Neena Shukla, CPA, CFE, CGMA, FCPA, CTP

As a government contractor, it is vital to possess a comprehensive understanding of the regulations governing 401(k) plans and the intricacies of nondiscrimination testing. While these retirement savings plans are commonly offered by employers, it is imperative to meet specific requirements to maintain their tax-deferred status.

In the ever-changing landscape of cybersecurity regulations, government contractors must be prepared to adapt and comply with the latest requirements to safeguard sensitive information.

In this article, we will delve into the intricacies of government shutdowns, their direct implications on contractors, and equip you with practical strategies to effectively prepare for any future shutdown scenarios that might arise in 2023.

As a government contractor, you understand the importance of safeguarding sensitive information. But with the rise of email and online communication, cybercriminals are using phishing scams to trick unsuspecting employees into revealing confidential data.

If you’re a small business owner, you may have come across the term ESG and wondered about its meaning. ESG stands for Environmental, Social, and Corporate Governance, which are important factors that investors use to evaluate companies of all scales.

The US has issued an executive order banning all federal contractors and employees from downloading or using TikTok on any device that is owned by the government, citing security concerns. This ban has sparked much debate about the future of the platform and what this means for users.

As a government contractor, understanding your obligations under the Service Contract Act (SCA) is essential. In this blog post, we will provide you with an overview of the SCA, including its requirements and challenges when implementing the standard. We will also discuss how compliance can be achieved and the risks associated with noncompliance.

By Neena Shukla, CPA, CFE, CGMA, FCPA, CTP | If you have a responsible estimating system, you would typically anticipate recovering all of your direct costs. However, to ensure recovery of your Company’s indirect costs, requires a good budgeting process and established internal controls.

Budget variances, the difference between planned billing rates and planned forward pricing rates and actual performance, favorable and unfavorable, will happen.  When they do, it is critical to profitability to understand what is causing the variance so it can be considered in your budgeting process going forward or operationally corrected.

In this blog post, we’ll take a look at what types of research and development expenses can be considered allowable under the FAR, as well as some tips for ensuring that your expenses meet the criteria.

Budget variances will happen.  When they do, it is critical to profitability to understand what is causing the variance so that it can be considered in your budgeting process going forward or operationally corrected.

One of the most important aspects of an adequate accounting system lies in the supporting policies and procedures.  But where do you start when developing these policies and procedures? 

FASB’s amendments to ASC 842 offer simpler guidance for common control lease arrangements and provide a practical expedient for lessees to account for leases in common arrangements without considering legal enforceability.

Understanding the rules and laws governing PTETs and various state rules, as well as GAAP guidance, can help make sure government contractors remain compliant and efficient.

An accounting system for government contractors is composed of a general ledger, unallowable costs, job costing, labor collection, indirect cost allocation, and billing. An accounting system does not equate to accounting software; it is the process, including written policies and procedures.

Government contractors have to understand the fundamentals of strategic costing and strategic pricing in order to make correct decisions that determine their overall profitability on a job.

Learn more about these five types of government contracts presented in detail – including what they entail, their risks, and the pros and cons of each.

Government contractors should perform an internal assessment of their compliance before an audit is performed and participate in the audit process to ensure a favorable result.

The pandemic and the resulting changes in employee work routines and locations have created a potential cost-allowability issue that many government contractors have not previously encountered – potential idle facilities and/or idle capacity.

Learn about unallowable costs and what determines a costs’ allowablility. We also provide a listing of FAR and DFARS clauses that are considered to contain expressly unallowable costs subject to penalties.

The new lease standard has brought about a lot of changes. In this blog post, we will discuss some of the most important things to remember when implementing ASC 842. We’ll also provide a checklist of tasks that should be completed in order to ensure compliance with the new lease standard. 

Every few years, we reach out relative to the importance of a government contractors’ response to audits performed by the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Department of Labor (DOL) or, for that matter, any other government audit function.

Government regulation requires costs to be classified as either a direct cost or an indirect cost.  As we know, indirect costs, in the aggregate, represent the largest class of expense incurred on government contracts.  Direct costs, by definition, are identifiable with a specific “final cost objective” while indirect costs are associated with common or joint cost objectives.

