Stepping-through your DCAA Preaward Survey (Audit)
(Scroll through the box below using its arrows, and then click on any of the 15 items to view)
Generally Accepted Accounting Principles (GAAP). Is your accounting system in accordance with GAAP? Are your books maintained on an accrual basis (as required by GAAP)?
This is a fundamental question that must be answered with a "Yes". As shipped, Light2 is pre-configured to address the requirements of GAAP and DCAA. As to the accrual basis of accounting, your books should properly reflect costs and expenses when they are incurred and revenues when they are earned. Again, these are fundamental requirements that your accounting system and procedures must satisfy. "Out-of the box", Light2 is fully responsive to this requirement.
Proper segregation of costs. Do controls exist to preclude direct charging of indirect expenses and indirect charging of direct contract costs?
That is, does management and your accounting staff understand the difference between direct, indirect and unallowable expenses and that these costs must be accounted for separately in your accounting system in their own accounts and groups of accounts?
As one of the first items in the Preaward Survey, you can safely surmise that satisfying this requirement is of primary importance. Your Accounting Policies & Procedures (P & P) manual, brief as it may be, should fully communicate your understanding of this fundamental requirement.
Your accounting system should complement your P & P's, providing accounting system users with aids that help insure that this requirement is met. Below is an animated presentation of Light2 doing exactly this...In fact, as you'll see, the standard installation of Light2 includes a pre-configured, read-for-use, P & P manual.
Direct costs by contract. Does your accounting system have a subsidiary job cost ledger or accounts receivable ledger which accumulates costs by contract at a level of detail consistent with that used in your cost proposal?
If your accounting system is Light2, you do. Light2 allows you to budget, track and report project costs at virtually any level of detail that you deem necessary or appropriate. Typically, this is the same level of detail that was presented in the cost proposal submitted for the effort.
Allocation of indirect costs. Are indirect costs accumulated in logical groupings in your books and are these groupings allocated based on benefits accrued to intermediate and final cost objectives? Is your cost accounting system formally documented with a written description of the contents of bases and pools (groupings)?
As seen in Item 2, Light2 allows you to establish the necessary Cost Types and Classes (Pools) to fully address this requirement. You also saw that you are able to attach notes and other descriptive text to these items and to General Ledger accounts as well - resulting in a fully-documented accounting system.
The following screenshot of Light2's listing of General Ledger accounts displays the results of your system configuration efforts: the "logical" grouping of indirect costs. The screenshot of he company's Overhead rate formula displays the bases (Direct and Bid & Proposal Labor) to which the computed Overhead rate is applied. As depicted, Light2 provides you with complete control over the definition of the formulas by which indirect cost rates are calculated.
Accumulation of costs under general ledger control. Are your job cost ledger and other books of account reconcilable and currently posted to your general ledger control accounts?
Because it is impossible in Light2 to enter any transaction without a General Ledger account number, and because transaction entry - whether for financial or job costing purposes - is accomplished through a unified set of transaction entry screens, satisfying this requirement is a built-in feature of Light2. For the very same reasons, your Light2 General Ledger and Job Cost Ledgers are always, by definition, in complete agreement and, with respect to each other - completely up-to-date.
Timekeeping system. Is labor charged to intermediate and final cost objectives based on a timekeeping system document (paper or electronic timecards) completed and certified by the employee and approved by the employees' supervisors?
Light3 and our fully embedded electronic timekeeping system, Light3 Web Publishing, fully satisfies these requirements as well. Employees can charge their time to any intermediate or final cost objective (indirect or project account) with the ease that defines all of Light software. Click here to review Light3 Web Publishing and download a free demo.
Labor distribution. Are labor cost distribution records reconcilable to payroll records and do labor distribution records trace to and from the cost accumulation records in labor subsidiary or general ledger accounts?
Again, this requirement is met by a built-in feature of Light. For timesheets entered through Light or Web Publishing (electronic timekeeping) a reconciliation is constantly maintained for salaries accrued (the result of the "posting" of your timehseets) and payroll paid (the result of generating your payroll paychecks). Aside from the fact that this feature effortlessly satisfies a DCAA requirement, it is also valuable in the context of ensuring that your books are as complete and accurate as possible...at all times.
