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DCAA CompliantQuickBooksBoot CampPresented byJenny W. Clarkjwclark@solvability.comwww.solvability.com
DCAA Com p liant Qu ick Books Boot Cam pInt rodu ct ionFor small businesses in the federal market, the process of business development,proposals, pricing, contract management and execution of contracts continues toincrease in complexity and cost. At the same time, there is more competition forfederal dollars and on-going pressure to do more with less funding.Small businesses bring flexibility, innovation, creativity and disruption to theircustomers, while driving the economic growth in our nation. By collecting andorganizing the training materials in this “boot camp” format, our goal is to help smallbusinesses in federal contracting learn faster so they can be more competitive overall.You are invited to become a part of our community, where we will share information toimprove our processes and decision-making. Please join us at our website atwww.solvability.com as well as our community groups on social media.Jenny W. ClarkCEOSolvability, Inc.
DCAA Compliant QuickBooks Boot CampTable of ContentsTOPIC01 Introduction02 Table of Contents03 Boot Camp Agenda04 SF 1408 Pre-Award SurveyOVERVIEW of Federal Contracting05 DCAA Information for Contractors06 FAR Cost Principles07 CAS List & Link08 Indirect Rates & Incurred Cost Submissions09 FAR – Federal Acquisition Regulation10 Contractor Business Systems11 Prime Relationships and Small Business Strategies12 How Far Can You Go with QuickBooks Pro13 Government Contract Accounting Made Easy with RPM14 Understanding Price to Win15 Strategic Pricing Model16 Travel Accounting for Federal Contractors17 DCAA Compliant Quick Books18 DCAA Compliant Quick Books WorksheetsAPPENDIX – electronic filesA05 DCAA Information for ContractorsA06 FAR Cost Principles GuideA07 CAS HandbookA09 FAR – Federal Acquisition 21-3031-4044-5657-6768-7172-100101-107
DCAA Compliant QuickBooks Boot CampAGENDADay 1: Government Contract Accounting Made Easy Overview of Federal ContractingRequirements for a DCAA Compliant accounting systemElements of a DCAA compliant timesheet and labor distribution systemUnderstanding Cost accounting requirements based on accrual methodsDirect, Indirect and Unallowable costsContract types and Billing requirementsLunch provided at training location Indirect rate strategiesComputing Indirect Rates for competitive pricingReview of FAR 31.205 Unallowable costsDay 2: DCAA Compliant QuickBooks for Government Contractors DCAA Compliance and QuickBooks LimitationsPreferences and settings to configure QuickBooks for DCAA complianceSetting up a DCAA Compliant Chart of AccountsConfiguring Customers & JobsConfiguring Employee Data, Service Items and Payroll itemsBusiness rules for coding transactions to streamline reporting and billingLunch provided at training location Controlling timing and reporting for accrual based Cost accountingCreating invoices based on contract requirementsReporting of Cost and RevenueComputing Indirect Rates based on your Income StatementPage 1
Preaward Survey of Prospective Contractor Accounting System Checklist[FAR 16.301-3 states that a cost-reimbursement type contract may be used only when thecontractor’s accounting system is adequate for determining costs applicable to the contract. Ifno information is available in the files to make this determination, a Preaward Survey ofProspective Contractor’s Accounting System (SF1408) can be requested from DCAA. Beforerequesting such an audit, it is a good idea to send this checklist to prospective contractor’s forcompletion to ensure they understand the requirements of the SF1408, and to ensure they areready for DCAA to come in and perform an audit].Instructions:1. Mark “X” in the appropriate column.2. On Page 2, provide a narrative describing how the current accounting system supports yourresponse to each item. Be as descriptive as