Compliance of Initial Disclosure Statement

Overview

There is some confusion regarding the review of Initial Disclosure Statement. DCAA Contract Audit Manual, Section 8-206 "Criteria for Adequacy Determination" (http://www.dcaa.mil/cam/Chapter_08_-_Cost_Accounting_Standards.pdf) provides details for the criteria for and Adequacy Determination. Important parts are captured below.

a. To be considered adequate, a Disclosure Statement must be current, accurate, and complete. (1) A Disclosure Statement is current if it describes the cost accounting practices which the contractor intends to follow for estimating, accumulating and reporting costs associated with covered contracts. The Disclosure Statement, therefore, could possibly include practices that are currently in use; will be instituted at some future date; will be followed with the incurrence of a new cost; or a combination of these.

and,

(2) A Disclosure Statement is accurate if it correctly, clearly, and distinctly describes the actual method of accounting the prime contractor or subcontractor uses or intends to use on contracts subject to 41U.S.C. 1501-1506 (formerly 41 U.S.C. 422). Vague, ambiguous, and contradictory descriptions of the contractor's cost accounting practices may hinder subsequent compliance audits, cause disputes and itigation between contracting parties, and ultimately result in additional cost to the Government. onsequently the auditor should carefully evaluate the described practices for specificity and clarity. Clerical accuracy is also a requirement for the Disclosure Statement. Therefore, the auditor should verify whether the contractor has checked the appropriate boxes, inserted the applicable code letters, omitted any questions, etc.'

Audit Program 19100 reads,

This standard audit program assists the auditor in planning and performing the audit in support of the cognizant Federal agency official’s (CFAO) initial determination of compliance of the contractor’s description of cost accounting practices submitted in the Disclosure Statement.

Summary

A DCAA auditor is looking at 2 things when reviewing the adequacy of a contractors disclosure statement. They are:

1. Whether the disclosure statement is current, complete and accurate, and,

2. Whether the disclosures are in compliance with acceptable practices. They are not auditing the details, but whether the way the contractor is doing something is compliant or not.

DCAA Audit Program

File:19100 AP Compliance of Initial Disclosure Statement.pdf

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