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DEFENSE CONTRACT MANAGEMENT AGENCY DCMA AERONAUTICAL SYSTEMS DIVISION 495 SUMMER STREET BOSTON, MA 02210-2184 IN REPLY REFER TO DCMAA-C 4624 8 Mr. William C. Holmes. CREW 1400 Eye Street Suite 450 Washington, D.C. 20005 Dear Mr. Holmes: Enclosed please find redacted copies of the Audit Reports that were referred to DCMA by DCAA for a release determination. We have determined that the redacted information is protected from mandatory disclosure under Exemption (B)(4) of the Freedom of Information Act and the Trade Secrets Act. You have the right to appeal this partial denial. Your appeal must be in writing, must be made within 60 calendar days of the date on this letter and should include your reasons for reconsideration. Forward your appeal to the Director, Defense Contract Management Agency, ATTN: FOIA Officer, P.O. Box 151300, Alexandria, VA 22315-9998, Please reference our case number 08-059 (Holmes) in your appeal and attach a copy of this letter. Sincerely, Cruel Neoey — Director DCMA Aeronautical Systems Division Attachment 1 DEFENSE CONTRACT AUDIT AGENCY REPORT NO. 03541-2003A10100101 ‘November 3, 2004 PREPARED FOR: Administrative Contracting Oficer Defense Contact Management Agency - Twin Cities ATTN: DCMAW.GTOC (Ms. Linda Johnson) Bishop Henry Whipple Federal Building Suite 1150 1 Federal Drive Fort Snelling, MN 55111 PREPARED BY: DCAA Minneapolis Branch Office United States Courthouse 300 South Fourth Street, Suite 519 Minneapolis, MN 55415-1329) Telephone No. 612/664-5470 FAX No. 612/664-5490 E-mail Address deaa-fa03541@dcaa.mil SUBJECT: FY 08 Incurred Cost Desk Review CONTRACTOR: — Sioux Manufacturing Corporation ‘Main Street & Hwy 57 PO Box 400 Fort Totten, ND 58335 REPORT RELEASE RESTRICTIONS: See Page 8 Subject of Review Executive Summary Scope of Review Results of Review Contractor Organization and Systems CAA Personnel and Report Authorization Report Distribution and Restrictions List of Appendixes ‘CONTENT! FOR OFFICIAL USE ONLY ‘Audit Report No, 03541-2003A10100101 SUBJECT OF REVIEW ‘We reviewed the Sioux Manufacturing Corporation (SMC) April 15, 2004 certified final indirect cost proposal for reimbursement of FY 2003 incurred costs. The purpose of the review as to establish indirect cost rates forthe period. ‘The proposed rates apply primarily to the flexibly-priced contract listed in Appendix 2. A copy of SMC's Certificate of Final Indirect Costs, dated April 15, 2004, is included as Appendix Ito the repor. ‘The proposal is the responsibility of the contractor. Our responsibility is to report our ‘conclusions on the proposal based on our review. EXECUTIVE SUMMARY ur desk review disclosed errors in the calculation ofthe indirect rates. However, since our findings neither represent significant question costs, nor are related to the inclusion of unallowable costs, we did not deem necessary to expand this evaluation fom a review to an, examination, SCOPE OF REVIEW ‘We determined that no significant costs were questioned in prior years and that no indicators of audit risk had been identified, Accordingly, we limited our review to the verification of the mathematical accuracy of the proposal, @ limited review of claimed costs for ‘unusual items and items having obvious potential for including significant unallowable costs, and limited review for compliance with special contract terms and conditions. We conducted ‘our review in accordance with generally accepted government auditing standards. A review is substantially less in scope than an examination, the cbjective of which isthe expression of an opinion on Sioux incurred cost proposal. Accordingly, we do not express an opinion. ‘We evaluated the incurred cost proposal using the applicable requirements contained in the: © Federal Acquisition Regulation (FAR) and © Defense FAR Supplement (DFARS). ‘The contractor claims exeraption under 48 CFR 9903.201-1(b)(3) from the practices required by the Cost Accounting Standards Board rules and regulations because it considers itseifa small business concer, FOR OFFICIAL USE ONLY “Rens: C8-0R Audit Report No, 03541-2003A10100101 RESULTS OF REVIEW Our review disclosed exceptions to the indirect rates as calculated. The contractor did not allocate IR&D expense to final cost objectives using the same allocation baze used for G&A expense (Totel Cost Input), according with FAR 31.205-18 (i). Also, SMC excluded tunellowable overhead expense from its G&A Total Cost Input Base, However, nothing came to ‘our attention that caused us to believe that significant costs claimed on the government contract are unallowable, unallocable or unreasonable. Our recommended and accepted rates for FY 2003 are as follows: Indirect Cost Category Pool == Base Ref, Overhead REDACTE! Exhibit A REDACTEL ea G&A ‘Cumulative Allowable Cost Worksheet (CACWS) The costs noted on the schedule of cumulative allowable costs represent costs that are considered allowable under the listed contracts and