The DCAA Accounting Services Ensures Key Elements Are Included

Posted by DCAA Accounting Compliance on July 11th, 2018

There are many different factors that will be considered and come into play during when your accounting system will be reviewed by an auditor to check for DCAA compliance. There are several key components that must be included and an equal number that must be strictly avoided for this matter to make up a compliant account system.  Therefore, it is prudent to know about these top areas that can either make or break your accounting system when audited by DCAA or Defense Contract Audit Agency.

Isolation Of Costs By Contract

The most significant aspect of a DCAA complaint accounting system is to clearly differentiate between direct costs and indirect costs. The DCAA Accounting Services will ensure that this primary component is well captured in your accounting system. Apart from that, the expert will further break it down so that the costs for each contract are easily captured separately as well to provide more authenticity to your accounting system. There may be a few contracts that may require collecting costs at the lower levels of it such as a work break down structure.  The auditor will appreciate an accounting system that not only captures costs by contracts but also at its lower levels. This will support the billing by contract according to the appropriate levels.

Segregation Of Indirect Cost

It is paramount in a DCAA complaint accounting system that its segregates the indirect costs by cost pool. With the help of the expert and the tips provided during Dcaa Consulting Services you will be able to do this easily according to the indirect rate structure of the company. This is another key element to include in the compliant accounting system that usually involves identifying the unique ranges of all general ledger accounts. These accounts should correspond with the particular pool or any possible division.  Inclusion of this element will ensure that the type of cost is easily recognized and that it helps in indirect rate calculation as well.

Separation Of Unallowable Costs

This is another important aspect of DCAA accounting system requirements as unallowable costs are considered to be the hot buttons by DCAA auditors. These costs should be clearly differentiated from the allowable costs. Once again you will need to create a unique range of general ledger accounts to accomplish this. These ledgers related with unallowable expenses must be in accordance to the policy of your company on handling unallowable costs and the auditor may ask about such policy as well. The FAR Part 31 will tell you more about such unallowable costs but if you hire an expert then you do not have to worry about such lacunas.

Labor Tracking System

You must follow a solid timekeeping process but that is not all for adequate and proper DCAA compliance. In addition to that your accounting system must be able to track the labor detail and report on it as well. This is an important element for a compliant accounting system as well. There are several accounting systems that lose track of it even after its initial input simply due to the lack of visibility of the labor detail in the system. An auditor will surely want to review your labor reports that must include Labor Distribution and Timesheet Edit Reports. Visit for a DCAA consulting to know more about labor detail and apposite final cost objective.

Monitoring Against Contract Value

The contract or fund value monitoring is also crucial for DCAA compliance. This is important so as to comply with the FAR clauses for Limitation of Funding and Limitation of Costs that may be specified for specific contracts. These clauses help the government contractor to manage the funds and also to know the cost and billing aspect to adjudge where they stand with respect to this standpoint. According to the requirement you will need to notify your specific Contracting Officer as and when you reach a certain percentage of the funded or contract value.  Failure to comply will result in your inability to complete the project with the remaining funds.

Considering The Indirect Rates

You will also need to monitor and calculate the indirect rates when you perform under a cost type contract. This must be done frequently so that you can compare them with your target or provisional rates.  Any variance will impact on the end result and such variance in indirect rates must be properly analyzed. This will help you in determining how the project will be affected. It may result in either over or under billing to the government. This must be adjusted periodically.