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Optimize Your Business with Crucial Technology & Benchmarking Insights | The 2020 GAUGE Report

by Kim Koster GovCon, Government Compliance

Sep 17, 2020

Between the COVID-19 pandemic, CMMC compliance, and social unrest—not to mention the usual myriad of unique industry challenges—2020 has been an unprecedented, arduous year for the GovCon industry and beyond. With so much change and so many surprises, many contractors are left with their heads spinning, wondering where to turn. One thing is clear during this tumultuous period: one of the best sources of advice for GovCons is each other. There’s great benefit in learning how other government contractors are confronting challenges and opportunities similar to yours. Unanet and CohnReznick’s fourth annual GAUGE Report can provide this guidance. This report is a collection of survey results from over 1,450 contributors in the GovCon sphere and provides performance metrics and business practices that are shaping this current volatile government contracting landscape. “The year 2020 continues to be a season of reckoning,” the report authors observe, “as government contractors are either reaping the rewards of having laid a sound business and technology foundation, or paying the price of playing catch-up.” Technology is the theme of this year’s GAUGE and the report explores how GovCon leaders need to leverage technology to best position their companies not only during this season of remote work but for the next five years. Some major takeaways from the report include: Optimism impacted: Prior to the pandemic in early March, 84% of survey respondents reported that they were either very or cautiously optimistic about their business outlook. Near the end of March, the percentage of respondents reporting this optimism dropped to 68%.Project and resource success: 59% of respondents reported that 76%-100% of their projects are on or under budget, and 55% of respondents rated their resource management at a high level of maturity, an improvement over previous years.Slowly adapting new technology: 53% of surveyed contractors use a project-based ERP system, while 18% use an entry-level system and 29% rely on other generic ERP tools. With the focus on technology in this year’s report, it is clear that GovCons’ success going forward depends on them “empowering teams to be productive in any setting and adapting quickly to new ways of operating” through the use of technology. You can get your own copy of the GAUGE Report here and begin leveraging crucial industry information and best practices. We’re excited to hear how the report helps your organization establish and refine company goals in 2020 and beyond.

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An Up-Close Look at DCAA’s Ambitious Audit Plans for 2020

by Kim Koster GovCon, Government Compliance

Jul 16, 2020

Government contractors, prepare for closer scrutiny from the Defense Contract Audit Agency in fiscal 2020 and beyond. Having cleared its longstanding audit backlog, the DCAA has returned to performing a full range of audits, the agency’s director, Anita F. Bales, declared in a recent letter to the U.S. Congress. In fiscal 2019, the DCAA “focused more effort on other audits such as business systems, Truth in Negotiation Act, Cost Accounting Standards, and labor and material reviews,” she said in the letter, which accompanied a report summarizing the agency’s activities last fiscal year. “We also successfully met the Congressional requirement to complete incurred cost audits within one year of adequate submission as well as contracted with seven independent public accounting (IPA) firms to perform 101 incurred cost audits.” The DCAA’s renewed commitment to timely audits is expected to continue in the current (2020) fiscal year, putting the onus on government contractors to prepare for a busy compliance season. In particular, DCAA said it “prioritizes the audits that pose greatest risk to the government,” namely contracts that “involve significant costs, significant audit findings in the past, or circumstances that reduce the incentive to control costs, such as those inherent in cost-type of contracts.” Here’s what the agency says about various types of audits: Incurred cost audits “continue to be a priority to meet both the adequacy review (60 days) and completion (12 months) timelines.” Forward pricing audits “net the highest rate of return and are time sensitive because to be of value they must be completed before contract negotiations.” Special audits are prioritized in coordination with contracting officer needs. Other audits become a high priority “when DCAA or the contracting officer identifies a high-risk area such as inadequate business systems. DCAA assigns priority to additional audits based on individual contract and audit risks to the government.” To maintain timeliness with its audits and prevent another backlog, the DCAA indicated it plans to continue using IPA firms to conduct select incurred cost audits. To support a more aggressive audit caseload, the DCAA said it is focusing on recruiting, developing and retaining high-quality auditors and support staff, such as with hiring events and internship programs aimed at bringing college students into the fold and grooming them to become full-time employees. As it ramps up its caseload, the DCAA also has increased its industry outreach. In July 2019, it adopted the materiality guidelines from DoD’s Professional Practice Guide to “help oversight professionals plan their work and provide the information contracting officers need to make reasonable business decisions.” The agency also has been regularly engaging with industry groups, resulting in a proposed FAR change and improvements to the incurred cost electronic (ICE) model. It also is working with the acquisition community to mitigate the risks associated with using Other Transaction Agreements, or OTAs. The goal: ensure cost reasonableness “without hindering the speed that makes OTAs so valuable.” Moving forward, expect the emphasis on Truth in Negotiation Act audits to continue. The DCAA said it is stepping up efforts to train and educate its staff about TIN audits, and that beginning in fiscal 2020, its field audit offices will join its headquarters TIN team in conducting TIN audits. ”These collaborative, proactive efforts are vital as DCAA will double the number of hours dedicated to these audits in FY 2020.” Also expect the DCAA to continue to leverage technology — data analytics, “intelligent documents,” etc. — as it moves away from outdated Excel and Word-based audit tools. Looking ahead to fiscal 2020 and beyond, DCAA said it expects to “move away from complex, specialized audits performed by dedicated teams, like TIN and business systems, to performing these audits with our FAO staff.” The agency also plans to finalize its strategic plan in FY 2020, meaning more changes to audit processes and procedures could be forthcoming. We closely monitor the DCAA here at Unanet, so stay tuned to this space for updates.