are, therefore, reimbursable, For those contracts identified as "Ready to Close,” the information on the CACWS should be used to close out contracts. Individual contract audit closing statements will only be issuet requested by the ACO. We discussed the results of our review with Ms. Lori Brown, Chief Financial Officer in an exit conference held on October 20, 2004. FOR OFFICIAL USE ONLY “RemeA 08051 Audit Report No, 03541-2003A.10100102 EXHIBIT A SIOUX MANUFACTURING CORPORATION SCHEDULE OF CLAIMED COST VS. QUESTIONED COST BY INDIRECT RATE FOR THE PERIOD ENDING ON SEPTEMBER 36, 2603, Recemmended/ Overbead’Barden: Chimes __Questioned__“Aceepted__Nate veieattunden Bok: Overead Expense LESS IR&D 1 ‘Qveten/ Burden Base (All Labor, Direat Laer (including IRAD Later a Diect Labor) PLUS: Acciona! IRED Labor assigned as Overhead u Ovesheus Rate General & Adininisrative (G&A): GBA Poot Claimed! Accepted G&A Expenses REDACTED: ADL E ACTED ECACTED ' Rap No BD ACTED f REDON « 1 G&A TCLBase: : ~ Allowable Overhead = RE DS ACTED PLUS: Unallowable Overhead as 7 Direct Labor Mate LESS: IRAD tansfer 10 G&A Poot 1 LESS: Unllowable R&D wer: 1 EpSCTED GBA Rate 3 FOR OFFICIAL USE ONLY ‘Audit Report No. 03541-2003410100101 EXHIBIT A SIOUX MANUFACTURING CORPORATION SCHEDULE OF CLAIMED COST VS. QUESTIONED COST BY INDIRECT RATE FOR THE PERIOD ENDING ON SEPTEMBER 30, 2003 (CONTINUATION) 1 Voluntary Deletions: Allowable OH Pool 9 Unsllowable Overhead Ke ae e G/L Overbead Rate < Explanatory Notes: 1, Allocation of IR&D Costs Our review of the contractor's submission for FY 2008 disclosed that IR&D was included in the overhead pool instead of been eccounted as'a G&A Expense. FAR 31.205-18 states: “IR&D (i) IRED and BA&P costs shall be allocated to final cost objectives on the seme basis of allocation used for the G&A expense”. vo . ‘ 2. G&A Total Cost Input Base ‘The contractor excluded from the G&A TCI Base, the unallowabl¥overbead expences. This practice isnot according with FAR 31-203(Q), which states as follows: Once an appropriate base fr allocating indiject costs has been accepted, the contractor shall not fragment the base by removing ind}@i@al elements. AU items properly inclodable in an indirect cost base shall beara pro rate share of indirect. costs irespective oftheir acceptance as Government contract cost, For example, when a cost input base is used forthe allocation of G&A costs, the contractor shall include in the base all items that would properly be part of the cost input base, whether allowable or unallowable, and these items shall bear their pro rata share of G&A costs.” 4 FOR OFFICIAL USE ONLY Audit Report No, 03541-2003A10100101 CONTRACTOR ORGANIZATION AND SYSTEMS Sioux Manufacturing Corporation (SMC) was incorporated under The Spirit Lake Tribe, North Dakota, in September 1989, Sales for fiscal year ended September 30, 2003 were $36.23 nillion, most from government contracts, of which 4.35 percent are CPFF contracts and 95.65 percent are FFP contrects. SMC manufactutes autoclave bonding-compression molding of ‘advanced composite structure and ballistic panels. During FY 2003, SMC had approximately 225 employees. SMC isnot subject tothe requirements of the Cost Accounting Standards because itis @ small business. ‘Accounting System: SMC’s accounting period is ftom October 1 to September 30, SMC maintains an accounting system on tae accrual basis in accordance with generally accepted accounting principles. SMC’s accounting system is posted on a current basis. Appropriate adjusting entries tare made at the end of each month and at year end. SMC prepares financial statements on an annua! basis. The annual financial statements are audited by external CPAS. SMC maintains a job cost accounting system which is fully integrated inthe overall ‘accounting system, Wherein contracts are assigned individuel project numbers and direct costs are identified and charged to those numbers. Indirect costs are identified with and accumulated under individual departments, which in tur are identified tothe various indirect cost pools Indirect expenses are recorded and billed to projects using actual! rates, The contractor's accounting system is considered to be adequate for the accumulation and reporting of costs on ‘goverament contracts. The following schedule describes SMC’s indirect cost pools and related allocation bases, and the type of effort normally charged direct and indirect: Jusizest Cost Pools and Allocation Bases: Indirect Cost Poo! Allocation Base __ Manufacturing Overhead Total manufacturing direct labor dollars G&A Expense Total incured costs, excluding G&A expenses ‘The Following Effort Is Normally Charged Direct: Direct time of direct labor employees Premium (overtime, shift, field) time of direct labor ‘Raw material, purchased parts and subcontracted items ‘Travel expenses incurred by direct employees Freight charges for direct raw materials, purchased parts, and subcontracted iteras Purchase, fabrication or rental of special tooling or test equipment 5 FOR OFFICIAL USE ONLY Dama $e Audit Report No. 03541-2003A10100101 ‘+ Professional services and consultant fees © Temporary help to perform direct effort ‘The Following Effort Is Normally Charged Indirect: ‘Manayement, supervisory, end clerical salaries Indirect time of direct employees Premium (overtime and shift) of indirect employees Social Security, unemployment insurance, workraer's compensation, group insurance, pension expense, vacation and holiday pay ‘Travel expense associated with indirect labor effort Other expenses such as general operating supplies, depreciation, employee wellness programs, utilities, ental costs of facilities, and general purpose equipment. 