Defense government contractors could potentially see no more DCAA incurred cost audits beginning October 1, 2018. Section 820 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 has established a new and independent Defense Cost Accounting Standards Board (DCASB) to oversee cost accounting standards across all of Department of Defense (DoD). The three primary objectives for this new board are:
The board’s first order of business will be to amend the existing CAS Board’s implementing statute 41 U.S.C. § 1501 to specify additional duties for the CAS Board. For instance, one new standard will request the CAS Board meets at least once per quarter. A notice of each meeting and the meeting’s agenda will be published in the Federal Register. Additionally, they will report annually to multiple congressional committees regarding how it has conformed its accounting standards to GAAP and minimized the burden on contractors.
A noteworthy change more pertinent to government contractors is the potential to avoid further DCAA incurred cost audits. This could be achieved by the DCAA accepting a reputable CPA firm’s indirect rate audit reports with no additional testing required. The only condition is that the audit must be performed in accordance with Generally Accepted Accounting Principles (GAAP).
This is a significant change as DoD contractors will be able to finalize their indirect rates and close out their contracts at a much faster and efficient pace. Currently, incurred cost audits may last about one to two years, although they usually do not begin until years after the filing of the incurred cost submission.
Those in a prime or subcontractor relationship will now have the benefit of settling and closing out on-going subcontracts in a timely manner. Subcontractor costs often linger because of the wait for a subcontractor’s rates to be audited and settled. If a subcontractor does not have any prime DoD contracts the wait can be lengthy.
The Federal Government will now have the advantage of faster closeouts with contractors and the ability to de-obligate any remaining funding at a much more rapid pace. Furthermore, they also will be able to close-out contracts more quickly than in the past.
One downside and confusion regarding NDAA Section 820 will occur for contractors who have both civilian and defense contracts. Who will have the final say? Will the new DCASB create new standards? What effects will this newly formed board have on the existing and long standing CASB? We’re not sure how this will all be resolved; however, Aronson will continue to provide updates as October 1, 2018 approaches. Stay tuned!
For any questions, please contact Donna Dominguez at 301.222.8232 or email@example.com.
DCAA (Defense Contract Audit Agency) is trying to close out outstanding Incurred Cost Submissions (ICS) and if yours has not been submitted you are at RISK! A recent MRD states that in May 2016 DCAA will provide a list of delinquent contractors to the Defense Contract Management Agency (DCMA) for ICS Fiscal Years Ending (FYE) 2014 and older that do not have a valid extension.
So what happens if you’re on this list? Well, June 2016, if DCMA does not notify the DCAA of a valid extension or ongoing coordination that would authorize leaving the assignments open, DCAA audit teams are advised to close out ICS assignments on the list. If an ICS is received after an assignment has been closed, DCAA can re-open the assignment if requested.
On March 3, 2016, our Aronson LLC Government Contracting specialists Donna Dominguez and Aisha Mian hosted “Cracking the Code: Preparing an Incurred Cost Submission,” where they provided tips, guidance, and best practices to help government contractors efficiently prepare Incurred Cost Submissions. As a follow up to this webinar, Donna and Aisha have prepared answers to attendee questions that we wanted to share with our blog readers. If you’re interested in viewing a recording of this webinar, please click here.
If you’re a contractor that has a majority of non-DoD contracts, you’ll want to pay attention to this update on DCAA audits! The 2016 National Defense Authorization Act prohibits the DCAA from providing audit support to any non-DoD agency until the Secretary of Defense certifies that the DCAA has reduced its backlog of incurred cost submissions to 18 months or less. While this sounds advantageous to the DCAA, it sounds relatively painful to a contractor who is currently amidst an audit with the DCAA.
Professional Services Council (PSC) recently invited Sherry Kobus, DCAA (Defense Contract Audit Agency) Small Business Program Manager to speak at their seminar held on October 9, 2015. Sherry spoke to both small and large government contractors regarding a variety of topics that impact small businesses. Some highlights from Sherry’s presentation are: