billing system: getting paid on a government contract 16 april 2014

BILLING SYSTEM:

Getting Paid on a Government Contract

16 April 2014

ANNOUNCEMENTS

Trish Carlin, CPASr. Consultant, Carlin Consulting Group

Joshua HarlorSupervisory Auditor, Defense Contract Audit Agency

Linda HildebrantDirector of CAS Compliance, Morpho Detection

Dale EnglishSupervisory Contract Specialist, NAVFAC SW

Contract Invoicing Provisions

Adequate Billing System

Gov’t Invoicing

FormsWAWF

DCAAOversigh

t

Customer Acceptanc

e & Approval

BILLING CYCLE


Contract Invoicing ProvisionsContract BriefFAR 52.216-7 Allowable Cost & PaymentProvisional Billing RatesFee Withhold

Invoicing FormsPublic VoucherProgress PaymentInvoice & Receiving Report

Wide Area Workflow (WAWF)DCAA Oversight/MonitoringGovernment Acceptance & Approval

DFARS Business System Final Rule

DFARS 252.242-7005System DFARS Provision DFARS Clause

Accounting• Indirect / ODC• Control Environment• Billing• Labor• General IT

242.75 252.242-7006

Earned Value Management 234.2 252.234-7002

Estimating• Budget / Planning

215.407-5 252.215-7002

Material Management & Accounting

242.72 252.242-7004

Property Management 245.1 252.245-7003

Purchasing 244.3 252.244-7001

Elements of an Adequate Billing System

DCAA Contract Audit Manual 5-

1100

Billing System should provide reasonable assurance that billings applicable to Government contracts are prepared in accordance with applicable laws and regulations, and contract terms; and that material misstatements are prevented, or detected and corrected in a timely manner.



1100

The Billing System should include processes for: • Segregating and excluding unallowable costs• Segregating incurred costs that are non-billable • Withholding costs that are appropriate adjustments• Adjusting submissions for final rates or indirect

billing rates• Identifying costs that require specific approval • Identifying contract overpayments



1100Key Processes Include:

Billing system policies and procedures

Billing reviews and approvals

Training of employees

Contract briefings



1100Key Processes IncludeReconciliation of recorded and billed cost

Adjustment of cost and rates

Exclusion of non-billable costs

Subcontractor progress payments, performance-based and commercial financing payments



1100Key Processes Include

Estimate to complete, estimate of costs of delivered/invoiced items

Loss contract procedures

Contract overpayments, refunds and offsets

Billing system – IT system internal controls

Contract Brief

DCAA Contract brief guidance

DCAA Contract brief templates

FAR 52.216-7 Allowable Cost & Payment

(a) Invoicing(b) Reimbursing costs(c) Small business concerns(d) Final indirect rates(e) Billing rates(f) Quick closeout procedures(g) Audit(h) Final payment

Provisional Billing Rates

Purpose of Provisional Billing Rates (PBRs)What are the procedures for establishing PBRs?When should we submit?What information should we provide?DCAA reviewMonitoringCommon deficienciesFrequently asked questions

Purpose of PBRsOne criterion for an adequate accounting system is that it provide for billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms. Interim payments on cost-type contracts are allowed as specified in the contract provisions.Reimbursement of indirect costs in these interim payments is generally made through provisional billing rates.Provisional Billing Rates are established to approximate the contractor’s final year-end rates, as adjusted for any unallowable costs.Provisional Billing Rates are used for interim purposes until settlement is reached on the final indirect rates for the contractor’s fiscal year.FAR 42.704-Billing Rates-provides procedures and guidance for establishing PBRs.

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Reasons for Contractor SubmissionContractors are STRONGLY encouraged to submit a billing rate proposal to assist the responsible official in establishing rates

Opportunity to present and explain expected changes

Note: Vouchers and progress payments may be REJECTED if submitted without using properly established billing rates

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Procedures for Establishing Billing RatesFAR 42.704(b)

The contracting officer or auditor shall establish PBRs on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities.

When the contracting officer or auditor determines that the contract value does not warrant submission of a billing rate proposal, PBRs may be established by making appropriate adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs.

Also, contractors may voluntarily submit a billing rate proposal to assist the responsible official in establishing rates (Preferred).

It is important to discuss the requirements with the contracting officer or cognizant auditor.