6 FOR OFFICIAL USE ONLY “Pema BOR ‘Audit Report No, 03541-2003A10100101 DCAA PERSONNEL Telephone No. Primary contacts) regarding this report: Olga M. Agosto, Auditor 612/664-5481 Stuart O. Thomas, Supervisory Auditor 6121664-5475 Other contacts} regarding this report: Kristine A. Haris, Branch Manager 612/664-5470 Keith Tack, Financial Liaison Advisor 586/574-8050 FAXNo. Minneapolis Branch Office 612/664-5450 Keith Tack, Financial Liaison Aévisor 586/574-7048 E-mail Address Minneapolis Branch Office ‘dean f203541@deaa mil General information on audit matters is available et htp:/iwww.dcaa.mil, REPORT AUTHORIZED BY: ‘Stuart O. Thomas for! KRISTINE.A. HARRIS Branch Manager DCAA Minnespolis Branch Office 7 FOR OFFICIAL USE ONLY DEMA 26. Audit Report No. 03541-20034 10100101 REPORT DISTRIBUTION AND RESTRICTIONS DISTRIBUTION: E-mail Address "Tina johnson@dcaa. mil Administrative Contracting Officer Defense Contract Management Agency Twin Cities ATTN: DCMAW-GTOC (Ms. Linda Johnson) Bishop Henry Whipple Federal Building, Suite 1150 1 Federal Drive Fort Snelling, MN SS111 ‘US Army Taok-Automotive & Armaments Command deaa-pla-tacom@deaa sil DCAA Procurement Lisison Auditor ATTN: AMSTA-AQ-AMP/DCAA PLA Office Mail Stop 303/Keith Tack 6501 E. 11 Mile Road, Bldg 231 Telephone Warren, MI 483975000 ‘586/574-8050 Sioux Manufacturing Corp Main Sweet & Hwy $7 PO Box 400 For: Totten, ND 58335 (Copy furnished thru ACO) RESTRICTIONS: 1. Information contained in this report mey be proprietary. It is not practical to identify durin the conduct of the review those clements ofthe data which are proprietary. Make proprietary determinations in the event of an external request for access. Consider the restrictions of 18 U.S.C, 1905 before releasing this information tothe public. Under the provisions of Title 32, Code of Federal Regulations, Part 290.7(b), DCAA will refer any Freedom of Information Act request for reports received to the cognizant contracting agency for determination as to releasability and a direct response to the requestor. Do not use the information contained in this report for purposes other than action on the subject of this review without first discussing its applicability with the auditor. 8 FOR OFFICIAL USE ONLY Paina 661 ‘Audit Report No, 03541-200310100101 LIST OF APPENDIXES Certificate of Final Indirect Costs APPENDIX | Indirect Cost Rate Agreement ‘APPENDIX 2 9 FOR OFFICIAL USE ONLY Report No, 03541-2003A10100101 APPENDIX 1 SIOUX MANUFACTURING CORPORATION POBOX 40, FORT TOTTEN, ND 54535 (CERTIFICATION OF FINAL INDIRECT COSTS FISCAL YEAR ENDED 90003 “Tino ery hat ve eve hi prope tb alain ran he Ut ny owe adele Al on nde i is rope ob inde cae fr fal yar ‘ed Sopaber 300 are eouble a src i eco por of Fea! Asli Reguson FAR) snd primes piste Oe conmcta {ewe th nl asec rater wi op ad 2 ‘Trop! der ote ny at wich re expe wallow under {pple cas pre eth EAR oo opens Sur Mautcting Crpasion 10 FOR OFFICIAL USE ONLY Report No. 03541-2003410100101 APPENDIX 2 DEFENSE CONTRACT AUDIT AGENCY asst s205 steer 28, 2008 pomaloiootol Mo. Los Broa, Chi Fascia! Otcet, Stowe Manufstsing Corastion PO: Bos 40 Fon Tosen, ND S635 Dear Ms Brown: “This eter st forthe agreed yon fil nist ont er xablished by sui etconiation a asortnce win FAR 70S AOIGN, ‘The final aan nds cot rate forte Hua year ended September 30, 209 ar 8 ‘otows Atocton Base cs tat ant Baten Great & Adrininaive REDACTED m Allnaion Ras: (2 Total Labor Dots (Tei Cost nga ‘Tose rte re sppiale othe bare ons pelle foreach of te contracts perormed dsring your facl oar ended FY 208, ‘The lowes easy conta! forte ida fee! Sear adem nceptcn ae shown in Enclonure, Schedule of Comultve Allowable Car by Coat, “This inet ae understanding thal nt change any monet cling contrat Enclonae, Tivundersandios i incoporsted into cache’ the feted contacts upon cwton ‘NOV 0 1 2004 FOR OFFICIAL USE ONLY n FOR OFFICIAL USE ONLY Bae he Report No. 03541-2003A10100101 APPENDIX 2 03521 s205 (etaher 25,2006 200eA10100101 ‘udiec con tao which were Mente as ‘Teej aes do ot ince anv sme ees coss in theaeteraentf th scbjel es, "here wee ao conte ht contin sdvaneupresreate o pial revisions reading these mies inppiably part ot wale Plese cot youu sexpice of he tens of he inaecs coet regret by ging a cenag tlt tome A spew sla enclave for ou ears, In