Many government contracts and grants require an "adequate" or "approved" accounting system. In this session, you will understand what products and what action you need to take to have an "approved" compliant accounting system that meets government requirements. Review real-life scenarios, dispel myths in the industry, and learn how to handle and avoid common pit-falls and misconceptions.

2. Welcome to Accounting System
Compliance for Non-Accountants
Speakers:
• Melissa Metzger, MAFM
• Robert E Jones, CPA, CPCM, NCMA Fellow

6. CREDITS & PRESENTATIONS
Earn 1 PDH Credit for Attending this Session
Where are the PDH forms for Education Sessions?
Where are the Presentations?
www.samesbc.org

7. Why we’re here
Many government contracts and grants require an "adequate" or
"approved" accounting system.
More than a FAR requirement for certain contract types, an adequate
accounting system will help you understand your costs and positions
you for financial success.

8. Today we’ll learn:
The essential components of an accounting system and best practices
for passing the SF 1408 survey.

9. Learning Objectives
• Recognize the need for an
adequate or approved
accounting system
• Describe the criteria for a
government contract adequate
accounting system
• List the components of an
accounting system
• Explain some of the best
practices for successfully
passing the survey/audit

10. Why You Need an Adequate System
The government wants to ensure the accuracy of your cost collection
and reporting for the following contract types:
• Cost-reimbursable
• Time and materials (T&M)
Reference:
FAR 16.104 (i) https://acquisition.gov/content/part-16-types-contracts
DFARS 242.7502 https://www.acq.osd.mil/dpap/dars/dfars/html/current/242_75.htm

11. Why You Need an Adequate System
For SBIR Phase II (cost-reimbursable).
Reference: SBIR Course 8 Tutorial 2
https://www.sbir.gov/tutorials/accounting-finance/tutorial-2

12. Why You Need an Adequate System
For Progress Payments on Fixed Price Contracts.
Reference: FAR 32.503-3(a)(2) and (b)
https://acquisition.gov/content/part-32-contract-financing#i1082047

13. What is an Adequate System?
An accurate, compliant accounting of costs from effective and consistent
use of software, applications, files and documents, and policies and
procedures.

14. Components of an Accounting System
Your software and supplemental apps are the center of your system,
make sure you have something that meets the function for:
• General ledger and sub-ledger functionalities
• Project or job accounting
• Timekeeping and labor distribution
• Expense reporting capabilities

15. General Ledger and Sub-Ledgers
• A general ledger is a list of accounts, (aka chart of accounts) that
accumulate costs by type, that are grouped in a certain way to
produce financial statements and other reports for both internal and
external users.
• Sub-ledgers exist “underneath” the general ledger. They afford for
accumulation of costs in more detail. (AR, AP, etc.)

16. Project or Job Accounting
• Both a reporting and management tool, project or job accounting
allows for the ranking and gathering of data by task. This work
breakdown structure (WBS) is the backbone of government contract
accounting and should align with the SOW as closely as possible.
• Actual and projected costs should be compared to budgeted costs to
make course corrections to ensure profitability and performance.

17. Core Accounting Software
• GovCon focus• Off-the-shelf general use

18. Timekeeping and Labor Distribution
• Timekeeping is the process of recording employee time by both the
project or job and the task.
• Labor distribution is the process of recording employee pay by
general ledger account.
FYI: Labor is one of the most scrutinized areas of government contracting because it is usually
the largest expense for a company.

19. Timekeeping and Labor Distribution Apps
• Supplemental programs• All-encompassing programs

20. Expense Reporting
• The ability to track costs paid for with company credit cards, and/or
reimbursements to employees, for travel is another critical point in
achieving an adequate system.
• This process must afford for alignment of cost to both the project and
the task it supports.

21. Expense Reporting Apps
• Supplemental programs• All-encompassing programs

22. Components of an Accounting System
Tools or Files (e.g. Excel workbooks) you should use:
• Timesheets
• Rate calculations
• Accruals

23. Components of an Accounting System
Policies & Procedures to have for reference to help resolve issues:
• Written manual

24. Components of an Accounting System
Records and reports to have on file:
• Receipts
• Invoices
• Financial Statements

25. Record Management Apps

26. Describe the Criteria
1. Generally Accepted Accounting Principles (GAAP)
2.a. Segregation of direct and indirect costs
2.b. Direct costs by contract
2.c. Logical and consistent allocation of indirect costs
2.d. Accumulation of costs under general ledger control

27. Describe the Criteria
2.e. Timekeeping system
2.f. Labor distribution system
2.g. Interim (monthly)posting of books
2.h. Exclusion of unallowable costs
2.i. Costs by contract line item (if required)

28. Describe the Criteria
2.d. Accumulation of costs under general ledger control
2.e. Timekeeping system
2.f. Labor distribution system
2.g. Interim (monthly)posting of books
2.h. Exclusion of unallowable costs
2.i. Costs by contract line item (if required)

29. Describe the Criteria
2.j. Segregation of preproduction costs
3.a. Limitation of cost or limitation on payments clauses
3.b. Progress payments
4. Sufficient for follow-on acquisitions
5. In full operation
Reference: DCAA Accounting System Requirements
https://www.gsa.gov/forms-library/pre-award-survey-prospective-contractor-accounting-system

30. Best Practices for the Survey/Audit
• Start early - even before you need an
"approved" system.
• Complete the checklist - and gather
all of your supporting documentation.
• Hire an outsider - to help you prepare
and to perform a mock audit.

31. Q&A AND FEEDBACK?
For PPT & Resources:
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32. Melissa R. Metzger
MAFM
melissa@leftbrainpro.com
Robert E. Jones
CPA, CPCM, NCMA Fellow
robert@leftbrainpro.com