As many of you know, AASHTO recently released its new 2012 audit guide. You can click here to review the revised internal control questionnaire that many DOTs request as part of their annual reporting package. The highlighted sections are new to this questionnaire.
Some of the more significant changes, along with our suggestions of best practices, include:
- Any manual billing processes will need to be disclosed. It is not too late to mechanize as mush of your billing process as you can so you can eliminate 'manual processes.' Less is definitely better for this question.
- Confirm that payroll registers include data for overtime hours. If yours does not, check with your payroll provider to determine if it can be added.
- Describe how time sheet errors are detected and corrected. It is a best practice to require that any changed time sheets be completed in ink with the employee initials beside any change (not the project manager or supervisor - the employee who initially completed the time sheet should initial and approve the change). Noting what caused the error would also be beneficial.
- Describe how time sheets identify work outside the agreed upon scope. Hopefully these are minimal, since it is a best practice to obtain a change order prior to performing work outside the scope.
- Confirm how the company accounts for uncompensated overtime. Most of our clients credit their indirect cost pool for the hours worked in excess of 40 per work times the employee's normal hourly rate.
- Describe how the company ensures that costs are not billed to the government prior to proper authorization. Most of our clients cannot bill a project until a project code is set up in the accounting system. Project codes require written contracts with the customer.
- List employees engaged in lobbying, advertising, public relations, charity, or entertainment activities AND describe the associated costs in relation to the indirect cost rate. They are requesting information about how the company tracks unallowable costs for any of the above activities, including relating costs. A best practice is to set up separate time codes for each of these activities as well as an unallowable compensation account for any time charged to these categories.
- All related party transactions will need to be disclosed, including relatives working for the company and their related compensation and hours worked.
- Question C13 is the most concerning - Does the Company have any special, project-specific indirect cost rates negotiated with a State DOT? This should give everyone pause to give anyone a 'special deal'. For federal government purposes, most vendors sign a contract, sometimes unknowingly, that the U.S. government gets most favorable pricing. If you disclose that you provide favorable rates to a specific state DOT (e.g. Maryland), be prepared for other states to request the same rate. We can't think of any other reason why this question is included in the questionnaire.
- An officer is now required to certify the questionnaire.
Above are just a few of the additional items so please review the questionnaire in detail. If you have any questions, please don't hesitate to reach out to David Shaffer, Director, Audit & Accounting, at Email or 215-441-4600.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.