Jump to content
The Wifcon Forums and Blogs
Sign in to follow this  
  • entries
    43
  • comments
    0
  • views
    3,878

Entries in this blog

 

Year End Preparations for Incurred Cost Proposal

December books closed ✔ Payroll tax returns filed (940/941/944) ✔ W-2s distributed ✔ 1099s delivered ✔ Incurred Cost Proposal…in Process…? You might not consider preparing for the Incurred Cost Proposal (ICP) during all of your other year-end tasks. You might think, “I’ve got 5 more months to worry about that.” Now is the best time to prepare and worry. Why? Most importantly, all of the information is fresh. If you wait until May or June to start the ICP process, you’ll have the worries from the first half of 2016 clogging your brain. It’s much easier to find and fix problems now. As time passes, people change and memories fade. Trying to figure out what happened 12 months ago is difficult enough. Why wait and try to figure out what happened 17 months ago? If you closed December books, your financial statements are complete and your trial balance is accurate. You need financial statements and the TB for Schedules B, C, and G. Your payroll tax returns are needed for Schedule L. Job cost ledgers are used for Schedule H, and invoicing-to-date reports are used for Schedule K. See, you’re ICP is already halfway complete! One piece of information contractors overlook is a contract brief. These are not only required for the ICP, but are a best practice for your contract and financial management processes. Contract briefs give the reader a quick summary of important details without rifling through a stack of documents. The more of these data items you incorporate in your accounting or contract management software, the easier your data extraction process. For example, marking each customer order/job/project (aka contract) with the appropriate contract type and prime contract number means you can easily run revenue and cost reports by contract type and prime contract. We help clients with preparation of the Incurred Cost Proposal and developing and implementing systems to improve all reporting processes. Call today! The post Year End Preparations for Incurred Cost Proposal appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Why You Need A Budget

“Nah, we make enough money. Thanks, but no thanks.”  “We never worry about making our payments.”  “Our employees are dedicated to the mission of the business. They’re okay with lower compensation.”  If any of these scenarios sound familiar, stop reading now; this article will not be of interest to you. However, if you want to… The post Why You Need A Budget appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Why January is the Best Time to Begin Preparing the Incurred Cost Proposal

A new year presents new opportunities for working more efficiently and effectively. When dealing with federal contracts, the Incurred Cost Proposal (ICP) presents one of the biggest opportunities. You’re closing 2016 and preparing for taxes anyway. What better time to gather information and documents for the ICP? Not sure what an Incurred Cost Proposal is or whether you’re required to file one? Here’s a brief primer. What is the ICP? The Incurred Cost Proposal (also known as an Incurred Cost Submission) is the annual reconciliation of the costs (direct and indirect) that a contractor expends in fulfilling a federal contract. Under FAR 52.216-7, it applies to cost-reimbursable and flexibly priced contracts. However, fixed price contracts are still documented in the submission. How is the ICP Used? The ICP is used to determine your final indirect rates for billings used in interim billing rates and forward pricing rate agreements.  FAR 42.1701 provides for systematic review and monitoring of rates. What is the deadline for submission? The ICP is due six months after the close of a contractor’s fiscal year, which is June 30 for those that follow a calendar year. An auditor should verify the adequacy of your submission immediately, but it might take two or more years for the full audit. Any errors can result in penalties and interest, so accurate submissions are of paramount importance. How to Prepare the ICP My colleague Suzanne Camden and I gave a presentation on How to Prepare the ICP with Success! for the National Contract Management Association World Congress.  It outlines the ICP preparation process, including the various schedules that must be completed. Start Preparing Today! June 30 might seem like a long way away, but it will be here before you know it. Don’t procrastinate until May or June! Create a folder right now to gather the necessary documents as you perform your month-end, quarter-end, and year-end tasks. Here are some of the things you can do now to prepare: Download the ICP Adequacy Checklist and use that as your guide. Download the ICE (Incurred Cost Electronically) Model (template). List the required ICP schedules and what you can accomplish or gather right now. As you reconcile your 940 and 941s, you can reconcile Schedule L. As you’re comparing budget to actual for overhead and general and administrative expenses, you can reconcile schedules B, C, and E. If you have a Period of Performance that ended 12/31, you can reconcile that contract immediately. Pro tip: if you do find yourself running behind while preparing the ICP, you can request an extension in writing from the governing office of the Defense Contracting Audit Agency as long as you do so before the deadline. But this should be a last resort. Be proactive. Make this a better year for your ICP. Get started today! If you have questions about the ICP and your federal contract, please feel welcome to reach out to Robert@LeftBrainPro.com or call (614) 556-4415. The post Why January is the Best Time to Begin Preparing the Incurred Cost Proposal appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Why January is the Best Time to Begin Preparing the Incurred Cost Proposal

