Grants and DOE Accounting compliance

The Department of Energy is one of the largest civilian departments in the Federal Government.  This is also an area of the government that has not suffered as much cutback as some other areas, making it a good target for small business.  I know of some people with awards from the DoE that have not felt the pressure to keep a compliant accounting system, like they would have felt from the DCAA were they working with the Department of Defense.  There are some differences to be sure and there are also some similarities between awards from the DoD and the DoE.  One of the main differences is the difference between a grant and a contract.  This difference does spark the question of possible remedies when the award is a grant since a grand does not necessarily expect a result.  Also, when working with the DoE, even though there are requirements for a certain type of accounting system (10 CFR 600.311), there is usually not the threat of a government agency to come knocking on your door to check and verify this like there is when contracting with the DoD.  Certainly, there is a huge compliance incentive with DoD cost type contracts when the possibility of a DCAA auditor showing up to audit the system to FAR and DCAA requirements shows up.  Failing a DCAA audit has consequences that most small businesses don't want to deal with.

When receiving an award from the DoE, however, there is not the threat of a DCAA government auditor hanging over your head.  Sometimes this can allow complacency and even ignorance of whether or not the accounting system is in compliance.  In other words, the risk might be lower and companies that are not risk averse might choose to gamble a little bit that their system might not be "caught".  This can be a risky strategy.  If the contracting officer suspects this, they can investigate.  I know that the DoE has even contracted with the DCAA in the past on some matters.  So what can happen if a DoE award winner is found to not comply?  The rule comes from 10 CFR 600.352 entitled Enforcement.  This entitles the government to several actions once they have properly notified the awardee:

  1. Temporarily withhold cash payments
  2. Disallow all or part of the cost of the activity or action not in compliance
  3. Wholly or partly suspend or terminate the current award
  4. Withhold further awards for the project or program
  5. Apply other remedies that may be legally available.

I recently talked with a prospect that had just received a notification letter from their contracting officer per 10 CFR 600.352.  They were given a little more than a week to come up with a mitigating plan or the agency would implement one of the 5 actions mentioned above.  This letter has the same seriousness of a visit from your friendly folks at the DCAA. 

I think the take-away from all of this is that compliance with the government's regulations on accounting and finances for government awards are necessary when receiving awards from the government.  Yes, these systems will cost the awardee some extra money and some extra pain in setting up and complying with the requirements.  This is the "price of doing business" with the Federal Government.  The key is to understand this cost, plan for the cost and the government will even help pay for this expense.  It's a simple game really, you just need to understand and play by the rules.