The Department of Defense and civilian federal agencies alike have been trending towards cost reimbursement type contract awards during the past several years. This has increased the amount of oversight by the DCAA in assuring Contracting Officers that potential contract awardees have compliant systems in place before a contract award happens. Compliant systems are not limited to software and information technology, but also include policies and procedures and related internal controls. These compliant systems foster consistency, enhance credibility, reduce conflicts with auditors, and improve cash flow when properly implemented.
There are at least five readily identifiable benefits to implementing a cost accounting system, with compliance leading the way. We refer to these benefits as the "Five C's".
- Conflict reduction
- Cash flow
Let's begin with the all-important concept of Compliance, and in particular, compliance with the Federal Acquisition Regulations, the Cost Accounting Standards and other regulations. Oftentimes this is referred to as "DCAA compliance" even though the Defense Contract Audit Agency does not actually write the rules and regulations that they oversee. The main takeaways are that a properly configured and reviewed accounting system (software and policies) provides your management and other interested stakeholders with a strong sense of readiness for an outside review while providing reasonable assurance to third parties performing audits that cost management is a high priority in your organization.
On the topic of Consistency, a former DCAA auditor once told me, "If you are going to be wrong about something, then be consistently wrong about how you handle it in your books. I'm okay with that since it can be corrected. But when you are inconsistent in your cost accounting by recording an expenditure correctly at one time, and then incorrectly recording it at another time - that is a red flag." Most government contractors (with a few exceptions) must become familiar with the consistency standards set forth in CAS 401 and CAS 402. A major benefit to consistency is that you decrease your chances for defective pricing with the consistent budgeting and cost accumulation inherent within a cost accounting system.
Credibility comes about when you can readily comply with either the federal governments' or your prime contractors' requests to provide them with a "Description of the Accounting System". If you can definitively represent that your company has installed and has in full operation a system that fully meets (and exceeds) the evaluation criteria set forth on the SF1408 (Preaward Survey of Prospective Contractor Accounting System), then your credibility becomes far greater than it would otherwise be with a patchwork, non-compliant system. It shows that you take your accounting seriously by having invested in a purpose-built, commercial-off-the-shelf accounting system that provides supportable, auditable and reliable source data integrity, and credibility in the eyes of outside auditors and your teaming partners is achieved.
Conflict reduction is - or should be - what we all strive for in our daily lives. When you have business systems in place that provide standards-based cost reporting, conflicts of time and auditor disagreements are often avoided. Time spent interacting with auditors is reduced, thereby freeing up time for you and your staff to focus on more productive activities than spending hours piecing together supporting documentation from disparate systems. When you can readily produce information that an auditor may request with a clear audit trail, the auditor will be less likely to challenge the data at its source. Over the years, we have received many calls from our clients who tell us how smoothly their DCAA audit went and that the auditors were laudatory about SYMPAQ.
Last but not least, we all know that Cash Flow is the lifeblood of any business. And, of course, cash flow is greatly enhanced by having a business system in place that enables a streamlined invoicing process for generating bills faster and more accurately than with manual, off-line methods. When you are able to produce Public Vouchers directly from your cost accounting software, you are not only able to easily retrieve the data that populates the forms, but also produce the SF1034 and SF1035 billing formats that can be uploaded to iRAPT (formerly Wide Area Workflow) or similar government invoicing portals. Invoicing faster with fewer errors and omissions means getting paid faster.