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Creating Value …
… Delivering Solutions
Michael Baker Corporation
Preparing for the Hailstorm!
How a Structured Risk Assessment and Mitigation Approach Can Benefit Everyone
July 22nd 2013
FAR Unallowable Costs & It’s Affect on Profit
2
In 2012 Baker Removed > $12 Million!
Source: Montgomery’s Auditing, Tenth Edition, Copyright 1985
Why the Hailstorm Analogy?
4
Severe Weather Watch Warning
Source-www.liveweatherblogs.com
FAR Unallowable Costs & It’s Affect on Profit
5
How much is Baker leaving on the table?
The Hailstorm Arrives at PNC Park
Source-www.flickr.com
FAR Unallowable Costs & It’s Affect on Profit
6
How much is Baker leaving on the table?
How can we protect the field?
Source-www.flickr.com
How Do We Protect the Field?
• Do Nothing? • Build a Dome? • Put Up Umbrellas? • Install Drainage? • Cover the Infield? • Some or all of the above?
7
Compare That To Our Approach? • Do Nothing?
– Contractors Let CPA’s Calculate – No Control over the Process or the Certification
• Build a Dome? – Absolute Assurance NOT Required – Cost Prohibitive
• Put Up Umbrellas? – Do the Minimum
• Install Drainage? – Planning, Internal Controls, P&P’s, Training
• Cover the Infield? – Basic and Effective Control
• Some or all of the above? – Decided in the Planning Stage
8
The Time to Mitigate Risk is During Planning!!!
Source-AP Photo/Gene J. Puskar
Learning Objectives • To Share a Contractor’s Structured Process for:
• Risk Assessment • Risk Mitigation • Distribution
• In order to: • Achieve a FAR Compliant Overhead Rate • Increase Efficiency and Timeliness for All
10
Goal of the Day • By sharing our Structured Risk Assessment
and Mitigation Methodology, we hope to: • Receive Suggestions for Improvement • Provide a Starting Point for Risk Assessments
from a Consultants Perspective • Promote Collaboration Amongst Consultants
and State DOT’s on Risk • Promote and Increase the Downstream
Efficiency and Timeliness for All Involved
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12
FHWA Risk
DOT’s Risk
Consultant Risk
CPA’s Risk
Why Are We Here Today?
Common Area
13
Our Goal After This Presentation is…
FHWA
DOT’s
Consultant
CPA’s
Larger Common Area
Agenda 1. Overview of Baker 2. Structured Risk Assessment 3. Structured Risk Mitigation 4. Efficient Distribution 5. Questions and Answers
14
Agenda 1. Overview of Baker 2. Structured Risk Assessment 3. Structured Risk Mitigation 4. Distribution 5. Questions and Roundtable Discussion
15
Who is Michael Baker Corporation? A Leading Provider of Planning, Architecture, Engineering and
Construction Solutions for Infrastructure and the Environment Publicly traded on the NYSE MKT under ticker symbol “BKR” Founded in 1940 Consistently ranked in the Top 10% of ENR Design Firms Financially Sound and Poised for Growth
2012 Gross Revenues: $593 Million 3000+ Employees in over 100 Offices Worldwide Over $1.6 Billion Total Backlog at 12/31/12 (Funded/Unfunded) Strong Balance Sheet
Core Markets Transportation and Civil Infrastructure Programs Federal Government - DHS/DoD
Confidential
16
17
Who We Are Today…
$280 47%
$313 53%
Federal Transportation
2012 Revenues By Business Market
84%
16%
Public Private
By Sector
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Primary Engineering Markets Federal Transportation
Rt. 52 Causeway, NJ USACE Sustainment Center of Excellence
Our Core Markets & Practices
Architecture Aviation Defense Environmental Geospatial
Homeland Security Municipal & Civil Oil & Gas Planning & Urban Design
Rail & Transit
Transportation Telecommunications & Utilities
Urban Development Water
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Who We Are Today…
• Engineering News-Record Rankings – 30th Top 500 Design Firms – 13th Top 100 Pure Design Firms – 11th Top 100 Green Design Firms – 16th Airports – 14th Water Supply – 12th Transportation – 7th Bridges
• Building Design + Construction – 11th Top 25 AEC Firms in Government Sector
Michael Baker Corporation
Focused on Growing Core Engineering Business
Seeking strategic acquisitions that support our core businesses Acquired The LPA Group of Columbia, SC in May 2010 Acquired JMA Architecture Studios of Las Vegas, NV in June 2011 Acquired RBF Consulting of Irvine, CA in October 2011
Seeking strategic organic growth
Construction Management – Transportation and Facilities
Growth in Marcellus Shale – Full scope engineering support of E&P companies – Engineering support for pipeline and production well sites
Urban Land Development Rail & Transit
Confidential
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Where does Baker do Business?
