Record Retention Requirements
Government and contractors are required to adhere to certain standards regarding maintenance of any record related to procurements and assistance awards. The regulations and requirements are different whether you are an agency, a contractor, or the recipient of a grant or cooperative agreement. This article will set out, in general, the governing law for each group as well as what is part of the records suite and the retention periods.
In addition to the general requirements of 36 CFR Chapter XII, Subpart B, Part 1222 regarding agency records management responsibilities, retention rules for government related specifically to contracting files are found in Federal Acquisition Regulation (FAR) 4.8. Relevant acquisition supplements (like DFARS) should also be consulted for any record maintenance rules specific to an agency.
FAR 4.8 applies to all contracting actions and prescribes requirements for establishing, maintaining, and disposing of contract files. It mandates that the documentation in the files should be sufficient to constitute a complete history of the transaction for the purpose of (1) providing a complete background as a basis for informed decisions at each step in the acquisition process, (2) supporting actions taken, (3) providing information for reviews and investigations, and (4) furnishing essential facts in the event of litigation or congressional inquiries. The FAR goes on to outline the types of files to be kept (cancelled solicitations, on each contract, and on each contractor) and the contents of each file.
Retention periods for the government range from three to six years generally or in some cases longer. A table of retention periods for the government can be found at FAR 4.805.
For contractors, their own internal management and retention policies, FAR 4.7, applicable agency supplements, task/delivery order terms, and other applicable federal laws govern records maintenance.
The records suite includes all available records related to a contract in any form, which means digital and electronic data as well as accounting procedures and practices. Contractors, including subcontractors, must maintain records sufficient to provide satisfactory supporting evidence regarding negotiation, administration, and audit requirements of any government agency or the Comptroller General. FAR 4.7 specifically outlines documents that must be maintained related to financial and cost accounting, pay administration, and acquisition supply records.
The general retention period for contractors is three years after final payment under the contracts, although retention periods for financial and cost accounting, pay administration, and acquisition supply records are longer (mostly four years with some two year requirements).
Assistance Award Recipients
Like contractors, award recipients must follow their own internal management and retention procedures, the terms of any specific contract, agency supplements, and any other applicable federal laws. In addition to these requirements, the law governing assistance awards is 2 CFR 200.
In general, the types of records to be maintained are any records specifically identified in the award as needed to carry out the grant or for retention. This includes financial records, supporting documents, performance reports, property records, procurement records, and all other non-federal entity records pertinent to the award.
The default period for retention is three years from the applicable records retention commencement date, which is the date of submission of the final expenditure report or for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report. For real property and equipment records, the commencement date is three years after final disposition of the property. For indirect cost rate and related records, it is three years if the record was used to support a negotiated rate with the government or at the end of the fiscal year if not used to support a negotiated rate. Exceptions to the default period arise in the event of litigation or audit, as directed by the government, if records are transferred to the possession of the agency, for records pertaining to post-award program income, and for any items that would have long term retention value.
The purpose and importance of record retention rules have become solidified in the post-Enron environment with more stakeholders – government included – demanding ethical corporate practices. As it relates to government contracting, a sound and robust document maintenance plan that follows the the requirements of the governing law will ensure regulatory compliance, mitigate liability, assist in litigation preparation or defense, provide support in an audit or investigation, or provide back up for cost allowance disputes. The take away is that contractors, whether in procurements or assistance awards, must maintain adequate record files and do so according to the applicable retention periods. With increased government scrutiny and the ever present threat of fraud allegations, complete and comprehensive records that are available are not only a regulatory requirement but a sensible business practice.