1. BILLING SYSTEM: Getting Paid on a Government Contract 16 April 2014

2. ANNOUNCEMENTS

3. Trish Carlin, CPA Sr. Consultant, Carlin Consulting Group Joshua Harlor Supervisory Auditor, Defense Contract Audit Agency Linda Hildebrant Director of CAS Compliance, Morpho Detection Dale English Supervisory Contract Specialist, NAVFAC SW

4. BILLING CYCLE WAWF DCAA Oversight Contract Invoicing Provisions
Adequate Billing System
Gov’t Invoicing Forms
WAWF
DCAA
Oversight
Customer Acceptance & Approval
BILLING CYCLE

5. Adequate Billing System Contract Invoicing Provisions. Contract Brief
Adequate Billing System Contract Invoicing Provisions Contract Brief FAR Allowable Cost & Payment Provisional Billing Rates Fee Withhold

6. Invoicing Forms. Public Voucher. Progress Payment
Invoicing Forms Public Voucher Progress Payment Invoice & Receiving Report Wide Area Workflow (WAWF) DCAA Oversight/Monitoring Government Acceptance & Approval

7. Adequate Billing System

8. DFARS Business System Final Rule DFARS 252.242-7005
4/15/2017
DFARS Business System Final Rule DFARS –
System
DFARS Provision
DFARS Clause
Accounting
Indirect / ODC
Control Environment
Billing
Labor
General IT
242.75
Earned Value Management
234.2
Estimating
Budget / Planning
Material Management & Accounting
242.72
Property Management
245.1
Purchasing
244.3

9. 4/15/2017 –
Elements of an Adequate Billing System DCAA Contract Audit Manual
Billing System should provide reasonable assurance that billings applicable to Government contracts are prepared in accordance with applicable laws and regulations, and contract terms; and that material misstatements are prevented, or detected and corrected in a timely manner.

10. The Billing System should include processes for:
4/15/2017 –
Elements of an Adequate Billing System DCAA Contract Audit Manual
The Billing System should include processes for:
Segregating and excluding unallowable costs
Segregating incurred costs that are non-billable
Withholding costs that are appropriate adjustments
Adjusting submissions for final rates or indirect billing rates
Identifying costs that require specific approval
Identifying contract overpayments

11. Key Processes Include: Billing system policies and procedures
Elements of an Adequate Billing System DCAA Contract Audit Manual
4/15/2017 –
Key Processes Include:
Billing system policies and procedures
Billing reviews and approvals
Training of employees
Contract briefings

12. Key Processes Include Reconciliation of recorded and billed cost
Elements of an Adequate Billing System DCAA Contract Audit Manual
4/15/2017 –
Key Processes Include
Reconciliation of recorded and billed cost
Adjustment of cost and rates
Exclusion of non-billable costs
Subcontractor progress payments, performance-based and commercial financing payments

13. Elements of an Adequate Billing System DCAA Contract Audit Manual 5-1100
4/15/2017 –
Key Processes Include Estimate to complete, estimate of costs of delivered/invoiced items Loss contract procedures Contract overpayments, refunds and offsets Billing system – IT system internal controls

14. Contract Brief DCAA Contract brief guidance DCAA Contract brief templates

15. FAR Allowable Cost & Payment (a) Invoicing (b) Reimbursing costs (c) Small business concerns (d) Final indirect rates (e) Billing rates (f) Quick closeout procedures (g) Audit (h) Final payment

16. Provisional Billing Rates Purpose of Provisional Billing Rates (PBRs) What are the procedures for establishing PBRs? When should we submit? What information should we provide? DCAA review Monitoring Common deficiencies Frequently asked questions

17. Purpose of PBRs
One criterion for an adequate accounting system is that it provide for billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms. Interim payments on cost-type contracts are allowed as specified in the contract provisions.
Reimbursement of indirect costs in these interim payments is generally made through provisional billing rates.
Provisional Billing Rates are established to approximate the contractor’s final year-end rates, as adjusted for any unallowable costs.
Provisional Billing Rates are used for interim purposes until settlement is reached on the final indirect rates for the contractor’s fiscal year.
FAR Billing Rates-provides procedures and guidance for establishing PBRs.
DFARS (c) The Contractor’s accounting system shall provide for— …
(16) Billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms;

