Accounting System, Cost And Accounting, Department of Defense News, Running Your Business

A World Without DCAA hits SBIR Phase One

Here are some of the requirements from the Department of Homeland Security’s latest SBIR  RFPs

 

“Additional deliverables in this phase include the following (templates to be provided later by the federal Program Manager):

  • Monthly Status Reports, including master schedule for Phase II activities, quad chart, table showing each task description, percentage completed, targeted completion date, revised dates (if applies), etc.
  • Monthly Financial Status Report showing reporting month, cumulative costs, allocated financial data for direct labor categories, labor hours, labor rates, consultants/subcontractors cost, travel, materials purchased, etc.
  • Monthly status calls “

Section A-5

https://www.fbo.gov/index?s=opportunity&mode=form&id=41268594cdfdef40295cae324d0b2abe&tab=core&_cview=1

I recently participated in a Navy SBIR conference where one of the other panelists encouraged contractors not to worry about the budgets on their SBIR Phase One. It appears that may no longer be the case.

I had a dim memory of the DOD program staff asking for similar reports years ago. I went to look and found one form so old that I cringed at the title: “Fund Man Hours Expenditures”. I imagine an updated version of this is in many small business contractor’s futures.

All of this underlines the importance of doing it right from the start. Contractors starting out should start out with a cost accounting system that will meet their needs and the government requirements.

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Accounting System, Department of Defense News, Running Your Business

DFARS Cyber Security for Small Business Contractors

In 1998, I listened to an IT staff member from a large contractor proceed to chew out the contractor’s accounting staff for ‘losing’ a folder stored on the company’s servers containing all of the year-end closing work. He proceeds to call the staff “idiots” and ignorant while glossing over the fact that the IT department’s backup of the critical data had failed the night before.

He noticed my smile and could not decide if I was agreeing with him or laughing at him, so he asked me what the F**K I was smiling about. I replied,

“I want to thank you. For years people have criticized accountants as being unresponsive to the company’s needs, speaking a language no one else understands, and not really caring about the success of the company. People now say this about IT people instead”.

A few weeks later a software consultant, with full access to all of the IT systems, destroyed the company’s general ledger by using direct access to the database to create new balances in 146 general ledger accounts. The consultant then spent months trying to fix the error while hiding it from the company. Nine months later, one of the company’s employees printed out a general ledger report that showed a WIP balance of a little over two million dollars while the subsidiary ledger showed an amount several times larger.

What saved us was the trial balance that I had printed out the day before the consultant screwed up the general ledger. I took the printout with me as a resource for my work for them with DCAA.

As a result of this lesson, and too many others, I started asking myself twenty years ago about the relationship between accounting and IT.  Part of my thinking can be seen in the name I chose for my later technology company: “Accountable Technologies”. I would love to say that Edward Snowden was the final nail in the coffin, but there are thousands of accidental and deliberate Snowdens scattered across American businesses, large and small.

I personally believe that IT personnel should have episodic access to the accounting system; not at will. Perhaps you do not agree with this, fine.

But, you should take advantage of the new cyber security requirements adopted by the Department of Defense to think about the issue, to develop your own policies and procedures.

DARPA put up an excellent guide for small business with links to expanded materials. Take a look and think about it.

https://www.darpa.mil/work-with-us/for-small-businesses/cybersecurity

By, the way, if you were wondering what happened to the missing folder, an employee visiting from another location to document procedures, had moved the folder to her personal files for future reference thinking she had copied it. We discovered this a couple of hours later when she wandered in to the office.

More at www.dcaacompliance.com

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DCAA Relations, Department of Defense News

The Good News — DCAA Gets A New External Peer Review Opinion. The Bad News — Qualified with Deficiencies (Again). DOD OIG identified 25 Deficiencies

DCAA receives it overdue external peer review from DOD OIG. Unfortunately, it is not the stellar report we hoped for.

https://media.defense.gov/2017/Nov/22/2001847672/-1/-1/1/DODIG-2018-028.PDF

 

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DCAA Relations, Department of Defense News, Incurred Cost Proposals

Bales Testifies Before House, Industry refers to DCAA as a “Collection Agency”

DCAA Director Bales testified yesterday before the House Armed Services Subcommittee On Oversight and Investigations. Here is a link to her written testimony: http://docs.house.gov/meetings/AS/AS06/20170406/105777/HHRG-115-AS06-Wstate-BalesA-20170406.pdf

My Highlights:

  1. The Risk Assessment program for incurred cost proposal audits will continue.
  2. Outside CPA firms doing audits of incurred cost proposals are a bad idea because they are not qualified and lack governmental authority.
  3. She opposes proposed legislation requiring GS-14 managers to be CPAs because CPA skills do not translate to government contracting work (Yes, we are going to have fun with that one).
  4. She opposes proposed legislation requiring incurred costs proposal audits to be completed within one year of adequate submission because this would eliminate the efficiency of doing multiyear audits.