Highlighted Bridge Project
New River Gorge Bridge, W.Va.
Longest Single Arch Steel Bridge in the World
3,000 Feet Long A Main Arch Span of 1,700 Feet Second Highest Bridge in the United
States 876 Feet Above the Gorge Completed in the Fall of 1977
23
Agenda 1. Overview of Baker
2. Structured Risk Assessment 3. Structured Risk Mitigation 4. Distribution 5. Questions and Roundtable Discussion
24
25
Multiple Sources of Authoritative Guidance on Risk Assessments
Source: NHI Advanced Audit Training Session, Harrisburg PA, June 13-14, 2013.
FAR Unallowable Costs & It’s Affect on Profit
26
How much is Baker leaving on the table?
Internal Controls?
Source-Gary Slafka, Michael Baker
FAR Unallowable Costs & It’s Affect on Profit
27
How much is Baker leaving on the table?
Internal Controls?
Source-Gary Slafka, Michael Baker
Chapter 9.3 – Internal Controls Procure to Pay Narrative/Walkthrough
28
AASHTO Audit Guide on Risk
Chapter 9.3 – Internal Controls Procure to Pay Process Flow Chart
29
AASHTO Audit Guide on Risk
Chapter 9.3 – Internal Controls Procure to Pay Process Flow Chart
30
AASHTO Audit Guide on Risk
Chapter 9.6 – Understand the AE Firms Business
31
AASHTO Audit Guide on Risk
Chapter 9.6 – Understand the AE Firms Business
32
AASHTO Audit Guide on Risk
33
• Chapter 9.6 – Understand the AE Firms Business
AASHTO Audit Guide on Risk
Pull in the AASHTO Audit Guide Chapter 9.9 - Audit Risk and Materiality Chapter 10.4 – Baseline for Determining Risk,
consider 14 different types of high risk expenses Define Materiality – based on DL $’s Perform a Comparative Account Analysis Identify H, M & L Risk by Account and Identify Inherent, Control and PLAN Detection risk Assess if the Risk is Mitigated
34
Goals for the Structured Risk Assessment
35
One
Two
Three
Comparative Analysis
Identify H, M or L Risk Mitigate Risk
Baker’s Structured Risk Assessment Process
2011 2012 2012 Baker Legacy Baker Legacy Dollar Inherent Control General
Financial Statement Account/Element 2011 Baker Legacy
2012 Baker Legacy
2012 % of Direct Labor
2012-2011 Dollar Change Baker
Legacy
2012-2011 % Change Baker
Legacy
Risk Due to Dollar Change
2012-2011 plus or minus either
$2M or 15%
Risk Due to Nature of Account
Risk Due to Prior Year
Adjustments
Overall Risk Rating &
Position Paper
Keyword Search
Analysis & Position Paper
Statistical Sampling
Top 25 High Dollar Judgement Review
All Other Judgement
Reviews
Summary Analysis & Explanation Risk Mitigated
Revenue 513,122,698 497,252,779 N/A (15,869,919) -3.1% High Low Low Low No No No No Risk Narrative Yes
