Architects & Engineers Articles - THE COMMONWEALTH OF MASSACHUSETTS EXECUTIVE OFFICE OF TRANSPORTATION AND PUBLIC WORKSMassachusetts Highway Department Consultant Prequalification Requirements Overhead Rate Audit - January 1, 2008 Section I As part of the ADM-016 prequalification requirements of the MassHighway’s Architect and Engineering Review Board, consultant contractors are required to submit an independent audit report of their annual fiscal year indirect costs and resultant overhead rate of their most recently completed fiscal year to the Executive Office of Transportation and Public Works - Audit Operations Section. This is an annual requirement which is due 150 days or five months after the close of the consultant’s twelve-month fiscal year end. For example, for those consultants with a fiscal year ending of December 31st, the audit reports are due by June 1st of the following year. For those consultants with a fiscal year ending of June 30th, the reports are due by December 1st of the same year. It is the consultant’s responsibility to submit the audit report each year. No notice of noncompliance with the audit requirement will be sent out by MassHighway or EOT Audit Operations. Requests for extensions of time will be considered. One-time courtesy audits will also be considered for smaller size consultants located in the Commonwealth. These courtesy audits are conducted by EOT Audit Operations. Contact EOT Audit Operations at the below e-mail address for further information. Required Submittal Documents
Please mail or e-mail required documents to EOT.Audit@eot.state.ma.us The Executive Office of Transportation and Public Works: When submitting the required documents please include a financial contact person for your firm who can answer questions regarding the submittal. Consultants will be removed from the Architect and Engineering Review Board prequalification list for the year in which the above required documents are not submitted. THE COMMONWEALTH OF MASSACHUSETTS CONSULTANT PREQUALIFICATION REQUIREMENTS Audit Standards and Criteria Requirements The indirect cost schedule and resultant overhead rate audit must meet the following requirements:
Once the submittal is received, EOT Audit Operations will send out a confirmation letter. This letter notifies the consultant the receipt of the submittal and if additional information is required. The Audit shall be subject to review and approval by the EOT Audit Operations. Adjustments to the overhead rate may result based on the EOT Audit Operations review. EOT Audit Operations will be reviewing the reasonableness of employee compensation, including bonuses as part of the overhead rate review in accordance with FAR 31.201-3 and 31.205-6 EOT Audit Operations uses the PSMJ Salary Survey and the Defense Contract Audit Agency Manual as criteria to review the reasonableness of compensation. Additional salary information may be requested to complete this review. EOT Audit Operations will keep salary information confidential. Upon request, the Consultant shall authorize access to their Independent Certified Public Accountant’s audit work papers to EOT Audit Operations or its designee. This review will be performed on those consultants to whom MassHighway is the Home State Cognizant Agency as defined in chapter 10 of the AASHTO Uniform Audit and Accounting Guide. Accounting System Requirements The Consultant shall establish and maintain an accounting system adequate to support costs associated with a contract. The consultant’s accounting system shall:
THE COMMONWEALTH OF MASSACHUSETTS CONSULTANT PREQUALIFICATION REQUIREMENTS Section II EOT Audit Operations has adopted the AASHTO publication of the Uniform Audit and Accounting Guide. This guide can be found on the AASHTO Administrative Subcommittee on Internal and External Audit website at http://audit.transportation.org. It can also be found at www.mass.gov/mhd go to Business Resources to Audit. EOT/MassHighway may deviate or apply additional restrictions beyond those published in the AASHTO Uniform Audit and Accounting Guide. For example it is the policy of the agency not to reimburse CADD costs as a direct cost to contracts. EOT/MassHighway also has a maximum overhead rate limitation on state funded contracts. Section III Field Office overhead rates shall be established in accordance with the FAR. To assist the consultant in the development of a field office overhead pool and the resultant rate EOT Audit Operations recommends the use of the below allocation formulas. The AASHTO Uniform Audit and Accounting Guide also identifies other allocations methods. There are two common allocation formulas that can be utilized to allocate cost between home office and field office indirect cost pools. Allocation method #1 is the ratio of direct field labor to total direct labor as shown below. This percentage should be applied to expenses common to both field and home office direct labor in equal proportions, i.e. indirect salary, payroll taxes, health insurance, paid leave, pension benefits, legal and accounting fees, general and professional liability insurances. Allocation method # 2 is the ratio used to allocate supportive services costs to the field office pool as shown below. Indirect salaries (excluding paid leaves and bonuses) multiplied by Allocation method # 1 Percentage above Direct Home Labor plus Indirect Salaries – excluding paid leaves and bonuses (same $ as above). Allocation method # 2 is used to allocate costs associated with the supportive services such as rent, utilities, office supplies, postage, administrative travel, and telephone. Section IV on the next page shows an example of an overhead schedule and how the allocation percentages are established and applied. >click here for full article Find out how our expertise in accounting for architects and engineers can add value to your business. Email us or call us at 1 (888) 875-9770. related linksPODCAST: Overhead Rates, State Agency Updates and Best Practices for Engineers |
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