common pitfalls which might prevent you from passing a dcaa pre-award audit
DESCRIPTION
One of the most daunting tasks for small government contractors in being able have their accounting systems determined to be adequate by Defense Contract Audit Agency (DCAA). Per DCAA, "the pre-award accounting system survey is an audit to determine the acceptability of a contractor's accounting system for accumulating costs under a prospective Government contract". Without a good bill of health from DCAA, contractors are limited in the types of contracts that they can be awarded. This presentation covers some of the common pitfalls which might prevent you from passing a DCAA Pre- Award Audit and provides guidance on how to become a successful government contractorTRANSCRIPT
Presented by: Steve Dasher, CPA Jason Mills, CPA Kelly Ryan, CPA
December 11, 2012
Common Pitfalls Which Might Prevent You from Passing a DCAA Pre-Award Audit
About LRMD
Year end financial statements with consultation meeting
Tax Planning and Preparation
Thirty year foundation and growing
Help contractors develop, grow and build transferable value
Rate developmentDevelop pricing modelsCompliance with FAR and CAS regulationsDue diligence related to M&AIncurred cost submissions
LRMD Growth Analysis
Vision
Values
Competencies
Capacity
Controls & Procedures
Top-D
own Bottom-up
Transferable value
DCAA Pre-award Audit of Accounting System
Accordance with GAAP
Internal controls
Billings and timekeeping systems
Proper tracking and segregation of costs
ELEMENTS REQUIRED BY DCAA
RECORDS IN ACCORDANCE WITH
GAAP
ABILITY TO MONITOR RATES
JOB COST REPORTS RECONCILE TO
ACCOUNTING RECORDS
PROPER ALLOCATION OF EXPENSES
PREVENTING CONTRACT OVERRUNS
COMPLIANCE WITH CONTRACT TERMS
VERIFY LABOR DISTRIBUTION
ADEQUATE TIME KEEPING SYSTEM
FOLLOWING WRITTEN POLICIES AND PROCEDURES
Obtain a Planning Letter!Communicate during Fieldwork!Have a CPA present for your Audit!
Suggestions
Building A Cost Structure
• Directs • Fringe • Overhead• G&A• Unallowables
Define the cost pools
• CLIN: Contract Line Item Number
Direct costs by contract and CLIN if
applicable • Unallowable costs and
• indirect costs
Segregate costs
Indirect Rate DevelopmentWhat fits your company the best?
2 or 3 Tiers (multiple Fringe or OH Rates)
Indirect Rate structure needs to be consistent
Changes must be reported to DCAA
It is designed for compliance and competitiveness
Rate ceilingsContractual requirements (M&H vs. G&A)
Wrap Rate AnalysisMake sure you understand your Company’s Rate
Know your industry and competitors
Company size & business status can impact rate
Know your competitive range
1.5 1.8 2.1
(Average for Small to Mid-Size Service Contractors)
How to Apply the Wrap RateSample WRAP rate calculation:
3 Tier Structure – Fringe 41%, OH 5%, G&A 8%
WRAP RATE 1.60 FEE @ 5% 1.68
Annual Salary $100,000Hourly Pay $48.08Fully Burdened $76.88BILLING RATE $80.77
Wrap rate = (1.41*1.05*1.08) = $1.60
Financial Metrics
Use indirect rates to monitor company’s financial metrics
Use Analytics •Current
year vs Prior Year
•Current Year vs Budget
•Current Year vs Industry
Financial Metrics
Ratios• Liquidity• Efficiency • Profitability• Leverage
Cash FlowCapacity
Growth Pattern
Questions?REMEMBER …..
we are ALWAYS here to help!