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Provisional Rates - A potential DCAA focus area in 2012

Posted by Mike Anderson on Tue, Jan 24, 2012 @ 03:01 PM

Provisional Rates

Over the last year or so the DCAA has focused attention on larger government contractors.  Many smaller businesses may feel left out since they have not been visited by the DCAA.  More likely, they may feel that everything is "ok" since for most of us "no news is good news".  Our Account Managers here have been hearing bits of news from various sources that this might change in 2012.  First, the DCAA is apparently going to focus more on completing Incurred Cost Proposal audits in 2012, especially from smaller contractors.  The backlog of Incurred Cost audits was estimated to have quadrupled over the last 10 years but even DCAA Director Fitzgerald didn't know the exact number in a meeting with Senators Brown (R-MA) & McCaskill (D-MO) in  February last year.  Rest assured the number is huge.  We have recently seen clients that have received letters from the DCAA that demand the Provisional Billing Rates for Jan. 1, 2012 thru Dec. 31, 2012 be completed and turned in to the DCAA by February 1, 2012.  So we are seeing focus not only on the provisional rates (Ref Far 42.704(b)) but we expect to see a focus on cleaning up the backlog of Incurred Cost Proposals.  Both of these efforts will affect small business contractors.  The Provisional rates affect your ability to bill the government in the near future.  Once the DCAA audits the Incurred Cost Proposals the provisional rates become final rates.  The government is bound to payment based on the final indirect rates so these are very important numbers.  If your final indirect cost rates are lower than your provisional indirect cost rates, then the contractor could be liable for repayment to the government.  The important message for all government contractors is twofold: 1) it is important that your provisional rates are calculated correctly so that they come as close as possible to the final rates and 2) it is important that your Incurred Cost Reports are correctly done and accurate.  We envision spending a lot of time on those two areas this year.  It would be wise for all government contractors to do the same.

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Topics: Indirect billing rates, Year end indirect rates, Provisional rates, DCAA, DCAA audit

Budget Cuts, Fraud & Inefficiency Means Stricter Compliance

Posted by Mike Anderson on Wed, Oct 12, 2011 @ 08:30 AM

There may be a perfect storm brewing in the government contracting world that will make it harder to do business with the federal government.  It started in July of 2008 when the Government Accountability Office (GAO) issued a report that 3 of 3 DCAA audits showed inadequacies in the DCAA's performance of the audits.  This was followed up with another GAO investigation in September of 2009 that indicated a widespread problem within the DCAA organization.  As a result the DCAA went through 3 directors in a little over a year.  Major reform was announced and the DCAA is performing audits strictly to the book now, with only a "pass/fail" grade issued.  But even with this increasing dose of compliance issues for contractors, there continues to be problems.  Does it seem to you that we are hearing more about federal contractor fraud cases lately?  And then how about the case where government contractor executives are paid excessive salaries?  Many contracts suffer from cost overruns and late deliveries.  Combine all of this with the current economic crisis and the emphasis on cutting the federal budget and we have a perfect storm focused on government contractors.  What does this mean?  I think it will mean more scrutiny on government contractors, more emphasis for compliance and certainly more emphasis on performance.  There will be more difficulty for firms to survive in the government marketplace that do not meet all he compliance issues and/or that don't perform on-time and either on budget or under budget.  The contractors that can do this will be rewarded.  The contractors that cannot perform to this new standard will be rapidly pared from the market.  Companies that have an experienced staff to respond to all the government's compliance issues will prosper.  Companies that do not have significant experience in this area need to shore up that weakness.  Outsourcing this function can strengthen a company and assure survival.  Tech BizSolutions staff has the experience to offer to these companies in need of this service.  Call us today if you need to address a weakness or potential weakness.  We can help.
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Topics: FAR, DCAA compliance, Government Contractors, DCAA, DCAA audit

