This article on Item Unique Identification Compliance was originally published in the Deltek Government Contracting Blog in 2020 and has been updated here in 2022. To read the entire Deltek article click here.
Item Unique Identification Compliance
Written by Peter Collins
Those of us in the government contracting community should be well aware of the recent Department of Defense (DoD) Audits and the financial improvement and audit readiness (FIAR) initiative. It has been widely reported that the DoD failed to pass these full financial scope audits in fiscal years 2018, 2019, 2020 and 2021.
Despite the fact that the Department of Defense has been aware of these audits for nearly 30 years (Congress passed the CFO Act in 1990), and have made significant strides towards increased accountability and improved financial management since then, the Department is still unable to account for all of its government property.
Unable to Account for Assets
It is important to note for the government contractor community, that the auditor’s report has repeatedly highlighted a number of material weaknesses that were directly related to their inability to achieve a positive audit opinion. Among many other challenges, the DoD has been unable to account for its assets in the possession of contractors.
The June 2021 FIAR Report included an Independent Auditor’s Report which stated:
“The Department lacks the policies, controls, oversight and documentation to accurately record property in the possession of contractors.”
Furthermore, the Office of Inspector General has identified Government Property in the Possession of Contractors as a Material Weakness in the previous four audits. This is nothing new, nor surprising, but it’s important for Defense Contractors to note that the auditors in 2021 again went further to say:
“Government property in the possession of contractors cannot be identified in the Department’s property and financial systems. As a result, the Department’s financial and accountability records are incomplete.”
The important element here is that the Pentagon has repeatedly identified the management of Government Property as a weakness. And it is particularly worth noting that the auditors have put a spotlight on the accountability of Government Property in the possession of contractors. Defense contractors that are obligated to manage government property should ensure that their internal processes and procedures will position them favorably for a potential DCMA audit.
A significant part of today’s requirement to pass a government property audit means being able to consistently substantiate the existence and completeness of government property inventory. Contractors need to be audit ready from “floor to book” and “book to floor.” In other words, there needs to be complete accountability for all DoD assets and property. Asset accountability starts with item unique identification (IUID).
Item Unique Identification
Item unique identification is integral to the management and tracking of government property, specifically serially-managed assets. Adhering to the details of MIL-STD-130 and the IUID policy, establishing operational systems within organizations is critical to properly identify, label and report government assets.
Organizations that manage government property, or deliver end items to the government, need to comply with the IUID methodology. Item unique identification is the key component in MIL-STD-130 and the IUID Policy, which dictate that all government property must be permanently labeled with a globally unique identifier.
An IUID is similar in concept to a license plate on your car. Every individual piece of government property needs to have an IUID associated with it that is properly labeled and permanently affixed to the asset in the form of a plate or a tag. And furthermore, that IUID data also needs to be properly reported to the IUID Registry.
What is the IUID Registry?
The IUID Registry is the Department of Defense’s master repository for all IUID data. The Registry is now located within the Procurement Integrated Enterprise Environment (also known as PIEE). The primary objective of the IUID Registry is to allow the government to manage and track end items, legacy items, updates and rebuilds, and other property. It allows the government to establish a system of record, to track and trace all assets, to create an audit trail for all assets, and to analyze, report on, and optimize its assets. It provides full lifecycle visibility of all assets and enhances the quality of information available for logistics support, systems engineering and operational planning.
When submitting data to the IUID Registry, you should expect to submit the following information:
- What property the company has in its custody
- What the item is
- How and when it was acquired
- The item’s initial value
- Its custody status (i.e., government versus contractor)
- Description of how it is marked for tracking
- Additional details for end items, legacy items and government-furnished property (GFP)
FIAR Audits
In recent years, annual audits in the defense industry have become the new normal (for the Dept of Defense at large – but also for the contractors that serve them). The Financial Improvement and Audit Readiness (FIAR) initiative has been in place for more than 10 years, but has really only been performing DOD department-wide full financial audits since 2018.
The U.S. Congress is ultimately behind this FIAR initiative, with the objective of holding the DoD accountable by performing these annual full financial statement audits. The stated FIAR objective is to achieve and sustain full audit readiness of DoD property, plant, equipment, operating materiel and supplies.
It puts the highest priority on accountability for all qualifying asset information and to be able to verify the existence and completeness of that inventory. This Department-wide endeavor requires military contractors and program managers to track and report all DoD property.
How Does the DCMA Fit In?
The DCMA is an agency under the Department of Defense that works directly with defense contractors to ensure government supplies and services are delivered on time, come in at projected costs, and meet all performance requirements. The Agency’s mission is to protect the government from acquiring assets that are not of optimum quality, being purchased at the most competitive prices, and delivered on time.
In addition to their auditing role, DCMA representatives routinely visit contractors both before a contract is awarded and throughout the life of the contract. They look to identify possible risks, ensure contracts are written to meet government needs and standards, and confirm that all terms and conditions of a contract are being met. Specifically, when DCMA representatives evaluate government contracts, they are looking to ensure that every qualifying asset is uniquely identified, labeled and tracked in accordance with the IUID Policy.
To that end, DCMA has developed a series of procedures that allow DCMA auditors to systematically assess compliance under two important policies, MIL-STD 129 (Shipment Identification) and MIL-STD 130 (Asset Identification). The DCMA has also developed specific auditing standards to evaluate a contractor’s systems and processing for managing their IUID and radio-frequency identification (RFID) obligations.
IUID Compliance and Modern Business Systems
Compliance to military IUID regulations is critical for defense contractors today. Understanding the goals and objectives of the DCMA in order to be prepared for audits has become an imperative for modern government contractors.
Government contractors today need to take advantage of modern technology to stay in compliance with their contracts. Some contracts specifically call out the requirement for property management business systems to be in place at the organization.
Fortunately for Deltek Costpoint users, the integration with A2B Tracking’s UC! Web is a complete solution for property managers. UC! Web was specifically designed to address IUID compliance and government property management requirements to provide automated labeling, verification and reporting to PIEE, wide area workflow (WAWF), GFP Module, IUID Registry and Plant Clearance Automated Reutilization Screening System (PCARSS).
This Government Property Management Business System integrates directly to the Costpoint Fixed Assets module, providing Costpoint users with enhanced asset management capabilities designed to meet tough requirements for managing government property and delivering organizations the ability to achieve sustained audit readiness.
Government contractors today need to take advantage of modern technology to stay in compliance with their contracts. Fortunately for Deltek Costpoint users, the integration with A2B Tracking’s UC! Web is a complete solution for property managers. UC! Web was specifically designed to address Item Unique Identification (IUID) compliance and government property management requirements to provide automated labeling, verification and reporting to PIEE, wide area workflow (WAWF), the IUID Registry and other important government systems.
To learn more about how the Deltek Costpoint and UC! Web integration can support your compliance objectives visit the Deltek Partner Marketplace. Also, get a more in-depth take on Defense Contract Audit Agency (DCAA), DCMA and IUID compliance with the webinar DCAA and DCMA Audit Readiness, available on demand.
Editors Note: This article was originally published in October 2020. It has been revised and updated for accuracy in February 2022.