atcordnce wih FAR 52.2167, you se dca to prompt best adjustment ‘vouchers or final vouchers fra erly pied conta. dat juan shuld be ley “elceatd toa be veadly ide Gabler vosEeaor by dus oie, Cre thoulé be taken (hat oats claned do ot exces conse Tieton or contact inte os me cen, SGOSTINE A HARRIS Brasch Manager Encoues: ‘Schedule of Conlatve Allowable Cost by Contact, ‘Sioux Manaae ting Carprtiogsceptike above se Fal iirc com ler, wane Cae Maar _ sire Ce. Mig re "Pee atecer pate__se Jaa fry CONTRACTOR: Siaux Manutcing Camonacn 2 YOR OFFICLAL USE ONLY 2 FOR OFFICIAL USE ONLY ~ RA 8-04 APPENDIX 2 Report No, 03541-2003 10100101 NO 180 TYIDINAO HOI © ‘aa ARTIS opusedang amuamemneey 2S sunsor)Na OR OFFICIAL USE ONLY Wort 60) Attachment 2 DEFENSE CONTRACT AUDIT AGENCY REPORT NO. 3541~2004A 10100102 September 13, 2005 PREPARED FOR: Administrative Contracting Officer Defense Contract Management Agency - Twin Cities ATTN: DCMAW-GTOC (Ms. Linda Johnson) ‘Bishop Henry Whipple Federal Building, Suite 1150 Fort Snelling, MN 55111 PREPARED BY: DCAA Minacapolis Branch Office 250 Marquette Avenue, Suite 525 Minneepolis, MN 55401-1872 Telephone No, 612/343-7750 FAXNo, 612/343-1774 E-mail Address doaa-f003541@dcaa mil SUBJECT: Report on FY 2004 incurred Cost CONTRACTOR: Sioux Manufacturing Corp. Main St & Hwy 57 PO Box 400, Fort Totten, ND 55415-1329 REPORT RELEASE RESTRICTIONS: See Page 6 CONTENTS: Subject of Review Scope of Review Results of Review , Contractor Organization and Systems CAA Personnel and Report Authorization Report Distribution and Restrictions List of Appendixes youu aE FOR OFFICIAL USE ONLY etm cos Report No. 3541-2004410100101 SUBJECT OF REVIEW We reviewed Sioux Manufacturing Corporation's (SMC) March 29, 2005 certified final indiect cost proposal for reimbursement of FY 2004 incurred costs. The purpose ofthe review was to determize the allowability of direct and indirect costs and establish audit determined. indirect cost rates for the period. The proposed rates apply primarily tothe flexibly-priced contract listed in Appendix 2. A copy of SMC's Certificate of Final Indirect Costs, dated September 26, 2004, is included as Appendix 1 of this report. ‘The proposal isthe responsibility ofthe contractor. Our responsibifity is to report our conclusions on the proposal based on our review. SCOPE OF REVIEW We determined that no significant costs were questioned in prior years and that no indicators of audit risk bad been identified. Accordingly, we limited our review to the verification of the mathematical accuracy of the proposal a limited review of claimed costs for ‘unusual items and items having obvious potential fr including significant unallowable cost, ‘anda limited review for compliance with special contract terms and conditions. We conducted ‘our review in accordance with generally accepted government auditing standards. A review is substantially ess in scope than an examination, the objective of whichis the expression of an opinion on incurred cost proposal. Accordingly, we do not express an opinion ‘Our assessment of contro! risk reflects thet we bave not specifically tested the effectiveness of SMC's systems and related intemal conzrols. The scope of our examination reflects our assessment of control risk and includes tests of compliance with laws.and regulations that we believe a reasonable basis for our opinion We evaluated the incurred cost proposal using the applicable requirements contained in the: + Federal Acquisition Regulation (FAR) and * Defense FAR Supplement (DFARS), ‘The contractor claims exemption under 48 CFR 9903.201-1(b)(3) from the practices required by the Cost Accounting Standards Board rules and regulations because it considers itself a small business concern, FOR OFFICIAL USE ONLY WenA BLA Report No. 3541-20044 10100261 RESULTS OF REVIEW Based on our review, nothing came to our attention that caused us to believe that ignificant costs claimed on the government contracts identified in Appendix 2 were ‘unallowable, urallocable or unreasonable Indirect Cost Rates ‘The contractor's proposed indirect rates are acceptable as proposed, The attached Indizect Cost Rate Agreement (Appendix 2) decaments SMC’s concurrence with our findings and recommendations and includes a schedule of cumulative allowable costs. SMC's proposed overhead and G&A rates are based on amounts from the general ledger. Rate calculations ave as follows: Indirect Category Pool ‘Base Rate Reference ‘Overhead . 7 a G&A REDACTED b (2) Total Labor Dollars (&) Total Cost input lative Allowal Worksheet (CACWS) The costs noted on the schedule of cumulative allowable costs represent costs that are considered allowable under the listed contracts and are, therefore, reimbursable. For those contracts identified as “Ready Close,” the information on the CACWS should be used to close ‘out contracts. Individual contract audit closing statements will only be issued if requested by the ACO, Exit Conference We informed Ms. Peggy Duchscherer, Controller of the results of our review in an exit conference held on August 26, 2005. The Rate Agreement Letter in Appendix 2 documents 'SMC’s concurrence with our evaluation results. 