Audits of Contractor Overpayments

DCAA is stepping up its audits of contractor billing systems to determine whether there have been any overpayments. In a new audit program released last November entitled "Audits of Contractor Overpayments", DCAA signaled its support for OMB's "Payment Recapture Audit" initiative, also announced last November. You can read more about OMB initiative here. Essentially, the initiative was a challenge to all executive departments and agencies to increase their efforts to recapture improper payments by intensifying and expanding payment recapture audits. The memorandum makes some astonishing assertions such as "One of the biggest sources of waste and inefficiency is the nearly $110 billion in improper payments made in Fiscal Year (FY) 2009 it individuals, organizations, and contractors."

 

If the auditors have not yet been into your facility to look at billings, be they cost-reimbursement vouchers or progress payments, or T&M contracts, or invoices, they will be. Expect them, no matter your size. We will spend the next couple of days unpacking the new audit program to find out what it might mean for you.

The following is a listing of what the auditor will do during one of these audits. If your billing policies and procedures or your billing practices do not meet these standards, you are at risk.

1. Compare billings with cash receipts to identify contract overpayments and ensure amounts due the Government are refunded or offset in a timely manner;
2. Identify and resolve overpayments due to liquidation differences in a timely manner;
3. Reconcile recorded to billed costs to ensure costs are not over billed;
4. Identify contract administration adjustments to determine if adjustments are needed to billings and, if so, that they are computed correctly and appropriate refunds or offsets are processed timely;
5. Ensure timely and documented responses are prepared in response to demand letters;
6. Review contractors’ processes for monitoring subcontractor billings and identifying/resolving any overpayments timely;
7. Ensure offsets are properly authorized, adequately documented, and applied against billings for previously identified overpayments;
8. Ensure refunds are processed in a timely manner; and
9. Timely notification to the cognizant paying office and contracting officer timely of significant overpayments.