SUMMARY:
Government contractors must distinguish between the design-focused SF 1408 survey and the comprehensive, transaction-based Accounting System Review (ASR) to ensure compliance with DCAA standards and secure federal funding.
- The SF 1408 Pre-Award Survey evaluates the general design of a company’s accounting system without testing transaction functionality, typically serving businesses new to government contracting.
- An Accounting System Review (ASR) entails rigorous testing of a system’s ability to handle various transaction types over a one- to two-month period, in accordance with DFARS clause 252.242-7006.
- Administrative Contracting Officers (ACOs) have the authority to approve system sufficiency, with determinations typically valid for up to 3 years, provided no significant changes occur.
- Contractors should maintain precise system documentation and communicate frequently with their ACO to successfully navigate these audits and maintain eligibility for cost-reimbursement contracts.
Mastering the distinct requirements of both the SF 1408 and ASR ensures contractors possess the approved accounting systems necessary to gain a competitive advantage in federal bidding.
Table of contents
In a previous blog, we provided an overview of the SF 1408 Pre-Award Survey and offered our best-practice recommendations and essential criteria for approaching it. One thing we noted was that SF 1408 is not an audit, nor is it an Accounting System Review (ASR); however, we didn’t offer a full explanation of the difference between them. In this blog, we’d like to flesh out some of the significant differences between the two.
First of all, it’s essential to understand that, although they serve different purposes, pre-award surveys and ASRs are used to ensure that government contractors are operating their accounting and financial systems appropriately. When a government agency opts to review your accounting systems, they aren’t doing it to give you a hard time. The purpose is to ensure government funds are used correctly and that companies conduct themselves accordingly.
Ultimately, the purpose of both is to confirm that a business has an approved accounting system. With an approved accounting system, government contractors gain an advantage over competitors bidding on RFPs that include requirements in either SF 1408 or an ASR.
The Difference Between SF 1408 and an ASR
More often than not, companies handling an SF 1408 pre-award survey are either new to government contracting or are beginning to handle cost-reimbursement contracts for the first time. Although the DCAA evaluates the general design of a company’s accounting system during this survey, they don’t test complete functionality (i.e., running test transactions). If your business has a reliable accounting system design, then they’ll give you the go-ahead to use it. If the design appears to be faulty, the DCAA will offer recommendations to improve it and bring it up to standards.
On the other hand, ASRs include thorough testing of accounting systems to ensure they are fully functional and can handle various types of transactions. All standards follow the criteria outlined in DFARS clause 252.242-7006. The extent of an ASR is another significant difference; in essence, most of these reviews require considerable time and attention, often lasting 1 to 2 months. Typically, the administrative contracting officer (ACO) takes the lead in deciding whether the system is sufficient; so long as the organization doesn’t make significant changes to the system, the ACO’s determination will hold for up to 3 years.
Best Practices for SF 1408 and ASRs
Our blog on SF 1408 outlines a few best practices for government contractors, and we think some of them apply to ASRs as well. For instance, keeping accurate documentation of your system, no matter what survey, review, or audit is coming your way, is essential. And, in the case that it does, always stay in close contact with your ACO and other contracting officers. It never hurts to ask them questions or request some guidance.
Finally, no matter what type of contract is looming in the future, stay on top of requirements, whether they are outlined in an RFP or enforced by the DCAA. Things change rapidly in government contracting, so understanding essential details and conditions will always give your business the upper hand.
Hopefully, this blog has cleared some of the fog around the differences between the SF 1408 pre-award survey and ASRs. Government contracting is inundated with audits, reviews, surveys, and other accounting system inspections, which is why so many new government contracting businesses find it difficult to prepare all the necessary documents and processes. If you’re a new government contractor and need help preparing your organization for an SF 1408 pre-award survey, an ASR, or any other DCAA/DCMA review, feel free to reach out to GovCon365! Each member of our team is an expert in government contracting regulations, and our Microsoft Dynamics 365 for Government Contractors solution is designed to support your business in any review, survey, or audit.