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Government Contractors: Is Your Accounting Software DCAA Compliant?

Government Contractors: Is Your Accounting Software DCAA Compliant?

DCAA Accounting Software NeedsWorking with the US Government is a lucrative opportunity that can provide both money and growth for businesses. Especially lucrative for small businesses, the federal government actively seeks out small business for contracting jobs.

This however, is not without very specific regulation from the federal government, in which a contractor is required to provide significant detail about the direct, indirect, and overhead expenses associated with every item billed to the government in fulfillment of specific contract awards.

Compliance can be a factor that makes or breaks federal contracts, and the DCAA (Defense Contract Audit Agency) is incredibly strict when it comes to accounting software.

A critical point, as cited in Federal Acquisition Regulation (FAR 16.104 (i)), is the adequacy of a potential contractor’s accounting system:

Adequacy of the contractor’s accounting system. Before agreeing on a contract type other than firm-fixed-price, the contracting officer shall ensure that the contractor’s accounting system will permit timely development of all necessary cost data in the form required by the proposed contract type. This factor may be critical-

(1) When the contract type requires price revision while performance is in progress; or

(2) When a cost-reimbursement contract is being considered and all current or past experience with the contractor has been on a fixed-price basis. See 42.302(a)(12).”

The inability to determine costs accurately could be detrimental to potential contractors, and the DCAA requires said contractors to have these functions in their accounting software:

  1. Proper segregation of direct costs from indirect costs.
  2. Identification and accumulation of direct costs by contract.
  3. A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives. (A contract is final cost objective.)
  4. Accumulation of costs under general ledger control.
  5. A timekeeping system that identifies employees’ labor by intermediate or final cost objectives.
  6. A labor distribution system that charges direct and indirect labor to the appropriate cost objectives.
  7. Interim (at least monthly) determination of costs charged to a contract through routine posting of books of account.
  8. Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31, Contract Cost Principles and Procedures, or other contract provisions.
  9. 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 proposed contract.
  10. Segregation of preproduction costs from production costs.

Among these ten factors, the DCAA also requires accounting software to be GAAP Compliant, and to provide financial information based on limitation of cost (FAR 52.232-20 and 21) or limitation of payments (FAR 52.216-16). Download the DCAA Checklist here.

Again, without these needs met, potential contractors could lose contracts during a DCAA Audit. The solution, however, has been around for decades. Microsoft Dynamics SL has built a name for itself as the go-to financial management solution for government contractors, and meets the needs of DCAA Regulations.

Brittenford Systems has helped government contractors across the nation to implement and run Microsoft Dynamics SL in compliance with these regulations, helping you to sleep better each night. With many of our specialists coming from government contractors, we are poised to help entities of all sizes meet your specific needs.

Read through the related resources on how a solution through Dynamics SL and Brittenford can help you to secure more contracts:

Contact Brittenford Systems to learn how we can help you thrive as a government contractor.


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