What is a "Sensitive" Consultant?

We feel that we're talking about consultant costs too much on these blog pages. But every time we think we have the guidance nailed down, something new comes up. The other day, some contract auditors informed a contractor that it was going to review "sensitive" consultant costs as part of their incurred cost audit. Of course we asked them what "sensitive" meant in the context of consultant costs. There answer was somewhat vague but went along the lines of "we'll know it when we see it". So, they proceeded to ask for details of all consultant costs as well as all of the 1099s the contractor issued (see our previous posting on 1099s).

Had the auditors known their own guidance, they would have been prepared to list "sensitive" consultant costs. According to the DCAA Standard Audit Program for reviewing consultant costs, sensitive consultants are defined as follows:

Prior audit experience and professional judgment must be exercised in determining which consultants are sensitive. Overall Agency audit experience in this area has resulted in the following ranking of consultant services (shown in decreasing order of sensitivity)

• lobbyists

• sales/marketing

• management services (excluding CPA firms)

• legal

• technical/engineering

• accounting, CPA firms, actuary, and insurance

• other

Regarding the highest risk category, lobbyists, DCAA (and other contract auditors) will access public websites to determine whether any registered lobbying firms are working on behalf of particular contractors. Just because a contractor shows up on a lobbying firm's list of clients however, doesn't mean that the lobbying firm engaged in lobbying activities on behalf of the contractor. Most lobbying firms perform non-lobbying activities in addition to lobbying activities so it is important to show the actual activities performed.