Accounting system review or SF 1408 pre-award survey – What is the difference?
We see RFPs being issued with either SF 1408 (Pre-Award Survey of Prospective Accounting System) or Accounting System Review (ASR) requirements as a pre-requisite to a contract award that third- party CPA firms can perform. Sometimes RFPs are not clear on what the government wants. Understanding RFP requirements and draft-contract clauses are tantamount to enabling a successful proposal submission. In many instances, primes may ask for a higher-level assertion of the accounting system, then the contemplated contract requires. Understanding these requirements is extremely important in negotiating contract requirements with prime contractors.
SF (standard form) 1408
- Used when a company is new to government contracting or new to cost reimbursement contracts;
- Provides a recommendation without any assurance on adequacy or suitability of the accounting system;
- Involves the evaluation of the design effectiveness not the operating effectiveness of the accounting system (meaning the system may not be currently set up); and
- Generally, does not involve tests of transactions and hence quicker to perform and does not result in an audit opinion.
- Opines on the compliance with criteria as prescribed in the DFARS clause;
- Involves detailed testing of transactions to ensure operating effectiveness of the accounting system; (system must be up and running with historical transaction data);
- Takes time to complete (often 1-2 months, at least);
- Puts final determination of accounting-system adequacy in the hands of the contracting officer or the administrative contracting officer; and
- Confirms that an accounting system review is valid for three years in the absence of any material changes in the accounting system.
Benefits of an Approved Accounting System
- Gives Contractors a competitive advantage by reducing the pool of competitors when RFP’s have these requirements;
- Is compliant with RFPs contemplating cost-reimbursable contracts or CLINs;
- Many agencies are adopting the DFARS criteria as a sound model for an acceptable system;
- Most agencies will accept a qualified CPA firm opinion on accounting system adequacy.
- Be proactive with contracting officers! Utilize the RFP Q&A process to clarify business system requirements;
- Be proactive within your own entity. Understand when certain business systems may meet thresholds for further scrutiny. Use our recently published business system assessment.
- If the RFP does not require a formally approved system prior to contract award, it is incumbent on the Contractor to ensure their accounting system is properly functioning and ready for audit should they be selected for award;
- If the RFP requires a formally approved system prior to contract award, it is incumbent on the Contractor to schedule an ASR long before procurement response is due when verification and evidence is required to support solicitation requirements;
- Prime Contractors should consider flowing down accounting system requirements, as part of their subcontract monitoring responsibility per FAR 42.202(e)(2) when awarding a cost-type subcontract.
- Subcontractors should understand the accounting system requirements placed upon them by Prime Contractors in relation to the prospective contract type.
For over 40 years, CohnReznick has provided comprehensive services to assist government contractors with a full life cycle approach to winning and managing contracts. We ensure your financial and procurement processes are compliant, efficient and effective - so you can focus on what matters most, profitable growth.
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