We have had some internal discussions lately here and think it might be helpful to share some of our experiences of signs that an accounting system is not compliant with DCAA requirements. This is based on experience of looking at a lot of different systems, participating in many DCAA audits, not only in past careers but for clients, and day to day experiences working with these systems.
This list is based on the government's standard pre-award survey form SF1408 but we have also tried to put this in terms that most non-government people can understand to take away any confusion. So here are the top 15 signs (apologies to David Letterman's "top 10 list" and Bill Engvall - "here's your sign"):
15. Your Chart of Accounts is set up with expense accounts on an alphabetical basis
14. You don't use timesheets
13. You use timesheets, but not everyone fills them out or they don't fill out all time worked
12. Labor and other expenses are not segregated by direct and indirect categories
11. Direct expenses (both labor and other expenses) are not segregated by job or project
10. Indirect billing rates are not calculated monthly
9. Job costs and the application of indirect rates to each job are not calculated monthly
8. It's difficult or impossible to reconcile payroll with expensed labor
7. You're not sure if your contracts are fixed price, cost-plus or time and material
6. Your accounting system operates on a cash basis, not an accrual basis
5. You don't pay your subcontractors within 30 days
4. You don't produce an annual budget
3. You don't have written policies and procedures for all of the above
2. You've already failed a DCAA accounting system review
Andthe number one sign:
1. Your accountant asks for a copy of FAR Part 31.
I would like to thank our Dave Donley for his input to this. Some of you have either talked with Dave or remember him from some Blog posts when the blog was on the Tech BizSolutions website. Dave is a super guy and has tremendous insight into the government accounting regulations. Obviously this list is just that, a simple list. the only way to be completely sure your system will pass a DCAA audit is to have an expert review and evaluate your system. We can do that for you if you need some assistance. We offer quick reviews for free from time to time (monitor our website or sign up for our mailing list) and we can do complete reviews for a minimal fee when you are ready. The best way is to let ReliAscent take over your accounting completely. This way you can be sure it is done compliant and correctly and you can concentrate on the issues that are more critical to making money for your business.