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May 8, 2012
DCAA Re-newed Focus on Cost SupportTo emphasize the importance of documenting costs incurred please consider the following.
I was retained by a new
client to help them resolve a nasty DCAA audit report of a small business. The report questioned $200,000 in costs mainly
due to a lack of cost support such as receipts, invoices, consulting agreements and mileage logs. The company relied
mainly on credit card statements. This simply will not answer the mail. Additionally DCAA is attempting to apply
Level 1 Unallowable cost penalties equal to the $200,000. So as you might imagine this is a huge issue for the
small business. I expect I will be able to at least cut that number in half and hopefully negotiate something reasonable
with the ACO.
This is a classic example why it is so important to maintain adequate records and fully document
the costs incurred as well as business purpose. Credit card statements simply will not fly in an audit. Must have
receipts, must document consultants and legal charges with agreements and require your consultants to detail the charges on
their invoices. If you are involved with automobile expense must document the business usage with mileage logs
or similar documentation. Need written plans or policies for any bonuses, etc.
Yes this is very bureaucratic
and an nuisance to everyone involved, but better to be safe today than sorry later.
Tue, May 8, 2012 | link
April 16, 2012
DCAA Trends on Accounting System Audits.I have noticed that DCAA is placing more emphasis on budgeting and forecasting in its
audits of contractor accounting systems. This is not a direct requirement of accounting systems but is at least implied
in a number of contract clauses related to pricing and invoicing and limitations of funds and similar clauses. To get
DCAA buy-in need to adequately cover the budgeting, forecasting and cost reporting processes. Particular attention should
be placed on monitoring actual indirect cost rates each month, comparing to provisional and updating budgets/forecasts on
a timely basis. I have noticed an increased interest by DCAA on forecasting of costs on a given project. This
is all driven by cost reimbursable projects. Suggest processes and policies be updated accordingly.
Mon, April 16, 2012 | link
March 29, 2012
Deltek Possibly Viable to Some Small Business ContractorsAs I have mentioned on my website, Deltek
is the leader in government contract accounting systems. However, for the most part Deltek has not been
very attainable for most small businesses. As a result most small businesses have been limited to Quick
Books. As I mention on this website, Quick Books can be made DCAA and FAR compliant. This
involves some add-ons and other work arounds. I do this rather often for small business clients.
Deltek apparently has now developed an alternative that may be reachable by some small businesses. I
feel the need to let the small business community know about this capability. It
is called Deltek Essentials. I have not experienced this new Deltek product so I cannot comment on how
well it will work for small business. The price tag is greater than any Quick Books solution; however,
it is within reach of some small businesses. My first reaction to Essentials is whether the typical small
business would have the adequate resources to run it and manage it. Or is this a tail wagging the dog thing.
That would be my number one question. There is no doubt it will exceed the FAR and DCAA accounting
system requirements as the Deltek technology has always been a leader. Deltek has always been an
excellent technology for government contract accounting systems; actually it is no. 1 in the industry. JAMIS
is right there as well. It has a lot of advantages over Quick Books. Assuming government
contract accounting expertise is not required to run and manage it, and additional accounting resources are not required either,
then I believe it will be a good solution for small businesses. This new Deltek product is certainly worth investigating.
If I get the chance to see Essentials in action I will certainly comment on its viability for small business.
At this point, it sounds like an alternative worth investigating.
October 6, 2011
Marketing CostsI hear DCAA is going to re-focus on marketing costs for allowability. I understand they are going to start increasing
its scrutiny on reviewing sales and marketing expense reports for allowability. This should make one emphasize the segregation
of promotional marketing from Bid and Proposal efforts and direct selling efforts. The latter two are allowable in most
cases. Contractors should review its expense reporting practices to make certain unallowable costs are properly segregated.
Thu, October 6, 2011 | link
September 7, 2011
Collecting On Incurred Costs SubmissionsThe whole idea under a cost reimbursable contract is to submit an Incurred Cost Submission at year end and firm up the billings
to actual rates. However, DCAA has fallen far behind on its audits to finalize rates at year end. In some cases
as much as three years. This situation is not addressed in the Allowable Cost and Payment clause. This is
unfortunate for contractors. Unfortunately situation places contractors in a delay position on collecting any amounts
due as a result of final indirect cost rates. It results in an under-recovery and the inability to collect
until DCAA gets around to auditing the Incurred Cost Submission. Some suggestions to minimize this situation include:
1. Get submissions into DCAA as soon as you possibly can to get the ball rolling.
2. Go on offense pressure both
DCAA and the Contracting Officer to make the audit a priority.
3. Get provisional rate proposals and agreements in place
as soon as possible.
4. Remain conservative on forecasting the provisional rates knowing it may take years for DCAA to
finalize the final rate. Do not understate these rates. Understating these rates is in essence an interest free
loan that you are offering the government. This loan may take years to unravel.
To get caught up, I hear
DCAA is hiring special audit travel teams to come in and get caught up in areas where DCAA is unreasonably behind.
I have found this situation to be favorable to contractors. Get your submissions in so your rates can be audited and
settled.
Most important is get the Incurred Cost Submissions into DCAA. Failing to do so puts the obligation
on you. This further delays finalizing these rates and unltimately getting what your entitled to for indirect costs.
Remember, you can only recover costs for indirect rates if there is funding available. The sooner you get the rates
submitted, the more likely you can make certain there is adequate funding. If you have a funding issue, solicit additional
funds sooner versus later. It is difficult to secure these funds late in a fiscal year or late in the contract's period
of performance.
Wed, September 7, 2011 | link
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