One question we always get is how to account for uncompensated overtime. Almost every small business has at least one employee working gazillion hours over a standard 40-hour work week. The DCAA considers these hours "at work labor." They want these hours captured in the name of treating all contractors accounting and pricing systems equitably and consistently.
Not addressing this issue successfully now poses a huge risk since DCAA auditors have no wiggle room in overlooking it as a minor problem. Any deficiency in your accounting system will likely lead to a failing grade, according to the latest DCAA guidance to its auditors (see previous article). This could prevent you from obtaining lucrative flexibly-priced contracts or fixed price contracts financed through progress payments.
The DCAA way
The basic DCAA audit guidance for addressing uncompensated overtime is very simple and straight-forward. They will divide your yearly salary by all the hours you worked and used for personal time off. This results in your "effective" billing rate. The DCAA expects you to adjust your rate in your accounting system each pay period to reflect this effective rate. The drawback to this system is contractors have to make these adjustments in their accounting system every pay period. It also artificially reduces your hourly rate. The DCAA will use this lower rate when evaluating any proposal you have submitted to the government or a prime.
A better way
The DCAA guidance does recognize other methods as being suitably fair and consistent. One approach lets you use your existing timekeeping system to segregate your "extra effort" hours, dollarize those hours, and direct those dollars to the appropriate place on your balance sheet as a liability, similar to how you might already treat regular accrued wages. Periodically, you can bring those dollars back to the income statement as a credit expense in an indirect pool. This reduces your pool costs, which gives the government credit for your extra work. You also won't have to adjust your billing rates in your accounting system or for proposals.
Everyone's happy, even the DCAA. That's what life's all about for government contractors, right?
DCAA Compliance Blog
Your Source for DCAA News and Information for Contractors
ReliAscent® LLC is the only government contract accounting firm that specializes in all aspects of government contracting compliance. From our DCAA compliant accounting services, to monthly government contract accounting for all government agency awards, contract management & administration, and financial services & planning, our goal is to ensure the success of our clients, and all small business government contractors and grantees.
In our DCAA Blog, we discuss the latest government contracting news from the Federal Government, the DCAA, and DCMA, as well as promotions offered by ReliAscent, and helpful tools and resources for contractors.
We hope you will visit and take part in the discussions on our blog on a regular basis. If you ever have any questions or would like to discuss how our experts can help, do not hesitate to contact us at any time!
Uncompensated Overtime - A DCAA Hot Button
Posted by Tyler Link on Wed, Feb 05, 2014 @ 12:53 PM
Topics: DCAA compliance, government cost accounting, DCAA audit, uncompensated overtime dcaa, uncompensated overtime
Outsourced Accounting and Cloud Computing Means Compliance
Posted by Mike Anderson on Tue, Feb 14, 2012 @ 09:02 AM
How do small businesses survive in the world today, especially when they are primarily government contractors? The government has such a twisted path of regulations concerning contractors and then they control the amount of fee or profit that the small business can earn. There is definately a cost in doing business with the government that many businesses don't realize when starting. One of the constants we have noticed over the years is that experience in government contracting makes a difference. Small businesses usually can't afford to hire someone with experience on their staff but they can hire a consultant and outsource this experience level on an "as needed" basis. We have found that fully outsourcing back office services such as bookkeeping, accounting, payroll, contract management and even HR or purchasing can be valuable to the small business. This allows those services to be performed by "experts" in the area and allows the members of the small business to focus on the tasks that they are experts at - thereby increasing their value to the bottom line. A web hosted accounting system is a great tool for this scenario because both the outsourced consultant as well as company management can access the financial records at any time. The following video outlines some of the benefits of such a web hosted solution, just imagine the cloud shared application is your accounting system!
Topics: business consultants, Government contract consultants, DCAA compliance, Outsourced CFO
Monitor your subcontractor's Incurred Cost Submissions
Posted by Mike Anderson on Mon, Dec 12, 2011 @ 07:20 AM
Tech BizSolutions has noticed another policy change from the DCAA recently that could impact the bottom line of a small business. One of our clients received a notice from the DCAA that indicated there will be more emphasis on subcontracts. Specifically this emphasis will be on reviewing policies and procedures related to subcontracting. Two areas of concern were outlined on monitoring subcontractors and on requiring subcontractors over $700K to submit Incurred Cost Submissions either to the prime or to your ACO in accordance with FAR 52.216-7. This has significant impact for many small businesses. Tech BizSolutions can help any company with preparation of an Incurred Cost Submission as well as your subcontractors (just a reminder that an Incurred Cost Submission is due within 6 months from the end of a company’s fiscal year per FAR 52.216-15).
So there are basically 2 action items required:
1. You may need to review your Policies and Procedures to make sure you have the proper documents in place for your subcontracts and control of your subcontractors. Tech BizSolutions can help you by performing a review and providing a “gap” analysis. Then Tech BizSolutions can help fill in these “gaps” with standard procedures that Tech BizSolutions has developed to handle these situations. Of course, training can be supplied by Tech BizSolutions until you are comfortable that these policies and procedures are working properly to be compliant.
2. You may need help with preparing your Incurred Cost Submission. Now is not too early to start getting ready even though it may not be due for 6 months. Completing your ICE early can also help improve your positive cash flow. To help you complete your ICE report, Tech BizSolutions has created two valuable resources to help you prepare for your ICE submission. Use these resources to ensure you can accurately finish each Schedule from the ICE. Click on the links below and you will be directed to our website where you can download each today!
Download your copy of “The Ice Date Requirements Checklist” here!
Download your copy of “The ICE Preparation Checklist” here!
Tech BizSolutions can help your company prepare a complete Incurred Cost Submission to ensure you remain in compliance. Tech BizSolutions staff are experts in completing Incurred Cost Submissions. We will complete this accurately, quickly, and in the most advantageous fashion for the needs of your company.
Contact us today to see how we can help you with these important tasks. In today’s government contracting environment you don’t want to have this done improperly. Errors in Incurred Cost submissions can take money from your bottom line. Don’t let that happen. Call Tech BizSolutions today to see how we can help you protect your bottom line.
Topics: Incurred Cost Submission, DCAA compliance
Budget Cuts, Fraud & Inefficiency Means Stricter Compliance
Posted by Mike Anderson on Wed, Oct 12, 2011 @ 08:30 AM
Topics: FAR, DCAA compliance, Government Contractors, DCAA, DCAA audit
DCAA Cost Accounting Basics - Costs
Posted by Mike Anderson on Thu, Jul 21, 2011 @ 06:32 PM
Topics: Cost Accounting, Direct Cost, Indirect Cost, Unallowable Cost, DCAA compliance
Accounting System DCAA Adequacy
Posted by Mike Anderson on Wed, Jul 06, 2011 @ 05:18 PM
Topics: DCAA compliance, DCAA audit, Adequacy Audit
Government Contracting not getting any easier
Posted by Mike Anderson on Thu, Oct 14, 2010 @ 01:45 PM
Topics: government contracting, DCAA compliance, DCAA, DCAA audit