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DoD Underscores Requirement of Segregating Covid-19-related Costs with 3610 Guidance

by Kim Koster GovCon, Government Compliance

May 11, 2020

For government contractors that managed to secure relief under the CARES Act or PPP, big questions still remain about compliance, reporting, auditing, and accounting. As usual, the details matter, and in the case of these emergency pieces of legislation, the details weren’t always addressed upfront. So, it’s good news that the Department of Defense (DoD) recently provided guidance for contracting officers (COs). Click here for a copy of the Class Deviation – CARES Act Section 3610 Implementation. But what’s most compelling is that these guidelines make it clear that it’s more critical than ever that GovCons prioritize their relationship with their CO during this unusual time, and have strong control measures in place. First, here are a few basic highlights from this recent guidance: COs must put in writing that a GovCon cannot perform its contracted work at a government facility due to facility closures, nor can they do the job via telework. Paid leave for employees idled by the facility closure, including sick leave, may be direct charged to the affected contract, and not as regular leave that would have been recorded as fringe expense in the normal course of business, so long as it can be attributed to the Covid-19 outbreak from Jan. 31 – Sept. 30, 2020. The leave charged to the contract must be necessary to maintain the workforce in a ready state to permit a return to work upon facility re-opening and to ensure the safety of the workers. Finally, and most important of all, the 3610 guidance is very clear that in order to be eligible for reimbursement of the cost of paid leave, GovCons must segregate these specific costs and actions so that compliance with these terms can be reasonably identified. The guidelines say, “segregation and identification of costs can be performed by any reasonable method, as long as the results provide a sufficient audit trail.” How can GovCons do this simply and effectively? This article in Compliance Week: Preparing for the compliance caveats that accompany CARES Act, PPP, gives good counsel on the value of ERP to resolve this segregation issue. Your Unanet platform will enable your business to accurately track, manage, and segregate costs associated with the Covid-19 outbreak so you can specifically demonstrate to your CO precisely where your business incurred costs that are eligible for reimbursement. Want to understand more about how Unanet can be a solution to helping your business segregate costs for reimbursement and manage your projects? Check out our white paper, The Business of Projects.

