ALEUT
MANAGEMENT
SERVICES
PROCUREMENT DIRECTIVE – PDH06
Title:
Audit of Purchase Orders and
Subcontracts
Effective Date: Jan. 5, 2014
Rev. Level 0
Supersedes:
Revalidated:
Next revalidation: Jan. 5, 2015
Description
of Changes:
1.
Purpose
This document sets forth procedures in regard to the identification of procurement
actions that are auditable by various Government agencies under U.S.
Government prime contracts and AMS indirect procurement actions.
This procedure applies to all procurement transaction issued in direct support of
U.S. Government prime contracts and subcontracts and indirect procurement
purchase orders and subcontracts that may apply to indirect costs.
2.
References
Federal Acquisition Regulation, Part 31 – Contract Cost Principles and Procedures
Federal Acquisition Regulation, Part 42 – Contract Administration and Audit
Services
Federal Acquisition Regulation, Subpart 42.7 – Indirect Cost Rates
Federal Acquisition Regulation, Part 42.704 – Billing Rates
Federal Acquisition Regulation 52.215-2 – Audit and Records—Negotiation
Federal Acquisition Regulation 52.216-7 – Allowable Cost and Payment
Federal Acquisition Regulation 52.244-2 – Subcontracts
3.
General
It is AMS’s standard that auditable records are maintained in support of all AMS
procurement activities. In addition, certain U.S. Government laws, regulations, and
contractual requirements may subject AMS components to additional
recordkeeping requirements.
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Audit of Purchase Orders and Subcontracts
4.
Procedure
Definitions
“Direct cost” means any costs that can be identified specifically with a particular
final cost objective.
“Indirect cost pools” means (except for FAR, Subparts 31.3, 31.6 and 31.7)
groupings of incurred costs identified with two or more cost objectives but not
identified specifically with any final cost objective.
“Indirect cost” means any cost not directly identified with a single, final cost
objective, but identified with two or more final cost objectives or an intermediate
cost objective.
“Cost objective” means (except for FAR, Subpart 31.6) a function, organizational
subdivision, contract, or other work unit for which cost data is desired and for which
provision is made to accumulate and measure the cost of processes, products,
jobs, capitalized projects, etc.
“Direct associated cost” means any cost which is generated solely as a result of
the incurrence of another cost and which would not have been incurred had the
other cost not been incurred.
AMS procedure states that all procurement actions are subject to review by various
U.S. Government agencies, based on the clauses set forth in its prime contracts.
Various statutes, implementing regulations, or contract/subcontract terms may
provide U.S. Government agencies access to AMS procurement records for the
purpose of audits. FAR Clause 52.215-2 provides U.S. Government auditor’s
primary authority for access to contractor records. The contracting officer (CO)
must insert this clause in all negotiated contracts, except those that are:
-1
lity services (FAR, Subpart 15.209(b))
Annual Incurred Cost Audit of Subcontractors
When AMS Flexible priced subcontracts are subject to incurred cost audits and
reviews, the Procurement Department must take the following steps:
tions and Certifications completed by the Supplier
to determine if the Supplier has previously been subjected to annual incurred cost
audits by DCAA. If the subcontractor has been subjected to reviews in the past,
document this fact and the audit review dates in the procurement file. The
Procurement Department shall follow-up with the subcontractor to ensure that an
annual incurred cost proposal has been submitted when the AMS annual
Representation and Certification is submitted by the Supplier.
bcontractor has not been subjected to an annual incurred cost audit in
the past, the Procurement Department shall contact the ACO to initiate an audit.
An annual incurred cost proposal shall be requested by either the Government or
AMS. The Procurement Department shall follow up with the subcontractor to
ensure that an annual incurred cost proposal is submitted to the Government so
that DCAA can conduct the audit. The results of the DCAA audit shall be promptly
communicated to the Accounting Department. The Accounting Department is to
ensure that the results of the subcontractor’s audited proposal are incorporated
into future billings to the Government.
Audit of Purchase Orders and Subcontracts
Page 3
the past, DCAA does not have the resources to conduct the audit, and the
subcontractor will allow AMS personnel to review its records, the Procurement
Department shall contact the Accounting Department to initiate an audit. An annual
incurred cost proposal shall be requested by AMS. The results of the AMS audit
shall be promptly communicated by the Accounting Department. The Accounting
Department is to ensure that the results of the subcontractor’s audited proposal are
incorporated into future billings to the Government.
Statutory and Regulatory Requirements
Among statutory bases for access to AMS records are 10 U.S.C. 2313(a),
"Examination of Records of Contractor," 10 U.S.C. 2306a, ("Truth in Negotiations"),
and 41 U.S.C. 422(k) (Cost Accounting Standards).
The following Federal Acquisition Regulations have implemented the statuary and
other audit access requirements:
- Negotiation" Clause, FAR 52.2152 in all negotiated contracts other than those which are not expected to exceed
$150,000
-2 (Instructions for Submission of a Contract Pricing
Proposal)
-20 and 52.215-21 (Requirements for Cost or Pricing Data or
Information Other Than Cost or Pricing Data)
-2 and 52.230-3 (Cost Accounting Standards)
-4 (Economic Price Adjustment - Labor and Material)
-16 (Progress Payments)