Does your Contract say something like this?

"Throughout the life of the ID/IQ, contractors are required to maintain an accounting system that is adequate for determining costs applicable to cost-reimbursement type task orders as described in FAR Subpart 16.3. This is an accounting system that the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), any federal civilian audit agency, or a third-party certified public accounting firm has audited and determined adequate for determining costs applicable to this contract."

Cost Principles

Cost-reimbursement contracts require contractors to adhere to specific cost principles. These cost principles are defined in FAR Part 31, which outlines allowable and unallowable costs that can be charged to the government. Auditors will review the contractor's accounting practices and records to ensure compliance with these principles.

Audit of Costs

Contractors are often required to provide audited financial statements and other documentation that support their claimed costs. Government auditors, typically from the Defense Contract Audit Agency (DCAA) or other audit agencies, will review these documents to verify the accuracy and reasonableness of the costs.

Incurred Cost Submission

Contractors with cost-reimbursement contracts are typically required to submit an Incurred Cost Submission (ICS) within a specified timeframe after the end of the contractor's fiscal year. This submission includes a breakdown of incurred costs and supporting documentation. Auditors review this submission for compliance with applicable regulations.

Allowable Costs

Auditors determine whether the costs claimed by the contractor are allowable. Costs must comply with the applicable cost principles, and they must be necessary and reasonable for contract performance.

Allocability

Costs must be allocable to the specific contract, meaning that they can be directly tied to the work performed under that contract.

Audit of Indirect Costs

Government auditors often review a contractor's indirect costs, such as overhead and fringe benefits, to ensure they are allocated in accordance with approved cost accounting practices.

Cost Realism

In some cases, auditors assess the realism of the proposed costs in the contract bid to ensure they are consistent with the contractor's cost accounting practices and the requirements of the contract.

Subcontractor Costs

Auditors may also review subcontractor costs to ensure they are reasonable and allowable.

Penalties for Unallowable Costs

 If unallowable costs are identified during an audit, the government may disallow those costs, and the contractor may be required to repay the government. There may also be penalties for submitting unallowable costs.