Redstone Government Consulting Blog | Compliant Accounting Infrastructure (11)

ASC 606, Revenue from Contracts with Customers, had an impact on the way many contractors recognized revenue related to contracts with the Federal Government. Redstone has covered this topic a couple of times (January 26, 2021 Government Contractor Challenges in 2021 Webinar and May 6, 2021 MossAdam/Redstone Webinar Compliance Changes for Government Contractors). ASC 606 also impacts the recognition of sales commissions. The overarching GAAP matching principle requires that the expense of sales be matched to the recognition of the related revenue.

In my years as a CPA and consultant I’ve worked with many small businesses that have asked for input on what they need to be doing to get more reliable financial data. Usually, it’s business owners looking for ways to be able to make important decisions faster, but lately it’s often companies new to government contracting that are trying to figure out what they need to be doing to keep clear of problems with DCAA. In either scenario, one of my first suggestions is a formal monthly close process. When I say “formal”, that doesn’t mean that it has to be cumbersome and complicated. If the business financials are relatively simple, then that close process can also be fairly simple and still be effective. But it needs to be structured, with a specific checklist in place as to the procedures that are to be performed, the order in which they are to be done, who is responsible for each task, and target deadlines for each. That recommendation then raises the next question – what do you mean by “close”?

Redstone GCI has been pleased to be a part of the Early Adopter testing program for Costpoint version 8.1. There have been numerous changes and improvements within the system in all modules, but we would like to highlight the below areas that our consultants found most useful.

The focus of fraud used to be primarily on defense contractors, health care providers and health care suppliers. However, other companies are now being exposed to the Federal Claims Act (FCA) including software companies, private equity financiers, insurance companies, and educational institutions. Additionally, fraud is not just related to companies receiving the funds.

In January of this year (2021), we told you that the United States Department of Labor (DOL) under the Trump administration announced a final rule clarifying the standard for whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). This rule reaffirmed the “economic reality” test as the primary factor for determining employee status. The final rule was published in the Federal Register on January 7, 2021 and the Rule was set to have an effective date of March 8, 2021.

If having unbilled receivables is a new concept based on your experience with other software systems, you may find it a relief that having an unbilled balance is not necessarily bad or wrong. Unbilled Receivables is the offsetting account for billing and revenue postings in Deltek Costpoint. When a billing is posted, the Billed Receivables account is debited, and Unbilled Receivables account is credited. For the revenue posting, the Unbilled Receivables account is debited and Revenue account credited. Hence, if the billing and revenue posting amounts are the same, the offsetting Unbilled Receivables account will be zero. That sounds great, however, there may be situations where billing and revenue do not or should not match, which then creates a balance in the Unbilled Receivables account. So, when is it okay to see an Unbilled Receivables balance?

Have questions regarding what travel costs are allowable? Do you think the travel regulations say you can never have first-class airfare reimbursed? Or do you think the regulation says you are restricted to a compact rental car? For the answer to these questions and more, check out our video on travel regulations and myths!

What is CUI, CDI and CTI?

CUI is Controlled Unclassified Information and encompasses all Covered Defense Information (CDI) and Controlled Technical Information (CTI). CUI requires the safeguarding or dissemination of controls pursuant to applicable laws, regulations, and government-wide policies.

• Covered Defense Information (CDI) is unclassified controlled technical information or other information described in the Controlled Unclassified Information (CUI) Registry found here.
• Controlled Technical Information (CTI) is technical information with military or space application that is subject to controls on the access, use, reproduction, modification, performance, display, release, disclosure, or dissemination. It does not include information that is lawfully publicly available without restrictions.

Where does DCAA’s View of the Contractor and their Role in Acquisition Come From?

DCAA Auditor Training

DCAA website provides that new auditors receive in-depth professional training from DCAA’s Defense Contract Audit Institute (DCAI), along with on-the-job training at their assigned field audit office. DCAI is located in Atlanta, GA and provides auditors with an excellent basis on which to start their careers in contract audit. Many at Redstone GCI can speak from personal experience that, once you get past the exciting MARTA ride from the airport, the instructors at DCAI provide a good hands-on learning environment. However, we are not sure if it is a subliminal message piped into the classroom or local indoctrination at assigned field offices, but the auditors are coming away with the impression that no contractors can be trusted, and a good audit opinion has to include questioned cost.

Have you made a change in accounting practice that would require a Cost Accounting Standard (CAS) Cost Impact? Watch our latest blog to help you understand the requirements and potential issues.