2 FOR OFFICIAL USE ONLY Pema & Report No, 3541-2004A10100101 CONTRACTOR ORGANIZATION AND SYSTEMS. Organization Sioux Manufacturing Corporation (SMC) was incorporated under The Spirit Lake Tribe, North Dakota, in September 1989. Sales for fiscal year ended September 25, 2004 were $38.43 rillion of which $38.05 million were directly to the goverament. SMC manufactures autoclave bbonding-compression molding of advanced composite stracture and ballistic panels. SMC is not subject to the requirements ofthe Cost Accounting Standards because it isa small business. Accounting System ‘SMC’s accounting period is from October I to September 30. SMC maintains an accounting system on the accrual basis in accordance with generally accepted accounting principles. SMC’s accounting system is posted on a current basis. Appropriate adjusting entries are made atte end of cach modth and at yéar end. SMC prepares financial statements on an annual basis. The annual financial statements are audited by external CPAs, ‘SMC maintains a job cost accounting system which is fully integrated in the overall accounting system, wherein contracts are assigned individual project mumbers and direct eats are identified and charged to those numbers. Indirect costs ar identified with and accumulated under individual departments, which in tur are identified to the various indirect cost pools. Indirect expenses are recorded and billed to projects using actual rates. The contractor's accounting system is considered to be adequate forthe accumulation and reporting of costs on ‘govemment contracts. The following schedule describes SMC’s indirect cost pools and related allocation bases, and the type of effort normally charged direct and indirect: rect Cost Pools and Allocation Bases: Indirect Cost Poo! Allocation Base ‘Manufacturing Overhead “Total manufacturing direce labor dollars G&A Expense Total incurred costs, excluding G&A expenses ‘The Following Effort Is Normally Charged Direct Direct time of direct labor employees Premium (overtime, shift field) time of direct labor Raw material, purchased pats and subcontracted items ‘Travel expenses incured by dicect employees Freight charges for direct raw materials, purchased parts and subcontracted items Purchase, fabrication or rena of special tooling or test equipment Professional services and consultant fees ‘Temporary help to perform direct effort 3 FOR OFFICIAL USE ONLY Timi Cs ot Report No, 3541-2004A10200101 ‘The Followin: Normally Charged Indirect Management, supervisory, and clerical salaries Indirect time of direct employees Premium (overtime and shift of indirect employees Social Security, unemployment insurance, workmen's compensation, group insurance, pension expense, Vacation and holiday pay ‘Travel expense assorizted with indirect labor effort (Other expenses such as general operating supplies, depreciation, employee ‘wellness programs, utilities, renal costs of facilities, end general purpose equipment. 4 FOR OFFICIAL USE ONLY. Denia SOF Report No. 3541-2004A10100101 DCAA PERSONNEL ‘Telephone No, _ Primary contact(s) regarding this report: ‘Stuart 0, Thomas, Supervisory Auditor (612/343-7765 Other contacts) regarding this report: Gordon A. Eeten, Branch Manager 6121343-7750 FAX.No. Minncapolis Branch Office 612/343-7774 E-mail Address Minaeapolis Branch Office Tena-fuod541 @deaa mil General information on audit matters is available at http:/www.deaa mil. REPORT AUTHORIZED BY: és! Stuart O. Taomas for! GORDON A. EETEN Branch Manager DCAA Minneapolis Branch Office 5 FOR OFFICIAL USE ONLY ramet 869 Report No. 3541-2004A10100101 REPORT DISTRIBUTION AND RESTRICTIONS DISTRIBUTION: Adainistrative Contracting Officer Defense Contract Management Agency - Twin Cities ATTN: DCMAW-GTOC (Ms. Linda Johnson) Bishop Henry Whipple Federal Building, Suite 1150 Fort Snelling, MN SS111 ‘Sioux Manufacturing Corp Main St & Hwy 57 PO Box 400 Fort Totton, ND 55415-1329 (Copy furnished thra ACO) RESTRICTIONS: 1. Information contained in this report may be proprietary. It is not practical to identify during the conduct ofthe review those elements ofthe data which are proprietary. Make proprietary determinations inthe event of an external request for acess. Consider the restritions of 18 U.S.C. 1905 before releasing this information to the public. 