6-803 Interplant Billings
As used in this section, interplant billings are invoices (or credit memorandums) for work or services performed at a contractor's plant or division and charged to flexibly priced contracts at another plant or division. For purposes of this section, the auditor at the plant or division billed for services is referred to as the prime auditor and the auditor at the location where the work is performed is referred to as the lower-tier auditor.
6-803.1 General
a. A contractor may use more than one of its plants or divisions to perform required work or services. It may issue interplant work orders, purchase orders, or requisitions for the ser
vices or work to be performed. Where plants or divisions involved are separate entities for accounting purposes, the contractor generally will use interplant billings or invoices to bill costs or charges applicable to the work or services performed. Except as provided in FAR 31.205-26(e), the allowable costs for such work or services will be the actual costs of the performing organizational unit (6-313).
b. The provisions of this section are not applicable to monthly or periodic billings which cover solely estimated indirect expense allocations, such as distributions of home office ex
penses to various benefiting plants. Ordinarily, the contractor will adjust these allocations to actual at its fiscal year end. The cognizant auditor will review charges of this nature as part of the normal overhead audit at the benefiting plants through the assist audit procedures (6
804).
6-803.2 Audit Procedures
a. The prime auditor will initiate requests for assist audits of interplant billings pursuant to the criteria stated in 6-306.3b.(2) and 6-313 and should normally include copies of the related work orders, purchase orders, or subcontracts and billing documents to help the low
er-tier auditor identify the costs to be audited. However, the lower-tier auditor has a mutual responsibility to assure concurrent and coordinated audit effort similar to that envisioned in subcontract audits (6-802). In addition, these responsibilities include satisfying applicable portions of the mandatory annual audit requirement related to auditable subcontracts/assist audits (MAAR 12). The prime auditor's timely identification of auditable interplant work authorizations and information as to anticipated volume of auditable work is essential to sound audit planning and performance of the assist audits.
b. The lower-tier auditor should coordinate planned audit effort with the prime auditor and the lower-tier Plant Representative/ACO to assure coverage in specific areas of mutual interest. Based on this coordination, the lower-tier auditor will furnish the prime auditor with the anticipated issuance date of the assist audit report. The prime auditor will also coordinate these matters with the Plant Representative/ACO at his or her location.
c. The tier auditor will arrange for necessary technical assistance with the lower-tier Plant Representative/ACO. Guidance on technical assistance is in Appendix D.
d. Requirements in 6-1005b. will govern the scope of the incurred interplant costs audit.
The audit will normally be comprehensive and include a reconciliation of the cost records to the total interplant billings for each fiscal year during the contract performance. Do not per
form audits of individual interplant billings except in unusual circumstances as required by 6-1003f.
6-803.3 Audit Reports
a. The lower-tier auditor will issue timely audit reports, prepared under the general re
quirements of Chapter 10, to the prime auditor according to the reporting schedule. The re
port will cover the acceptability of the total transferred costs, together with specific com
ments on the indirect expense rates. When circumstances warrant, the lower-tier auditor should issue a special report to advise the prime auditor on a timely basis of newly noted matters which affect the allowability or allocability of interplant costs.
b. Comments on indirect expense rates should indicate whether or not final rates have been established. If final indirect expense rates have not been established, the lower-tier au
ditor will provide comments regarding claimed billing rates and the effect of questioned costs on the billing rates. The lower-tier auditor will issue a supplemental audit report when indirect expense rates have been finalized.
c. The lower-tier auditor will also provide comments on any transferred costs not covered by an interplant work order.
d. The lower-tier auditor will explain all suspended or disapproved costs in sufficient detail to enable the prime auditor to prepare necessary DCAA Form 1s.
6-804 Corporate, Home Office or Service Center Audits
The contractor's home or group office comprises the general corporate or divisional headquarters responsible for the management of business carried out at various plants, branches, divisions, or subsidiaries of the organization.
a. The home office is responsible for the overall administration and management of the operations performed under its general guidance and incurs expenses that are allocable to the operations carried out at the various plants, branches, divisions, or subsidiaries.
b. Some home or group office services may not be of a general nature but are performed for a particular plant or division. Under such conditions, the associated costs may be directly charged to the plant or division. Treat these transactions as intracompany billings covered by the audit procedures outlined for interdivisional transactions (6-313).
6-804.1 Audit Responsibility – Home Office Audits
a. The home office auditor is responsible for the audit of all corporate or home office expenses distributed to the various segments of the corporation irrespective of how such expenses may be charged to the segments.
b. There is, however, a significant corollary responsibility placed on lower-tier auditors.
They must develop sufficient information and necessary visibility to permit effective evalua
tion by the home office auditor. For example, lower-tier auditors, in cooperation with the contract audit coordinator (CAC) and home office auditors, may identify overlapping or duplicative effort between the home office and operating entities. The CAC program (15
200) was established, in part, to improve communication and visibility in this important area.
