MRD 08-PPD-040(R) - Audit Guidance on Discontinuance of MOCAS Priority Audit Initiative

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DEFENSE CONTRACT AUDIT AGENCY DEPARTMENT OF DEFENSE8725 JOHN J. KINGMAN ROAD, SUITE 2135 FORT BELVOIR, VA 22060-6219 IN REPLY REFER TO PPD 730.5.50.1 December 19, 2008 08-PPD-040(R) MEMORANDUM FOR REGIONAL DIRECTORS, DCAA DIRECTOR, FIELD DETACHMENT, DCAA HEADS OF PRINCIPAL STAFF ELEMENTS SUBJECT: Audit Guidance on Discontinuance of MOCAS Priority Audit Initiative SUMMARY This memorandum revises our process for prioritizing incurred cost audits. Effective FY 2009, FAOs will no longer identify and target for accelerated completion specific “MOCAS Priority” audits. In addition, FAOs will no longer identify and target for accelerated completion those contractor fiscal years (CFYs) associated with 20 or more future overage contracts. FAOs should continue to conduct annual coordination meetings with local DCMA Contract Management Offices (CMOs) to discuss (1) priorities based on adequate submissions on hand and (2) proactive measures to obtain late submissions and adequate submissions previously returned as inadequate. This guidance has been coordinated with DCMA Headquarters and they agreed to issue related guidance to their staff. Additionally, we have deleted the MOCAS Priority DMIS field and we will be updating the DMIS Audit Planning Guide appropriately. BACKGROUND On May 31, 2001, in MRD 01-PPD-042(NR), Audit Guidance on Coordinating Incurred Cost Audit Priorities and Final Voucher Audits in Support of DCMA’s DRID #53 Contract ...

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PPD 730.5.50.1

DEFENSE CONTRACT AUDIT AGENCYDEPARTMENT OF DEFENSE8725 JOHN J. KINGMAN ROAD, SUITE 2135 FORT BELVOIR, VA 22060-6219

December 19, 2008 08-PPD-040(R)

MEMORANDUM FOR REGIONAL DIRECTORS, DCAADIRECTOR, FIELD DETACHMENT, DCAAHEADS OF PRINCIPAL STAFF ELEMENTSSUBJECT: AuditGuidance on Discontinuance of MOCAS Priority Audit Initiative SUMMARY This memorandum revises our process for prioritizing incurred cost audits.Effective FY 2009, FAOs will no longer identify and target for accelerated completion specific “MOCAS Priority” audits.In addition, FAOs will no longer identify and target for accelerated completion those contractor fiscal years (CFYs) associated with 20 or more future overage contracts.FAOs should continue to conduct annual coordination meetings with local DCMA Contract Management Offices (CMOs) to discuss (1) priorities based on adequate submissions on hand and (2) proactive measures to obtain late submissions and adequate submissions previously returned as inadequate.This guidance has been coordinated with DCMA Headquarters and they agreed to issue related guidance to their staff.Additionally, we have deleted the MOCAS Priority DMIS field and we will be updating the DMIS Audit Planning Guide appropriately. BACKGROUND On May 31, 2001, in MRD 01-PPD-042(NR), Audit Guidance on Coordinating Incurred Cost Audit Priorities and Final Voucher Audits in Support of DCMA’s DRID #53 Contract Closeout Goals, we communicated the ESC establishment of SPO G2-05-01, DCMA Performance Goal Contracts.The objective of the SPO was to target, for accelerated completion, DCAA-controllable incurred cost audits necessary to accomplish DCMA performance goals for CFYs associated with overage contracts and canceling funds.In addition, to prevent the buildup of overage contracts requiring a final audit, FAO efforts included identifying and targeting for accelerated completion those CFYs associated with 20 or more future overage contracts.To accomplish the objective, FAOs conducted annual coordination meetings with local DCMA CMOs to address contract closeout plans for identified CFYs containing overage contracts, including an assessment of the FAO resource requirements to support the plans and reach agreement on programming and prioritizing the related incurred cost audits.

