Clause FAR (Federal Acquisition Regulation) 52.216-7 Requirements

Government Contractors with cost-type and time & material contracts containing the allowable cost and payment clause FAR 52.216-7 are required to prepare and submit an incurred cost submission in accordance with DCAA guidelines to DCAA and DCMA annually.  The incurred cost submission is due 6 months after the close of your fiscal year. So, companies with calendar year-end submissions are due June 30, 2012. If you would like a quote on preparing your company’s incurred cost submission please feel free to call us at 978-957-9665 or e-mail us at pwitts@wittscpa.com.

Follow @wittscpa

NIH Grantee Audit and Accouting Requirements

As you are probably aware of, doing business with the NIH requires a lot of compliance in the area of accounting beyond the normal filing of annual income tax returns. As an NIH grantee, you are required to prepare an annual indirect cost rate proposal and may be required to have either an A-133 program audit or an audit in accordance with Government Auditing Standards of your NIH grants.

Your company’s NIH indirect cost rate proposal must be submitted to NIH within six months of the close of your company’s fiscal year. The indirect cost rate proposal is a complex proposal requiring an understanding of the Federal Acquisition Regulation (FAR) and NIH supplements and regulations. Costs included in the proposal are subject to upcoming fiscal year and adjust current grants. The indirect cost proposal can be even more complex if you are working with multiple government contracting or granting agencies.

As required by 45 Code of Federal Regulations (CFR) 74.26, if your company has expended over $500,000 in NIH grant expenditures, your company is required to have either a financial related audit in accordance with Government Auditing Standards or an audit in accordance with the requirements of OMB Circular A-133. The audit report must be filed with NIH within nine months of the close of your company’s fiscal year. The audit is of your grant awards for compliance with the FAR requirements and OMB Circular A-133 requirements.

Our firm specializes in helping companies to comply with the requirements of their U.S. Government grants or contract awards. We can prepare your indirect cost proposal and support negotiations with NIH. We can determine if your company has had grant expenditures in excess of $500,000 and are required to have an audit. We can perform either a financial related audit or an audit in accordance with the requirements of OMB Circular A-133 to meet your NIH audit requirements.

Our firm has over 20 years of experience working with companies doing business with U.S. Government through contracts and grants. Please feel free to call us at (978) 957- 9665 or e-mail us at pwitts@wittscpa.com to discuss how our firm can help you comply with the accounting and auditing requirements of your grant awards.

Follow @wittscpa

DCAA to Increase Government Auditing Staff

The DCAA is going to increase its spending on their audit staff by 14% in 2013.  According to the Pentagon’s new request, the budget for auditors would increase from $1.7 billion to $1.9 billion dollars in 2013.  This all comes at a time where the U.S. Military Budget is looking to decrease by 5%, so why increase the budget for auditors and not military personal?

As of today there is $400 billion in unaudited defense contracts. The increase in defense spending that occurred after 9/11 caused a huge pile-up of defense contracts that the DCAA hasn’t had the proper staffing to complete in a timely manner.  What this means is that there is money out there waiting to be handed out to companies and recovered by our government.  It is estimated that the U.S. Government could claim up $2.2 billion in overcharges, while companies could be seeing an even larger pay day which could potentially help give the lagging economy a boost.

The Pentagon is claiming that these contracts need to be audited and they need to be audited now.  It is estimated that the U.S. Government has lost nearly $30 billion to fraud in contracts related to the wars in Iraq and Afghanistan.  With fraud being as bad as it is, along with the 44% decrease of incurred cost audits performed by the DCAA in 2011, the Pentagon is making a great case for the budget increase.

Under the Pentagon’s new proposal the DCAA would get an 11% budget increase to $1.3 billion and the Defense Department budget would be $613.9 billion.

Follow @wittscpa

DCAA Questioned on Reasonableness of Executive Compensation Surveys

The Armed Services Board of Contract Appeals (ASBCA) has recently discovered statistical flaws with how the DCAA measures executive compensation in relation to the FAR 31.205-6.  The ASBCA’s findings came after a long eight step process to perform the executive compensation review.  The ABSCA’s analysis came up with 8 conclusions:

1. Ignored differences in the survey sample sizes.
2. Selected non-responsive revenue bases.
3. Failed to consider financial performance.
4. Failed to consider discriminators (i.e., security clearances, customer satisfaction, etc.).
5. Inconsistent consideration of applicable executive positions.
6. Inconsistent selection of comparable industries/markets.
7. Inconsistent selection of surveys to be used.
8. Inconsistent use of the 50^th percentile vs. mean salary.

Of course this is all conclusions that ASBCA has made and the government still has yet to challenge the results of these findings.  This battle of reasonableness is still at the very beginning of what looks to be a long and ugly journey.  We have helped our clients with these Executive Compensation issues and are discovering the same issues noted in the ASCBA case.  If you need help in reviewing a DCAA audit finding in relation to Executive Compensation please feel free to email me at pwitts@wittscpa.com.

The full text of the case can be found at ASBCA 56105, 56322.

Follow @wittscpa

Peter Witts, CPA PC Acknowledged in the Book Plasma Antennas

Peter Witts, CPA PC has been recognized for the advice given to Dr. Theodore Anderson in writing his book Plasma Antennas.  Peter Witts and his staff helped Dr. Anderson and Haleakala Research and Development, inc. in many areas of government contract accounting.  Specific areas included DCAA compliance, accounting services, and tax services.

The exact wording of recognition is as follows, “The author appreciates Peter Witts of Peter Witts, CPA PC, for advice pertaining to Haleakala Research and Development, Inc. on contracts for the plasma antenna and accounting work. “ 

For more information or order Dr. Anderson’s book, Plasma Antennas you can contact us here at Peter Witts, CPA PC or visit any three of the links below:

http://www.artechhouse.com/Plasma-Antennas/b/2130.aspx

http://www.amazon.com/Plasma-Antennas-Theodore-Anderson

http://www.barnesandnoble.com/w/plasma-antennas-theodore-anderson

Follow @wittscpa

President Obama Okays 3% Withholding Repeal

President Obama has just signed in law H.R.674, which has now become known as the 3% Withholding Repeal and the Job Creation Act.  The laws primary focus is on eliminating the 3% withholding that local, state, and federal governments were taking on payments to contractors in excess of $10,000.  The hope is that the increased cash flow will give these small businesses more money to hire employees and pay their suppliers. 

            The 3% Withholding law was originally put in place to insure that contractors and subcontractors were paying their taxes.  They would then maybe receive the 3% back, but with no timetable on when they would receive it.  This was a huge problem for contractors and subcontractors because that 3% would sometimes make up all of their profit. 

On November 16^th the House of Representatives passed the bill H.R. 674 with a unanimous vote 422-0. It is safe to say that all parties involved agree that this is a bill that needs to be passed. The 3% Withholding Repeal will begin January 1^st, 2013.

Law H.R. 674 also includes Vow to Hire Heroes Act of 2011, which is a program that is being setup to help retrain veterans to get the skills they need to gain jobs.  In return the act includes tax breaks for companies that hire unemployed veterans. 

Follow @wittscpa

Happy Veterans Day!

Peter Witts, CPA PC wishes all of our war veterans a Happy Veterans Day. Thank you to all that have served this country and protected our freedom.