DCAA-approved accounting system: Everything you need to know

When your business firm is shortlisted for a government agreement, it is provided with a sequence of surveys like the Standard Form (SF) 1408. This is basically an evaluation of the structure and design of your existing accounting system to make sure it will be suitable for a potential future government contract. Even Though there isn't an ideal accounting system out there that is accepted by the federal government on the get-go, there are specific prerequisites that can be applied to be compliant for becoming a government accounting system. When it comes to government employees, a systematic plan is essential to illustrate to the government that your accounting system is meeting its specified criteria, as mentioned in the SF 1408. A CPA-certified public accountant can help you in selecting a DCAA-compliant accounting system for your firm. Additionally, they can also provide the necessary requirements for any generic finance firm accounting system.

Understanding a Government-Approved Accounting System

For your firm's accounting system to become a Government-approved accounting system, it must be on par with specific standards: Generally Accepted Accounting Principles (GAAP), Cost Accounting Standards (CAS), Federal Acquisition Regulations (FAR), in addition to some other government standards. The Defense Contract Audit Agency (DCAA) assists in providing regulations and recommendations on the type of software that government employees utilize for their accounting purposes. To become a prosperous government contractor and obtain contracts, a firm must be functional enough to pass a DCAA audit.

Importance of a DCAA-Approved Accounting System

Government-approved accounting systems help you track your financial records, timekeeping, bookkeeping, and other essential accounting needs while simultaneously remaining compliant with the Defense Contract Audit Agency.

Essentials for DCAA-compliant accounting

There are several aspects that your organization needs to fulfill to become DCAA compliant with your accounting system. Here are some essential aspects to look into:

• Utilizing the generally accepted accounting principles (GAAP)
• Exclude and track the unallowable costs
• Compliant timekeeping practicality
• An acceptable exertion of generally accepted accounting principles (GAAP)
• Acceptable cost and transaction collection and documentation
• Severance of pre-contract and contract finances.

Therefore, having a DCAA-compliant accounting system and accurately following the GAAP principles is the most accurate way to ensure compliance with each of the contract requirements. For this endeavor, you can place your trust in time-tested CPAs who have real-world experience with making firms DCAA and Department of Defense (DOD) compliant and making compliance seamless for your business.

To act in accordance with DCAA standards, contractors must make sure to comply with the following DCAA accounting system requirements:

DCAA Accounting System Requirements

Exclusion of Costs

It's essential to isolate the direct and indirect prices to ensure cost allotment and prevent improper billing. This isolation assists in the seamless tracking of finances linked with particular contracts.

Time Efficiency

An exceptional management of time is important to ensure and allocate the employees working hours in a precise manner. Additionally, this also makes sure that the labor costs are accurately imbursed to contracts. Thus, averting the inconsistencies and future audit problems.

Accounting for irrelevant costs

The accounting system must be able to find out and isolate the irrelevant or unavoidable costs, as instructed by the federal regulations. Additionally, to intercept them from being billed by the government and maintaining compliance as well.

Job Order Costing

A functional job costing is essential for surveying all company related expenses accurately. This function allows for accurate measurement of costs with respect to projects. This ensures that all finances are accounted for accurately.

Operational Controls

A robust command of internal controls is essential for ensuring the preciseness and measurement of financial management and reporting. These operational controls assist in ensuring compliance with DCAA standards, protecting your firm from errors and deception.