1. Accounting for Joint Ventures Laura Davis President – Strategic Consulting Solutions Executive Member – PDS Consulting Solutions

2. Populated vs Unpopulated JV Populated JV’s hold the employees directly. ▫Requires benefits plans ▫Require accounting staff to manage payroll and financials Unpopulated JV does not have employees ▫Each member of the JV has the employees ▫Members have subcontract with JV and bill the costs to the JV ▫Does not require full accounting to support

3. Accounting for JV’s Populated JV ▫Full set of accounting records ▫Payroll, Billing, Accounts Payable, etc. Unpopulated JV ▫Minimal accountings records ▫No Payroll ▫Accounts Payable includes invoices from Members ▫Billing

4. Indirect Rates Populated JV ▫Full set of indirect rates (Fringe, Overhead, G&A, etc) ▫Responsible for indirect rates and audit issues Unpopulated JV ▫Minimal indirect rates ▫No Fringe or Overhead Pool ▫G&A for Accounting, Contracts, and Oversight

5. Management Oversight of Unpopulated JV Various Ways to handle ▫Recover through G&A of Member company ▫Bill Management Fee to JV ▫Assign Third Party to Oversee as Consultant

6. Government Audits of JV’s Populated ▫Fully audited ▫Pricing, Accounting System, Incurred Cost Submission, Floorcheck, etc. Unpopulated ▫Minimal Audit ▫Will perform same audits, but scope is less due to volume of transactions  No Floorcheck audit ▫Must verify that Members and all Subcontractors have compliant accounting system and submit ICS

7. Close-out of Contracts Populated ▫Incurred Cost Submissions for JV and Major Subcontractors ▫Adjustment for Indirect Rates on Cost Plus and T&M contracts Unpopulated ▫Incurred Cost Submissions for Members and Major Subcontractors ▫Incurred Cost Submission for JV (minimal information) ▫Adjustment for Indirect Rates (minimal impact)

8. Recommendation Appoint Third Party to assist with close-out ▫Incurred Cost Submissions ▫Audits ▫Negotiations ▫Maintenance of Records Establish a Reserve ▫Indirect Rate Adjustment ▫Close-out Costs

9. Conclusion Populated JV operates as normal contractor with same/similar activities Unpopulated JV puts the primary accounting functions and audit requirements on Members Agree on close-out process on front-end to minimize issues – close-out can be several years after operations cease.

10. Questions

11. Laura Davis 109A Jefferson Avenue Oak Ridge, TN 37830 (865) 220-0051 www.SCSConsults.com www.PDSConsults.com