APTAC Spring Training Conference 2018 Left Brain Professionals Inc. Many business owners admit accounting is about as foreign to them as any non-English language. Some have learned enough to survive a rudimentary conversation, while others have delegated responsibility to someone else. That someone else may not be properly trained in accounting or well-versed in the nuances of government contract accounting. In government contracting, accounting is as important as the contract itself. In fact, the contract type dictates certain accounting requirements including invoice formats and status reports. If you’re performing work on a cost-reimbursable contract (any cost-type or time-and-material contract), you must have an approved accounting system. Obtaining an approved accounting system means understanding the 14 items addressed in the SF 1408 Preaward Survey of Prospective Contractor Accounting System. The survey addresses segregation of costs, job costing, and timekeeping, among other topics. We walk through the SF 1408 providing practical guidance and insight into each requirement. You don’t have to be an accountant to understand this, but you need to understand this to be successful in government contracting.

1. Accounting System Compliance
For Non-Accountants
Robert E. Jones
CPA, CPCM, NCMA Fellow

2. Positive Share
“You only live once, but
if you do it right, once
is enough.”
~ Mae West

3. Safety Check

4. Accounting System
Software
Apps
Records & receipts
Policies & procedures

5. Compliance
Generally Accepted Accounting Principles (GAAP)
FAR 31 Contract Cost Principles
Cost Accounting Standards (CAS)

6. Government Unique Issues
Job costing
Total time accounting (uncompensated overtime)
Unallowable Costs
Cost Pools

7. GAAP
1. Economic Entity Assumption
2. Monetary Unit Assumption
3. Time Period Assumption
4. Cost Principle
5. Full Disclosure Principle

8. GAAP
6. Going Concern Principle
7. Matching Principle
8. Revenue Recognition Principle
9. Materiality
10.Conservatism
https://www.accountingcoach.com/accounting-principles/explanation

9. FAR 31 Cost Principles
Guide for treatment of costs
Guidance for some specific industries
Detailed guidance for 52 types of costs
https://www.acquisition.gov/far/html/FARTOCP31.html

10. Cost Accounting Standards (CAS)
Designed to achieve uniformity and consistency in
the cost accounting principles followed by defense
contractors.
19 standards – some must be followed by all
government contractors
http://www.dcaa.mil/Content/Documents/CAM/chapter_08_-_cost_accounting_standards.pdf

11. Cost Accounting Standards (CAS)
401 – Consistency in Estimating, Accumulating and Reporting Costs
402 – Consistency in Allocating Costs Incurred for the Same Purpose
403 – Allocation of Home Office Expenses to Segments
404 – Capitalization of Tangible Assets
405 – Accounting for Unallowable Costs

12. Cost Accounting Standards (CAS)
406 – Cost Accounting Period
407 – Use of Standard Costs for Direct Material and Direct Labor
408 – Accounting for Costs of Compensated Personal Absence
409 – Depreciation of Tangible Capital Assets
410 – Allocation of Business Unit General and Administrative Expenses
to Final Cost Objectives

13. Cost Accounting Standards (CAS)
411 – Accounting for Acquisition Costs of Material
412 – Composition and Measurement of Pension Costs
413 – Adjustment and Allocation of Pension Cost
414 – Cost of Money as an Element of the Cost of Facilities Capital
415 – Accounting for the Cost of Deferred Compensation

14. Cost Accounting Standards (CAS)
416 – Accounting for Insurance Cost
417 – Cost of Money as an Element of the Cost of Capital Assets
Under Construction
418 – Allocation of Direct and Indirect Costs
419 – Reserved
420 – Accounting for Independent Research and Bid and Proposal
Costs

15. Why Do All Of This?
Required for cost-reimbursable
Required for many Multiple Award Contracts
(MAC)
Concepts required for fixed price modifications in
excess of cost or pricing data threshold ($2M after
NDAA 2018)

16. “DCAA Approved” System
Misnomer
DCAA does not approve system
Systems are deemed “adequate” by CO after a
survey or audit

17. Accounting System Survey
SF 1408 – 14 categories
1. Segregate direct and indirect costs
2. Costs accumulated by contract
3. Allocation of indirect costs
4. General ledger control
5. Timekeeping system by final cost objectives

18. Accounting System Survey
6. Labor distribution system
7. Routine posting of books
8. Exclusion of unallowable costs
9. Costs by CLIN/SLIN
10.Segregation of preproduction costs
11.Limitation of funding or payments

19. Accounting System Survey
12.Support for progress payments
13.Reliable data for follow-on acquisitions
14.System in full
https://www.gsa.gov/forms-library/pre-award-survey-prospective-contractor-accounting-
systemoperation

20. Software
No software or vendor can guarantee compliance,
acceptance, or adequacy
Some software developed for government
contractors to address unique issues

21. Previous Audit or Approval
Only good as long as you maintain everything as it
was surveyed or audited
If longer than 2 years ago, probably no longer
acceptable
 Change in key personnel
 Failure to follow policies & procedures
 Changes in software or apps

22. Surveys, Reviews, & Audits
Survey – consulting engagement with no
assurance ($)
Review – more formal with limited assurance ($$)
Audit – most formal (and intense) with assurance
($$$)

23. Contact
Robert E. Jones, CPA, CPCM, NCMA Fellow
(614) 556-4415
robert@leftbrainpro.com