Direct Labor:Direct Labor-Regular 95.94% (3,224,588) -2.5% High Low Low LowDirect Labor-Overtime Straight 4.06% (793,805) -13.1% Medium Low Low LowDirect Labor Base - - (4,018,393) -3.0% High Low Low Low No No No No Risk Narrative YesPayroll Burden and Fringe:Holiday Pay 6.45% 1,449,624 20.9% High Low Low Low Yes No No No Risk Narrative YesVacation Pay 9.65% 18,121 0.1% Low Low Low Low No No No No No YesSick Pay 1.96% (6,892) -0.3% Low Low Low Low Yes No No No No YesPayroll Benefits 26.16% (2,705,278) -7.4% High High High High Yes No No Yes Position Paper YesPayroll Taxes 12.87% 93,584 0.6% Low Low Low Low Yes No No No No Yes Total Payroll Burden and Fringe - - (1,150,840) -1.5%General & Administrative:Salaries 47.57% 150,800 0.2% Low High High High No No Yes-Top 15 Execs Yes Position Paper YesTravel Expenses 4.79% (1,021,075) -14.1% Medium High High High Yes Yes Yes-Top 10% of $'s Yes Position Paper YesDepreciation 7.19% (3,190,471) -25.5% High Low Medium Low Yes No No No Position Paper YesOccupancy Costs 14.58% 154,402 0.8% Low Low Low Low Yes No No No No YesEquipment 1.88% (253,374) -9.4% Medium Low Low Low Yes No No No Risk Narrative YesInterdepartment Computer Costs 8.37% (126,532) -1.2% Low Low Low Low Yes No No No No YesSupplies 0.81% (150,524) -12.5% Medium Low Low Low Yes No Yes Yes Risk Narrative YesInsurance 4.48% 92,940 1.6% Low Low Low Low No No No No No YesTelephone 3.89% 426,010 9.2% Medium Low Low Low Yes No No No Risk Narrative YesProfessional Fees: Consulting, Legal, Acctg 5.87% (268,723) -3.4% Low High High High Yes No Yes Yes Position Paper YesConventions, Training, Seminars 1.15% 189,198 14.5% Medium High High High Yes No Yes Yes Position Paper YesReproduction Costs -0.07% 102,149 -53.3% High Low Low Low Yes No No No Risk Narrative YesOther 8.90% 1,352,681 13.3% High High High High Yes No Yes Yes Position Paper YesDepartment Overhead Cost Transfers -0.08% (11,601) 11.9% Medium Low Low Low No No No No No YesState Income Taxes 0.00% - - Low Low Low Low No No No No No Yes Total General and Administrative - - (2,554,119) -1.8%
Total Dept Payroll, Burden, Fringe, G&A - - (7,723,352) -1.7% 15 1 6 7 14 22
Total Overhead (3,704,959) -1.7%
Overhead Rate
Mitigation Methodology Executed = Remaining Detection Risk
36
How Does Baker Determine Materiality? 2011 2012 2011 2012
Description 2011 Baker Legacy 2012 Baker Legacy 2011 Baker
Legacy 2012 Baker Legacy
Upper Limit 6,690,081 6,489,161 5.00% 5.00%5,352,064 5,191,329 4.00% 4.00%4,014,048 3,893,497 3.00% 3.00%3,345,040 3,244,580 2.50% 2.50%2,676,032 2,595,664 2.00% 2.00%
Baker Govt Compliance 2,000,000 2,000,000 1.49% 1.54% Baker Govt Compliance 1,338,016 1,297,832 1.00% 1.00% Baker Govt Compliance 669,008 648,916 0.50% 0.50% Baker Govt Compliance 500,000 500,000 0.37% 0.39%
334,504 324,458 0.25% 0.25%
Either OrHigh Risk <-$2M or >+$2M <-15% or >+15%Medium Neg. -$500K to -$2M -5% to -15%Medium Pos. +$500K to +$2M +5% to +15%Low Risk -$500K to+$500K -5% to +5%
