In-State Engineering Consultants
In-state engineering consultants who anticipate performing services for the North Dakota Department of Transportation (NDDOT) are required to submit an indirect cost rate for approval. Submitted indirect cost rates must comply with cost principles contained in the Federal Acquisition Regulation, 48 CFR 31 (FAR). Engineering consultants should have a current approved indirect cost rate no older than 12 months from the close of the firm's fiscal year to ensure rates reflect the most recent costs.
Engineering consultants are required to submit an audited indirect cost rate conducted by an independent Certified Public Accountant (CPA). Audits of indirect cost rates should be conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS) and the AASHTO Uniform Audit & Accounting Guide.
In the absence of an audited FAR-compliant indirect cost rate, engineering firms may request to utilize a temporary indirect cost rate. Inquiries related to the use of a temporary indirect cost rate should be directed to Andy Ayash, Consultant Administration Services.
Documentation
Engineering consultants must submit the following documents to NDDOT for review and approval:
- Indirect Cost Rate Audit Report
- Financial Statement Audit Report
- AASHTO Internal Control Questionnaire (Appendix B of the AASHTO Uniform Audit & Accounting Guide)
- AASHTO Review Program for CPA Audits of Consulting Engineers’ Indirect Cost Rates (Appendix A of the AASHTO Uniform Audit & Accounting Guide)
- The review program must be accurately and fully completed, including the comment and workpaper number reference sections of the program. Ensuring that workpapers are accurately referenced is the responsibility of the CPA and the engineering consultant.
- Management Representation Letter
Engineering consultants are encouraged to submit documentation electronically via the State of North Dakota's Secure File Transfer System (SFTS). Please contact Audit Services Division to facilitate the uploading of required documents. Engineering consultants may submit hardcopy documentation to: Audit Services Division, 608 E Boulevard Ave, Bismarck, ND 58505.
Approval Process
All submitted indirect cost rates will be subject to NDDOT's risk assessment process. Upon completion of this risk assessment process, the NDDOT may accept the indirect cost rate without any further review, may perform a limited review of the indirect cost rate, or may perform a cognizant review of the indirect cost rate.
If NDDOT opts to perform a limited review of the indirect cost rate or a cognizant review of the indirect cost rate, the consultant engineer and the CPA firm will be notified, as additional documentation will be required. Limited reviews and cognizant reviews often involve the review of the engineering consultant's accounting records and the CPA's workpapers.
If NDDOT opts to accept the indirect cost rate without any further review or conducts a limited review, an acceptance letter will be issued to the engineering consultant. NDDOT retains the right to conduct a cognizant audit of approved rates or adjust them based on receipt of additional information after the date of the acceptance letter. If NDDOT opts to conduct a cognizant review of the indirect cost rate, a cognizant approval letter will be issued to the engineering consultant.
Facilities Capital Cost of Money (FCCM) will be approved separately from the indirect cost rate when calculated on the indirect cost rate report. Fixed fees cannot be calculated on the FCCM according to FAR paragraph 15.404-4(c)(3). FCCM is to be calculated on direct labor only and listed separately on the cost summary sheet.
23 CFR part 172 was revised effective June 22, 2015, requiring consulting engineers to certify that the final indirect cost rate is allowable in accordance with the federal cost principles. NDDOT will therefore require consulting engineers to submit a certification form when any contracts are signed.
Out-of-State Engineering Consultants
Out-of-state engineering consultants who anticipate performing services for the North Dakota Department of Transportation (NDDOT) are required to submit an acceptance or cognizant letter from a Department of Transportation from the state where the engineering consultant is headquartered or from a state where the engineering consultant actively engages in performing services.
23 CFR part 172 was revised effective June 22, 2015, requiring consulting engineers to certify that the final indirect cost rate is allowable in accordance with federal cost principles. NDDOT will therefore require consulting engineers to submit a certification form when any contracts are signed.
Any questions regarding indirect cost rate audits can be addressed to Audit Services Division.
Questions regarding contract submittals and award procedures can be sent to Andy Ayash, Consultant Administration Services.
Resources
- Certification of Final Indirect Costs Sample Form
- Uniform Audit & Accounting Guide from AASHTO
- Guide is available for purchase from AASHTO.
- Title 23 U.S.C.
- Title 48 Code of Federal Regulations
- Consultants and Engineers
FAQs
Generally, yes. Contracts funded with federal-aid highway funds require an indirect cost rate established in accordance with Federal Acquisition Regulations (FAR). NDDOT requires the same criteria be used for state-funded projects as well as federal-funded projects. Certain smaller contracts or subconsultants may not need an indirect cost rate.
Generally, yes. NDDOT will determine whether the submitted indirect cost rate has risk for non-compliance with state and federal laws and regulations. An audited rate is required to provide assurance that the requirements of these laws and regulations are met.
Audits may be completed by an independent certified public accountant (CPA), an agency of the federal government, or a state transportation agency where a consultant's headquarters office is located.
The $250,000 threshold applies to all prime consultants that contract with NDDOT. NDDOT is not required to conduct audits of subconsultants; however, if a subconsultant has an indirect cost rate, it is expected the subconsultant will use that rate on NDDOT-funded projects, and that rate will likely have been audited.
Once a consultant meets the $250,000 threshold based on total cumulative contracts in a 12-month period, the consultant will be required to obtain an annual CPA-audited indirect cost rate for all subsequent years in which the consultant contracts with NDDOT, even if the total contract amount drops below the threshold in any subsequent year.
If the consultant's business significantly changes, or the amount of work with NDDOT significantly changes, NDDOT will assess risks and may reevaluate these requirements on a case-by-case basis.
If a consultant is awarded a $200,000 3-year prime contract that begins in 2017, the consultant is below the threshold. If the same consultant is awarded another contract in 2018 in the amount of $75,000, the consultant now has $275,000 in active contracts to perform work on NDDOT's behalf. Therefore, the consultant is now required to obtain a CPA-audited indirect cost rate for 2018 based on the $250,000 threshold.
The threshold is for any 12-month period, not necessarily the calendar year. Engineering consultants will need to determine if they exceed the threshold.
All indirect cost rate audits must be conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS) and the AASHTO Audit Guide for compliance with Federal Acquisition Regulations (FAR). Many CPA firms are not trained to conduct these audits. We suggest contacting your local ACEC office for names of CPA firms familiar with FAR-compliant audits. NDDOT will not favor or specify firms to be used.