18. Reasons for Contractor Submission
Contractors are STRONGLY encouraged to submit a billing rate proposal to assist the responsible official in establishing rates
Opportunity to present and explain expected changes
Note: Vouchers and progress payments may be REJECTED if submitted without using properly established billing rates

19. Procedures for Establishing Billing Rates
FAR (b)
The contracting officer or auditor shall establish PBRs on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities.
When the contracting officer or auditor determines that the contract value does not warrant submission of a billing rate proposal, PBRs may be established by making appropriate adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs.
Also, contractors may voluntarily submit a billing rate proposal to assist the responsible official in establishing rates (Preferred).
It is important to discuss the requirements with the contracting officer or cognizant auditor.
It is important to discuss the requirements/procedures for establishing your billing rates with the contracting officer or DCAA auditor to establish the procedures you should follow in submitting and establishing billing rates based on your particular circumstances.
Although FAR (b)- [see below]- permits the Government to establish provisional billing rates without a detailed billing rate proposal using historical data, experience tells us that history without regard to budgetary expectations, may not be representative of rate experience during the billing period. That is, the risk of over payment or under payment is increased. Furthermore, the Government may request a proposal if it is necessary to establish representative billing rates.
To help ensure timely cost recovery (e.g., reduce the possibility of returned voucher, etc.), it is in the contractor’s best interest to submit a detailed provisional billing rate proposal prior to entering a new fiscal period that is as close as possible to the expected allowable year-end rates.
Reference: FAR (b) states that “When the contracting officer (or cognizant Federal agency official) or auditor determines that the dollar value of contracts requiring use of billing rates does not warrant submission of a detailed billing rate proposal, the billing rates may be established by making appropriate adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs and to reflect new or changed conditions.”

20. Procedures for Submission
Contractors submit provisional billing rates to its DCAA Office or Administrative Contracting Officer
Electronic submissions are encouraged
Provide in excel format on a CD or through
FAR (a)—The contracting officer (or cognizant Federal agency official) or auditor responsible under for establishing the final indirect cost rates also shall be responsible for determining the billing rates.

21. When Should We Submit?
Prior to the beginning of the fiscal year (once budgets are complete) or when the established billing rates are no longer representative of final year end rates due to unforeseen events or circumstances.
The PBRs should represent a 12-month period (the contractor’s fiscal year).
PBRs should be submitted at least annually
Vouchers and progress payments can be returned if submitted without properly established billing rates.
FAR requires the billing rates to be established by the Contract Auditor or Contracting Officer before use in public vouchers. Therefore, contractors should submit a proposal as early as possible prior to the beginning of the fiscal year to allow the necessary time to review and establish the rates. If budgetary data is available for the next year prior to the end of the current year, the contractor should submit when available to facilitate the review and establishment of provisional billing rates for the next fiscal year.

22. What Should We Provide in a PBR Proposal?
Proposed billing rate calculations (Pool and Base) with brief rationale
Prior fiscal year (FY) pool and base
Current FY to date pool and base
Current FY budget pool and base, if available
Comparative analysis with explanation of any significant differences
Again, as stated on slide 4, discuss the format and specific requirements with your ACO and/or DCAA auditor.

23. DCAA Review
Some example procedures DCAA may perform include the following:
Compare proposed pool and base to prior year and year-to-date pool and bases.
Review trend of questioned costs in relevant incurred cost audits and consider an adjustment for unallowable expenses in calculating current year provisional billing rates.

