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Small Businesses, depending on the
situation, need to have their accounting systems approved by the
Defense Contract Audit Agency.
In some
cases the
Contracting Officer can
approve or disapprove a system without DCAA involvement.
Approval of any contractor's system is not
the same when it comes to small vs. large when you are talking about the
three systems (accounting, estimating or purchasing).
DCAA Contract Audit
Manual (CAM) DCAAM 7640.1
Not only are the
systems different, they are used differently when it comes to small and large
business and commercial vs. non-commercial.
See:
FAR 15.407-5 Estimating Systems
DFAR 215.407-5-70(b) (1) Disclosure, maintenance, and review requirement
FAR 32.503.3 Initiation of progress payments and review of accounting system
FAR 44.3 Contractors’ Purchasing System Review
DFAR 244-305-70 Purchasing system
Essential Elements in Government Accounting.
Job Cost Tracking
HR & Payroll
Billings & Accounts Receivable
Valuable Elements
Dashboard / Key Performance Indicators
Budget / Resource Management
Time Management
Written Policies & Procedures
DCAA Requirements
Segregate direct from indirect costs Direct Costs
Costs directly associated with performing the contract
If you didn’t have the contract, would you still incur the cost?
Examples include;
Labor
Subcontractors/consultants
Materials
Travel,
Doesn’t matter if its billable or not
Indirect Expenses
Allows for the recovery of the cost of operations not associated with a
specific job
Based on simple math
Conceptually perplexing
No two companies are the same.
Types of Indirect Costs
Fringe
Overhead – Company Site
Overhead – Client Site
G & A
Subcontractor/Material Handling
Segregate & accumulate costs by contract
Logical & consistent allocation of indirect expenses
Accumulation of costs under general ledger control
Timekeeping system that identifies labor hours and labor cost
Labor distribution system that charges direct & indirect labor to what was
worked on
Monthly determination of costs charged to contract through routine postings
Identification & exclusion of unallowable expenses
Identification of costs by contract line item or task
Segregation of pre - production costs from production costs (or pre-contract
costs) Types of Expenses
Direct
Indirect
Fringe
Overhead
G & A
What happens if you don’t have an Acceptable Accounting System?
Award(s) can / will be delayed
You will be subjected to additional audits
Audit frequency will be increased (higher risk category)
Additional reporting burdens may be required
Payments can be delayed
Award can be canceled / terminated
Contract can be terminated during performance
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