37
What is the Impact of the $2M or 15% Threshold? 2011 2012 2012 Baker Legacy Baker Legacy
Financial Statement Account/Element 2011 Baker Legacy
2012 Baker Legacy
2012 % of Direct Labor
2012-2011 Dollar Change Baker
Legacy
2012-2011 % Change Baker
Legacy
Revenue 513,122,698 497,252,779 N/A (15,869,919) -3.1%
Direct Labor:Direct Labor-Regular 95.94% (3,224,588) -2.5%Direct Labor-Overtime Straight 4.06% (793,805) -13.1%Direct Labor Base - - (4,018,393) -3.0%Payroll Burden and Fringe:Holiday Pay 6.45% 1,449,624 20.9%Vacation Pay 9.65% 18,121 0.1%Sick Pay 1.96% (6,892) -0.3%Payroll Benefits 26.16% (2,705,278) -7.4%Payroll Taxes 12.87% 93,584 0.6% Total Payroll Burden and Fringe - - (1,150,840) -1.5%General & Administrative:Salaries 47.57% 150,800 0.2%Travel Expenses 4.79% (1,021,075) -14.1%Depreciation 7.19% (3,190,471) -25.5%Occupancy Costs 14.58% 154,402 0.8%Equipment 1.88% (253,374) -9.4%Interdepartment Computer Costs 8.37% (126,532) -1.2%Supplies 0.81% (150,524) -12.5%Insurance 4.48% 92,940 1.6%Telephone 3.89% 426,010 9.2%Professional Fees: Consulting, Legal, Acctg 5.87% (268,723) -3.4%Conventions, Training, Seminars 1.15% 189,198 14.5%Reproduction Costs -0.07% 102,149 -53.3%Other 8.90% 1,352,681 13.3%Department Overhead Cost Transfers -0.08% (11,601) 11.9%State Income Taxes 0.00% - - Total General and Administrative - - (2,554,119) -1.8%
Total Dept Payroll, Burden, Fringe, G&A - - (7,723,352) -1.7%
Total Overhead (3,704,959) -1.7%
Overhead Rate
38
How Does Baker Assess Risk? Dollar Inherent Control General
Financial Statement Account/Element
Risk Due to Dollar Change
2012-2011 plus or minus either
$2M or 15%
Risk Due to Nature of Account
Risk Due to Prior Year
Adjustments
Overall Risk Rating &
Position Paper
Revenue High Low Low Low
Direct Labor:Direct Labor-Regular High Low Low LowDirect Labor-Overtime Straight Medium Low Low LowDirect Labor Base High Low Low LowPayroll Burden and Fringe:Holiday Pay High Low Low LowVacation Pay Low Low Low LowSick Pay Low Low Low LowPayroll Benefits High High High HighPayroll Taxes Low Low Low Low Total Payroll Burden and FringeGeneral & Administrative:Salaries Low High High HighTravel Expenses Medium High High HighDepreciation High Low Medium LowOccupancy Costs Low Low Low LowEquipment Medium Low Low LowInterdepartment Computer Costs Low Low Low LowSupplies Medium Low Low LowInsurance Low Low Low LowTelephone Medium Low Low LowProfessional Fees: Consulting, Legal, Acctg Low High High HighConventions, Training, Seminars Medium High High HighReproduction Costs High Low Low LowOther High High High HighDepartment Overhead Cost Transfers Medium Low Low LowState Income Taxes Low Low Low Low
39
How Does Baker Mitigate Risk?