2. Under the provisions of Title 32, Code of Federal Regulations, Part 290.7(b), DCAA will refer any Freedom of Information Act request for reports recvived to the cognizant contracting agency for determination as to releasability and a direct response to the requestor, 3. Donot use the information contained in this report for purposes other than action on the subject ofthis review without first discussing its epplicability with the auditor 6 FOR OFFICIAL USE ONLY POMA 06-0R Report No. 3541-2004A10100101 LIST OF APPENDICES Certificate of Final Indirect Costs APPENDIX | Indirect Cost Rate Agreement APPENDIX2 ? FOR OFFICIAL USE ONLY rena (809 ‘Report No. 3541-20044 10100101 APPENDIX t ' e i 1 SEN SERNA ANA CORR EON A Peng sin TRE FOTTEN, Nb SEBS URTHIEAIONOF FINALINDIRECT COSTS FISCAL VPAR ENDED 9 264 Tis raaser ean Hhaneve ma hiss ne din 62nd tne of hem bags wa ee { | 8 FOR OFFICIAL USE ONLY Penta og cS Report No. 3541-2004A10100101 APPENDIX 2 DEFENSE CONTRACT AUDIT AGENCY 3501 a5 vga 3, 2005 300tai0i00101 ‘Ms. Led Brown, Chie Faecal Offer ‘ious Manufetasing Conpration 2.0. Box 0) For Toten, ND 58535, Dwr Ma. Brown “This eters fot te rnd pon net cost tes etblised by aor _etereation in esotage With FAR #2 705 2OYKD. “Th ial ua niet cout ie forthe Fadl year nda! September 26,2006 ae a flows: uate Rue Grerbeut Gonna Adainionive RED Allocution Bases (9) Toul LaborDotas (8) Toa Cost input “These rates ae appli the base cote speed fr ech ofthe contra performed uring your fecal yer ended FY 2008, Toe allowable corey caret forthe ines fac Sear aed om ineopton ae shown in Enclosure, Scelule of Curative Allowaba Cast by Conse “Tis nrc te understanding shall nochange any monetary cling comrct bligulon or specif crt allowance er dielowasor promo! form te ona ated io Enclose’ ‘Thisuncertangingsnconrsid ito each halted ones open SEP 1 2 2008 FOR OFFICIAL USE ONLY 9 FOR OFFICIAL USE ONLY Report No. 3541-20044 10100101 APPENDIX 2 as gros agua 31, 2005 EROUATOI0ON0L “The tbjet ates do ince any specif iadire otitems which Were wena irc cot in be sett of the yee ae “Thee were no cori hs contin’ advance agreeat oF spec provisions ender these as apples, np fw, Please conte your acceptance of eee of he nds ost ee agreement by signing wed retin tis eter tome. Adoptee 0 0s lope enclose fr Your ecard. 1m seordnce wih FAR 52.216-7, yu ar dizectedt promply submit jst vouchers ot fal voucher fr al Nesbly pace conc. Age adherents soul lly ‘Gelinas so abe renilyeaifabe fr verieaon by ts oflee Cae shold betes Ta moutsclemed Go aot exceed contra insion or cna inde con meetings Siem, ee. moc Mimnger Enclose ‘Schedule of Cumulative Allowable ox by Cont, veel M Kap ssovanine hake i hiss fe eee eee CONTRACTOR: Sux Minufasins Coon 2 FOR OFFICIAL USE ONLY 10 FOR OFFICIAL USE ONLY APPENDIX 2 Report No, 3541-2004A10100101 XINO 480 TVIDIHAO x08 © 290M an ertmoovd quo o-teusvve, =F a Sm) SEG ITED so, famed gor pans eL nokns geting Bamigmie ms snunsor9wa FOR OFFICIAL USE ONLY Tpeaia UA Attachment 3 DEFENSE CONTRACT AUDIT AGENCY AUDIT REPORT NO. 3541-2005A10100101 February 22, 2007 PREPARED FOR: Defense Contract Management Agency Administrative Contracting Officer ATTN: DCMAA-ATOF (Ms, Linds Joknson) Bishop Henry Whipple Federal Building, Suite 1150 Fort Snelling, MN $5111 PREPARED BY: DCAA Minneapolis Branch Office 250 Marquette Avenue, Suite 525 Minneapolis, MN’ 5401-1872 Telephone No, 612/343-7750 FAX No. 61343-7774 E-mail Address deaa-f203541@deaa mil SUBJECT: Report on Audit of FY 2005 Incurred Cost Submission CONTRACTOR: _ Sioux Manufacturing Corporation Main St & Hwy 57 PO Box 400 Ft. Toten, ND $8325 REPORT RELEASE RESTRICTIONS: See Page 7 CONTENTS: Subject of Audit Scope of Audit Results of Audit Contractor Organization and Systems CAA Personnel and Report Authorization ‘Audit Report Distribution and Reswictions List of Appendixes FOR OFFICIAL USE ONLY pain REP. Audit Report No. 3541-2005A10100101 SUBJECT OF AUDIT ‘We examined the Sioux Manufacturing Corporation's (Sioux) August 18, 2006 certified {inal indirect cost proposal and related books and records for reimbursement of CFY 2005 incurred costs. The purpose of the examinstion was fo determine allowability of direct and indirect ‘costs and establish audit determined indirect cost rates for Octaber 1, 2004 through September 31, 2005, The proposed rates apply primarily tothe flexibly-priced contracts listed in Appendix 2. A copy of Sioux’s Certificate of Final Indirect Costs, Dated August 18, 2006, is jneluded as Appendix 1 to the report. ‘The proposal is the responsibility of the contractor. Our responsibility is to express an ‘opinion based on our examination SCOPE OF AUDIT ‘We conducted our examination in accordance with generally accepted government auditing standards, Those standards require that we plan and perform the examination to obtain reayouable assurance about whether the data and records examined are Fee of material misstatement. An exzminstion incfudes: © evaluating the contractor's internal controls, assessing control risk, and determining the extent of audit testing needed based on the control risk assessment; © examining, on 2 test basis, evidence supporting the amounts and disclosures inthe ata and records evaluated; © assessing the accounting principles used and significant estimates made by the contractor, ‘© evaluating the overall data and records preseatation; and “We evaluated the proposal using the applicable requirements contained in the: + Federa} Acquistion Regulation (FAR) and + Defense FAR