One of the most common findings in any U.S. Government audit is missing documentation. The finding doesn’t cite anything about the allowability of the claimed cost other than no supporting documentation can be provided by the client. It’s potentially the single most frustrating and expensive audit finding in any audit report. Implementing a records retention process is integral to any compliance program and one that’s often overlooked.
You may have the perfect indirect rate but if you can’t support it, it’s not perfect. Auditors will cite allocability, unreasonableness, any provision necessary to question costs. Examples of missing documentation cited include cancelled checks, subcontract agreements, consulting agreements, invoices, etc. The array of documentation auditors want to see is inconsistent, but a largely predictable universe at this stage. Contractors must define their retention standards consistently and follow them or it will cost money at the time of audit.
RKI works with contractors to ensure they identify what they need to keep,, who needs to keep it, where it needs to be kept, and for how long it’s retained; all with an aim of making records efficiently retrievable for U.S. Government (or other) audit interests. An efficient audit results in cost savings via reduced administrative costs, less questioned costs, and less management anxiety. A FAR documentation framework is a must in today’s environment. An efficient audit is a cost effective audit. If you’re a government contractor then an investment in compliance is a requirement. And the simplest, most cost effective measure you make may just be your records retention.