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Procedures for SubmissionContractors submit provisional billing rates to its DCAA Office or Administrative Contracting Officer

Electronic submissions are encouraged

Provide in excel format on a CD or through e-mail

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When Should We Submit?Prior to the beginning of the fiscal year (once budgets are complete) or when the established billing rates are no longer representative of final year end rates due to unforeseen events or circumstances.The PBRs should represent a 12-month period (the contractor’s fiscal year).PBRs should be submitted at least annuallyVouchers and progress payments can be returned if submitted without properly established billing rates.

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What Should We Provide in a PBR Proposal?

Proposed billing rate calculations (Pool and Base) with brief rationale

Prior fiscal year (FY) pool and base

Current FY to date pool and base

Current FY budget pool and base, if available

Comparative analysis with explanation of any significant differences

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DCAA ReviewSome example procedures DCAA may perform include the following:

Compare proposed pool and base to prior year and year-to-date pool and bases.

Review trend of questioned costs in relevant incurred cost audits and consider an adjustment for unallowable expenses in calculating current year provisional billing rates.

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MonitoringPBRs should be monitored:• Throughout the year• Immediately after year-end• Upon submission of the final indirect rate

proposalPBRs may be adjusted by either party at any time to prevent substantial under or over payment – FAR 42.704(c).If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly.

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AdjustmentSubmit a letter with new rates, an explanation as to what caused the change, and with supporting data

If DCAA/DCMA has NOT issued a memo:Begin using the new rates immediately

If DCAA/DCMA HAS issued a memo:Continue using the rates as listed on the memo unless you receive a new memo from DCAA/DCMA

Please contact your cognizant office if you have concerns

NOTE: If PBRs are adjusted, use the new rate on the current year cumulative expenses

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Common DeficienciesFailure to remove unallowable costs from the billing rate projections.

Failure to adjust provisional billing rates based on actual experience:

Before year end, if there are known or reasonably anticipated significant variances.

After year end once actual rates, net of unallowable expenses, are calculated.

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Frequently Asked QuestionsDo I submit the Provisional Billing Rate Proposal to the ACO or DCAA Office?

FAR 42.704 indicates the office responsible for final indirect cost rates also establishes provisional billing rates.

If final rates are ACO determined, submit to that office.

If final rates are audit determined, submit to local DCAA Office.

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Frequently Asked QuestionsCan I use just use the most recent FY ended rates for provisional billing purposes?

No. However, the responsible official may establish the billing rates based on prior year history less unallowable costs.

If budgetary data is available, your proposed billing rates may be based on the budget less the estimated unallowable costs.

Once provisional billing rates are established with DCAA or the ACO, do I need to submit proposed changes based on new information?

YES. The contractor should submit new proposed billing rates when known or reasonably anticipated significant variances have occurred.

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Fee Withhold

Three contract clauses (FAR 52.216-8, -9, and -10) regulate how the Government will pay fees under CPFF and CPIF contracts

Public Voucher

Contractor ResponsibilitiesPreparation of VouchersElectronic Submission of VouchersCommon Deficiencies

Contractor ResponsibilitiesContractors should:

Contact the cognizant DCAA office after contract award.

Ensure DCAA has the necessary information to process contract billings, such as current provisional billing rates, copy of the contract, any special contract provisions, etc.

Maintain adequate billing system internal controls.

Ensure adequate support is maintained for amounts billed.

Submit timely incurred cost proposals and final vouchers in accordance with FAR 52.216-7.

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Preparation of VouchersThe contractor is responsible for preparing and submitting claims for reimbursement according to the terms of the contract.

Vouchers should not be submitted more than once every two weeks.

Public voucher claims for reimbursement must be prepared on the prescribed Government forms:

First voucher on a contract is an interim voucher, as are all subsequent vouchers prior to the final voucher.

Final voucher will not be submitted until all contract work is completed. The auditor may provide advice concerning the format for preparing public vouchers and financial representations.

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Electronic Submission of Interim Vouchers


All vouchers should be submitted through WAWF unless contract terms require hard copy vouchers to be submitted.

In WAWF, the “Cost Voucher” is the equivalent of the SF 1034. Data equivalent to the SF 1035 must be included in a separate electronic file and attached to the cost voucher in WAWF.

Vouchers must be prepared and submitted in accordance with the terms of the contract, including any special billing or payment instructions.

Guidance and training for completing a cost voucher invoice can be obtained from the WAWF website at https://wawf.eb.mil.

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Electronic Submission of Interim V ouchers examples from DCAA Manual 7641.90, Information for Contractors, located at: http://www.dcaa.mil/DCAAM_7641.90.pdf

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http://www.dcaa.mil/DCAAM_7641.90.pdf


Final voucher:

Last voucher to be submitted on a contract.

