Presentation - Billing System

Getting Paid on a
Government Contract
16 April 2014
Trish Carlin, CPA
Sr. Consultant, Carlin Consulting Group
Joshua Harlor
Supervisory Auditor, Defense Contract Audit Agency
Linda Hildebrant
Director of CAS Compliance, Morpho Detection
Dale English
Supervisory Contract Specialist, NAVFAC SW
& Approval
Adequate Billing
Adequate Billing System
Contract Invoicing Provisions
Contract Brief
FAR 52.216-7 Allowable Cost & Payment
Provisional Billing Rates
Fee Withhold
Invoicing Forms
Public Voucher
Progress Payment
Invoice & Receiving Report
Wide Area Workflow (WAWF)
DCAA Oversight/Monitoring
Government Acceptance & Approval
Adequate Billing System
DFARS Business System Final Rule
DFARS 252.242-7005
DFARS Provision
DFARS Clause
Material Management &
Property Management
Indirect / ODC
Control Environment
General IT
Earned Value Management
• Budget / Planning
Elements of an Adequate Billing System
DCAA Contract Audit Manual 5-1100
Billing System should provide reasonable
assurance that billings applicable to Government
contracts are prepared in accordance with
applicable laws and regulations, and contract
terms; and that material misstatements are
prevented, or detected and corrected in a timely
Elements of an Adequate Billing System
DCAA Contract Audit Manual 5-1100
The Billing System should include processes for:
• Segregating and excluding unallowable costs
• Segregating incurred costs that are non-billable
• Withholding costs that are appropriate adjustments
• Adjusting submissions for final rates or indirect
billing rates
• Identifying costs that require specific approval
• Identifying contract overpayments
Elements of an Adequate Billing System
DCAA Contract Audit Manual 5-1100
Key Processes Include:
Billing system policies and procedures
Billing reviews and approvals
Training of employees
Contract briefings
Elements of an Adequate Billing System
DCAA Contract Audit Manual 5-1100
Key Processes Include
Reconciliation of recorded and billed cost
Adjustment of cost and rates
Exclusion of non-billable costs
Subcontractor progress payments, performancebased and commercial financing payments
Elements of an Adequate Billing System
DCAA Contract Audit Manual 5-1100
Key Processes Include
Estimate to complete, estimate of costs of
delivered/invoiced items
Loss contract procedures
Contract overpayments, refunds and offsets
Billing system – IT system internal controls
Contract Brief
DCAA Contract brief guidance
DCAA Contract brief templates
FAR 52.216-7 Allowable
Cost & Payment
(a) Invoicing
(b) Reimbursing costs
(c) Small business concerns
(d) Final indirect rates
(e) Billing rates
(f) Quick closeout procedures
(g) Audit
(h) Final payment
Provisional Billing Rates
Purpose of Provisional Billing Rates (PBRs)
What are the procedures for establishing PBRs?
When should we submit?
What information should we provide?
DCAA review
Common deficiencies
Frequently asked questions
Purpose of PBRs
One criterion for an adequate accounting system is that it provide for
billings that can be reconciled to the cost accounts for both current
and cumulative amounts claimed and comply with contract terms.
Interim payments on cost-type contracts are allowed as specified in
the contract provisions.
Reimbursement of indirect costs in these interim payments is
generally made through provisional billing rates.
Provisional Billing Rates are established to approximate the
contractor’s final year-end rates, as adjusted for any unallowable
Provisional Billing Rates are used for interim purposes until
settlement is reached on the final indirect rates for the contractor’s
fiscal year.
FAR 42.704-Billing Rates-provides procedures and guidance for
establishing PBRs.
Reasons for Contractor Submission
Contractors are STRONGLY encouraged to submit a
billing rate proposal to assist the responsible official in
establishing rates
Opportunity to present and explain expected changes
Note: Vouchers and progress payments may be REJECTED
if submitted without using properly established billing rates
Procedures for Establishing Billing Rates
FAR 42.704(b)
The contracting officer or auditor shall establish PBRs on the basis of
information resulting from recent review, previous rate audits or
experience, or similar reliable data or experience of other contracting
When the contracting officer or auditor determines that the contract
value does not warrant submission of a billing rate proposal, PBRs
may be established by making appropriate adjustments from the
prior year’s indirect cost experience to eliminate unallowable and
nonrecurring costs.
Also, contractors may voluntarily submit a billing rate proposal to
assist the responsible official in establishing rates (Preferred).