Accordingly, take appropriate measures to assure that effective coordination is accomplished among the home office auditor, the plant auditor, and the CAC.
c. The audit scope will depend to a large extent on the overall value and percentage of Government contracts the contractor is performing and the amount of home office expenses
6-804 allocated and assigned to Government contracts. When appropriate, the corporate auditor should perform the audit during the contractor's fiscal year.
d. The corporate auditor should resolve audit problems, such as inequitable allocation methods or corporate policies, as soon as possible to prevent undue delays of overhead audits at the various segments. In this connection, refer to 15-200 for the CAC program procedures.
Plant level auditors should specify dates by which home office reports are needed in the au
dit request.
6-804.2 Audit Procedures
a. Guidance in Chapters 4 and 6 are applicable to the audit of home office expenses. In reviewing home office expense pools, pay particular attention to the expense types which may not be applicable to the business as a whole, such as those applicable only to a particular group of products, group of plants, or only to those products sold through certain channels or to certain customers.
b. The corporate auditor should review accounts not included in the expense pool for the possibility that they are applicable to Government contracts. These accounts include other (or miscellaneous) income and expense accounts, reserves for contingencies, surplus, and others. (See 6-500.)
c. The corporate auditor should review tax returns, corporate minutes, reports filed with regulatory bodies (such as SEC filings), and financial statements for their impact on the con-tractor's organization, operations, and claimed costs. (see 3-2S1.) The results of this review should be coordinated with, and written confirmation provided to, cognizant lower-tier audi
tors to help comply with mandatory annual audit requirement relating to the review of tax returns and financial statements (MAAR 4).
d. The corporate auditor should furnish copies of consolidated financial statements, in
cluding notes thereto, to cognizant lower-tier auditors.
6-804.3 Cost Accounting Standards (CAS) -- Home Office
Cost Accounting Standard 403 (Allocation of Home Office Expenses to Segments) is particularly important in reviewing the allocability of home or group office expenses. The need for assuring compliance imposes special requirements on both the home office auditor and lower-tier auditors, and close coordination and interface between these auditors is essen
tial. All auditors involved in the review and analysis of home or group office expenses will observe the specific guidance contained in Chapter 8.
6-804.4 Audit Reports
a. The higher-tier auditor normally should issue audit reports annually, but also report significant findings when discovered. The narrative section of the report should contain summary comments on unsatisfactory contractor policies and procedures affecting contract costs at the plant level to alert those auditors to conditions that may require special emphasis.
b. Audit reports should provide sufficient detail and information for the plant level audi
tors to identify and evaluate cost allocations considering the circumstances or specific provi
sions of their contracts.
c. Reports distributed to plant or division level auditors should not divulge "contractor confidential" information which the contractor itself does not release to the plant or division
level. A factor representing the percentage of questioned or disapproved allocated home or group office expenses may be all that is required at the plant or division level.
6-805 Offsite Locations (including overseas locations)
The contractor may maintain books and records at locations different from the site of physical work performance. For purposes of this section, auditors at locations where contrac
tors' books and records are maintained are referred to as prime auditors and those where the work is physically performed as offsite auditors. Both prime and offsite auditors must estab
lish adequate communication to assure effective interface.
6-805.1 Audit Responsibility – Offsite Locations
a. The prime auditor retains responsibility for the audit of the primary accounting records and approval of costs under Government contracts. In this connection, the prime auditor will coordinate the overall plan or program, including assist audit requests, with the offsite audi
tor to assure proper integration of audit efforts at the respective locations. The assist audit request should include, as a minimum, a listing of current employees at the offsite location, the name, title, and telephone number of the offsite contractor representative, a listing of contractor project numbers active at the offsite location, a cross-reference to active Govern
ment contract numbers and types, a copy of a current payroll distribution, and DMIS con
tractor DUNS ID for the offsite auditor to use when setting up the assignment. It is especially important that the prime auditor notify the offsite auditor of special provisions or sensitive areas concerning contract performance. The offsite auditor has a corollary responsibility to apprise the prime auditor of any auditable work or additional areas of audit coverage at the offsite location which have not otherwise been identified.
b. The offsite auditor will time-phase general areas of audit coverage at the offsite loca
tion to coincide with the prime location's overall plan. The offsite auditor should initiate physical observations and coordination with offsite contract administration officials.
c. Where warranted, the prime auditor(s) should make periodic visits to offsite locations to coordinate audit activity. The prime and offsite auditors should discuss any unresolved problems between them through regional channels. (See 6-807.)
d. These responsibilities also include satisfying the applicable portions of the mandatory annual audit requirement related to auditable subcontract/assist audits (MAAR 12).
6-805.2 Audit Reports
a. The format and content of the assist audit report will conform with the general re
quirements of Chapter 10.
b. The offsite auditor will address assist audit reports to the prime auditor. All assist audit reports with positive findings shall contain a recommendation for a followup assist audit whenever one is considered necessary. When audit results involve questioned costs or re
quire further action at the prime location, the prime auditor will advise the offsite auditor of the disposition of the audit findings.
c. The offsite auditor will issue reports to local contract administration officials concern
ing matters of local interest or in response to requests from the local officials. The offsite auditor will furnish copies of reports to the prime auditor.