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Pre-Award Surveys for Government Contractors
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Pre-Award Surveys for Government Contractors

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  • 1. Government ContractingPre-Award Survey Webinar – February 2012
  • 2. Special GuestSteven ChoGlass JacobsonComplianceAuditing8(a) Specialist1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 3. Objectives- Cover the basics of Standard Form 1408, the Pre-Award Survey 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 4. Agenda- Know that Standard Form 1408 is the Pre-Award Survey for accounting system.- Understand the ramifications from a failure to have an “adequate accounting system.”- Understand the basics for an “adequate accounting system” that is DCAA compliant. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 5. Standard Form 1408 Pre-Award Survey of Prospective Contractor Accounting System1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 6. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 7. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 8. The Pre-Award Survey- It is a walkthrough, not a full blown DCAA audit.- The objective of the survey is to obtain an understanding of the accounting system to appropriately complete Standard Form 1408. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 9. The Pre-Award Survey- The FAR states that “a cost-reimbursement contract may be used only when the contractor’s accounting system is adequate for determining costs applicable to the contract.” 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 10. The Pre-Award Survey- Upon completion of the Pre-Award Survey, the auditor makes recommendations to the ACO.- DCMA rules state that only the ACO can make a determination as to the adequacy of the accounting system. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 11. What are the requirements of an “adequate accounting system?” - A timekeeping system that identifies employee’s labor my intermediate or final cost objectives. - A labor distribution system that charges direct and indirect labor to a contract through routine posting of books of account. - Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31, Contract Cost Principals and Procedure, or other contract provisions. - Segregation of preproduction costs from productions costs.1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 12. What are the requirements of an “adequate accounting system?” - Identification of costs by contract line item and by units (as if each unit or line item were a separate contract) if required by the proposed contract. - Accounting system provides financial information required to support requests for progress payments. - Is the accounting system designed, and are the records maintained in such a manner that adequate, reliable data is developed for use in pricing follow-on acquisitions? - Is the accounting system currently in full operation?1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 13. What are the requirements of an “adequate accounting system?” - Accounting in accordance with Generally Accepted Accounting Principals. - Proper segregation of direct costs from indirect costs. - Identification and accumulations of direct costs by contract. - A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives. - Accumulation of costs under general ledger control.1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 14. What are the ramifications of NOT having an “adequate accounting system?” - Loss of contract to competitors that you would have otherwise awarded. - Unable to generate reports necessary to manage contract costs. - Inability to efficiently and effectively monitor indirect rates for competitive pricing and determine profitability.It is NOT OPTIONAL. It is a basic contract requirement with a pass or fail determination! 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 15. What are the ramifications of NOT having an “adequate accounting system?” - False Claims Act, 18 U.S.C. 287, criminal proceedings. Penalties may include fines and prison terms. - False Claims Act, 31 U.S.C. 3729, civil proceedings. Civil penalties are minimum $5,000, up to $10,000, plus 3x amount of unallowable costs. - False Claims Act, 18 U.S.C. 1001. Fines, penalties and possible prison sentences. - Major Fraud Act of 1998, 18 U.S.C. 1031. Fines up to 1 million, imprisoned up to 10 years, or both.1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 16. Now, let’s explore some of the major elements in more detail.1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 17. Accounting in Accordance with GAAP- Must be an accrual basis- No cash basis- Maintain a set of written policies, procedures and internal controls 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 18. Timekeeping System- Employees time recorded on a daily basis.- Timesheets, whether in paper form or electronic, must allow for audit trail for erasure and alteration.- Changes to timecard must be traceable.- Employees must record all hours, paid or unpaid.- Timecard is signed by employee and supervisor. 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 19. Unallowable Costs- Alcoholic beverages- Entertainment, including membership in country clubs, social clubs and dining clubs- Advertising costs (NOTE: some advertising costs are allowable, such as help wanted ads, advertising for items related to contract performance, and promotion for export of products to other countries).- Public relations (NOTE: certain community service activities are allowable, as well as costs require by contract).- Lobbying and political activity costs 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 20. Unallowable Costs- Contributions and donations- Gifts- Interest- Fines and penalties imposed by federal, state, local or foreign regulations- Bad debts- Contingencies 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 21. Unallowable Costs- Goodwill- Organization costs- Asset valuation resulting from business combinations or acquisitions- Relocation cost if the employee resigns within 12 months- Compensation in excess of the Benchmark Executive Compensation Cap, currently at $693,951 for fiscal years after December 31, 2009. (There are pending proposals to reduce the cap) 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040
  • 22. Steven Cho, CPAGlass Jacobsonsteve.cho@glassjacobson.comwww.glassjacobson.com/governmentcontracting(301) 917-3040 1901 Research Blvd, Suite 300 Rockville, MD 20850 - - - www.glassjacobson.com - - - (301) 917-3040