Government Contracting not getting any easier

Posted by Mike Anderson on Thu, Oct 14, 2010 @ 01:45 PM

Many of our clients have noticed a "different" DCAA recently.  Other clients have noticed that there is a difference in their subcontracts with major primes.  All of them don't understand how they could have been doing the same type of contracting in the past without this type of scrutiny and why has that changed?  Well, we have to go back about 18 months.  The DCAA was audited by the Government Accountability Office (GAO) and found to have errors in their audits.  A second review by the GAO disclosed further and more widespread problems.  Then the Senate got involved (Homeland Security and Government Affairs Committee) and the DCAA came under close scrutiny.  Shortly thereafter, the head of the DCAA was dismissed.  To make a long story short, the DCAA has come under intense scrutiny and criticism over the last 18 months.  Many changes have been implemented at the suggestion of everyone in authority.  Ok, but what does that mean?  It means that the DCAA's reaction is also severe.  The DCAA is following all the regulations (FAR, CAM, GAGAS, and more) to the letter.  As a matter of fact, some of the GAO criticism and Senate committee criticism centered on the fact that DCAA supervisors over-rode auditor findings and recommendations.  Other findings centered on audits being done too fast without focusing on the quality of the audits.  The DCAA response is obviously to hire more auditors so that they won't fall further behind, while doing more thorough audits.  The other obvious change is that DCAA audit supervisors are resistant to over-ride an auditor's finding.  Well, if the auditor is not using common sense or is just "off-base", it is not getting thrown out like before.  Likewise, previously the DCAA auditor would provide an audit report that "passed with some recommendations".  Today the contrator either passes or fails the audit, no more intermediate grades.  This means compliance is harder, especially for smaller businesses.  This trend is likely to continue for some time.  Contractors will find it more difficult to comply with all the rules, especially if they are not fully accustom to the government regulations.  Government contracting is becoming more difficult.  Most contractors either need to have an "expert" on staff or they need to outsource expertise to insure compliance.  
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Topics: government contracting, DCAA compliance, DCAA, DCAA audit

DCAA Timekeeping Requirements - Part 3

Posted by Mike Anderson on Wed, Sep 29, 2010 @ 03:05 PM

In the previous two articles in this series we looked at what is required for a DCAA timekeeping system and what types of systems will meet these requirements.  Today I want to look at how the DCAA monitors these systems and what you, as a government contractor, might expect to be compliant. I think you can fairly assume that any time the government comes to your facility to do an audit (pre-award audit, system audit, or other) that they will be interested in looking at your timekeeping system.  But there are also other types of ways that they will check up on contractors timekeeping systems.  This is usually called a Labor Floor Check.  This is where a DCAA auditor shows up at your facility unannounced and randomly samples a few employees and checks for their understanding of the system and how they fill out their timesheets.  They have a detailed audit program that they follow from their Contract Audit Manual and it could be worth while to familiarize yourself with exactly what they might be looking for.  They will be looking for standard stuff like is the employee actually at work, do they know what to charge their labor to, are they recording their labor times daily, do they know the company procedure for timekeeping and are they following it.  There are also guidelines for the auditor to follow if you have remote employees or "work at home" employees.  These two areas are possible areas of misuse and of keen interest to the auditor.  You can be certain that if the auditor finds dicrepancies that your contracting officer will hear about it.  If you cannot resolve these findings with the auditor and/or contracting officer, there can be serious consequences.  All the more reason to make sure your timekeeping system is a good system and you have trained employees to use it properly.
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Topics: Government Contractors, DCAA, DCAA audit, timekeeping