What is not clear is if DCAA is actually caught up. In the era of parsing words within the beltway, she states that there still is a backlog and the hiring freeze makes it impossible for them to catch up.

Best line from the industry testimony so far:

David Berteau, Professional Services Council

“As one of our member companies characterized it, DCAA should focus on being an auditing agency, not a collection agency”

 

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Cost And Accounting, DCAA Relations, Department of Defense News, Incurred Cost Proposals

DCMA Criticized for not Following DCAA Recommendations on Incurred Cost Proposal Audits.

One again proving that the contractor should defend costs BEFORE DCAA makes its findings official.

 

http://www.dodig.mil/pubs/report_summary.cfm?id=7287&utm_source=DoD+IG+Email+Update+-+Reports+and+Testimonies&utm_campaign=e02c5e6e40-DoD_IG_Reports&utm_medium=email&utm_term=0_3a17f8681e-e02c5e6e40-277174597

Visit us at www.dcaacompliance.com

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Accounting System, Cost And Accounting, DCAA Relations, Department of Defense News, Running Your Business

GAO Ruling Supports GSA Decision that Favors DCAA Accounting System Audits Over Private Firm Audits

A recent GSA RFP awarded 9.15%  (7,600 out of 83,100 points) of possible RFP scoring points for approved accounting and purchasing systems, systems approved by DCAA or another government agency. The approval of the critical systems by private accounting firms did not receive any points.

Evolver and AFSC challenge the agency’s basis for assigning certain points.  Specifically, both Evolver and AFSC challenge the RFP provision that, in order to be awarded 5,500 points for an “audited/adequate cost accounting system,” an offeror’s proposal must include proof of a federally audited and approved accounting system.  The firms maintain that this requirement is overly restrictive of competition, as there are independent public accounting firms that can verify the adequacy of an offeror’s accounting system for federal contracts.  The firms further argue that proof of an acceptable system should not be required with proposal submission; rather, proof should be provided only at the time the government actually requires the service for which the certification is necessary.”

Here is GAO ruling:

“Under these circumstances, where the agency can reasonably anticipate that DOD will be the prime user of the Alliant 2 GWAC, and where DOD does not accept third party certification of a contractor’s cost accounting system, we find nothing improper about the solicitation’s provision that gives an evaluation preference to firms that have a federally audited and approved accounting system.”

Now here is the troubling part of the ruling:

 “In this regard, the agency explains that allowing firms to accrue points in this manner helps to provide a GWAC where successful offerors have experience in government contracting.  In addition, successful offerors will be able to perform cost-reimbursement task orders for DOD from the first day the GWAC is awarded, and procuring agencies issuing task orders under the GWAC will not have to waste time and resources while vendors subsequently obtain an audited and approved system.  Id.  Given this explanation by the agency, we find nothing improper about the solicitation’s approach of awarding points to offerors that have proof of an audited system at the time of contract award.” (emphasis added).

Gee, wouldn’t it be wonderful if a contractor could just call DCAA and schedule an accounting system audit?

http://www.gao.gov/products/B-413559.2,B-413559.8#mt=e-report

 

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DOD OIG Critical of DCMA Followup on CAS Violations

http://www.dodig.mil/pubs/report_summary.cfm?id=7232&utm_source=DoD+IG+Email+Update+-+Reports+and+Testimonies&utm_campaign=1028bc1344-DoD_IG_Reports&utm_medium=email&utm_term=0_3a17f8681e-1028bc1344-277174597

 

“For the 27 DCAA CAS reports we selected, we identified several instances in which contracting officers did not comply with FAR, DoD Instruction 7640.02, or agency instructions. We found:

    • 12 instances in which contracting officers did not issue a Notice of Potential Noncompliance within 15 days, as FAR 30.605(b)(1) requires;     • 16 instances when contracting officers failed to complete all actions on the reported noncompliances within 12 months, as DoD Instruction 7640.02    requires;     • 3 instances in which contracting officers did not have adequate documentation or rationale for determining that the DCAA-reported noncompliance    was immaterial, contrary to FAR 30.602; and     • 8 instances in which contracting officers did not obtain a legal review of their CAS determination, as Defense Contract Management Agency (DCMA),   Instruction 108 requires.

As a result, correction of the reported CAS noncompliances was delayed. In addition, contractors may have been inappropriately reimbursed contractors additional costs resulting from the noncompliance.”

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