Final Contract Audit

A Final Contract Audit is the audit performed at the close of a cost-reimbursable contract. Its purpose is to determine the actual allowable costs the contractor incurred and to support the establishment of the final contract price. The buyer uses the audit findings to reconcile the contract and settle the amount payable.

The Government of Canada's Supply Manual uses the form "final contract audit" and lists it as a contract-closeout activity. In current federal buyer guidance, the activity is tied to cost-reimbursable contracts, where the buyer may obtain a cost audit to establish the actual final cost and assess whether the resulting price is reasonable.

Where the Final Contract Audit sits in contract closeout

The Government of Canada Supply Manual places Final Contract Audit under the "Close Out Contract" phase. It appears alongside other closeout tasks such as the disposition of crown assets and final payment or amendment. That placement shows the audit is a closing step. It happens after the work is done, when the buyer needs to confirm what the work actually cost.

Which contracts are audited

All cost-reimbursable contracts require a cost submission when the contract is completed. According to CanadaBuys buyer guidance on cost-reimbursable contracts, an audit provision applies to contracts exceeding $50,000 with Canadian businesses. That provision allows the buyer to determine actual costs and the final cost of the contract.

Buyers do not audit every contract. They select contracts for cost audit after consulting the Cost and Price Analysis Group (CPAG). Selection criteria include contracts associated with Major Crown projects and contracts where there is a risk of significant overpayment. CPAG also takes part in reviewing audit results.

From audit report to finalization of cost amendment

Once the audit is complete, the buyer establishes a final price with the contractor. The guidance states a goal of completing finalization within 90 days of receiving the audit report, as set out on CanadaBuys.

The agreed final price is then formalized through a finalization of cost amendment. This amendment adjusts the total contract price and states that no further claims may be submitted. The buyer's final-price certification must confirm that the price charged is reasonable and aligns with the contract.

Related terms

• Cost audit: the examination of the contractor's costs that the Final Contract Audit relies on.
• Cost submission: the document the contractor provides at contract completion.
• Finalization of cost amendment: the contract amendment that records the final price and closes off claims.
• Cost-reimbursable contract: the contract type where the buyer reimburses actual costs.
• CPAG: the Cost and Price Analysis Group, which participates in selecting contracts for audit and reviewing results.

What a Final Contract Audit means for suppliers

If you hold a cost-reimbursable contract, plan for the audit from the start. Expect to submit a cost submission at completion, and keep the cost information and supporting records that the contract's audit provisions require. After the audit, you take part in setting the final price and agree to, or otherwise address, the audit findings.

Be aware that the finalization amendment settles the contract and states that no further claims may be submitted. Confirm that all legitimate costs are captured before you agree to the final price.