Most Government contractors with cost-type contracts have been subjected to "paid voucher" reviews. These are reviews where contract auditors (usually DCAA or Defense Contract Audit Agency) will take a voucher that has previously been paid in the last year and trace the amounts claimed, billed, and paid to source documents. This is a fairly recent program coming out of DCAA with dubious benefits. One former auditor speculated that after DCAA transitioned most of its important work to DCMA (Defense Contract Management Agency), it has been scrounging around looking for purposeful work. Whether paid voucher reviews provide a benefit to the Government or not, most of the testing steps do not require the skills of professional auditors (Certified Public Accountants). Many "testing" steps are those that anyone, with minimal training, could perform - e.g. did the contractor pay the vendor in 30 days?
The basic audit policy is to review one paid voucher per year at non-major contractors and one voucher per month at major contractors. The distinction between major and non-major is $100 million of costs charged to flexibly priced contracts in a year. Contractors with less than $100 million are considered non-major contractors.
One aspect of these reviews that sometimes becomes contentious concerns T&M (Time and Material) contracts and the requirement to compare employee qualifications to those specified in the contract. This is why auditors request contractors to provide personnel files - to ascertain whether their education, training, and experience qualifies them to perform the function at the level they are billed to the Government. For example, while an apprentice may perform a particular function just fine, the Government, by terms of the contract, wants and is paying for a Senior Engineer. Contractors, if you ever find yourself in a situation where you cannot meet the contractual requirements for a particular skill, contact your contracting officer and let them know the situation. It might require a reduction in a T&M rate but that is much better than finding yourself on the wrong end of an investigation.
Another issue that frequently arises concerns contractor oversight of cost-type subcontractors. For most non-major contractors, this is not a problem because there are no subcontract costs charged to the contract. But where there are subcontract costs, the auditors will want to know what controls are in place to manage those subcontracts and monitoring subcontract billings. Contractors do have the contractual requirement to ensure the propriety of subcontractor submitted costs and where those subcontracts are cost-reimbursable, the Government expects a level of oversight similar to what it performs for the prime contracts.
The DCAA audit program for paid voucher testing can be viewed or downloaded here.
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