Though a key aspect of other transactions is to attract commercial businesses who otherwise do not do business with the federal government, DCAA has been asked by the Department of Defense Inspector General office to provide audit guidance to its staff in the event it is asked to review costs. Though it is not quite clear what their role will be, they have developed guidance for auditing participants of other transactions. Contractors can expect either DCAA or independent firms working for a consortium (such as our firm) to selectively review participants in other transactions and to follow the guidance discussed below.

The guidance provides three objectives:

Contractors incurred costs follow the OT terms and reasonably compare in total to billed costs.

The contractor's billed costs comply with the terms of the OT.

The contractor has provided its cost share (e.g. contribution) amount in accordance with the OT agreement and has not direct billed this to the government.

Auditors will review primarily three key documents: Schedule of Payments, Payable Milestones and Funding Schedule. The Schedule of Payments, for milestone payments, will include a description of payable milestones, dates and the amounts government versus the contractor will contribute. The Funding Schedule identifies the consortium members and their respective cost sharing amounts. Other documents examined often includes the Quarterly Business Status Report (comparison of incurred costs by quarter with forecasted expenditures), Payable Events/Milestone Reports and Annual Program Plan Document (description of forecasted expenditures and milestone events).

The guidance recognizes that costs for OTs may be accounted for in different ways: as a contract, an IR&D project or a combination of both (i.e., government cost share accounted as a contract with the contractor share accounted for as an IR&D project). It reminds auditors to follow FAR 31.205-18(e), Independent Research and Development and Bid and Proposal Costs. It further states that these IR&D costs are allowable if the work performed would have been allowed as contractor IR&D had there been no so such cooperative agreement. If the contractor accounts for the government portion of OT costs as an IR&D project, the auditor should be on the lookout that the contractor equitably accounts for the payments (e.g. credit to the IR&D account) and verify that only allowable IR&D costs are allocated to government contracts.

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