A new year presents new opportunities for working more efficiently and effectively. When dealing with federal contracts, the Incurred Cost Proposal (ICP) presents one of the biggest opportunities. You’re closing 2017 and preparing for taxes anyway. What better time to gather information and documents for the ICP? Not sure what an Incurred Cost Proposal is or whether you’re required to file one? Here’s a brief primer. What is the ICP? The Incurred Cost Proposal (also known as an Incurred Cost Submission) is the annual reconciliation of the costs (direct and indirect) that a contractor expends in fulfilling a federal contract. Under FAR 52.216-7, it applies to cost-reimbursable and flexibly priced contracts. However, fixed price contracts are still documented in the submission. How is the ICP Used? The ICP is used to determine your final indirect rates for billings used in interim billing rates and forward pricing rate agreements.  FAR 42.1701 provides for systematic review and monitoring of rates. What is the deadline for submission? The ICP is due six months after the close of a contractor’s fiscal year, which is June 30 for those that follow a calendar year. An auditor should verify the adequacy of your submission immediately, but it might take two or more years for the full audit. Any errors can result in penalties and interest, so accurate submissions are of paramount importance. How to Prepare the ICP My colleague Suzanne Camden and I gave a presentation on How to Prepare the ICP with Success!for the National Contract Management Association World Congress.  It outlines the ICP preparation process, including the various schedules that must be completed. Start Preparing Today! June 30 might seem like a long way away, but it will be here before you know it. Don’t procrastinate until May or June! Create a folder right now to gather the necessary documents as you perform your month-end, quarter-end, and year-end tasks. Here are some of the things you can do now to prepare: Download the ICP Adequacy Checklist and use that as your guide. Download the ICE (Incurred Cost Electronically) Model (template) List the required ICP schedules and what you can accomplish or gather right now. As you reconcile your 940 and 941s, you can reconcile Schedule L. As you’re comparing budget to actual for overhead and general and administrative expenses, you can reconcile schedules B, C, and E. If you have a Period of Performance that ended 12/31, you can reconcile that contract immediately. Pro tip: if you do find yourself running behind while preparing the ICP, you can request an extension in writing from the governing office of the Defense Contracting Audit Agency as long as you do so before the deadline. But this should be a last resort. Be proactive. Make this a better year for your ICP. Get started today! If you have questions about the ICP and your federal contract, please feel welcome to reach out to Robert@LeftBrainPro.comor call (614) 556-4415. The post Why January is the Best Time to Begin Preparing the Incurred Cost Proposal appeared first on Left Brain Professionals.
leftbrainpro.com
 

Why January is the Best Time to Begin Preparing the Incurred Cost Proposal

A new year presents new opportunities for working more efficiently and effectively. When dealing with federal contracts, the Incurred Cost Proposal (ICP) presents one of the biggest opportunities. You’re closing 2017 and preparing for taxes anyway. What better time to gather information and documents for the ICP? Not sure what an Incurred Cost Proposal is…
leftbrainpro.com
 

Why January is the Best Time to Begin Preparing the Incurred Cost Proposal

A new year presents new opportunities for working more efficiently and effectively. When dealing with federal contracts, the Incurred Cost Proposal (ICP) presents one of the biggest opportunities. You’re closing 2017 and preparing for taxes anyway. What better time to gather information and documents for the ICP? Not sure what an Incurred Cost Proposal is…
leftbrainpro.com
 

Why Hire a CPA for Government Cybersecurity?

Could your business recover from an abrupt loss of $82,000 to 256,000? That’s how much a single cybersecurity breach could cost a small business, according to an analysis by Tech Republic. For federal government contractors, the stakes are even higher. DFARS 252.204.7008 (Compliance Safeguarding and Covered Defense Information Controls), and 252.204.7012 (Safeguarding Covered Defense Information and Cyber Incident Reporting) requires Department of Defense contractors to fully implement required controls on covered contractor information by December 31, 2017. Failure to comply could result in losing a contract or in having to stop work until you can demonstrate compliance with all 14 categories and 110 specific items of the NIST 800-171 R1 controls. For details about covered items and practical steps you can take to achieve compliance, see our earlier blog posts on the Answers Blog. With the deadline fast approaching, a wide variety of technology and consulting companies are pitching cybersecurity services to small business contractors. Some require you to make costly investments in their technology or offer a one-size-fits-all solution. Here are a few reasons to consider engaging a CPA with government contracting experience to advise on cybersecurity compliance. Humans are at the core of cybersecurity protection – and humans are fallible. Not long ago, most companies relegated anything “cyber” to the IT department. However, technology alone will not protect your company from phishing, hacking and other cybersecurity breaches. Your biggest vulnerability may not involve software or hardware, but the people operating your systems. Are they consistent and thorough in following cybersecurity best practices? Do they use and protect strong passwords? Do they avoid phishing emails? If not, the most sophisticated technology can and will fail to protect your company and its data. Today’s cybersecurity best practices touch on personnel practices, supply chain management, and operational decisions. Nearly all areas of your business require strict policies for managing, storing and transmitting information. These must be applied consistently for effective protection. Trusted Advisors and Compliance Experts. As discussed above, technology is only a part of cybersecurity. Best practices require evaluating risks, implementing procedures to mitigate the risks, training employees to follow policies and continually monitoring adherence to those policies. Most companies invest in control systems to ensure compliance with laws and regulations surrounding financial reporting, tax reporting, labor relations, environmental impacts and many other aspects of business. CPAs set up, manage and audit the majority of such systems. CPAs have earned a unique advisory role based on their understanding of business and adherence to core values of independence, objectivity and skepticism. To maintain their credentials, they must complete appropriate continuing education and comply with a strict code of ethics. Their work also is subject to rigorous external quality reviews. A CPA who understands cybersecurity as well as the needs of small businesses and government contractors is an ideal partner to help you comply with government regulations – including those governing cybersecurity. CPAs Offer Multidisciplinary Knowledge. In addition to core education in business and accounting, many CPAs have expertise in business continuity and disaster recovery. Some hold additional credentials specifically related to IT and security. These include Certified Information Systems Security Professionals (CISSP), Certified Information Systems Auditors (CISA) and Certified Information Technology Professionals (CITP). Moreover, the American Institute of CPAs has established a Cybersecurity Risk Management Reporting Framework for companies to use in designing cybersecurity programs and reporting them to stakeholders – including boards of directors, senior managers, investors and government compliance officers. This framework also includes descriptive criteria, controls and an attestation guide to help CPAs report on cybersecurity. As more businesses implement the AICPA framework, it is becoming a common denominator in talking about cybersecurity in the business world. Preparing for Audit and Reporting Security Breaches For government contractors, compliance requires more than establishing a cybersecurity framework. You must be able to demonstrate compliance and have systems in place to report security breaches. Although no formal audit process has been established for compliance with the NIST 800-171 framework, it is wise to develop your systems with audits in mind. With extensive training and experience in both consultative and audit engagements, a CPA who understands cybersecurity and government contract compliance has an edge in helping you prepare. In addition to preparing for audit, you must have systems in place for reporting security breaches. FAR 52.204-21 has no reporting requirement, but other FAR clauses around Personally Identifiable Information and related items do have separate reporting requirements. Depending on where your business is located, you may have state reporting requirements in addition to any federal contract reporting requirements. Many companies don’t understand the need for solid cybersecurity controls until they have suffered a breach. For example, an attorney friend tells a story about a Human Resources professional who received an email from the president of her company requesting a list of all employees and their social security numbers. She prepared the list and responded to his email. A few minutes later, she bumped into the president and told him, “I just sent the list of information you requested.” He responded, “What information?” The HR professional immediately realized what had happened, but the damage was done. While this happened at a relative small company, its 115 employees resided in 32 states, requiring notification to each of the states. Since state laws are not synchronized, the company had to employ a national law firm. Chances are, if a CPA had been involved in developing the company’s cybersecurity policies, there would have been a clear prohibition against sending sensitive employee information via email – no matter who made the request. Questions about cybersecurity and government contracting? We’re here to help! Please call or email Robert E. Jones at (614) 556-4415 or robert@leftbrainpro.com. The post Why Hire a CPA for Government Cybersecurity? appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Updated DCAA Guidance for the Incurred Cost Proposal

