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Accounting Basics for Government Contractors

Accounting Basics for Government Contractors. Jenny Clark Solvability, Inc. What Makes a Government Contractor Different?. Cost Principles Accounting System Requirements Working with Defense Contract Audit Agency (DCAA). Cost Principles. Direct Costs Indirect Costs Unallowable Costs.

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Accounting Basics for Government Contractors

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  1. Accounting Basics for Government Contractors Jenny Clark Solvability, Inc.

  2. What Makes a Government Contractor Different? • Cost Principles • Accounting System Requirements • Working with Defense Contract Audit Agency (DCAA)

  3. Cost Principles • Direct Costs • Indirect Costs • Unallowable Costs

  4. Direct Costs • Direct Labor • Subcontractors • Consultants • Direct Materials • Direct Travel • Other Direct Costs

  5. Indirect Costs - Pools • Fringe Benefits – payroll taxes & benefits • Overhead – cost of supporting contract work • General and Administrative – corporate expenses

  6. Unallowable Costs • Interest Expense • Donations & Sponsorships • Entertainment • Penalties • Reasonableness • FAR 31.205

  7. Accounting System Requirements • General Ledger Control • Ability to compute Fringe, Overhead & G&A Rates for pricing and billing • Labor Tracking

  8. Sample Chart of Accounts for Government Contractor • 04xx Fringe Benefits • 050x Direct Labor • 051x Direct Travel • 052x Direct Materials • 06XX Overhead • 08XX General & Administrative • 09xx Unallowable Costs • 095x Other Income and Expense

  9. Pricing by Multipliers • Bidding is based on what you pay the employees plus what it costs to give them benefits, a place to work and corporate support, plus fee (profit) • Typical Multiplier – about 2: • You pay employee $30 and bill out at $60

  10. Fringe Pool/Rates – 25% to 35% • Fringe Pool • Payroll Taxes + Leave + Group Insurance, etc • Fringe Base – Total Productive Labor

  11. Overhead Rates – 10% to 80% • Highly dependent on costs to support the work, including rent & facility expense, computers, training, supervision, equipment required. • Overhead Costs/Direct Labor Costs

  12. General & Administrative – 6% to 12% • Cost of running the company • Accounting, Human Resources – corporate functions • G&A Costs/Total Costs

  13. Fee (Profit) • Usually 6% to 10% • Expect the prime contractor to ask you to reduce fee • Don’t tell the prime your indirect rates – not required to disclose except to DCAA • Award Fee and Incentive Fees are not a “straight %”

  14. Financial Success • Find the right teammates & win the work • Labor Control PRIMARY factor • High priced personnel not billable

  15. Working with Defense Contract Audit Agency (DCAA) • Pre-award • Proposal Pricing • Financial Capabilities • Timekeeping Review & Floorchecks • Billing Systems Review • Incurred Cost Submission Review • Accounting System Review • More Desk Audits – less Field time

  16. What Makes Government Contractors Different? • Federal Acquisition Regulations • Cost Accounting Standards • DCAA requirements • Contract terms • Customer requirements • Competitive strategy • Best Practices

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