Contractors Will be Cited for Denial of Access to Records if There Are Delays in Providing Requested Documents

In an apparent attempt to speed up provision of requested documentation during audits, auditors are now told if requested documentation is not provided in a timely manner they are to (1) follow procedures for denial of access to records (2) take appropriate actions to withhold any unsupported costs billed to the government until the data is received and (3) question the unsupported costs in the audit report if the documentation is not received prior to the completion of the auditor’s fieldwork at the contractor. These procedures are to be followed even if the contractor concurs to the questioned costs resulting from lack of support and if the records are alleged to have been destroyed, lost or stolen auditors are to obtain a written statement from senior management (i.e. no lower than business segment vice president or CFO) detailing the circumstances. If the auditor concludes the contractor cannot support its assertions on a timely basis they are to consider whether an internal control deficiency exists (providing as an example if cost transfers or adjusting entries are not provided in a timely manner), the contractor’s accounting system should be cited as a significant deficiency or material weakness.

The guidance spells out what is considered to be reasonable expectations of timely support where the auditor has the obligation to clearly state what support is needed and when it should be provided and the contractor should be provided a reasonable time to provide the data. The assumption is that documentation supporting a contractor’s assertions in a proposal or submission should be readily available (e.g. support for proposed hours should be provided the same day since the proposal is based on it) unless there is extenuating circumstances such as the data is stored off-site where additional time will be permitted. Costs that cannot be evaluated due to denial of access to data will be questioned and if unsupported costs are pervasive, the auditor should issue either a “qualified or adverse opinion.”

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