Accounting System, Cost And Accounting, DCAA Relations, Incurred Cost Proposals

Support the Audit and Stand Up for Your Rights

A recent CBCA case (CBCA 3407) brings up a couple of critical issues relevant to small government contractors.

To abridge, the government lost a summary judgement motion from a government contractor for termination costs.

One of the government’s arguments focused on the government’s belief that the contractor failed to support the proposed costs. Here is the relevant section:

“The contracting officer’s third reason for denying appellant’s sponsored claim is that DCCS’s claimed costs are not supported by accounting data and other information sufficient for review by the Government. Appellant counters by asserting that DCCS made all of its accounting data and other information available for the Government’s review, but CMS declined to review it. Thus, appellant asserts that respondent’s “real complaint is that DCCS declined to make copies of the supporting data, but nothing in DCCS’s subcontract or the FAR requires a contractor or subcontractor to incur the cost of copying voluminous records that are otherwise made available for the Government’s review and inspection. . . . DCCS fully satisfied its contractual obligation by offering to make the records available for CMS’s examination, audit and reproduction.” (page 8).

Score: Contractor 1, Government 0.  The appeals board, by its decision, supported the contractor’s position.

LESSON ONE:  A contractor is under no obligation to make copies for the government. This literally applies to all contractor documents, not just the previously discussed horrible requests for copies of employee driver’s licenses, birth certificates, or other documents containing private information.

Of course, AS A COURTESY, I would encourage contractors to allow government auditors to make or to make, reasonable copies to support their workpapers. Just remember who has the control.

LESSON TWO: The contractor is also not obligated to provide electronic copies of anything other than such documents associated with electronic billing. DCAA even laments and comments on this reality in their Information for Contractors.

The point, again, is the contractor is obligated to support the audit and the auditor’s reasonable and standard requests. DCAA has a set of procedures they are under standing orders to follow if they feel that a contractor is no supporting the audit, to include a demand letter for the ‘missing documentation’. Five years ago, they sent these letters to my client at the first sign of trouble. Now, it has been about five years since I have seen one. Support the audit, stand up for the rights of your employees and yourself.

 

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