Webinar Follow-Up: Aronson Answers Questions on Attributes of an Adequate Accounting System
As a follow-up to the L2 Federal Resources webinar on “Attributes of an Adequate Accounting System,” Aronson LLC government contracting specialists Nicole Mitchell and Brian Bender have prepared answers to several attendee questions:
Is my contract covered by the Cost Accounting Standards (CAS), and how do I determine the level of CAS coverage (e.g., Full, Modified, Not CAS Covered)?
Click here to download a flowchart that illustrates the method for determining CAS coverage and whether or not your company should be submitting a Disclosure Statement.
Does my company have a robust set of policies and procedures?
At a minimum, your business should have the following written policies and procedures (P&P) in place prior to DCAA review/audit: Continue reading »
Tax Tip: Proof of Gross Income
During the course of a tax audit, the agent will add up all bank deposits, back out identifiable non-tax items (such as account transfers) and compare that total to the gross income reported on the tax return. The excess of deposits over reported income is deemed to be unreported taxable income unless proven otherwise. Frequently, taxpayers find themselves trying to explain undocumented deposits. A loan from a friend, a gift from a relative, and other clearly nontaxable deposits will be included in the taxpayer’s income unless proof of Continue reading »
Transfer Pricing – General Principles, Penalties and Contemporaneous Documentation
General Principles – Transfer pricing is relevant for U.S. companies with foreign subsidiaries or foreign parent companies that engage in certain intercompany transactions. U.S. transfer pricing rules require that intercompany pricing between a U.S. company and a foreign affiliate must be based on an ‘arm’s length’ price that would be charged in a similar transaction with an unrelated third party. The arm’s length principle is typically applied to intercompany transactions in which goods, services or property are sold between a U.S. company and a foreign affiliate. The transfer pricing rules also can apply to Continue reading »
What is the Real Value of a Benefit Plan Audit?
That depends on who you ask. If you ask an employer that takes their fiduciary obligations seriously, or one that has had problems with their plan in the past, then the audit is very valuable. However, if you ask an employer that is not so in-tune with their fiduciary obligations and views the audit as a commodity that goes to the lowest bidder, then the audit is a hassle and of little or no value.
For many, a benefit plan audit is not an option:
Once a retirement plan falls into the large plan category, an audited financial statement is Continue reading »
What Are Your Chances of Being Selected for an IRS Tax Audit?
The 2011 IRS Data Book, a compilation of statistical data and IRS activities, is out. You can read the whole book here: http://www.irs.gov/pub/irs-soi/11databk.pdf or just skip to page 22 of the publication for the important stuff.
In summary, the average audit rate for individual tax returns is 1.1%. But what’s in your return can push you above the average. At the high end, those making more than $1 million have an audit instance of 12.5%. At the other end, returns for those making under $200,000 and without any business or rental activities have Continue reading »
DCAA Executive Compensation Audit Approach is “Fatally Flawed”
On January 18, 2012 the Armed Services Board of Contract Appeals (ASBCA) ruled the Defense Contract Audit Agency (DCAA) sampling methodology for audits of contractor executive compensation is “fatally flawed statistically and therefore unreasonable.”
This decision is related to Continue reading »
Preparing for Your Audit – Practical Tips & Tricks
For many, your 2011 financial audit is coming quickly (if it hasn’t already started) and, with that, your friendly Aronson auditors! While we provide you with a Prepared by Client List (PBC), here are some tips to give you greater insight into what goes on in the minds of those crazy auditors and how you can make the audit process smoother for everybody involved.
- Auditors love to get all of their information all at once. They really like walking in that first day of an audit and seeing all of the information pulled and ready in the audit room, rather than piecemeal over a period of time. Continue reading »
Worker Classification: The New ‘Get Out of Audit Jail Free’ Card!
In recent years, the battle over how workers are classified has heated up. Federal and state government agencies have been going after businesses that intentionally or unintentionally classify their workers inaccurately as independent contractors when they should have been classified as employees. The resulting audits have proven to be very costly for companies that aren’t in compliance. Continue reading »
DCAA Provides Guidance on Pass-Through Charge Limitations
On February 18, 2011 the DCAA issued memorandum 11-PSP-003(R) regarding FAR 52.215-23 on Pass-Through Charge Limitations. The memo states that any indirect costs and associated profit applicable to subcontractor costs where the contractor does not provide “added value” (e.g., subcontract management functions) are considered excessive pass-through costs which are unallowable.
New DCAA Memorandum Mandates Independent Review on DCAA Audits
Good news for all contractors, Effective July 26, 2011, many DCAA audits where a report will be issued, will undergo an independent reference review subsequent to supervisory review but prior to report issuance. Continue reading »
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What We Are Writing
- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
- New Employee vs. Independent Contractor Considerations
- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)