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Frequently Asked Questions

Q. May a firm that is eligible for “Exempt” classification have an opportunity to register and use the “Exempt” criteria for audit purposes?
A: All firms classified as “Exempt” by November 1, 2008 may apply this status retroactively. Otherwise, the firm will need to hire a Certified Public Accountant (CPA) firm to perform the required Overhead and Direct Cost audits. Firms must file for “Exempt” status by January 1 of each subsequent year to retain the “Exempt” status for the calendar year.

More information is available about the procedures necessary for qualification as an Emerging Small Business Enterprise (ESBE) and Small Business Enterprise (SBE).
Q. Will NJDOT provide any consideration for firms that lack Federal Acquisition Regulations (FAR) audits and have to perform "catch-up" audits for several years?
A: All firms are subject to the criteria, which is based on whether a firm has “Exempt” status, or whether it exceeds the $50,000 threshold of incurred New Jersey Department of Transportation (NJDOT) Direct Labor in any one fiscal year.
Q. Will a review of the firm-prepared Overhead Rate submissions be performed before they are used in completing the Direct Cost Audits?
A: Yes. Those “Exempt” and non-exempt consultants with less than $50,000 of Direct Labor in a fiscal year, that do not hire an independent CPA firm to prepare their Overhead Rate, must submit their firm adjusted and prepared Overhead Rate for review and acceptance by the NJDOT Bureau of Auditing prior to submission of the Direct Cost audit and “Settle-Up Schedule”. Additionally, a Compliance Certification Form must be submitted with the overhead statement certifying that all required audit criteria was met.

These requirements apply to both prime and sub consultants.

