If you are like most start-up government contractors, you’re using Quick Books Pro for your accounting software. 1) Can Quick Books Pro (QBP) be DCAA Compliant? 2) Will DCAA approve your accounting software? 3) How long will I be able to use QBP for my accounting system?
The answers are 1) yes, 2) no, because DCAA doesn’t approve any accounting software, and 3) probably until you reach 20 employees or receive your first prime contract. This article is the first in a series that will explain answers to those questions.
As you may have heard Paul Gunn say, almost any accounting software can be DCAA compliant if structured and run correctly. For specific requirements, go to www.dcaa.mil and download Information for Contractors, then review pages 13 to 20 in Chapter 2, Pre-Award Survey of Prospective Contractors Accounting Systems.
Within cost accounting systems, the General Ledger Chart of Accounts determines how you classify and organize your costs, and the Job Costing features are used to track contract costs. For example, you will have general ledger accounts for Travel. As a government contractor, you must identify more information about that Travel. Was the travel part of direct cost chargeable to a specific contract? If the traveler exceeded the lodging per diem, how do you identify that cost so that it won’t be billed to the government contract? If the travel is indirect, was it the cost of a business development trip or travel to a seminar? Within your General Ledger Chart of Accounts, you would likely have the following: Direct Travel, Overhead Travel, General and Administrative (G&A) Travel and Unallowable Travel. For Direct Travel, you would also identify the specific contract.
In Quick Books Pro, using features such as Account numbers, setting up Accounts and Sub Accounts in a hierarchy, and using the Customer and Job coding will help provide the accounting structure that you need. Most companies use Service Items for Labor Categories, and Payroll Items to distribute labor costs between onsite and offsite direct labor, overhead labor, G&A labor and leave accounts.
To supplement what is built into Quick Books Pro, most companies use billing spreadsheets to track Contract Value, client information, period of performance, or to develop their indirect rates. These billing spreadsheets also show current billed amounts in detail by labor category with hours and billing rates for Time & Materials (T&M) contracts, or by Direct Cost, applied Overhead plus G&A and Fee for Cost Plus Contracts. Spreadsheets also need to track the cumulative contract billed amount and cost in detail.
So what is the answer? Can Quick Books Pro be DCAA Compliant?
Yes, Quick Books Pro as part of a documented and controlled accounting process with trained accountants can be made DCAA Compliant. And QBP is a good option as a starter package, but pay attention to what details you are tracking outside of the system, and have a plan for converting and upgrading your systems, personnel and training built into your proposal pricing and budgets.
Edited By Paul Gunn