DCAA Compliance – What it means to you. Part II

April 22nd, 2012

Part 2 of a two-part series on DCAA compliance.

Below are a few checklists to help you organize your DCAA pre-awarded contract process, as well as post-award and internal controls needs.

Before you begin the request for proposal (RFP) process for a DCAA-engagement, it’s important to have all your documentation and processes in place prior to submitting the proposal. These items will become must-haves prior to beginning work on the DCAA project; so, why not have them in place beforehand? For assistance, contact us or visit the DCAA.org web site.

Prior to the RFP process, consider this these elements—several of which were covered in more detail in our DCAA Part I blog article from December 2011.

• Set up a Chart of Accounts to segregate Direct and Indirect Costs
• Establish a Job Cost Accounting process
• Account for Indirect Cost Pools and Allocation Bases
• Determine Indirect Rate Computations
• Purchase or have a good Timekeeping System and understand the Labor Distribution Requirements
• Account for Un-allowable Costs

Once you have been awarded the contract, consider these items in your Action List:

• Re-evaluate previously identified differences in tax expenses
• Identify significant changes in management or staff since the contract has been awarded
• Be familiar with the audit type (FAO)
• List recent guidance or audit program changes
• Question transactions that resulted in a high number of dollars, but aligned with a low number of hours

Finally, having the right DCAA-compliant software is an invaluable part of your project’s success.

Also, working with a certified DCAA accounting team who knows the ins-and-outs of the contract process, document-recording procedures, unallowable costs identification, and regulations around DCAA-contracts will help make the process easier.

Take your time when considering the requirements of a DCAA contract. Do your homework and talk to contractors with experience in this area. Keeping all the steps, details, and processes top of mind will help to make your DCAA contract experience run that much smoother.

If you have questions about a DCAA audit, contact us. We’d be happy to walk you through the nuance, regulations, and set-up procedures.

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DCAA Compliance – What it means to you. Part I

December 23rd, 2011

Part 1 of a two-part series on DCAA compliance.

If you’re a small business owner with a strong desire to work as a government contractor, there are a few accounting requirements you should to be aware of before you begin. Understanding and abiding by these principles and others may reduce the amount of tension you feel when asked to participate in a Defense Contract Audit Agency (DCAA) audit.

Adhering to these Top 10 DCAA Audit Triggers and the many other specific DCAA accounting requirements may be time consuming in the beginning, but will save you a tremendous amount of effort—not to mention headaches—in the end.

Working with a knowledgeable accounting team, up front, that understands the regulations, can save you a lot of time later when a DCAA audit approaches. You will want to have all your ducks in a row before the audit.

Below are a few accounting details to contemplate as you consider becoming a government contractor.

What you should look for and pay attention to:

• A knowledgeable accounting staff: Take into consideration the degree of knowledge you and/or your staff must have in relation to DCAA regulations. It takes experience, attention to detail, and a strong strategic focus to adhere to these regulations. Working with an accounting firm with experience in this area is paramount.
• Cost Account Standards (CAS): In general, DCAA does not approve of job cost accounting software packages, but rather puts good faith in the contractor job cost accounting practices found in the Federal CAS method. In fact there are many chapters written about what needs to go into this cost-accounting method, some of which include:

• Long-range planning for indirect rates
• General ledger postings
• Overhead and General and Administrative (G&A) structure
• Accounting for government contracts on a separate spreadsheet from commercial work
• Unallowable costs that cannot be charged to government contracts
• Timekeeping System and Labor Distribution Requirements: If your software is set up correctly, your DCAA audit will go much smoother than if it’s not. If you choose not to use DCAA-compliant software, a detailed review of your current system will take place, resulting in more time, effort, and resources on your part.
• Un-allowable Costs: Certain costs are not allowed in the pricing structure, cost reimbursements, or settlements under a government contract. To allow for these types of costs, separate accounts need to be established and they must not be priced into the contract during the request for proposal (RFP) process.
• Expense Reports, Purchase Orders, and more: Detailed time records are required. The same goes for expense reports, purchase orders, and much more.
• Check your math: When government proposals are written, a great deal of effort goes into the proposal review. In fact, immense scrutiny is paid toward direct and indirect rates against long-range plans, labor category pricing, hiring agreements, vendor quotes, and more. Accuracy is key.
• Billing: Another area of interest is in the area of costs, plus time and materials billing. Time and materials billing must have all the supporting detail—at the transaction level—or it will not be paid. Working with an accounting firm or staff with this level of detail in mind is crucial.
• Managing Data Volume: If you’re working on a government contract that lasts several months or even years, data volume can be overwhelming for one staff person to oversee. Working with an accounting team helps to alleviate the burden of managing the large amounts of data needed to effectively oversee the categorization, transaction detail, and regulations needed.

For more information on how to begin working as a government-contracted vendor and the accounting principles needed to be successful, consider downloading this free book “Small Business Federal Government Contracting.”

When you have questions about the accounting-related practices, contact us. We’d be happy to walk you through the nuances needed to be DCAA compliant.

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Empire Accounting Solutions Launches New Cloud Computing Website

January 3rd, 2011

Welcome to Empire Accounting Solutions’ new website. We are pleased to offer Next Generation Accounting Services utilizing Cloud Computing Technology.

What does this mean for you? It means we can offer you the highest quality accounting and bookkeeping services more efficiently than ever by using the internet and internet based services to process information, securely maintain your financial data, and enable you, your staff and Empire Accounting Solutions staff to access your data 24/7. Most importantly, it allows us to generate financial statements and analyze your financial results in a timely manner by streamlining the workflow processes. The best part of all is that we offer our services at a very competitive fee.

How do we accomplish this? We become your internal accounting department: paying bills, posting cash receipts, balancing checking accounts, preparing payroll and payroll tax returns, producing W-2’s, and preparing monthly financial statements.

What are the steps in this process?

• You fax or email digital copies of your vendor invoices to a secure portal as you receive them. We post this information to your accounting software (typically Peachtree or QuickBooks). We pay the bills when they are due based on your approval process, ensuring your cash flow is adequate.
• You fax or email cash or accounts receivable deposit information which we promptly post to your checking accounts.
• Using a secure portal, you login to your checkbook 24/7 to review current checking account balances.
• You send us bi-weekly payroll data, we process your payroll and your employees are paid via direct deposit and have access to online pay stubs. We post payroll information to your accounting software immediately after payroll is processed to ensure up to date cash balances are represented in your checking account.
• We prepare monthly financial statements by the 15^th of each month.

How does this benefit you? It benefits you by saving you time and money. With our systems, procedures, experienced bookkeeping staff and CFO oversight, we become your off-site accounting department, saving you the time and effort required to manage that function in-house. You realize direct cost savings by eliminating labor overhead costs including employer payroll taxes and paid time off.  In addition, you realize indirect cost savings by eliminating office space for bookkeeping and accounting staff, the IT costs required to maintain an internal accounting department and the managerial costs inherent in supervising an internal accounting department. This is a huge relief to most business owners.

Contact us now to see how your firm can begin saving time and money.

We love what we do.  Come up and join us in the Cloud, we think you’ll love it too!

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