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What is the DCAA, and What Audits Do They Perform?

by Kim Koster GovCon, Government Compliance

Aug 08, 2019

What is the DCAA? Let’s quickly level set on the mission of the Defense Contract Audit Agency (DCAA). Their primary function is to perform contract and financial audits for agencies that are responsible for acquisition and contract administration for the US Government. DCAA audits ONLY government contractors. They conduct these audits in accordance with the Generally Accepted Government Auditing Standards (GAGAS). The principles that GAGAS embodies are unbiased audit conclusions based on facts. DCAA is a very vital part of the acquisition process for the Department of Defense (DOD) and certain other agencies. Their charter is to make sure that the taxpayers’ money is spent responsibly and ethically by conducting audits that ensure the validity of costs throughout the acquisition process. They have a tremendous amount of influence because they communicate with the Contracting Officer (CO) and make recommendations that have an impact on contract negotiations. The recommendations help the CO understand what the price of the contract should be. In the past, the relationship between the government contracting community and DCAA has been strained. DCAA is making a concerted effort to improve overall relationships with government contractors by improving communication and coordination. Common DCAA Audits Understanding the various audits the DCAA tends to run is necessary for preparing for them. In future blogs, we will dive deeper into each audit, but for now, here is a quick description of some of the most common ones: Incurred Cost: The most common type of DCAA audit, an incurred cost audit exists to ensure that claimed actual costs and billed costs reconcile. Forward Pricing: This audit is conducted on contract proposals, are related to a specific contract, and are conducted prior to award. The purpose of this audit is to ensure out year rates are reasonable and realistic for use in forward pricing. Pre-Award: Accounting System Audit: An Accounting System Audit is performed to ensure that a government contractor’s accounting system complies with laws and regulations, is reliable, there is a minimal risk of misallocations and mischarges, and allocations and charges are consistent with billing procedures. Timekeeping: This audit aims to ensure the contractor is compliant with its timekeeping practices, that the employee time records are correct, that employees perform in their assigned job classifications, and time is charged to the proper cost objective. Special Audits: Special audits may be performed for a variety of reasons, but typically occurs when a Contracting Officer needs an independent financial opinion on specific portions of a contract for a contractor’s accounting business system. Other Audits: These audits are usually performed for a variety of reasons, usually when there is potential for a high risk of misallocation or mischarging of costs.   Ease the Path to Compliance with Unanet What is the DCAA? Something you don’t have to fear with the help of Unanet! Remember that there is no such thing as DCAA compliant software. It is your organization and procedures that will be assessed for compliance. That said, Unanet is uniquely designed for government contractors and has been battle-tested for compliance rules and regulations. Our compliance features are built into the tool, making compliance part of the fabric of your business. Unanet currently has over 2,000 clients using and trusting the system. Unanet supports compliant accumulation and allocation of costs utilizing time keeping, expense accounting, cost pools, indirect rates, revenue recognition, and project management all in one truly integrated system. Whether you are a small new or a seasoned larger GovCon, you can count on Unanet for your compliance needs. Unanet is recognized by the audit agencies as being “compliant ready,” giving you an immediate advantage in the audit process. To learn more about the DCAA, download our white paper, “A GovCon’s Essential Guide to DCAA Compliance.”

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DCAA Compliant Software

by Kim Koster ERP Software Best Practices, GovCon, Government Compliance

Jun 13, 2019

Just to be clear, there is no such thing as DCAA Compliant Software! It is your organization and procedures that will be assessed for compliance. That said, software such as Unanet, that is purpose-built for government contractors can significantly help you with achieving compliance. DCAA compliance requires that your accounting and related business processes which collectively including policies, manual procedures and tools be compliant. Software alone is not audited for DCAA compliance or certified, nor approved as DCAA compliant. However, Unanet software has been reviewed by DCAA auditors at more than one thousand customer sites and, along with the customer policies and procedures, approved as supporting DCAA requirements. Unanet software makes implementation of the DCAA regulations easy and efficient. Here is a small sampling of the DCAA regulations that a compliant accounting system must include and that are directly supported by Unanet accounting software: Proper segregation of direct and indirect costs Identification and accumulation of direct costs by contract Method for allocation of indirect costs A Timekeeping System that enforces specific requirements related to charging hours Labor distribution – how costs are allocated to charged time Segregation of unallowable costs Accumulation of costs under General Ledger Control To learn more, download A GovCon’s Essential Guide to DCAA Compliance.  

