Experienced professionals who know what to look for.
Helping Government Contractors with Audits and Audit preparation support
| At govIRG, we have Certified Public Accountants and other accounting staff that can provide: |
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| - Audits that meet your Subpart 16.3 Cost Reimbursement Contract requirements |
| - Moch audits to prepare for a financial audit required by your contract. |
| - Audit support to prepare you for audit. |
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."
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Subpart 16.3 - Cost-Reimbursement Contracts Additional Information
FAR Part 16.3, titled "Cost-Reimbursement Contracts," provides guidelines and regulations for cost-reimbursement contracts in federal government procurement. Cost-reimbursement contracts are a type of contract in which the government reimburses the contractor for allowable costs incurred in the performance of the contract, and often includes additional provisions for profit or fee.
In the context of audit requirements for cost-reimbursement contracts, several key provisions are outlined in FAR Part 16.3 to ensure the government's interests are protected, and that the costs claimed by the contractor are reasonable, allowable, and allocable. Here are some of the audit requirements and principles associated with cost-reimbursement contracts under FAR Part 16.3:
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.
Navigating Audit Compliance
It's important to note that specific audit requirements may vary depending on the contract and agency involved. Contractors and auditors must follow the regulations outlined in FAR Part 16.3 and other applicable federal procurement regulations to ensure the proper execution of cost-reimbursement contracts. Additionally, contractors often work closely with their contract officers to address audit-related matters.