Government Contractor Compliance for Architecture & Engineering Firms

If your architecture or engineering firm works on government contracts, then you know how challenging it can be to remain current and compliant with the regulations for FAR and all the government agencies such as DCAA, DOT, or DOD.  Government contracts require specialized timekeeping, reporting and accounting procedures, and over the years, Axium has helped hundreds of AE firms meet the specific requirements. 

The key to FAR and DCAA compliance is properly configuring your accounting software and following specific documented procedures. Axium's Ajera software for architectural and engineering firms is fully capable of being FAR and DCAA compliant software.  Among other things, Ajera can help you meet auditing requirements by accounting for costs, revenue and profits by project and allowing for proper job costing. However, it's important for firms to understand that regardless of your accounting software, the proper accounting procedures must be followed to be FAR and DCAA compliant.

DCAA Audits and Architecture & Engineering Firms

DCAA audits are common and the penalty for lack of DCAA compliance can be severe.  Prior to being awarded a government contract, firms are typically asked to complete a "pre-award survey of prospective contractor accounting systems,"which is completed by an auditing arm of the government. 

Although the DCAA will evaluate an architecture or engineering firm's accounting software, they will primarily seek to understand your accounting practices.  The following are requirements that are important to understand to ensure DCAA compliant software and proper accounting procedures:

1. Segregate direct costs from indirect costs
2. Accumulate and segregate direct costs by contract and by contract line item
3. A logical and consistent method for the allocation of indirect costs
4. Costs must be accumulated under General Ledger control
5. A timekeeping system that identifies labor by cost objective and allocates this time properly
6. Interim determination of costs
7. Segregation of unallowable costs

To learn more about DCAA compliant software and accounting procedures,
download our free DCAA whitepaper DCAA: Will Your Accounting System Pass Muster?

DCAA Surveys of Contractor Accounting Systems

The DCAA states that these surveys seek to gather two types of information, "the contractor's financial capability to perform the contract" and "the adequacy of the accounting system to accumulate the type of cost information required by the contract."

The financial capabilities assessment can be performed during the pre-award or post contact award periods. The type of financial information examined by DCAA consists of such data as:

• Financial statements, including those contained in reports issued to stockholders, lending institutions, and SEC filings
• Cash flow forecasts
• Loan agreements and evidence showing compliance with these agreements
• Aging of accounts receivable and payable
• Financial history of the contractor and affiliated concerns
• Employee payroll tax returns (Federal)

You can learn more about DCAA compliance requirements in the
DCAA's Information For Contractors and the DCAA Contract Audit Manual (CAM).   

AASHTO Uniform Audit and Accounting Guide

For AE firms that contract with DOTs, or other state and local agencies using federal transportation funds, the American Association of State Highway and Transportation Officials' (AASHTO) Uniform Audit and Accounting Guide, is the definitive manual. 

The AASHTO Uniform Audit and Accounting Guide was designed to be used as a tool by State DOT auditors, architecture and engineering firms, and public accounting firms that perform audits and attestations of AE firms. The techniques presented within the guide focus on examination, auditing, and reporting procedures to be applied to indirect costs incurred by AE firms for services performed on various federal, state, and local transportation projects.

ACEC outlined some key points of the updates made in 2010 to the AASHTO guide. 

Penalties For Not Meeting Government Compliance

Failure to comply with the Federal Acquisition Regulation (FAR) accounting requirements can result in the loss of future business, reduced fees, and even criminal penalties in extreme cases.  For example, the penalties for knowingly including unallowable costs in the overhead rate include suspension, debarment, and potential prosecution under the False Claims Act, which is criminal fraud. 

To learn more about the certification of overhead rates, view our free webinar with CPA Wayne Owens,
How the New Certification of Overhead Rates Will Impact Your AE Firm.

Learn More About How Axium Can Help with FAR & DCAA Compliance

For AE firms working on government contracts, understanding how systems need to be configured to become FAR and DCAA compliant software is critical to ensuring your success.  If you would like to tell us more about your projects or any government contractor needs you have in a Personalized Demo, Axium can share how we'd recommend you approach your specific situation.