DCAA Recently provided updated guidance on the incurred cost proposal through two MRDs (audit guidance memos) and an update to the ICE model. The first MRD on August 27, 2015, updated the Incurred Cost Proposal Adequacy Checklist to aid in determining the auditability of the proposal. Note that there is no score or definitive guide on adequacy. A proposal with multiple deficiencies may be auditable while another proposal with only one deficiency may not be auditable. Audit teams must use their professional judgment in evaluating deficiencies. The second MRD on September 30, 2015, updated the Post Year-End and Corporate Incurred Cost Audit Programs. The update resequenced the steps in risk assessment, consolidated reconciliation audit procedures, add a separate small business risk assessment, and updated procedures for subcontracting testing. DCAA also released ICE Model Version 2.0.1d in August 2015. The latest update is only to Supplementary Schedule C. This schedule identifies prime contracts where the contractor is a subcontractor. The information on this schedule should be the same information as the Schedule J of the prime contractor. Submission of Supplemental Schedule C is not mandatory. Need help with preparation of your incurred cost proposal? We can help! Call today. The post Updated DCAA Guidance for the Incurred Cost Proposal appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

The Proposal Adequacy Checklist

Is your proposal in response to a federal Request for Proposal thorough, accurate and complete? If not, chances are high that you will be eliminated from competition – which represents a waste of time and opportunity for you and a corresponding waste of time for the contracting agency. Contracting agencies use the RFP process to identify the best supplier based on a combination of qualifications, history of achievement, timeliness, responsiveness, and cost.  To have a chance at winning a contract, it is vitally important that you submit the information requested, in the level of detail requested or required by law, in the format requested. To reduce the number of nonresponsive contracts, several federal contracting authorities have developed proposal adequacy checklists. These walk contractors through format, cost elements, subcontracts, and exceptions to certified cost or pricing data. Checklists require prospective contractors to provide the location of requested items, or an explanation of why the requested information is not provided. Checklists apply only to the cost proposal, and not to the entire proposal submission. Agencies that rely on proposal adequacy checklists include: Department of Defense/Defense Acquisition Regulations System (36 items) Defense Contract Audit Agency (uses DFARS checklist) Defense Contract Management Agency (35 items) National Aeronautics and Space Administration (34 items) Certain RFPs, including those that require certified cost or pricing data, should require a proposal adequacy checklist to be submitted as part of the proposal (DFARS 215.408 (5)). In addition, any contracting officer has the authority to require inclusion of a checklist in response to an RFP. In any event, completing the appropriate checklist is a valuable tool to validate the adequacy of your proposal. To learn more about proposal adequacy checklists, you can view Proposal Adequacy Checklist—The New Normal, a presentation that Robert Jones and Suzanne Camden gave for the National Contract Management Association’s World Congress in July 2014. Our next blog post will delve into more detail about creating responsive proposals. In the meantime, if you have questions about proposal adequacy checklists or any other aspect of the RFP process, we’re here to help! Email robert@leftbrainpro.com or call (614) 556-4415. The post The Proposal Adequacy Checklist appeared first on Left Brain Professionals.
leftbrainpro.com
 

Test, Test, Test

Implementing a new accounting system inherently implies change to your current processes. It also means entering data in different fields in a new system. To be certain your system setup is correct, you must test all of your scenarios. Let’s back up for a moment. Before testing, you need a good list of what you want to test. At a high level, every organization needs to test two main cash flow processes: Order to Cash, and Procure to Pay Depending on the type of products (services vs manufacturing) and the specific structure of your organization, you may have a few or several sub-processes to test. For example: Order to Cash Contract review Customer order entry Engineering/design Supply Chain Planning Purchasing Procure Receive inventory Accounts payable Manufacturing Inventory Delivery Customer invoicing Receive customer payment Back to my main topic: test, test, test. Write out a list of scenarios and test each scenario multiple times. Fully execute each process as if you were doing it live. While you won’t actually manufacture a part, you will simulate issuing and receiving inventory, delivering product, invoicing customers, and receiving payments. Test, test, test each scenario until you validate the expected results. The post Test, Test, Test appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Surviving the DCAA Exit Conference and Audit Remediation

