The Defense Contract Audit Agency (DCAA) refers to federal guidelines when assessing government contractor accounting practices for compliance and contract renewal. The Federal Acquisition Regulation (FAR) encompasses broad guidance that contractors must follow to maintain regulatory compliance in financial reporting, data transparency, and accounting practices.
In a volatile financial environment, contractors must understand the implications of FAR to protect their employees and consumers, maintain fair financial practices, and establish a transparent financial accounting system.
What is the Reach of the Federal Acquisition Regulation in Government Contractor Accounting?
The FAR establishes direct and indirect statutes that govern how contractors must conduct and report their financial accounting practices. However, some FAR practices are not reflected in other statutes as a result of certain executive or judicial decisions.
What this means for contractor accounting is that the rules that govern how contractors are suspended or debarred from their government contracts, how evidence must be disclosed to federal officials, and the terms under which contracts may be terminated all fall under FAR provisions.
Therefore, understanding the FAR and its supplement agencies is the most significant factor in a government contractor’s ability to deploy and maintain compliant accounting practices that satisfy the requirements of the DCAA.
What is an Agency FAR Supplement?
Agency FAR Supplements are not inherently different from the regulations codified by FAR. The supplements simply allow agencies to deploy specific procedures to encourage FAR compliance. Agency FAR Supplements cannot be deployed unless an agency lacks the regulatory resources to fulfill the FAR requirements in the first place.
To learn more, government contractors should explore Title 48 in the Code of Federal Regulations, which includes regulations such as the DFARS (Defense Federal Acquisition Regulation Supplement).
These supplements are required to remain consistent with the FAR except in cases where deviations are approved according to the FAR clauses: Authorized Deviations in Provisions and Authorized Deviations in Clauses.
Examples of FAR Supplements as denoted by the Code of Federal Regulations, Title 48, include:
Department of the Treasury Acquisition Regulation (DTAR)- Department of Energy Acquisition Regulation (DEAR)
- Office of Personnel Management Federal Employees’ Group Life Insurance Federal Acquisition Regulation
- Department of Education Acquisition Regulation (EDAR)
- Department of the Air Force Federal Acquisition Regulation Supplement
- U.S. Agency for International Development Acquisition Regulation (AIDAR)
- Department of Transportation Acquisition Regulation (TAR)
- Department of Housing and Urban Development Acquisition Regulation (HUDAR)
- Department of Homeland Security Acquisition Regulation (HSAR)
- Department of the Interior Acquisition Regulation (DIAR)
- Department of Commerce Acquisition Regulation (CAR)
This is not an exhaustive list. Numerous FAR supplements exist under Title 48, which depending on the industry may regulate accounting compliance for your business under different terms.
What is a Non-FAR Supplement?
Agency FAR supplements are just some of the regulations that contractors should know about. Non-FAR agency supplements can also change a contractor’s terms for compliance, including labor provisions, contract award criteria, and affirmative action responsibilities.
Contractors are impacted by non-FAR agency supplements differently depending on the industry. For example, the Department of Energy’s supplements determine the exchange rate and administration of a contractor’s energy savings. These supplements remain in effect except where prohibited by provisions in the FAR or by Agency FAR Supplements.
FAR provisions may conform to the supplements of non-FAR agencies depending on which agency is in charge of implementation. To learn more about the requirements and guidance of subjects covered in the FAR, contractors should be aware of all relevant procurement policies.
For example, Policy Letter 11-01 (Performance of Inherently Governmental and Critical Functions) guides performance management. For additional information, including relevant statutes not covered by the FAR, contractors should access the memorandums of The Office of Federal Procurement Policy (OFPP), including the FAIR (Federal Activities Inventory Reform) Act.
How Diener & Associates Assists Government Contractor Accounting
Multiple primary and supplemental agencies dictate a government contractor’s accounting provisions. These include the regulations specific to the FAR that determine a contractor’s disclosure practices, contract termination conditions, and more.
Government contractors must remain knowledgeable on these as well as non-FAR supplement agencies to maintain and achieve compliant accounting practices. The practices that govern compliance in their industry determine their eligibility for future contracts based on the results of DCAA audits.
Diener & Associates is a team of experienced CPAs focused on helping government contractors overcome common challenges with federal compliance, including educating leaders and employees on the FAR.
Our team of CPAs reviews contractors’ accounting, timekeeping, and legal processes, conducting mock internal audits to detect compliance gaps, and assisting supervisors in their understanding of relevant federal standards.
Schedule a consultation today to learn how the expert CPAs at Diener & Associates can help you overcome common compliance challenges, even in your first government audit.