Ensure timely and appropriate resolution and
disposition of audit findings
Process
CMO/Center approval of deviations to DCMA mandatory
requirements is not authorized for this instruction.
LATEST CHANGE
The
acronym ACO as used in this instruction
could refer to Corporate Administrative
contracting Officer (CACO), Divisional
Administrative Contracting Officer (DACO),
or Administrative contracting Officer,
unless specified otherwise.
For
the special Programs Directorate, the
approval authority for actions herein
remains with the appropriate CMO Contracts
Director. DACOs and CACOs assigned to
the special Programs Directorate will not be
realigned to the Cost and Pricing Center.
1. Receive an audit report. When the ACO receives a DCAA audit report, the ACO shall determine whether the audit is a reportable audit (DoDI
7640.02).
1.1. Reportable audits include the following
types of contract audit reports if they included findings and
recommendations:
1.1.1. Accounting and
Management Systems Audits which include audits, follow-up audits, and flash
estimating on a
contractor’s Control Environment and Overall Accounting System; General IT
System; Budget and Planning System; Purchasing System (including Contractor
Purchasing System Review (CPSR)); Material System (including Material
Management and Accounting System (MMAS); Compensation System; Labor System;
Indirect and ODC System; Billing System; and Estimating System.
1.1.2. Defective Pricing
Audits
1.1.3. CAS Noncompliance and
CAS Cost Impact Audits
1.1.4. Earned Value Management
Systems Audits
1.2. Reportable audits also
include the following types of audit reports if the questioned cost or
potential cost avoidance is $100,000 or more:
1.2.1. Claims and Equitable
Adjustment Audits
1.2.2. Operations and Operations
Follow-Up Audits
1.2.3. Incurred Cost Audits (except
for audits of audit-determined indirect rates where DCAA and contractor
agree on all questioned costs and there is no penalty
identified) and Final Indirect Cost Rates
1.2.4. Final Pricing Submissions
1.2.5. Terminations Audits
1.2.6. DCAA Insurance and Pension
Audits
1.3. All supplemental audit reports that
supersede or supplement a previously issued reportable audit report are
reportable, regardless of whether the supplemental report includes findings,
recommendation, questioned cost, or potential cost avoidance.
1.4. Non-reportable audits are any audit that is not
listed in 1.1., 1.2., or 1.3.
2. The ACO shall ensure all reportable audits are properly recorded in the CAFU
eTool (DoDI
7640.02). DCAA generally populates the list of reportable audits
in the CAFU eTool on a monthly basis. However, the ACO shall immediately add any missing reportable audits to the CAFU
eTool (DoDI
7640.02).
3. The ACO shall ensure that the information for each reportable audit, including
status and remarks, in the CAFU eTool is current, accurate, and complete (DoDI
7640.02).
3.1. For reportable audit reports, the ACO shall ensure that the following information is current, accurate,
and complete in the CAFU eTool (DoDI
7640.02):
3.1.1. Report number
3.1.2. Report date
3.1.3. Contractor name
3.1.4. DoD Activity Address
Code (DODAAC)
3.1.5. Code for Type of Audit
(see 3.4 below)
3.1.6. Questioned costs,
potential cost avoidance, or recommended price adjustment
3.1.7. Questioned costs subject
to penalty
3.1.8. Qualifications or
unresolved costs (yes or no response)
3.2. A reportable audit is open until the ACO dispositions the audit report. For open audit
reports, the ACO shall also ensure the following information is current, accurate,
and complete in the CAFU eTool(DoDI
7640.02):
3.2.1. Audit status (unresolved, resolved, litigation,
investigation)
3.2.2. Target resolution date
3.2.3. Target disposition date
3.2.4. Actual resolution date
3.2.5. Armed Services Board of
Contract Appeals (ASBCA) docket number or U.S. Court of Federal Claims case
number
3.2.6. Original audit report
date (only required for supplemental audit reports)
3.3. A reportable audit is closed if the ACO has dispositioned the audit report. For closed audit reports,
the ACO shall also ensure the following information is current, accurate,
and complete in the CAFU eTool(DoDI
7640.02):
3.3.1. Disposition date
3.3.2. Questioned costs,
potential cost avoidance, or recommended price adjustment sustained
3.3.3. Percentage of questioned
costs or potential cost avoidance sustained
3.3.4. Penalty assessed
3.3.5. Original audit report
date and/or supplemental audit report number
3.4. Code for Type of Audit. The ACO shall use the following audit type codes to designate the type of
audit in the CAFU eTool (DoDI
7640.02)
:
Code
Type of Audit
A
Reserved
B
Accounting and Management Systems Audits which
include audits, follow-up audits, and flash reports on a
contractor’s Control Environment and Overall Accounting System;
General IT System; Budget and Planning System; Purchasing System
(including Contractor Purchasing System Review (CPSR)); Material
System (including Material Management and Accounting System (MMAS);
Compensation System; Labor System; Indirect and ODC System; Billing
System; and Estimating System.