necessary.Contractor Name:Point of Contact (Name/Ph #/Email):CAGE Code:READY FOR AUDIT (YES) / (NO):Yes1. Is the accounting system in accord with generally acceptedaccounting principles?NoN/ANote12. ACCOUNTING SYSTEM PROVIDES FOR:a. Proper segregation of direct costs from indirect costs.2b. Identification and accumulation of direct costs by contract.3c. A logical and consistent method for the allocation of indirectcosts to intermediate and final cost objectives. (A contract isfinal cost objective.)4d. Accumulation of costs under general ledger control.5e. A timekeeping system that identifies employees' labor byintermediate or final cost objectives.6f. A labor distribution system that charges direct and indirectlabor to the appropriate cost objectives.7g. Interim (at least monthly) determination of costs charged to acontract through routine posting of books of account.8h. Exclusion from costs charged to government contracts ofamounts which are not allowable in terms of FAR 31, ContractCost Principles and Procedures, or other contract provisions.9Page 2
Preaward Survey of Prospective Contractor Accounting System Checklisti. Identification of costs by contract line item and by units (as ifeach unit or line item were a separate contract) if required by theproposed contract.10j. Segregation of preproduction costs from production costs.113. Accounting system provides financial information:a. Required by contract clauses concerning limitation ofcost (FAR 52.232-20 and 21) or limitation on payments(FAR 52.216-16).b. Required to support requests for progress payments.12134. Is the accounting system designed, and are the recordsmaintained in such a manner that adequate, reliable data aredeveloped for use in pricing follow-on acquisitions?145. Is the accounting system currently in full operation? (If not,describe in Page 2 narrative which portions are (1) in operation,(2) set up, but not yet in operation, (3) anticipated, or (4)nonexistent.)15Instructions: Use this section to explain how the current accounting system supports your response toeach item. If a response is N/A provide further explanation. Use as much space as needed. Providereferences to current policies and procedures if applicable.Note1Narrative2345678910Page 3
Preaward Survey of Prospective Contractor Accounting System Checklist1112131415 PLEASE ANSWER ALL QUESTIONS BELOW: ARE YOU PLANNING ON BIDDING ON COST TYPE CONTRACTS? (YES/NO) ARE YOU READY FOR A DCAA AUDIT? (YES/NO) HAVE YOU READ THE REQUIREMENTS IN THE SF1408? (YES/NO) HAVE YOU READ THE “Information for Contractors” DOCUMENT ON DCAA’SWEBSITE (http://www.dcaal.mil/)? (YES/NO) PLEASE IDENTIFY THE DCAA OFFICE THAT IS COGNIZANT OVER YOURCOMPANY - (Found on DCAA’s WEBSITE (http://www.dcaa.mil/) PLEASE IDENTIFY YOUR COMPANY’S POINT OF CONTACT (Name/ph #/eMail) If an Outside CPA/Consultant/Non DoD agency has reviewed your Accounting System,please provide a copy of the Report. [Insert name and title of individual responsible for design of the accounting system]Name: Signature:Title: Date:Contractor:Page 4
Overview of Federal Contracting05 DCAA Information for Contractors06 FAR Cost Principles07 CAS List & Link08 Indirect Rates & Incurred Cost Submissions09 FAR – Federal Acquisition Regulation10 Contractor Business Systems11 Prime Relationships and Small Business StrategiesAPPENDIX – electronic filesA05 DCAA Information for ContractorsA06 FAR Cost Principles GuideA07 CAS HandbookA09 FAR – Federal Acquisition RegulationPage 5
DCAA Information for Contractorshttp://www.dcaa.mil/DCAAM 7641.90.pdfPage 6
