Several government agencies routinely require pre-award audit reviews to ensure the appropriate and responsible use of taxpayer funds. Foremost among these are the Department of Defense (DOD) and its Defense Contract Audit Agency (DCAA), which conduct detailed reviews before awarding any cost-type contracts.
Additionally, agencies such as the National Aeronautics and Space Administration (NASA), Department of Energy (DOE), and the General Services Administration (GSA) may also require pre-award audits. It's crucial to understand the audit expectations for each agency and prepare accordingly, ensuring both fiscal transparency and compliance.
In a pre-award audit, also known as a DCAA 1408 Review, there are several expectations you should prepare for:
1. Accounting System Adequacy: The Defense Contract Audit Agency (DCAA) will use a checklist to evaluate the sufficiency of your accounting system. This is a crucial step in the process as it helps the auditors gain an understanding of your financial operations.
- Proper segregation of direct costs from indirect costs – It must be clear which costs are directly associated with specific contracts and which are not.
- Identification and accumulation of direct costs by contract – A detailed record tracking the direct costs attributed to each contract should be maintained.
- A logical and consistent method for the allocation of indirect costs – The method used to allocate these costs should be rational and applied consistently across all contracts.
- Accumulation of costs under general ledger control – Costs must be controlled and documented in an organized, reliable manner under a general ledger system.
- A timekeeping system that identifies employees' labor by intermediate or final cost objectives – This pertains to the tracking of labor costs, ensuring it can be traced back to the specific cost objectives.
- A labor distribution system that charges direct and indirect labor to the appropriate cost objectives – This system needs to accurately allocate labor costs to their respective cost objectives.
2. Pre-Award Survey – This survey, also known as SF1408, is considered a "pre-award audit" and is necessary for the award of any cost type contract. The purpose of the survey is to determine if your accounting system is capable of accumulating costs for your contract effectively.
3. Evaluation of Contractor's Accounting System – The pre-award survey allows government agencies to assess the adequacy of a prospective contractor's accounting system. This evaluation ensures that taxpayer funds are used appropriately and efficiently.
4. Examination Before Contract Award – The SF1408 is an examination conducted before a contract award that determines the acceptability of your accounting system. It's used to establish if your accounting system is DOD contract-ready.
5. Contractor Purchasing System Review (CPSR) – This review is conducted to check if your purchasing system meets the required standards.
Need Assistance?
Remember, the ultimate goal of a pre-award audit is to ensure that taxpayer funds are used effectively and responsibly.
Should you need assistance navigating the complexities of the SF1408, consider seeking help from a professional firm specialized in government contracts and auditing that offer dedicated services and have extensive experience in helping businesses prepare for DCAA audits.
Additionally, resources like the DCAA's own Guidebook and the Federal Acquisition Regulation can provide invaluable assistance in understanding the requirements in detail. Always remember, adequate preparation can make the difference between a successful audit and one fraught with difficulties.
Debbie Sabin is an accomplished professional with extensive experience in time and attendance solutions. As one of the founders of both Hour Timesheet and Clockwise, she has built a reputation for creating innovative and user-friendly tools that help businesses streamline timekeeping, payroll and invoicing processes.
With a background in business administration and project management, Debbie has always had a passion for finding ways to improve workflow processes and increase productivity. This drive led her to establish Hour Timesheet, a company specializing in time tracking software that simplifies timekeeping and enhances overall workforce management.
Under Debbie's leadership, Hour Timesheet has grown into a highly regarded provider of time tracking solutions for businesses of all sizes. The company's flagship product, a cloud-based timesheet system, offers a seamless and intuitive experience for both employees and managers.
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