Evaluating Cost Accounting Software for DCAA Compliance

According to the Website Findaccountingsoftware.com there are 700+ Commercial off-the-shelf (COTS) accounting packages available today. How many of these do you suppose can likely be configured to be DCAA compliant with proper setup? You might be surprised to learn that the correct answer is the vast majority of them! Upon an examination of the questions contained on the SF1408, the secret sauce for passing your DCAA Pre-Award Survey is found within your General Ledger's Chart of Accounts and Trial Balance and with your Payroll/Labor Distribution setup. For example, question 15 on the SF1408 checklist states, "Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31, Contract Cost Principles and Procedures." This requirement can be accommodated by defining a section within your chart of accounts where unallowable costs are accumulated. This can be configured regardless of the accounting software you are using.

So why bother with a cost accounting software package that proclaims DCAA compliance "out-of-box"? Because once you have gotten past the DCAA pre-award scrutiny and the coveted contract has been won, the need for an industry specific government contract accounting system will become abundantly evident. Most likely, when you attempt to prepare your first billing voucher you will realize your existing accounting software cannot adequately accommodate cost reimbursable, flexibly priced contract invoices. How will you be certain that you are recovering all of your eligible costs and charging the correct fee when your off-line billing spreadsheet potentially contains errors? Sooner than later it will come time to prepare your Incurred Cost schedules to support your "claimed" costs. Is your accounting software going to be able to produce the reports you need to make that process more accurate and less time consuming? Here are some reporting requirement examples that you should consider when evaluating and investing in cost accounting software that is purpose built for government contracting:

      *Produces fully burdened cost ledgers with contract inception-to-date totals
      *Compares provisional billing rates to actual indirect rates on an interim basis
      *Creates the annual Incurred Cost Electronically (ICE) schedules for DCAA
      *Costs your salaried (exempt) labor to determine uncompensated overtime
      *Issues retroactive rate adjustment billing vouchers
      *Tracks funding by CLIN, SLIN and ACRN
      *Invoices multiple revenue types under IDIQ contract awards
      *Tracks level of effort in order to provide limitations of funds notice
      *Invoice by WBS element ( task orders)
      *Accounts for funding modifications and change orders.

In addition, there are many other requirements (e.g., Service Contract Act reporting) that may vary from one contract award to the next, but be aware that merely passing a DCAA pre-award audit with carefully designed and augmented accounting software is not a means to an end. Be sure to prepare a list of specific questions ahead of viewing a live demonstration, and use this list as a starting point to make an educated choice on a system that is best suited for your company.

Written by G. Chris Brown

View all posts by: G. Chris Brown

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