Months can expire between the conclusion of an audit and when the DCAA issues an audit report. Save yourselves needless speculation and angst! Make sure to hold an exit conference before auditors leave your premises. You may want to request that the auditor and the auditor’s supervisor both attend the meeting, Your designated point of contact and affected members of the management team should all attend. An exit conference gives you the opportunity to discuss audit findings before they become official. You can probe the accuracy of the findings and, if needed, clarify any items upon which there is disagreement. When required, follow up with documentation to support your position. Auditors should review their findings in order of priority. For high-priority findings, DCAA might not close the audit until you remediate the underlying issues. As a result, it is vital that you gain a thorough understanding of the finding as well as what the auditor will accept as remediation. Auditors might specify that lower-priority findings be fixed by the next audit. Again, you should obtain auditors view’ on what constitutes an acceptable solution to the issue. In some cases, auditors may say that your way of handling a procedure is acceptable, but they would prefer that you use a different approach. You must then evaluate the cost to your business of changing your approach versus the cost of having auditors challenge your business processes. The Preliminary Report After the exit interview, the auditor should prepare a preliminary report covering all of the findings resulting from the audit. This is often not completed until weeks or months after the audit. You should begin remediation of any findings addressed at the exit interview while awaiting the preliminary report. After receiving the report, you should review the findings and respond in writing to any areas of disagreement. Be prepared to back up your position with documentation. The Final Audit Report Some months after auditors have left your premises, the DCAA will satisfy its reporting requirements by issuing a final audit report. Typically, reports should include: A statement that identifies the scope and objectives of the audit, including the area, system, or proposal being audited. Objective audit findings. Adequate support for all conclusions. A description of any issues that adversely affected the audit. A summary of audit results, including the auditor’s findings, recommendations for contractor compliance with applicable regulations, and overall opinions. Review this report with your management team carefully and develop a plan to address remaining audit findings as required. If you successfully managed the audit process, you can breathe a sigh of relief and return to managing your business. What if I Disagree with the Audit Report? DCAA auditors are only human. They can make mistakes or issue findings with which you disagree. You do have rights of appeal under the Contract Disputes Act. Moreover, your contracting officer can reject DCAA recommendations, although this is increasingly rare. Litigation can be expensive, however. Unless their errors present a threat to your payments or continued operation as a government contractor, it may be to your advantage to change your systems to comply with their findings. This is a decision that you should make with competent legal counsel. If you have questions about DCAA or DCMA audits and your business, please call or email Robert E. Jones at (614) 556-4415 or robert@leftbrainpro.com. The post Surviving the DCAA Exit Conference and Audit Remediation appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Small Business & Government Relations

NCMA Dayton hosted “Small Business & Government Relations” as part of it’s monthly Bagels & Business series. Panelists: Tom Krusemark, Procurement Center Representative, Small Business Administration Dave London, Chief Operating Officer, Tridec Technologies Bill Cox, Procurement Specialist, Procurement Technical Assistance Center Michael Bridges, President, Peerless Technologies Bill Cox’s opening statement to small businesses “You need… The post Small Business & Government Relations appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

SF1408 Accounting System Review

Has your prime or contracting officer told you that you need an approved or adequate accounting system before your next award? What exactly is an approved or adequate accounting system? In the world of government contracting, most people think of DCAA-approved accounting systems. There are a few misnomers in that statement: DCAA does not approve accounting systems. They audit or review systems and provide recommendations to the contracting officer who holds the responsibility and authority for approving a system. DFARS 242.7502(b) DCAA can no longer (at least temporarily) perform audit services for non-defense agencies. Sec. 893 of the National Defense Authorization Act of 2016 prohibits the DCAA from providing outside audit support to non-DOD agencies until the DCAA certifies that the backlog for incurred cost audits is less than 18 months of incurred cost inventory. DCAA is not the only organization that can perform accounting system reviews. See the DFARS clause above and item #3 on DCAA’s SF1408 Checklist. There are other misnomers regarding the requirement of an adequate or approved system. FAR 16.301-3 states that an “adequate” system is required for cost-reimbursement contracts while DFARS 242.7502(a) implies that an “approved” system is required for cost-reimbursement, incentive-type, time-and-materials, and labor-hour contracts. Note the distinction that the FAR does not indicate incentive-type, time-and-materials, and labor-hour contracts and neither clause mentions fixed-price contracts. Approved systems are also not required for the acquisition of commercial items or actions below the simplified acquisition threshold. While the FAR does not define an “adequate” or “approved” system, two common sources of guidelines are the SF1408 Preaward Survey of Prospective Contractor Accounting System and the Accounting System Administration criteria in DFARS 252.242-7006(c). Additional guidance can be found in the 18 Cost Accounting Standards. The basic criteria include: Transactions under general ledger control, in accordance with GAAP Segregation of direct and indirect costs Identification of all costs, particular time (labor), by end cost objective, contract, and/or line item Logical collection and allocation of indirect costs Identification and segregation of unallowable costs How can you get an accounting system review? You have three primary options: Self-certify Have prime’s audit team review your system Hire an outside firm You probably realize some of the issues with those options. Self-certifying, if the contracting officer allows, add another layer of compliance risk in your federal contract. Most subcontractors view their primes as competitors and don’t want them nosing around their books. And there’s no guarantee that a contracting officer will accept your letter from an outside firm. That said, most contracting officers acknowledge the obstacles to system approval and recognize the role that outside firms play. Are you looking for accounting system review or guidance in designing your system? We can help! Call today. The post SF1408 Accounting System Review appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Received a DCAA Audit Letter? Don’t Panic!

