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Nuts and Bolts of Government Accounting

Learn about DCAA audits, indirect rates, and accounting systems in government contracts, with guidance on audit types and managing costs effectively.

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Nuts and Bolts of Government Accounting

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  1. Nuts and Bolts of Government Accounting Paula Handrahan Abt Associates Inc.

  2. Agenda • DCAA • Acceptable accounting systems • Indirect rates • Proposal Audits

  3. DCAA Audits • What is DCAA’s role? • Advisor to buying command on proposal reviews • Reports to ACO on rate and CAS audits • What types of audits will they do? • Pre-award audits • System reviews • Post-award audits • Incurred cost (rate) audits • CAS audits (If CAS covered)

  4. DCAA Audits • What determines the type of audits DCAA can perform? • Type of contract • Basis of contract award • Size of company • What happens if the you disagree with DCAA? • The PCO or ACO would have to justify why they are siding with you.

  5. Indirect Rates • What are they? • A way of recovering costs that are not directly associated with a particular contract. • How many rates do you need? • Depends on many things • Size of the organization • Mix of government vs. commercial sales • Basis of award • Variety of products in the business unit

  6. Indirect Rates • What makes up the different pools? • Overhead pools: • Expenses related to providing the product/service but not part of the end product (facility costs, supervision, etc.) • How many overhead rates should I have? • Less is more…small pools are difficult to predict and manage • G&A pool: • Expenses for overall operation of the business as a whole (CEO, CFO, CIO, etc.) • Material/Subcontract Handling pool: • Expenses related to material handling or subcontract management (receiving, subcontract operations, etc.)

  7. Indirect Rates • What makes up the bases? • Overhead Base • Generally direct labor dollars • Sometimes includes fringe benefits on direct labor • G&A Base • Total Cost Input (all direct and indirect costs except G&A expenses) • Value added (all direct and indirect costs except material/subcontract costs & G&A expenses) • Single element (usually direct labor) • Material/Subcontract Handling Base • Material/Subcontract dollars

  8. Indirect Rates • How do you choose a base? • G&A • What base best represents the total activity of a business unit in a typical fiscal year • Overhead • What base best allocates the expenses to the final cost objective to reasonably reflect the benefits received

  9. Accounting Systems • There is no 1 approved accounting system that has to be used • Any system used must be able to track costs by job • Direct costs are key • Labor, material, travel, etc • Labor hours are generally required but can be in a subsidiary ledger

  10. Proposal Support • DCAA guidance, proposal support must be available immediately at start of audit. • Must explain how your budget was prepared

  11. Direct Labor Support • Hours: • Did you base your estimate on history? • Are you using a learning curve? • If it’s a follow on contract will certain functions take less time on this contract? • Labor Rates: • Are you bidding actual salaries? • If so have the salary support (roster, W-2, etc.) • Are you bidding a combined rate (engineer, scientist, etc)? • If so be able to show how the rate was computed. • Are you bidding a loaded rate? (T&M) • Be able to show how the rate was loaded • Also be able to support the components of the loaded rate

  12. Subcontract/Consultant Support • Have the sub/consultant bid available for review. • Did you competitively source the vendor? • If so have the competing bids • Be able to explain why you chose the vendor you bid. • If it was not a competitive bid why? What made this vendor uniquely qualified to do the work

  13. Other Direct Costs • Does your bid have material? • You will need a bill of material • You will need quotes for material bid • Does your bid have travel? • You will need to be able to support airfare and any per diem being bid. • Other costs? • Be able to explain how you arrived at estimates for any other direct costs. Did you use a factor, history, etc?

  14. Indirect Costs • Do you have a Negotiated Indirect Rate Agreement (NICRA) • If so did you apply the rates in the manner prescribed on the NICRA? • Have a copy of the NICRA available for review. • If this is your first bid? • If so be able to support how you arrived at the rates you used.

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