JAMIS Software

Search Icon View Demo

MENUMENU
  • Products
        • JAMIS Prime ERPProduct Overview
          • Project Accounting & FinanceCost Accounting For Government Contractors
          • Time and Expense ManagementTimesheets, Time Off Management, and Expense Reporting
          • Customer Relationship Management (CRM)Opportunity Lifecycle Management
          • Asset ManagementFixed Assets, Depreciation, and Government Property Management
          • Contract ManagementContract Lifecycle Management
          • Business Planning SuiteBid & Proposal, Budgeting, and Forecasting
          • Distribution ManagementRequisitions, Purchasing, and Inventory Management
          • Dashboards & Business IntelligenceReal-time Reporting, Inquiries, & Dashboards
        • JAMIS HCMProduct Overview
          • Human Resources ManagementHR, Recruiting, Onboarding, Benefits, Compensation, and Learning
          • Payroll ManagementDomestic & International Payroll, & Outsourced Tax Services
        • Industry Specific EditionsProduct Overview
          • Manufacturing EditionProject Manufacturing built for federal government contractors
          • Nonprofit EditionGrant management for federally-funded nonprofits.
        • Company Size
          • Small Business
          • Enterprise BusinessScalable and full-featured solutions for mid-to-large organizations.
  • Services
    • Implementation Services & Consulting
    • Customer Support
    • JET - JAMIS Education & Training
    • JAMIS Cloud Services
    • System Customization
  • Resources
        • Get the JAMIS edge in Government Contracting

          JAMIS is a true cloud ERP system that breaks down barriers and helps drive collaboration and knowledge-sharing across your organization, so your people can do what they do best.

          Why JAMIS?
          DCAA Compliance
          Security

          Resources
          • Webinars & Videos mega menu arrow
          • Whitepapers mega menu arrow
          • Prime Insights Blog mega menu arrow
          • Datasheets mega menu arrow
          • Customers mega menu arrow
          FEATURED CONTENT
          JAMIS Prime 7.0 Release

          JAMIS Prime 9.0 Release

          JAMIS Software Corporation announces the launch of Version 9.0, delivering major enhancements in financials, manufacturing, mobility, and cybersecurity to help customers boost efficiency, collaboration, and control.

          Learn more mega menu arrow

  • Events
    • GovCon Webinar Series
  • Company
    • About JAMIS
    • Company News
    • Management Team
    • Partners & Affiliates
    • Careers
    • Office Locations
  • Contact Us

The Criteria For An Acceptable Accounting System

Posted by JAMIS Software on June 12, 2018

DFARS 252.242-7006 – Definition of an accounting system

“The contractor’s system or systems for accounting  methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for reporting in compliance with applicable laws, regulations, and management decisions, and may include subsystems for specific areas such as indirect and other direct costs, compensation, billing, labor, and general information technology.”

The 18 Criteria

1. A sound internal control environment, accounting framework, and organizational structure:

  • Policies & Procedures/Code of Ethics/Tone at the Top/Organizational Structure and Assignment of Authority/Governance

2. Proper segregation of direct costs from indirect costs;

  • Chart of accounts
  • Direct cost can’t be charge indirect and vice versa
  • Approval by a knowledgeable person

3. Identification and accumulation of direct costs by contract:

  • Project-based system
  • Job cost ledger – ability to accumulate by contract

4. A logical and consistent method for the accumulation and allocation of indirect costs to intermediate and final cost objectives.

  • Indirect rate structure should provide for a fair and equitable allocation of cost. Reasonable cost/benefit relationship is established
  • Written description of pools and bases

5. Accumulation of costs under general ledger control:

  • Frequency of subsidiary ledger posting to GL
  • AR, AP, Labor

6. Reconciliation of subsidiary ledgers and cost objectives to general ledger:

  • AP, AR, Project Ledger, Rates
  • How often? Monthly, quarterly?
  • How are variances corrected? Monitored?

7. Approval and documentation of adjusting entries:

  • Segregation of duties – Entry, approval, posting
  • Supporting documentation on entry

8. Management review or internal audits of the system to ensure compliance with the Contractor’s established policies, procedures, and accounting practices:

  • Policies and procedures for monitoring
  • Who will monitor? – Audit committee, Senior management
  • How will you document this review?

