Late last year, the Defense Contract Audit Agency (“DCAA”) published a “Selected Areas of Cost” guidebook to replace Chapter 7 of the DCAA Contract Audit Manual (“CAM”). The newly refreshed guidebook provides further direction for auditors and contractors on how to properly treat certain types of costs listed in Federal Acquisition Regulation (“FAR”) 31.2. Thirteen areas of costs have been updated with additional guidance.
Chapter 7 covers both the previous version and new version of the CAM, related to the allowability of professional & consultant rates. The new guidance provides more insight into the evidence required to defend the costs incurred by the contractor. The evidence required by DCAA is to help prove the true nature of the professional services costs and clear up any “gray area” or concerns. Specifically, the guidance states contractors need to retain the following to be considered allowable:
1) Details of all agreements.
- An agreement that explains what the consultant will be doing for the contractor.
2) Invoices or billings.
- A copy of the bill for the actual services rendered. This should include evidence as to the time accumulated for the work and nature of the services provided to determine what was done in exchange for the payment and that the terms of the agreement were satisfied. This documentation does not need to be included on the actual invoice and can be supported by other evidence provided by the contractor.
3) Consultant work product and related documents.
- Explanation of what the consultant accomplished for the fees paid; this could be information on the invoice, a drawing, a power point presentation, final deliverable or some other evidence of the service provided.
Retention of proper documentation and adequate preparation is essential to the success of an audit.
To find out more about how you can successfully overcome the DCAA audit process, join our monthly lunch and learn or webinar events here. Continue following the JAMIS Prime Insights blog for more information on the role of DCAA, the various types of audits, the audit process, and best practices on how to prepare for a positive outcome.