When you receive a Phase II SBIR, STTR, RO1, BARDA, APRA-E grant or contract, you need to think about government award accounting and how to comply with the Federal Acquisition Regulation (FAR), specifically FAR 52.216-7. Of course, there are pitfalls along the way.
After more than 30 years of specializing in government award accounting, we know the mistakes government awardees make, and how to prevent them. This 10-part blog series is designed to help you avoid trouble and protect your innovation and business.
MISTAKE #6: SPENDING TOO MUCH OF YOUR GOVERNMENT GRANT OR CONTRACT BUDGET ON ACCOUNTING STAFF
This blog may seem like the polar opposite of Mistake #10, “Spending too much time on accounting when you’re not an accountant.” In that blog, we talked about the dangers of spending your time working IN the business, instead of ON it—especially, when you’re trying to learn the complexities of government award accounting.
In our opinion, if you have a cost-reimbursable government grant or contract, you need accounting help. The question is how much.
FAR COMPLIANCE AND YOUR GOVERNMENT AWARD ACCOUNTING
If you have a cost-type government award, you must comply with the rules contained in the FAR (Federal Acquisition Regulation) and there’s a 100% chance of an audit.
To protect themselves, some awardees will hire a good internal accountant. At the controller level, this could mean a salary of $120,000 to $160,000 per year depending on where in the country you’re located – plus benefits, office space, and so on. In California, Massachusetts, NY and many other high cost areas, it can be much higher.
DOES YOUR CPA FIRM HAVE GOVERNMENT AWARD ACCOUNTING EXPERTISE?
Many of our clients have a CPA or CPA firm that helps them maintain the books in accordance with generally accepted accounting principles (GAAP) – a requirement of FAR Part 31 accounting.
However, it’s important to recognize that most CPAs are general practitioners and/or tax experts. They don’t specialize in government award accounting, in fact, most have ever worked in this area before.
What does that mean to you?
Whether you hire someone internally or go to your outside CPA firm, there’s an enormously good chance that they’ve never helped a client:
- Set up a FAR Part 31 compliant accounting system
- Represented a client during a pre-award audit with DCAA or DFAS
- Maintained a set of books in accordance with FAR part 31
- Prepared an invoice to the government and passed a government invoice audit
- Understand the nuances of different indirect rate structures
- Monitor indirect rates enough to know when a fluctuation is cyclical and when it’s structural
- Approach a government customer when a structural indirect rate problem exists.
- Re-budgeted an award once a structural rate issue is discovered
- Project and negotiate the right indirect cost rate
- Prepare the annual incurred cost submission
- Pass an audit of the incurred cost submission
- Pass a Uniform Guidance Audit (UGA)
HOW TO TELL IF YOUR CPA IS GOVERNMENT AWARD ACCOUNTING-READY
Finding out if your internal accountant or outside CPA is qualified to handle your grant or contract accounting is analogous to thinking about questions you’d ask a doctor before they performed knee surgery (pick those that apply to your funding award type):
- How many companies have you represented during a DCAA pre-award audits (DOD)?
- How many companies have you represented during a DFAS pre-award audit (NIH)?
- How many incurred cost submissions have you prepared?
- How many incurred cost audits have you negotiated?
- How many negotiated incurred cost rate agreements?
- How many clients have you helped pass a uniform guidance audit?
- What’s the most common audit findings that you’ve experienced?
- Does my company have any gray areas that you’re concerned about?
WHY JAMESON IS A MORE COST-EFFECTIVE SOLUTION
First, we have been in business since 1978 and have 40 plus years of experience in government award accounting. We specialize in government contract and grant accounting, it’s all we do.
All our Account Managers (the people who would manage your account) are CPA’s with at least 10 years of experience, most have 15 or 20. Before they become account managers, they have to go through a three-year training/apprenticeship program here, before we’ll put them in charge of your account.
In other words, they must be incredibly well-prepared to help our clients. The stakes are too high to settle for anything less.
Clients work with us in one of three ways.
- Some hire us to help set up their chart of accounts, train them and to check in on quarterly basis to make sure they’re on track.
- A lot outsource the monthly FAR oversight and hire us to fill the gaps their internal bookkeeper or accountant can’t handle.
- Many outsource their entire accounting department to us.
Why does this make financial sense?
Our clients find that unless their annual revenue exceeds $10 Million it’s almost always less expensive to outsource this function than it is to build it themselves – and it isn’t even close!
They love that our fees grow when they grow and shrink when they shrink. They never have to spend time hiring and firing and training and most important – never spend time worrying!
GET THE HELP YOU NEED
If you’re concerned about compliance, audits or your contract or grant management and would like to talk to one of our government award accounting experts, contact Ryan at firstname.lastname@example.org or 781.862.5170 ext. 2106
To learn more about our services, visit our solutions page.