Got the big contract, now what? Accounting by former DCAA Supervisory Auditor

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• Well-written accounting policies and procedures reference specific accounts and account groups and describe how certain costs are treated.
• Direct Costs – These are costs that are easily identifiable as they connect to the direct delivery of production, i.e., direct labor, travel, materials, and subcontractors.
• GAAP is the accounting principles currently used in the United States and provides rules on how financial transactions should be accounted for.
• After winning a large government contract, they may desire to start treating the cost of an assigned buyer as a direct cost.
• Now might also be time to consider if folks are really in the right positions/titles.

Many cost volumes require a complete basis of estimates to be written and tied to the price tables. The question is “How is the pricing manager going to be able to do this without coordinating with the technical/management volume leads? ” The Basis of Estimates and technical schedules MUST be in sync with the cost volume timelines. This includes giving out deadlines to the BOE writers and standardizing the BOE data calls.

Understanding the DCAA Compliance Checklist

Government contractors must establish a policy that identifies which indirect cost pools are to be maintained within the accounting system and defines the allocation base elements for each indirect cost pool. While direct costs are specifically incurred for a contract, indirect costs require further consideration. This is especially important when preparing your accounting system for cost-reimbursement (cost-type) contracts.

Don’t make your pricing volume the reason for your proposal loss. It’s a good idea to keep a checklist of these basic rules and to regularly go through it and ensure that you’re in compliance. Messing up your timesheets can cause a massive headache in the case of a DCAA audit, including fines and disqualification from future contracts. This means making sure all of your expenses are accounted for and that your revenue is accurate.

Government Contractor Chart of Accounts Template

The survey assesses whether your accounting system can accurately track costs in accordance with contract terms. If you fail the survey, you will not be able to receive the contract. One of the most useful features of QuickBooks for government contractors is the “P&L by Class” report. This presents a condensed view of each individual project broken down by profitability and cost element. We take a 50 minute deep dive into the topic of indirect cost rates during webinars, so we won’t get into it here. However, you can register for a live webinar or watch a recorded webinar, or watch our 5 video series to better understand indirect rates by clicking here.

To set up QuickBooks for the class method, create a class in the class list for each indirect cost pool structure identified in the indirect cost allocation policy. Being DCAA compliant is vital for a government contractor and having the chart of accounts set up properly allows you to begin the whole process the right way. Some companies lump all their direct labor costs – for W-2 employees, contract labor and temporary labor – into a single account.

DCAA Website

An Why A Dcaa Compliant Chart Of Accounts Should Be Your Systems Foundation system should have the ability to track billings and project costs in accordance with indirect rates. Costs must be assigned to the right buckets-typical cost pools might be direct labor, fringe benefits, overhead , general and administrative (G&A), and material handling (M&H). As a government contractor, it’s so important to maintain DCAA compliant accounting systems and have your chart of accounts set up correctly so that you can begin the process of bidding on a new contract right away.

Some accounting software packages designed for government contracting provide pre-configure COAs. For each account, you set up a general ledger account that will be used to record transactions and update account balances. To facilitate indirect rate calculations, accounts need to be grouped to allow costs to flow into cost pools that make up your indirect cost.

Similar to Accounting Systems for Government Contractors (

The chart of accounts is simply a list of general ledger accounts, grouped by their function, within your accounting system. In a typical chart of accounts, you will find a balance sheet section that includes assets, liabilities, and equity section, and you will find a profit and loss (P&L) section. You should determine if you are addressing each of these requirements as well as the effort expended using your current processes. An integrated compliant cost accounting system will greatly reduce the cost compared to a QuickBooks-centered solution. It is ultimately your responsibility to understand the requirements and have proper controls in place prior to a DCAA compliance audit.

It’s important to note that you can have multiple indirect cost pools; what’s right for you depends on your business and processes. In Phase II, however, the Federal government has higher expectations. One reason is because a Phase II is for a lot more money—around $1 million, versus only $150,000 in Phase I. The contracting officers need to be confident that you have, among other things, accurately estimated your indirect rate. The ability to calculate a good indirect rate comes from a good accounting system that differentiates direct from indirect costs, and isolates unallowable ones. It is more likely that the agency will shift from making a “fixed price” award, commonly used in Phase I to a “cost plus fixed fee” or CPFF award. A firm fixed price or FFP award requires a recipient to perform the work necessary to produce the deliverables specified in the contract/grant for an established dollar amount.

This is a policy statement; the Federal government doesn’t want to give an award to a firm that isn’t playing by the rules concerning items such as payroll taxes. Two weeks later theSCA audit is over, and I receive my findings. The company was assessed almost $200,000 in back wages, but we were found to not be negligent in our practices, policies and procedures.

• Under “Company Settings”, you can set the first day of the workweek to coincide with the day of the week on which your weekly timesheets begin so that payroll periods and timesheet periods are the same.
• Framework for allocating specific jobs to Clients and Contracts.
• Some accounting software packages designed for government contracting provide pre-configure COAs.
• You don’t want to be scrambling at the last minute or miss out on contracts because of a poorly organized system.
• Managing government grants, contracts and projects requires a robust set of processes and systems, including project management and accounting tools to handle the funding correctly and to comply with government reporting requirements.
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Each independent member of PrimeGlobal is a separate firm and an independent legal entity. PrimeGlobal is not a partnership and independent member firms are not acting as agents of PrimeGlobal or other independent member firms. Add a column for account statements that specifies which statement you’ll be using for each account-cash flow, balance sheet, or income statement.