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Deltek Insight 2011: Meeting DCAA Expectations

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  • 1. CP-239: MeetingDCAA ExpectationsPresented bySusan Zimmermann –ZooM Consulting LLC
  • 2. Enabling Success Project Human Financial Project Manufacturing Resources Management Management Do More Market Teaming CRM and Capture Win More Intelligence Solutions Management Know More Business Performance Management Winning More Increasing Project Improving Cash Reducing the Cost Business Visibility Flow of Compliance2 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 3. Do More Project Human Project Financial Manufacturing Resources Management Management Do More Market Teaming CRM and Capture Win More Intelligence Solutions Management Know More Business Performance Management Project Execution Project & Corp Time, Expense, Reporting, GRC & & Management Accounting Labor, Payroll Compliance3 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 4. Agenda Overview of what will be covered during session Key session takeaways Reaching a Balance in the Current Environment Common Problems and Solutions Questions4 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 5. Key session takeaways How the DCAA audit environment has changed How to evaluate the possibility of an accounting system change Learn possible solutions to some of your biggest DCAA issues5 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 6. Reaching a Balance in theCurrent Environment6 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 7. Reaching a Balance in theCurrent Environment What is going on?  Increase in companies with unapproved accounting systems  Increase in unfavorable reports coming from DCAA  No issues removed once documented  Documentation of responses included  Multiple years of incurred cost audits open  Contracting officers have to muddle through lengthy reports7 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 8. Reaching a Balance in theCurrent Environment Why is this happening?  GAO Reports  Determined there was an issue with audit quality such as:  Insufficient testing  Inadequate planning and supervision  Reporting problems  Compromise of Independence  Inadequate understanding of controls by the auditor  Caused increased focus on the effectiveness of Contractor Systems  Accounting  Estimating  Property Management  Purchasing8 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 9. Reaching a Balance in theCurrent Environment Evaluating a Change  Legitimate Issue versus misunderstanding  Expressly unallowable cost  Interpretation  Business Impact of Change  Cost of Changing  Effects on Project Costs  Small pocket affected or entire organization  Pending Contract Awards  Ease of making change systematically  FAR and CAS support position9 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 10. Common Problems andSolutions10 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 11. Common Problems and Solutions Labor Costing  Issue  The auditor has determined that your methodology of labor costing is inappropriately allocating costs to projects  Myth  There is only one way to cost labor  Factors affecting the appropriate costing method for your business  Timekeeping Policy  Labor Costing period versus pay period  Reporting period  Amount of Uncompensated Overtime11 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 12. Common Problems and Solutions Labor Costing Sample Government Contractor  Attributes  Collects time on a weekly basis  Pays employees on a bi-weekly basis  Adheres to total time accounting  Salaried Employees  Standard 40 hour work week12 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 13. Common Problems and Solutions Labor Costing - Auto Adjust Functionality  Takes a percentage of the employees salary per pay period and divides it by the number of hours in the timesheet period.  Percentage is assigned in Timesheet Period Control Screen  An employee with a $2000 bi-weekly salary at 50% would have $1000 apportioned over the hours for a weekly timesheet period Project Hours Cost Hourly Rate Fringe 16.00 $344.09 IRD 8.50 $182.79 OH 7.50 $161.29 Direct 1 14.50 $311.83 46.50 $1000.00 $21.5053713 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 14. Common Problems and Solutions Labor Costing – Auto Adjust Functionality Pros  Most precise measure of costs to associated cost objective  Ease of reconciliation of labor costing to amount paid Cons  If timesheet period and pay period are not synchronized could inappropriately cost in total time accounting environment with flex time. Total if 1st Wk 1st Wk 2ndWk 2ndWk portioned over Hours Cost Hours Cost Total Bi-Weekly Difference Fixed 0 $0 56 $1200 $1200 $1400 ($200) Price CPFF 24 $800 0 $0 $800 $600 $200 24 $800 56 $1200 $2000 $2000 $014 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 15. Common Problems and Solutions Labor Costing – Standard Variance Functionality  Uses the Estimated Annual Hours and corresponding Hourly rate fields to cost labor per hour.  