The Importance of Internal Controls for Government Contractors

Effective internal controls are essential to the success of any organization.  This is especially true for government contractors who operate in one of the most regulated industries in the world.  No organization of any size can ensure compliance with their own policies much less comply with the myriad of government rules and regulations without an effective suite of internal controls specifically designed for their operating environment.

For example, it is virtually impossible to maintain adequate accounting, purchasing and property systems without effective internal controls.  Internal controls also play a significant role in preventing and, if necessary, detecting unethical behavior among employees.   In fact, FAR clause 52.2-3-13 “Code of Business Ethics and Conduct” requires the larger government contractors to implement a suite of specifically identified internal controls.  More recently, internal controls covering a contractor’s IT systems have become critical.  The emphasis on internal controls for IT systems is appropriate for three reasons.

• IT now supports virtually all contractor operations and functions from business development, to contract performance, to corporate functions such as accounting, HR, and purchasing.
• Cyber security
• Government regulations such as FedRAMP and the DFARS clause 252.204-7012 “Safeguarding Covered Defense Information and Cyber Incident Reporting”  impose stringent requirements on contractors’ IT systems.

Unfortunately, internal controls are not yet commoditized and cannot simply be purchased.  Nor can internal controls be effectively implemented in a piecemeal fashion. Effective internal controls need to work together in an overall framework.  Too few internal controls substantially increase a contractor’s risk, too many are costly and time-consuming, thus hurting the firm’s competitiveness.  Conversely, a suite of internal controls designed specifically for your organization will contribute as much to your success as good business development or state of the art, technical skills.

The right ERP system, will ensure you’ll always remain compliant with the government’s rules and regulations. An application like JAMIS Prime ERP can do just that and integrate all the key components of your business. Take a look at our website HERE for more information or sign up to join our JAMIS webinar series HERE.

To learn more about this topic, Aronson offers a “White Paper” entitled “Internal Controls – Going Beyond Auditing.”   If you have any questions regarding this white paper or how Aronson can help your firm succeed please contact Payal Vadhani (pvadhani@aronsonllc.com), Lead Partner of Aronson’s Technology Risk Services Practice.