Protecting Your Small Business’s Government Funding

Establishing a compliant accounting system early on has an enormous influence in determining a small business’s success when working with the government.

Having someone oversee your accounting system that doesn’t understand the unwritten rules of what it means to be a compliant government contractor or grantee can put awards in jeopardy, lead to fines, or even worse, said ed, CPA and managing partner of Jameson & Co., during his presentation last week at the Beyond Phase II Mentor-Protégé Training Week in Chicago. The Federal Acquisition Regulations (FAR) governs the process by which the government purchases goods and services. This process consists of a qualified professional performing recognition and acquisition planning, contract (or grant) formation, and contract/grant administration.

Jameson & Co. are experts in the FAR, and have helped companies procure, manage, and survive audit on more than $4 billion in government awards. ed offered a wide range of recommendations for companies new to government contracting such as the best ways to protect a company from an audit, and determining what expenses companies can bill to the government. 

Jameson has spent 30 years working with small businesses on their accounting systems for government contracts and grants. He started his presentation by talking about the cultural changes caused by new government contracts at small businesses and startups. For many startups, especially those that receive their first Small Business Innovation Research (SBIR) award, their employees aren’t used to filling out time sheets required by federal agencies.

One key cultural issue when dealing with the government is the simple act of filling out a daily timesheet – a FAR requirement. Timesheets can make employees think deeper about how many hours they are working at their young company and their level of compensation. It forces company leadership to consider how they pay for overtime (or not) and account for it with the government. Companies often need an accountant to go over their options before making a decision as uncompensated overtime is a complex issue in government accounting.

Jameson recommended working with an accountant early on to establish key policies and procedures and to make sure that your cost proposal contains a competitive indirect rate that won’t destroy your cash flow. Jameson mentioned that one of their most popular introductory services was their Phase I Survival Kit. “When we work with a company early on, we don’t have to worry about as many bad habits.”

Jameson also pointed out that company leaders need to think systemically. He questioned, “What happens if your accountant gets hit by a bus?” Leadership needs to make sure their accounting records stand on their own, so an accountant does not become a single point of failure.

A topic that drew quite a few questions from small business leaders at the conference dealt with indirect rate calculations for cost plus fixed fee contracts. Jameson highlighted that not all the rules are black and white and that the FAR is based on concepts and principles. He even gave a colorful example of when a lab jacket could be considered a direct cost rather than an indirect cost.

Jameson also noted that small business leaders should get used to flying coach if they want to expense it all their travel costs to the government. “The government isn’t going to pay you to stay at the Ritz Carlton and fly first class,” Jameson disclosed.

Most of the Q&A surrounded audit concerns from the audience. Jameson was quick to point out that preparing a company’s finances properly can make it more competitive for future contracts and protect it against surprises during audits. Audits can be scary for many small business owners and it’s where accountants truly prove their worth. Jameson said audits can also work in a company’s favor. A strong performance during an audit gives the government assurance that the company values their relationship with the government and reduces the government’s financial risk.

For a copy of the presentation, contact Jameson & Co.

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