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SF 1408 Evaluation Checklist - The Big Question

Vector_Form_with_Pen_and_Checkboxes_IconFrom time to time, I will speak with a government contractor who tells me that they have invested in a commercial-off-the-shelf cost accounting software package in anticipation of a DCAA audit, but have not yet gotten it up and running. Perhaps they are under the impression that auditors will be willing to give them a pass if the system is not operational, but certainly anticipated. It's not a matter of if; it is a matter of when

The second page of the Standard Form 1408 features the evaluation checklist that DCAA auditors use to determine the "adequacy" of a contractor's accounting system.  This form is used by auditors when a flexibly priced contract (e.g., Cost Plus, Time and Materials) is in a preaward stage, and therefore a survey of the bidder's accounting system and its internal controls is required prior to the actual contract award. There are five questions on the form, with a couple of questions broken into detailed subcategories. The question that is possibly most critical is the fifth and final question on the form; to wit:

"IS THE ACCOUNTING SYSTEM CURRENTLY IN FULL OPERATION? (if not, describe in Section I Narrative which portions are (1) in operation, (2) set up, but not yet in operation, (3) anticipated, or (4) nonexistent.)"

Having invested in an industry-specific and purpose-built accounting system designed for government contractors that is not in full operation won't count for much more than having a non-compliant system that is in full operation, so don't fool yourself into believing that your investment in a compliant accounting package that you're not currently utilizing will enable you to get past the scrutiny of the DCAA. They'll likely fail you when it comes to the last question on the SF1408 provided they haven't already uncovered a tripwire prior to getting to the final question. In all cases, you will need to ensure that your accounting system is currently in full operation before an auditor begins the survey. If it is not, you should file a request for an extension to allow for enough time to be able to demonstrate the capabilities of your system to meet all criteria with live data and system-generated reports. Full operation can be a moving target and it does not infer that you are utilizing the entire feature set of your system. What it does infer is that for audit purposes, you have the capability of addressing of each criterion listed in conjunction with a supporting policy and procedure document, where applicable.    

With SYMPAQ, we make it easy to get to full operation in a relatively little amount of time by providing low-cost and fixed-price implementation services. We offer a "stock" setup that includes your chart of accounts, indirect rate tiers, and elements of cost, among other critical items that streamline the process of going live with your new, DCAA-compliant books of record. 

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