24. Monitoring PBRs should be monitored: Throughout the year
Immediately after year-end
Upon submission of the final indirect rate proposal
PBRs may be adjusted by either party at any time to prevent substantial under or over payment – FAR (c).
If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly.
FAR (c) indicates that established provisional billing rates may be prospectively or retroactively revised by mutual agreement at the request of the Government or contractor to prevent substantial over or under payment. The objective of this section is to ensure that billed costs are as close to what the contractor expects to incur in order to avoid significant over or under payment over the life of the contract. At many small businesses, unexpected events can have a significant impact on the indirect cost rates (e.g., award of a new contract, change in healthcare premiums, etc.) Therefore, the contractor should monitor its actual indirect cost rates on a monthly basis and if there are significant differences which will affect the year end rates, propose an adjustment to the contracting officer or DCAA office responsible for establishing provisional billing rates.
FAR (e) When the contractor provides to the cognizant contracting officer the certified final indirect cost rate proposal in accordance with (b) or (b), the contractor and the Government may mutually agree to revise billing rates to reflect the proposed indirect cost rates, as approved by the Government to reflect historically disallowed amounts from prior years audits, until the proposal has been audited and settled. The historical decrement will be determined by either the cognizant contracting officer ( (b)) or the cognizant auditor ( (b)).

25. Adjustment
Submit a letter with new rates, an explanation as to what caused the change, and with supporting data
If DCAA/DCMA has NOT issued a memo:
Begin using the new rates immediately
If DCAA/DCMA HAS issued a memo:
Continue using the rates as listed on the memo unless you receive a new memo from DCAA/DCMA
Please contact your cognizant office if you have concerns
NOTE: If PBRs are adjusted, use the new rate on the current year cumulative expenses

26. Common Deficiencies
Failure to remove unallowable costs from the billing rate projections.
Failure to adjust provisional billing rates based on actual experience:
Before year end, if there are known or reasonably anticipated significant variances.
After year end once actual rates, net of unallowable expenses, are calculated.

27. Frequently Asked Questions
Do I submit the Provisional Billing Rate Proposal to the ACO or DCAA Office?
FAR indicates the office responsible for final indirect cost rates also establishes provisional billing rates.
If final rates are ACO determined, submit to that office.
If final rates are audit determined, submit to local DCAA Office.
The ACO may request DCAA assistance to review the provisional rate proposal as part of his or her efforts to establish provisional billing rates.
If the contractor is uncertain on whether its final indirect rates are determined by audit or the contracting officer, it should contact its ACO or DCAA auditor for clarification.

28. Frequently Asked Questions
Can I use just use the most recent FY ended rates for provisional billing purposes?
No. However, the responsible official may establish the billing rates based on prior year history less unallowable costs.
If budgetary data is available, your proposed billing rates may be based on the budget less the estimated unallowable costs.
Once provisional billing rates are established with DCAA or the ACO, do I need to submit proposed changes based on new information?
YES. The contractor should submit new proposed billing rates when known or reasonably anticipated significant variances have occurred.

29. Fee Withhold Three contract clauses (FAR 52
Fee Withhold Three contract clauses (FAR , -9, and -10) regulate how the Government will pay fees under CPFF and CPIF contracts

30. Public Voucher Contractor Responsibilities Preparation of Vouchers Electronic Submission of Vouchers Common Deficiencies

31. Contractor Responsibilities
Contractors should:
Contact the cognizant DCAA office after contract award.
Ensure DCAA has the necessary information to process contract billings, such as current provisional billing rates, copy of the contract, any special contract provisions, etc.
Maintain adequate billing system internal controls.
Ensure adequate support is maintained for amounts billed.
Submit timely incurred cost proposals and final vouchers in accordance with FAR

32. Preparation of Vouchers
The contractor is responsible for preparing and submitting claims for reimbursement according to the terms of the contract.
Vouchers should not be submitted more than once every two weeks.
Public voucher claims for reimbursement must be prepared on the prescribed Government forms:
First voucher on a contract is an interim voucher, as are all subsequent vouchers prior to the final voucher.
Final voucher will not be submitted until all contract work is completed. The auditor may provide advice concerning the format for preparing public vouchers and financial representations.

33. Electronic Submission of Interim Vouchers
All vouchers should be submitted through WAWF unless contract terms require hard copy vouchers to be submitted.
In WAWF, the “Cost Voucher” is the equivalent of the SF Data equivalent to the SF 1035 must be included in a separate electronic file and attached to the cost voucher in WAWF.
Vouchers must be prepared and submitted in accordance with the terms of the contract, including any special billing or payment instructions.
Guidance and training for completing a cost voucher invoice can be obtained from the WAWF website at

34. Electronic Submission of Interim Vouchers
Electronic Submission of Interim V ouchers examples from DCAA Manual , Information for Contractors, located at:

35. Electronic Submission of Interim Vouchers
Final voucher:
Last voucher to be submitted on a contract.
A separate completion voucher will be submitted for each individual project or task order for which a separate series of public vouchers has been submitted.
In accordance with FAR (d)(5).