Supplement (DFARS). ‘The contractor claims exemption under 48 CFR 9903.201-1(b) (3) from the practices required by the Cost Accounting Standards Board rules and regulations because it considers, itself «small business concern. ‘Our assessment of control risk reflects that we have not specifically tested the effectiveness or Sioux’s systems and related internal controls. The scope of our examination reflects our assessment of control risk and includes tests of compliance with laws and regulation, that we believe provide a reasonable basis for our opinion, FOR OFFICIAL USE ONLY Rema 66-68 ‘Audit Report No. 3541-2005A10100101 RESULTS OF AUDIT & Indirect Rates In our opinion, the contractor's proposed indirect rates are acceptable as adjusted by our examination. The examination results and recommendations are presented below. The enclosed Indirect Cost Rate Agreement documents the contractor's concurrence with our findings and recommendations. Cost Voluntary Claimed Allocation Element Bool Pool Base Overhead meet Gan REDACTED Allgcation Bases: (@) Direct Labor Costs (©) Total Cost Input Government Participation in Allocation Bases: Government Category Flexibly Priced Overhead <1% G&A. <1% b. Direct Costs In our opinion, claimed direct costs are acceptable and are provisionally approved, pending final acceptance. Final acceptance of amounts proposed under Government contracts does not take place until performance under the contract is completed and accepted by the ‘cognizant authorities and the audit responsibilities have been completed. Claimed Ditect Costs Contract Number Labor Material ~ODC Total Direct Costs DAAEO7-02-C-L077 REDACTED FOR OFFICIAL USE ONLY A & Tyoma as Audit Report No. 3541-2005A10100101 © Cumulative Allowable Cost Worksheet (CACWS) The costs noted on the schedule of cumulative allowable costs in Appendix 2 represent costs that are considered allowable under the listed contracts and are, therefore, reimbursable. For those contracts identified as “Ready to Close,” the information on the CACWS should be used fo close out contracts. As ccordinated with your oie, individual contact audit closing statements will only be issued if requested by the ACO. Exit Conference We discussed the results of our examination with Mr. Mark Ystaas, Accounting, ‘Supervisor, in an exit conference held on January 30, 2007. Mr. Ystaas concurred with our results, noe . canes 5 FOR OFFICIAL USE ONLY “pom wis? Audit Report No. 3541-2005410100101 CONTRACTOR ORGANIZATION AND SYSTEMS ganization ‘Sioux Manufacturing Corporation (Sioux) was incorporated under The Spicit Lake Tribe, North Dakota, in September 1989. Sales for fiscal year ended September 25, 2005 were $28.3 rillion, Sioux manufactures autoclave bonding-compression molding of advanced composite structure and ballistic panels. Sioux isnot subject to the requirements of the Cost Accounting Standards Board because itis 2 small business. Accounting System ‘Sioux’s accounting period is from October I to September 30. Sioux maintains an ‘accounting system on the accrual basis in accordance with generally accepted accounting principles. Sioux’s accounting system is posted on a current basis. Appropriate adjusting entries fare made at the end of each month and at year end. Sioux prepares financial statements on sm annual basis. The annua! financial statements ate audited by extemal CPAs. ‘Sioux maintains a job cost accounting system which is fully integrated in the overall accounting system, wherein contracts are assigned individual project numbers and direct costs tre identified and charged to those numbers. Indirect costs are identified with and accurmulated ‘under individual departments, which in tum are identified to the various indirect cost pools. Indirect expenses are recorded and billed to projects using actual rates. The contractor's accounting system is considered to be adequate for the accumulation and reporting of costs on government contracts. The following schedule descrites Sioux’s indirect cost pools and related allocation bases, and the type of effort normally charged direct and indirect indirect Cost Pools and Allocatinn Bases: Indirect Cost Poo! __ Allocation Base Wanufacturing Overtead “Total manufacturing direct labor dollars G&A Expense Total incurred costs, excluding G&A expenses ‘The Followin Is Normally Charged Direct © Direct ime of direct labor employees © Premium (overtime, shift, field) time of direct labor * Raw material, purchased parts and subcontracted items ‘+ Travel expenses incurred by direct employees ‘= Freight charges for direct raw materials, purchased parts, and subcontracted items ‘= Purchase, fabrication or rental of special tooling or test equipment ‘= Professional services and consultant fees © Temporary help to perform direct effort 4 FOR OFFICIAL USE ONLY Audit Report No, 3541-2005A.10100101, effort Is Nor Indisect ‘Management, supervisory, and clerical salaries Indirect time of direc employees Premium (overtime and shift) of indirect employees