A separate completion voucher will be submitted for each individual project or task order for which a separate series of public vouchers has been submitted.

In accordance with FAR 52.216-7(d)(5).

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Common DeficienciesCommon deficiencies found during voucher reviews:

Math errors.

Billed costs not allowed per the contract terms (e.g., overtime).

Incorrect provisional billing rates (indirect costs).

Billing over contract ceiling amounts.

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Progress PaymentFAR 32.5 – Progress Payments Based on CostsSF 1443 – Contractor’s Request

Invoice & Receiving ReportWAWF's Receiving Report takes the place of the DD250 and MIRR

Wide Area Workflow (WAWF)

Wide Area Workflow (WAWF)o Contractors input invoices via Internet

o Government performs inspection/acceptance via Internet

o Sends inspection/acceptance information to Payment System via Electronic Data Interchange

o Provides visibility to all – Industry, DCMA, DCAA, DFAS, Buying Commands

o Maintains electronic records

o Standard DOD application with Single Face to Industry

o Provides secure and auditable transactions


oBenefits for Contractors

• Electronic submission of invoices

• Faster payments

• Total visibility of document status

• Eliminates lost or misplaced documents

• Secure transactions with audit capability


Document types used to create, submit, inspect, accept, certify, or process payment on the following document types:

Invoice Document Types (Seven)Receiving Report Document Types (Six)Receiving Report and Invoice Document Types

(Four)Financing Document Types (Three)Voucher Document Types (Five)Property Document Type (One)

Wide Area Workflow

***Billing to the correct Contract Line Item Number (CLIN) on the Contract is

critical***

DFARS Clause 252.232-7006 Wide Area Workflow Payment Instructions

Attached to the invoice/voucher, must be supporting documentation, if required by

the contract

DCAA Oversight/Monitoring

Periodic Audits by DCAA. When contract financing is cost-based, such as interim cost reimbursement (interim vouchers) or cost based progress payments, the billing system and the contract costs are subject to periodic audits by DCAA.

DCAA will, at a minimum, verify that the costs billed have been incurred in performance of the contract, that they are in agreement with the accounting records, and that they are in accordance with the contract terms.

Wide Area Workflow (WAWF)Includes a voucher sampling approach that replaces the direct bill program

DFARS 242.803 gives DCAA authority to:Approve interim vouchers selected using sampling methodology for provisional payment and forward to the disbursing office

ALL provisionally approved interim vouchers are subject to a later audit of actual costs incurred

Review final vouchers and send to the Administrative Contracting Officer (ACO)

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Government Acceptance & Approval

EDI

FTP Data Upload

Web Input using Web Forms

Submits Shipping Reports & Invoices

InternetInternet

WAWF transmits payment actions EDI 810C, 856, & 861 via GEX to

DoD pay system

WAWF transmits payment actions EDI 810C, 856, & 861 via GEX to

DoD pay systemEFTEFT

Authorize transfer of fundsVia EFT to Vendor’s bank

•Receives email notificationof awaiting actions

•Pays or rejects invoicesusing Web Forms onlinein WAWF


•Certifies invoices ready for payment in WAWF


•Accepts / rejects using Web Forms online in WAWF


•Inspects / rejects using Web Forms online in WAWF

VendorVendor BankBankWAWFApplication

WAWFApplication

DoD PaySystems

DoD PaySystems

Payment Office

Payment OfficeLocal

Processing Office

Local Processing

Office

Accepting / Receiving

Activity

Accepting / Receiving

Activity

Inspecting Activity

Inspecting Activity

Invoice requirements are listed in The Federal Acquisition Regulations (FAR) (FAR Part 32.905).

Company must be registered in System for Award Management to receive electronic payments (EFT) (https://sam.gov) Federal Agencies use different electronic payment systems such as: - Wide Area Work Flow (WAWF) - DoD

- PayWeb - ONR -Payment Management System (PMS) – DHHS

http://www.acquisition.gov/far/html/Subpart%2032_9.html

https://sam.gov/

Be proactive before submitting invoice: - Read your contract

- Understand your contract

- Ask questions of your Contract Specialist

- Follow the invoicing instructions

- Know who is responsible for actions needed

- Monitor your invoices progress

For more information about our organizations visit

www.sdaga.org

www.ncmasd.org

http://www.sdaga.org/

http://www.ncmasd.org/

billing system: getting paid on a government contract 16 april 2014

Documents