QuickBooks and DCAA Compliance – Q&A Overview
The question regarding QuickBooks and DCAA compliance, or QuickBooks as a pre-approved accounting system comes up frequently. Many companies resort to much more costly platforms thinking that they must in order to be DCAA compliant. The following will hopefully shed some light on DCAA approved or compliant accounting systems. Remember, compliance requires more than just the software, but read on, and we will address those items.
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Q: Can I buy a DCAA approved accounting system in a box or off the shelf?
A: Many government contractors are probably searching for the elusive DCAA approved accounting system. They want to know which brands are approved and how much they costs. Some are more interested in a specific software package because they have been told the DCAA auditors are more lenient if you have it. However, the problem is that a DCAA approved accounting system does not exist right out of the box. Two companies can purchase the same exact accounting package and one will pass an audit and the other may not.
Q: Does DCAA endorse any accounting software package?
A: DCAA approves an accounting system based on a set of evaluation criteria. This audit is often referred to as an accounting system audit, pre-award accounting system survey, or post-award accounting system audit. The most common accounting system evaluation is the pre-award survey. It is usually conducted upon award or preliminary award of a cost reimbursable type contract. However, a government agency can request an accounting system audit of the contractor for any type of contract being awarded. The evaluation is based on standards required by Federal Acquisition Regulations and the criteria are applied to all accounting systems, regardless of the name, manufacturer, or price of the software package in use. The accounting system audit addresses important requirements such as job cost, separation of unallowable costs, and indirect costs. The accounting system must be able to segregate cost according to projects, contracts or jobs. Any accounting system that can track job cost has the potential to be approved after an audit. A low-end general accounting package is just as “approvable” as a high-end accounting package designed especially for government contracting if it can track job costs. Another feature that increases the chances of passing an audit is the ability to distribute labor or payroll costs to jobs…with the system. This is often referred to as labor distribution.
Q: Is the accounting system simply just the accounting software?
A: Another problem with the “in-the-box” DCAA approved accounting system is that many believe that the software package IS the accounting system. An accounting system is far more encompassing. It includes not only the software package, but also the policies and procedures the company has in place that governs how transactions are put into that software. Some policies and procedures may include timekeeping policies, cost segregation policies, and internal control over accounting transactions. The software is just the tool that a company uses to store accounting information. How the information gets in there, what gets in, how often it gets in, and who says it gets in…is the very function of the policies and procedures. Now, while everyone involved in the accounting functions may know the proper way to handle transactions, the policies and procedures still need to be documented. Documented policies provide proof that you actually have them and they provide a framework for new employees or other staff to follow consistently. For government contracting, two of the most important policies to have in place are the cost segregation policies and time reporting policies.
Q: Can QuickBooks with job costing pass a DCAA audit?
A: The Federal Acquisition Regulations only require that the system be able to track job cost in accordance with its rules. In fact, most job costs accounting systems can become compliant. Many probably are already in operation but the system’s terminology is just not in terms government contractors expect. QuickBooks is the easiest because it is user-friendly and is basically a desktop system that doesn’t have to be run on a server. However, industry-specific software usually needs to be tweaked to segregate direct and indirect costs and to track labor costs by job or project.