Four Things Every Government Contractor Should Look for in an Accounting Firm
Even more than most companies, government contractors must work closely with their accounting firm to make sure reports, policies and procedures, timekeeping and more are clear, concise and in compliance. This means that it’s important for your company to find the most effective and efficient accounting firm in the federal marketplace.
The right partner will be an accounting firm that can not only assist you with your federal, state and local taxes, but who can also help you pass your pre-award survey and (for defense contractors) help you make the most out of the visit by your Defense Contract Audit Agency (DCAA) auditor. Here are four things to make sure the accounting firm understands before choosing one to serve your government contracting company:
1. Understands Government Contracting
There are many accounting firms who primarily serve clients that focus on commercial customers and non-governmental buyers. Commercial customers conduct business operations differently from government contractor customers. In order to receive great results, narrow your search for an accounting firm to those who specialize (in whole, or in part) in government contracting.
For instance, the accounting firm must be knowledgeable about Federal Acquisition Regulations (FAR) and skilled enough to incorporate these regulations with your organization’s bottom line. An accounting firm that understands government contracting requirements can prepare your organization for success.
2. Understands the Value in Time-Keeping
Tracking time is important for all professional service companies, but for government contractors their importance cannot be overstated. Government contractor timesheets are important for the government, the contractor and the employee. Workers are compensated by a federal government agency based on their timesheets. These timesheets become legal documents that must be completed accurately to avoid federal regulatory violations or criminal charges. With that said, an accounting firm that can help write timekeeping policies and procedures is crucial.
Mistakes happen, so you want to be prepared just in case there is an evaluation (such as Timesheet Floor-Check administered by the DCAA). When reviewing an accounting firm’s policies and approach, ask specific questions, such as:
• How would a worker record his or her time on a specific project?
• What if the worker recorded time for the wrong project?
• Is there a policy you’d recommend for out-of-scope work?
3. Understands the Importance of Compliance
Being compliant means more than just crossing the T’s and dotting the I’s. Strategic compliance ranges from accounting system design, implementation and training to FAR Part 31 and CAS compliance, so an accounting firm that is knowledgeable and understands compliance is an asset to your organization.
According to The Rose Report, in the past, a firm that didn’t pass its DCAA audit but was nearly compliant might have been given the opportunity to make the necessary improvements and go through a follow-up review. Today, companies are either deemed compliant or not. There are no second chances.
“An inadequate accounting system may simply preclude you from getting the contract,” says Jeanne McMillen, a Rose Financial Services Partner and head of its Government Contracting Group. “The award could be ready for issuance, but if your accounting system is rated inadequate the game is over before it even starts.”
4. Understands Incurred Cost Proposals
Incurred Cost Proposals (ICPs) are those that address costs incurred on government contracts that include both direct and indirect costs. The Incurred Cost Submission is to reconcile the costs to the amounts billed. This process can be time consuming because the DCAA can request multiple year audits and pose questions to contractors that require data recorded several years ago.
ICPs must be completed six months after the contractor’s fiscal year. If submissions are six months delinquent, DCAA will recommend a decrement factor and for the CO to make a unilateral determination. (FAR 42.703-2(c)(2)) (Defense Contract Audit Agency).
The right accounting firm can prepare and review your organization’s Incurred Cost Submissions and make sure all costs are represented, make sure the correct billing level is used, perform a cost scrub and basically prepare you for a DCAA audit.
Outsourcing the right services to help your company grow can take time and thorough research. Be mindful of what your potential accounting firm will and will not do, and measure its services with your company’s goals. Reaching your company’s bottom line is worth the work.