C
Claims and Equitable Adjustments Audits. Only include DCAA
audits with reported questioned costs of $100,000 or more.
D
Defective Pricing Audits
E
CAS Noncompliance and CAS Cost Impact Audits
F
Operations Audits and Operations Follow-Up Audits. Only include DCAA audits
with reported potential cost avoidance of $100,000 or more.
G
Incurred Cost Audits (except for audits of audit-determined indirect rates
where DCAA and contractor agree on all questioned costs and there is no
penalty identified). Only include DCAA audits with reported questioned
costs of $100,000 or more.
H
DCAA Insurance and Pension Audits
I
Final Pricing Submissions. Only include
DCAA audits with reported questioned costs of $100,000 or more.
J
Termination Audits. Only include DCAA audits with reported questioned costs
of $100,000 or more.
K
Earned Value Management System Audits
4. The ACO shall fully consider all contract audit findings and recommendations
including the assessment of penalties and interest and obtain any required
clarification to ensure the ACO understands DCAA’s findings and recommendations (DoDI
7640.02).
5.1. Immediately establish target dates and a plan for resolving and
dispositioning each reportable audit.
5.2. Promptly update the status of reportable
audits as unresolved, resolved, dispositioned, or under litigation or
investigation.
5.2.1. LATEST
CHANGE The audit status is "resolved" when the CMO
Contracts Director approves the ACO's, or the Director of Corporate/Divisional Administrative Contracting Officer Group approves the CACOs or DACOs,
written price negotiation objective (PNO) or memorandum to the contract file
outlining the plan and target date to resolve the audit findings and
recommendations. The CMO Contracts Director may delegate authority to
approve the action to a level no lower than the contract team
supervisor/leader. For a CAS noncompliance, the audit status is
"resolved" when the ACO notifies DCAA that the ACO disagrees with the alleged noncompliance or issues a notice of potential
noncompliance to the contractor and provides a copy of the notice to DCAA
(FAR 30.605(b)(1)). LATEST CHANGE The CMO Contracts Director shall approve the ACO's, or the Director of Corporate/Divisional Administrative
Contracting Officer Group shall approve the CACOs and DACOs,
notice to DCAA or the notice of potential noncompliance to the contractor
before issuance.
5.2.2. The audit status is
"dispositioned" when:
5.2.2.1.
The CMO Contracts Director approves the ACO’s price negotiation memorandum (PNM). LATEST CHANGE The Director of Corporate/Divisional Administrative
Contracting Officer Group approves the CACOs and DACOs PNM.
5.2.2.2. The ACO renders a decision on the audit findings and recommendations for
accounting and management system audits and notifies the contractor in
writing. LATEST CHANGE The CMO Contracts Director shall approve the ACO's, or the Director of Corporate/Divisional Administrative
Contracting Officer Group shall approve theCACOs and DACOs, written notice before the ACO
releases the decision to the contractor.
5.2.2.3.
