42.1-90 Audit resolution and disposition.

(a)  Policy. Contracting officers shall use contract audit advice provided by the Defense Contract Audit Agency (DCAA) and promptly act to resolve DCAA audit recommendations. This requires --

(1)  Full consideration of audit findings and recommendations;

(2)  Prompt and proper resolution of differences between contracting officers and auditors on proposed disposition of audit findings and recommendations;

(3)  Expeditious disposition (including fund recovery actions);

(4)  Documentation of differences between audit recommendation and dispositions thereof; and

(5)  Open dialogue between contracting, auditing, and audit follow-up personnel to establish and maintain an effective audit resolution system.

(b)  System structure. The contract audit follow-up system shall be structured in consonance with the contracting officer's independent decision making role and the contract auditor's financial advisory role. Resolution of audit reports (other than pre-award) is required by law within six months of report issuance. Disposition shall take place as soon as possible after resolution.

(c)  Responsibilities.

(1)  PL is the contract audit follow-up official responsible for managing DISA's contract audit follow-up program. PL ensures that the DISA contract audit follow-up system is implemented in accordance with DoD Directive 7640.2, as amended, and that system operation results in timely and appropriate resolution and disposition of audit reports.

(2)  HCOs must ensure that:

(i)  Contracting officers fully consider contract audit advice in the course of determining pre-negotiation positions.

(ii)  Audit findings and recommendations are resolved and disposed of effectively and in a timely manner, while fully protecting the Government's interest.

(iii)  Up-to-date records are maintained on all applicable audit reports from receipt through disposition. For open reports, this includes written milestone plans comprised of target dates for resolution and disposition, and planned actions to accomplish those dates. When an audit is resolved, it must be supported by specific contract file documentation.

(iv)  The semiannual contract audit follow-up status report submission is prepared in accordance with DoD Directive 7640.2, as amended; Verified against prior status report submission and the applicable DCAA control logs, and submitted to PLD within 15 calendar days after the end of the 31 Mar and 30 Sep reporting periods. PLD coordinates submittal of the Agency report to the DoD Inspector General within 30 calendar days after the end of the reporting period.

(v)  Adequate training is provided.

(vi)  Procedures are established for documenting and reviewing:

(A)  Proposed pre-negotiation objectives that provide the independent review for internal control purposes. This will be accomplished as part of the business clearance review and approval process. In documenting the pre-negotiation position, the contracting officer shall indicate whether the audit recommendations were accepted or, if not, whether the auditor revised them. When the contracting officer disagrees with the audit position, the contracting officer's pre-negotiation documentation shall include the rationale for not accepting the audit advice. The post-negotiation documentation shall include a summary of the field pricing report recommendations and reasons for any pertinent variances from these recommendations.

(B)  Objections from the contractor to the administrative contracting officer (ACO) for auditor-determined indirect cost rates. This will be accomplished as part of the business clearance review and approval process. If the contractor submits a written objection to the ACO, the ACO may communicate further with the contractor in order to reach agreement. If the ACO disagrees with the audit recommendation, the ACO shall comply with the business clearance procedures for documentation and review before disposition. If the ACO agrees with the audit recommendations, the ACO shall issue a final decision, after complying with the clearance review and approval procedures.

(vii)  A copy of the post-negotiation business clearance is provided to the cognizant contract auditor so the report may be closed.

(viii)  Any recovery of funds is accomplished in accordance with DoD Directive 7640.2, as amended, FAR 32.6, and DFARS 232.6.