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DCAA Audit Expense Receipt Electronic and Original 4.703(c) 1-3

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Hi,

With the increase in online T&E solutions, has DCAA established additional guideline related to Original Receipts vs. scanned and digital copies, etc.

My question is related to 4.703.(c).3 (see below) "The contractor or subcontractor retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems."  I have delved deep into the internet and have found no guidance. 

If we meet (c) 1 and 2 then 3. defeats the purpose of reduction of paperwork, time for scanning and maintaining originals, etc.

I have been through DCAA audits where the scanned document was accepted because of policies, procedures, internal audit,  approvals, etc. were followed.  If a company has an expense policy that covers the process, will DCAA waive 3?  

 If DCAA doesn't accept a scan or electronic copy as "original" why should a company use one of the new online T&E services? 

Thoughts?

As always, thank you for your review, input and guidance

Marc

4.703.. . .

(c) Nothing in this section shall be construed to preclude a contractor from duplicating or storing original records in electronic form unless they contain significant information not shown on the record copy. Original records need not be maintained or produced in an audit if the contractor or subcontractor provides photographic or electronic images of the original records and meets the following requirements:

(1) The contractor or subcontractor has established procedures to ensure that the imaging process preserves accurate images of the original records, including signatures and other written or graphic images, and that the imaging process is reliable and secure so as to maintain the integrity of the records.

(2) The contractor or subcontractor maintains an effective indexing system to permit timely and convenient access to the imaged records.

(3) The contractor or subcontractor retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems.

(d) If the information described in paragraph (a) of this section is maintained on a computer, contractors shall retain the computer data on a reliable medium for the time periods prescribed. Contractors may transfer computer data in machine readable form from one reliable computer medium to another. Contractors’ computer data retention and transfer procedures shall maintain the integrity, reliability, and security of the original computer data. Contractors shall also retain an audit trail describing the data transfer. For the record retention time periods prescribed, contractors shall not destroy, discard, delete, or write over such computer data.

 

 

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An interesting question. Currently, opinions in industry regarding what the FAR means vary.

1. It might mean that each receipt must be held for one year after electronic scanning.

2. It might mean that, when a contractor implements electronic scanning, all receipts must be held for one year to permit DCAA to validate that the scanning process is working "honestly".

In a related note, some contractors that receive receipts via email (e.g., from hotels or car rental agencies) have claimed that those are the original receipts. The originals were electronic and so there is no additional retention action necessary except to link the emails with the associated expense reports. Nobody has told me how DCAA has reacted to that assertion.

In another related note, one contractor retained all travel-related receipts for 3 years after final payment. Contract PoP was 10 years. Audit took place in Contract Year 10, covering CYs 1 - 9. Auditors were upset (to say the least) to find that many receipts were blank. The contractor explained that the receipts were originally printed using thermal ink, which had faded over the years. Fun times.

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Marc, the general contractual records retention obligation is found in FAR 52.215-2.  Through that clause, FAR 4.7 is made a term of contracts containing 52.215-2.  DCAA guidance on this topic is for internal use only and is not binding on contractors.  Further, remember that DCAA audit reports only express DCAA's advice to contracting officer's.  Have you looked for contracting agency guidance on this issue or  researched board and court cases to see if there has been an interpretation of this requirement?

 

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Here_2_Help and Retreadfed,

Thank you, I appreciate you taking the time to respond!  Sorry for the delay, I had "notify me of replies" off.

Here_2_help, I agree with you on the what the "FAR means".  I feel like a dog chasing its tail!  I love the story of the thermal ink!  Can you imagine the look on the Auditors face!  

Retreadfed, thank you for pointing me to CAM: 3-204.21 Contractors Use of Scanned Images.  This of course references (a) FAR 4.703(c)-1,2 and 3; (d) and (e).  (e) is where it gets interesting. . . 

e) If we have not tested the contractor’s scanned images, auditors should determine if the contractor has preserved the original documents. If the original documents were preserved, auditors should test a sample of scanned documents to original documents to determine reliability. If the contractor did not preserve the original
documents, auditors must consider the contractor’s environment and review the permanent files for risk factors to ensure there is no obvious reason we should not rely on the scanned documents. Assuming no significant risk factors are identified, the auditor should complete the assignment with the scanned images, and determine if there is an impact on the audit opinion.

So if policies and procedures are being followed, controlled environment, checks and balances, approvals, etc. then there would be minimal risk and the scanned image should be acceptable.

I can refer to the contractor's environment as a basis.  It not, we will just say the originals are all in thermal ink or how about classified and printed in disappearing ink!

  Again, thank you both for your guidance, greatly appreciated!

Marc

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54 minutes ago, marcfgov said:

So if policies and procedures are being followed, controlled environment, checks and balances, approvals, etc. then there would be minimal risk and the scanned image should be acceptable.

I can refer to the contractor's environment as a basis.  It not, we will just say the originals are all in thermal ink or how about classified and printed in disappearing ink!

Sounds like a reasonable approach.

In another related anecdote, receipts related to classified meetings are interesting. In my experience, the traveller takes an exacto knife and literally excises any information related to location from the original receipt before attaching it to the expense report. The expense report does not report a location of the meeting. The business purpose of the meeting is invariably "classified meeting." Fortunately, classified customers tend to have classified auditors, as well. They tend to understand national security concerns.

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