PROGRAM: FOR AUDIT OF COSTS COST TYPE CONTRACTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00552R000700050026-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: January 7, 2004
• Sequence Number: 26
• Content Type: REGULATION

Approved For Release 2006/10/20: CIA-RDP89B00552R000700050026-9
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Approved For Release 2006/10/20: CIA-RDP89B00552R000700050026-9
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PROCRA14: FOP AUDIT eir COSTS
COOT TTEr CONTRACTS
CONTRACT RAMER
ASK cona(s)
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The steps enumerated in this standard audit prograr, are not considered niradatory.
The auditor is expected to utilize judgment in expending or contracting the scope of
audit. ln the ovent significant deviations are wee te, this program the chance should
be noted and explained in en attaohed addendum.
AT lif.ADWARTERS
1.
Review contract brief ani branch controls an open task orders, noting comments
and spacialionnxnuds since last endit.
2. Review prior it working papers.
3. Review -completed Survey of Internal.,Ctrole end Accounting Practices or
Cost Ageounting Standards Discloeure Statenent, and Contractor's submitted
Government Property ProcedUre.
4. Prepare end/or post to Summery of Contractor's Claims Schedule, the
cumulative amoUnts of each expense 'lament, the total cost, fee end total
U shown on the cantraetoes latest admitted invoice. (in the event the
contreetar'sinvoicesdo act ah m cumulative amounts, the invoices should
be listed individnally end the contractor intommel at time of visit, to
eoparwith standard Wilma procedure).
5. Moseaseile total claim to cceicalWar control curd. Review audit adjuatments
end seetunile to antral cord. Post total moments Mown on control card to
Sammy Ot Contractor's Claims Schedule.
I. Wita1e3atall
a. aseceolle the ecatrattoes elate by expose element with the contractor's
cost ledger. List sepersits4 tar each fiscal year in order to expedite
flasi reports when astaal indireet 0440me allocation rates ham been
alidetisted.
b. Sibelentinte over/imam,
1. PIMA labor IRMA
44 Manias Labor entries im prodect leiger and select transactions for audit.
b.. LS truseaetios selected is thyroxine payroll distribution, review and
embeest Moos labor distribmtion register the identity or employees, hours
and &Uwe easztad totals pecOeit dewing the period selected for audit.
Wag the esteem* tom Labor distribution realater, examine end reconcile
tine oesile. levity pey rates claimed to employees' earnings records or
persamnai departsent records. /last extensions of boors and rates for
elnriealitootracry. test paid pmyroll checks.
e? It transaction selected is not comma. payroll distribution but represents
?trametr or adgestmest, trace the transaction to its inception to ascertain
propriety and follow ma slow of the steps enumerated in 2b above to ensure
sectiabilltr.
t with contractor's accounts receivable.
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?1110 7E 2
AUDIT PROCRAn FOR AUDIT OF COSTS - COST TM COMACTS
Direct ratcria3.s Awlit
a. Dxwnine direct materials entries in project ledger and select transactions
for audit.
b. If transaction selected is for charges from voucher register, purchase
puma, etc., reviee sed extract from applicable register the reference
nuaber (voucher or purchase order umber), the identity of the vendor and
amonnt charged to the project during the period selected for audit. Using
the extract from the applicable register, examine and test vouchers in
Weil, placing particular emehmeie on the ceetreeter's system of internal
controls ulth respect to the issuins, approvine, prieiuij, verifying, extencilnt,
disecunting and/or Dermot as it *miles to rev:tuitional purchase orders,
receiving reports, inspection reports, vendor's invoices and payment cheeks.
valuate purchases to determine whether the items vere required for contract
perfanaance and 'bought in reasonable quantities at prudent prices. Be alert
to the eeesibility that certain vendors neer be related or subsidiary companies
end therefore eligible for special pricing allowances.
c It transaction selected is not a normal purchase fran the voucher register
or pure:hose journal but repreeeuts a transfer or adjuatverti, trace the
transaction to its inception to ascertain proprietary and follow as many of
Us steps enoserated in 3b above as deemed necessary to ensure equitehilitY.
46 Anita of Le/Aerial Withimx21%enteltock
M6 Examine stook withdrawals entries in project ledger for transfer of costs
from stow** and select transactions for audit.
to. Review sod extract from the stores withdrawals register, the requisition
amber sad sweat charged to the project during the period selected for
andito Wag the extract from the stores ulthdrawals register, examine
and reeonsile requisitionm listing the quantities, description and unit
prime attar) items withdr;mn. Test requisition unit prices to stock record
coal. last stalk record cord prices to vendors' invoices.
P. *not either Direst Costs
116 EMMA* other direct east atria la proSect imiger and select transactions
tee audit.
h? True molested tramilactkins to basis docamentatica to determine aLtovability
lat esepliabee id* aaataraat toms, spatial antborizations, etc. Test for
alerieal seataragy mod pepasate.
