Accounting Difficulties Facing Government Contractors
Navigating the financial and accounting landscape can be daunting. Government contracting is notoriously stringent, and in recent years, the government has only tightened the screws further to protect taxpayer funds. This means that as a contractor, you must be able to demonstrate compliance with an ever-growing number of accounting systems, policies, procedures, and infrastructures. And this is no easy feat. The bar is set higher for government contractors than it is for businesses in the commercial market.
Governments Requirements for Contractors
It's essential to have a clear understanding of the government's accounting requirements. One of the key areas of focus is compliance with Federal Accounting Standards Board (FASB) criteria. This includes adhering to regulations like the Federal Acquisition Regulations (FAR), Cost Accounting Standards, and FAR agency supplements.
In addition, it's essential to have a clear understanding of the areas of emphasis during audits. For example, the Defense Contract Audit Agency (DCAA) places a lot of scrutiny on contractors' management of subcontractors. This includes looking at things like timeliness of payments, documentation of contractor oversight, and subcontractor reviews.
Getting a Government Contractor's Accounting System approved by the DCAA (Defense Contract Audit Agency)
Obtaining approval from the Defense Contract Audit Agency (DCAA) for your accounting system can present a unique set of difficulties. Direct and indirect cost segregation, cost pools and allocation bases, timekeeping, labor distribution systems and maintaining compliance with invoicing, can seem endless. It's important to note that the Defense Contract Management Agency (DCMA), defines business systems requirements and provides direction on audits and approval criteria. Compliance with these regulations is crucial, as contractors found to have deficient systems face significant withheld payments.
Make the Most of your Knowledge and Keep Up with Changes
The implementation of an accounting system and regulatory compliance can provide a wealth of valuable information. However, if you don't know how to use this information to your advantage, it can be of little benefit to your company. To truly make the most of the knowledge you've acquired, it's essential to understand the government's purpose, needs, and processes as well as use that understanding to manage and grow your business.
Fortunately, today's technological innovations offer contractors greater capacity for compliance with government requirements. This allows for the use of systems that can help manage and grow the business while adapting to keep up with ever-changing requirements. By taking advantage of these tools, contractors can make the most of the information they've acquired and use it to achieve growth and success.
Staying on top of the ever-changing rules and regulations when it comes to finance management and accounting is essential. The recent economic stimulus plan has brought increased transparency to government finance, but the truth is, changes in these requirements are a constant in the world of government contracting.
The key is to stay informed and be proactive. This means staying up to date on any new regulations, attending relevant workshops and seminars, and consulting with experts in the field. By doing so, you can ensure that your company is always in compliance and ready for whatever changes come your way.
Be Prepared for Surprise Audits
It's important to always operate under the assumption that your business will be subjected to a thorough government audit. These audits can happen without any advance notice, so it's essential to always maintain a state of preparedness. The goal is to ensure that your company can confidently pass any evaluation with flying colors.
What happens if your company is found to be noncompliant with its accounting system? Unfortunately, the process of regaining acceptance from the government is not only difficult and time-consuming, but it can also have serious consequences for your business. Contracts may be terminated, opportunities for new business may be lost, and even payments on existing contracts may be withheld until improvements are made.
That's why it's crucial to maintain a robust accounting system that is always in compliance with government regulations. This means staying informed of any changes or updates to regulations, conducting regular internal audits, and working with experts in the field to ensure that your company is always operating at its best.
If you have questions, contact HFM today. Our professionals are well versed on the latest issues to provide our clients with professional, personalized services.