As we speak with clients across the country, we find that many government contractors accumulate the majority of their job cost accounting separate from their general ledger system. The fact that you collect all of the direct costs on a separate excel spreadsheet does not ensure a compliance relating to your grant or contract. These costs are required to be collected in your general ledger or Quickbooks file for most small companies.
Properly collecting and segregating costs in the general ledger starts with properly recording labor distributions. Labor should spread to the various labor categories that are represented on the employees’ timesheets. From there, costs should be categorized as direct or indirect costs. This will allow an auditor the ability to easily calculate your company’s indirect rates which is required under your grants and contracts.
By not establishing a general ledger that properly reflects your company’s grant and contract spending, you will be susceptible to Uniform Guidance Audit (formerly A-133 Audit) findings or you may be deemed to have inadequate accounting system. Both findings could lead to delays or the inability to secure your grant or contract.
–Brian LaCroix, CPA