December 19, 2008 PPD 730.5.50.108-PPD-040(R) SUBJECT: AuditGuidance on Discontinuance of MOCAS Priority Audit Initiative

We have learned that one of the primary causes for contracts not being closed within FAR-mandated timeframes is late and/or inadequate final indirect cost rate proposals.Delinquent submission of final cost proposals may be an indication of weaknesses in the contractor’s accounting system and related internal controls.Therefore, the MOCAS Priority Initiative has been discontinued and a coordination process that better addresses the contractor’s responsibility for timely submission of adequate incurred cost submissions is being implemented. GUIDANCE Effective FY 2009, FAOs will no longer identify and target for accelerated completion specific “MOCAS Priority” audits.In addition, FAOs will no longer identify and target for accelerated completion those CFYs associated with 20 or more future overage contracts.FAOs should continue to conduct annual coordination meetings with DCMA to discuss (1) priorities based on adequate submissions on hand, (2) proactive measures to obtaining adequate submissions and aggressively pursue late submissions, and (3) options addressing expiring or canceling funds for specific contracts.Before prioritizing any unplanned audits due to expiring or canceling funds, auditors should request DCMA to ensure appropriate procedures have been performed to facilitate contract closeout (e.g., contractor has provided evidence that all subcontracts have been closed.)The revised process for conducting coordination meetings includes the following: 1.FAOs should share with DCMA their incurred cost program plan based on adequate submissions on hand and discuss priorities.

2.For any unplanned audits identified by DCMA as a priority, inform DCMA that before prioritizing the audit, we will require assistance in obtaining: a.An adequate proposal, if not received; and b.Verification from the contractor that all subcontracts have been closed.

3.For any unplanned audits identified by DCMA as a priority due to expiring or canceling funds, in addition to the steps identified above, DCAA should ensure: a.The contractor has adjusted billing rates for all open contracts for year-end claimed rates where submissions have been received. b.Current billing rates have been decremented to reflect prior year audit experience where submissions have not been received.

If the contractor does not adjust rates timely, request DCMA assistance to adjust billing rates. Ifthese efforts are unsuccessful, DCAA should proceed with the issuance of a DCAA Form 1.

4.FAOs should share with DCMA a list of contractors with inadequate and/or late incurred cost submissions and solicit ACO support for corrective actions.

December 19, 2008 PPD 730.5.50.108-PPD-040(R) SUBJECT: AuditGuidance on Discontinuance of MOCAS Priority Audit Initiative

5.FAOs should remind ACOs of available proactive actions for dealing with contractors in non-compliance with FAR 52.216-7,Allowable cost and payment, including: a.Limiting proposal due date extensions for only exceptional circumstances in accordance with FAR 52.216-7(d)(2)(i); b.Establishment of unilateral rates in accordance with FAR 42.703-2(c)(2), Certificate of Indirect Costs; c.Application of a decrement to provisional billing rates for unsupported costs in accordance with FAR 31.201-2(d),Determining allowability; d.Establishment of contract withholds due to inadequate systems in accordance with DFARS 242.7502(a)(4).

FAOs are reminded that contractors’ authorization to direct bill should be rescinded if the contractor fails to submit its final indirect incurred cost proposal in accordance with FAR 52.216-7 (CAM 6-1007) unless a valid ACO extension has been granted.In addition, a contractor’s continued failure to submit timely and adequate incurred cost submissions should be reported as an Indirect/ODC System internal control deficiency.

FAOs with questions regarding this memorandum should contact their regional offices. Regions with questions should contact Policy Programs Division at (703) 767-2270 or e-mail DCAA-PPD@dcaa.mil.

DISTRIBUTION: C

/Signed/ Kenneth J. Saccoccia Assistant Director Policy and Plans

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