DCAA Timekeeping Requirements - Part 2

Posted by Mike Anderson on Wed, Sep 22, 2010 @ 02:30 PM

Uncompensated Overtime DCAA

Last week we looked at the DCAA requirements for Timekeeping on a government contract and this week I want to explore the different types of systems.  For small companies, a manual timekeeping system is probably sufficient and cost effective.  This requires that the employee has only 1 timecard that they fill out daily in ink.  The supervisor must monitor arrival & departure to help verify the time record at the end of the time period.  Corrections are made in ink, with an explanation, dated & signed.  These timecards must be reviewed and approved by the supervisor prior to entry into the accounting system.  As the company size grows, it makes not only economic sense but procedural sense to move to a more automated system.  So what is the difference?  The basic requirements of both types of systems are the same.  Daily recording, correct charge codes used, corrections having a complete audit trail, approval cycles, etc. are required of both types of systems.  We have seen some companies get into trouble by setting up an "electronic" timekeeping system based in a spreadsheet software like Microsoft's Excel.  Excel lacks several key ingredients like the change control/audit trail & approval processes that the DCAA needs to see.  The audit trail needs to include the original entry, a description of the change, initialed, authorized and dated by both the employee and the supervisor.  Automated systems also must insure that only the employee can access their specific record (nobody else can record time on another employees timesheet).  Of course, the supervisor must also have access to the employee's time record for monitoring and for approval.  There are many timekeeping software packages on the market today but only a select few have DCAA approved packages and you usually have to ask specifically for the DCAA approved package.  Tech Biz has worked with many of these and we know the pro's and con's for them.  While there is no one simple answer (there are lots of variables, lots of extra features and certainly costs to weigh) we can usually help steer clients to the most cost effective solution on an automated system to meet each company's specific needs.  Timekeeping is a key ingredient to effective government contracting and meeting DCAA requirements.  It is probably the number 1 audit finding by the DCAA.  You need to make sure and get this one right.

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Topics: government contractor, DCAA, DCAA guidance, timekeeping

Timekeeping and the DCAA

Posted by Mike Anderson on Tue, Jun 01, 2010 @ 01:12 PM

Did you fill out your timecard today?  I'm talking about exempt employees mainly here since non-exempt employees have always had fairly difinitive ways to record time for both government and non-government jobs.  Does anybody remember the "good old days" where you filled out a what looked like a punchcard for all of your hours worked?  How about feeling like your employer didn't trust you even though you were salaried?  Do you have trouble remembering to record your time spent let alone remembering to record the time each day?  You are not alone.  Timecards for government contractors are some of the most difficult paradyme shifts when entering the world of government contracting.  Many systems exist but not all will pass DCAA muster.  The most common problem system involves filling out Excel spreadsheets electronically.  These systems typically don't have the type of controls the DCAA wants to see and will fail a DCAA audit as a result.  There are various "manual" versions of timekeeping (reminiscent of the punch card mentioned above) and there are a host of web-based systems that have been developed specifically to meet the DCAA requirements.  If you have any questions about your system, seek professional help prior to your DCAA audit to make sure your system will pass.
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Topics: DCAA compliance, DCAA, DCAA audit, timekeeping

ARRA Money distribution and systems reviews

Posted by Mike Anderson on Wed, May 12, 2010 @ 04:22 AM

Has anybody in small business wondered where the American Recovery and Reinvestment Act (ARRA) money was and if it would ever trickle down to small business?  It has taken a while to get the money flowing on some of these programs (other than construction projects).  We are starting to see ARRA funds used for funding of some STTR and SBIR topics.  There are some additional stipulations attached to funds coming from the ARRA, however. The contractor must have a funds control system that tracks and reports ARRA funds separate from non-ARRA funds.  The contractor must also keep track of jobs created by the ARRA funds or jobs supported by the funds.  It is required that the costs claimed are allowable, allocable and properly supported.  The contractor is also required to flow down these requirements to subcontractors.  These requirements are in addition to the usual DCAA and FAR requirements for government contracting.  So the question is; "will the government really be able to monitor these additional requirements"?  Well, we had a client last week that received a notice from their contracting office notifying them that a team was coming to their facility to do a "review" of these requirements associated with the ARRA funds.  The review is requesting to see "backup documentation" in support of these requirements.  Sounds like a system audit.  So if you are receiving ARRA funds (or proposing to receive these funds) be prepared for a "review" of your backup documentation.  This is beginning to happen.
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