Who Can Approve Your Accounting System?, Redstone Government Consulting

Government contractors have been undergoing accounting system reviews by DCAA for years, but more recently, the adequacy of a contractors accounting system does not necessarily have to be determined by DCAA.  Some Government agencies are relying on outside accounting and consulting firms to offer confidence that a government contractor has an adequate accounting system as a prerequisite for awarding a cost reimbursable contract. 

Did you know that in order for a government contractor to be awarded a cost reimbursable contract, the contractor must have an accounting system which has been reviewed and approved for estimating, accumulating and reporting cost in a manner acceptable to the Government?  FAR Part 31, Cost Principles, is the regulation that all government contractors must adhere to in order to attain this “approved” status and it is becoming more and more important to government contractors, small and large, to ensure that the accounting system has been review and approved.   Traditionally, this has been accomplished with a Pre-award Accounting System Review by DCAA.  However, there is good news for contractors, some government agency solicitations offer contractors the option of either providing evidence that the accounting system has been reviewed and approved by DCAA or provide evidence that the accounting system has been reviewed and approved by an independent CPA.  Although, the cost of hiring an outside CPA/consultant is out of pocket for the contractor, this option is good for many reasons, 

  1. Contractors don’t have to wait around on DCAA, who is understaffed and overworked,
  2. Contractors can bid on more opportunities or they don’t have to pass up opportunities as a result of not having that “DCAA Approved Accounting System”,
  3. If and when DCAA does eventually come to audit, a contractor will have increased confidence in their accounting system, and
  4. This can also be helpful for a prime/sub relationship in that prime contractors are responsible for monitoring their subs and gaining confidence in their sub’s accounting system can contribute to that monitoring process and allow prime contractors to issue cost reimbursable contracts to their subcontractors without any DCAA involvement.

Have you seen this requirement in a solicitation?  Many times the language in a government solicitation looks something like this:

“In order to be considered for award of this contract and subsequent cost-type task orders awarded hereunder, the offeror shall provide evidence that it has an adequate financial management and accounting system and fund tracking procedures in accordance with FAR 16.301-3(a)(3).

Providing evidence of an adequate accounting system is a matter of contractor responsibility in accordance with FAR 9.103 and 9.104-1(e). The offeror shall complete and submit a Defense Audit Agency (DCAA) Preaward Survey of Prospective Contractor Accounting System Checklist at the time of proposal submission.  Offerors having applicable and current information from DCAA or DCMA shall also submit that documentation.

Offerors who have not had an Accounting System Review(s) by DCAA or DCMA may, at the offeror's expense, submit information from an Independent Certified Public Accountant (CPA) or other qualified independent third party, verifying that the offeror's accounting system complies with the requirements stated within the DCAA Contract Audit Manual (DCAAM) Chapter 5-202, Preaward Survey of a Prospective Contractor's Accounting System and Standard Form (SF) 1408, Preaward Survey of Prospective Contractor's Accounting System.”

We at Redstone Government Consulting have experience helping contractors meet this requirement.  We are CPAs/Consultants, many of whom are retired from DCAA, that specialize in accounting and regulatory compliance for Government Contractors.  In situations where an independent third party review can satisfy solicitation requirements as validation of an adequate accounting system, Redstone Government Consulting will work with you to make sure that your accounting system meets the preaward criteria for an “approved accounting system”.  Similarly, if the solicitation requires an accounting system deemed adequate by DCAA or another government agency, Redstone Government Consulting will work with you towards a favorable government audit opinion.  

Written by Courtney Edmonson

Courtney Edmonson Courtney is the Chief Executive Officer for Redstone Government Consulting, Inc. She is responsible for guiding the direction of the organization after spending several years as a vital member of the consulting and management team. Her entrepreneurial mindset and deep knowledge of the company and the government contracting industry have enabled Courtney to provide financial and operational leadership for Redstone while implementing a strategic vision for Redstone’s team and company growth. Courtney has extensive experience with Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) compliance, evaluation and preparation of Cost Presentations, cost accounting systems setup and reviews, and policy and procedure preparation. This technical experience gives her the background needed to lead a high-performing managerial team and the leadership skills necessary to establish a growth mindset within the organization. Prior to her career in consulting, Courtney served as a financial statement auditor for large and mid-tier government contractors. This experience helped her to develop a deep knowledge of the markets and industry in which Redstone operates. Courtney was both an Advisory and Assurance Consultant and a Government Contracts Consultant with the CPA firm, Beason & Nalley, Inc., where she first provided services for various industries before focusing on risk assessments in the government contracting industry. Courtney is a lead instructor for the Federal Publication Seminars courses, “Government Contractor Accounting System Compliance,” and “Accounting Compliance – Training Academy” and provides class instruction for other compliance courses and webinars such as “Preparation of Incurred Cost Submissions,” “Cost Accounting Standards,” and “FAR Part 31, Cost Principles.” She is a CPA licensed in Alabama and holds a Master of Accountancy from the University of Alabama in Huntsville and a BS in Accounting from Jacksonville State University.

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Compliant Accounting Infrastructure, DFARS Business Systems, DCAA Audit Support