Department of Defense Solutions

A proven depth of knowledge is a powerful strategy.

A contract with the Department of Defense is not to be taken lightly. These awards are subject to oversight by the DCAA
and therefore require strict accounting compliance. If you want to get it right, consider getting some help.

The Department of Defense (DoD) is an executive branch of the federal government charged with coordinating and supervising all functions of the government concerned with national security and the U.S Armed Forces. There are three subordinate military departments and four national intelligence services: the U.S. Department of the Army, the Department of the Navy, and the Department of the Air Force, as well as the Defense Intelligence Agency (DIA), the National Security Agency (NSA), the National Geo-spatial Intelligence Agency (NGA), and the National Reconnaissance Office (NRO). Other Defense Agencies include the Defense Advanced Research Projects Agency (DARPA), the Defense Logistics Agency (DLA), the Missile Defense Agency (MDA),  the Defense Threat Reduction Agency (DTRA) and the Pentagon Force Protection Agency (PFPA).

THE BOTTOM LINE ON DOD CONTRACTING—THIS IS SERIOUS BUSINESS CONDUCTED WITH SERIOUS PEOPLE.

If you’re new to DoD, it’s important to understand that in order to minimize potential government collusion, the federal procurement process requires at least three independent individuals to oversee and sign off on your ongoing funding relationship with the government over the life of your award:

  • Technical customer
  • Procuring or contracting officer
  • Auditor(s)

The DoD maintains thousands of Defense Contract Audit Agency (DCAA) auditors in branch locations all over the United States in order to ensure that you can demonstrate your ongoing compliance with the Federal Acquisition Regulations (FAR), Supplemental DoD Regulations (DFAR), Cost Accounting Standards (CAS) and any contract-specific requirements.

Award types

Department of Defense (DoD) awards typically include SBIR/STTR, BAA, ARPA, IDIQ, and RFP as well as other funding vehicles, with almost all R&D funding performed through cost-reimbursable type contracts. All “cost reimbursable” type funding vehicles require the recipient to properly account for all actual project specific costs as well as the proportional indirect costs associated with the award.

DOD AWARDS MEAN LIVE, IN-PERSON DCAA AUDITS, INCLUDING: 

  • Pre-Award Audits
  • Indirect Cost Rate Projection audits
  • Progress Billing audits (including examining your WAWF billing)
  • Annual Incurred Cost Submission audits
  • Surprise Floor Check audits
  • Accounting System audits
  • Contract close out

To make sure you’re adhering to government award requirements, you’ll be audited. Most of the audits listed above are performed by the DCAA on a judgmental basis, or as requested by your technical customer or contracting office. The annual incurred cost submission has a 100% chance of being audited, although DCAA may rotate between desk audits, and live, in-person audits, based on your overall risk assessment.

The annual incurred cost submission and everything that goes with it.

The annual incurred cost submission or “true up” report is due 180 days after the Company’s fiscal year end and must reflect all general ledger expenses on a generally accepted accounting principles (GAAP) basis. This report is used by the local DCAA branch office to help the customer settle the final accounting for all contracts, including the negotiation of a final indirect cost rate agreement.

Included in the schedules is information which needs to be submitted to DCAA including:

  • A copy of your financial statements, audited if available.
  • All expenses must be accounted for and reported as either direct, indirect and unallowable based on the Federal Acquisition Regulations (FAR). Additionally, the DoD Supplemental Regulations must be applied – which may affect the recovery of salaries, patent & legal costs, and travel costs among others.
  • All labor costs must be distributed through the general ledger, on an accrual basis, based on monthly labor distributions derived from employee prepared (and supervisor approved) time sheets, which must be reconciled to the quarterly payroll tax returns – a cash basis document.
  • Indirect costs must be proportionally allocated to all contract and non-contract (including commercial) activities based on the methodology agreed to in the annual indirect cost rate negotiation. Care must be taken to ensure that the recovery of indirect costs is properly established to avoid embedding negative cash flow surprises into your business relationship with the government.
  • An Accounting Policies and Procedures manual, and any Employee Handbooks.
  • Detailed descriptions of all consulting and subcontracting costs.
  • The annual incurred cost submission must be certified by an officer of the Company.

Once the annual incurred cost report is submitted, any over-billing or under-billing of indirect expenses must be proactively remedied on a contract-by-contract basis.

Example of DCAA Annual Incurred Cost Submission

JAMESON & COMPANY AND THE DOD

We are the leading experts in the accounting and administration of government contracts, and we enjoy an excellent professional reputation with many of the DCAA branch offices and contracting officers. There are a number of ways in which we can help including:

  • Assist in the development of the financial portion of your contract proposal including the appropriate indirect cost rate
  • Set up your accounting system and train your financial liaison
  • Oversee your accounting system on a periodic basis including ensuring that Wide Area Work Flow (WAWF) billings are accurate
  • Prepare the annual incurred cost audit
  • Negotiate the initial and ongoing indirect rate agreements and represent you during all DCAA audit(s)
  • Help with overall strategic planning and transaction planning
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