DCAA Compliant Accounting Systems

What is a DCAA Approved Accounting System?

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Perhaps one of the first and most important concepts to understand is that "DCAA approved accounting" is a bit of a misnomer.  Despite what you may have heard, there is, in fact, no such thing as a "DCAA approved accounting system (or approved DCAA accounting software)," nor is there such a thing as a "DCAA certified accounting system (or services)."  There are simply systems that are compliant with FAR & DCAA requirements, and DCAA compliant accounting software, that is designed to pass the accounting system audit. 

Many DoD, NASA, DHS, and even DoE contractors are often instructed by the Federal Government (or prime contractors), to "get their accounting system compliant," in order to be considered for award. Whether this is because they have just been selected for an SBIR award, or a cost type (or even some T&M) contract(s), the small business needs to move quickly to:

  • Install a compliant accounting and timekeeping system (or convert their existing system)
  • Draft compliant policies and procedures
  • Train their employees 

To learn more about the components of a compliant system, download our popular white paper: "A Quick Guide to the DCAA Compliant Accounting System - Understanding the SF1408," now.


DCAA Accounting - Step 1: Setting Up Your System

At ReliAscent, our experts handle the setup (install or conversion), process for you.  First, we can install your accounting software (or bring your existing system into compliance), and then make the system--as a whole--compliant (via "satellite" systems/add-ons, and through the work of our experts).

However, setting up a compliant timekeeping system, and then bringing your accounting system into compliance is only the first step---you must also maintain your compliant system throughout the duration of your contract (usually indefinitely, should you plan on continued federal contracting). This means having experienced experts handle things like monthly closes, DCAA ICE submissions, and audit support services (see Step 2, below).

Setting up the system starts with installing and/or properly formatting your accounting/general ledger software (ReliAscent recommends small businesses use the desktop version of QuickBooks®, as it is the most user-friendly and affordable system, and does not lack many critical components required for compliance, like the Online version). 


How Do I Set Up A Compliant Accounting System If...

I have not used a "standard" off-the-shelf accounting software previously?

In this case, a small business needs help immediately (but the good news is that you are starting fresh, so the time and costs associated with setting up your system are minimized). The following is a rough order of tasks needed to get a system up and running:
  • Install a general ledger program (ReliAscent normally recommends QuickBooks®)
  • Format a company template within the general ledger program to:
    • Structured chart of accounts
    • Segregate adequately the direct and indirect expenses
    • Isolate unallowable expenses
    • Set up a job cost environment where the direct expenses may be charged to a single final cost objective
    • Set up a labor distribution system
    • Insure GAAP compliant accounting
  • Establish a compliant timekeeping system (either manual or automated)
  • Establish a payroll system compliant with government requirements
  • Establish a way to do:
    • Indirect Rate calculations on a regular basis (normally the government likes monthly)
    • Provide for Subsidiary Job Cost Reports in a fashion that the government likes to see
  • Establish a system of policies and procedures
  • Training to employees 

I have an existing QuickBooks® system but I don't think it is compliant?

ReliAscent will take a look at your current QuickBooks® system and in a cursory review, identify gaps in compliance that need to be fixed.  These gaps typically fall under the major areas identified in the governments Form 1408.  The next step is for ReliAscent to provide a quote to the company on how to fix this.  This normally involves a one time up-front expense for the conversion of the QuickBooks® file and then a monthly charge going forward, for ReliAscent to help with compliance issues, invoicing, indirect rate calculations and management, creating subsidiary job cost reports, as well as other accounting functions.  The up-front conversion can be one of several methods:

  • Beginning Balance method dating back to a previously significant date (like beginning of a FY or a contract)

  • Beginning Balance method from installation date going forward

  • Overlay of accounts

Once the conversion method is selected, work can begin.  The main tasks encountered in a conversion include:

  • Restructuring the Chart of Accounts
  • Setting up a job cost accounting system
  • Setting up a labor distribution system
  • Identifying direct costs to final cost objectives
  • Identifying and isolating unallowable expenses
  • Modified, memorized reports

syncing the general ledger system to the timekeeping system, the payroll system, job cost system, the indirect rates system, etc. Other than described in this paragraph, the general guidelines of set-up will be very similar to that described in the section above.


I have a different general ledger program but don't think it is compliant?

Sometimes a small business has a general ledger program already in use when they decide to start accepting work from the Federal Government. This system may be able to be made compliant (ReliAscent has worked with several other general ledger systems in the past, making them compliant).  Several steps should be reviewed prior to proceeding with making the accounting system compliant.  This is a partial list of considerations prior to converting the system:

  • Does the existing system have enough controls to do the basic GAAP and job cost accounting required by the government?
  • Does the company expect to grow the Federal Government contracting in the future - would it make sense to consider changing to an accounting system that is fully compliant "out of the box"?
  • What does the company use for timekeeping today? Can this system be compliant?  If so, does it electronically integrate with the general ledger software program?
  • A determination, based on the above questions, can be made to see if the existing general ledger can continue to be used.  If so, it normally will have to be structured like the first section above which will require a one-time effort.
  • In addition, the timekeeping system will need to be made compliant and mapped to the general ledger system.
  • The system for calculating indirect rates will need to be established outside the program and mapped to the system.
  • The system for calculating and printing job cost reports will need to be established and mapped to the general ledger system
  • Policies and procedures will need to be developed for all processes.

Many times it may be determined (in this evaluation), that it may be easier to simply convert the system to a QuickBooks®-based system, since this is an already proven system, it's easier to convert, and easier to operate in a compliant manner, due to the vast experience the ReliAscent team has with this type of system.


I have a QuickBooks® system that I think has been set-up in a compliant fashion?

The first step would be to review the QuickBooks® system in a cursory fashion to see if it meets the general guidelines of SF1408.  If not, a conversion can be recommended as described above.  If the cursory review looks good, then a more detailed review may be in order to see if the system is compliant.  This is normally done in the form of a Mock audit.  


DCAA Accounting - Step 2: Maintaining Compliance

Once the accounting system is brought into compliance, ReliAscent offers different levels of compliant accounting services to Federal Contractors and Grantees, each tailored to your business and compliance needs. The specific level and type of services is often dictated by your contracting agency, contract requirements, and budget. To learn more about our government contract accounting services, visit our DCAA Accounting Services page.

Our Cloud-based government accounting program and services include:

  • Cloud-hosted QuickBooks® for confidentiality, security and ease of access by you, the client, from anywhere you can access the internet
  • Web-Based automated Timekeeping with electronic integration to QuickBooks®
  • QuickBooks® structured in a Job Cost environment compatible with FAR & DCAA requirements
  • Project burdened cost reporting
  • Indirect rate calculations
  • Chart of accounts structured to meet the Federal Acquisition Regulations
  • Financial management tools
  • Profitability on current contracts
  • Financial position of the company

Contact us to discuss in detail how this might work for you.  Any assistance you request from ReliAscent will be an allowable cost under your contract. 


DCAA Accounting Services