66 alkslassenmegasesvaaca
I. frepare stadasible simaristag the contractor's claims by elements of cost
11111 be* ervalmiad parioi *Lab lasocred. It downbeats having different
orasheal sates aro laugmed, a breatricen by department is required.
b. asUs sele sfaiteake? *bar law *PP:reved alai* by elements of coat and
easpate the latireot mamma at the eurrently approved rates. (If current
bash Moe coy adtelsteatly to imitooto substantial overclain and nev
Moo awe Wag reommeatod aaammettly with this audit, the recommended
rates are to be sabatitated tee those am obsolete).
7.
16?BEENSI
41). Dobmmdaetbat the aamarmOhr emintelas records of covenabent property
In its possesaiaa in scoordanse vith tkow approved procedure or Appendix Ds
AM at property record costrei Garda tor specific items developed by
malt at diraet material and/se stares withdrawals. Verify that Goverumeat
fermilhed eqUipeemt is included in property record control onto?. Ascertain
that loony property ham been marked in accordance with contracting officer's
approved method.
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%Nod 14,40
PAM 3
AUDIT 21OCRAK 7C AuDn OF COSTS - COST TiFLCONTRACTS
b. Amend Survey
changes sale
8. Exit Conference -
of Internal Contriam and Accounting Practices for aay
in the Contractor's system since the last audit.
?Aft uith contracor's representative for the purpose
of advisins of the results of audit and contractor's
reaction to specific items questioned. Discuss status
of indirect empenia allocation rates, final vouchers,
emd cumulative claim and reconciliation statemenbi.
Obtain latest finenciel statements and/or annual report from
oontrantur.
AT HEADQOARTOMS
1. Prepare report (s) an audit inolemus a statement on maintenance of property
room& in accordance uith apTroved procedure or Appendix DI AM.
2. index working papers end crime reference.
3. Port audit reports to Brandt Control tor each task order.
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CASE N.
PROGRAM FOR AUDIT CIF COSTS
TDC AND RATERIAL CONTRACTS
ConTUCT Burma
TASK ORDER(S)
The steoa enumerated in this standard audit program are not considered mandatory.
The auditor is expected to ntilize juigment in expanding or contracting the scope of
audit. DI the event significant deviations are made to this program the change should
be noted end explained in an attached addendUm.
AT
sting":
1. Review contract brief and branch controls on open teak orders, noting comments
and special approvals since last audit.
2. Review prior audit working papers.
3. ReView completed Survey on Internal Controls and Accounting Practices or
Cost Accounting Standards Disclosure Statement, end Contractor's submitted
Government Property Procedure.
4. Prepare and/or post to Summary of Contractor's Claims Schedule, the cumulative
amounts and hours at each labor category, the amount of each expense element,
and total as Amu an the coutractor's latest submitted invoice. (In the event
the contractor's invoices do not Oboe cumulative amounts, the invoices should
be listed inditiduallyand the contractor informed at tine of visit, to comply
with standard billing procedure.)
5. Reconcile total claim to ccsAmpfor control card. Review audit adjustments
and reconcile to control card. Post total neyments shown an control card to
Shimmery
of Contractor's Claims Sehedule.
6. Verify* contractor's compitations bynultiplying the total hours billed in
each labor category times the authorized rtes.
ntlanD
1. Total Claims
at. Reconcile the contractor's hours claimed by labor category and monetary
value of materiels and other direct posts with the contractor', cost ledger.
b. tiontantists aver/under payment with contractor's accounts receivable.
2. Minuet Libor Audit
a. Ricemine labor entries in projeot ledger and select transactions for audit.
b. If transaction inflected is for regular paarroLl distribution, review and
extract from labor distribution register the identity of employees and
hours charged to the project during the period selected for audit. Using
the extract from labor distribution register, examine and reconcile time
cards.
0. If transaction selected is not a normal payroll distribution but repressenta
a transfer or adjustment, trace the treneaction to its inception to ascertain
propriety and follow as many of the steps enumerated in 2b above to ensure
equitability.
d. Reconstruct several TM rates on heels of current information, i.e. actual
labor rates, current indirect expense allocation rates, etc. (Nhile in all
probability adjustments cannot be made on the current contract, this informap.
tion can have retrospective application to future contracts.
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PROGRAL FOR AUDIT OP COOTS - TIM AND KATERIAL COMPACTS
3. Direct eaterials Audit
a. Examine direct materials entries in project ledger and select transactions
for audit.
t4 If transaction selected is for chows from voucber register, purchase
*areal, etc., review and extract tram applicable register the reference
=Aber (wencher of purchase ordernumber) the identity of the vendor
and Nougat ?barged to the project during the period selected for audit.
