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CPSR Audits and the Role of your Accounting System

From time to time, a client will make us aware of an upcoming Contractor Purchasing System Review (CPSR) they'll soon undergo and will request information or guidance about how the SYMPAQ Purchase Order module can meet the audit requirements. While SYMPAQ's procurement capability can provide a mechanism to issue written purchase orders to your suppliers and subcontractors and track committed costs (obligations) by task order, there is much more to having an adequate purchasing system than the accounting software that you are using. This is because when DCMA is conducting a purchasing system review, the vast majority of what is being scrutinized is your written policies and procedures. This is why the review of a contractor's purchasing system is separate from a cost accounting system review. While the DCAA spends audit time reviewing your accounting policies and procedures, they will also spend time reviewing your accounting software's capabilities often with an equal amount of emphasis placed on both. However, none of the criteria set forth on the SF1408 survey involve a contractors' purchasing system.  

The reality is and as strange as it may seem, you don't need an automated purchase order system to pass a CPSR. Yes, there are a few evaluation criteria that automation can certainly streamline, such as the ability to easily embed flow-down clauses on your purchase order documents issued to suppliers and subcontractors. There are tangible benefits that an acceptable or adequate cost accounting system (in particular Accounts Payable and Job Cost) can provide that include historical cost or price analysis of subcontractors and the history of purchase transactions. What you absolutely will need to have in place to get your purchasing system "approved" are well-documented policies and procedures that address the twenty-four CPSR evaluation criteria set forth in DFARS 252.244-7001. For example, you should have a policy that states your company routinely checks the debarred contractor list prior to issuing purchase orders to prospective suppliers and subcontractors. You should have a policy in place to document negotiations in accordance with FAR 15.406-3, and so forth. The majority of what is reviewed doesn't pertain to your software's procurement capabilities. 

That said, a prospective client once observed during a demonstration, "You don't have a project cost accounting system if you don't have an integrated purchase order system." The basis of this observation is that unrealized costs include commitments for future expenses that you have obligated to a vendor via a purchase order for the anticipated acquisition of products or services, but the actual costs have not yet been incurred. Therefore, your project accounting systems' job cost ledger should not only reflect costs incurred from the inception of a contract through the current accounting period but also should include a column to display committed costs in order to provide the big picture of how you're performing against your budget and/or available funding. And while this represents a key role of your automated purchase order system, your CPSR will not require that you provide proof that you track such financial commitments to your suppliers or subcontractors. 

To conclude, if you were under the impression that having an integrated purchase order system within your suite of cost accounting modules will provide most of what you will need to pass your CPSR with flying colors, then you're likely in for an unpleasant surprise. As is the case with any "system" review performed by government auditors, be it by DCAA or DCMA, you should familiarize yourself with the requirements for an acceptable purchase order system in advance, and please be sure to get your written policies and procedures up to snuff. 


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