Labor recording is the basis for the valuing and allocating the efforts of you and your employees and a critical process for government contractors who depend on it for their product and services costing (read billing/cash flow) and pricing.

While a contractor’s forward pricing rates may sometimes get confused with their provisional billing rates, by the contractor and even the government, they are completely different rates developed for completely different purposes.

FAR (Federal Acquisition Regulations) is one of the most important laws to know for any company looking to work with the federal government. In this blog post, we’ll cover some key points so you can get started on understanding your responsibilities as a contractor!

It is important for government contractors in developing their business systems and offering them up to the government as representative of their compliance with the published requirements to understand what a “system” is in the context of government compliance.

DCAA compliance is an essential component of government contract administration. The key for government contractors is to know what rules and regulations they are subject to, implement the necessary processes to ensure compliance, and maintain that compliance.

The Federal government uses special programs to help small businesses win at least 23 percent of all federal contracting dollars each year. Small businesses should take advantage of these programs to give them a competitive edge in the government contracting arena.

Should you accept government work if you are a technology firm? Yes, if you want to increase your revenue. Here are some tried-and-true tactics for winning government contracts that will help tech businesses succeed in the extremely competitive business world.

Learn about service centers and cost allocation methods, specifically direct allocation and step allocation, that can help you understand the “true” cost of your products and services so you can price them for a profitable return.

Managing a remote team as a government contractor can be difficult if not handled correctly; however, it is possible to make a successful transition from onsite to remote staff. Here are ten tips to get you started.

Many government contractors opt to use policies and procedures that they either find online or obtain from other sources.  Herein lies the problem.  How do you know that what is a compliant practice for one organization will result in a compliant practice for your organization? 

The DOJ’s Civil Cyber-Fraud Initiative will target government contractors and grant recipients’ security procedures in order to limit future cybersecurity problems. In this article, we review what you should know about the new civil cyber-fraud initiative, what might lead to infractions, and how to avoid hefty fines.

With the potential redirected push for cost-type contracting over fixed-price contracting, there are new compliance issues for government contractors.

The SF1408, Preaward Survey of Prospective Contractor (Accounting System) details some sixteen specific requirements a potential contractor must meet for their accounting system to be considered adequate. To make compliance more understandable and attainable, we’ve compiled the following five capabilities contractors should implement and document in written policies and procedures.

Do you have a lease? If so, it is important to be aware of the new Lease Accounting Standards for Government Contractors. Lease accounting standards are changing and government contractors need to know how this will affect them.

The federal government is the largest single customer in the world. Continuing with our Basics of Government Contracting Series, in this blog post we discuss how the federal government buys goods and services and what you need to know as a government contractor.

Retaining talent in a post-Covid environment can be challenging, but it is important to keep your employees engaged and productive. Here are five tips on how you can successfully retain your talented people when economic uncertainty looms overhead.

If you’re thinking about pursuing government contracts, it’s important that you weigh the pros and cons carefully to make an informed decision.

The standard calculation of a proposed hourly rate for an exempt salary employee encompasses dividing the individual’s salary by the standard 2,080 work hours per year. However, there is a way you can make your hourly rate more competitive and FAR compliant at the same time.

In another demonstration of the federal government’s commitment to cybersecurity, the DOJ released details of its Civil Cyber-Fraud Initiative. Here’s how contractors can comply.

On January 15, 2021, the Office of Management and Budget issued a memorandum (M-21-11) to the heads of all executive departments and agencies entitled “Increasing Attention on Federal Contract Type Decisions”.

The Federal Acquisition Regulations and the Cost Accounting Standards require consistency in estimating, accumulating and reporting costs.  In other words, the way you price your contracts must be consistent with the way you account for and report them.  There are two things you can do to help ensure compliance.

One of the effects of cash flow shortages from COVID-19 has been an increase in rent deferments or abatements. It’s one thing to alter the language of a contract, but the question becomes how to treat rent concessions in the financial statements, and which set of guidelines to follow.