For government contractors, auditing is a matter of when – not if. Yet many contractors still panic when they receive the inevitable audit request from the Defense Contract Audit Agency. If you have been preparing from the start of your contract, you should be in good shape to withstand an audit. Yet, even if you have been so busy running your business that all thought of audits fell to the back burner, there are steps you can take before and after the auditors arrive to manage the process successfully. The DCAA Audit Letter and Data Call To initiate an audit, DCAA auditors will send an audit letter that includes: A description of the type of audit they plan to perform. A list of systems and records they want to examine (known as a data call). A deadline for your response. Once again, take a deep breath. Then begin developing a plan of attack for dealing with the audit. Examine the audit letter to see what auditors are looking for and what the agency’s agenda might be. Pull the Contract Audit Manual for guidance. Appoint someone as the primary point of contact between your company and the auditors. Ideally, you should appoint someone who is familiar with your overall business operations and who has a thorough understanding of government contracts, federal regulations and the DCAA audit process. Establish a chain of command for responding to the audit. Ensure that any employees likely to be involved in the audit understand their roles and responsibilities. Begin gathering requested data. Small business contractors often lack the in-house expertise to prepare for audits and represent themselves through the audit process. An experienced CPA will be an invaluable asset to you during the audit process. Your expert can serve as a buffer between you and the auditors. Ideally, you should appoint a CPA with the knowledge and experience to expedite the audit process and to push back against overly aggressive auditors if needed. The Entrance Conference Once you’ve put a preliminary plan in place, schedule an entrance conference with the DCAA auditors. Goals of the conference include: Introduce the auditors to your point of contact. Clarify the purpose of the audit. Agree on the audit scope. Nail down specifics. Do not accept a broad scope such as, “an audit of the contractor’s facilities.” Specify the types of records and data the auditor intends to review. Remember, the DCAA auditors have the right to review any documentation that supports a cost charged and recovered on a federal contract, grant, or cooperative agreement. Set the auditor’s level of access to documents, information and personnel. During the Audit While auditors are at your business, your goal should be to assist them in completing their task as quickly as possible while protecting your company’s interests. Here are some tips for managing the audit process and avoiding needless disruption to your operations. Be courteous and professional. The auditors represent one of your biggest clients, the federal government. Make sure to treat them accordingly. Know your rights. By law, auditors are only entitled to access specific records required to assess costs. They must follow Generally Accepted Government Auditing Standards to determine which records are relevant. If possible, provide auditors with a designated office or work area. Bring any requested documents to them rather than allow them to roam throughout your company. For floor checks, have your designated point of contact or another company manager accompany the auditor during interviews with employees. Ask auditors to make data requests, in writing, to your designated point of contact. Although DCAA auditors are not required to make written requests, these are very helpful in evaluating, tracking and prioritizing their requests. Review and log all documents before providing them to auditors. Auditors will ask clarifying questions. Answer them – but make sure you are only answering their specific questions. Do not volunteer additional information. This is where an experienced government contracts CPA can be especially helpful. Hold interim conferences as needed to manage the audit process. These will allow you to address any perceived deficiencies or mistakes in your data. If the auditors discover something wrong, remedy the issue before they leave your site, if possible. In our next blog post, we’ll discuss The Exit Conference and Audit Remediation. In the meantime, if you have questions about DCAA or DCMA audits and your business, please call or email Robert E. Jones at (614) 556-4415 or robert@leftbrainpro.com. The post Received a DCAA Audit Letter? Don’t Panic! appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Podcast: Implementing a DCAA Approved Accounting System

In this episode, Robert spoke with Michael LeJeune from RSM Federal about implementing a DCAA approved accounting system for government contracting. Robert does an excellent job of breaking down exactly what a DCAA approved accounting system looks like as well as what it takes to get your system approved. We think this episode will make the concept of getting your system approved much less intimidating as well as provide you with practical advice that will set your company up for success. You can listen to the full podcast below. For more podcasts from the Game Changers, check out their website. The post Podcast: Implementing a DCAA Approved Accounting System appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Outsource Your Incurred Cost Proposal

Congratulations! You Submitted Your Incurred Cost Proposal. But is it Adequate? If your company has flexibly priced or time-and-materials federal contracts that contain the Allowable Cost & Payment clause (FAR 52.216‐7), you are required to file an Incurred Cost Proposal (also known as an Incurred Cost Submission) within six months of the end of your fiscal year. For calendar year companies, the June 30th deadline just passed. If you submitted your ICP on time, congratulations! It is imperative to submit your ICP promptly unless you obtain a waiver. If you missed the deadline, time is of the essence! The Defense Contract Audit Agency will provide a single late notification letter when an Incurred Cost Proposal is 30 days late. If your ICP is still outstanding six months after the deadline, the DCAA will refer your contract to the Defense Contract Management Agency for audit. Keep in mind that timeliness alone will not protect you from increased scrutiny. If the DCAA deems your proposal inadequate, it also may refer your contract to the DCMA for audit. Many contractors prepare their ICPs in house. This may be a good option if your staff includes an experienced cost accountant and contracts compliance expert who stays on top of the complex and changing regulations that apply to ICP submissions. These may include annual changes to FAR regulations, the proposal adequacy checklist, the ICP format and the expectations of government auditors. In most cases, however, small and medium-sized businesses can’t justify the expense of keeping a contracts specialist on staff.  Just as they hire experts to prepare their tax returns, they bring in an experienced contracts compliance accountant to prepare their ICPs. Here are just a few of the reasons to consult an ICP expert: An expert stays current with the latest Federal Acquisitions Regulations and all of the requirements for preparing adequate Incurred Cost Proposals. Hiring an expert may cost less than you would pay an inexperienced accountant to navigate the intricate requirements for developing and submitting an ICP. An expert knows which expenses are allowable and which are not, protecting your submission from rejection. An expert knows how to classify expenses, making it easier to prepare Incurred Cost Reports, saving time at the end of the year An expert knows how to classify labor costs in a way that the government recognizes, which can save staff time and protect against findings when your contract is audited. If you missed the deadline or have any doubts about the adequacy of your Incurred Cost Proposal, start working on a solution as soon as possible. You’ll find more detailed information about the ICP preparation process in our January blog post. Questions about the ICP and your federal contract? We’re here to help! Reach out to Robert@LeftBrainPro.com or call (614) 556-4415. With more than 14 years of Department of Defense contract and accounting experience for both Fortune 500 and small to mid-sized businesses, he has extensive experience classifying costs, creating reports, working with clients to prepare ICPs and navigating audits. The post Outsource Your Incurred Cost Proposal appeared first on Left Brain Professionals.
leftbrainpro.com
 

