Redstone Government Consulting Blog | Compliant Accounting Infrastructure

We knew this was coming based on the June 30, 2025, PF 2025-38 (FAL 2025-05) Implementation of Indirect and Fringe Benefits Cost Reimbursement Limits on Financial Assistance Awards guidance to Granting officers. However, we believed the May 15, 2025, preliminary injunction issued by the U.S. District Court for the District of Massachusetts in the case of Association of American Universities et al. v. U.S. Department of Energy would slow down DOE‘s implementation of the cap on indirect cost recovery for more than just Institutions of Higher Education (IHEs). Sadly, that is not the case.

You’ve won the contract; the work is underway (or even finished), but how do you actually get paid? Billing the federal government is an entirely separate process, often more complex than the work itself (if you let it be). Between compliance requirements, strict documentation rules, and lengthy payment terms, it’s no surprise that payment delays are one of the most common (and costly) frustrations in this space.

Here are the biggest billing challenges we see and how to stay ahead of them, so your cash flow doesn’t take a hit.

Recently, we conducted research related to some incurred cost audit findings for a client and came across an Armed Services Board of Contract Appeals (ASBCA) case that highlighted key information every contractor, especially small businesses, should know. The Technology Systems, Inc. ASBCA No. 59577 reads like a soap opera. It starts with some ups and downs. There were audit findings in Fiscal Year (FY) 2001, which the contractor and the Administrative Contracting Officer (ACO) negotiated. For FY 2002 to 2006, the contractor’s indirect rates were accepted as proposed. This was followed by relationship issues during the FY 2007 audit between the Defense Contract Audit Agency (DCAA) auditor and the contractor (No surprise to most of us). Then, a period of separation occurred, from FY 2009 to 2013, when DCAA decided that proposal pricing supporting new contract awards was the priority. During this time, the contractor’s FY 2007 incurred cost audit was shelved, along with significant potential questioned costs. Then, in an act of desperation, the ACO issued a Contracting Officer’s Final Decision (COFD) based on a DCAA memorandum for the FY 2007, which questioned costs to avoid the statute of limitations running out. Ok, enough of the soap opera, let’s go through the things you need to know.

A little background – On April 15, 2025, Executive Order 14275, Restoring Common Sense to Federal Procurement, was issued. The intent of this order was to make revolutionary changes to the Federal Acquisition Regulations (FAR) to make the federal acquisition process more efficient and cost-effective. Section 2 states, “It is the policy of the United States to create the most agile, effective, and efficient procurement system possible. Removing undue barriers, such as unnecessary regulations, while simultaneously allowing for the expansion of the national and defense industrial bases is paramount. Accordingly, the FAR should contain only provisions required by statute or essential to sound procurement, and any FAR provisions that do not advance these objectives should be removed.”

If you’ve ever found yourself scratching your head over why the Project Status Report (PSR) doesn’t match the Revenue Worksheet (Rev WS), you are not alone. These two reports serve different purposes and speak two distinct languages. But to truly understand the differences, you must start with what is happening behind the scenes in the Costpoint Project Ledger.

The de minimis rate is an indirect rate that can be elected by Non-federal entities (State, local government, Indian Tribe, Institution of Higher Education or non-profit) that do not have a current negotiated indirect cost rate agreement (NICRA). The de minimis rate is addressed in 2 Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, specifically 200.414(f).

Revenue recognition is a very critical and highly scrutinized aspect of accounting for government contractors. Whether you're working on cost-plus contracts, time and materials, or firm fixed price agreements, how and when you recognize revenue can significantly impact your financial reporting and compliance with government regulations.

Are you interested in learning how to set up and manage labor categories in Unanet to improve project management, timekeeping, and labor cost compliance for government contractors? Labor categories are critical for organizing and tracking work performed on contracts, especially on Time & Materials (“T&M”) contracts. While cost type and fixed price billing may not require a labor category for billing purposes, they can still play an important role in project management and budgeting at the contract level. In accounting systems like Unanet, these categories classify time into roles such as Project Manager or Senior Software Developer that are tied to billing rates, simplifying T&M billing. Unanet also provides flexibility in how labor categories are derived, allowing setup at the admin/master level, project level, person level, or person-to-project assignment level. This adaptability ensures alignment with contract requirements regardless of how your business is structured.

The Good

Ok, finding some good is going to be a challenge. Let's start with the fact that the Defense Contract Audit Agency (DCAA) receives approximately 3,500 incurred cost proposals annually, but only audits around 500 of them. And even though DCAA is still auditing about 75% of the dollars submitted ($193B), only .3% is questioned ($760M), and only 31% of that is likely to be sustained by contracting officers. This comes from the DCAA Report to Congress for 2024.

See, we did find some good.

Project status report (PSR), job status report, project summary, many names for the same thing…a report that gives the user a summary of the information associated with a project. The project status report in Deltek’s Costpoint is a snapshot of a project's current status at any given time. It contains data from many different sources and is useful to Accounting, Project Management, and Leadership to assess the current position of a project or contract. This report has a range of options to provide users with the specific information related to the project they would like to review.