As any government contractor knows, successful budgeting is really important. Watch our SlideShare for tips on how to budget for success and then contact KDuncan & Company at www.kduncan.com for additional information!
Budgets are important for any
government contractor. A contractor
must know the purpose and use of a
budget, because budgeting has a
significant impact on its financial
What is a budget?
• Projection of future costs incurred
• Defined for a period of time
• Basis for cash flow projections
• Done annually (at least)
• Consistent structure to:
1. Chart of accounts
2. Indirect cost pools
3. Cost proposal
• Basis for indirect rates in cost proposals
• Benchmark to measure financial performance
• Basis for billings on cost plus contracts
• Valuable tool for planning expenditures
Costs that can be
attributed to a
Costs that are not
to a cost object, such
as a particular project,
facility, function or
Indirect Cost Pools
The accumulated costs that
jointly benefit two or more
programs or other cost
Multiplier / Loading / Wrap Rate
A fully burdened labor rate – the rate at which an
organization must bill out its direct labor units to
cover its direct and indirect costs before any
profit is made.
Rules and Regulations
• Generally Accepted Accounting Principles (GAAP)
• Truth in Negotiations
• Cost Accounting Standards (CAS)
• Federal Acquisition Regulation (FAR)
• Defense Contract Audit Agency (DCAA)
Acceptable Indirect Rate Structures
Single Tier: All indirect costs contained in a single overhead
pool where the base is direct labor.
Two Tier: Overhead and G&A pools (fringe benefits costs
related to direct labor are included in the Overhead pool).
Three Tier: Separate Fringe Benefits, Overhead and G& A pools.
• FUTA (Federal Unemployment Insurance)
• SUTA (State Unemployment Insurance)
• Worker’s Compensation Insurance
• Health and Welfare (typically includes health
• Holiday’s, Vacation, and Sick Leave
• Pension Costs
• Project management
• Recruiting and training
• Government site and contractor site
General and Administrative (G&A) includes:
• Salaries and related fringe benefit costs of the executive
and administrative staff.
• Costs of legal, accounting, and financial services.
• Facilities costs of corporate office.
• Selling and marketing expenses.
Basis of Estimates
3. Detail, detail, detail
4. For every cost account
• Indirect budgets in support of cost proposals will
have the direct and indirect costs associated with
this proposal added to the annual budget.
• May choose to add the costs of other contracts
not awarded as yet. The risk is that if the award
never comes, the G&A rate may have been
lowered to an unsustainable lever.
• Fixed Price – Set amount for goods or
• Time & Material – Set rate for labor per labor
category, number of units (hours) are
• Cost Plus – Direct & Indirect Costs (dollars)
incurred are variable, must be reconciled
before contract close-out through audit,
quality of records is vital
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