SmallBusiness2 ACCOUNTINGSYSTEM04 27 06

NAVY GOLD COAST 2007 AUGUST 15, 2007: 

NAVY GOLD COAST 2007 AUGUST 15, 2007 ACCOUNTING SYSTEM REQUIREMENTS PRESENTED BY: Greg Hoelscher, DCAA Supervisory Auditor Danielle Faelschle, CPA, DCAA Supervisory Auditor

Slide2: 

WHO IS DCAA? WHEN DOES DCAA GET INVOLVED? WHAT IS AN ADEQUATE ACCOUNTING SYSTEM? DCAA AUDIT PROCESS HELPFUL WEBSITES PRESENTATION OVERVIEW

Slide3: 

Perform all necessary contract audits for the DoD and provide accounting and financial advisory services regarding contracts and subcontracts to all DoD components responsible for procurement and contract administration services. These services will be provided in connection with negotiation, administration, and settlement of contracts and subcontracts. Provide contract audit services to other government agencies as appropriate. (DoT, NASA, DoE, FAA etc.) DCAA MISSION

DCAA SERVICES: 

DCAA SERVICES Typical audit services performed by DCAA include (but are not limited to): Preaward Contract Audit Services Price Proposals Preaward Surveys (Accounting, Financial Capability) Forward Pricing Labor & Overhead Rates Postaward Contract Audit Services Incurred Costs/Annual Overhead Rates Truth in Negotiation Act (TINA) Compliance Claims Financial Capability CAS (Cost Accounting Standards) – Compliance & Adequacy Progress Payments

DCAA SERVICES, (Cont’d): 

DCAA SERVICES, (Cont’d) Contractor Internal Control System Audits Accounting EDP (Electronic Data Processing) Estimating Compensation Billing Budgeting Material Management Labor Purchasing Indirect and Other Direct Cost

DCAA SERVICES, (Cont’d): 

DCAA SERVICES, (Cont’d) Negotiation Assistance Factfinding and analysis of contractor information after audit Procurement liaison assistance Financial Advisory assistance Other Audits – PCO or ACO Request DCAA’s Homepage - www.dcaa.mil

DCAA AUDIT INVOLVEMENTWITH CONTRACTS: 

DCAA AUDIT INVOLVEMENT WITH CONTRACTS IS THE AUDIT AND RECORDS CLAUSE PRESCRIBED BY FEDERAL ACQUISITION REGULATIONS (FAR) CONTAINED IN THE SOLICITATION OR CONTRACT?

DCAA AUDIT INVOLVEMENTAUDIT AND RECORDS CLAUSE: 

DCAA AUDIT INVOLVEMENT AUDIT AND RECORDS CLAUSE COMMERCIAL ITEMS (FAR 52.212) SIMPLIFIED ACQ. PROC. (FAR 52.213) SEALED BIDDING - IFB’S (FAR 52.214-26) NEGOTIATION (FAR 52.215-2) = No Audit and Records Clause = Contains Audit and Records Clause

Slide9: 

Conform w/Generally Accepted Accounting Principles, Produces equitable results that can be verified, Are applicable to the contemplated contract or contracts, Are consistently applied. The auditor must determine if the accounting system provides costs that: ACCOUNTING SYSTEM REQUIREMENTS

Slide10: 

USE STANDARD FORM (SF) 1408: As guidance for developing your accounting system. ACCOUNTING SYSTEM

Slide11: 

TYPES OF CONTRACT COSTS TWO TYPES OF CONTRACT COSTS DIRECT COSTS – THOSE COSTS THAT CAN BE IDENTIFIED SPECIFICALLY TO A CONTRACT - “DIRECT CHARGE” INDIRECT COSTS – THOSE COSTS THAT CANNOT BE DIRECTLY IDENTIFIED TO A SINGLE CONTRACT BUT IDENTIFIED WITH TWO OR MORE CONTRACTS - “ALLOCATED”

Slide12: 

A direct cost is any cost that can be identified specifically with a particular final cost objective. DIRECT COST (FAR 31.202)

Slide13: 

DIRECT COST (FAR 31.202) DIRECT CONTRACT COSTS EXAMPLES MATERIAL BOUGHT FOR A CONTRACT. EMPLOYEES’ WAGES WORKING ON A CONTRACT. SUBCONTRACTOR CHARGES ON A CONTRACT. TRAVEL INCURRED DIRECTLY RELATED TO A CONTRACT.

