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Government Contracting Accounting

EisnerAmper's Federal Government Contracting Group serves contractors who are awarded federal contracts/grants.

  • Offers a variety of services – most common:
    • Accounting System Compliance
    • DCAA Audit Assistance
     
  • Provides specialized expertise to help preserve your funding and livelihood

Traditional vs. Government Accounting 

Traditional Accounting

  • Serves commercial businesses
  • Serves a part of your business as a government contractor

Government Accounting

  • Government contractors subject to the Federal Acquisition Regulation (FAR)
    • FAR dictates all the regulations/requirements of the accounting system
    • IRS has the tax code; government contracting has the FAR
     
  • Specific expertise needed to ensure compliance with these special rules/regulations

Dual Market Business

  • How to function when serving both commercial and government clients
  • One accounting system to serve both
  • Government trumps commercial and will dictate the accounting system

Accounting System Compliance 

  • Often the first thing contractors need help with upon securing an award
  • Basis for maintaining your contract and avoiding possible suspension, cancellation or pay back of your award dollars

Chart of Accounts 

  • Core of the company’s accounting system
  • Creates a formatted structure for the company
  • First step in segregating costs into proper cost pools

Types of Cost Pools 

  • Direct Costs
    • Any cost that can be identified with a final cost objective (i.e. a contract/grant/job/task)
    • Examples: Labor, Subcontractors/Consultants, Materials
     
  • Indirect Costs
    • Any cost that cannot be identified with one final cost objective but benefits multiple cost objectives
    • Allows for recovery of operation costs not associated with a specific job
    • Further segregated into these general categories:
      • Fringe (health insurance)
      • Overhead (rent)
      • General & Administrative (G & A) (professional fees)
       
     
  • Unallowable Costs
    • Any cost that cannot be included in prices, cost reimbursements or settlements under a government contract to which it is allocable
    • Any cost specifically stated to be unallowable
    • Contractors must properly segregate unallowable from allowable costs in the accounting system
    • Contractors may be subject to penalties
     

Timekeeping 

Timekeeping system that identifies labor by cost objective and allocates this time properly

  • Many contractors’ systems falter here
  • All employees’ time, whether direct or indirect, must be accounted for daily, by the work activity performed
  • Proper procedures for time sheets or entering time
  • Employee responsibility for preparing/correcting time sheet
  • Adequate management overview
  • Written policy for employees and management to follow
  • Traceability of changes
  • System that detects errors and required changes

Properly filling out the time sheets:

  • Filled out daily and submitted weekly
  • Signed and dated by employee and reviewing supervisor
  • Done in ink or government approved timekeeping system
  • Every employee must comply
  • Work week is 40 hours
  • Work 2,080 hours for the year

Summary 

  • FAR dictates everything
  • Government Compliant Accounting System:
    • Critical
    • Key to maximizing cost recovery
    • Help you bid competitively
     
  • Your investment in the proper expertise and accounting system will benefit your company for years to come

Contact: Anthony J. Faugno 

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