You've Turned in Your Incurred Cost Proposal - What's Next? - Part 3

This is the third and final posting on what contractors can expect once they have completed their annual incurred cost submission, turned it in to the Government, and have had the Government declare it to be"adequate". Remember, "adequate" does not mean that claimed costs are allowable, allocable, and reasonable to the contract. It only means that the submission itself includes all the requisite schedules and is internally consistent and reconcilable. Today we want to focus on best practices for getting the audit done in a timely manner so as not to expend resources that one wouldn't have otherwise expended.

Contractors should provide requested data as quickly as possible. Its to everyone's advantage. Prolonging an audit cost the contractor time, resources, and money that cannot be regained. There is no return on that investment - time lost due to inefficiency. Auditors are less efficient when they have to start and stop and start and stop. Not only does it waste time but auditors always have multiple assignments in their queues and while waiting for data from one contractor, are off performing another audit. So, who knows when they'll get back to your audit. When they eventually get back to your audit, they need to re-familiarize themselves with the status, the issues, and progress to date. Perhaps by then its even a different auditor and you have to reeducate a new auditor on your systems and processes. The best way to handle an audit is to prioritize it within your organization, dedicate whoever it is that is most familiar with the incurred cost submission and the location of the books, records, and supporting data, and stay focused on that singular event until the audit is completed.

Contractors should always be cognizant of what's hot and what's not. Contractors should be subscribing to industry newsletters and reading blogs such as this one to stay up to date on the "hot button" topics that are peculating throughout the Government in general and the audit and contract administration groups in particular. One are that is causing contractors a lot of grief lately is employee compensation. DCAA's got a few compensation benchmark surveys that they like to compare to contractor compensation levels. Anything above the benchmark average plus 10 percent gets questioned. Because of this, it would be wise for contractors to assess their own vulnerabilities in this area and be prepared to defend their compensation levels. Assessing the adequacy of business systems is another area getting a lot of audit coverage. If the Government can find fault with one of the six proscribed business system criterion, then they can withhold part of the billings. Withholding billings causes cash flow issues and generally harms contractors. Another source of "hot button" topics is to read DCAA's annual reports. There's a little bragging going on as DCAA spikes the football. The stories it tells about how they saved the Government a ton of money get passed around to other auditors who can and will apply the same techniques at other contractors.

We trust that you have enjoyed this short series. If you have any questions please contract us. Comments are always appreciated.