Outsource Your Incurred Cost Proposal

Congratulations! You Submitted Your Incurred Cost Proposal. But is it Adequate? If your company has flexibly priced or time-and-materials federal contracts that contain the Allowable Cost & Payment clause (FAR 52.216‐7), you are required to file an Incurred Cost Proposal (also known as an Incurred Cost Submission) within six months of the end of your…
leftbrainpro.com
 

January 26th NCMA Webinar: Hot Topics in Unallowable Costs

Understanding unallowable costs is a key factor in profitably managing government contracts. Government agencies will only reimburse contractors for costs that are considered reasonable, allocable and allowable under the contract terms, Cost Accounting Standards or Generally Accepted Accounting Principles. Identifying these costs is important to avoid billing issues, incurred cost audit findings, and to pass pre-award accounting system surveys. On Thursday, January 26, I will present a webinar for the National Contract Management Association on “Hot Topics in Unallowable Costs.”  From noon to 1:30 p.m. ET, we will discuss often-overlooked information in FAR Parts 31.000–31.204, how this information sets the stage for the selected costs in FAR 31.205, and hot topics for auditors. Attendees will leave with a greater understanding of how unallowable costs impact their government contracts. Key takeaways include: •    A deeper understanding of FAR Part 31, “Contract Cost Principles and Procedures”
•    Knowledge of other sources of cost interpretations
•    Critical thinking on unallowable costs We’ll cover a lot of ground in the webinar, including: •    Defining unallowable costs
•    Unallowable costs vs IRS deductible costs
•    Unallowable vs non-billable costs
•    Cost Accounting Standards – CAS 405
•    Common issues, such as auditor hot buttons, bad debts, entertainment, etc.
•    Travel expenses
•    Legal expenses Once we’ve covered the basics, we’ll go on to discuss current Hot Topics, including: •    The annual hat trick: what it is, and what to watch for
•    Unallowable vs expressly unallowable costs
•    Directly associated unallowable costs
•    New FAR 31.205 Selected Cost Principles Guidebook
•    Related party rent vs cost of ownership As we’ll discuss, non-compliance can be costly! The government charges penalties for expressly unallowable costs. Moreover, The Defense Contract Audit Agency is, on average, 5 to 6 years behind in auditing incurred cost proposals. That means a disallowed amount could incur 5 to 6 years of interest. The webinar will wrap up with a discussion of best practices for handling unallowable costs, including how to be audit ready and audit proof. We’ll go over: •    DCAA tools to use
•    Policies & procedures
•    Structures & reporting
•    A prudent approach to documenting costs If you’d like to attend the webinar, tickets are available on the NCMA website. If you’re unable to attend or want to pick my brain about unallowable costs, give me a call at (614) 556-4415 or email Robert@leftbrainpro.com. The post January 26th NCMA Webinar: Hot Topics in Unallowable Costs appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Intellectual Property in Government Contracts

Question In your discussion of intellectual property in government contracts, you talked about government purpose rights and how you negotiated with the government for your client to keep the background technology but allow the government to own the form factor.  Where both the contractor and the government contribute funding, the parties are left to negotiate… The post Intellectual Property in Government Contracts appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Increased Profit Margins On Government Contracts

What are your current profit margins on government contracts? Are you still bidding a fee of 6% to 10%? Many contractors think they must accept low profit margins on government contracts. Not true! FAR 15.404-4(a)(3) clearly states, “Both the Government and contractors should be concerned with profit as a motivator of efficient and effective contract performance. Negotiations aimed merely at reducing prices by reducing profit, without proper recognition of the function of profit, are not in the Government’s interest. Negotiation of extremely low profits, use of historical averages, or automatic application of predetermined percentages to total estimated costs do not provide proper motivation for optimum contract performance.” Profit/fee calculations must consider the unique circumstances of the immediate negotiation. The only statutory limits on profit/fee are for cost-plus-fixed-fee contracts: Experimental, developmental, or research work performed under a cost-plus-fixed-fee contract – 15% of estimated contract costs
All other cost-plus-fixed-fee contracts – 10% of estimated contract costs Are primes and contracting officers beating you with the Weighted Guidelines stick? That tool only applies to negotiated contracts when certified cost or pricing data is obtained. The Weighted Guidelines are certainly a tool to use in calculating a fair and reasonable fee, but not a constraint. Look at items 13-20 – COST. Since cost analysis is not applicable to many acquisitions (see FAR 15.403-1(b), and acquisitions below the threshold of $750,000 for certified cost or pricing data), cost data should not be supplied to the Government or prime and should not be the basis for price negotiations. So, how much fee can you charge? A lot of factors go into pricing and price analysis, so there is no black-and-white answer. You should start at 30% and adjust your rates as necessary. Keep in mind that the contracting officer must determine that your prices are fair and reasonable (through market research), so higher rates will make you less competitive. I see many contractors successfully bidding and winning at 18% to 25%, well above the 6% to 10% myth. Another myth is that you must offer the Government a discount, a rate less than you charge everybody else. Not true! The Government simply asks that you not charge them more than you charge your most favored customer for the same or similar products under the same or similar circumstances. If you offer discounts based on quantity, prepayment, or prompt payment, you need to offer those same discounts to the Government. If they do not meet the quantity requirements or choose not to negotiate terms and conditions (such as early or flexible delivery), then you don’t have to honor the discount. Just be sure your pricing schedule for government contracts reflects the same options and discounts you offer your best customer, nothing more. And, if you reduce your commercial pricing or offer additional discounts, make the same offer to the Government. See GSAM 538.270 for details on GSA’s “Most Favored Customer” clause. Want to increase your profit margins on government contracts? Call today to learn more of our insider secrets. We’ll walk you through a cost and price analysis of your products. The post Increased Profit Margins On Government Contracts appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Federal Privacy Act Criminal Penalties Apply to Government Contractors

