Tuesday, June 25, 2013

Record Imaging

We've discussed record retention requirements from time to time, most recently here. Contractors should become intimately familiar with FAR 4.7 because that section lays out in detail the time periods for which various types of records must be retained and made available for Government review.

Frequently, questions arise about whether those records may be imaged and stored electronically. Auditors routinely ask for "original" documents and there is good reason for that. They want to insure that they are not reviewing "altered" documentation. But sometimes, their insistence goes beyond what is legally required. Lets take a look.

10 USC Section 2313 is the statute that gives the Government the authority to examine contractor records. Paragraphs (g) and (h) of that section discusses the medium used to store records.

Paragraph (g) unequivocally authorizes contractors to storing "original" records in electronic form.
(g) Forms of Original Record Storage. - Nothing in this section shall be construed to preclude a contractor from duplicating or storing original records in electronic form.
Paragraph (h) then sets forth a few conditions/requirements.
(h) Use of Images of Original Records. - The head of an agency shall not require a contractor or subcontractor to provide original records in an audit carried out pursuant to this section if the contractor or subcontractor provides photographic or electronic images of the original records and meets the following requirements:
(1) The contractor or subcontractor has established procedures to ensure that the imaging process preserves the integrity, reliability, and security of the original records
(2) The contractor or subcontractor maintains an effective indexing system to permit timely and convenient access to the imaged records
(3) The contractor or subcontractor retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems.

By the way, most modern accounting software allows users to attach or link electronic copies of invoices or other documentation directly to the transaction. So, for example, if you're paying an invoice for Rent, you can attach a PDF copy of the invoice to the transaction. If you want to retrieve or view a copy of the bill later on, you click on an icon and the copy opens up. That meets criteria No. 2 above.

The next time auditors give you grief over having to view scanned copies of documents, you might want to refer them to 10 USC Section 2313.

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