Financial Statement Account/Element
Keyword Search
Analysis & Position Paper
Statistical Sampling
Top 25 High Dollar Judgement Review
All Other Judgement
Reviews
Summary Analysis & Explanation Risk Mitigated
Revenue No No No No Risk Narrative Yes
Direct Labor:Direct Labor-RegularDirect Labor-Overtime StraightDirect Labor Base No No No No Risk Narrative YesPayroll Burden and Fringe:Holiday Pay Yes No No No Risk Narrative YesVacation Pay No No No No No YesSick Pay Yes No No No No YesPayroll Benefits Yes No No Yes Position Paper YesPayroll Taxes Yes No No No No Yes Total Payroll Burden and FringeGeneral & Administrative:Salaries No No Yes-Top 15 Execs Yes Position Paper YesTravel Expenses Yes Yes Yes-Top 10% of $'s Yes Position Paper YesDepreciation Yes No No No Position Paper YesOccupancy Costs Yes No No No No YesEquipment Yes No No No Risk Narrative YesInterdepartment Computer Costs Yes No No No No YesSupplies Yes No Yes Yes Risk Narrative YesInsurance No No No No No YesTelephone Yes No No No Risk Narrative YesProfessional Fees: Consulting, Legal, Acctg Yes No Yes Yes Position Paper YesConventions, Training, Seminars Yes No Yes Yes Position Paper YesReproduction Costs Yes No No No Risk Narrative YesOther Yes No Yes Yes Position Paper YesDepartment Overhead Cost Transfers No No No No No YesState Income Taxes No No No No No Yes
Mitigation Methodology Executed = Remaining Detection Risk
Narrative/Position Papers
Risk Narrative Exec Compensation (NCM=N/A >$500M) Travel Professional & Legal Fees Conventions & Seminars All Other Miscellaneous Accounts Intangible Asset Valuation
40
Agenda 1. Overview of Baker 2. Structured Risk Assessment
3. Structured Risk Mitigation 4. Efficient Distribution 5. Questions and Roundtable Discussion
41
42
F/S P&L F/S P&L Removed as Expressly Accruals & Adjustments Keywords w/o Dups & Creds Mergers & Acquisitions Net Sample Net SampleAccount Description NO_OF_RECS AMOUNT_SUM Low Risk Unallowed Records Dollars Records Dollars Records Dollars Universe Universe
73307 Gasoline 8,106 1,323,160.64 1,323,160.6473309 Lease 3,484 1,546,700.64 1,546,700.6473311 Major Repairs 122 56,123.98 56,123.9873313 Oil, All Maintenance, Wash 1,601 106,899.74 106,899.7473315 Other-Vehicle Expense 261 69,490.04 69,490.0473317 Tires 138 63,722.24 63,722.2473318 Fleet - Management Fee 6,361 32,299.72 32,299.7273319 Vehicle Unit Chg (Credit) 108,368 -3,034,371.97 -3,034,371.9774105 Business Meals 14,577 701,120.27 4,910 38,987.48 763 79,208.90 7 432.40 8,897 582,491.4974106 Business Meals - Unallowable 4,174 265,458.14 265,458.1474107 Entertainment 1,640 196,029.55 196,029.5574108 Fax 6 62.69 62.6974109 Gas/Fuel 102 1,741.25 1,741.2574111 Other Travel Expense 13,053 228,521.42 7,325 102,011.73 127 2,544.39 7 14.00 5,594 123,951.3074112 Parking 7,986 450,105.52 2,956 273,037.14 148 4,183.30 2 43.00 4,880 172,842.0874113 Per Diem 1,869 68,473.51 529 -5,257.00 23 1,138.00 0 0.00 1,317 72,592.5174115 Personal Mileage 14,637 785,376.36 785,376.3674117 Travel - Meals 15,853 184,643.34 5,436 32,199.00 292 4,337.42 11 82.72 10,114 148,024.2074119 Travel - Airfare 12,523 2,100,204.00 8,050 238,119.66 149 77,772.84 6 1,989.64 4,318 1,782,321.8674121 Travel - Lodging 12,104 1,539,225.21 4,390 187,473.77 225 38,321.91 16 1,387.35 7,473 1,312,042.1874123 Vehicle Exp - Fleet (Unit) 24,360 933,569.54 933,569.5474125 Vehicle Exp - Rental 6,068 336,754.19 336,754.1979025 Corp Travel Agency Fees 54 5,603.55 5,603.5579072 Maps 41 10,924.12 10,924.1279075 Meals - Other 925 43,519.33 515 -4,697.63 130 22,828.05 0 0.00 280 25,388.91
Totals 258,413 8,015,357.02 2,238,056.73 461,487.69 34,111 861,874.15 1,857 230,334.81 49 3,949.11 42,873 4,219,654.53
Baker’s Approach for a Statistical Sample
The 8 Steps for a Valid Statistical Sample?