Version: June 2011Thru FAC 2005-52FAR Cost Principles Guide(Chronology of Cost Principle Revisions Issued in Federal AcquisitionCirculars (FACs) Since 1984)TABLE O FCO ARFARFARSe ctionTitle31.201-1 -- Com pos ition ofTotalCos ts31.201-2 -- D e te rm ining Allowability31.201-3 -- D e te rm ining R e as onablene s s31.201-4 -- D e te rm ining Allocability31.201-5 –Cre dits31.201-6 -- Accounting for Unallowable Cos ts31.201-7 -- Cons truction and Arch ite ct-Engine e r Contracts31.202 -- Dire ctCos ts31.203 -- Indire ctCos ts31.204 -- Application ofPrinciples and Proce dure s31.205-1 -- Public R e lations and Adve rtis ing Cos ts31.205-2 -- Autom atic D ata Proce s s ing Eq uipm e ntLe as ing Cos ts31.205-3 -- Bad D e bts31.205-4 – Bonding Cos ts31.205-5 -- CivilD e fe ns e Cos ts31.205-6 -- Com pe ns ation for Pe rs onalSe rvice s31.205-7 -- Continge ncie s31.205-8 -- Contributions or D onations31.205-9 -- R e s e rve d31.205-10 -- Cos tofM one y31.205-11 –D e pre ciation31.205-12 -- Econom ic Planning Cos ts31.205-13 -- Em ploye e M orale, H e alth , W e lfare , Food Se rvice ,And D orm itoryCos ts and Cre dits31.205-14 -- Ente rtainm e ntCos ts31.205-15 -- Fine s and Pe naltie s , and M is ch arging Cos ts31.205-16 -- Gains and Los s e s O n D is pos ition or Im pairm e ntO fD e pre ciable Prope rtyO r O th e r CapitalAs s e ts31.205-17 -- Idle Facilitie s and Idle CapacityCos ts31.205-18 -- Inde pe nde ntR e s e arch And D e ve lopm e ntand BidAnd Propos alCos ts31.205-19 -- Ins urance and Inde m nification31.205-20 -- Inte re s tand O th e r FinancialCos ts31.205-21 -- Labor R e lations Cos ts31.205-22 -- Lobbying and PoliticalActivityCos ts31.205-23 -- Los s e s on O th e r ContractsInde xPage 7Page 99105106106110
CAS: Cost Accounting 2413414415416417418419420TitleConsistency in Estimating, Accumulating, and Reporting CostsConsistency in Allocating Costs Incurred for the Same PurposeAllocation of Home Office Expenses to SegmentsCapitalization of Tangible AssetsAccounting for Unallowable CostsCost Accounting PeriodUse of Standard Costs for Direct Material and Direct LaborAccounting for Costs of Compensated Personal AbsenceDepreciation of Tangible Capital AssetsAllocation of Business Unit General and Administrative Expenses to Final Cost ObjectivesAccounting for Acquisition Costs of MaterialComposition and Measurement of Pension CostAdjustment and Allocation of Pension CostCost of Money as an Element of the Cost of Facilities CapitalAccounting for the Cost of Deferred CompensationAccounting for Insurance CostsCost of Money as an Element of the Cost of Capital Assets under ConstructionAllocation of Direct and Indirect CostsReservedAccounting for Independent Research and Development and Bid and Proposal Costs*Most small businesses are not subject to CAS RequirementsSOURCE – Wikipedia http://en.wikipedia.org/wiki/Cost Accounting StandardsCAS ApplicabilityA company may be subject to "full" CAS coverage (required to follow all 19 standards), "modified" CAS coverage (required to follow only Standards 401, 402,405, and 406), or be exempt from coverage. However, a company under "full" coverage is not subject to a standard where it does not apply (e.g., a companywhich does not use standard costing does not have to comply with CAS 407)."Full" coverage applies only when a company receives either one CAS-covered contract of US 50 million or more, or a number of smaller CAS-coveredcontracts totaling US 50 million. In addition to complying with all 19 standards (where applicable), the company must also file a CAS Disclosure Statement,which spells out the company's accounting practices (such as if certain costs are treated as direct contract charges or as part of overhead expense). There aretwo versions of the CAS Disclosure Statement: DS-1 applies to commercial companies while DS-2 applies to educational institutions."Modified" coverage applies when a company receives a single CAS-covered contract of US 7.5 million or more.In some instances, a contract may be exempt from CAS standards: Contracts awarded to small businesses are exempt from CAS, regardless of contract size Contracts for commercial items Contracts where the price is set by law or regulationAny contract less than US 7.5 million is exempt, provided the company has not been awarded a contract greater than US 7.5 