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What You Need to Know About the Contractor Purchasing System Review

by Kim Koster GovCon, Government Compliance

Jun 13, 2019

What is a DCMA Compliant Purchasing System? A DCMA compliant purchasing system is one designed to ensure that purchases are made at fair and reasonable prices and in compliance with the applicable contract terms, regulations and public laws. The first thing a contractor needs to understand about contractor purchasing systems is what constitutes a purchasing system. Many contractors think a purchasing system is something that can be purchased off the shelf and installed, like a mechanical system. However, as depicted in the figure below, a purchasing system is an amalgamation of people, processes, and tools that must work together to achieve the goal of spending taxpayer dollars wisely. Advantages of a DCMA Compliant Purchasing System Maintaining an approved purchasing system (i.e. one that has passed a CPSR) benefits the contractor for many reasons, including: It may fulfill a contractual requirement. All Department of Defense cost plus or time and material (T&M) contracts will contain a clause (252.244.7001) that requires the contractor to maintain a compliant purchasing system. If the contractor is subject to the Cost Accounting Standards, the clause allows the government to withhold up to 5% of the payments if the contractor fails to maintain an adequate purchasing system.Some solicitations require the bidders to have an approved purchasing system. Others, such as the recent General Services Administration (GSA) Governmentwide Acquisition Contract (GWAC) solicitations, offer bonus evaluation points for contractors that have an approved purchasing system.Providing advance notification and obtaining the contracting officer’s consent to enter into a subcontract is generally not required when the contractor has an approved purchasing system. Not only does this eliminate some bureaucratic paperwork, it also significantly reduces a contractor’s risk. If the contractor was required to provide advance notification and obtain consent for a subcontract and did not––or cannot prove that they did––the government can disallow all costs for that subcontract. Why is a CPSR Performed? When, how, and why is a CPSR performed? The objective of a contractor purchasing system review (CPSR) is to evaluate the efficiency and effectiveness with which the contractor spends government funds and complies with government policy when subcontracting. The review gives the Administrative Contracting Officer (ACO) a basis for granting, withholding, or withdrawing approval of the contractor’s purchasing system. Though contractors will benefit from passing a CPSR, they cannot initiate one. Rather, once a contractor’s sales to the government—excluding competitively awarded firm-fixed-price and fixed-price with economic price adjustment contracts and sales of commercial items pursuant to FAR Part 12—are expected to exceed $50 million in the next 12 months, the ACO is required to conduct a risk assessment. The ACO will review the contractor’s past performance and the volume, dollar value, and complexity of their purchasing to determine if the risk of ineffective or inefficient purchasing justifies the costs and effort required to perform a CPSR. Though the ACO is solely responsible for initiating a CPSR, it is possible other government organizations can determine the risk justifies the effort and ask the ACO to schedule a CPSR. A CPSR, as contemplated by FAR Subpart 44.3 and DFARS Subpart 244.3, will be conducted by the Defense Contract Management Agency (DCMA) in accordance with the CPSR Guidebook. All CPSRs, except a follow-up review, are predicated on a risk assessment. Take the time to understand what DCMA will be looking for in your purchasing system and carefully review the DCMA CPSR Policies and Procedure Checklist. There are 24 DFARS criteria that must be met and at least 65 items on the DCMA checklist. CPSR References: DFARS 252.244-7001, Contractor PurchasingSystem Administration DCMA CPSR Policies and Procedures Checklist DCMA CPSR Guidebook Risk Assessment Form Now that you know why a CPSR is performed, let’s talk about the risk assessment form.The ACO will conduct the risk assessment utilizing the CPSR risk assessment form. Some of the information that will be requested is company information, last CPSR date and recommendations, sales data, contract type mix, sales to the government as a percent of total sales, number of POs/subcontracts by dollar values for the most recent year, type of business, and if you have been suspended from doing business in the past three years. The ACO will submit your completed risk assessment form to the CPSR Team to determine if the CPSR Review will be scheduled. If you have reached or are about to reach the $50 million threshold, it is time for you to make sure your purchasing system operating in a manner that can pass a CPSR. Don’t wait until the ACO calls. Start preparing today. Policies and Procedures are a Big Part of the CPSR Having and adhering to policies and procedures is the largest part of this review. So, making sure your documentation is in order, up-to-date, followed, and monitored is critical. TIP: Establish a self-audit program and document the results. DCMA will see this as a very favorable activity. Below are some basic, overarching guidelines for your CPSR policies and procedures: Establish clear lines of authority and responsibilityEnsure that all purchases are based on authorized requisitions and include documented support for vendor selected, price paid, and files, which are subject to government reviewImplement internal audits or reviews, training, and policies for the purchasing department to ensure the integrity of the systemInclude a system description detailing policies, procedures, and purchasing practices that comply with the requirements of the FAR and DFARSInstall a sound organizational and administrative structure to ensure effective and efficient procurement of requirements at the best value from responsible and reliable sourcesEstablish a role-based training program for all who participate in the purchasing process CPSR Requirements and DFARS 252.244.7001(a) The Business Systems Rule sets forth 24 system criteria that must be present in all contractor purchasing systems for a purchasing system to be “acceptable.” The criteria are outlined in DFAR 252.244-7001(a). In