Soci Security, unemployment insurance, workmen's compensation, group insurance, pension expense, vacation and holiday pay Travel expense associated with iniret laber effort + Other expenses such as general operating supplies, depreciation, employee wellness programs, utilities, rental costs of facilities, and general purpose equipment 5 FOR OFFICIAL USE ONLY BER Audit Report No. 3541-2005A10100101 DCAA PERSONNEL ‘olephone No Primary contac regarding this aut Stuart 0. Thomas, Supervisory Auditor 12383-1165 Othe contact regarding this audit eport: ‘Gordon A Eeten, Branch Manager 612283-7750 Minneapolis Branch Office an88-774 Exmsil Adiress Minneapolis Branch Office ‘dcas-f103541@deaa.mil General information on audit matters is availabe at htp://vww.deaa mil AUDIT REPORT AUTHORIZED BY: Js Stuart O. Thomas Moc! GORDON a. EETEN Branch Manager DCAA Minneapolis Branch Otfice 6 FOR OFFICIAL USE ONLY Audit Report No. 3541-2005A10100101 AUDIT REPORT DISTRIBUTION AND RESTRICTIONS DISTRIBUTION: mail Address Defense Contract Management Agency Adininistrative Contracting Officer ATIN: DCMAA.ATOF (Ms. Linda Johnson) linda johnsong@dema mil Bishop Henry Whipple Federal Building, Suite 1150 Fort Snelling, MN S5LLL Sioux Manufacturing Corp Main St & Hwy 5? P.O, Box 400 Fr. Totten, ND 58335, (Copy furnished thra ACO) RESTRICTIONS: 1. Information contained in this audit report may be proprietary. Tt is not practical to identify during the conduct ofthe audit those elements of he data which are proprietary Make proprietary determinations in the event ofan extemal request for access. Consider the restrictions of 18 U.S.C, 1908 before releasing this information tothe public. Under the provisions of Title 32, Code of Federal Regulations, Part 290.7(b), DCAA will refer any Freedom of Information Act requests for audit reports received to the cognizant contracting agency for determination as to releasabilty and a direct response to the requestor. 3. The contractor objects to release ofthis report in its entirety to higher-tier contractor because Sioux considers its rates to be proprietary information. See Appendix 3 for a copy of Sioux’s statement of objection to release 4. Do not use the information contained inthis audit report for purposes other than action on te subject ofthis aude without frst discussing its applicability wit the auditor. 1 FOR OFFICIAL USE ONLY Doma Audit Report No. 3541-2005A10100101 LIST OF APPENDIXES Centficate of Final Indirect Costs APPENDIX 1 Indirect cost Rate Agreement APPENDIX 2 Statement of Objection to Release APPENDIX 3 8 FOR OFFICIAL USE ONLY APPENDIX 1 Audit Report No. 3541-20054 10100101 xe pow TORT IOTEN. ND. 833 NUT ACIP RING CORPORA HON CU RTeIC YTION OF FINAL INDIREC COSTS v2408 FISCAL YEARIN Toys feo that Ise reves hs gps slo Fin ondirect cost eaten el he aston brow ledge and he vel i 2) n> spenpos tees Fal nine ett iowa se ascurdance wit the coat pire ef the Fedora Asuna ation oF Ry sei supper nc the Hil safe eos aes al pS al This renin, sags inchide ay wente Wl ate expreses satalioustle wir fo supple appheade vest prin Sows Mamufitunrsy Comer Brats of kaeoote-m 9 FOR OFFICIAL USE ONLY ‘Auait Report No. 3541-2005A10100101 DFEENSE COVERACL ALDI AGENCY ES, eters 12H Me Cat R Moku, Pena Sis Mata 0 Porm am a Me ek ‘hic tate see eh he apres up fal ante eet ste som A eS on rinacenntee eal vil ine! Gos rts or the ica eur an See Masato Hose aban — Kale Amat Tseriin co REDACTED & ah Conia Labor Toten ye Misble Cana iy Cat sigan, ve posite cha allan tga. Ps aaderstaangsri pariia ie! rae anderen sll tei eaten fo sis eons im the atemgh tae wat rss Pe Canee nprecena ge apesil prota robles a ‘het FOR OFACIALUSEONIY 10 FOR OFFICIAL USE ONLY Toma OM ‘Audit Report No. 3541-200SA10100101 APPENDIX 2 ue sts primate asin ae sun a en vom al exis pea certs Abt atte Rech st ‘lobe reals ids bis Se enon yt“ Cars aul be tche "anise med gl exes et ies or ht a Pi ela ‘Siow Manultsing seeps hs aurea ial ie oot an. Save de ee ster a bare HTL: ites. COR ERACHOR, Sous Mantasring Co FOR OFFICIAL USE ONLY u FOR OFFICIAL USE ONLY APPENDIX 2 ‘Audit Report No. 3841-2005A10100101 vaste oT 12 FOR OFFICIAL USE ONLY Twin 06-01 Audit Report No. 3541-2005A10100101 APPENDIX 3 SIOUX MANUFACTURING CORPORATION Po.eckaes —FORTTOTTEN NCRTADAADTAAIEE UA TOWTERARII — (RANTOVINEATES ubjest, SMC Indirect Rates fey Mr vert ot ag staf expresses their appeccition an couperative effort to finalize our andiect sates. While we have no objection ar sharing yaformation with other vnivactiesand’oe subcontractors that ceal with Your agency. we would like to muinisin sentol over the disseminaton of such infirmation. SMC therefore reyuests thst m0 vraiamstion felating to SMC indieet Rates be released 1 any wher cualravtore andor sabsomiracines OF any other person oF etty shit requests such information, Avy quests ‘ody be forwarded to SMC Ir there sre any adkitiora questions. you may cemtact Mark Yscuas at SMC PaO Oe here so R.Mchay. Presi CEO / 1B FOR OFFICIAL USE ONLY