Government contractors can benefit from integrating control frameworks and monitoring processes for both Sarbanes-Oxley (SOX) compliance and Government Contract Business System internal control requirements. Here we address some of the top FAQs on integrating control frameworks. 

How do these frameworks overlap, and what are the key components of each?

 Some examples of key overlaps include:

• Revenue and Expense Recognition: Testing EACs for SOX and government accounting such as is required for progress billing and incurred cost reporting.
• Timesheet Management: Testing inputs, distribution, approvals for SOX, government accounting, and NIST security.
• Access Controls: Testing over CUI repositories for NIST, SOX, and government accounting.
• AP Disbursements: Testing allowability, cutoffs, and approvals for SOX and government accounting.
• Fixed Assets: Testing valuations and controls for SOX, government accounting, and NIST.

How can government contractors reduce compliance complexity?

Coordinate data requests, control testing, and review timing across audit teams to streamline operations and enhance efficiency. Leverage staff knowledge across multiple frameworks to maximize efficiency and reduce complexity. Evaluate your regulatory environment and future goals to identify commonalities and develop an integrated compliance approach.

What are the designated business system requirements and key compliance needs?

Government contractors must comply with specific business system requirements outlined in FAR and DFARS. Non-compliance can lead to ineligibility for awards, payment withholds, or compromised contract performance. The application of CAS depends on the award type, size, and business status.

The systems designated by the government are:

• Accounting Systems: Maintain sound internal controls, reconcile subsidiary ledgers, document adjustments, and comply with GAAP and CAS.
  
• Estimating Systems: Management review provisions and compliance verification with budgeting policies are required.
  
• Purchasing Systems: Ensure purchase orders are based on authorized requisitions.
  
• Property Systems: Tag, track, and manage government equipment and materials in the possession of contractors.
  
• Earned Value Management: Define authorized work elements and use a work breakdown structure for cost control.
  
• Material Management and Accounting: Maintain data integrity and timely information flow, which are essential for accurate government reporting.

How can government contractors integrate and maintain flexibility in compliance systems?

To streamline compliance efforts, leverage overlapping control requirements across SOX and government contracts. Use the same systems for managing government and commercial assets, helping to ensure compliance without unnecessary complexity.

What practical strategies can streamline compliance efforts?

Tailor compliance approaches to avoid overburdening commercial operations with government requirements. Reuse artifacts and documentation across compliance audits to streamline processes and reduce costs. Implement separate government, commercial procurement, and travel policies to meet specific compliance needs without unnecessary complexity.

How can government contractors address cross-framework conflicts?

Understand and manage material differences between SOX and government contracts to avoid conflicting recommendations. Avoid imposing unnecessary timesheet requirements on commercial departments when not required. Develop flexible policies that meet both government and commercial needs without overcomplicating processes.

How can government contractors minimize business interruptions due to compliance activities?

Properly plan for working sessions and site visits to avoid disrupting business operations. Consider creating separate infrastructures or teams to handle specific compliance requirements, reducing the burden on primary operational teams.

How should government contractors evaluate and structure compliance activities?

Thoroughly evaluate your regulatory environment and identify areas of overlap between different frameworks – structure compliance activities to efficiently gather data and evidence, meeting the core requirements of each applicable framework. Integrate testing activities for SOX, IT, and government compliance to maximize efficiency and leverage common data requests.