1. Analyze Sample Universe Contents a. Get to know your sample universe
2. Decide on Best Type of Sample a. Variable – Monetary Unit – Wide Ranges b. Variable – Physical Unit – Narrow Ranges
3. Baker – Physical Unit & Three Strata a. Why? Narrow ranges and prior history
4. Select Sample Size Based on Risk a. 160 is > than recommend to be conservative
43
The 8 Steps for a Valid Statistical Sample?
5. Remove LDS Top 10% for 100% Review a. $4.2M x 10% = $423K (High Risk) 125 Items b. Satisfies AASHTO Guide Chapter 10.2 for LDS
6. Use Software to Select Unbiased Sample a. Audimation IDEA, ACL Services Ltd., DCAA b. Selection can be repeated by CPA or State DOT
7. Analyze Sample for Baker’s 30 Criteria a. Total of 285 transaction reviewed
8. Use Software to Project Exceptions a. Findings projected over Sampling Universe
44
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Tolerable Misstatement Expected Error Rate or Expected Variability in
Questioned Ratios High Moderate Low Low 47 58 77
Moderate 69 86 114 High 87 109 145
What is the Appropriate Sample Size?
AICPA (DCAA) Minimum Sample Table
Source-www.DCAA.mil
46
What FAR Clauses Did We Test For Unallowed Costs?
Attributes FAR/FTR Reference Description1 31.201-2 Determining Allowability2 31.201-3 Determining Reasonableness3 31.201-4 Determining Allocability4 31.201-6(a) Unallowable Costs - Directly Associated Costs5 31.203 Indirect Costs-Remove if item s/b a direct cost6 31.205-1 Public Relations/Advertising7 31.205-3 Bad Debts8 31.205-8 Contributions & Donations9 31.205-12 Economic Planning
10 31.205-13 Employee Morale, Health, Welfare, Food Service and Credits11 31.205-14 Entertainment12 31.205-15 Fines and Penalties13 31.205-18 IR&D and B&P (Research and Bid & Proposal)14 31.205-22 Lobbying & Political15 31.205-27 Organization Costs16 31.205-34 Recruitment17 31.205-35 Relocation18 31.205-38 Selling19 31.205-43c Trade, Business, Technical and Professional Activity Costs
Principal purpose of meeting required. For Business meals, NA for Travel Status20 31.205-46(a)(2) Travel Costs Limited to FTR/JTR. May need math for meal per diem?21 31.205-46(a)(7)(i) Travel - Date and Place Required.22 31.205-46(a)(7)(ii) Travel - Purpose of Trip Required.23 31.205-46(a)(7)(iii) Travel - Name, Title or Relationship to Contractor, if solo no name needed24 31.205-46(b) Travel - Airfare costs in excess of lowest, allowed if circuitous routing or excessively prolong travel25 FTR 301.10(125)a Travel - Flight over 14 hrs - 3 additional requirements26 31.205-47 Legal Proceedings - Fraud, Mergers & Acquisitions27 31.205-51 Costs of Alcoholic Beverages28 Policy & Procedure Receipt Greater than $2029 Policy & Procedure Proper Itemized Receipt if >$2030 Policy & Procedure Proper Accounting by Account if >$20
47
Attribute FAR/Other Reference Description Goal of Analysis
1 FAR 31.201-2 Allowability Determine overall allowability in general, summary of all applicable references tested for each document. A cost is allowable if it is not disallowed by another section.