The term ‘kickback’ is defined by Public Law 99-634 as any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided directly or indirectly, to any prime contractor…

As the COVID-19 pandemic continues with no real end in sight the performance of traditional on-site audits by DCAA becomes a significant safety issue.

The recent cancellation of the General Services Administration (GSA) $15Billion Alliant 2 Small Business (A2SB) contract highlights the need for small government contractors to have a properly evaluated cost accounting system.

The government is increasingly placing emphasis on compliance with the False Claims Act (FCA) and the Truth in Negotiations Act (TINA) currently known as the Truthful Cost or Pricing Act. 

As a government contractor, you are tasked with continuing contract performance under the risks of uncertain and constantly changing circumstances.

Good allocation practices can provide a better understanding of the “true” cost of your products and services, allowing you to become more competitive, better utilize your available assets and facilitate your management decision making process.

In 2014, the Financial Accounting Standards Board (FASB) issued new guidance, ASU 2014-09, Revenue from Contracts with Customers.

Most companies have found that offering incentive bonuses or awards is a good way to obtain and retain good employees.

Many government contractors start with firm-fixed-price contracts and do well, but at some point they are lured by the possibility of being awarded a cost-type fixed-fee contract that is too tempting to pass up. 

The necessity to protect data is one not limited to private sector businesses that store, manage and process personally identifiable information (PII). In fact, government agencies such as the Department of Defense (DoD) also need to evaluate, review and enhance cybersecurity measures both internally and with contractors.

Cybercrime costs the U.S. economy between $57 billion and $109 billion every year. Although there have been guidelines for meeting cybersecurity benchmarks in the past, all DoD contractors are now subject to Cybersecurity Maturity Model Certification (CMMC).

With increased Pentagon spending and the Defense Contract Audit Agency’s (DCAA) reduction and outsourcing of their Incurred Cost Submission audit backlog, government contractors should anticipate a significant increase in audit activity.

Government spending has increased, leaving Congress no choice but to review the Pentagon’s enforcement of the law related to the incomplete and inaccurate cost and pricing data used to establish contract pricing. First implemented in 1962 to level the playing field during contract price negotiation, the law has left many government contractors raking in the profits today. But what may seem like a windfall could lead to a downfall.

The Defense Contract Audit Agency recently questioned the allowance of subcontractor costs, not based on their reasonableness, but on the contractor’s lack of supporting documentation as defined in the cost principle. Government contractors can protect themselves and recover the costs they are owed, but there are steps to follow and documents to submit.

For government contractors, it is important to recognize your ethics and business conduct program must be tailored to your company’s specific risk profile.  This is a dynamic compliance process and has to be monitored and revised accordingly to keep it relevant and effective. Does your company’s business conduct and ethics program meet the necessary requirements?

Government contractors’ incurred cost proposals include all costs incurred during the fiscal year on both commercial and government contracts. For those with fiscal years the same as calendar years and work was performed on cost reimbursable and/or time and material contracts that include the Allowable Cost and Payment clause at FAR 52.216-7, it’s time to begin preparing and submitting your incurred cost proposal/submission.

Contractors or subcontractors that have never had an audit performed by DCAA, or have made changes to their accounting and estimating systems and processes, should be proactive and have self-assessment/mock-reviews of each performed in advance of a DCAA audit. Are you ready?

Government contractors must stop work immediately when they receive a stop work order (SWO) from a contracting officer. What are the next steps? There are several processes to follow, including one to aid in the recovery of additional costs incurred as a result of the SWO.

The government cannot dictate the number of indirect rates you have or how you apply them but they can cite you for non-compliance in the allocation of your indirect costs. Learn how best to allocate your costs based on the type of expense.

Was your rate structure used to allocate indirect costs to your products or services established to satisfy your accounting software? Was it dictated by your customer? Did you set it up because you thought that is what was needed to win contracts? Did you get it from a book or seminar, or even Google? If you answered “yes” to any of these questions, you need to read further.

As government contractors grow to gain new clients and hire more staff to perform the obligations, the accounting system must grow too. Small and emerging government contractors can properly account for costs incurred on government cost-type contracts without overcomplicating the process.