Interim determination of costs. Do you post contract costs at least monthly to your books of account?
Your answer to this is "Yes", of course. It only makes sense that you would keep your books up to date.
Exclusion of unallowables. Do your books identify and exclude unallowable costs?
Because you can associate any General Ledger account with any of the Cost Classes or Cost Types that you create in Light2, the exclusion of unallowable costs is as easy as point-and-click. As detailed in the following screenshot, costs that can contain unallowable costs are associated with the "Unallowable" cost group.
Costs by Contract Line Item. Can your system be expanded to the requisite level of detail and do you have procedures to determine what this level might be?
Yes. Detailed reporting of any account, for any project, is available throughout Light2. The Project (Job) Costing Cycle, Reporting Cycle and Customer & Projects and Maintain Projects screens allow you to extract and report contract cost data for any date range you desire. Light2's Ad Hoc reporting capability takes "drilling-down" to the next level.
Preproduction Costs (applies principally to manufacturing contracts). Are these costs routinely segregated to assist in repricing or follow-on contract pricing?
Preproduction costs, if any, are segregated in Light2 In the same way that unallowable costs are segregated. Additionally, other means are available within Light2 which allow you to separately identify these and any other costs that you may wish to segregate.
Limitation of Costs. Can interim indirect expense rates be readily calculated from your books of account, and are the interim rates routinely monitored?
Who is responsible for monitoring total contract expenditure against contract limitations on price or cost, and how frequently is this reviewed? Are controls in place to ensure compliance with the reporting requirements of FAR 52.216-16 or Far 52.232-20, -21 and -22?
Light2 computes interim indirect cost rates on-demand and for any fiscal period for which costs exist in your books. Additionally, it offers your managers (and other interested parties) an array of equally accessible management reports that provide for the monitoring of total contract expenditures against contract limitations.
Billing (e.g. progress payments, public vouchers). Do you have controls or procedures that would provide that interim billings of direct cost are prepared directly from the books and records, excluding unallowable costs? Do you have procedures to ensure that subcontractor and vendor costs are only included in billings if payment to the subcontractor or vendor will be made in accordance with the terms and conditions of the subcontract or invoice and ordinarily within 30 days of the contractor's payment request to the Government? Can billings be reconciled to the cost accounts for both current and cumulative amounts claimed?
This requirement is met by simple virtue of the fact that Light2 only bills direct costs, and only those costs that are actually recorded in your books. In short, if your billing of contract costs under CPFF contracts and hours expended under T&M contracts are prepared through Light2, you can be assured that only direct contract costs are billed. Additionally, per the following screenshot, Light2 generates reports that reconcile project costs incurred to project costs billed for any date range for which costs and amounts invoiced are recorded in your books.
Your policies and procedures concerning the payment of subcontractor and vendor invoices should be consistent with regulations and in accordance with the terms of the invoice or subcontract.
Adequate, reliable data. Is your system capable of producing cost information at a sufficient level of detail for use in pricing follow-on contracts?
Absolutely. Having satisfied all other requirements presented in the Preaward Survey - and as a direct function of its extensive reporting capability - Light2 can easily produce historical cost information in ample detail for use in the pricing of any and all follow-on contracts.
Accounting system in operation. Is your accounting system in full operation? If not, which portions are in operation and what is the status of implementing the full accounting system?
And now for the best part.
Shipped pre-configured with a working chart of general ledger accounts, sample customers and projects and vendors - as well as a default cost structure for the calculation of indirect cost rates - your accounting system is ready for day-to-day use and all functionality is fully activated upon installation.
We strongly recommend a measured, patient approach to your new accounting system's implementation. However, should circumstances so dictate, there's little keeping you from satisfying a DCAA Preaward Survey within a matter of hours of Light2's installation. Should you need some fast assistance, refer your auditor to this Web page! You will, our course, need to supply your company's opening journal entries and other core and historical data, but your system is ready for this immediately. All features, functionality and capabilities are "ON" from the beginning...
(Scroll through the top box using its arrows, and then click on any of the 15 items to view)