The Mysteries Behind Accounting Systems Solutions and ......Types of Accounting Systems • Common...
Transcript of The Mysteries Behind Accounting Systems Solutions and ......Types of Accounting Systems • Common...
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The Mystery Behind Accounting Systems Solutions and SetupsApril 28, 2016
The Fundamentals of Government Contracting Webinar Series
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Your Presenters
JanetBorjesonDixonHughesGoodmanLLP240.403.3735janet.borjesen@dhgllp.com
@DHG_GovCon
MikeMardesichDixonHughesGoodmanLLP703.970.0508mike.mardesich@dhgllp.com
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Fundamentals – Season 1
• Challenges of Contracting with the Federal Government (November 2015) -Completed
• Contract Types and Associated Risks (December 2015) – Completed• Year-End Closing (January 2016) - Completed• An Introduction to the Incurred Cost Submission
– Part I: Who, What, Where, When, Why, and How? (February 2016) -Completed
– Part II: Preparation and Adequacy Review (March 2016) - Completed• Accounting Systems and Setups (April 2016) - You are Here!• Accounting System Adequacy 101 (May 2016)• The Composition of Total Cost (June 2016)• Making Way for 2017 – Budgeting and Provisional Rates (July 2016)• Procurement Systems: DFARS Business Systems Rule and Criteria (August 2016)• Exploring the Gray Area of Unallowable Costs (September 2016)• Policy and Procedures Manual: What’s In It and Why Do You Need One? (October
2016)
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Overview
• Types of Accounting Systems• Common Myths• How Your Accounting System Can Fit Your
Growth Strategy• A Walk Through of an acceptable accounting
system• Other business systems
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Types of Accounting Systems
The Fundamentals of Government Contracting Webinar Series
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Types of Accounting Systems
• Common names for accounting systems:– Financial accounting– Tax accounting– Cost accounting– Contract cost accounting
• One set of books with different slices and levels of information reporting!
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Accounting System @DHG_GovCon
• The Accounting System!– Overall accounting system controls– Direct cost controls– Indirect cost controls– Labor system controls– General IT system controls
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Myth #1
To be DCAA compliant a contractor needs a big, expensive accounting system
• False – There are many commercially available accounting software systems that help contractors meet system requirements
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Commonly Used Software
• QuickBooks• Deltek• Unanet • PROCAS• eFAACT – an Add-On to QuickBooks• MicroSoft Nav (PVBS)• JAMIS• SSI
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Myth #2
There are different systems for different types of contracts
• False – An acceptable accounting system accumulates costs by contract or job regardless of the contract type
Fundamental requirements outlined on the SF1408 and in DFARS 252.242-7006
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Myth #3
“I’m a small business, I don’t need to be DCAA compliant”
• False – If a contractor has a contract with the federal government, according to the DCAA “Contractors should recognize that an operable accounting system that is under general ledger control is of paramount importance when performing government contracts.” DCAAM7641.90 (3a(3))
Additionally, it is much more difficult to switch to a compliant system after the fact.
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Myth #4
The system needs to be able to calculate the indirect rates
• False – The system should be designed in order to assist with the accumulation of costs in cost pools such as fringe, overhead, general and administrative, and segregate the unallowable expenses.
The calculation of the indirect rates can be accomplished using memorandum records as long as the amounts
reconcile back to the general ledger.
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How Your Accounting System Can Fit Your Growth Strategy
The Fundamentals of Government Contracting Webinar Series
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How to Select the Right System
• Some things to consider when selecting a new accounting system:– Contract type– Number of employees– Billing complexities– Rate structure– Department structure– System integration with timesheets, labor, HR,
inventory, other key elements– What do you want your system to provide?
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Management Reporting
• A well designed and monitored system can produce timely management reporting– Allows management to make business
decisions timely– Allows management to monitor trends in their
business
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Tools for Success
• Implement training and compliance programs• Keep it consistent – keep it simple• Set up the system to support how you do
business – not the other way around!• Minimize reporting formats – avoid the “excel
crutch”• Document policies and procedures - minimize
disruption from turnover• The system is much more than just accounting –
stakeholders all have different needs and viewpoints
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What An Acceptable Accounting System Looks
Like
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Chart of Accounts
• The chart of accounts is essential to any accounting system– Segregates direct, indirect, and unallowable
costs– Common account number schemes:
• Revenue - 4000• Direct – 5000• Indirect – 6000 – 8000• Unallowable – 9000 (for both Direct and Indirect)
– Consistent across contract types– Ease of indirect rate calculation
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Time Keeping System
• The time keeping system should have the following guidelines– Follow a company’s payroll cycle, if possible– Employee signature approval– Supervisor signature approval– Able to be locked, once approved.– If changes are to be made, the changes are required
to be documented– An audit trail of the changes needs to be able to be
produced– Be able to traced to labor allocation
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Labor Cost Allocation
• Labor cost allocation based upon the hours worked in each time period.
• Total time accounting!• Some DCAA acceptable labor costing methods:
– Effective rate calculation each period– Pro rata allocation of hours– Predetermined rate and variance
• Labor costs need to be documented and reconcile to the approved timekeeping records.
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Other General Guidelines
• The accounting system should be reconciled at least monthly– The Balance Sheet accounts– The Profit and Loss accounts
• Identify costs by contract• Approval and documentation of all adjusting journal
entries• Billing and revenue can be reconciled to cost accounts• System of internal controls• The system should be able to prepare financial
statement reports and a trial balance• A policies and procedures manual
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Other Business Systems
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Other Business Systems
• Earned Value Management System (252.234–7002)
• Estimating System (252.215–7002)• Material Management & Accounting
System (252.242–7004)• Property Management System (252.245–
7003)• Purchasing System (252.244–7001)
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Other Items
• Join David and Mike next month as they take a deep dive into the accounting system criteria
• Join DHG on May 5, 2016 for our 21st
Annual Government Contracting Update
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