Annual Testing of Contractor Eligibility for Direct Billing

The DCAA memo addresses auditors’ annual testing of contractors’ on-going eligibility for direct billing. The name and focus of the revised audit program is to ascertain whether there can be continued reliance on contractors’ internal controls for direct billing purposes as spelled out in the DCAA Contract Audit Manual (DCAM) 6-1007.6. The guidance includes a proforma memo for the record that provides auditors will select a sample of paid vouchers submitted directly to the government paying offices and will (1) test the contractor’s procedures for preparing vouchers on flexibly priced contracts (including T&M and labor hour contracts) and (2) verify the contractor is current in submitting its incurred cost proposals and final vouchers. The proforma memo will state that the tests were made, continual reliance can be placed on the contractor’s procedures and the incurred cost proposals and final vouchers are submitted on time. If the tests indicate the vouchers cannot be relied upon the memo should so state, a flash billing system report should be issued and the memo should state the direct billing program will be rescinded. Similarly with untimely submittals, the memo should state the incurred cost proposals or final voucher are not timely submitted, a flash estimating system report should be issued and direct billing will be rescinded (08-PPD034(R)).

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