million, and also anycontract less than US 700,000 is always exemptContracts awarded under sealed bid procedures, or where "adequate price competition" was available (the latter meaning where at least twocompanies had the ability to bid and perform on a contract, even if only one bid was later received)Contracts awarded to foreign governmentsContracts awarded to foreign concerns (only the disclosure statement and CAS 401 and 402 apply in this case) (See CFR 9903.201-1(b))Previously, contracts where performance would have been performed entirely outside the United States (including territories and possessions) were alsoexempt, but this exemption was removed for new contracts effective October 11, 2011.Page 8
CAS: Cost Accounting /pguide/98-30C14.htmPricing Handbook14. Cost Accounting StandardsTable of Contents14.1 Introduction14.2 Background & History14.2.1 General14.2.2 The Cost Accounting Standards Board (CASB)14.2.3 FAA Cost Accounting Standards Reform14.3 Summary of The Cost Accounting Standards14.4 Cost Accounting Standards Versus Cost Principles14.5 Applicability14.6 Types of Coverage14.7 Disclosure Statements14.7.1 FAA Submittal Requirements14.7.2 Adequacy versus Compliance14.7.3 Miscellaneous Disclosure Statement Issues14.8 Cost Accounting Standards Administration14.8.1 Price Adjustments14.8.2 Effecting the Price Adjustment14.8.3 Administration ResponsibilityPage 9
CAS: Cost Accounting Standards*CAS DISCLOSURE /files/omb/procurement/casb ds-1.pdfPage 10
CAS: Cost Accounting Standards*Page 11
Indirect Rates & Incu rred Cos t Su b m is s ionsFA R A llow able Costan d P aym en tClause 52.21 6-7A L L O W A B L E C O ST A N D P A YM EN T (52 .2 1 6-7 )(D EC 2 002 )--A L TERN A TE I (FEB 1 997 )(a)In voicin g.(1 )Th e Govern m en tw illm ake paym en tstoth e C on tractorw h en requested asth e w orkprogresses,but(exceptforsm allbusin esscon cern s)n otm ore often th en on ce every tw o w eeks,inam oun tsd eterm in ed to be allow able by th e C on tractin g O fficerin accord an ce w ith th e Fed eralA cquisitionRegulation (FA R)subpart31 .2 in effecton th e d ate of th iscon tractan d the term sof th iscon tract. Th eC on tractorm ay subm itto an auth orized represen tative of th e C on tractin g O fficer,in such form an dreason able d etailasth e represen tative m ay require,an in voice orvouch ersupported by a statem en tofth e claim ed allow able costforperform in g th iscon tract.(2 )C on tractfin an cin g paym en tsare n otsubjecttoth e in terestpen alty provision sof th e P rom ptP aym en tA ct. In terim paym en tsm ad e priortoth e fin alpaym en tun d erth e con tractare con tractfin an cin g paym en ts,exceptin terim paym en tsif th iscon tractcon tain sA ltern ate Itoth e clause at52 .2 322 5.(3)Th e d esign ated paym en toffice w illm ake in terim paym en tsforc on tractfin an cin g on th e 30 thd ay afterth e d esign ated billin g office receivesa properpaym en trequest. In th e even tth attheGovern m en trequiresan aud itoroth erreview of a specific paym en trequestto en sure com plian ce w iththe term san d con d ition sof th e con tract,th e d esign ated paym en toffice isn otcom pelled to m akepaym en tby th e specified d ue d ate.(b)Reim bursin g costs. (1 )Forth e purpose of reim bursin g allow able costs(exceptasprovid ed insubparagraph (b)(2 )of th isclause,w ith respectto pen sion ,d eferred profitsh arin g,an d em ployee stockow n ersh ip plan con tribution s),the term " costsin clud eson ly-(i)Th ose record ed coststh at,atthe tim e of th e requestforreim bursem en t,theC on tractorh aspaid by cash ,ch ec k,oroth erform of actualpaym en tforitem sorservicespurc h asedd irectly forth e con tract;(ii)W h en th e C on tractorisn otd elin quen tin payin g costsof con tractperform an ce in theord in ary course of busin ess,costsin curred ,butn otn ecessarily paid ,for-(A )Suppliesan d servicespurch ased d irectly forth e con tractan d associatedfin an cin g paym