this blog, we will review these CPSR requirements. Below, the DFARS criteria are grouped into summary activities with the applicable criterion. Procurement Planning/Market Research (2 Criteria) Apply a consistent make-or-buy policy that is in the best interest of the governmentEnsure proper type of contract selection and prohibit issuance of cost plus a percentage of cost subcontracts Conflict of Interest/Misconduct (1 Criterion) Enforce adequate policies on conflict of interest, gifts, and gratuities, including the requirements of the Anti-Kickback Act Competition (2 Criteria) Use competitive sourcing to the maximum extent practicable, and ensure debarred or suspended contractors are properly excluded from contract awardRequire management level justification and adequate cost or price analysis, as applicable, for any sole or single source award Negotiated Procurement (1 Criterion) Document negotiations in accordance with the FAR requirements for negotiation Memoranda Cost of Pricing Data and Price Reasonableness (5 Criteria) Evaluate price, quality, delivery, and technical, and financial capabilities of competing vendors to ensure fair and reasonable pricesPerform cost or price analysis and technical evaluation for each proposal or quote to ensure fair and reasonable subcontract pricesDocument negotiations in accordance with FAR 15.406-3Take discounts, including cash discounts, trade discounts, quantity discounts, rebates, freight allowances, and company-wide volume discountsEstablish and maintain procedures to ensure performance of adequate price or cost analysis on purchasing actions Source Selection (3 Criteria) Use competitive sourcing to the maximum extent practicable, and ensure debarred or suspended contractors are properly excluded from contract awardEvaluate price, quality, delivery, technical capabilities, and financial capabilities of competing vendors to ensure fair and reasonable pricesEstablish and maintain selection processes to ensure the most responsive and responsible sources and to promote competitive sourcing so that purchases are reasonably priced and from sources that meet quality requirements Contract Formation and Content (3 Criteria) Ensure purchase orders and subcontracts contain all flow-down clauses, including terms and conditions, and any other clauses needed to carry out the requirements of the prime contractNotify the government of the award of all subcontracts that contain flow-down clauses that allow for government audit of subcontracts, and ensure the performance of audits of those subcontractsEnsure purchase orders and subcontracts contain mandatory and applicable flow-down clauses, as required by the FAR and DFARS Foreign Purchasing and Performance (3 Criteria) Ensure compliance with all relevant domestic preference requirementsEnsure compliance with export control regulationsEnsure agreements are not executed with prohibited parties Procurement Administration (4 Criteria) Maintain subcontract surveillance to ensure timely delivery and procedures to notify the government of potential subcontract problems that may impact delivery, quantity, or priceDocument and justify reasons for subcontract changes that affect cost or priceEnsure that proper types of subcontracts are selected, and that there are controls over subcontracting, including oversight and surveillance of subcontracted effortEstablish and maintain procedures to timely notify the contracting officer, in writing, of excessive pass-through concerns Tips for a Successful CPSR The process kicks off with the risk assessment and a series of detailed data questionnaires. Make sure your data is correct and that YOU understand what the information means so you can easily answer the reviewer’s questions. Answer clearly and timely so that the reviewer can understand the answer. Contractors that don’t have CPSR experience in-house may find it beneficial to engage a consultant to help prepare for the CPSR. Review the below tips for a successful CPSR: Prepare a strategic plan for compliancePrepare yourself with policies, procedures, and toolsSelf-audit plan executed and documentedUnderstand the purpose of the purchasing reviewStudy the guidebook and all references that DCMA providesHave at least one member of the executive team and ALL other participants at the entrance meetingChoose a point of contact to be a liaison with the CPSR teamKeep a copy of all questions and answer documentedAt the exit meeting, make sure that you have all the stakeholders and understand issues brought up by the team The CPSR report will state recommendations that the CO/ACO will use to make the final determination of approving or disapproving the purchasing system. Common Issues Some common review issues can be easily corrected by taking the time upfront to put together a comprehensive plan. Planning the system is very important, so don’t rush through it. Make sure you are thorough. After the system is planned and documented, it must be executed and maintained to avoid issues. Below are a few common issues, but this list is by no means exhaustive: Policies and procedures don’t address the requirementsThe actual practice doesn’t match the policies and proceduresLack of competition – too many sole-source with inadequate justificationsInadequate FAR/DFAR flow-downsInadequate price analysisInadequate documentation Procurement planning is essential. It is difficult to pass a CPSR if every purchase is urgent. Having a Successful CPSR Requires an Integrated ERP Tool Unanet purchasing software delivers powerful functionality to manage and simplify your buying process, designed to address the specific needs of professional services firms. With Unanet’s one system, purchasing integrates directly with timekeeping, expense, financials, and billing, saving time and money, and increasing accuracy. Our web-based system makes the process easy and visible from purchase requisition (PR), to issuance of the purchase orders (PO), through to customer invoice. Through Unanet’s workflow and approval process, all purchasing transactions can be tracked efficiently and integrated into the project forecasts. With Unanet, the overall purchasing requirements for the CPSR will be met. You can trust the accuracy of the data you are providing to the CPSR team as well as provide reports with all the needed traceability. To learn more, download the Aronson and Unanet white paper, The Contractor Purchasing System Review (CPSR) – What You Should Know.

