When a company is dealing with the DoD or NASA, it is usually very clear that their accounting systems are required to not only be compliant with FAR regulations but must be capable of passing a DCAA audit. When dealing with other agencies, such as the NSF, DOE or HHS (mainly the NIH division) it may not be as demanding that the system be capable of meeting these difficult regulations. It may even be less risky as to whether or not the agency will monitor the accounting system in the form of an audit. The agency usually requires audits for awards over $500,000 or $750,000 but they normally put the burden of audit on the awardee. Sometimes the agency may not have time to follow-up to make sure that the awardee is getting the independent audits done and the awardee may come away with a “false sense of security” that they are doing things in a correct manner and within the guidelines allowed by the agency. In fact, the awardee may be violating terms of the award and just does not know it. I have heard of instances where small companies went many years with awards that required the independent “Yellowbook” audits but did not perform them and thought they were in compliance. In one instance I saw one of these companies receive a letter finally from the DOE stating they did not have records of the audits from the previous 8 years and they were requesting these documents be sent to the agency within 30 days or face termination of current funding. Imagine the panic within this organization as they had not done any audits for the last 8 years!Read More
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In the world of government contracting there are always issues with the way contractors do their accounting. It's not good enough to do it like a normal business and the Federal Government instills lots of additional requirements. These requirements all are based in a logic that helps protect the government from fraud and helps insure the government gets a good value for what they are paying for. Sometimes these requirements can be not only intimidating but they can cause confusion and even inadvertant miscues. It is not easy to run a compliant accounting system as a government contractor.