Basic Financial Requirements for Do D Government Contracting

Basic Financial Requirements for Do. D Government Contracting 2015 National SBIR/STTR Conference The views expressed in this presentation are DCAA's views and not necessarily the views of other Do. D organizations DCAA 1965 -2015: Celebrating 50 Years of Excellence

Defense Contract Audit Agency Approximately 5, 000 employees located at over 300 offices throughout the United States and overseas Responsibilities and Duties: Perform all needed contract audits for Do. D Provide accounting and financial advisory services to Do. D (and civilian when requested) acquisition and contract administration components during all contract phases: Preaward Contract execution Settlement (contract closing) DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 2

Do. D SBIR/STTR Contracts Phase I (FFP up to $150, 000) Preaward Accounting System Audit NOT required Proposal amount is under audit threshold amount Annual Incurred Cost Submission NOT required Phase II (Cost-Type up to $1 million) Preaward Accounting System Audit required Proposal amount is under audit threshold amount Annual Incurred Cost Submission required DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 3

Accounting System Requirements DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 4

Solicitation FAR 16. 301 -3 requires prior to award of a cost reimbursement contract, the contractor’s accounting system be adequate No FAR requirement that the accounting system already be audited and deemed adequate in order to submit a proposal DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 5

Prior to Contract Award Contracting Office or DCMA conducts Preaward Survey to consider responsibility of prospective contractor Design of the Accounting System is part of the Preaward Survey (SF 1408 Criteria) DCAA requested to evaluate design of Accounting System DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 6

Preaward Accounting System Audit Evaluates design of Accounting System to determine if it is acceptable for prospective contract DCAA or Buying Command will request contractor complete DCAA Preaward Accounting System Checklist Contractor should be prepared to demonstrate how accounting system satisfies SF 1408 criteria at initial meeting DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 7

Preaward Accounting System Checklist Based on SF 1408 criteria Generally used by contractors new to government contracting that the Government plans to award a cost type contract (cost reimbursement contracts, or for contractors that will receive progress payments based on cost) Assesses whether the requirements for an adequate accounting system have been met DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 8

Preaward Accounting System Compliance Requirements Generally Accepted Accounting Practices (GAAP) Proper Segregation of Costs Direct Costs by Contract Allocation of Indirect Costs Accumulation of Costs Under General Ledger Control Timekeeping System Labor Distribution Interim Determination of Costs Exclusion of Unallowables Costs by Contract Line Item Preproduction Costs Limitation of Costs Billings Adequate, Reliable Data DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 9

After the Audit is Complete Issue report to Contracting Officer with an opinion that the accounting system is or is not suitably designed, in all material respects, for award of a prospective contract Includes a completed SF 1408 An opinion that the system is not suitably designed means that the contractor cannot be awarded a cost type contract. The award will be delayed until corrective action is taken and a follow-up audit can be performed DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 10

Incurred Cost Submissions DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 11

Due Dates of Submissions Incurred cost claims are due six months after completion of the contractor’s fiscal year end Per the Allowable Cost and Payment Clause (FAR 52. 216 -7(d)(2)) Allowable cost and payment clause applies to cost-reimbursement type contracts (FAR 16. 307) DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 12

Provisional Billing Rates (PBRs) DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 13

Purpose of PBRs Established to approximate the contractor’s final yearend rates, as adjusted for any unallowable costs Used for interim purposes until settlement is reached on the final indirect rates for the contractor’s fiscal year FAR 42. 704 - Billing Rates - provides procedures and guidance for establishing PBRs The contracting officer or auditor shall establish PBRs on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities. DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 14

When Should We Submit PBRs? Prior to the beginning of the fiscal year (once budgets are complete) or when the established billing rates are no longer representative of final year end rates due to unforeseen circumstances. PBRs should be submitted at least annually. Vouchers and progress payments can be returned if submitted without properly established billing rates. DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 15

Monitoring PBRs should be monitored: Throughout the year Immediately after year-end Upon submission of the final indirect rate proposal PBRs may be adjusted by either party at any time to prevent substantial under or over payment – FAR 42. 704(c). If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly. DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 16

Public Vouchers DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 17

Public Vouchers Cost type contracts provide for interim payments for costs on a Standard Form (SF) 1034 public voucher or equivalent. DCAA will perform voucher reviews based on risk. Fixed price contracts are subject to FAR Part 32 financing methods. DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 18

Contractor Responsibilities Contact the cognizant DCAA office after contract award Ensure DCAA has the necessary information to process contract billings, such as current provisional billing rates, copy of the contract, any special contract provisions, etc. Maintain adequate billing system internal controls Ensure adequate support is maintained for amounts billed Submit timely incurred cost proposals and final vouchers in accordance with FAR 52. 216 -7 DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 19

DCAA Guidance on Billing Oversight Revised guidance on billing oversight and modified the risk-based approach for selecting interim public vouchers for review Revised risk-based approach for selecting interim public vouchers at low-risk contractors Revised procedures for paid voucher review (1 voucher per year for non-majors) Improve consistency and efficiency and satisfy DCAA’s responsibility under FAR/DFARS DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 20

DCAA Internet Resources www. dcaa. mil Audit Process Overview – Information for Contractors Manual DCAA Pre-award Accounting System Checklist Do. D Contract Proposal Adequacy Checklist DCAA Incurred Cost Adequacy Checklist Incurred Cost Electronically (ICE) Model Links to Acquisition Regulations Small Business Seminar Slides DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 21

Contact Information Do. D Office of Small Business Programs www. acq. osd. mil/OSBP DCAA dcaa-oal-smallbusinessfocalpoint@dcaa. mil DCAA 1965 -2015: Celebrating 50 Years of Excellence Page | 22