Veins the extract fram the applicable register, examine and test vouchers
in detail, placing particular emphasis on the contractor's system of
Internal astral* with respect to the issuing, approving, pricing, verifying,
exteadies, disooueting and/or payment as it applies to requisitions purchase
Orders, receiving reports, inspection reports, vendor's invoices and. mutat
Ivaluate purchases to detereine whether the items vere required for
*softest performance and bougbt in reasonable quantities at prudent prices.
Be alert to the possibility that certain vendors may be related or subsidiary
04M/00010$ and therefore eligible tor special pricing allowances.
0. IS transaction selected is not a normal purchase fron the voucher register
or purchase Janina but represents &transfer or adjustment, trace the
trsosactice to its inception to ascertain proprietary and follow as many
of the steps enumerated in 3b above as deemed necessary to ensure equitability.
4. Aldlt Lteterial Witham= from Stock
aw Oxman* etc* vithdrevals entries in project ledger for transfer of costs
tram stores and select transactions for audit.
b. Anvies end extract from the stores vithdravals register the requisition
Number and amount Charged to the project during the period selected for
audit. Using the extract from the stores vithdrevals resister, examine
nod
reconcile requisitions listing the quantities description and unit
edge! or the Items sithd4on. test requisition unit prices to stop*
Marl ems& 24st stook/4100rd card prices to vendors' invoices.
5. kadtik 4 ow DAreat Omits
44 Itsidas *tarry direct east entries in prollsot ledger and select transactions
ftes OM.
b. TOW selected traumatism to basis dosnmestation to determine allowability
Gampliseae eta eontract terms, special anthorizetions, etc. Test for
almarical eneUnay and Poimeati?
6, ,!1. If the contract provides a
teteteslol beeMAD6 rats verVW ogoVeectorit Ulna&
1112WANNE
a. Manias thet the costrseter satetains records of Government property in
Its pessessisa In ascordsose frith the approvei1 procedure or Appendix B, AEP.
Toot prOperty re0Ord Matra Dards for specific items developed by audit of
direct Naterila fledier stores withdrawals. Verify that Government remitted
4140mistU ineladed in property mord control system. Ascertain that
Weer propertw has bean aerbed in accordance with contracting Officer's
weaved method.
AP 2
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Case ro.
OVICRIMAD AUDIT PROCIRAII
Jeadquartem
1. Review completed survey of controls and accounting procedures.
2. Review the contract, noting terms relevant to overhead determinations each nl:
fluids to be used in determining allosable cost, whether ASR Section :,71 or other.
Overhendmaximum limitations.
Speoial Approvals of costs or facilities that relnte to overhead vpliontion.
Method for determining final overhead whether by negotiation, audit Uterminp-
tion or other.
3. Obtain from the contractor, its signed overhead proposals covering the perio1( )
to be madited.
4. Review the statements in (1) above and:
(a) Compare current costs with costs of previous periods, noting changos in pro-
cedures, disparity of costs between fircelperiods or unusually large expend-
itures in any particular expense category.
(b) Determine whether costs specifically disallowed under ASPR Section XV or other
criteria for determining Allowable costs have been excluded from contractor's
claims.
(c) :.ate any deviations, exceptions or questions to be discussed with the contractor's
representative prior to starting field audit.
Field:
1. Discussion with contractor's accounting representative:
(n) Ascertain that statements presented are valid and represent the contractor
total overhead claims.
(b) Discuss any questions that arose in prefield review.
(C) 1W/1SW contractor's current accounting procedures, compare present procedurec,
with procedures at most current audit and determine if changes result in inerlui es
Discuss any apparent inequities with contractor.
2. Verification of overhead expense:
Verify the expenses proposed to the contractor's general ledger an fianucial
ntatements. Reconcile differences.
Select a representative period for detail verification.
Mxamine all transactions in each account, for period selected for rev:/ew hy
(1) Trace entries in general ledger for the period selected to the source
of the entry, i.e., cash disbursements, accounts payable register or oter.,,
(2) Itemize each transaction, and tie-in to general ledger.
(3) E,cpand scope to cover broader period if test cheek reveals deficiencies.
(4) Follow procedures for auditing costs as described in Chapter IV Slctioc 3
of the DOD contract audit manual.
(d) Eliminate all costs found to be unallowable in accordance with ASPR Saotion YV
or other cost criteria not current period cost, in excess of contract livitAion:
and in excess of amount considered reasonable.
(e) Cmpote overhead rates taking into consideration costs questioned.
3. Discuss with contractor's responsible representatives all costs questioned find get hir,
concurrence or reason for nonconcurxence.
4. Obtain latest billing and bidding rate information along with supporting schqOuies.
IleadVAASSL
1. Prepare advisory report for the contracting officer. Itemize and explain aIl cost
questioned, compute overhead rates, and state contractor's concurrence or nonconcurr