en tsto subc on tractors,provid ed paym en tsd eterm in ed d ue w illbe m ad e—(1 )In accord an ce w ith the term san d con d ition sof a subcon tractorin voice;an d(2 )O rd in arily w ith in 30 d aysof th e subm ission of th e C on tractor'spaym en trequesttoth e Govern m en t;(B )M aterialsissued from th e C on tractor'sin ven tory an d placed in th e prod uctionprocessforuse on th e con tract;(C )D irectlabor;(D )D irecttravel;(E)O th erd irectin -h ouse c osts;an d(F)P roperly allocable an d allow able in d irectcosts,assh ow n in th e rec ord sm ain tain ed by th e C on tractorforpurposesof obtain in g reim bursem en tun d erGovern m en tcon tracts;an d(iii)Th e am oun tof progressan d oth erpaym en tstoth e C on tractor'ssubcon tractorsth ateith erh ave been paid ,orth atth e C on tractorisrequired to pay pursuan ttoth e clause of th iscon tracten titled " P rom ptP aym en tforC on struction C on tracts." P aym en tssh allbe m ad e by cash ,c h eck,oroth erform of paym en ttoth e C on tractor'ssubcon tractorsun d ersim ilarcoststan d ard s.(2 )A ccrued costof C on trac torcon tribution sun d erem ployee pen sion plan ssh allbe exclud edun tilactually paid un less—(i)Th e C on tractor'spractice isto m ake con tribution stoth e retirem en tfun d quarterly orm ore frequen tly;an d(ii)Th e con tribution d oesn otrem ain un paid 30 d aysafterth e en d of th e applicablequarterorsh orterpaym en tperiod (an y con tribution rem ain in g un paid sh allbe exclud ed from theC on tractor'sin d irectcostsforpaym en tpurposes).Page 12
Indirect Rates & Incu rred Cos t Su b m is s ions(3)N otw ith stan d in g th e aud itan d ad justm en tof in voicesorvouch ersun d erparagraph (g)below ,allow able in d irectcostsun d erth iscon tractsh allbe obtain ed by applyin g in d irectcostratesestablish ed in accord an ce w ith paragraph (d )below .(4)A n y statem en tsin specification soroth erd oc um en tsin corporated in th iscon tractbyreferen ce d esign atin g perform an ce of servicesorfurn ish in g of m aterialsatth e C on tractor'sexpen se oratn o costtoth e Govern m en tsh allbe d isregard ed forpurposesof cost-reim bursem en tun d erth isclause.(c)Sm allbusin esscon cern s. A sm allbusin esscon cern m ay receive m ore frequen tpaym en tsth an everytw o w eeks.(d )Fin alin d irectcostrates. (1 )Fin alan n ualin d irectcostratesan d th e appropriate basessh allbeestablish ed in accord an ce w ith Subpart42 .7 of th e Fed eralA cquisition Regulation (FA R)in effectfortheperiod covered by th e in d irectcostrate proposal.(2)(i)Th e C on tractorsh allsubm itan ad equate fin alin d irectcostrate proposaltotheCon tractin g O fficer(orcogn izan tFed eralagen cy official)an d aud itorw ith in the 6-m on thperiod follow in g th e expiration of each of itsfiscalyears. Reason able exten sion s,forexception alcircum stan ceson ly,m ay be requested in w ritin g by th e C on tractoran d gran ted in w ritin g by theC on tractin g O fficer. Th e C on tractorsh allsupportitsproposalw ith ad equate supportin g d ata.(ii)Th e proposed ratessh allbe based on th e C on tractor’sactualcostexperien ce forth atperiod . Th e appropriate Govern m en trepresen tative an d th e C on tractorsh allestablish th e fin alin d irectcostratesasprom ptly aspracticalafterreceiptof th e C on tractor’sproposal.(3)Th e C on tractoran d th e appropriate Govern m en trepresen tative sh allexecute a w rittenun d erstan d in g settin g forth th e fin alin d irectcostrates. Th e un d erstan d in g sh allspecify (i)th e agreed upon fin alan n ualin d irectcostrates,(ii)th e basesto w h ich th e ratesapply,(iii)th e period sforw h ich theratesapply,(iv)an y specific in d irectcostitem streated asd irectcostsin th e settl
DCAA Compliant QuickBooks Boot Camp Table of Contents TOPIC Pages 01 Introduction 02 Table of Contents 03 Boot Camp Agenda 1 04 SF 1408 Pre-Award Survey 2-4 OVERVIEW of Federal Contracting 05 DCAA Information for Contracto
