accounting software consulting for government contractors
A government contractor’s accounting system is the heart of the company’s overall compliance system and is the primary means of providing evidence that cost billed to the U.S. Government are in accordance with applicable procurement regulations. For this reason, the accounting system will receive the highest level of scrutiny during contractor business systems reviews. Our company will serve as your accounting and government regulation compliance experts to ensure that your accounting system adheres to systems criteria recently implemented by the Department of Defense (DOD), and certain civilian agencies such as the Department of Energy (DOE) and National Aeronautics and Space Administration (NASA).
DFARS 252.242-7006 defines the accounting system as the contractor’s system or systems for accounting methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret and present accurate and timely financial data for reporting in compliance with applicable laws, regulations and management decisions, and may include subsystems for specific areas such as indirect and other direct costs, compensation, billing, labor and general information technology.
Due to the focus on a wide variety of facets within this clause, it is critical that contractors be prepared to illustrate the operating effectiveness of controls not just within the accounting system, but also in other subsystems that feed into the accounting system; such as general IT controls, billing, labor and timekeeping that span outside of the 18 specific system criteria delineated within the regulation.
Our objective is to ensure that your company has a fully compliant accounting system that consistently produces sound data in compliance with applicable procurement regulations. We can help ensure your accounting system provides consistent and reliable data for the use in pricing, billing and other reporting functions to Company management as well as the U.S. Government. DFARS business systems regulations governing accounting system requirements have become more and more complex. To be acceptable, DFARS 252.242-7006 currently requires an accounting system to accomplish the following functions:
- A sound internal control environment, accounting framework, and organizational structure;
- Proper segregation of direct costs from indirect costs;
- Identification and accumulation of direct costs by contract;
- A logical and consistent method for the accumulation and allocation of indirect costs to intermediate and final cost objectives;
- Accumulation of costs under general ledger control;
- Reconciliation of subsidiary cost ledgers and cost objectives to general ledger;
- Approval and documentation of adjusting entries;
- Management reviews or internal audits of the system to ensure compliance with the Contractor’s established policies, procedures, and accounting practices;
- A timekeeping system that identifies employees’ labor by intermediate or final cost objectives;
- A labor distribution system that charges direct and indirect labor to the appropriate cost objectives;
- Interim (at least monthly) determination of costs charged to a contract through routine posting of books of account;
- Exclusion from costs charged to Government contracts of amounts which are not allowable in terms of Federal Acquisition Regulation (FAR) part 31, Contract Cost Principles and Procedures, and other contract provisions;
- Identification of costs by contract line item and by units (as if each unit or line item were a separate contract), if required by the contract;
- Segregation of preproduction costs from production costs, as applicable;
- Cost accounting information, as required—
- By contract clauses concerning limitation of cost (FAR 52.232-20), limitation of funds (FAR 52.232-22), or allowable cost and payment (FAR 52.216-7); and
- To readily calculate indirect cost rates from the books of accounts;
- Billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms;
- Adequate, reliable data for use in pricing follow-on acquisitions; and
- Accounting practices in accordance with standards promulgated by the Cost Accounting Standards Board, if applicable, otherwise, Generally Accepted Accounting Principles.
Proposed new rules designed to improve the efficiency and effectiveness of business system audits, if approved, may allow your company to self-certify the adequacy of its accounting system with an audit by an independent CPA, in lieu of DCAA, to test your accounting system for compliance with relevant systems criteria. Unfortunately, few independent CPA firms have the experience and expertise in government contracting to properly conduct such an audit in compliance with Generally Accepted Government Auditing Standards. Redstone Government Consulting has the unparalleled expertise, including over 160 years of senior level DCAA experience, needed to ensure your accounting system complies with DFARS 252.242-7006 and other FAR and DFARS regulatory requirements.
Some of the services we provide to meet your accounting system compliance needs include:
- Designing and/or implementing a new tailored accounting system, or updating the existing system for process improvements.
- Preparing written accounting system policies, procedures, and detailed staff instructions.
- Risk assessments and GAP analysis of your current accounting policies, procedures, and practices.
- Mock audits of your accounting system using procedures that mirror DCAA/DCMA procedures for evaluating accounting systems.
- Providing subject matter experts regarding accounting system regulatory compliance and GAGAS compliance to assist independent CPAs performing accounting system audits and internal auditors.
- Developing and implementing appropriate corrective action plans.
- Developing and delivering customized staff training.
- Responding to DCAA/Independent CPA audit findings and contracting officer inquiries.
- Advice and assistance to supplement, as needed, internal compliance department knowledge and expertise.
- Strategic planning assistance
- Software source selection and implementation services
- Ongoing and recurring oversight assistance.