6-806 Washington Area Offices
a. Many large contractors maintain offsite offices in the Washington, D.C. area. Histori
cally, contractors’ Washington, D.C. area offices (hereinafter referred to as Washington Of
fice) have incurred significant expressly unallowable costs; e.g., lobbying and entertainment.
Contractors should identify and exclude these unallowable costs from any billing, claim or proposal applicable to a Government contract.
b. A Washington Office is defined as office space that is leased, rented, or owned in the Washington, D.C. metropolitan area by a Government contractor. The space is used, at least partially, for the purpose of Legislative/Executive Branch lobbying, public relations, and/or marketing the contractor's products.
c. To be successful, Washington Office audits require a coordinated audit approach between the cognizant auditor and the Washington Office auditor. The decision to re
quest a Washington Office audit is usually made by the cognizant field audit office.
Corporate or home office auditors should contact divisional auditors to determine the extent of divisional employee involvement at the Washington Office. Many contractors staff their Washington Office with both corporate and divisional employees.
6-806.1 Audit Risk Assessment
a. FAOs should perform a risk assessment of the Washington Office before requesting an assist audit. The risk assessment should focus on: the significance and sensitivity of the proposed Washington Office costs, the amount of Washington Office costs being identi
fied and excluded from the proposal, and the adequacy of the contractor’s accounting poli
cies and procedures and internal controls for Washington Office costs. The following are examples of conditions that may require an assist audit:
(1) The proposed Washington Office costs are significant.
(2) The contractor does not eliminate any (or very small amounts of) costs for unal
lowable activities, such as lobbying, from its proposed Washington Office costs (FAR 31.205-22).
(3) The contractor excludes little or no directly associated unallowable costs from its proposed costs for the Washington Office.
(4) The contractor’s accounting policies and procedures for Washington Office costs are not documented, especially the policies and procedures for identifying and segregating unallowable costs.
(5) The contractor has made major changes to the accounting policies and proce
dures for Washington Office costs.
(6) Major Washington Office management changes have occurred.
(7) A compliance audit of the Washington Office accounting policies and proce
dures has not been performed in the last three to five years (either by the contractor’s internal audit department or DCAA).
b. The results of the risk assessment should be included in the assist audit request. If a contractor is eliminating as unallowable costs the entire Washington Office - both corporate and division - an assist audit is normally not needed.
6-806.2 Assist Audit Request
a. The offsite Washington Office assist audit will be performed by the designated audit office for that geographic area. The designated audit office will treat all
Washing-ton Office audits as customer requested assignments. It will also initiate coordination with the cognizant FAO if a Washington Office assist audit has not been requested in a three year period.
b. Washington Office assist audits are most efficient and effective when coordinated with FAO corporate or division audits. The designated audit office will tailor their audit program with the FAO requesting the assist audit before performing any field work.
6-807 Differences of Opinion Between DCAA Offices
In the exchange of information and ideas in the performance of assist audits, it is possible that significant differences of opinion on administrative procedures or technical accounting matters may develop. Auditors encountering such differences in performing audit assignments will forward the information to their respective regional offices. If the directors of the respective regions cannot resolve the differences, or if the differences are resolved, but the matters involved would be of interest to Headquarters, either or both regional directors will forward promptly to Headquarters, Attention PAC, a report containing sufficient details regarding the differences involved including, where appro
priate, the conclusions reached. Reporting to Headquarters on problem areas encoun
tered in the administration of the CAC program is covered in 15-210.2.
Figure 6-8-1 Figure 6-8-1
Pro Forma Assist Audit Request [Date]
MEMORANDUM FOR FAO MANAGER, [insert the cognizant FAO name]
SUBJECT: Notification of Subcontract Award [Intracompany Order] and Assist Au
dit Request
As part of our incurred cost audit of [contractor name], we request that you include the following subcontract(s)/intracompany order(s) in your incurred cost audit of [subcontractor name]. Enclosed are copies of subcontract(s)/intracompany order(s) awarded by [contractor name] to the subcontractor under your audit cognizance. We are also providing the [contractor name] identified point of contact for [subcontractor name], along with their mailing address and phone number to assist you in coordinat
ing with the identified subcontractor.
Con
tract No.
Type Subcon
tract No.
Period of Performance
FY In
curred Cost
Subcon
tract Value
Annual incurred cost audits are required that cover the period of performance of the subcontract(s). Please acknowledge this request. We request that you furnish our office with a Cumulative Allowable Cost Worksheet (CACWS) on an annual basis, and a final CACWS or final voucher evaluation memorandum when audits of costs incurred covering the entire period of performance are completed.
In addition, we request that you inform our office if either of the following condi
tions occurs during subcontract performance:
Annual incurred cost audits disclose significant questioned costs. If so, please provide the amount applicable to the subcontract so we can prevent the prime contractor from over billing the Government.
The subcontractor no longer has an adequate accounting and/or billing sys
tem.
If you have any questions pertaining to this memorandum, please contact Mr./Ms.
[insert name], Supervisory Auditor, at [insert the telephone number] at your conven
ience.
John A. Smith FAO Manager Enclosures: a/s
6-900 Section 9 --- Notices of Cost Suspensions and Disapprovals under Cost-Reimbursement Contracts
6-901 Introduction
This section states the audit guidance and procedures to be followed for effecting sus
pensions and disapprovals of costs under cost reimbursement contracts and the issuance of DCAA Form 1, Notice of Costs Suspended and/or Disapproved under Cost Reimburse
ment Contracts.
6-902 General Guidance for Suspensions and Disapprovals
a. In general, an item of cost, either direct or indirect, which lacks adequate explana
tion or documentary support for definitive audit approval or disapproval should be sus
pended until the required data are received and a determination can be made as to the al
lowability of the item. Suspensions may also be used to:
(1) Reduce the fixed-fee when the interim amount claimed for payment is in excess of the amount authorized by the contract.
(2) Establish the necessary withholding reserves required by the contract terms when the contractor fails to do so.
(3) Provide for the correct amount of current reimbursements of costs in accordance with contract billing requirements (e.g., suspend costs that are otherwise allowable but which have not met the contract billing requirements (see 6-1005c and 6-1006)).
b. Costs claimed by the contractor for which audit action has been completed, and which are not considered allowable, will be disapproved. Disapproved cost may comprise any of the following:
(1) Items specifically limited or excluded by FAR Part 31 or other terms of the con
tract.
(2) Items which, although not specifically unallowable under (1) above, are deter
mined, in accordance with FAR Part 31, to be unreasonable in amount, contrary to gener
ally accepted accounting principles, or not properly allocable to the contract in accordance with the relative benefit received or other equitable relationship.
(3) Items disapproved at the direction of the ACO (DFARS 242.803(b)(ii)(B)).
c. Costs which the auditor determines should be suspended or disapproved should be discussed with the contractor to ensure that the auditor's conclusion is based upon a proper understanding of the facts and to inform the contractor of the auditor's determination. If the contractor agrees that the costs in question should be suspended or disapproved, one of the following actions will be taken:
(1) Where the costs have not yet been submitted on a reimbursement voucher, ar
rangements will be made to ensure exclusion of the costs from any future reimbursement claims. The auditor shall maintain a record of improper contract costs which the contractor has agreed to deduct or exclude from its claims on public vouchers.
(2) Where the costs have already been included in provisionally approved reim
bursement vouchers, the auditor may issue a DCAA Form 1, or as an alternative the con
tractor may deduct the amount on the next voucher submitted. For indirect costs, this may be accomplished by the contractor making the appropriate reduction to the billing rates.
6-902