Annual Overhead Rate Audits

The performance of certain contracts with state and local government agencies, such as the Departments of Transportation (DOTs), include the requirement for the contractor to obtain an audit of its annual indirect cost rate calculations (i.e., “Overhead Rates”) in accordance with Part 31 of the FAR.  The fundamental calculation is the same as that used for in the Federal Incurred Cost Submission (ICS), but the nature of the report and intended users differ.  This type of assurance service requires an independent CPA experienced in:  1) government contracting, 2) auditing practices and standards, 3) the company’s  industry and operations, and 4) a wide array of underlying accounting and reporting standards promulgated by the various agencies, such as the American Institute of Certified Public Accountants (“AICPA”) and the Government Accountability Office (“GAO” Yellow Book or Generally Accepted Government Auditing Standards, “GAGAS” requirements) and the AASHTO Audit Guide.    

CGS' combination of Big Four accounting experience, industry knowledge and government contracting expertise uniquely qualifies us to effectively and efficiently audit overhead rates.  CGS uses a risk-based audit approach specifically tailored to each client's industry and operations:

• CGS’ Managing Partner has over 40 years of experience in government contracting with over 20 years of auditing Engineering & Construction (E&C) firms’ overhead rates.
• CGS’ other partners similarly have 10+ years of accounting, auditing and industry experience.
• CGS’ Partners are members of the AICPA and the Illinois CPA Society.
• We deliver Big Four experience and expertise at Small Business Prices to provide exceptional client service utilizing our unique blend of skills and experience.

Having audited overhead rates enables our clients to successfully compete on proposals for state and local contracts as many state agencies require audited overhead rates.  Even for larger contractors with a mix of state and Federal contracts, having their overhead rates audited provides additional assurance that the overhead rates in the company’s Federal ICS are accurate and reliable.

Through our overhead audits, we also often identify opportunities for companies to improve their cost recovery in a compliant manner.  Unique transactions or events; lack of familiarity with FAR Part 31 – Contract Cost Principles; etc. are often the causes for companies to under recover their costs.  We can help to identify those opportunities.

CGS also offers clients a variety of other services related to overhead rate calculations when not engaged to perform an audit:

• Preparation of overhead rate calculations or a review of a client’s overhead rate calculation prior to government submission to ensure compliance.
• Assistance with reviews for unallowable costs to support overhead rate calculations.
• Design of Indirect Rate Structures and Corporate Home Office Allocations.
• Assisting clients in responding to government requests for information and working with government auditors to achieve successful outcomes for our clients.

Please contact us for more information on how we can assist you.