The Mystery Behind Accounting
Systems Solutions and Setups
April 28, 2016
The Fundamentals of Government Contracting Webinar Series
government contracting
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Your Presenters
@DHG_GovCon
MikeMardesich
DixonHughesGoodmanLLP
703.970.0508
[email protected]
JanetBorjeson
DixonHughesGoodmanLLP
240.403.3735
[email protected]
government contracting
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Fundamentals – Season 1
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@DHG_GovCon
Challenges of Contracting with the Federal Government (November 2015) Completed
Contract Types and Associated Risks (December 2015) – Completed
Year-End Closing (January 2016) - Completed
An Introduction to the Incurred Cost Submission
– Part I: Who, What, Where, When, Why, and How? (February 2016) Completed
– Part II: Preparation and Adequacy Review (March 2016) - Completed
• Accounting Systems and Setups (April 2016) - You are Here!
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Accounting System Adequacy 101 (May 2016)
The Composition of Total Cost (June 2016)
Making Way for 2017 – Budgeting and Provisional Rates (July 2016)
Procurement Systems: DFARS Business Systems Rule and Criteria (August 2016)
Exploring the Gray Area of Unallowable Costs (September 2016)
Policy and Procedures Manual: What’s In It and Why Do You Need One? (October
2016)
government contracting
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Overview
@DHG_GovCon
• Types of Accounting Systems
• Common Myths
• How Your Accounting System Can Fit Your
Growth Strategy
• A Walk Through of an acceptable accounting
system
• Other business systems
government contracting
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The Fundamentals of Government Contracting Webinar Series
Types of Accounting Systems
government contracting
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Types of Accounting Systems
@DHG_GovCon
• Common names for accounting systems:
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Financial accounting
Tax accounting
Cost accounting
Contract cost accounting
• One set of books with different slices and levels
of information reporting!
government contracting
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Accounting System
@DHG_GovCon
• The Accounting System!
– Overall accounting system controls
– Direct cost controls
– Indirect cost controls
– Labor system controls
– General IT system controls
government contracting
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The Fundamentals of Government Contracting Webinar Series
Common Myths
government contracting
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Myth #1
@DHG_GovCon
To be DCAA compliant a contractor needs a big,
expensive accounting system
• False – There are many commercially available
accounting software systems that help
contractors meet system requirements
government contracting
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Commonly Used Software
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@DHG_GovCon
QuickBooks
Deltek
Unanet
PROCAS
eFAACT – an Add-On to QuickBooks
MicroSoft Nav (PVBS)
JAMIS
SSI
government contracting
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Myth #2
@DHG_GovCon
There are different systems for different types of
contracts
• False – An acceptable accounting system
accumulates costs by contract or job regardless
of the contract type
Fundamental requirements outlined on the
SF1408 and in DFARS 252.242-7006
government contracting
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Myth #3
@DHG_GovCon
“I’m a small business, I don’t need to be DCAA
compliant”
• False – If a contractor has a contract with the
federal government, according to the DCAA
“Contractors should recognize that an operable accounting
system that is under general ledger control is of paramount
importance when performing government contracts.”
DCAAM7641.90 (3a(3))
Additionally, it is much more difficult to switch to a
compliant system after the fact.
government contracting
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Myth #4
@DHG_GovCon
The system needs to be able to calculate the
indirect rates
• False – The system should be designed in order
to assist with the accumulation of costs in cost
pools such as fringe, overhead, general and
administrative, and segregate the unallowable
expenses.
The calculation of the indirect rates can be accomplished
using memorandum records as long as the amounts
reconcile back to the general ledger.
government contracting
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The Fundamentals of Government Contracting Webinar Series
How Your Accounting System
Can Fit Your Growth Strategy
government contracting
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How to Select the Right System
@DHG_GovCon
• Some things to consider when selecting a
new accounting system:
– Contract type
– Number of employees
– Billing complexities
– Rate structure
– Department structure
– System integration with timesheets, labor, HR,
inventory, other key elements
– What do you want your system to provide?
government contracting
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Management Reporting
@DHG_GovCon
• A well designed and monitored system
can produce timely management reporting
– Allows management to make business
decisions timely
– Allows management to monitor trends in their
business
government contracting
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Tools for Success
@DHG_GovCon
• Implement training and compliance programs
• Keep it consistent – keep it simple
• Set up the system to support how you do
business – not the other way around!
• Minimize reporting formats – avoid the “excel
crutch”
• Document policies and procedures - minimize
disruption from turnover
• The system is much more than just accounting –
stakeholders all have different needs and
viewpoints
government contracting
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The Fundamentals of Government Contracting Webinar Series
What An Acceptable
Accounting System Looks
Like
government contracting
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Chart of Accounts
@DHG_GovCon
• The chart of accounts is essential to any
accounting system
– Segregates direct, indirect, and unallowable
costs
– Common account number schemes:
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Revenue - 4000
Direct – 5000
Indirect – 6000 – 8000
Unallowable – 9000 (for both Direct and Indirect)
– Consistent across contract types
– Ease of indirect rate calculation
government contracting
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Time Keeping System
@DHG_GovCon
• The time keeping system should have the
following guidelines
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Follow a company’s payroll cycle, if possible
Employee signature approval
Supervisor signature approval
Able to be locked, once approved.
If changes are to be made, the changes are required
to be documented
– An audit trail of the changes needs to be able to be
produced
– Be able to traced to labor allocation
government contracting
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Labor Cost Allocation
@DHG_GovCon
• Labor cost allocation based upon the hours
worked in each time period.
• Total time accounting!
• Some DCAA acceptable labor costing methods:
– Effective rate calculation each period
– Pro rata allocation of hours
– Predetermined rate and variance
• Labor costs need to be documented and
reconcile to the approved timekeeping
records.
government contracting
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Other General Guidelines
@DHG_GovCon
• The accounting system should be reconciled at least
monthly
– The Balance Sheet accounts
– The Profit and Loss accounts
• Identify costs by contract
• Approval and documentation of all adjusting journal
entries
• Billing and revenue can be reconciled to cost accounts
• System of internal controls
• The system should be able to prepare financial
statement reports and a trial balance
• A policies and procedures manual
government contracting
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The Fundamentals of Government Contracting Webinar Series
Other Business Systems
government contracting
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Other Business Systems
@DHG_GovCon
• Earned Value Management System
(252.234–7002)
• Estimating System (252.215–7002)
• Material Management & Accounting
System (252.242–7004)
• Property Management System (252.245–
7003)
• Purchasing System (252.244–7001)
government contracting
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Questions?
government contracting
@DHG_GovCon
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Other Items
@DHG_GovCon
• Join David and Mike next month as they
take a deep dive into the accounting
system criteria
• Join DHG on May 5, 2016 for our 21st
Annual Government Contracting Update
government contracting
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The Fundamentals of Government Contracting Webinar Series
Join us next month for Accounting System
Adequacy 101 on Thursday, May 26, 2016
government contracting
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