New to this forum, new(ish) to govcon. Working with a large AEC firm and through acquisitions we are adding more federal contracts. Tell me about your scrubbing process for overhead accounts for unallowable costs.  Do you sample certain risk accounts and make projections? Do you use excel or use a stat sampling program? Our processes have been the same for a very long time and this is my first experience with govcon as I was previously working in project finance for another AEC firm. 

Thanks!

1. Evaluate each account for risk of incurring unallowable costs. The scrub approach depends on (a) likelihood of incurrence, (b) how much risk the company is willing to take and (c) effort to review.

2. Document your risk analysis. Determine which accounts will be scrubbed -- and how.

3. If you are doing less than 100% transaction reviews and projecting the results, ensure your approach is statistically valid (see FAR 31.201-6(c)). EZ-Quant is the "go to" stat sample program but there are others. In all other circumstances, assume that if DCAA finds anything, they will question the cost they find.

4. After-the-fact scrubs are not a good substitute for 100% allowability reviews at the point of entry into the accounting system.

Good luck!

I recommend setting up specific accounts to capture expressly unallowable costs and unallowable costs that are readily identifiable. For all other accounts, I recommend an annual analysis plan for reviewing the GL and identifying any unallowables or potential unallowables based on materiality. I disagree whole heartedly with the above point that it needs to be statistically sound. As a DCAA auditor of 12 years, with a focus in Incurred cost, and now a consulting profession that's a few years old, I've never known of a statistical valid method being of any relevance on the company side. That is the foundation of the AUDIT side so that they can project but that is totally different.