By: John S. Morlu II, CPA
The National Security Agency (NSA) has announced the Fiscal Year 2025 Quarter 1 (FY25 Q1) Dormant Account Review-Quarterly (DAR-Q) process for assessing unliquidated obligations (ULOs). This critical review, conducted in accordance with the Department of Defense’s Financial Management Regulation (DoD FMR), presents an opportunity and responsibility for small business government contractors to ensure compliance and contribute to the agency’s audit readiness.
In this article, we’ll break down the DAR-Q process, its importance, and how contractors can prepare to meet the NSA’s requirements effectively.
Understanding the DAR-Q Process
DAR-Q is a financial oversight mechanism used to validate ULO balances at the contract line item number (CLIN) and sub-line item number (SLIN) levels. The review focuses on determining whether:
1. Services or Goods Have Been Provided: Verification is required to confirm that the ULO amount corresponds to services or goods delivered or to be delivered under the specified contract.
2. Downward Adjustments Are Necessary: If the ULO amount is no longer valid—whether in part or in full—a downward adjustment will be made to de-obligate the unused funds.
This process ensures that the NSA’s financial records remain accurate and compliant with federal auditing standards.
Why DAR-Q Matters
For small business contractors, the DAR-Q review serves several purposes:
- Compliance with Federal Standards: It ensures that contractors align with the DoD’s financial regulations, promoting transparency and accountability.
- Audit Preparedness: With an emphasis on documentation, DAR-Q plays a critical role in ensuring that both contractors and the NSA meet stringent audit requirements.
- Efficient Fund Utilization: Contractors can use the review process to reconcile contract balances, avoiding potential penalties or funding disputes.
Key Steps in the FY25 Q1 DAR-Q Process
The NSA has outlined a clear roadmap for the upcoming DAR-Q cycle:
1. Distribution of CLIN/SLIN Lists
The NSA will provide a consolidated list of CLINs and SLINs requiring contractor input by 06 December 2024. These lists will be distributed via the Acquisition Resource Center (ARC) portal.
2. Request for Information (RFI)
Contractors will receive an RFI titled “FY25 Q1 Dormant Account Review-Quarterly.” This request will detail the specific data required for each ULO, along with instructions for submission.
3. Submission Deadline
Contractors must respond to the RFI through the ARC portal no later than 13 January 2025. Timely submission is critical to maintaining compliance with DAR-Q timelines.
4. Contractor Certifications
Two key certifications, Certification A and Certification B, will be used to execute a unilateral modification by the Contracting Officer. Contractors must ensure these certifications are accurate and supported by documentation.
Preparing for DAR-Q: A Contractor’s Checklist
To navigate the DAR-Q process successfully, small business contractors should take the following steps:
1. Review Your ULO Balances
Examine all unliquidated obligations associated with your contracts. Verify that:
- Deliverables (goods or services) are complete or in progress for the ULO amount.
- All financial records align with the obligations stated in the CLIN/SLIN documentation.
2. Gather Supporting Documentation
Ensure that all ULOs have adequate supporting evidence. This may include:
- Invoices
- Delivery receipts
- Contract modifications
- Performance reports
- Correspondence confirming the status of deliverables
This documentation is vital for audit purposes and contractor certifications.
3. Understand Contractor Certifications
- Certification A: Confirms that the ULO amount is accurate and justified based on deliverables provided or pending.
- Certification B: Acknowledges the need for a downward adjustment and de-obligation of funds where applicable.
Each certification must be completed accurately to avoid delays or complications in the review process.
4. Leverage the ARC Portal
Familiarize yourself with the ARC portal’s submission process. Ensure your team is equipped to upload required documentation and respond to RFIs efficiently. Delayed or incomplete submissions could jeopardize your compliance status.
5. Communicate with the NSA
If there are discrepancies or uncertainties regarding your ULO balances, communicate promptly with the NSA’s contracting team. Addressing potential issues early can prevent complications during the review.
Best Practices for Small Business Contractors
1. Maintain Accurate Financial Records
Consistent record-keeping simplifies the DAR-Q process and ensures you can provide required documentation promptly.
2. Regularly Reconcile Accounts
Periodic reconciliation of your contract balances helps identify and address potential ULO discrepancies before the DAR-Q review.
3. Engage Your Internal Team
Assign a dedicated team member to oversee the DAR-Q process. This individual should act as a liaison between your organization and the NSA.
4. Stay Informed About Regulations
Familiarize yourself with the DoD’s Financial Management Regulation and any updates relevant to ULOs. This knowledge will enhance your ability to meet compliance requirements.
5. Participate in Training Sessions
If the NSA or other government agencies offer training on the DAR-Q process, take advantage of these resources to enhance your understanding and preparedness.
Benefits of Participating in DAR-Q
While the DAR-Q process may seem daunting, it offers several benefits for small business contractors:
- Strengthened Agency Relationships: Demonstrating your commitment to compliance and financial integrity can enhance your reputation with the NSA and other government agencies.
- Improved Contract Management: The review process provides an opportunity to resolve outstanding financial issues, improving your overall contract performance.
- Future Opportunities: Contractors with a strong track record of compliance are more likely to secure future government contracts.
Consequences of Non-Compliance
Failure to participate in the DAR-Q process or provide accurate and timely information can result in:
- Delayed payments or contract terminations
- Financial penalties
- Damage to your reputation as a government contractor
Non-compliance may also hinder your ability to compete for future contracts, as agencies prioritize vendors with a proven commitment to regulatory standards.
Looking Ahead: Key Dates to Remember
- 06 December 2024: Distribution of CLIN/SLIN lists and RFI letters.
- 13 January 2025: Deadline for RFI responses through the ARC portal.
Mark these dates on your calendar and allocate sufficient time for internal reviews and submissions.
Conclusion
The NSA’s FY25 Q1 Dormant Account Review-Quarterly is a pivotal process for maintaining financial integrity and compliance with federal regulations. For small business contractors, active participation in DAR-Q not only fulfills contractual obligations but also reinforces their standing as reliable government partners.
By preparing thoroughly, maintaining accurate records, and adhering to submission timelines, contractors can navigate the DAR-Q process with confidence. Use this opportunity to demonstrate your commitment to excellence and secure your place as a trusted participant in government contracting.
For additional guidance, consult the posted DAR-Q documentation and reach out to the NSA’s contracting team with any questions or concerns. Together, we can ensure the success of this critical financial review.
Author: John S. Morlu II, CPA is the CEO and Chief Strategist of JS Morlu, leads a globally recognized public accounting and management consultancy firm. Under his visionary leadership, JS Morlu has become a pioneer in developing cutting-edge technologies across B2B, B2C, P2P, and B2G verticals. Under his leadership, the firm has become a leader in innovation, introducing transformative technologies such as ReckSoft.com, an AI-powered reconciliation tool, FinovatePro.com, a cutting-edge cloud accounting solution, and Fixaars.com, an AI-driven platform revolutionizing opportunities for handymen worldwide. Through his visionary approach, John continues to redefine industry standards, driving efficiency, precision, and global economic empowerment.
