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Consultant Audits Under ACECAASHTOFHWA Guidelines

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Consultant Audits Under ACECAASHTOFHWA Guidelines

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    1. 1 Consultant Audits Under ACEC/AASHTO/FHWA Guidelines

    2. 2 Introduction This program supports the implementation of Section 307 (single audit) as well as fairness and efficient use of scarce resources.

    3. 3 Presentation Outline Section 307 - The Law and its Intent Task Force Guidance ADOT’s Position Audit & Analysis Implementation Recent Events

    4. 4 Task Force Members ACEC - HNTB, Kimley-Horn, Otak, Ralph Whitehead, and Anderson & Associates AASHTO - Alabama, Arizona, Illinois, North Carolina, and Washington FHWA - 2 representatives from the Office of Program Administration including the Pre-construction Leader

    5. 5 Section 307 (a) CONTRACTING FOR ENGINEERING AND DESIGN SERVICES “(C) PERFORMANCE AND AUDITS - Any contract or subcontract awarded in accordance with subparagraph (A), whether funded in whole or in part with Federal-aid highway funds, shall be performed and audited in compliance with cost principles contained in the Federal Acquisition Regulations, including part 31 of title 48, Code of Federal Regulations.”

    6. 6 Section 307 (C) PERFORMANCE AND AUDITS INTENT OF THE LAW Single set of accounting rules = FAR Applied consistently to all contracts

    7. 7 Section 307 LAW 307 applies to any contract funded with Federal-aid highway funds. QUESTION Does 307 apply to State funded design contracts when the construction contract is Federally funded? ANSWER No, 307 only applies to specific contracts funded in whole or in part with Federal-aid highway funds.

    8. 8 Section 307 LAW Contracts shall be performed and audited in accordance with the FAR. QUESTION Can a firm choose national, geographic or business segment overhead rates? ANSWER Yes. It is up to a firm to propose FAR compliant overhead rate(s) and it/they must be consistently and fairly applied to all public clients.

    9. 9 Section 307 LAW Contracts shall be performed and audited in accordance with the FAR. QUESTION How can greater consistency among States in determining FAR allowable costs be achieved? ANSWER ACEC and AASHTO agree greater consistency among States is desirable. Inconsistencies will be referred to AASHTO’s Audit Subcommittee for action.

    10. 10 Section 307 (a) CONTRACTING FOR ENGINEERING AND DESIGN SERVICES “(D) INDIRECT COST RATES - Instead of performing its own audits, a recipient of funds under a contract or subcontract awarded in accordance with subparagraph (A) shall accept indirect cost rates established in accordance with the Federal Acquisition Regulations for 1-year applicable accounting periods by a cognizant Federal or State government agency, if such rates are not currently under dispute.”

    11. 11 Section 307 ( D) INDIRECT COST RATES INTENT OF THE LAW Single, Annual Audit by a “Cognizant Agency”

    12. 12 Section 307 LAW Instead of performing its own audits, a recipient of Federal funds shall accept indirect cost rates established by a cognizant Federal or State agency. QUESTION What is the definition of a “cognizant agency?” ANSWER A “cognizant agency” is any one of the following: Federal Agencies Home State (where the firm’s headquarters is located) non-Home State (cognizance transfer required by Home State)

    13. 13 Section 307 LAW Instead of performing its own audits, a recipient of Federal funds shall accept indirect cost rates established by a cognizant Federal or State agency. QUESTION What constitutes an acceptable or “cognizant audit?” ANSWER A “cognizant audit” is one performed by a: Cognizant Agency (unconditional) Non-Home State (conditional) CPAs hired by the Firm (conditional)

    14. 14

    15. 15 Section 307 LAW A recipient of funds shall accept indirect cost rates from a cognizant agency, if rates are not currently under dispute. QUESTION Who can dispute and what constitutes a legitimate dispute? ANSWER AASHTO and ACEC have chosen not to address the issue of disputes at this time. If necessary, the Task Force will formulate additional guidance for FHWA.

    16. 16 Section 307 (a) CONTRACTING FOR ENGINEERING AND DESIGN SERVICES “(E) APPLICATION OF RATES - Once a firm’s indirect cost rates are established under this paragraph, the recipient of the funds shall apply such rates for the purposes of contract estimation, negotiation, administration, reporting, and contract payment and shall not be limited by administrative or de facto ceilings of any kind.”

    17. 17 Section 307 ( E) APPLICATION OF RATES INTENT OF THE LAW Single overhead rate without “CAPS”

    18. 18

    19. 19 Section 307 (a) CONTRACTING FOR ENGINEERING AND DESIGN SERVICES “(F) PRENOTIFICATION; CONFIDENTIALITY OF DATA - A recipient of funds requesting or using the cost and rate data described in subparagraph (E) shall notify any affected firm before such request or use. Such data shall be confidential and shall not be accessible or provided, in whole or in part, to another firm or any government agency which is not part of the group of agencies sharing cost data under this paragraph, except by written permission of the audited firm. If prohibited by law, such cost and rate data shall not be disclosed under any circumstances.”

    20. 20 Section 307 ( F) PRENOTIFICATION; CONFIDENTIALITY OF DATA INTENT OF THE LAW a Firm’s cost and rate data shall remain confidential

    21. 21 Section 307 LAW A recipient requesting or using the cost and rate data described in subparagraph (E)... QUESTION What cost and rate data will be shared for a given firm? ANSWER AASHTO has developed an Audit Report Format which contains sufficient disclosure of a firm’s cost and rate data. ACEC agrees this is an acceptable guide.

    22. 22 Section 307 LAW Such data shall be confidential and shall not be provided to another entity which is not part of the group sharing data. QUESTION How will confidentiality be maintained? ANSWER Any member of the group sharing cost and rate data shall use all legal means to maintain its confidentiality. If a member is legally required to disclose it, the firm will be notified in advance, in writing.

    23. 23

    24. 24 ADOT’s Position All contracts should be treated in the same way, whether federal money is involved or not. All consultants should be treated in a fair and equitable manner. It is advantageous to be inclusive in providing opportunities to Consultants of all sizes, wherever possible.

    25. 25 Audit & Analysis Implementation All Consultants shall be treated in a fair and impartial manner. ACEC/AASHTO/FHWA guidelines will be followed for all Consultants, whether operating in more than one State or not.

    26. 26 New Procedures The current standards for amount of work done with ADOT will be raised as to use of Unit Prices of Work or simplified overhead procedures. Project managers will be kept in the loop as to the status of A&A’s preaward assignments and the compliance of Consultants with providing information.

    27. 27 Oversight by USDOT Ongoing three-year project by the IG’s office. IG is staffing an audit unit of their own. Major concern with compensation issues. Failure of many CPA firms to “properly audit” overhead rates, based on sampling of audit workpapers.

    28. 28 Cognizant Audits Many states appear to be unwilling to act as cognizant agency. Use of audits done by other states even though they are not cognizant. Changes in the “Yellow Book.”

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