Like CAS 401 and CAS 402 (see previous blog posts on these CAS Standards), CAS 405 is part of modified CAS coverage and is one of the first CAS standards a company encounters. Compliance with this standard will likely not call for any changes to the company’s cost accounting system if the company is compliant with FAR 31.201-6 (Accounting for Unallowable Costs) because the FAR clause has more requirements than CAS 405.

Comparison to FAR

Like CAS 401, CAS 402 is part of modified CAS coverage and is one of the first CAS standards a company encounters. It likely will not call for any changes to the company’s cost accounting system because Federal Acquisition Regulations (FAR) 31.202 (Direct costs) and 31.203 (Indirect costs) give us words very similar to the CAS words.

Whether you call it “defective pricing” (DP) or Truth in Negotiations Act (TINA) or even the current labeling of Truthful Cost or Pricing Data Act (TCoPD - 41 USC Ch. 35) there is not much new about the impact to Federal Government contractors. The law supporting this goes back to 1962 in an environment where Congress believed contractors were overcharging the Government for negotiated goods or services. My how times have not changed. This could also describe our current Congress and may create worry among government prime and subcontractors.

As the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) season ramps up we have noticed a trend when it comes to award of SBIRs and Small Business Technology Transfer (STTRs) to small businesses in regard to cost analysis as part of Phase 1 awards, as well as dealing with the administration associated with a Phase 2 cost-reimbursable awards. A significant part of the SBIR process is to educate small businesses on the process and controls required to do businesses with the U.S. Government. The cost-reimbursable nature of phase 2 awards inevitably means that small businesses will have the opportunity to undergo accounting system adequacy determination, develop provisional billing rates, and undergo incurred cost submission review or audit. These are key barriers to entry to many businesses seeking to work with the U.S. Government and the pursuit of SBIR/STTR work not only provided necessary funding for small business research and development (R&D), but also an avenue to clear necessary hurdles when it comes to the back-office compliance. At least that was the case historically.

Many new government contractors are frustrated by being told they have a CAS 401 noncompliance, especially if they are not CAS covered. This is, of course, wrong terminology for non-CAS covered contractors, but is shorthand for saying the company is not estimating, accumulating, and reporting costs the same way. This is most frequently a difference between how a company estimates cost and then how the company accumulates and reports costs. This is not only important to the government, but to the company itself. A contractor cannot determine whether it is losing money on a contract if there is no way to compare what was bid to what was incurred. This is likely one of the first CAS standards a company encounters because even modified coverage calls this standard into play.

In order to fulfill project requirements, there are times necessitating that remote employees travel into the contractor’s site of operations for a meeting, special project, training, performance review, etc. The US Department of Labor, Wage and Hour Division, Fair Labor Standards Act (FLSA) states that the time employees spend commuting from home to their normal place of work before the beginning of the workday and from work back home at the end of the workday is not considered compensable time worked and therefore is not time for which employees must be paid. What if the employer wants to compensate remote employees for this travel time? The available guidance doesn’t seem to say an employer can’t pay an employee for this time, and many employers do, however, should they, and what things should an employer consider?

Executive Compensation Limit for Government Contractors

You pride yourself on working well and getting along with everyone, at least professionally. However, there is an auditor that seems to get under your skin. What do you do? Well, although there may not be a “magic bullet” to all make it better. I propose the following to get you through the situation at hand:

If your company has an accounting system audit in the near future, now is the time to get prepared, before DCAA starts knocking at your door. So, what are the common deficiencies? We are going to address the typical post award accounting system audit and deficiencies that DCAA frequently identifies during an audit.