Accounting
The backbone of the accounting system within an organization is the Chart of Accounts (CoA). The CoA is the listing of accounts that a company has described to embody the financial transactions of the company. The CoA is comprised of the accounts that make up the primary financial statements of a company, which are the income statement and the balance sheet.
The income statement is a statement of the change or revenue and expense accounts over some span of time, be it a day, a month, or a fiscal year. A balance sheet, on the other hand, is a snap shot at any one point in time of the company's asset, liability, and equity status.
Many off-the-shelf accounting systems will provide “canned” Chart of Accounts for use in specific industries. Unfortunately, most are designed for commercial applications and are not compliant with accumulating costs under a government contract. Government accounting, while based on the Generally Accepted Accounting Principles (GAAP), is a slightly hybridized system meant to comply primarily with Federal Acquisitions Regulations Part 31.
Before awarding any cost plus type of contract, and some large fixed price efforts, the Government, under the auspices of the Defense Contract Audit Agency (DCAA), will conduct a preaward accounting survey. The preaward accounting system survey is an audit to determine the acceptability of a contractor's accounting system for accumulating costs under a prospective Government contract. DCAA will determine if the system will provide reasonable data for projection of costs to complete a contract.
Contractors should recognize that an operable accounting system that is under general ledger control is of paramount importance when performing Government contracts. However, prospective contractors may have no work that requires the same type of accounting system as is needed for Government work. A prospective contractor may not want to install a new, more detailed accounting system unless awarded a contract. In this case, if the potential contractor anticipates a contract award, it must have developed a system that is operable, though not necessarily in use. It must be in a position to demonstrate this new system to the auditor and be ready to implement the system prior to incurring any costs on the Government contract. In developing their contract cost accounting systems, new companies often benefit from employing personnel or consultants who understand rules and regulations applicable to accounting for costs incurred on Government contracts. This is where CCA comes in. We have developed several compliant systems, on different platforms , for small and medium sized contractors that have allowed the award of Government work. We'd be happy to do the same for your company.