2 FAR 31.201-3 Reasonableness Reasonable in amount and nature, would prudent person incur in conducting a competitive business activity. Golf is NOT reasonable.
3 FAR 31.201-4 Allocability (1) Is it necessary for the overall operation of the business OR (2) can be allocated to one client/contract (i.e., directly) or to multiple clients/contracts (i.e., indirectly). The CEO is allocated to every client/contract since it is indirect.
4 FAR 31.201-6(a) Unallowable Costs Any DIRECTLY ASSOCIATED COSTS incurred as a result of an expressly unallowed cost, e.g. direct labor associated with lobbying, or golfing.
5 FAR 31.203 Indirect Cost Not identified to one contract, but allocated over all contracts. Insurance is an indirect cost which blankets the entire company, whereas specific insurance on employees solely working on a bridge as part of a Penndot contract s/b DIRECT.
6 FAR 31.205-1 Public Relations and Advertising
Allowable = recruitment, news media, community (e.g. blood drives), plant tours Unallowable = trade shows, souvenirs, ceremonies, company celebrations
7 FAR 31.205-3 Bad Debts Including directly associated costs such as collection attempts or legal actions. 8 FAR 31.205-8 Contributions and
Donations Unallowable, unless it is a community service activity (e.g., blood bank or charity drive).
9 FAR 31.205-12 Economic Planning – ALLOWABLE
EP = long-range management planning (aka strategic objectives) and ARE allowable.
10 FAR 31.205-13 Employee Morale, Health, Welfare, Food Service and Credits
Allowable = service awards, fitness center, water, uniforms (sports), refrigerators Unallowable = social parties (Xmas), picnics, gifts, flowers, golf
11 FAR 31.205-14 Entertainment Amusements (Kennywood, sporting events), diversions (golf), social activities (shows) are ALL unallowable. Also includes directly associated costs (i.e., an employee’s salary while he/she is at a golf outing).
12 FAR 31.205-15 Fines, Penalties, and Mischargings
These are unallowable.
13 FAR 31.205-18 IR&D (research) and B&P (proposals)
Bid and proposal costs are generally allowable if targeting a potential contract, but unallowable if general in nature for overall image enhancement.
14 FAR 31.205-22 Lobbying and Political Unallowable and typically identified on dues or memberships 15 FAR 31.205-27 Organization Costs Unallowable as it relates to reorganizing the corporate structure. Look for Project
Steel costs in 2012 16 FAR 31.205-34 Recruitment Allowable = help wanted ads, travel costs, employment agencies
Unallowable = ads that are not specific, extensive illustrations
17 FAR 31.205-35 Relocation Allowable = necessary and incident to relocation for a period over 12 months Unallowable = if other than the standard policy
How Did We Remain Consistent Interpreting FAR?
48
49
Supporting Document
Support Date
Support Link&Ref Amount Unallowed
AmountAllowable
Yes/No Basis of Conclusion
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Partial
IEXP722341 FEB-12 025.pdf 49.25 49.25 E X X X X X X X X X X X X X X X X X X X X X X X X X X X E X NO No detailed receipt and >$20.00.IEXP719534 FEB-12 027.pdf 31.47 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes Had bus lunch, dinner is not over std per IEXP765209 OCT-12 227.pdf 24.98 24.98 E X X X X X X X X X X X X X X X X X X X X X X X X X X X E X NO No detailed receipt and >$20.00.
IEXP750007 JUL-12 166.pdf 19.93 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X YesThis is not a travel meal, the amount is actually lodging-tax, which is allowable.