It is important to discuss the requirements with the contracting
officer or cognizant auditor.
Procedures for Submission
Contractors submit provisional billing rates
to its DCAA Office or Administrative
Contracting Officer
Electronic submissions are encouraged
Provide in excel format on a CD or through
When Should We Submit?
Prior to the beginning of the fiscal year (once
budgets are complete) or when the established
billing rates are no longer representative of final
year end rates due to unforeseen events or
The PBRs should represent a 12-month period
(the contractor’s fiscal year).
PBRs should be submitted at least annually
Vouchers and progress payments can be
returned if submitted without properly
established billing rates.
What Should We Provide in a PBR
Proposed billing rate calculations (Pool and Base) with
brief rationale
Prior fiscal year (FY) pool and base
Current FY to date pool and base
Current FY budget pool and base, if available
Comparative analysis with explanation of any significant
DCAA Review
Some example procedures DCAA may perform
include the following:
Compare proposed pool and base to prior year and
year-to-date pool and bases.
Review trend of questioned costs in relevant incurred
cost audits and consider an adjustment for
unallowable expenses in calculating current year
provisional billing rates.
PBRs should be monitored:
• Throughout the year
• Immediately after year-end
• Upon submission of the final indirect rate
PBRs may be adjusted by either party at any
time to prevent substantial under or over
payment – FAR 42.704(c).
If PBRs are adjusted, the contractor should
submit adjustment vouchers accordingly.
Submit a letter with new rates, an explanation as
to what caused the change, and with supporting
If DCAA/DCMA has NOT issued a memo:
Begin using the new rates immediately
If DCAA/DCMA HAS issued a memo:
Continue using the rates as listed on the memo
unless you receive a new memo from DCAA/DCMA
Please contact your cognizant office if you have concerns
NOTE: If PBRs are adjusted, use the new rate on
the current year cumulative expenses
Common Deficiencies
Failure to remove unallowable costs from the
billing rate projections.
Failure to adjust provisional billing rates based
on actual experience:
Before year end, if there are known or
reasonably anticipated significant variances.
After year end once actual rates, net of
unallowable expenses, are calculated.
Frequently Asked Questions
Do I submit the Provisional Billing Rate
Proposal to the ACO or DCAA Office?
FAR 42.704 indicates the office responsible
for final indirect cost rates also establishes
provisional billing rates.
If final rates are ACO determined, submit to
that office.
If final rates are audit determined, submit to
local DCAA Office.
Frequently Asked Questions
Can I use just use the most recent FY ended rates for provisional
billing purposes?
No. However, the responsible official may establish the billing
rates based on prior year history less unallowable costs.
If budgetary data is available, your proposed billing rates may
be based on the budget less the estimated unallowable costs.
Once provisional billing rates are established with DCAA or the
ACO, do I need to submit proposed changes based on new
YES. The contractor should submit new proposed billing rates
when known or reasonably anticipated significant variances
have occurred.
Fee Withhold
Three contract clauses (FAR 52.216-8, -9,
and -10) regulate how the Government will
pay fees under CPFF and CPIF contracts
Public Voucher
Contractor Responsibilities
Preparation of Vouchers
Electronic Submission of Vouchers
Common Deficiencies
Contractor Responsibilities
Contractors should:
Contact the cognizant DCAA office after contract award.
Ensure DCAA has the necessary information to process contract
billings, such as current provisional billing rates, copy of the
contract, any special contract provisions, etc.
Maintain adequate billing system internal controls.
Ensure adequate support is maintained for amounts billed.
Submit timely incurred cost proposals and final vouchers in
accordance with FAR 52.216-7.
Preparation of Vouchers
The contractor is responsible for preparing and submitting claims for
reimbursement according to the terms of the contract.
Vouchers should not be submitted more than once every two weeks.
Public voucher claims for reimbursement must be prepared on the
prescribed Government forms:
First voucher on a contract is an interim voucher, as are all
subsequent vouchers prior to the final voucher.
Final voucher will not be submitted until all contract work is
completed. The auditor may provide advice concerning the
format for preparing public vouchers and financial
Electronic Submission of Interim
Electronic Submission of Interim Vouchers
All vouchers should be submitted through WAWF unless contract terms
require hard copy vouchers to be submitted.
In WAWF, the “Cost Voucher” is the equivalent of the SF 1034. Data
equivalent to the SF 1035 must be included in a separate electronic file
and attached to the cost voucher in WAWF.