For more than 20 years, government contractors and their employees that operate an agency’s system of records have been subject to the same criminal penalties as government employees for violations of the federal Privacy Act (PA). These penalties have taken on new importance because a recent FAR amendment makes PA training required for certain federal contracts. Moreover, the training must include information on the criminal penalties a government contractor and its employees face for violating the PA. Specifically, violations are a misdemeanor punishable by a fine of up to $5,000; there is, however, no possibility of imprisonment. Because the language Congress used to describe this criminal violation is so carefully drafted, it’s important to get into the law’s wording and details. The criminal penalty provision of the PA punishes any contractor or its employees who “knowing that disclosure of the specific material is prohibited, willfully discloses the material in any manner to any person or agency not entitled to receive it.” Unfortunately, it’s not easy to describe what these words mean because there are not a lot of reported court decisions interpreting them. According to U.S. Department of Justice, there are at least two reported decisions on this criminal law. Realistically, however, only one of them really helps to describe how anyone, including a government contractor, can violate the PA’s criminal provision. That decision, actually a defeat for the government, involved a list of patients and their addresses prepared by Richard Trabert, the administrator of an Army hospital that was closing. A doctor at the closing hospital who would be seeing patients at a nearby private clinic asked Trabert to prepare the list which Trabert prepared from data in his computer. Trabert prepared the list and gave it to the administrator of the private clinic. The information on Trabert’s list was protected by the PA. The government charged Trabert with violating the criminal provision of the PA but a judge concluded that the government had not proven that Trabert violated the PA beyond a reasonable doubt. The government had failed to prove that there was both a “knowing disclosure” and a “willful disclosure.” Knowing disclosure. The government could prove a “knowing disclosure” from circumstantial evidence such as the fact that the employee had taken PA training. In Trabert’s case, however, there was no evidence he had received PA training and Trabert testified that he did not remember getting any PA training. In addition, senior personnel at the hospital knew Trabert was compiling the list but no one had told him it was illegal. Moreover, other lists had been prepared by others for the benefit of other clinics. Another way the government could prove a “knowing disclosure” would be “a specific admonition provided as to the general application of the Privacy Act” which in Trabert’s case was a computer screen banner warning of the PA’s applicability to information in the computer every time the computer was turned on. Significantly, the government did not have to prove that Trabert had been told specifically that the PA applied to the list he gave the clinic’s administrator. But here, there was no “knowing disclosure” for several reasons including the fact that similar lists had been prepared on other occasions by other employees without any one being charged with a crime. Willful disclosure. The government had also failed to prove a “willful disclosure:” that Trabert voluntarily and purposely disclosed the information in violation of the Act. Here, Trabert was guilty at most of gross negligence. According to the judge, it was not clear to Trabert that the disclosure of the list was inappropriate. Trabert was not aware of any improper motive in providing the list to the clinic and he knew that the clinic could not produce the useful list itself. He did not know that the doctor requesting the list wanted it for expanding his practice at the new clinic. Nor did Trabert benefit financially for disclosing the list like getting a job at the new clinic; the government did not prove that he even wanted a job there. Conclusion. Trying to distinguish an unfortunate “gross negligence” disclosure from a criminal “knowing and willful disclosure” is difficult. Trabert was wrong to prepare the list and give it to the private clinic. But he did not do it with the intention of violating someone’s privacy rights protected by the PA. United States v. Trabert, 978 F.Supp. 1368 (D.Colo. 1997). A good example of conduct that goes beyond “gross negligence” comes from civil (not criminal) lawsuits against an agency (and not its employee like Trabert) that violated the employees PA rights. Department of Energy employees filled out personnel security questionnaires after being told that the information would be used only for security clearances purposes. But the information was then sent to the Department of Justice for purpose of criminal prosecution. DOE had not told the employees that questionnaire information could be used for law enforcement purposes. Covert et al. v. Harrington, Secretary, Department of Energy, 876 F.2d 751 (9th Cir. 1989). Perhaps a good summary of what it takes to violate the PA is this: the violation “must be so patently egregious and unlawful that anyone undertaking the conduct should have known it unlawful.” While Trabert’s conduct was wrong, you cannot say that his actions met this test. Terrence O’Connor is a Partner and Director of Government Contracts at Berenzweig Leonard LLP, McLean, VA. He can be reached at toconnor@BerenzweigLaw.com. The post Federal Privacy Act Criminal Penalties Apply to Government Contractors appeared first on Left Brain Professionals.
leftbrainpro.com
 