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Understanding The DCAA Accounting System Audit

by Kim Koster Accounting, GovCon, Government Compliance

May 15, 2019

The topic of this blog is the post award accounting system audit. The post award accounting system audit is an examination of the accounting system at non-major contractors after contract award. The objective of the post award accounting system audit is to determine if the contractor’s accounting system complies with the DFARS 252.242-7006, Accounting System Administration, requirements. A post award accounting system audit is usually performed at the request of the contracting officer when: a follow-up audit to a preaward survey (SF1408) is recommended or a preaward survey was not conducted prior to contract award, and the contracting officer determines that an audit is now required to support contract requirements. What are the characteristics of an acceptable accounting system? Acceptable accounting system means a system that complies with the system criteria below to provide reasonable assurance that: Applicable laws and regulations are complied with; The accounting system and cost data are reliable; Risk of misallocations and mischarges are minimized; and Contract allocations and charges are consistent with billing procedures. What is DCAA Looking for in the Accounting System Audit? This list of criteria below is very similar to the SF1408 Preaward Survey. A sound internal control environment, accounting framework, and organizational structure Segregation of direct and indirect costs Identification and accumulation of direct costs by contract Consistent allocation method for of indirect costs to intermediate and final cost objectives Accumulation of cost under the general ledger control Reconciliation of subsidiary cost ledgers and cost objectives to general ledger Approval and documentation of adjusting entries Management reviews or internal audits of the system to ensure compliance with the Contractor’s established policies, procedures, and accounting practices A time keeping system that identifies employee’s labor by intermediate or final cost objectives A labor distribution system that charges direct and indirect labor to the final cost objectives Interim determination of costs charged to a contract through routine posting of books of account Exclusion from costs charged to the government contracts of amounts that are not allowable per FAR 31, Contract Cost Principals and Procedures, or other contract provisions Identification of cost by contract line item (CLIN) and by units if required by the proposed contract Segregation of preproduction costs from production costs Billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms Cost accounting information, as required: By contract clauses concerning limitation of cost (FAR 52.232-20), limitation of funds (FAR 52.232-22), or allowable cost and payment (FAR 52.216-7); and To readily calculate indirect cost rates from the books of accounts; Adequate, reliable data for use in pricing follow-on acquisitions Accounting practices in accordance with standards promulgated by the Cost Accounting Standards Board, if applicable, otherwise, Generally Accepted Accounting Principles. A common question is what are some of the typical pitfalls contractors have when completing this audit. Our answer is that all of requirements are important and non-compliance could leave you with a non-adequate system. If the Contracting Officer makes a final determination to disapprove the Contractor’s accounting system, and the contract includes the clause at 252.242-7005, Contractor Business Systems, the Contracting Officer will withhold payments in accordance with that clause. No one wants to not get paid!! A tried and trusted tool like Unanet can help you meet the requirements above. If you are not comfortable with taking this on yourself please do reach out to Unanet as we have a partner network that can assist you every step of the way. It will be worth every penny you spend. Good luck on your audit and hope that there are many contract awards coming your way. For more information, download A GovCon’s Essential Guide to DCAA Compliance.

