Back in 2013, DCAA (Defense Contract Audit Agency) established new procedures for sampling low-risk incurred cost proposals. You can read a summary of those new procedures here or read DCAA's entire 13 page policy here. Basically, incurred cost proposals from contractors with no history of significant questioned costs, are not audited. The term "significant" is defined in the policy and fluctuates depending upon how many dollars have been incurred on flexibly priced Government contracts.
DCAA recently announced that incurred cost proposals submitted by non-profit organizations are now subject to these same low-risk incurred cost procedures. Most notably, this affects a lot of contractors administered by ONR (Office of Naval Research) and to a lesser extent, NASA (National Aeronautics and Space Agency).
This should be welcome news for many non-profit organizations whose incurred cost submissions were being audited at a much higher percentage than those of their for-profit counterparts. We know of one non-profit with only one contract valued at about $350 thousand per year, that has been audited year after year after year without any audit findings.
This new policy does not extend to universities. Audits of universities are performed as Single Audits (also known as A-133 audits). Government dollars spent at universities usually exceed the $250 million threshold to which DCAA's low-risk incurred cost audit procedures apply anyway, making such exclusion moot.