ECT-208Government ContractAudits: A Strategic Approachfor a Successful OutcomeMay - 2011Presented byBrent Calhoon
Enabling Success                       Project                          Human                             Financial       ...
Do More                       Project                      Human                Project          Financial                ...
Introduction Backroundit Process Prerequisites for Success Impediments to Success Strategy Points Dispute Resolution ...
Government Auditors Defense Contract Audit Agency Civilian Agency Auditors Independent Accounting Firms Government Acc...
Definition of“Successful Outcome” Requestor/Customer (Contracting Officer)      Unbiased audit opinion(s) with sound bas...
Audit Guidance –Generally Accepted Government AuditingStandards (GAGAS) Competence – all personnel assigned to the audit ...
Audit Guidance –Generally Accepted GovernmentAuditing Standards (GAGAS) Professional Judgment – exercising reasonable car...
DCAA Audit Manual9   5/22/2012   ©2011 Deltek, Inc. All Rights Reserved
Audit Sequence Pre-Audit       Audit request       Audit Planning       Entrance Conference Field Work       Audit T...
Audit Sequence – Key Participants     Pre-Audit                         Entrance                   Field Work        Exit ...
Strategic Prerequisites to Success                 Open communication between all parties                                 ...
Strategic Prerequisitesto Success Show professional respect (no back-channeling or jumping ranks) Check emotions and pri...
Impediments to SuccessChecks and balances out of balance        - DCAA circling the wagons – reaction to recent congress/...
Impediments to Success (cont’d)     Contractors generally viewed negatively within the DC beltway     (political pariah)  ...
Strategy Points forContracting OfficersDo – Know what you need and why Discuss communication expectations (e.g., frequen...
Strategy Points for ContractingOfficers (cont’d)Don’t –    Cede regulatory authority to auditors    Presume the auditor ...
Strategy Points for AuditorsDo –    Understand the contractor’s business and competitive environment    Perform audit ac...
Strategy Points forAuditors (cont’d)Don’t –    Undermine the contractor/CO relationship    Be a crusader in the name of ...
Strategy Points forContractors Do – Be prepared for potential audits    - Perform self-assessments    - Findings/issues ...
Strategy Points for Contractors(cont’d)Do –    Help inexperienced auditors learn    Ask questions rather than make state...
Strategy Points for Contractors(cont’d)Don’t –    Be a victim    Make excuses; instead, provide reasons or mea culpas  ...
Contractor/DCAA DisputeResolution                                                                        Go to Board of Co...
CO/DCAA Dispute Resolution           •     “Significant                 disagreement”                                     ...
Questions, Comments, Banter?                                Baker Tilly                           Government Contractor   ...
Presenter Contact Information                 Brent Calhoon, Partner, Baker Tilly                 • 703.923.8311          ...
www.twitter.com/deltek           www.facebook.com/deltekinc           www.linkedin.com/company/163414           www.youtub...
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Deltek Insight 2011: Government Contract Audits: A Strategic Approach for a Successful Outcome

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Deltek Insight 2011: Government Contract Audits: A Strategic Approach for a Successful Outcome

  1. 1. ECT-208Government ContractAudits: A Strategic Approachfor a Successful OutcomeMay - 2011Presented byBrent Calhoon
  2. 2. Enabling Success Project Human Financial Project Manufacturing Resources Management Management Do More Market Teaming CRM and Capture Win More Intelligence Solutions Management Know More Business Performance Management Winning More Increasing Project Improving Cash Reducing the Cost Business Visibility Flow of Compliance2 5/22/2012 © 2010 Deltek, Inc. - The specifications, functionality and schedules described reflect Deltek’s current estimates, may change without notice, and do not constitute obligations of Deltek.
  3. 3. Do More Project Human Project Financial Manufacturing Resources Management Management Do More Market Teaming CRM and Capture Win More Intelligence Solutions Management Know More Business Performance Management Project Execution Project & Corp Time, Expense, Reporting, GRC & & Management Accounting Labor, Payroll Compliance3 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  4. 4. Introduction Backroundit Process Prerequisites for Success Impediments to Success Strategy Points Dispute Resolution Avenues4 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  5. 5. Government Auditors Defense Contract Audit Agency Civilian Agency Auditors Independent Accounting Firms Government Accountability Office Prime Contractors Others5 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  6. 6. Definition of“Successful Outcome” Requestor/Customer (Contracting Officer)  Unbiased audit opinion(s) with sound basis in regulatory requirements, facts, and circumstances  Timely  Places risk in perspective Auditor (DCAA)  Compliance with professional auditing standards  Useful to customer Auditee (Contractor)  Fair and objective analysis of facts and circumstances with reasonable interpretation of contractual/regulatory requirements given the business environment  Audit findings presented with context/perspective6 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  7. 7. Audit Guidance –Generally Accepted Government AuditingStandards (GAGAS) Competence – all personnel assigned to the audit collectively have the technical knowledge, skills, and experience to perform the audit Integrity – conduct of audit work with attitude that is objective, fact-based, nonpartisan, and non ideological Independence – free from personal and external impairments to ensure their opinions, conclusions, judgments, and recommendations are impartial.7 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  8. 8. Audit Guidance –Generally Accepted GovernmentAuditing Standards (GAGAS) Professional Judgment – exercising reasonable care and professional skepticism Quality Control and Assurance – reasonable assurance that the organization and its personnel comply with professional standards and applicable legal and regulatory requirements; external peer review at least once every three years Suitable Criteria – evaluation against criteria that are suitable and available (e.g., FAR, CAS, DFARS) - Objective - Complete - Relevant - Measurable8 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  9. 