The NJDOT Bureau of Auditing will evaluate these submissions on a sample basis, and reserves the right to retroactively adjust the submitted rates if it is determined that material adjustments were not reflected in the overhead schedules provided. The firm will be notified of the approval of the Overhead Rate submission.
Q. Where do I send the completed Overhead Audit Reports and “Settle-Up Schedules” related to Direct Cost Audits?
A: All Overhead and Direct Cost Audits (with accompanying “Settle-Up Schedules”), including all contracts where the firm performed both as a Prime consultant and as a Sub-consultant, should be forwarded directly to the NJDOT Bureau of Auditing only, 1035 Parkway Avenue, PO Box 600, Trenton, NJ 08625 within nine (9) months of the completed fiscal year. The direct cost portion of the audit should include a summary schedule of all contracts with incurred costs in the audit period, and a separate “Settle-Up Schedule” for each contract. These individual contract schedules should reflect any direct cost adjustments as well as adjustments to overhead based on the audited or approved (for exempt firms) overhead rates. All adjustments must be identified either to the basic agreement or to the appropriate CAM or Task Order. The Bureau of Auditing will review each submission and will formally notify the firm of its acceptance or of any needed revisions (all revisions must be provided within 30 business days). Upon final acceptance, the firm will be advised of any amounts due to the Department or due to the firm, and will be provided with a schedule which identifies the amounts by contract and CAM/Task Order. The NJDOT provided schedule will also identify the appropriate Prime consultant on those contracts where the firm performed as a Sub-consultant. Payment for all monies due to the Department for agreements where the firm performed as the Prime consultant should immediately be forward to the New Jersey Department of Transportation Cashier, 1035 Parkway Avenue, PO Box 600, Trenton, NJ 08625. The payment should be accompanied by copies of the supporting “Settle-Up Schedules” (as Prime consultant). For those contracts where the firm was a Sub-consultant, the “Settle-Up Schedule” and proper payment amount should be immediately forwarded to the appropriate Prime consultant. Upon receipt, the Prime consultant must then forward the payment to the NJDOT Cashier. For any amounts that are due to the firm, a Payment Voucher can be submitted to the applicable NJDOT Contract Manager, or to the Prime Consultant for forwarding to the Contract Manager. Payment will be limited to the contract/CAM/Task Order ceiling.
Q. What about the audit of the Direct Costs for firms who prepare Overhead Rates?
A: The firm will apply the approved Overhead Rate to the un-audited Direct Costs and submit adjustments via the “Settle-Up Schedule”.
Q. What happens if I do not submit the required audits, or firm derived Overhead Rates, according to this schedule?
A: Failure to submit to the NJDOT within nine months of the close of the firm’s fiscal year (or within the noted time frames for prior period and 2007 costs) may result in the suspension of new contracts or Consultant Agreement Modifications (CAM’s) awarded to the firm. This will remain effective pending the firm’s compliance.
Q. Will a FAR audit done by a cognizant Federal agency, or another State DOT, be acceptable to NJDOT?
A: Yes, as long as the required cognizant agency letter of concurrence is provided.
Q. Is there a recommended list of CPA firms who do this type of work?
A: The Department cannot legally provide a recommended list of CPA firms. However, any independent licensed CPA firm who has experience performing audits according to the above noted criteria (Generally Accepted Government Auditing Standards and FAR, Subpart 31) would be qualified.
Q. Are there any rules regarding the procurement or selection of CPA firms to perform this work? Is there any limitation on cost?
A: A licensed and experienced firm must be selected, as noted above. There are no specific rules regarding the procurement of a CPA firm. There are no restrictions regarding the location of the CPA firm, and it is acceptable to use a firm that already performs its financial statement audits. It would be prudent to hire a CPA firm that has undergone the required peer review before enlisting its services, given that this is required per the Generally Accepted Government Auditing Standards. Overall, the cost must be reasonable in relation to the services performed.
Q. Is reimbursement allowed for the cost of these audits?
A: Yes, the cost of the overhead audits is allowable in the consultant’s overhead rate calculation and can be billed through increased charges across all contracts. Reimbursements for the cost of direct cost audits are also eligible against the individual contracts being audited. If there are more than one consultant agreements, the CPA audit cost will be distributed among the audited agreements proportional to the total agreement expenditures to date. The NJDOT will modify the agreements to reflect the actual auditing cost allocable to each project.
Q. What amount should be included in future proposals for Direct Cost audits?
A: Consultants should include a separate line item of $1,000 for Direct Cost audits on future proposals. In addition, $1,000 should be added for each sub consultant. This amount may be revised if consultants prove that actual costs are much higher.
Q. If jobs are closed but the costs have not yet been audited, can they be reopened for the purposes of charging these costs?
A: Yes. Jobs that are reopened for this purpose will not be included on the Professional Services database of active projects.
Q. Can I still be audited by the NJDOT-hired CPA firms, if I prefer to do so?
A: No. Once a consultant or sub consultant reaches or exceeds the NJDOT Emerging Small Business Enterprise ($6.5 million in annual gross revenues), or State of New Jersey Small Business Enterprise Categories 1 and 2 ($5 million in annual gross revenues) thresholds, an NJDOT-hired CPA firm will not perform the required Overhead and Direct Cost audits.
Q. I am currently being audited by an NJDOT-hired CPA firm, but I have not yet received a final audit report. How does this new policy affect my firm?
A: Most audits in process will be issued in the near future. In cases in which audits are not near completion, the firm should provide audits from the point of the most recently completed audit. Firms in question will be contacted individually regarding this matter.
Q. When the consultant determines that an overpayment situation exists, can the overpayments be reimbursed to the Department on an installment basis? Can adjustments be combined?
A: NJDOT will consider proposals for installment payments. Proposals must be submitted to the Manager of Agreement Accounting for approval. Requests should include the total amount due and a schedule for repayment, and provide for a concurrence signature. One check can be sent for all amounts owed NJDOT, but the firm must provide a schedule detailing separately the amounts owed by contract and CAM.
Q. How will the “Settle-Up” process deal with sub consultants?
A: “Settle-Up” documents should be submitted by the Sub-consultants to the appropriate Prime consultant along with any payment amounts due NJDOT, only after final review and formal acceptance by the Bureau of Auditing. The Prime consultant must then forward the schedules and any payment due NJDOT to the Department’s Cashier. As noted previously and as detailed in External Audit Circular No.2, the entire direct and indirect cost audit submission must be provided to the Bureau of Auditing. This includes a Summary Schedule of Billed Costs and Fee, and separate "settle-up" schedules for each contract, for all projects whether the firm performed as either a prime or a sub consultant. (The Department will be responsible for distributing "settle-up" schedules to the appropriate contract managers for prime consultants.)
Q. Can the consultant bill for additional hours if, as a result of the audit, the adjusted cost is below the contract ceiling?
A: All hours must be negotiated and approved by the Contract Manager. The consultant’s firm should identify all costs currently incurred on a project, rather than inform the contract manager years later of additional costs.
Q. What constitutes a Quality Assurance Review? Will NJDOT formally approve the audited overhead rate and notify the consultant?
A: NJDOT Bureau of Auditing staff and CPA firms work together on behalf of NJDOT to review the reports and working papers of the consultant-hired CPA firms. We assure that the audits have been performed in accordance with Generally Accepted Government Auditing Standards, Title 48 Part 31 of the Federal Acquisition Regulations, the specific contract provisions, as well as the applicable State of New Jersey Circular Letters.

The recommended Audit Work Program should be used by the consultant-hired CPA firms to assure that all of the required steps are performed. For further guidance, The American Association of State Highway Transportation Officials (AASHTO) Audit Guide should be used. If the audit meets the requirements of the established audit criteria, the consultant will be notified by the NJDOT Bureau of Auditing that it has been accepted.
Q. What happens if a consultant receives notice of a failed Quality Assurance Review?
A: The consultant will be required to correct all deficiencies noted in the Quality Assurance Review within 90 days. Additional costs related to the correction of these deficiencies will not be eligible for reimbursement.
Q. What happens if a consultant fails to resolve Quality Assurance Review deficiencies within the timeframe allowed?
A: If a consultant fails to resolve the deficiencies within the 90 day period, it will not be in compliance with the Department’s audit requirements, and is ineligible for reimbursement on any NJDOT Contracts/CAM’s until all cited deficiencies are corrected.
Q. Can I send the firm prepared Overhead Rate to NJDOT Bureau of Auditing by e-mail?
A: No. Since the Compliance Certification Form requires an original signature for audit verification, both documents should be hand delivered to NJDOT or sent through US mail.
Q. Where can I view the current Treasury requirements for contracted Auditing Services?
A: The current Auditing Services contract is available on the New Jersey Department of the Treasury Web site. To access this information, use the “Search Term Contract(s) by Key word” and enter the words “Auditing of Contract.”
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  Department of Transportation
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  Last Updated:  July 28, 2010