36. Common Deficiencies Common deficiencies found during voucher reviews:
Math errors.
Billed costs not allowed per the contract terms (e.g., overtime).
Incorrect provisional billing rates (indirect costs).
Billing over contract ceiling amounts.

37. Progress Payment FAR 32.5 – Progress Payments Based on Costs SF 1443 – Contractor’s Request Invoice & Receiving Report WAWF's Receiving Report takes the place of the DD250 and MIRR

38. Wide Area Workflow (WAWF)

39. Wide Area Workflow (WAWF)
Contractors input invoices via Internet
Government performs inspection/acceptance via Internet
Sends inspection/acceptance information to Payment System via Electronic Data Interchange
Provides visibility to all – Industry, DCMA, DCAA, DFAS, Buying Commands
Maintains electronic records
Standard DOD application with Single Face to Industry
Provides secure and auditable transactions

40. Wide Area Workflow (WAWF)
Benefits for Contractors
Electronic submission of invoices
Faster payments
Total visibility of document status
Eliminates lost or misplaced documents
Secure transactions with audit capability

41. Wide Area Workflow (WAWF) Document types used to create, submit, inspect, accept, certify, or process payment on the following document types: Invoice Document Types (Seven) Receiving Report Document Types (Six) Receiving Report and Invoice Document Types (Four) Financing Document Types (Three) Voucher Document Types (Five) Property Document Type (One)

42. Wide Area Workflow ***Billing to the correct Contract Line Item Number (CLIN) on the Contract is critical*** DFARS Clause Wide Area Workflow Payment Instructions Attached to the invoice/voucher, must be supporting documentation, if required by the contract

43. DCAA Oversight/Monitoring Periodic Audits by DCAA
DCAA Oversight/Monitoring Periodic Audits by DCAA. When contract financing is cost-based, such as interim cost reimbursement (interim vouchers) or cost based progress payments, the billing system and the contract costs are subject to periodic audits by DCAA. DCAA will, at a minimum, verify that the costs billed have been incurred in performance of the contract, that they are in agreement with the accounting records, and that they are in accordance with the contract terms.

44. Wide Area Workflow (WAWF)
Includes a voucher sampling approach that replaces the direct bill program
DFARS gives DCAA authority to:
Approve interim vouchers selected using sampling methodology for provisional payment and forward to the disbursing office
ALL provisionally approved interim vouchers are subject to a later audit of actual costs incurred
Review final vouchers and send to the Administrative Contracting Officer (ACO)

45. Government Acceptance & Approval

46. Internet Vendor Bank WAWF Application DoD Pay Systems
EDI
FTP Data Upload
Web Input using Web Forms
Submits Shipping
Reports & Invoices
Internet
WAWF transmits payment actions EDI 810C, 856, & 861 via GEX to DoD pay system
EFT
Authorize transfer of funds
Via EFT to Vendor’s bank
Receives notification of awaiting actions
Pays or rejects invoices using Web Forms online in WAWF
Certifies invoices ready for payment in WAWF
Accepts / rejects using Web Forms online in WAWF
Inspects / rejects using Web Forms online in WAWF
Vendor
Bank
WAWF
Application
DoD Pay
Systems
Payment Office
Local Processing Office
Accepting / Receiving Activity
Inspecting Activity

47. Invoice requirements are listed in The Federal Acquisition Regulations (FAR) (FAR Part ).  Company must be registered in System for Award Management to receive electronic payments (EFT) (   Federal Agencies use different electronic payment systems such as: - Wide Area Work Flow (WAWF) - DoD - PayWeb - ONR -Payment Management System (PMS) – DHHS

48. Be proactive before submitting invoice:   - Read your contract - Understand your contract - Ask questions of your Contract Specialist - Follow the invoicing instructions - Know who is responsible for actions needed - Monitor your invoices progress

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