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DART – Let's Go.

Contract Audit

• Cost Principles from DART Procurement Regulations
• Incurred Cost Audits
• FAR - Part 31 Contract Cost Principles and Procedures (PDF file)
• Model Incurred Cost Proposal (PDF File)

Incurred Cost Audits


We conduct audits of cost type contracts (cost plus fixed fee, or other similar contracts) in order to render an opinion concerning the allowability, allocability and reasonableness of costs charged to DART contracts. We evaluate these costs based on DART Procurement Regulations (DPR); Federal Acquisition Regulations (FAR), if applicable; Generally Accepted Government Auditing Standards (GAGAS); terms and conditions of the specific contract' and guidelines established by the Institute of Internal Auditors (IIA). Based on the results of our audit, we will establish final overhead rates and allowable direct costs for the subject years of your contracts or subcontracts and, if necessary, recommend a cost adjustment to the amount billed under the contract for the subject years.

Contractor Proposal

DART audit will notify you in writing if we plan to audit your costs and what years this will encompass. We will ask you to furnish schedules of overhead costs and final claimed rates for the years you worked on this contract or subcontract, as well as a schedule of direct labor and overhead for all work billed to DART on any contract or subcontract for the subject years.

See "DART's Model Incurred Cost Proposal" (PDF File) for a typical presentation of this information. Note that this spreadsheet represents only an example for you to follow, the adjustments shown do not imply that we will treat your costs in the same manner. An adequate proposal should reduce the time required to do the audit as we can do some work before the auditor arrives at the field location.

Audit Evaluation

After receipt of an adequate proposal, the auditor will contact the contractor's representative and set up an entrance conference. If the proposal is inadequate, the auditor will notify the contractor of the deficiency.

At the entrance conference, the auditor will outline his objectives and what data he will initially need to begin his work. Examination of books and records may lead to additional data requests.

The audit will include an evaluation of both direct and indirect costs. We will examine supporting documentation for selected costs to validate amounts and determine the nature of the costs. We will also seek to determine whether such costs are: allowable, reasonable, allocable to the contract(s) or subcontracts and in accordance with generally accepted accounting principles (GAAP), Government statute, or regulation.

During the audit and in an exit conference, the auditor will discuss the audit findings with the contractor. We encourage you to provide a response, indicating whether or not you concur with the auditor.

Resolution of Audit

After completing the audit, the auditor will discuss the results of audit with the contractor and will give you the opportunity to respond to their findings. We will include your comments in the final audit report to the Board of Directors and the Contracting Officer (CO). If DART owes you, and you agree we will issue payment to you. If you owe DART, the CO will request payment. If you do not concur with the recommendations, he will consider your response and issue a final decision. You may appeal the decision under the contract "Disputes" clause.

Common Audit Findings

Common results of our past audits include:

Professional Liability Insurance. The GEC contract includes provision for an Owner Controlled Insurance Program (OCIP). Since this policy insures all contractors against professional liability claims, we do not allow inclusion of this cost in your overhead.

Site Based Costs. DART furnishes office space, computers, phones, transportation, utilities, office supplies, CAD support, postage and other similar costs for individuals working on the GEC contract. Consequently, DART anticipates that contractors will include only administrative costs for these categories in their overhead.

Entertainment. Contractors often have entertainment costs including alcoholic beverages in their overhead. Neither FAR nor DPR allow these costs.

Direct costs from other contracts. Some contractors include in their overhead contract labor, legal costs or other kinds of direct costs associated with contracts they have with other customers. An indirect cost does not benefit one specific cost objective, but benefits the firm as a whole.

If you have any questions, contact Rick Reynolds, Senior Manager, Contract/Construction Audit at 214-749-3135.

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