IEXP730647 APR-12 072.pdf 16.71 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes
CEO resides in Harrisburg and is required to be in Pgh throughout various times of the year to conduct business matters/meetings.
IEXP773952 DEC-12 272.pdf 15.96 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes
Attending Columbus Planning Session. Strategic planning is allowable per FAR 31.205-12
IEXP718678 JUN-12 133.pdf 12.00 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X YesEmployee used $12 lunch per diem during his business trip to RBF in Anaheim, CA
IEXP730418 APR-12 066.pdf 10.91 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes
IEXP751902 AUG-12 172.pdf 9.64 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X YesItemized receipt on business with CA Border Patrol
IEXP760252 DEC-12 280.pdf 8.30 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X YesItemized receipt on business for Total Time Accounting at RBF
IEXP772762 NOV-12 256.pdf 7.52 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes
Itemized receipt on business for Project consultants interviews pertaining to I-70 bridges east of Wheeling, WV
IEXP721449 MAR-12 037.pdf 6.30 6.30 E X X X X X X X X X X X X X X X X X X X X X X X X X X X E X NO Uallowed per FAR 31.201-2
IEXP764041 OCT-12 225.pdf 6.25 0.00 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Yes
Itemized receipt on business trip to Baker's Dallas office for business development/teaming
IEXP734886 MAY-12 092.pdf 1.90 1.90 E E E X X X X X X X X X X X X X X X E X E X X X X X X X X X NO
Itemized receipt, but not enough information for a business purpose. Employee is no longer with Baker.
$221.12 $82.43$% 37.3%
Attributes Tested
How Did We Document Our Analysis?
Legend DescriptionsX No exception noted for attributed tested.E Exceptions Noted with Questioned CostsR Exceptions Resolved or Deemed ImmaterialN Not applicable to this expense.
50
Projected ExtrapDescription Low High Stratum Sample Stratum Sample Dollars Items Dollars Items Error in $'s Factor
(Columns for Math) A B C D E F G H G/D H/F I I/G
Strata 1 Low Dollars: $0.01 $168.85 $1,260,047.05 $1,663.27 36,627 53 $279.59 10 16.81% 18.87% $193,217.79 $691.08Strata 2 Medium Dollars $168.88 $489.56 $1,271,221.63 $15,496.13 4,373 54 $2,300.83 13 14.85% 24.07% $186,324.62 $80.98Strata 3 Higher Dollars $489.83 $1,481.21 $1,265,574.59 $37,917.40 1,748 53 $5,228.54 12 13.79% 22.64% $172,443.17 $32.98
Sub-Total of Sampled Items $0.01 $1,481.21 $3,796,843.27 $55,076.80 42,748 160 $7,808.96 35 14.18% 21.88% $551,985.58 $70.69
High Dollar Strata $1,485.00 $12,275.70 $422,811.26 $422,811.26 125 125 $62,387.40 48 14.76% 38.40% $62,387.40 $1.00
Totals $0.01 $12,275.70 $4,219,654.53 $477,888.06 42,873 285 $70,196.36 83 14.69% 29.12% $614,372.98
Dollars Items Errors Error %
What Were the Results of the Sample?
Bell Curve Summary of Sample Results
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68.3
95.5
99.7
$552K Point Estimate of Projected Unallows Removed
$3.8M Net Sample Universe Containing 43K Transactions
160 Sample Items Vs. 43K = Efficient & Cost Effective Source-www.DCAA.mil
Agenda 1. Overview of Baker 2. Structured Risk Assessment 3. Structured Risk Mitigation 4. Efficient Distribution 5. Questions and Discussion
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Additional Requests • Large Amounts of Information
• Either Overhead Audit Related • Or Pre-Award or Post-Award Audits
• Made Available in a Secure and Timely Manner
FAR Unallowable Costs & It’s Affect on Profit
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How much is Baker leaving on the table?
PLAY BALL!
Source-www.theawsc.com
Questions on Anything?
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