Are you familiar with the
chart of accounts in government contracting? It’s a list of general ledger
accounts kept in your accounting system. The purpose of this chart is to
categorize financial transactions into liabilities, assets, expenses, and
revenues. By segregating records in this way, you’ll make things easier when you
have to gauge the overall condition of your business and the financial impact
of every project you work on. You need to create and maintain these charts
using accounting software programs. However, make sure that the one you choose
fulfills every DCAA
Accounting System Requirement.
The keystone
You may not be able to
pass a DCAA audit if your chart of accounts doesn’t comply with the standards
of this entity. You will surely find the conditions for an appropriate
accounting system in the Pre-Award Survey, but among those requirements are
proper segregation of indirect costs, direct costs, and unallowable expenses.
Apart from that, you need to deal with the logical and consistent accumulation
of indirect costs. By setting up a chart of accounts correctly, you can satisfy
these requirements.
Segregating cost pools
The most critical aspect
of a DCAA compliant chart of accounts is the grouping of costs. When you have a
separate sequence of accounts for direct costs, unallowable costs, and indirect
costs in an accounting software program of your choice, you should be able to
identify and differentiate the cost pools easily.
Contract-based cost accumulation
Another necessity for the
Pre-Award Survey or SF
1408 is your ability to ascertain and hoard direct costs based on
projects. It means associating the direct expenses with a single cost objective
instead of just staying at a customer level. For instance, if you have five
contracts from a government agency to work on, you have to ensure the revenues,
costs, and billings for each contract are distinguishable. The right accounting
platform can help you achieve compliance by setting up several jobs under the
same customer.
To conclude
This write-up focused
mainly on the need for a DCAA chart of accounts from the perspective of being
compliant. However, it can offer several business benefits too. For example, it
lets you determine your indirect cost rates, as well as your overhead rates
with enhanced accuracy. As a result, you get to submit more realistic bids to
avoid losing money on contracts.