Federal Contractors’ Obligations With Prevailing Wage and Fringe Benefits

Unique compensation requirements apply to federal contractors. In the construction sector, the Davis Bacon Act (DBA) requires covered contractors and subcontractors to pay a specific prevailing wage and fringe dollars for each hour an employee works on a covered job site. The regulations are difficult to understand for the non-initiated. Luckily, Lind Sawyer of Capital Strategies can make the confusing understandable. Here’s my conversation with Lind who was educating me on the finer points of the regulations. This could be illuminating for you too! Anne-Lise Gere, SPHR – What are the risks of not complying with prevailing wage and fringe benefits for DBA contractors? Lind Sawyer – The Department of Labor (DOL) is hot on the compliance trail. It recently announced a strategy called, “Plan, Prevent, Protect” to ensure these regulations are met. The DOL has teams of auditors who target federal contractors of all sizes. An audit from the DOL can be overwhelming, and the fines for noncompliance are expensive. The scary part is there is no formula for the fines. Fines are at the DOL auditor’s discretion.  I have seen an auditor shut down a worksite where the contractor and subcontractors were not in compliance. It puts small businesses at risk of losing everything. So this is a big deal. When audited, federal contractors must be prepared to prove compliance and show that all regulations have been followed. This means being able to prove that the prevailing wage was paid for every hour, for every pay period and the fringe benefit dollars are properly allocated to eligible benefits. Anne-Lise – Why is compliance so tricky for federal contractors? Lind Sawyer – The DBA wages and fringe are often higher than what’s paid to the employees on a private sector job.  Some contractors are working simultaneous federal contracts and private sector jobs with individuals shifting between job sites frequently. It’s hard to keep track of which hours are on a DBA contracts and which are not. Anne-Lise – How do DBA contractors operate in this context? Lind Sawyer – Because many contractors don’t have a system in place to track and allocate the benefit dollars, they end up paying the higher federal wages and the fringe benefit to employees in cash. Anne-Lise – What’s the problem of paying benefit dollars in cash? Lind Sawyer – Paying fringe benefits dollars in cash creates a multitude of problems.  Most business owners are acutely aware of the added financial burden of paying cash instead of providing benefits. It can increase their overall labor costs by up to 30%. Every cash wage also raises the FICA, FUTA, SUTA, General Liability and Workman’s Compensation cost. Fringe dollars are meant to provide additional benefits to workers on federal contracts. The DOL encourages fringe benefits to be used for insurance benefits (medical, dental, disability) and paid time off. Unfortunately, most federal contractors are UNAWARE of the option of paying fringe dollars in benefits although it is in the DOL Regulations. With the advent of paid sick leave for federal contractors on January 1, 2017,  it will be in the employer’s best interest to use those fringe dollars to fund the sick leave requirements. Anne-Lise – So what’s a DBA employer to do? Lind Sawyer – DBA employers should have a system in place tracking DBA hours, allocating prevailing wages and fringe benefits dollars in accordance to the regulations. Unfortunately, most payroll systems do not provide these functionalities. At Capital Strategies we have developed proprietary software called Fringe Tracker. It integrates with the existing benefits and payroll companies. So it doesn’t disrupt the existing relationship with payroll provider and benefit administrator. It calculates the amounts to be allocated. Allocating fringe dollars to indirect compensation has a significant and meaningful impact on employers’ bottom line. Anne-Lise – What are the most common fringe benefits funded by those federal dollars? In a few words, put in place an additional system to track and allocate fringe dollars. At Capital Strategies, our software not only allocates the fringe dollars to different benefit categories, it also adds the wage differential between private sector pay and federal contract wages to fund the benefits in the most efficient manner possible.   By reducing the wage differential between federal and private sector jobs, we also reduce the temptation for inaccurate timekeeping by employees. Our system automates compliance, applying the math calculations and recordkeeping according to the DOL Regulations, and generates profit by optimization of the fringe benefit payout. If you have questions about this article or HR compliance, please contact: Anne-Lise Gere at (757) 240-4402 or email annelise@gereconsulting.com, or Lind Sawyer at (757) 421-0411 or email kmgstrategies@msn.com, or Robert Jones at (614) 556-4415 or email robert@leftbrainpro.com. The post Federal Contractors’ Obligations With Prevailing Wage and Fringe Benefits appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

DoD Needs Pricing Improvement

A number of recent DoDIG reports indicate that DoD did not make an accurate determination of fair and reasonable pricing, could have purchased items at a lower price, or could have purchased fewer items. While excess inventory does not necessarily mean the prices were not fair and reasonable, it does mean that DoD spent more money than necessary – something that could have been avoided with a better requirement. Husky Mounted Detection System Spare Parts U.S. Army Engineering and Support Center C-130J Excess Inventory Billions Spent on F17 Engine Without Knowing Fair Price I constantly remind students and clients that FAR 15.402(a) clearly states that “contracting officers shall purchase supplies and services from responsible sources at fair and reasonable prices.” This requirement also applies to primes and subs at every level. While commercial items, sole source procurements, and single responses to solicitations present obstacles, they are not barriers and do not negate that primary directive. When you are responsible for awarding contracts or subcontracts, be sure to perform market research (FAR 10) and document how you determined fair and reasonable pricing. The post DoD Needs Pricing Improvement appeared first on Left Brain Professionals.
leftbrainpro.com
 

DoD Acquisition Updates

The past month has seen a number of proposed acquisition changes. Remember that the FAR/DFARS is updated on a regular basis. As you read the updates, take note of “proposed” rules versus “final” rules, effective dates, and comment periods. When reviewing an RFP/Q or other document, note the effective date of the contract and the… The post DoD Acquisition Updates appeared first on Left Brain Professionals.
leftbrainpro.com

Left Brain Professionals

Left Brain Professionals

 

Demystifying Billing Rate Structures

One of the most common topics we address with clients is their billing rate structure. The conversations tend to start in one of two ways. The first relates to a real or perceived competitive pricing issue. The second relates to an accounting system (software) upgrade. In both cases, we train clients how to properly structure… The post Demystifying Billing Rate Structures appeared first on Left Brain Professionals.
leftbrainpro.com
Sign in to follow this  
×