What Is The DCAA Accounting System Requirement For Unallowable Cost Accounting

Posted by dcaa Consultant on December 29th, 2020

Without satisfying the appropriate DCAA accounting system requirement, you can’t manage unallowable cost accounting tasks. All government contractors, as a condition of contracting, have to use a secure and approved cost accounting system. The condition remains limited only to cost reimbursable contracts, such as CPFF. Also, at specific moments, requirement imposition isn’t as formal as T&M contracts. Here are a few ways to make an accounting system compliant.

The first task is, of course, developing a compliant cost structure. It will include developing homogeneous cost pools. These pools usually incorporate direct cost, fringe, facilities, overhead, G&A, and unallowable cost. The pool structure depends on your organization's structure and its operations. You have to assign each of your accounts to the corresponding cost pool. It will also include establishing the project structure for each contract or project.

The second step incorporates developing policies that meet the requirements and DCAA audit expectations. The most significant ones are the direct vs. indirect cost segregation, indirect cost pools, allocation bases, allocation rates, invoicing, accounting unallowable costs, timekeeping, cost reporting, project account, labor accounting, etc.

The third step is about timekeeping and labor accounting. The company has to implement a timekeeping system that meets the audit expectations of the DCAA. Also, labor accounting should be according to total time accounting, especially when allocating labor costs.

The final step is about DCAA Cost Reporting. There are several necessary reports, which aren’t standard with most small business accounting system software solutions. A few of these include Indirect Cost Rate Statements, Labor Distribution, and Contract Status Reporting. If you use ICAT, then you can automate the reporting-related requirements on QuickBooks.

Like it? Share it!


dcaa Consultant

About the Author

dcaa Consultant
Joined: June 14th, 2017
Articles Posted: 18

More by this author