How to Set Up an Indirect Cost Pool Structure in QuickBooks

Government contractors span a huge variety of different business models, from small businesses to global enterprises. One thing that all government contractors have in common though is a high level of oversight with DCAA audits. Most federal government contractors looking to win bids and contracts for DoD jobs will need an accounting dcaa chart of accounts system that can pass an audit from the DCAA and easily prove a contractor’s compliance with Federal Acquisition Regulation regulations. The right accounting software can help your government contracting company ensure financial visibility for the different monitoring organizations and compliance with relevant regulations.

Regardless of which option you go with, I would be happy to discuss the ways that you can make the software work best for you. It also provides support for proposal pricing and negotiating Indirect Rates with the Government and Contractors who are DCAA regulated or engaging into a Cost-Plus Fixed Fee or Flexibility Contract. Check out our packages below to see which works best for where you are in your business development. We can be as hands-on as you need us to be or simply provide access to the software to you or your team and a multitude of ongoing training options.

Defense Contract Audit Agency (DCAA) for Small Businesses

Indirect cost pools should be organized in the accounting system consistent with how costs are proposed when bidding on opportunities. The contractor should account for costs in the same manner in which it proposes costs. Periodic calculation and review of rates (+ Incurred Cost projections) applied to progress billings to insure accurate recovery of indirect costs.

Variations and customization is permitted, as long as the chart of accounts meets DCAA requirements. Before implementing a significant variation from our standard chart of accounts, you may want to consult with an expert before your DCAA system audit. All books of account, including the relevant job order cost accounting system, must roll up to and reconcile with the general ledger system. Policies and procedures address the accuracy of the labor costs; in particular, that pay rates are appropriately authorized. On a test basis, evaluate documentation supporting the authorization of overtime to determine that the contractor is in compliance with FAR 22.103, where applicable.

DCAA FAR Compliant QuickBooks

Having an accounting system which is compliant with Federal Acquisition Regulations , Cost Accounting Standards , and DCAA/Cognizant Auditor requirements is an absolute must for every company doing business with the Federal Government. But what if you are a small Government contractor who lacks the Finance/Accounting experience to set up your Accounting System for compliance? In these cases, the following FAQ section can provide a more specific process based on your situation. Labor distribution must provide labor hours and labor dollars by employee, by job, and indirect labor accounts. Direct and indirect costs must be reconciled monthly in the general ledger.

• You should have a payroll item for every type of labor, and these need to be mapped correctly so labor costs can be posted to the right general ledger accounts.
• Procedures should also address changes in labor charging practices to assure consistency with CAS.
• Similarly, contracts can share differently in indirect costs from the various pools.
• Each cost pool is represented by an account grouping in the chart of accounts.
• There are many other aspects of Quickbooks that need to be configured, in addition to specific processes you must follow in your processes in order to remain DCAA compliant.

Determine if procedures require cross-checks, either manual or computerized, within the payroll department, for verifying the accuracy of names, rates of pay, hours worked, extensions, and accounting distributions. Segregation of responsibilities between timekeeping and payroll, to reduce the opportunity to allow any person to be in a position to both perpetrate and conceal errors or irregularities such as fictitious employees, improper time charges, etc. • Programs stressing management’s responsibility to provide for the accurate recording of labor hours. Identify and selectively evaluate documentary evidence and the frequency of the contractor’s management reviews to determine whether the scope of such reviews are appropriate, the conclusions sound, and appropriate follow-up actions were taken. Examinations of the labor accounting system, including the testing of labor charges for accuracy, and performance of unannounced floor checks in accordance with company policy and/or IIA standard. Internal Control Matrix for Audit of Labor and Accounting Controls, this is the DCAA audit program / checklist used to review and assess a contractor’s labor system – which follows in its entirety. DCAA compliance is simplified with a customizable default chart of accounts.

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For example, the ICE Model and EZ-Quant Applications used by the agency can be accessed online. With careful attention to the regulations and an affordable accounting system, small businesses can comply with the standards that govern federal contractors. • Direct labor employees recording their time no less often https://quickbooks-payroll.org/ than daily. Sufficient formal subsidiary records are maintained, if necessary, to assure accurate time recording and allocating to intermediate and final cost objectives when multiple jobs are worked in a day. If you’re already involved with government contracting, then you know that invoicing can be a challenge.

If you read over the checklist and don’t understand the items on it, this is a good sign that you won’t pass that audit. One of the requirements of a compliant system is a third party payroll provider . While most clients prefer Paychex , they also have the option of using ADP, Gusto, or any local payroll provider they choose. It must provide the necessary financial information to demonstrate compliance with the Limitation of Funds clause and to support progress payments. Stay current on changing tax regulations and learn how to grow your business profitably.

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Verify that the contractor performs reconciliations of timecards to attendance records and labor distribution summaries. If these reconciliations are performed as part of the IT operations, the auditor should document in the w/p’s and design appropriate tests to verify the effectiveness of the computerized procedures. Determine if the contractor’s policies and procedures are adequate to maintain the integrity of the timekeeping system. Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

It should also provide you with the tools you need to boost the profitability of your business and lower your operational cost. By more effectively monitoring profitability you can better identify which project management processes you need to improve. Additionally, if you streamline your accounting processes you can save time and avoid costly errors which arise frequently when data is not integrated or needs to be manually re-entered in multiple systems. Government contractor organizations are among the most frequently audited businesses in the world.

These subsets are standard to the industry of government contracting and are universally recognized by industry accountants and DCAA auditors alike. On form SF1408, Section II – Evaluation Checklist, Item #2 states the government contractor’s accounting system needs to have proper segregation of direct and indirect costs. It also requires the identification and accumulation of direct costs by contract. To meet this requirement, government contractors need a proper chart of accounts to classify these costs into a direct or an indirect expense category. An adequate accounting system for tracking costs and providing vital financial information to management is not only important, but is required for the performance of government contracts.

A good way to determine this is to consider if the cost would be incurred if the specific contract did not exist. Some examples of direct costs are direct labor, direct materials, manufacturing supplies, and travel directly related to a contract.