Question 1: If you have a corporate employee performing one of these functions (purchasing or subcontract administration) directly for a contract awarded to the division, where do we need to look to see how these costs get recorded at the divisional level? Do you follow the Corporate Disclosure Statement, Divisional Disclosure Statement, or both?
Question 2: Is it possible for the purchasing and subcontract administration function to reside at the corporate level with costs being directly allocated to the applicable divisions; however, the “reallocation” at the divisional level differs for only 1 of 6 divisions (the charges are associated with the same employees; however, do not get allocated to the final cost objective consistently based on different allocation methods at the divisional level)? Is this a violation of any of the Cost Accounting Standards?
Question 3: Furthermore, for the one division that differs, it is stating/describing the function as a direct to contract function; however, can they make this claim when the employees are actually corporate employees and they do not reside at the divisional level? Should the section(s) of the divisional disclosure statement related to direct labor be describing costs incurred by corporate employees? Is this a violation of any of the Cost Accounting Standards?
Question 4: If a CAS violation does not apply, are there any other regulatory FAR/DFARS violations?
Question 5: Which entity would be required to submit an FPRP for direct labor rates applicable to the purchasing and subcontract administration function (Corporate or Divisional)?
Thank you very much for the detailed history, it was very helpful in answering your questions! I am sorry for any delay, I was just forwarded this request today.
Q1 - The Home Office completes Parts I and VIII and each segment or Business Unit completes Parts I through VII therefore Part VIII will state what functions are performed at the Home Office level for the Segments or Business Units. Part III, filled out by the Business Unit will be where to find the Indirect vs Direct costs and in which circumstances, specifically stated, a cost that is normally allocated as indirect may be allocated as direct. I call these "sometimers" because they are sometimes indirect and sometimes direct.
Q2 - Yes, that function can be performed at the corporate level and costs allocated to divisions. The issue I am seeing here is that only 1 division is allocating the costs differently to FCO. This is not compliant unless it is specifically state in the DS Part III the circumstances in which this takes place AND this would have to be the same for all divisions performing CAS covered government contracts, not just one. If it is not specifically stated then it is a non compliance.
Q3 - Same answer to Q2 applies here
Q4 - CAS governs allocability and FAR/DFARS primarily governs allowability, however, there are some parts of CAS that are incorporated into the FAR, so you would look there to see if there is any non compliance. FAR Part 31, specifically FAR 31.2 has CAS principles incorporated, so look there to verify there would be no issues.
Q5 - Any entity that is using the rates established in a FPRP would submit those with their proposals. The CACO/DACO would be the authority on any rate proposals or agreements. For CAS purposes, the allocability and the cost flow is the primary concern, and that is what would need to be disclosed properly in the DS and practiced.