Nuts and Bolts of Government Accounting

Paula Handrahan

Abt Associates Inc.

Agenda

DCAA Acceptable accounting systems Indirect rates Proposal Audits

DCAA Audits

What is DCAA’s role? Advisor to buying command on proposal reviews Reports to ACO on rate and CAS audits

What types of audits will they do? Pre-award audits System reviews Post-award audits Incurred cost (rate) audits CAS audits (If CAS covered)

DCAA Audits

What determines the type of audits DCAA can perform? Type of contract Basis of contract award Size of company

What happens if the you disagree with DCAA? The PCO or ACO would have to justify why

they are siding with you.

Indirect Rates

What are they? A way of recovering costs that are not

directly associated with a particular contract. How many rates do you need?

Depends on many things Size of the organization Mix of government vs. commercial sales Basis of award Variety of products in the business unit

Indirect Rates

What makes up the different pools? Overhead pools:

Expenses related to providing the product/service but not part of the end product (facility costs, supervision, etc.)

How many overhead rates should I have? Less is more…small pools are difficult to predict and

manage G&A pool:

Expenses for overall operation of the business as a whole (CEO, CFO, CIO, etc.)

Material/Subcontract Handling pool: Expenses related to material handling or

subcontract management (receiving, subcontract operations, etc.)

Indirect Rates

What makes up the bases? Overhead Base

Generally direct labor dollars Sometimes includes fringe benefits on direct labor

G&A Base Total Cost Input (all direct and indirect costs except

G&A expenses) Value added (all direct and indirect costs except

material/subcontract costs & G&A expenses) Single element (usually direct labor)

Material/Subcontract Handling Base Material/Subcontract dollars

Indirect Rates

How do you choose a base? G&A

What base best represents the total activity of a business unit in a typical fiscal year

Overhead What base best allocates the expenses to the

final cost objective to reasonably reflect the benefits received

Accounting Systems

There is no 1 approved accounting system that has to be used

Any system used must be able to track costs by job

Direct costs are key Labor, material, travel, etc Labor hours are generally required but can be

in a subsidiary ledger

Proposal Support

DCAA guidance, proposal support must be available immediately at start of audit.

Must explain how your budget was prepared

Direct Labor Support Hours:

Did you base your estimate on history? Are you using a learning curve?

If it’s a follow on contract will certain functions take less time on this contract?

Labor Rates: Are you bidding actual salaries?

If so have the salary support (roster, W-2, etc.) Are you bidding a combined rate (engineer, scientist, etc)?

If so be able to show how the rate was computed. Are you bidding a loaded rate? (T&M)

Be able to show how the rate was loaded Also be able to support the components of the loaded rate

Subcontract/Consultant Support

Have the sub/consultant bid available for review. Did you competitively source the vendor?

If so have the competing bids Be able to explain why you chose the vendor you bid. If it was not a competitive bid why? What made this

vendor uniquely qualified to do the work

Other Direct Costs

Does your bid have material? You will need a bill of material You will need quotes for material bid

Does your bid have travel? You will need to be able to support airfare and any per

diem being bid. Other costs?

Be able to explain how you arrived at estimates for any other direct costs. Did you use a factor, history, etc?

Indirect Costs

Do you have a Negotiated Indirect Rate Agreement (NICRA) If so did you apply the rates in the manner

prescribed on the NICRA? Have a copy of the NICRA available for

review.

If this is your first bid? If so be able to support how you arrived at the

rates you used.