Each time the government changes or delays an existing contract, the contractor can submit a Request for Equitable Adjustment (REA) to receive compensation for costs incurred due to the change. Sometimes contract completion is delayed simply because of planned contract performance as the result of the government’s improper actions or lack thereof prior to, and even during contract performance.

The Defense Contract Audit Agency (DCAA) is noticing many government contractors are inaccurately recording lodging and subsistence travel costs and it’s become an area of “low hanging fruit” for DCAA auditors. What are the unallowable expenses under DCAA guidelines?

Whether you are new to government contracting and are just setting up your accounting system or are more established and not sure costs are being […]

The holidays are here. Is your company getting ready to have its annual holiday party? If so, you may be asking, “Are the costs of the company holiday party allowable or unallowable?” The answer is maybe.

This is a follow-up to previous discussions about a potential Federal government shutdown that was avoided through a continuing resolution restricting expenditures.   The threat hinges […]

We reported in December 2016 that the Department of Defense had issued a final DFARS rule requiring major contractors to engage in technical interchanges with […]

Whether it is to gain access to new technologies or increase resources and market presence, more companies, large and small are considering a merger or acquisition. 

For government contractors, compliance with the Truthful Cost or Pricing Data Act (TINA) is a critical part of staying on the right side of federal contracting and acquisition requirements. But what is the law, and what does it do? Here’s a brief primer.

The federal government is, by law, exempt from paying state and local taxes. However, this exemption does not apply to organizations with federal or state government contracts, […]

The costs of labor, especially in service-oriented companies is the most sensitive area of incurred cost that the Defense Contract Audit Agency (DCAA) is required […]

A large number of small companies and even some considered large have historically not concerned themselves with the allowability of their executive’s compensation. With annual allowability […]

If you have proposed on or been awarded a contract with the Federal government, and especially with the Department of Defense, you probably have been the recipient of a visit from the Defense Contract Audit Agency (DCAA).  While these visits to perform a multitude of audits and evaluations are not the end of the world, they should be taken and reacted to seriously.

FAR 44.101 defines a subcontractor as “Any supplier, distributor, vendor, or firm that furnishes supplies or services to, or for, a prime contractor or another […]

To emphasize the need for compliant policies and procedures we need to refer to a quote from the great Yogi Berra, “If you don’t know […]

ASU Issued: The Financial Accounting Standards Board (FASB) issued ASU 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), […]

Many organizations have the misguided belief that all Marketing/Sales Department expenses are unallowable and exclude them entirely from their allocation of indirect costs. This is not […]

Contractors that have a facility clearance through the Department of Defense’s Defense Security Service (DSS) must have a written plan in place for the implementation of […]

On January 26, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2017- 04, Intangibles – Goodwill and Other (Topic 350): Simplifying the […]

The U.S. General Services Administration (GSA) has released the first ever iBook version of the Federal Acquisition Regulation (FAR). While the FAR may never be […]

On September 28, 2016, DCAA removed Chapter Seven from the Contract Audit Manual (CAM) and released a new seventy-five chapter document entitled “Selected Areas of […]

So you are considering or have decided that you want to do business with the United States Government.  Why not when the government spends over […]

The Department of Defense has issued a final DFARS rule requiring contractors to engage in technical interchanges with the DoD before such costs are generated.  […]

Today’s political and budgetary environment will most likely lead to changes in procurement priorities and reduced government spending levels.  These realities, reflected in contract terminations […]

Preparation of Contract Briefs are often a forgotten and generally disregarded tool of contract management that can prove very useful in improving cash flow through […]

Travel expenses, while they may not be one of your largest costs, depending on your contractual requirements, could easily be one of the most scrutinized […]

The U.S. Department of Labor (DOL) published its long awaited and highly controversial final rule on April 6, 2016, which addresses when a person is considered a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA), when providing investment advice to a Plan, its participants and beneficiaries.

Even in today’s economic environment there are many companies, both start-up and established, that are looking to do business with the Federal government and its […]

One of the least appreciated and most maligned tools in management’s toolbox is the indirect expense or overhead rate structure. The indirect expense rate structure […]

Government contracting is a very complex industry with a myriad of rules and regulations to follow. Add to that the several years of dealing with […]

The Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification — better […]