Thursday, February 7, 2013

Do Accounting System Approvals Expire?

You work real hard to establish an accounting system that meets all of the requirements of DFARS (DoD FAR Supplement) 252.242-7006. DCAA (Defense Contract Audit Agency) or another agency comes in, conducts an audit and concludes that the system is adequate (yes, "adequate" is as good as it gets).

How long is that rating good for? Does it expire? Can you positively state one or two years later that you have an approved accounting system? What about five years later? Or seven?

When making certifications and representations, contractors may rely on the last completed accounting system audit, regardless of how many years in the past that occurred. The buying activity (contracting officer)  must exercise its own judgment on the matter and decide whether the most recently completed audit was recent enough to rely on it or whether a new audit needs to be requested. Different buying commands have different standards over what constitutes "recent enough". Some contracting officers are becoming more "liberal" in their assessment of "recent enough" because of DCAA's inability to provide timely accounting system audits. We heard of a recent case where a 2007 assessment was offered and accepted by the Government.

When requested by a buying activity, DCAA conducts preaward and/or post-award accounting system reviews. There are no set expiration periods for either. The rating (good or bad) applies until DCAA conducts a subsequent (or follow-up) audit.

From a practical perspective, the fact that a contractor's accounting system was deemed adequate in the past is a good indication (not a guarantee) that the system is still acceptable. Of course the contractor must continue to maintain the system to the standards in DFARS 252.242-7006. How will the Government know whether a contractor has continued to maintain an adequate system? It doesn't and won't until a new audit has been completed.

No comments:

Post a Comment