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Audits of Authority Contracts for A&E Services

Per 21 CCR section 10000.8, contracts for A&E services are subject to standard accounting practices. The Executive Director may require pre-, interim- and/or post-award financial and performance audits as necessary to ensure contract services are delivered within the agreed schedule and budget. 

The Audit Office uses these evaluations when working with A&E firms:

Advisory Services

Pre-award Review: determineS if the costs proposed in a qualifications-based selection are fair, reasonable, and supported by source documents. 40 US Code §1104 và California Government Code Title 1, Chapter 10, Section 4528(a)(1) require negotiation of fair and reasonable compensation.

Master Resource Pool (MRP) Review: determines if the consultant and its subcontractors’ cost billed are actual, supported, and reflect only those costs allowable by the contract provisions and by CFR 48 Chapter 1 Part 31. (Interim assessment of the current fiscal year) 

Contract Compliance Audit

Also called an Incurred Cost Audit, determines whether the Authority or its contractors/consultants adhered to contractual/financial compliance requirements, such as: 

  • Consultant and subconsultants’ financial management system is capable of accumulating and segregating reasonable, allocable, and allowable direct and indirect costs and maintains adequate cost records which segregate project costs from the costs of other operations as required by the cost principles of Code of Federal Regulations (CFR), 48 Chapter 1 Part 31 và 2 CFR Part 200 hoặc là 49 CFR Part 18.  
  • Consultant and subconsultants’ costs billed are actual, supported, and reflect only those costs allowable by the contract provisions and by CFR 48 Chapter 1 Part 31. 
  • Consultant and subconsultants’ compliance to their agreement with the Authority. (Full audit over several fiscal years)

Engaging with the Audit Office as an A&E Firm

Pre-award Review  Master Resource Pool (MRP) Review  Incurred Cost Audit 
Purpose
  • Provide negotiation support to the Contract Manager for qualifications-based procurements to assess the reasonableness of proposed consultant and subconsultant billing rates.
  • Review is not an audit of the proposed rates. 
  • Determine whether the consultant and subconsultants comply with the terms of their agreement with the Authority, including cost compliance with applicable federal regulations.  
  • Review limited to verifying costs proposed in the Master Resource Pool for a particular fiscal year are supported.
  • Review is not an audit of the proposed rates. 
  • Determine whether the consultant and subconsultants comply with the terms of agreement with the Authority, including cost compliance with applicable federal regulations.
  • Review accounting practices, internal controls, and supporting documentation for all billed costs over the audit period.
Key Steps for Subconsultants
  • Submit initially requested documentations
  • Auditor testing
  • Submit additional requested documentation
  • Report
  • Submit initially requested documentation
  • Auditor testing
  • Submit additional requested documentation
  • Report 
  • Submit initially requested documentation
  • Entrance meeting
  • Interviews and walkthroughs
  • Auditor testing
  • Submit additional requested documentation
  • Exit meeting
  • Report 
Common Initially Requested Documents
  • Cost proposal
  • Audited rates OR Indirect Cost Rate Schedules
  • Trial balance
  • Tax form 940/941
  • Payroll registers at time of Request for Qualifications (RFQ) 
 For identified fiscal year: 

  • Audited rates OR Indirect Cost Rate Schedules
  • Trial balance
  • Tax form 940/941
  • Payroll registers as of July 1st 
 For identified fiscal years: 

  • Audited rates OR Indirect Cost Rate Schedules
  • Trial balance
  • Tax form 940/941

For the current year: 

  • Completed Internal Control Survey 
Estimated Duration 3 đến 4 weeks 1 đến 2 months 4 đến 8 months

Following an Incurred Cost Audit

  • A subconsultant can request a letter confirming their audited overhead rate for any of the years audited.
  • If the consultant or subconsultant disagrees with the findings, they may request a review by the Audit Review Committee by submitting their concerns in writing. The committee includes the Chief Counsel, the Chief of Staff, and Chief of Contracting. The committee will review the concerns, request additional input, if needed, and respond in writing.

Typical Contract Language Found in Exhibit B: Budget Detail and Payment Provisions

Invoicing and Payment

For services satisfactorily rendered in accordance with the terms of this agreement, and upon receipt and approval of the invoices by the Authority Contract Manager, the Authority agrees to compensate the consultant for actual hours worked on an actual cost basis not to exceed the (escalated) loaded hourly billing rates, inclusive of actual hourly rate, fringe, indirect/overhead, general and administrative, and fee identified. The consultant agrees to compensate all subcontractors with the same payment structure. The consultant shall provide updated overhead rates for the prime consultant and all subcontractors at least 30 days prior to the annual escalation date. No invoice shall include costs for the prime consultant and/or any subconsultant that has not đã nộp its annual updated overhead. Rates shall not exceed the rates đã xác định, or upon escalation, and shall reflect actual costs.

Cost Principles

The consultant agrees to comply with the federal cost principles applicable to the FRA Grant Cooperative Agreement No. FR-HSR-0118-012-01-00, as amended (FY 10 Grant), the amended FRA Grant Cooperative Agreement No. FR-HSR-0009‐10‐01‐06 (ARRA Grant), US DOT funding requirement, and/or other federal agency funding requirements. These provisions, include but are not limited to, the applicable provisions of C.F.R. Part 200 (including § 200.101), the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, and US DOT’s implementing regulations at 2 C.F.R Part 1201. If applicable, this compliance also includes the OMB Circular A-87, as amended, Cost Principles for state and local governments and 48 C.F.R, Part 31 Contract Cost Principles and Procedures. The consultant agrees to comply with Title 49 C.F.R., Part 18, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments. Any costs for which payment has been made to the consultant that are determined by subsequent audit to be unallowable under this agreement, OMB Circular A-87, as amended, 49 C.F.R. Part 18 48 C.F.R. Part 31, and 2 C.F.R, Part 200, are subject to repayment by the consultant to the Authority.

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