Upload
david-matthews
View
212
Download
0
Embed Size (px)
DESCRIPTION
understanding_government_cost_accounting
Citation preview
PART 3-2
Section Agenda
Basic overview of Accounting for Federal Government Transactions :
DefinitionsHow to calculate indirect ratesOther misc. stuff
Learn those things, and you should be able to :Ensure your accounting system is set up properlyCreate a contract invoice to the US Government Get through a DCAA audit
PART 3-3
How it all fits together …
CONTRACT#1
CONTRACT#2
INDIRECT COSTS(Overhead, G&A)
INDIRECT COSTS(Overhead, G&A)
rent utilitieslegal fees
DIRECT COSTS
INVOICE INVOICE
DIRECT COSTS
admin
POOLS
Allocation Bases
INDIRECT RATES
LaborTravel
Material
PART 3-4
What Are : Direct Costs
Any cost that is measurable, and relates specifically to a ‘final cost objective’ (i.e. a contract)
Direct LaborTravelODC’s (Other Direct Costs) – materials, etc.
Your system needs to identify and accumulate direct costs by contract
Be able to run a report listing the costs charged to each contract by month, by cost type
PART 3-5
What Are : Indirect Costs
A cost that supports the main business, not assignable to one particular contract. Therefore, supports two or more final cost objectives (contracts). Ex) rent, exec. salaries, office supplies
Fringe benefits poolOverhead poolG&A pool
These costs are allocated to multiple contracts on some equitable basis.
Usually a Direct Labor base (dollars or hours)
PART 3-6
What Are : Pools
The sum of like costs – used as the numerator in rate calculations. 3 common pools :
–separate for larger companies, or combine w/:
‘Gray’ rules for which types of expenses go into each pool – use DCAA manual, judgment. Document rationale.
FRINGEPOOL
OVERHEAD POOL
G&APOOL
PART 3-7
What Are : Allocation Bases
Used as the basis for allocating indirect costs to contracts – the denominator in rate calculations.Many possible bases can be used to distribute indirect costs :Contract Overhead Direct Contract LaborPayroll Fringe Total LaborG&A Total costs exclusive of G&A
PART3-8
What Are : Indirect Rates
G&A, OH rates are applied to invoices -To recover $$ you spent on indirect costs.
Provisional Rate : A temporary rate established for a future prospective period of time. For budgeting, proposals, etc.
Final Rate : Established after an organization’s actual costs for a given accounting period (normally its fiscal year) are known.
If different from provisional rates, do adjustment to actual costs
PART 3-9
Overhead vs. G&AOH : Costs incurred for, or only benefiting, an
identifiable unit or activity of the organization; or, costs benefiting multiple contracts or contracts plus other work, however they are not chargeable to any particular contract(s); or, costs arise to support the performance of the contract.
Ask the question : would this type of cost be here if it weren't for 'x' contract(s)?
Ex) Salary of contract support staff; Rent for facilities necessary to perform contract work; added insurance, leased equipment, etc. for that space
G&A : Necessary to the overall operations of the organization; direct relationship to any particular cost objective cannot be shown.
Ex) Executive salaries; utilities; depreciation; professional fees (legal & accounting), etc.
PART 3-10
Recap Example :
Contractor has a firefighting force for general plant protection Indirect CostContract requires 3 firemen 24/7 to protect flammable materials needed for contract Direct Cost
None of cost of 3 firemen is in an indirect pool.Contractor may also allocate portion of general
protection force to contract via an indirect cost pool.
Which one?
PART 3-11
Rate Formulas
OH : OH Pool Direct Labor Base
G&A : G&A Pool . DL Base + Fringe + OH Pool + Unallowables
(total costs other than G&A)
PART 3-12
Example Rate Calculation – FY’06 rate
FY ’05 actualsDirect Labor $200,000Fringe benefits 24,000OH pool 105,000G&A pool 90,000Unallowables 8,000
OH rate : $105,000 = 52%$200,000
G&A rate : $90,000 = 27%($200K+24K+105K+8K)
PART 3-13
How do I know if my calculation is right?
As long as the basic premises of :
Accumulating indirect costs by logical cost grouping, andDistribution of the grouping on the basis of benefits accruing to the costs objective (i.e. what gives rise to the cost)
are maintained, your methodology should be acceptable.
PART 3-14
Step By Step
1) Prepare your accounting systemAssign all expense accounts into a pool (also, Unallowables). Cannot put an expense in more than one pool.
2) Write reports (or create Excel worksheets) for pool / base formulas for the fiscal period
3) Run calculations4) ‘Apply’ rates to invoices5) If estimated costs were used, calc. final
rates after FY is closed
PART 3-15
Unallowables
UNALLOWABLE EXPENSES
Legitimate business expenses which are expressly unallowable as contract costs; i.e. the US government simply will not pay for them. They must be excluded from any billing, claim, or proposal applicable to a government contract.So, it’s important to be familiar with these types of cost…
PART 3-16
Unallowables (cont’d.)
Remember the PLAID CAPE:
Public Relations ContributionsLobbying AdvertisingAlcohol PenaltiesInterest EntertainmentDebts
See FAR Part 31.205, ‘Selected Costs’ for details
PART 3-17
Recap : Things You Need …
A timekeeping system that tracks employees’ labor by contractChart of Accounts that separates direct costs from indirect, and identifies unallowable costs as suchAccounting system that is capable of accumulating costs by contract – a ‘job costing’ systemA logical and consistent method for allocating indirect costs (i.e. support and rationale for your indirect rate calculations)
PART 3-18
Audits
DCAA (Defense Contract Audit Agency) :Pre-Award review of Accounting System and Financial Capability
• System set-up, Chart of Accounts; cash flow, credit, etc.Indirect and Direct Rate Certifications
• Rate calculations and supporting data
A-133 Audit : for non-profit orgs with >$500K federal award expenditures
Conducted by whomever contractor hires (Big 4, other)
PART 3-19
Where To Go For Help :
DCAA ‘Information for Contractors’ Manual : www.dcaa.mil
www.managementconcepts.com/publications/acquisition/pricing.asp
Books, e-learning tools
SCORE office : www.scorepittsburgh.com
Shelly Costabile – NCDR Federal Acctg Mgr.(412)586-0960 or [email protected]