Labor posting calculates difference between labor cost and payroll cost  Posts difference to standard cost variance account and employee home org (from employee defaults screen in employee master)  Automatically adds a line to the timesheet. Hours Auto Adjust Std Var Diff OH 32.0 $842.10 $800.00 ($42.10) Direct 2 6.00 $157.90 $150.00 ($ 7.90) Variance Line 0.00 $50.00 38.00 $1000.00 $1000.0015 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 16. Common Problems and Solutions Labor Costing – Standard Variance Functionality  Pros  Allows all cost objectives to receive consistent hourly rate from week to week regardless of hours.  Associates variance with specific timesheet  Cons  Only one account can be used for variance posting  Must determine allocation methodology for variance that appropriately allocates.  Can only be run on individual employee basis  Must be careful when correcting timesheets if hours are increasing or decreasing16 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 17. Common Problems and Solutions Labor Costing – Payroll Variance Functionality  Uses the Work Hrs in Year and corresponding Hourly rate fields to cost labor per hour.  Payroll posting calculates difference between labor cost and payroll cost  Posts difference to payroll variance account and employee home org (from employee defaults screen in employee master) Hours Auto Adjust Payroll Var Diff OH 32.0 $842.10 $800.00 ($42.10) Direct 2 6.00 $157.90 $150.00 ($ 7.90) 38.00 $1000.00 $1000.0017 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 18. Common Problems and Solutions Labor Costing – Payroll Variance Functionality  Pros  Allows all cost objectives to receive consistent hourly rate from week to week regardless of hours.  Ease of timesheet corrections  Cons  Only one account can be used for variance posting  Must determine allocation methodology for variance that appropriately allocates.  Mingling of variance and legitimate payroll issues  Only calculated and posted when payroll is run18 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 19. Common Problems and Solutions Billing  Issue  The auditor has determined that you are not appropriately excluding costs from a bill.  How do you ensure someone doesn’t mistakenly bill something?  Resolution  Code costs to an unbillable account with an unallowable function code assigned in the project account group.  Code costs to a regular account and exclude that account from the billable accounts in the billing setup.  Caution! - unless using a revenue formula of equal to billings, revenue will still calculate on this account leaving a balance in Unbilled Accounts Receivable.19 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 20. Common Problems and Solutions Directly Allocated Costs  The auditor has determined a CAS 403 Noncompliance stating  9904.403-40(a)(1) Home office expenses shall be allocated on the basis of the beneficial or casual relationship between supporting and receiving activities. Such expense shall be allocated directly to segments to the maximum extent practical. Expense not directly allocated, if significant in amount and in relation to total home office expenses, shall be grouped in logical and homogeneous expense pools…..  Example – Costs for Health Insurance for all segments come in on one bill that is received at the home office and coded to a service center that is allocated out over a basis instead charged directly to the benefiting segments.20 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 21. Common Problems and Solutions Directly Allocated Costs  Costpoint has the flexibility to calculate complex rate structures  Multiple ways to allocate costs that facilitate compliance  Directly coding upon entry to the appropriate segment when using a multiple company organization structure in one database.  Use of a Service center to allocate the costs based on a homogeneous base.  Use of a multi-job allocation that allocates costs from one project to another project.  Cost pool allocation for residual allocations21 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 22. Common Problems and Solutions Directly Allocated Costs  REMEMBER  No pre-defined way to allocate costs  Must be reasonable and accurate reflect causal/beneficial relationship  For central payments made by a home office on behalf of a segment CAS 9904.403-40(b)(4):  Allocated directly to segments to the extent that they can be identified  Items not identifiable to specific segments should be allocated to benefitted segments using a base that represents the factors on which the total payment was based.22 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 23. Conclusion Change could be coming your way The flexibility of the system Know your options23 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 24. Q&A Open to audience www.twitter.com/deltek www.facebook.com/deltekinc www.linkedin.com/company/163414 www.youtube.com/user/deltekinc24 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved
  • 25. Call to actionVisit the Meet the Experts in the Solution PavilionReach me by email or phoneszimmermann@zoomconsultingllc.com (703) 867-718925 May 22, 2012 ©2011 Deltek, Inc. All Rights Reserved