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Audit of Settlement Proposals from a T4C


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I did a T4C, DCAA is telling me that they do not have time to audit the subcontractor's settlement proposal and that I need to hire someone off the street. I've searched in the SBA Database for firms registered in CCR and no luck. I'm in Oklahoma, so that would be my priority of company local. Would appreicate any advice anyone can offer.

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JLchief 55,

Vern's advice is sound.

You say you want a local audit firm. I want to let you in on a little secret.

When you hire an accounting firm or advisor/consultant, the travel costs will be relatively insignficant compared to the service fees based on hourly billings. Example: Assume $1,000 in airfare and $200/day in per diem costs. That's just a few hours of billable time.

So the efficient auditor is always going to be cheaper than the inefficient auditor, regardless of travel distance.

Thus, if you can find an experienced, knowledgeable auditor who can get the work done and give you a clear report quickly, hire that auditor--no matter where s/he hails from. Otherwise, you run the risk of hiring an inexperienced auditor who will need to be taught what the issues are (by the entity being audited) and who will give you a problematic audit report ... while taking twice as long (and billing twice as many hours) as the first auditor.

Just a little something to think about.

Hope this helps.

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Timbuk2,

You should note that the PGI was revised (last year?) to limit the field assistance that DCAA will provide to COs. DCAA will only audit FFP proposals valued at $10 million and above, and will only audit CP proposals valued at $100 million and above.

The "loophole" in the new (limited) approach is that DCAA will--quite reluctantly--audit subcontractor proposals valued below the set limits, if those proposals are part of a bigger Prime proposal that exceeds the limits.

Hope this helps.

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The email that I received from the DCAA Wichita Branch Office states that "DOD contracts are my priority and I currently do not have resources to complete even my DOD work in a timely manner. I do not anticipate things getting better next fiscal year. Your best alternative for timely resolution may be to obtain assistance from a private company".

The Boston office is auditing the prime contractor, since the contractor is located in that area. Boston Office told me that I would have to go to the local branch office for the subcontractor's proposal, which is the Wichita Branch.

Thanks for the advice on going to GSA, will followup with that. This isn't that big, $900k total, with about half of which is subcontractor's costs.

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Some suggestions.

There is a WIFCON member and occasional poster that I can recommend to you. I believe he is on the West coast now. He could probably assist you via a desik audit, at least, of the proposal. He is an outside CPA, now. He has at least 15 more years of experience than when I knew him as the chief of our District Office COE audit team for Civil Works construction and O&M projects. If interested, let me know and I will give you his name.

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Also, don't be surprised if DCAA doesn't get involved to check the work done by the audit firm. If you hire a firm that is not knowledgeable in the area of government contract cost accounting, you may be in for trouble.

For your information CPAs in Washington state are required to participate in the AICPA peer review program. Reviewing CPA engagements and work papers are not within DCAA's purview.

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Advising contracting officer's on the allowability of costs claimed on government contracts is within DCAA's perview. Reviewing the results of an audit of a contractor's claimed costs conducted by an independent auditor to determine if those results are consistent with the FAR requirements for allowability is well within DCAA's authority.

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Retreadfed --

You are correct and wrong at the same time.

The activities you describe are within DCAA's authority and purview. However, if the agency lacks the bandwidth to perform the audit in the first place, what makes you think it will have the bandwidth to perform the review of the independent auditor? When do you think that report is going to be issued?

The thing is, I don't think DCAA would simply "review the results of an audit of a contractor's incurred costs conducted by an independent auditor to determine if those results are consistent with the FAR requirements for allowability." I do not think it would work that way, at all.

What I think is that DCAA would conclude that it could not rely on the work of the independent CPAs (see the DCAA Contract Audit Manual, Section 4-1000.) I believe DCAA would conclude that it needed to reperform the work in order to express an opinion under GAGAS. For example, if the independent CPAs did statistical sampling, then DCAA would need to evaluate the methodology to conclude it was sound and met agency audit guidance for things such as sample size, or else perform their own stat sample and analysis.

In other words, "FAR requirements for allowability" do NOT address the acceptability of audit methodology. That is solely DCAA's call; and I believe they would either (a) pass on the effort because of lack of personnel, ( B) conclude the independent CPAs did not do an acceptable job, © conclude they could not issue an opinion at all without reperforming the work themselves, or (d) kick the issue upstairs for a decision. In the case of © or (d), a CO would have a nice long wait before any feedback was received. In the case of (a) the CO would be no better off than before, and in the case of ( B) the CO would be worse-off than had s/he done nothing at all.

Yes, this is stupid. Where is the adult supervision in the room?

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H2H, I somewhat agree with what you are saying. If you go back to my original post in this thread, I said not to be surprised if DCAA got involved even if an audit was done by a third party. I did not say that DCAA would get involved. I still stick by that observation. What DCAA would do if they were asked to review the third party's work to see if the contracting officer could rely upon it, would be speculation on my part. However, I have seen DCAA offices look at the conclusions reached by third party auditors then do sample transaction testing to determine if the third party's report could be relied upon. I have also seen DCAA ask for the workpapers to review and then sample the transactions identified in the workpapers. I have also seen them punt as you indicated based on a lack of resources. In other words, it is a crap shoot as to what will happen with DCAA.

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