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Contractor business systems and internal controls

Contractor Business Systems & Internal Controls

Baker Tilly helps government contractors demonstrate their compliance with contractual business system requirements. To achieve compliance, we work with clients to develop policies, processes and documentation around systems of internal controls.

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Professionals in Baker Tilly’s Government Contractor Advisory Services practice have significant experience in helping contractors design, document, analyze and improve contractor business systems and related internal controls. Our approach has withstood the scrutiny of the Department of Justice (in connection with contractor responsibility assessments), Federal compliance monitors, and a variety of Department of Defense (DoD) and civilian agency contracting officers. Government auditors have consistently appreciated our approach’s comprehensiveness and clarity.

    Contractor business systems and internal controls

    We help clients:

    • Document business processes, from transaction inception through conclusion
    • Identify, understand and document business and compliance risks relative to those processes
    • Analyze internal control activities and make recommendations to improve balance of automated vs. manual, preventive vs. detective controls, etc.
    • Analyze types of internal control activities and recommend improvements to the balance of automated vs. manual, preventive vs. detective, etc.
    • Identify internal control design gaps
    • Brainstorm and develop new or improved controls to remediate design gaps
    • Prioritize internal control activities based on their relative risk mitigation role (i.e., not all internal controls are created equal)
    • Develop a road map between their internal control framework and the government’s audit work plans
    • Draft policies, procedures, templates, and other tools to improve current controls and implement new controls
    • Define and document employee roles, responsibilities and authorities within each business system
    • Develop and deliver tailored training to business process owners and participants
    • Prepare self-assessment and internal audit work plans to facilitate periodic management monitoring of business system effectiveness
    • Perform mock system audits
    • Manage the government audit process
    • Rebut audit findings, negotiate resolutions and remediate matters requiring corrective action

    Accounting system

    We understand that contractors need compliant cost accounting systems that provide meaningful and timely financial information. Our expertise in cost and financial accounting, business information systems and government contracting enables us to design compliant systems/processes. We help our clients solve myriad government cost accounting challenges by providing the following types of services:

    Accounting system assessments

    • Accounting system adequacy reviews - SF1408
    • Mock accounting system audits DFARS 252.242-7006

    Policy, procedure, internal control and documentation evaluation and design

    • Billing system
    • Labor accounting
    • Indirect cost accounting
    • Other direct costs
    • Control environment
    • Compensation system

    Audit finding response and corrective action plan support

    • Rebut asserted deficiencies
    • Support responses to contracting officer determinations
    • Design corrective action plans
    • Facilitate demonstration of corrective action implementations

    Indirect cost rate support

    • Indirect cost structure evaluation, design and reengineering
    • Forward pricing and billing rate proposal preparation
    • Final indirect cost rate proposal preparation (incurred cost proposal)
    • Strategic indirect cost rate administration and negotiation support

    Strategic and tactical cost accounting compliance

    • FAR 31 cost principles
    • Cost Accounting Standards
    • Cost Accounting Standards Board (CASB) Disclosure Statements
    • Cost impact proposal preparation

    Purchasing system

    Our professionals have decades of experience assisting contractors with their purchasing system compliance needs. We have examined procurement compliance from our client’s perspectives. And, we’ve examined issues from the DOD’s perspective through contributions to the Section 809 Panel’s recommendations on supply chain management. So, we know the procurement regulations, why they exist and how the government reviews contractor systems for compliance. We frequently help our clients solve their most complex procurement compliance challenges by providing the following types of services:

    Strategic procurement compliance support

    • Defining “procurement system” scope, both organizationally and transactionally
    • Policy and procedure reviews and development
    • Procurement process analysis and streamlining support
    • Cost and price analysis assistance
    • Subcontract negotiation and documentation support
    • Subcontract administration and procurement compliance training

    Purchasing system review and CPSR readiness assessments

    • Mock CPSRs
    • Policy and procedure gap assessments
    • Procurement file documentation reviews
    • Supply chain management process compliance assessments
    • CPSR training

    CPSR audit support

    • Interpretation of CPSR team questions and findings
    • Support communication with CPSR team
    • Strategic guidance on responding to audit requests

    Audit finding response and corrective action plan support

    • Rebut asserted deficiencies
    • Support responses to contracting officer determinations
    • Design corrective action plans
    • Provide training on revised processes
    • Facilitate demonstration of corrective action implementations

    Estimating system

    Government contractor cost estimates/proposals face difficult scrutiny, and if done poorly, can result in unsavory outcomes. Our professionals understand government contract pricing and help clients develop consistent and compliant cost estimating systems. We help contractors comply with the government’s challenging and extensive cost estimating requirements by providing the following types of services:

    Estimating system assessments

    • Mock estimating system audits DFARS 252.215-7002
    • Budgeting and planning system evaluation
    • Process and internal control evaluation
    • Policy, procedure and documentation development

    Proposal pricing support

    • Truthful cost or pricing data compliance (Truth in Negotiations Act – TINA)
    • Pricing volume development, review and support
    • Basis of estimate development
    • Proposal adequacy reviews DFARS 252.215-7009
    • Subcontractor cost or price analysis support
    • Subcontractor commercial item determination assistance
    • Small business subcontracting plan development FAR 52.219-9
    • Contract claims, change order and request for equitable adjustment pricing support

    Audit finding response and corrective action plan support

    • Rebut asserted deficiencies
    • Support responses to contracting officer determinations
    • Design corrective action plans
    • Facilitate demonstration of corrective action implementations
    • Evaluate and rebut of defective pricing allegations

    Property system

    The Government Property Management System requirements are included in more contracts than most contractors may realize. In addition to its own unique requirements, the Government Property Management System has a natural interface with other systems such as purchasing, estimating, accounting and MMAS. Compliance with property system requirements is critical as the Department of Defense has shown recent, increased focus on managing its property.  Our experts help contractors comply with these requirements by providing the following types of services:

    Property system review and audit readiness assessments

    • Mock property system audits
    • Policy and procedure gap assessments
    • Process and internal control evaluation
    • Property records review and compliance evaluation

    Compliance documentation development

    • Policy and procedure development
    • Process flows
    • Internal control documentation

    Audit finding response and corrective action plan support

    • Rebut asserted deficiencies
    • Support responses to contracting officer determinations
    • Design corrective action plans
    • Facilitate demonstration of corrective action implementations

    Material management and accounting system

    The material management and accounting system (MMAS) is a government contractor system. MMAS is used for planning, controlling and accounting for acquisition, safeguarding, issuing and incorporating materials in production. MMAS have long faced scrutiny from government auditors seeking perfection in contractors’ manufacturing planning and production. The government’s MMAS criteria require many disciplines to function together smoothly for success, including estimating, purchasing, accounting and property management. We provide the following services to help government contractors design processes to seamlessly comply with MMAS and navigate audit scrutiny:

    MMAS review and audit readiness assessments

    • Mock MMAS audits
    • Policy and procedure gap assessments
    • Process and internal control evaluation
    • Inventory costing/accounting review
    • Material charging and transfer practices review

    Process design and implementation

    • Bill of material and master production schedule accuracy review and process development
    • Inventory process and internal control design
    • Material charging and transfer accounting design
    • Policy and procedure development
    • Scrap accounting
    • Physical inventory safeguarding and accuracy

    Audit finding response and corrective action plan support

    • Evaluate and rebut asserted deficiencies
    • Support responses to contracting officer determinations
    • Design corrective action plans
    • Facilitate demonstration of corrective action implementations