The ACO issues a final decision pursuant to the disputes clause and 90 days
have elapsed without contractor appeal to the ASBCA. LATEST CHANGE The CMO Contracts Director shall approve the ACO's, or the Director of Corporate/Divisional Administrative
Contracting Officer Group shall approve the CACOs and DACOs, final decision before the ACO issues the final decision to the contractor. LATEST CHANGE The ACO and the reviewing CMO Contracts Director, or Director of Corporate/Divisional Administrative
Contracting Officer Group, shall ensure that, in preparing Contracting Officer Final Decisions, advice
is obtained from assigned legal counsel, the Contract Disputes Resolution
Center (“CDRC”) and other advisors in accordance with DCMA Instruction
“Contract Claims and Disputes” and FAR 33.211. In addition, if the
contractor subsequently appeals the final decision to the U.S. Court of
Federal Claims, the ACO must reopen the audit record in the CAFU eTool.
5.2.2.4.
For CAS noncompliance audits, the ACO makes a written determination of compliance or noncompliance and
notifies the contractor and DCAA of the determination and the basis for the
determination (FAR 30.605(b)(3)). LATEST CHANGE The CMO Contracts Director shall approve the ACO's, or the Director of Corporate/Divisional Administrative
Contracting Officer Group shall approve the CACOs and DACOs, determination of compliance or noncompliance before the ACO issues the determination to the contractor. In addition, if the
contractor subsequently appeals the final decision to the ASBCA or U.S.
Court of Federal Claims, the ACO must reopen the audit record in the CAFU eTool.
5.2.2.5.
The ASBCA or U.S. Court of Federal Claims renders a decision on the claim,
the contractor makes all corrective actions directed by the Board or Court,
and any associated contractual documents are executed.
5.2.2.6.
DCAA issues a supplemental report that supersede or supplements a previously
issued reportable audit.
5.2.2.7.
For CAS cost impact audits, the ACO executes a bilateral modification that resolves the cost impact or
issues a final decision and unilaterally adjusts the contracts in accordance
with FAR 30.606. The ACO shall provide a copy of the PNM to DCAA and any
affected contracting officers (FAR 30.605(b)). LATEST CHANGE The CMO Contracts Director, or the Director of Corporate/Divisional Administrative
Contracting Officer Group for
assigned CACOs and DACOs, shall approve either action in advance.
5.2.2.8. LATEST CHANGE The CMO Contracts Director, or the Director of Corporate/Divisional Administrative
Contracting Officer Group for assigned CACOs and DACOs, makes a written determination that all
corrective actions have been taken and no further actions can reasonably be
anticipated.
5.2.3. The audit status is
"litigation” when any of the audit issues are under review by a court or the
ASBCA.
5.2.4. The audit status is
"investigation” when an investigative agency of the U.S. Government is
reviewing any of the audit issues.
5.2.5. For any reportable audit
that has not been “resolved” or “dispositioned” and is not in “litigation”
or “investigation,” the audit status is “unresolved.”
5.3. The ACO shall promptly and accurately report questioned costs sustained in
the CAFU eTool (DoDI
7640.02).
5.3.1. Questioned costs
sustained include DCAA questioned amounts that are agreed to by the contractor
during the course of the audit (except for audits of audit-determined indirect
rates where DCAA and the contractor agree on all questioned costs and there is
no penalty identified, agreed to by the contractor during negotiations, and
questioned costs the contractor does not agree with when the ACO issues a final
decision or makes a written determination that the costs are unallowable.
5.3.2. If DCAA issues a
supplemental report on the reportable audit, report zero questioned costs
sustained on the original reportable audit. The questioned costs sustained will
be reported on the supplemental audit report which is a reportable audit.
6. Resolve the Reportable
Audit. The ACO shall resolve all reportable audits within six months of the date
the audit report was issued (DoDI 7640.02). If the ACO is unable to resolve the reportable audit within six months, the ACO shall document why the reportable audit could not be resolved in the
six month period in the contract file and “remarks” section of the CAFU
eTool and document the actions taken to achieve resolution at least monthly (DoDI 7640.02).
6.1. LATEST CHANGE The ACO shall not report the audit status of a reportable audit as
“resolved” in the CAFU eTool until the ACO has documented the following in a PNO or memorandum to the contract
file, and obtained the CMO Contracts Director's approval, or for CACOs and DCAOs obtained the approval of the Director of Corporate/Divisional Administrative
Contracting Officer Group, required by paragraph 5.2.1. and any
required Contract Management Board or Review (BoR)
6.1.1. The plan and target
date to resolve each audit finding and recommendation including any
associated penalties and interest.
