We’re Experts on the Federal Acquisition Regulation Overhead Rate Audit Guide
Federal Acquisition Regulation (FAR) Overhead rate audits are specialized. They are so specialized that the American Association of State Highway and Transportation Officials (AASHTO) published the Uniform Audit and Accounting Guide to bring consistency to both the calculation and audits of overhead rates.
The updated AASHTO Uniform Audit and Accounting Guide was designed to be used as a tool by state DOT auditors, A/E firms, and CPA firms that perform audits and attestations of architecture or engineering (A/E) firms. The purpose of the update was to help ensure that the guide is consistent with current auditing standards and procedures, accounting principles, and Federal regulations. The update also was intended to strengthen the guide by providing additional guidance and clarification regarding the existing policies and procedures set forth in the FAR
Following are some of the significant changes and features of the new guide.
- States will give up state-specific rules – Many states previously had their own rules for various items, including limits on the allowability of certain expenses and limits on compensation expense. The new guide will solidify the agreement among states to follow the guide’s common interpretation of a FAR-based audit and, in turn, give up their state-specific overhead audit rules.
- Small architecture or engineering firm audit exemption – Small firms may be exempt from a CPA audit if the home state DOT conducts a risk assessment and ensures rates were established in accordance with FAR.
- Increased reliance on CPA FAR audits – Previously, firms operating in multiple states prepared calculations specific to each state and these state-specific rates were either audited by a CPA firm or tested by the respective state. Now, the majority of architecture or engineering firms will have one CPA firm overhead audit that will hopefully be recognized and accepted by all states.
- New guidance in determining reasonable compensation costs – Architecture or engineering firms should prepare their own independent compensation analysis. The guide provides a model for demonstrating reasonableness that includes the use of national compensation surveys of A/E firms.
- Criteria for selecting CPA firms – Recognizing the unique nature and complexity of FAR audit engagements, the guide provides specific criteria to be considered in selecting a CPA firm to perform your FAR audit. MillerMusmar meets the criteria described in the guide.
- Guidance and tools for Management – The guide is very specific in indicating management’s responsibility for determining a firm’s overhead rate in accordance with FAR. In this regard, to assist management, tools are provided to help in determining allowable or unallowable costs.
Contact the CPAs at MillerMusmar for your Overhead Rate Auditing Needs
If your A/E firm has been contracted to provide services to state or local governments, it is important that you engage a CPA firm that understands your firm’s indirect cost rate and how to navigate the FAR and AASHTO Audit Guide. At MillerMusmar, we are known for our expertise in conducting AASHTO overhead rate audits. We work closely with A/E firms to help them understand how overhead rates work and how to maximize compensation. Contact MillerMusmar CPAs today to learn about getting started with your AASHTO overhead rate audit.