In the world of compliance, audits are when, not if.
The basic rule of audits is “say what you do and do what you say.” In other words, have policies (procedures or work instructions) that outline the steps necessary to complete a task, and have evidence (transactional history) that supports your policies. Many audit findings come as a result of organizations not following their own written rules.
Here is information on many common audits a government contractor will likely experience. Know what is expected of your organization and act accordingly!
Incurred Cost Proposal
- FAR 52.216-7 – If this clause is in your contracts, submission of an Incurred Cost Proposal (ICP) is mandatory.
- DCAA ICE Model – This is the electronic model of the ICP that DCAA expects you to follow for the ICP.
- DCAA Guidelines for ICE Adequacy – Many organizations submit incomplete or inaccurate ICPs which can lead to errors in calculating final indirect rates, closing out contracts, penalties, and increased probability of future audits.
- DCAA Incurred Cost Submissions – A detailed guide for completing an ICP including many FAQs.
Real-Time Labor Evaluations
Real-Time Labor Evaluations is DCAA’s new term for “Floor Check Audits.” These unannounced audits are designed to evaluate timekeeping procedures and internal controls, analyze timekeeping practices, and reconcile labor charges with subsequent payroll and labor distribution reports.
The key word is unannounced! Almost every other audit will come with notification and the potential to negotiate date, time, and place of audit. With a “Floor Check Audit,” your only advance notification will come from the person at the front desk. While all government contractors are subject to be selected for such an audit, those with a history of poor timekeeping practices, or those accused of such by employees (through a compliant) are more likely to experience them.
Contrary to the belief of many, there are no “DCAA-approved” accounting programs – in other words, there is no brand name or packaged system you can purchase that will satisfy DCAA. “Approval” comes in the form of passing one or both accounting system reviews: Pre Award Survey or Post Award Audit. Pre Award Surveys are designed to evaluate an accounting system to determine if it is acceptable for a prospective contract. Post Award Audits ensure the accounting system is compliant with DFARS 252.242-7006(a)(1) and are often initiated due to concerns about defective pricing and information supplied as part of certified cost or pricing data.