6.1.2. Affirmative statement
that the ACO agrees or disagrees with each audit finding and recommendation.
6.1.3. Sound rationale for
resolving each audit finding and recommendation (including penalties and
interest). The rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS, and DCMA Instructions
related to the issue raised or questioned by DCAA, e.g., CAS noncompliance,
inadequate Accounting and Management Systems, unallowable terminations
costs.
The ACO shall disposition all reportable audits within 12 months of the date
the audit report was issued (DoDI 7640.02).
If the ACO is unable to disposition the reportable audit within 12 months, the ACO shall document why the reportable audit could not be dispositioned in
the 12 month period in the contract file and “remarks” section of the CAFU
eTool and document the
actions taken to achieve disposition at least monthly (DoDI
7640.02). LATEST CHANGE The ACO shall not report the audit status of a reportable audit as
“dispositioned” in the CAFU eTool until the ACO has documented the following in a PNM, final decision or
determination, or memorandum to the contract file, and obtained the CMO
Contracts Director’s approval, or for CACOs and DACOs
obtained the approval of the Director of Corporate/Divisional Administrative
Contracting Officer Group, required in paragraph 5.2.2and any required BoR:
7.1.1. Affirmative statement that the ACO agreed or disagreed with each audit finding and recommendation.
7.1.2. Sound rationale for
dispositioning each audit finding and recommendation (including penalties
and interest). The rationale must demonstrate that the ACO has
considered all appropriate FAR, DFARS, and DCMA Instructions related to the
issue raised or questioned by DCAA, e.g., CAS noncompliance, inadequate
Accounting and Management Systems, unallowable terminations costs.
7.2. For reportable incurred cost audits(DoDI
7640.02):
7.2.1.
Before dispositioning the audit, the ACO shall prepare a reconciliation of all costs questioned in the audit
report to the cost or pricing data submitted during the negotiations that
were relied upon in reach a settlement, FAR 42.705-1(b)(5)(iii) and include
the reconciliation in the PNM.
7.2.2. The ACO can disposition a reportable audit with DCAA unresolved costs.
The ACO shall include a remark in the PNM and the CAFU eTool stating the
unresolved costs will be addressed upon receipt of a DCAA audit opinion on
the unresolved costs.
7.3. The ACO shall provide a copy of the PNM, final decision or determination, or
memorandum to the file to DCAA and any other Government agency affected by the
disposition of the reportable audit (DoDI
7640.02) within 30 days of issuance.
8. CAFU records must be retained for 6 years and
three months, after payment of the last contract affected by the audit (DoDI
7640.02). LATEST CHANGE Retention of the file documentation and
copies of the actual audit reports from DCAA are the responsibility of the ACO and CMO Contracts Directors, and the Director of Corporate/Divisional Administrative
Contracting Officer Group. The electronic CAFU eTool records
are kept indefinitely and can be retrieved from archives by opening a Help
Desk ticket, requesting the record.
9.1. The CMO Commander/Director shall ensure that
the CMO Contracts Director and ACOs are rated on the applicable mandatory standard CAFU performance
objective. LATEST CHANGE The Director, Cost and
Pricing Center, shall ensure that the Director of Corporate/Divisional Administrative
Contracting Officer Group, and CACOs and DACOs, are rated on the
applicable mandatory standard CAFU performance objective.
The
CMO Contracts Directors and Director of Corporate/Divisional Administrative
Contracting Officer Group shall conduct an annual review to determine
whether their contracting officers timely and appropriately resolve and
disposition audit findings and recommendations, including the assessment of
penalties and interest, and obtained all required BoRs.
9.2.1. The review shall cover all reportable contract audits that were
dispositioned or resolved in the CAFU eTool during the fiscal year and any
reportable audits that were not resolved within six months or dispositioned
within 12 months. Sampling can be used but the sample plan and results
of the plan must be well documented and addressed in the report required by
paragraph 9.4.1. below.
9.2.1.1. The review shall include a verification that the information
in the CAFU eTool is current, accurate, and complete.
