Does Your A&E Firm Need a FAR Audit?
If your architecture or engineering firm performs government work or collects federal or state funding, you may be required to have an independently audited overhead rate in accordance with the Federal Acquisition Regulation (FAR). We can help!
Ensure Your Firm is FAR Compliant
We will examine your firm’s accounting and internal control systems to ensure FAR compliance. This process includes:
1. Overhead Rate Calculations
Assist management in properly calculating an overhead rate under FAR Part 31.
2. Accounting System Upgrades
Suggest improvements to quickly and efficiently determine your FAR overhead rate.
3. Industry Benchmarking
Review historical FAR overhead rates and compare to industry standards.
4. Analysis & Improvements
Analyze cost structure, systems and contracts to maximize allowable FAR overhead rates.
Determining the Need for a FAR Audit for Architecture and Engineering Firms
Generally speaking, if your architecture or engineering firm provides proposals for government projects, receives federal grants or funding, or completes work for the government, your firm may receive a request from the IRS to provide your overhead rates. These documents must be provided in accordance with the Federal Acquisition Regulation, or FAR.
Benefits of Hiring a CPA Firm for Your FAR Audit Needs
Clayton & McKervey specializes in providing third-party, independent audits for A&E firms. There are many benefits of getting a FAR audit prepared by us, including:
- You’ll receive a review of your firm’s systems to ensure your business has the opportunity to achieve maximum growth and profitability.
- Our experts help determine the accuracy of the information provided by your firm to ensure your records are correct, and the level of information provided is in compliance with government regulations.
- Clayton & McKervey is compliant with professional education requirements in accordance with the standards set forth by the Government Auditing Standards. Our in-depth knowledge of government contracts helps your firm request and receive payment without costly errors which could delay or penalize your profits.
Kevin Johns
As an owner and leader of the firm’s architecture & engineering practice, Kevin specializes in providing tax and accounting services to architecture and engineering clients around the globe. Kevin and his team can ensure your firm is FAR compliant and help you maximize your overhead rate, minimize expenses and secure more government contract work with the best rates possible.
Frequently Asked Questions
What size A&E firms should complete a FAR audit?
The size of your A&E firm doesn’t determine if you need to complete a FAR overhead audit, but rather this is contingent on your firm exceeding the dollars threshold for contracts for professional services with Government agencies. This threshold is generally set forth by your State Department of Transportation. For example, the Michigan Department of Transportation generally requires an overhead audit for professional services contracts greater than $500,000.
How does a FAR overhead audit impact profitability?
Many government agencies require that a FAR overhead audit be completed in order to bid on one of their contracts. The threshold requirement for a FAR overhead audit varies by State Department of Transportation. For example, the Michigan Department of Transportation generally requires an overhead audit for professional services contracts greater than $500,000. Once FAR compliant, your firm would be able to pursue government contracts thereby increasing future revenue-generating opportunities.
How does a third-party audit help ensure accuracy to meet compliance standards?
An independent CPA firm like Clayton & McKervey can conduct a FAR overhead audit for your A&E firm to ensure your compliance with Federal Acquisition Regulations, Part 31. During an audit, we would develop an understanding of your operations and job cost accounting system, evaluate the reliability of your internal controls and identify any issues of audit significance.
What is involved in the process of conducting a FAR audit?
The process involves developing an understanding of your firm’s operations and job cost accounting system, evaluating the reliability of your internal controls and identifying any issues of audit significance. Clayton & McKervey conducts these audits using a risk-based approach under the guidelines and recommendations of the American Association of State Highway and Transportation Officials’ (AASHTO) Uniform Audit and Accounting Guide under the provisions of FAR Part 31.
How do I contact Clayton & McKervey for more information about FAR audits?
If you would like more information about FAR audits or you are ready to get started, please reach out.
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“A&E firms that have government contracts exceeding $500,000 will generally need to have their overhead rates independently audited by a CPA firm,” said Kevin Johns, Architecture & Engineering Leader for Clayton & McKervey.
Kevin Johns
