Writing A Company Disclosure Statement

George Bulpitt – Gov-Con Solutions’ Senior Government Compliance Specialist, George Bulpitt provides steps to answer this common contractor question.

Continuing with another seminar question, an attendee asked. “My manager just asked me to write a disclosure statement for our company. I have no clue where to start, what do I do first?”

My first response was this was a “good news/bad news” situation.  The fact you are being required to prepare the statement indicates your company was successful in winning a significant contract. The not so good news is that preparing, monitoring and changing the statement can be a lot of work and brings additional burdens to your company.

The CASB (Cost Accounting Standards Board) Form 1 is what is needed first and I suggest obtaining a Microsoft Word version of the blank form from www.dcaa.mil/ds-1.doc. The form has a generous instruction section at the beginning and you should read it carefully.  In my opinion, a good portion of the statement’s final adequacy can be attributed to the instruction. The document itself consists of eight parts and cover sheet/certification.  Most preparers complete only to Part 7 since Part 8 is only used only for Home Office’s.

It is good planning to prepare for future changes to the document as you build the original. Addition of a footer to each document page indicating its change status, in addition, to the revision comments in the General Instructions will pay dividends.  The following are some examples:

Original  11/1/11 (for original submission)

Change 1, 11/1/12

This gives some visibility as to the last change on the page if multiple changes are present. The only time a complete disclosure statement is submitted after the original would be where a complete rewrite was involved. Normally, changes would only involve a cover letter and copies (paper or electronic) of the changed pages.   Maintain both paper and electronic copies as a practical way to work with the document. The footer should also include language indicating the proprietary and sensitive nature of each page of your disclosure statement.

Other general comments include the following:

Answer each question, N/A – not applicable is a valid answer.

When Continuation Sheets are used, they follow the section they are describing.

Insert “End of Part” on last Continuation Sheet for a section.

Continuation Sheets should restate paragraph numbers they are describing.

If you tick “Other” in a section, it must be described/detailed on a Continuation Sheet.

This is an official company document that requires your company to follow its stated practices as they are disclosed. Further, you agree to an adjustment in the Government’s favor if you change your practice and the change results in increased cost to the Government.

Begin working on the individual parts of the statement.  Read the questions carefully and note if the instructions in the individual parts require specific responses in addition to answering the questions.  For example, Part 2.1.0 requires inclusion of a continuation sheet narrative describing Direct Materials. Other parts contain tables which require code descriptions unique to that part.

You will be required to describe each pool and base used by your company in a current, accurate and complete manner. The level of detail included in these descriptions needs to be a balance of factual versus descriptive wording. Enlist the assistance of someone unfamiliar with the description and see if their reading matches yours. The auditor reviewing your disclosure statement will determine if you have met the current, accurate and complete standard as well as looking for errors in pool/base composition and cost flow issues from a CAS (Cost Accounting Standards) perspective.

PART VII – DEFERRED COMPENSATION AND INSURANCE COST is a section that might require obtaining some preparation assistance.  Depending on the complexity of your company’s benefit structure, there might be areas, such as pensions, better left to say, insurance professionals handling the plan.

A closing word on disclosure statement changes, the Government requires 60 days’ notice of prospective changes. You also need to submit a General Dollar Magnitude (GDM) estimate of the cost of the change for all applicable CAS covered contracts along with the proposed changes.   Federal Acquisition Regulation Part 30.604 -  Processing Changes to Disclosed or Established Cost Accounting Practices contains how to process changes.

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