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News for the aerospace industry | February 20, 2013

Government contractors need to improve contract life-cycle management
Government contractors are facing an increase in the number of audits to ensure against "fraud, waste, and abuse," according to a report by Baker Tilly. For example, the Defense Contract Audit Agency plans to increase the number of audits by 49% during fiscal year 2013.

Although audits are never a pleasant task, the best method to survive an audit is to be prepared. Government contractors can focus on cost efficiency and reducing overhead in advance of an audit. While auditors will be looking at compliance with government standards, audits also offer a peek into contractors' accounting systems.

"Although the primary purpose of incurred cost audits is to express an opinion on the acceptability of costs claimed under Government contracts, knowledge of contractors' accounting and other business systems gained during these audits is invaluable to the evaluation of contractors' price proposals," the DCAA says on its website.

Need to Improve

Government contractors will need to improve contract life-cycle management in 2013 due to the Defense Federal Acquisition Regulation Supplement Business System Rule, which was implemented in 2012. The rule allows the government to withhold 5% of payments to contractors if a DCAA audit finds deficiencies. As the government faces the threat of sequestration, agencies may apply more stringent standards to contractors.

Want to Improve

However, there are three other reasons government contractors will want to improve their management of contracts.
  • Cost Reduction and Efficiency – Government contractors must eliminate wasted effort to remain competitive.
  • Better Business Decisions – The entire business is driven from the contracts, but contractors may have a poor ability to get accurate, timely information to make data-driven decisions.
  • Mergers and Acquisitions – As the government contractors industry adjusts to the new budget priorities, mergers and acquisitions will pick up activity. The value of a GovCon business is dependent on the value of the contracts.
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  Government Contracting News 
  • Lawmaker urges more oversight of government contractors
    Rep. Darrell Issa, R-Calif., chairman of the Oversight and Government Reform Committee, has called on federal agencies to tighten oversight of contractors. "In the 21st century, we must have zero tolerance for fraudsters, criminals, or tax cheats receiving taxpayer money through grants or contracts," he said. Issa has introduced draft legislation to create a central civilian board for suspensions of contractors. Government Executive (2/8) LinkedInFacebookTwitterEmail this Story
  • Defense firms adjust to squeezed federal budgets
    U.S. defense contractors are learning to navigate a new environment in which the Pentagon cracks down on cost overruns, rewards money savings and scrutinizes spending ever more closely. Some critics warn that the atmosphere discourages innovation, but others say the cost-consciousness is here to stay. Fort Worth Star-Telegram (Texas) (2/1) LinkedInFacebookTwitterEmail this Story
  • Pensions at defense contractors could be under fire
    Defense contractors may find their defined-benefit plans in the cross hairs of the Government Accountability Office. Defense contractors have an estimated $100 billion in pension assets, which may come under scrutiny from the government. Charlie Jeszeck, director in the education, workforce and income security team at the GAO, says the office may look at how pension benefits are calculated. Pensions & Investments (free registration) (2/4) LinkedInFacebookTwitterEmail this Story
  • Column: U.S. lost $108B through improper payments in 2012
    The Department of the Treasury has estimated that $108 billion was lost in 2012, partly due to improper payments to contractors, Kavon Nikrad says. "While it is difficult to calculate the total amount spent inefficiently in the federal budget, [a] rough estimate ... shows this part of the budget dwarfs spending on almost all existing government programs," writes Nikrad. Roll Call (free content) (1/30) LinkedInFacebookTwitterEmail this Story
  • Army credits 2010 initiative for cost savings
    The U.S. Army has credited an initiative introduced in 2010 with cost savings and improved management of acquisitions. "Better Buying Power has produced large savings. We're continuously looking to optimize the use of the Army's money," said Tom Mullins, deputy assistant secretary of the Army for plans, programs and resources. (1/28) LinkedInFacebookTwitterEmail this Story
Is Upgrading Your Contract Management System a Priority for 2013? It should be.
With more aggressive audits and bigger fines, compliance risk has never been greater. Meanwhile budget cuts and potential Sequestration demand lower costs and improved efficiency. Learn how you can automate contract / subcontract management with SpectrumCLM now!
  Audit Readiness 
  • Keep required documentation in case you're audited
    There isn't one specific deduction that will always trigger an IRS audit, according to Steve McCormick of Scott & Baldwin CPAs. "Rather the IRS compares taxpayers' expenses to a variety of statistical data it has compiled to see if the expenses are in line with what is reasonable and customary for the type of business the taxpayer has," he writes. It's important to have proper documentation for your expenses in case the government audits your business, he notes. American City Business Journals/Sacramento, Calif. (1/18) LinkedInFacebookTwitterEmail this Story
  • GAO: Pentagon has not been accurately audited in years
    The Pentagon has not been accurately audited for a while, a recent Government Accountability Office report says. "DOD has been unable to pass audits since 1996, the first year agencies were required to prepare audited financial statements," said Gary Engel, a director of the GAO's financial management and assurance team. (2/11) LinkedInFacebookTwitterEmail this Story
  • Wanted: Ways to measure audit quality
    The International Auditing and Assurance Standards Board, the Public Company Accounting Oversight Board and the Center for Audit Quality all have projects under way to determine ways to measure audit quality. It is hoped that establishing such measurements will lead to better audits. (1/24) LinkedInFacebookTwitterEmail this Story
  • Due diligence audits before a deal is key for China
    Trying to keep costs down on due diligence accounting audits in China before an acquisition, which many companies do, is inviting trouble, experts say. "When you start cutting corners on audits ... you're enabling those who commit fraud," said Paul Gillis, a professor of accounting at Peking University in Beijing. Fraud in general is a growing risk for foreign companies in China. Reuters (2/10) LinkedInFacebookTwitterEmail this Story
 Will Your Contracts Stand Scrutiny in 2013?
Contract compliance and risk management are keys to survival in 2013! With DCCA auditors increasingly questioning compliance, the necessity for visibility and control is paramount. Only contractors with transparent processes will thrive.
Learn how to improve contract compliance with SpectrumCLM now!

  Best Practices 
  • Column: Global expansion can offer opportunity
    Drew West, director of marketing for Deltek, says companies should analyze the opportunities for global expansion. West recommends four steps -- investigate, collaborate, communicate and automate -- to maximize revenue from overseas. Accounting Today (1/31) LinkedInFacebookTwitterEmail this Story
5000 DCAA Auditors by 2015 — Are You Ready?
With increasing numbers of auditors digging deeper than ever are your contracts and contract/purchasing systems ready? Upgrade your processes and systems today. Don't know where to start? Watch this SpectrumCLM video to see how your organization can ensure compliance and drive efficiency.
Find out why 2013 is the year to make contract management a top priority, click to learn more now.

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