Slide14: 

An indirect cost is any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives... INDIRECT COST (FAR 31.203)

Slide15: 

INDIRECT COST (FAR 31.203) INDIRECT CONTRACT COSTS “ALLOCATED” OR “INDIRECT CHARGE” EXAMPLES PRESIDENT’S SALARY RENT ON OFFICE BUILDING CONTRACT ADMINISTRATION PAYROLL TAXES HEALTH INSURANCE PREMIUMS

Slide16: 

A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives. INDIRECT COST

Slide17: 

INDIRECT COST ALLOCATION OF INDIRECT COSTS POOL OF INDIRECT COSTS = INDIRECT ALLOCATION BASE RATE

Slide18: 

Example Indirect Cost Allocation

Slide19: 

A function, organizational subdivision, contract, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capitalized projects, etc. (FAR 31.001). COST OBJECTIVE

Cost Objective Example: 

Cost Objective Example Utility Costs = $1,000 Overhead = $800 1600 Sq ft or 80% G&A = $200 400 Sq ft or 20% Based on Square Footage. Total facility space = 2000 sq ft

Slide21: 

A cost objective that has allocated to it both direct & indirect costs... is one of the final accumulation points (FAR 31.001). FINAL COST OBJECTIVE

Labor Charging: 

Labor Charging Recording time daily. Recording time on the timecard (in ink). Project Numbers, Contract Number, etc… Changes To The Timecard. Problems with Electronic Timecards.

Timecard Example: 

Timecard Example

Adequate Timekeeping System: 

Adequate Timekeeping System Includes: Possession of timesheet by employee Completion of timesheet (by employee only) on a daily basis for actual work performed to the appropriate cost objective Audit trail of changes made to timesheet Approval of timesheet by supervisor Reconciliation of timesheet charges to the labor distribution

SEGREGATION OF UNALLOWABLE COSTS: 

SEGREGATION OF UNALLOWABLE COSTS FAR Part 31.201-6 states: “Costs that are expressly unallowable or mutually agreed to be unallowable, including mutually agreed to be unallowable directly associated costs, shall be identified and excluded from any billing, claim, or proposal applicable to a government contract. A directly associated cost is any cost which is generated solely as a result of incurring another cost, and which would not have been incurred had the other cost not been incurred. When an unallowable cost is incurred, its directly associated costs are also unallowable.”

SEGREGATION OF UNALLOWABLE COSTS (CONT’D): 

SEGREGATION OF UNALLOWABLE COSTS (CONT’D) An Adequate Accounting System Should: Maintain various general ledger accounts to identify and segregate unallowable expenses by indirect expenses pool (i.e. overhead, G&A) and by direct cost. Identify and segregate expressly unallowable costs from billings to the Government.

ADEQUATE ACCOUNTING SYSTEM SUMMARY: 

ADEQUATE ACCOUNTING SYSTEM SUMMARY An Adequate Accounting System Should: Maintain a job cost ledger to identify direct contract costs by job number and expense category (i.e. direct labor, travel, etc…) on a current and cumulative basis. Segregate indirect expenses by logical grouping (i.e. overhead, G&A, fringe, etc…) Identify and segregate unallowable expenses in the general ledger. Contain a written description of the indirect expense pools and allocation bases. Reconcile the Job Cost Ledger to the General Ledger.

Slide28: 

DCAA Audit Process Generally, DCAA will receive a request from contracting officer to perform audit if: Contractor submits a proposal for a cost-type contract. Contractor is awarded a cost-type contract. Contractor submits proposal under firm fixed price contract with progress payments.

Slide29: 

DCAA Audit Process The Auditor will: ESTABLISH MUTUALLY ACCEPTABLE DATE FOR AUDIT TO BEGIN CONDUCT ENTRANCE CONFERENCE SURVEY THE ACCOUNTING SYSTEM USING GENERALLY ACCEPTED GOVERNMENT AUDITING STANDARDS (GAGAS) CONDUCT EXIT CONFERENCE ISSUE AUDIT REPORT TO THE CONTRACTING OFFICER

Slide30: 

DCAA Audit Process If accounting system is unacceptable, DCAA will notify contractor and procurement official of system deficiencies. DCAA will not develop an acceptable accounting system for contractor. If requested by Contracting Officer, DCAA will review contractor’s revised system.

DCAA WEBSITE: 

DCAA WEBSITE CONTAINS INFORMATION FOR CONTRACTORS – PUBLICATION “DCAAP 7641-90 - Information for Contractors” http://www.dcaa.mil

OTHER WEBSITES: 

OTHER WEBSITES Ensure you are registered with the Small Business Adm. PRO-Net: http://pro-net.sba.gov Ensure you are in the Central Contractor Registration. Without this you cannot be awarded the contract URL http://www.ccr2000.gov Federal Business Opportunity Website Centralized site for Federal Procurement opportunities above $25K. You can search by Federal Supply Code or by base opportunities URL http://www.eps.gov

Slide33: 

Greg Hoelscher, DCAA Supervisory Auditor, San Diego Branch Office (858) 616-8872 greg.hoelscher@dcaa.mil Danielle Faelschle, CPA, DCAA Supervisory Auditor, North County Branch Office (858) 616-8860 danielle.faelschle@dcaa.mil Presenters’ Information

DEFENSE CONTRACT AUDIT AGENCY: 

DEFENSE CONTRACT AUDIT AGENCY QUESTIONS??