Vouchers must be prepared and submitted in accordance with the terms
of the contract, including any special billing or payment instructions.
Guidance and training for completing a cost voucher invoice can be
obtained from the WAWF website at
Electronic Submission of Interim
Electronic Submission of Interim V ouchers examples from
DCAA Manual 7641.90, Information for Contractors, located
Electronic Submission of Interim
Final voucher:
Last voucher to be submitted on a contract.
A separate completion voucher will be submitted for
each individual project or task order for which a
separate series of public vouchers has been
In accordance with FAR 52.216-7(d)(5).
Common Deficiencies
Common deficiencies found during voucher reviews:
Math errors.
Billed costs not allowed per the contract terms (e.g., overtime).
Incorrect provisional billing rates (indirect costs).
Billing over contract ceiling amounts.
Progress Payment
FAR 32.5 – Progress Payments Based on Costs
SF 1443 – Contractor’s Request
Invoice & Receiving Report
WAWF's Receiving Report takes the place of the
DD250 and MIRR
Wide Area Workflow (WAWF)
Wide Area Workflow (WAWF)
o Contractors input invoices via Internet
o Government performs inspection/acceptance via Internet
o Sends inspection/acceptance information to Payment
System via Electronic Data Interchange
o Provides visibility to all – Industry, DCMA, DCAA, DFAS,
Buying Commands
o Maintains electronic records
o Standard DOD application with Single Face to Industry
o Provides secure and auditable transactions
Wide Area Workflow (WAWF)
o Benefits for Contractors
• Electronic submission of invoices
• Faster payments
• Total visibility of document status
• Eliminates lost or misplaced documents
• Secure transactions with audit capability
Wide Area Workflow (WAWF)
Document types used to create, submit, inspect, accept,
certify, or process payment on the following document types:
Invoice Document Types (Seven)
Receiving Report Document Types (Six)
Receiving Report and Invoice Document Types (Four)
Financing Document Types (Three)
Voucher Document Types (Five)
Property Document Type (One)
Wide Area Workflow
***Billing to the correct Contract Line Item
Number (CLIN) on the Contract is critical***
DFARS Clause 252.232-7006 Wide Area
Workflow Payment Instructions
Attached to the invoice/voucher, must be
supporting documentation, if required by the
DCAA Oversight/Monitoring
Periodic Audits by DCAA. When contract financing is
cost-based, such as interim cost reimbursement (interim
vouchers) or cost based progress payments, the billing
system and the contract costs are subject to periodic
audits by DCAA.
DCAA will, at a minimum, verify that the costs billed have
been incurred in performance of the contract, that they
are in agreement with the accounting records, and that
they are in accordance with the contract terms.
Wide Area Workflow (WAWF)
Includes a voucher sampling approach that
replaces the direct bill program
DFARS 242.803 gives DCAA authority to:
Approve interim vouchers selected using sampling
methodology for provisional payment and forward to
the disbursing office
ALL provisionally approved interim vouchers are subject to a
later audit of actual costs incurred
Review final vouchers and send to the Administrative
Contracting Officer (ACO)
Government Acceptance &
Submits Shipping
Reports & Invoices
WAWF transmits
payment actions
EDI 810C, 856, &
861 via GEX to
DoD pay system
FTP Data Upload
Web Input using Web Forms
DoD Pay
Authorize transfer of funds
Via EFT to Vendor’s bank
•Receives email notification
of awaiting actions
•Inspects / rejects using Web
Forms online in WAWF
Accepting /
•Receives email notification
of awaiting actions
•Receives email notification
of awaiting actions
•Accepts / rejects using Web
Forms online in WAWF
•Certifies invoices ready for
payment in WAWF
•Receives email notification
of awaiting actions
•Pays or rejects invoices
using Web Forms online
Invoice requirements are listed in The Federal
Acquisition Regulations (FAR) (FAR Part 32.905).
Company must be registered in System for Award
Management to receive electronic payments (EFT)
Federal Agencies use different electronic payment
systems such as:
- Wide Area Work Flow (WAWF) - DoD
- PayWeb - ONR
-Payment Management System (PMS) – DHHS
Be proactive before submitting invoice:
- Read your contract
- Understand your contract
- Ask questions of your Contract Specialist
- Follow the invoicing instructions
- Know who is responsible for actions needed
- Monitor your invoices progress
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