Basic Financial Requirements for
Government Contracting
The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations
Accounting System
Requirements
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Prior to Contract Award
Contracting Office or DCMA conducts
Preaward Survey to consider responsibility of prospective contractor
Design of the Accounting System is part of the Preaward Survey (SF 1408 Criteria) DCAA requested to evaluate design of Accounting System
Preaward Accounting System Audit
Evaluates design of Accounting System to determine if it is acceptable for prospective contract
DCAA or Buying Command will request contractor complete Preaward Accounting System Checklist
Contractor should be prepared to demonstrate how accounting system satisfies SF 1408 criteria at initial meeting
Based on SF 1408 criteria
Generally used by contractors new to government contracting that the
Government plans to award a cost type contract (cost reimbursement contracts, or for contractors that will receive progress payments based on cost)
Assesses whether the requirements for an adequate accounting system have been met
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Preaward Accounting System Checklist
Preaward Accounting System
Compliance Requirements
Generally Accepted Accounting Practices (GAAP)
Proper Segregation of Costs Direct Costs by Contract Allocation of Indirect Costs Accumulation of Costs Under General Ledger Control Timekeeping System
Labor Distribution
Interim Determination of Costs Exclusion of Unallowables Costs by Contract Line Item Preproduction Costs
Limitation of Costs Billings
Issue report to Contracting Officer with an opinion that the accounting system is or is not suitably designed, in all material respects, for award of a prospective contract.
Includes a completed SF 1408
An opinion that the system is not suitably designed means that the contractor cannot be awarded a cost type contract of the award will be delayed until corrective action is taken and a follow-up audit can be performed
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After the Audit is Completed
Contractors not making interim (at least monthly) determination of costs charged through routine posting to books of
account
Failure to properly segregate direct and indirect costs
Improper timekeeping
Failure to exclude unallowable costs
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Incurred Cost Submission
Due Dates of Submissions
Incurred cost claims are due six months after completion of the contractor’s
fiscal year end
Per the Allowable Cost and Payment Clause (FAR 52.216-7(d)(2))
Allowable cost and payment clause applies to cost-reimbursement type contracts (FAR 16.307)
ICE is an excel spreadsheet
It includes all schedules required for an adequate submission per FAR 52.216-7 ICE is not a requirement but a tool to assist in preparation of an adequate incurred cost submission
The submission of an adequate proposal may expedite contract closings
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Incurred Cost Electronically
Model (ICE)
If submissions are six months delinquent, DCAA will recommend a decrement factor and for the CO to make a unilateral
determination. (FAR 42.703-2(c)(2))
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Provisional Billing Rates (PBRs)
Purpose of PBRs
Established to approximatethe contractor’s final year-end rates, as adjusted for any unallowable costs Used for interim purposes until settlement is reached on the final indirect rates for the contractor’s fiscal year
FAR 42.704 - Billing Rates - provides procedures and guidance for establishing PBRs
The contracting officer or auditor shall establish PBRs on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other
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When Should We Submit?
Prior to the beginning of the fiscal year (once budgets are complete) or when the
established billing rates are no longer
representative of final year end rates due to unforeseen circumstances.
PBRs should be submitted at least annually. Vouchers and progress payments can be returned if submitted without properly established billing rates.
Monitoring
PBRs should be monitored:Throughout the year
Immediately after year-end
Upon submission of the final indirect rate proposal
PBRs may be adjusted by either party at any time to prevent substantial under or over payment – FAR 42.704(c).
If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly.
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Common Deficiencies
Failure to remove unallowable costs from the billing rate projections.
Failure to adjust provisional billing rates based on actual experience:
Before year end, if there are known or reasonably anticipated significant variances.
After year end once actual rates, net of unallowable expenses, are calculated.
Public Vouchers
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Cost type contracts provide for interim payments for costs on a Standard Form (SF) 1034 public voucher. DCAA will perform voucher reviews based on risk. Fixed price contracts are subject to FAR Part 32 financing methods.
Contractor Responsibilities
Contact the cognizant DCAA office after contract award
Ensure DCAA has the necessary information to process contract billings, such as current
provisional billing rates, copy of the contract, any special contract provisions, etc.
Maintain adequate billing system internal controls Ensure adequate support is maintained for
amounts billed
Submit timely incurred cost proposals and final vouchers in accordance with FAR 52.216-7
Preparation of Vouchers
The contractor is responsible for preparing and submitting claims for reimbursement according to the terms of the contract.
Vouchers should not be submitted more than once every two weeks.
All vouchers should be submitted through WAWF unless contract terms require hard copy vouchers to be submitted.
Public voucher claims for reimbursement must be prepared on the prescribed Government forms:
First voucher on a contract is an interim voucher, as are all subsequent vouchers prior to the final voucher. Final voucher will not be submitted until all contract work is completed
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Common Deficiencies
Math errors
Billed costs not allowed per the contract terms (e.g. overtime)
Incorrect provisional billing rates (indirect costs)
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DCAA Internet Resources
www.dcaa.mil
Audit Process Overview – Information for Contractors Manual
DCAA Pre-award Accounting System Checklist DoD Contract Proposal Adequacy Checklist DCAA Incurred Cost Adequacy Checklist Incurred Cost Electronically (ICE) Model Links to Acquisition Regulations
Small Business Seminar Slides
Contact Information
DoD Office of Small Business Programswww.acq.osd.mil/OSBP
DCAA