Contracts funded by the U.S. Government are subject to the Federal Acquisition Regulations (FAR). Whether a prime contract, subcontract, or grant (or cooperative agreement), FAR compliance is mandated by the terms and conditions. Audits performed by DCAA or financial auditors from other federal agencies evaluate whether costs on one or more prime contract, subcontract, or grant adhere to all applicable regulations (FAR Compliance and compliance with all applicable supplemental regulations) and Public Laws.

FAR encompasses rules on how the government may procures goods and services (including definitions of contract types) plus rules on how suppliers of those goods and services propose, record in accounting ledgers, and invoice for them. Part 30 describes criteria for a contract (or contractor) becoming fully covered by the Cost Accounting Standards; Part 31 explains cost accounting rules, even if not covered by Part 30. The contractor’s purchasing rules are discussed in Part 44. Part 42 describes responsibilities of the (typically geographically near the contractor) Administrative Contracting Officer (ACO), as opposed to the (buying command) Procurement Contracting Officer (PCO or CO). While the PCO (or appointed Contracting Officer’s Representative [COR] or Contracting Officer’s Technical Representative [COTR]) oversees technical methods and achievements plus pre-award and award administrative issues, the ACO oversees the administration of post-award FAR compliance issues for the supplier organization, as a whole.