9. A timekeeping system that identifies employee’s labor by intermediate or final cost objectives:

  • Paper or automated system
  • Employee recording hours worked and to what cost objective
  • Frequency of time entry, self-certification, supervisory approval

10. A labor distribution system that charges direct and indirect labor to the appropriate cost objectives:

  • Labor is posted to the general ledger (account / project on TS)
  • Reconciliation exists between labor and payroll

11. Interim (at least monthly) determination of costs charged to a contract through routine posting of books of account:

  • Closing the books on a monthly basis
  • Project reporting on a monthly basis, billings, financial reporting

12. Exclusion from costs charged to Government contracts of amounts which are not allowable in terms of FAR part 31 and other contract provisions.

  • Separately identified in the chart of accounts
  • Ongoing training for employees on unallowable cost, most importantly A/P folks
  • Burden of proof is on the contractor – adequate backup documentation

13. Identification of costs by contract line item and by units if required by the contract:

  • Understanding of contract reporting
  • Can the system expand to the level of detail required?
  • Proper set up of project for billing and reporting

14. Segregation of pre-production costs from production costs:

  • Unique project/accounts for segregation
  • Process for communicating actual vs. estimated costs to the pricing group for use in follow on pricing or re-pricing

15. Cost accounting information as required for:

  • Limitation of Cost (52.232-20), Limitation of Funds (52.232-22) and Allowable Cost and Payments (52.216-7),
    • You must be able to calculate rates /provide cost incurred/billed information to be in compliance with these clauses
    • Who monitors?
    • Process for communication between contracts and accounting
  • Readily recalculate indirect rates from books of account
    • Calculation of indirect rates based on cost incurred
    • Monitor and review of actual against provisional

16. Billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms:

  • Invoices should tie to/reconcile to project cost reports
  • If special contract terms, your system should accommodate this

17. Adequate, reliable data for use in pricing follow-on acquisitions:

  • If you have complied with 1 – 16 your data should be accurate and reliable
  • Use as your basis for forecasting/pricing
  • If necessary, incorporate impact on rates for potential win(s)

18. Accounting practices in accordance with standards promulgated by the CAS Board and GAAP

  • Policies and procedures
  • CAS Disclosure Statement, if applicable
  • Financial statements
  • CAS 401, 402, 405 and 406 incorporated into FAR
    • CAS 401 -> Consistency in estimating, accumulating, and reporting costs
    • CAS 402 -> Consistency in allocating cost incurred for the same purpose
    • CAS 405 -> Accounting for unallowable cost
    • CAS 406 -> Cost accounting period

DCAA guidance on complying with all 18 criteria:

“A material noncompliance with any one of the 18 criteria indicates a significant deficiency/material weakness exists and the contractor has not complied in all material respects with the DFARS criteria.”

  • Significant Deficiency: “Shortcomings in the system that materially affect the ability of officials of the DoD to rely upon information produced by the system that is needed for management purposes.”
  • Material Weakness: “A deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that a material noncompliance with a compliance requirement will not be prevented, or detected and corrected on a timely basis.”

There aren’t any accounting software solutions out there that will make you DCAA compliant.  But there are systems out there designed specifically to help make the challenge of your next audit much less daunting.  To find out more about how JAMIS Prime can help your business, sign up for our next webinar HERE.  Or you can contact us today at info@jamis.com.

Topics: Blog

Welcome!

Previous Posts:

Fully-Integrated Quality Management Software to Connect Quality Control with Projects, Operations, and Finance

Turn Your Financial Data Into Useful Business Insights

3 Key ERP Automation Tools That Can Improve Operational Efficiency and Decision Making

Production Costing with Production Orders – Understanding True Profitability for GovCon Manufacturers

facebook twitter youtube linkedin
Copyright © 2023 JAMIS Software Corporation. All rights reserved.
JAMIS Headquarters | 6688 Gunpark Drive, 2nd Floor, Boulder, Colorado 80301
Legal | Sitemap
This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Reject
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT