Overhead Rate Audits & FAR Compliance

An entity that participates in government contracts or receives federal or state funding must frequently calculate indirect costs (overhead) rates before submitting a grant proposal, or as part of a bid for a contract.

These rates must be compliant with the Federal Acquisition Regulation (FAR), a complex set of rules governing the federal government's purchasing process. Overhead rate audits are unique and should be performed by a CPA with FAR expertise.

In addition to requiring a FAR compliant overhead rate, many states’ Department of Transportation (DOT) require architectural and engineering (A/E) firms to have their overhead rates audited by an independent CPA before they can bid on these jobs.   An annual audit is usually required as long as the A/E firm continues to do work for the DOT. The American Association of State Highway and Transportation Officials (AASHTO) has issued a uniform audit and accounting guide, which provides guidance and required procedures for conducting these audits.  Thompson Greenspon has consulted with A/E firms to assist them in becoming FAR compliant, and provided FAR overhead rate audit services to A/E firms for many years.

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– Virginia M.