9. DCAA Audit Manual9 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  10. 10. Audit Sequence Pre-Audit  Audit request  Audit Planning  Entrance Conference Field Work  Audit Testing  Formation of preliminary conclusions and draft report Exit Conference & Post Audit  Contractor response to audit findings  Audit follow up  Final audit report10 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  11. 11. Audit Sequence – Key Participants Pre-Audit Entrance Field Work Exit Conference Conference & Post-Audit • Contracting • Auditor • Auditor • Contracting Officer • Contractor • Contractor Officer • Auditor • Auditor • Contractor • Contractor11 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  12. 12. Strategic Prerequisites to Success Open communication between all parties Contracting Officer Successful Audit Outcome Contractor Auditor12 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  13. 13. Strategic Prerequisitesto Success Show professional respect (no back-channeling or jumping ranks) Check emotions and pride at the door Pick battles carefully – minimize conflict Ask “so what?”; be prepared to answer “so what?” Form opinions based on facts and reasoned, objective analysis rather than assumptions (i.e., resist judging a book by its cover) Document discussions Review FAR Guiding Principles (FAR 1.102)13 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  14. 14. Impediments to SuccessChecks and balances out of balance  - DCAA circling the wagons – reaction to recent congress/GAO scrutiny and criticism  - Thinly-veiled threat to COs [(MRD) 09-PAS-004(R)]  Agree with us or we’ll report you to OIG  Tempered somewhat by new guidance on resolving contract audit recommendations [(MRD) 10-PAS-015(R)]  - “Materiality” generally interpreted as anything greater than zero  No cost/benefit considerations  At odds with Gates/Carter efficiency initiativeDCAA opinions are pass/fail – no flexibility for COs or Contractors [(MRD)08-PAS-043(R)]14 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  15. 15. Impediments to Success (cont’d) Contractors generally viewed negatively within the DC beltway (political pariah)  Increasing regulatory burden and new compliance requirements  Political intolerance for noncompliance (i.e., anything less than perfection given current view of materiality)  DCAA: fear of favorable audit opinions  COs: growing reputational/professional risk15 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  16. 16. Strategy Points forContracting OfficersDo – Know what you need and why Discuss communication expectations (e.g., frequency, content, etc.) Set expectations regarding quality and usefulness of audit report Arbitrate grievances raised by either contractor or auditor Understand the gravity of incorrect conclusions16 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  17. 17. Strategy Points for ContractingOfficers (cont’d)Don’t – Cede regulatory authority to auditors Presume the auditor is always right Be reluctant to hold both auditors and contractors accountable to you Impair auditor independence17 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  18. 18. Strategy Points for AuditorsDo – Understand the contractor’s business and competitive environment Perform audit according to auditing standards - Independent - Objective - Sufficient evidence Assess materiality/impact; frame findings in fair context Understand contractor’s audit policies18 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  19. 19. Strategy Points forAuditors (cont’d)Don’t – Undermine the contractor/CO relationship Be a crusader in the name of the taxpayer Become invested in outcomes – focus on the process Let personal opinion cloud professional judgment Stop pursuing the facts because they’re hard to find Leap to conclusions before asking questions19 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  20. 20. Strategy Points forContractors Do – Be prepared for potential audits - Perform self-assessments - Findings/issues should not be surprises Assign a qualified and dedicated audit liaison Establish policy for audit process - Require audit requests in writing - Define “reasonable” response times for info requests - Set policy for conduct of employee interviews - Define communication schedule Establish database to track/monitor requests20 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  21. 21. Strategy Points for Contractors(cont’d)Do – Help inexperienced auditors learn Ask questions rather than make statements – chance to learn what auditor needs to reach reasonable conclusion Encourage senior-level finance/accounting managers to build rapport with auditors Showcase internal control procedures and evidence of continuous improvement21 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  22. 22. Strategy Points for Contractors(cont’d)Don’t – Be a victim Make excuses; instead, provide reasons or mea culpas Break commitments/your own audit policy Provide information without verifying accuracy Make the audit process inefficient22 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  23. 23. Contractor/DCAA DisputeResolution Go to Board of Contract Appeals or Claims Court (long, involved, difficult and expensive process) Resolve with DCAA headquarters Resolve with DCAA regional director Resolve with DCAA regional manager Resolve with DCAA auditor and contracting officer23 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  24. 24. CO/DCAA Dispute Resolution • “Significant disagreement” DCAA Director/Director Defense when CO Procurement and Acquisition Policy sustains less DCAA Regional than 75% of Manager/ Component Management DCAA findings • DCAA has 3 days to elevate Auditor/ Contracting • Any issue can Officer be elevated by DCAA Director24 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  25. 25. Questions, Comments, Banter? Baker Tilly Government Contractor Advisory Services Vienna, VA25 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  26. 26. Presenter Contact Information Brent Calhoon, Partner, Baker Tilly • 703.923.8311 • brent.calhoon@bakertilly.com Katrina Karaan, Manager, Baker Tilly • 703.923.8441 • katrina.karaan@bakertilly.com26 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
  27. 27. www.twitter.com/deltek www.facebook.com/deltekinc www.linkedin.com/company/163414 www.youtube.com/user/deltekinc27 5/22/2012 ©2011 Deltek, Inc. All Rights Reserved
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