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Getting Ready for a DCAA Audit

by Kim Koster GovCon, Government Compliance

May 22, 2019

Let’s quickly level-set on the mission of the Defense Contract Audit Agency (DCAA). Their primary function is to perform contract and financial audits for agencies that are responsible for acquisition and contract administration for the US Government. DCAA audits ONLY government contractors. Each DCAA audit is conducted in accordance with the Generally Accepted Government Auditing Standards (GAGAS). The principles that GAGAS embodies are unbiased audit conclusions based on facts. DCAA is a very vital part of the acquisition process for the Department of Defense (DOD) and certain other agencies. Their charter is to make sure that the taxpayers’ money is spent responsibly and ethically, by conducting audits that ensure the validity of costs throughout the acquisition process. They have a tremendous amount of influence because they communicate with the Contracting Officer (CO) and make recommendations that have an impact on contract negotiations. The recommendations help the CO understand what the price of the contract should be. In the past the relationship between the government contracting community and DCAA has been strained. DCAA is making a concerted effort to improve overall relationships with government contractors by improving communication and coordination. DCAA Audits are a Fact of Life for Government Contractors During our most recent GAUGE Report, we noted the types of audits that were most prevalent. There are many audits that a GovCon can be subject to. Below are those results with the ICS being the largest audit by far.   Tips to Prepare for a DCAA Audit 2019 GAUGE survey respondents said that their DCAA oversight is increasing, 6% more than last year. So, it is important to understand how you can best manage your compliance and audits. Here are a several tips you can use to help ensure a successful DCAA audit. Why Unanet for DCAA Audit Preparation? Unanet is purpose-built with the project or contract in mind. It is uniquely designed for government contractors and has been battle-tested for compliance rules and regulations. Our compliance features are built into the tool, making compliance part of the fabric of your business. Unanet currently has over 1,000 clients using and trusting the system. Unanet supports compliant accumulation and allocation of costs utilizing time keeping, expense accounting, cost pools, indirect rates, revenue recognition, and project management all in one truly integrated system. Whether you are a small new or a seasoned larger GovCon, you can count on Unanet for your compliance needs. Unanet is recognized by the audit agencies as being “compliant ready,” giving you an immediate advantage in the audit process. Click here to learn more.