9.2.1.2. LATEST CHANGE For reportable audits resolved during the period, verify the PNO or
memorandum to the contract file was approved by the CMO Contracts Director, or Director of Corporate/Divisional Administrative
Contracting Officer Group, andd included:
9.2.1.2.1. The plan and target date to resolve each audit finding and
recommendation, including any associated penalties and interest.
9.2.1.2.2. Affirmative statement that the ACO agrees or disagrees with each audit finding and recommendation.
9.2.1.2.3. Sound rationale for resolving each audit finding and
recommendation (including penalties and interest). The rationale must
demonstrate that the ACO has considered all appropriate FAR, DFARS, and DCMA Instructions
related to the issue raised or questioned by DCAA, e.g., CAS noncompliance,
inadequate Accounting and Management Systems, unallowable terminations
costs.
9.3.2. LATEST CHANGE For reportable audits dispositioned during the period, verify the PNO, final
decision or determination, or memorandum to the contract file was approved
by the CMO Contracts Director or Director of Corporate/Divisional Administrative
Contracting Officer Group and included:
9.3.2.1. Affirmative statement that the ACO agreed or disagreed with each audit finding and recommendation.
9.3.2.2.
Sound rationale for dispositioning each audit finding and recommendation
(including penalties and interest). The rationale must demonstrate
that the ACO has considered all appropriate FAR, DFARS, and DCMA Instructions
related to the issue raised or questioned by DCAA, e.g., CAS noncompliance,
inadequate Accounting and Management Systems, unallowable terminations
costs.
9.3.3. For reportable
audits that were not resolved within six months or dispositioned within 12
months timeframes, verify the status of the reportable audit in the CAFU
eTool is correct and that the ACO has a sound plan and target dates for resolving and dispositioning
the reportable audit and is making adequate progress against the plan.
9.3.3.1. The review will include an assessment of:
9.3.3.1.1. The overall timeliness and appropriateness of the resolution and
disposition of the audit findings and recommendations.
9.3.3.1.2. Any identified training deficiencies.
9.3.3.1.3. Each ACO to determine whether the ACO has demonstrated the requisite specialized knowledge, experience,
training, business acumen, and judgment in executing the duties of an ACO as they relate to the appropriate resolution and disposition of DCAA
findings and recommendations and this DCMA Instruction.
9.4. LATEST CHANGE If the CMO Contracts Director or Director of Corporate/Divisional Administrative
Contracting Officer Group determines that any ACO has not demonstrated the requisite specialized knowledge, experience,
training, business acumen, and judgment required to execute the duties of an ACO, the CMO Contracts Director or Director of Corporate/Divisional Administrative
Contracting Officer Group shall immediately submit a recommendation
to terminate the ACO's appointment to DCMA-AQ (with a copy to the Division
Contracts Director, or Director, Cost and Pricing
Center, as applicable).
9.4.1. Annually on October 30, the CMO Contracts Director shall report the results
of the review to the appropriate Division Contracts Director. LATEST CHANGE Annually on October
30, the Director of Corporate/Divisional Administrative Contracting Officer
Group shall report the result of the review to the Director, Cost and
Pricing Center.
9.5. LATEST CHANGE Division Contracts Directors and the Director, Cost
and Pricing Center shall summarize the results of the CMO reviews and
provide the results to DCMA-AQ by December 30 annually. LATEST CHANGE The report will address any identified training deficiencies and either
contain a statement that the CMO Contracts Director or Division Contracts
Director, or
Director of Corporate/Divisional Administrative Contracting
Officer Group, as applicable, will
conduct the required training or include a request for DCMA-AQ to conduct
the required training.
Competencies/Certifications
The ACO will be certified in accordance with the Defense Acquisition
Workforce Improvement ACT (DAWIA) for the position held.
The ACO will be a
warranted contracting officer of the United States Government under
Department of Defense.
Training Matrix
Contract Audit
Follow Up Training Matrix Template
What
TASKS are
required to
accomplish this
process?
Methods
of training
On-the-Job
Training (OJT)
Computer
Based Training (CBT)
Course
(Commercial, College/ Vocational)
Contractor
Sponsored Training
Guidebooks
DCMA
Developed
Administrative Task (The task is wholly enabled by the
contents of the instruction and requires no training intervention)
