DCAA Compliance, Audit, FAR and Government Contract Consulting
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Government Contract Cost Accounting System - Adequacy and DCAA Compliance

A critical pre-requisite to government contracting and particularly to negotiated contracts is an adequate cost accounting system determination or approval.  A common service I offer is to help contractors with their government contract cost accounting systems and converting them to DCAA compliant systems.  Ultimately, securing DCAA and government approval.   I have been doing a lot of these lately and decided to write some about it.  This is a crucial pre-requisite to winning certain types of government contracts.  I provide assessments of cost accounting systems and make the system, procedures and internal controls compliant with DCAA and FAR requirements.  This usually takes a few days.  I provide the contractor an exact and specific road map to secure DCAA compliance.  If the client follows my road map its system will pass any objective DCAA audit and will secure an approval of its government contract cost accounting system. This is because I was a DCAA auditor once and have over 25 years experience with DCAA, FAR and CAS matters.   I know what it takes.

What does it take to get an Approved Government Contract Accounting System?

For non-major contractors there are twelve (12) key elements that you must pass.  These are must haves, no exceptions.  In order for an accounting system to be approved it must demonstrate the ability to:

  • Segregate direct costs from indirect costs;
  • Accumulate contract costs by cost element by contract, project, task or cost objective for each cost element (labor, materials, subcontracts, other direct costs, fringe, overhead and G&A);
  • Maintain an adequate timekeeping system;
  • Maintain adequate labor and accounts payable distribution systems;
  • Account for unallowable costs and exclude such costs from billings, claims and proposals;
  • Make certain direct costs and indirect costs are controlled by the general ledger;
  • Capture pre-contract costs separately;
  • Maintain homogeneous indirect cost pools and allocate indirect costs to contracts, projects, tasks or cost objectives based on a beneficial, causal and equitable basis;
  • Comply with financial clauses like the Limitations of Costs/Funds and Progress Payments clauses;
  • Make interim accumulation of costs in the books of account, at least monthly;
  • Track costs by contract line item and;
  • Provide reliable historical accounting data for follow-on procurements.

These 12 items only touch the surface.   There are many underlying complexities and implications to the key items.    I know to some this may be overwhelming.  But I make it simple for the contractor.  My assessment will highlight exactly what you need to do and will guarantee passing any objective DCAA audit.  I have conducted many of these assessments and helped contractors secure compliance without exception.

As a small business going at this alone is not a good idea, with all the underlying complexities.  Given the small cost of an assessment my advice is to seek a few days time of an expert to lead you in the right direction.