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What is SF1408?

by Kim Koster GovCon, Government Compliance

Feb 21, 2019

Just in case you are completely new to Government Contracting, let’s quickly level set on the mission of the Defense Contract Audit Agency (DCAA). Their primary function is to perform contract and financial audits for agencies that are responsible for acquisition and contract administration for the US Government. DCAA audits ONLY government contractors like you. They conduct these audits in accordance with the Generally Accepted Government Auditing Standards (GAGAS). The principles that GAGAS embodies are unbiased audit conclusions based on facts. If you are interested there is a ton of information on the DCAA website dcaa.mil to help you more thoroughly prep for impending audits. With all that said, let’s focus in on the topic of this blog, which is the Pre-Award Accounting System Survey (SF1408). The Accounting System Survey is considered “pre-award audit” and it is necessary for the award of any Cost Type contract. Below is an excerpt from the DCAA Letters to Congress about Pre-Award Audits: Pre-Award Audits. Pre-award audits determine whether the design of a contractor’s accounting system is acceptable, which is a necessary condition for awarding cost type contracts. To better meet the needs of buying commands, DCAA prioritized these audits and developed tools to assist both contractors and auditors. As a result, DCAA has reduced the number of days to complete pre-award audits going from approximately 120 days in FY 2012 to about 60 days in FY 2016. Those measures, combined with effective communication between audit staff, contracting officers, and contractors, has allowed us to more quickly identify system deficiencies, provide workable solutions, and reduce the time between solicitation to award. Additionally, a part of our outreach to small businesses focuses on the necessary components of an acceptable accounting system, which we feel also contributed to this success. The “Pre-Award Survey (SF1408)” is conducted prior to award and is contract specific. It results in an opinion that the system is “acceptable” for use on the contemplated contract. It should be noted that this is NOT a true audit because it does not look at any actual costs – only the system capabilities. It is referred to as a “Survey” in the document and it is considered a “review” in auditor terminology. It can, and often is, done on a system that is not yet implemented based on the software capabilities and pro forma company policies and procedures. The Survey is a Pre-Award Survey known as Standard Form (SF) 1408 which is asking questions about your accounting system. Below are some of the inquiries of the form: Is the accounting system in accordance the GAAP? Accounting System provides for: Proper segregation of direct and indirect costs Identification and accumulation of direct costs by contract Method for allocation of indirect costs Timekeeping System Labor distribution Segregation of unallowable costs Accumulation of costs under General Ledger Control Accounting System provides financial information Required by contract clauses concerning limitation of cost (FAR 52.232-20 and 21) or limitation of payments (FAR 52.216-16) Required to support requests for progress payments Is the accounting designed to have reliable and accurate data? Is the accounting system fully operable? This overall process can be tricky for new government contractors and it is highly suggested that you have the right processes and tools in place to assure success. If you are not comfortable with taking this on yourself please do call Unanet, as we have a partner network that can assist you every step of the way. This is a great example of investing upfront to ensure the success of your project. It will be worth every penny you spend. For more information, download the SF1408 Overview.

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DCAA Timekeeping Requirements and Timesheet Software

by Kim Koster GovCon, Government Compliance

Feb 04, 2019

Unanet has timesheet features and functions that directly support the DCAA timekeeping requirements stated in the Automated Timekeeping Systems section of the Defense Contract Audit Agency (DCAA) regulations and Federal Acquisition Regulations (FAR). Note that DCAA requires that the timekeeping process, collectively including policies, manual procedures and tools be compliant; timesheet software alone is not audited for compliance or certified, nor approved as DCAA compliant. However, Unanet timesheet software has been reviewed by auditors at hundreds of customer sites and, along with the customer policies and procedures, approved as supporting DCAA timekeeping requirements. Unanet timesheet software makes implementation of the DCAA regulations easy and efficient. Here is a small sampling of the DCAA regulations supported by Unanet: Employees charge time to authorized, open projects An employee access their timesheet through a secure password Employee records are viewable and there are auditable comments for any timesheet change Supervisors approve the entire timesheet All time must be reported (total time accounting) Administrators monitor delinquent timesheets Learn more about how Unanet timesheet software can help support DCAA timekeeping requirements! For information on controls checked during a DCAA audit please refer to publication 7641.90 titled, “Information for Contractors,” or contact the Defense Contract Audit Agency at the address below: Defense Contract Audit Agency ATTN: Policy Auditing Standards Division (PAS) 8725 John J. Kingman Rd., Suite 2135 Fort Belvoir, VA 22060-6219 (703) 767-3234 (FAX)