ACCOUNTING SYSTEMS for SBIR/STTR AWARDS. Presented by: Mike Anderson

Transcription

1 ACCOUNTING SYSTEMS for SBIR/STTR AWARDS Presented by: Mike Anderson

2 Seminar Objectives What is the Difference Between a Grant and a Contract Accounting Requirements For Cost-Type Awards What are Audit Requirements Government Contracts 2

3 Price of Non-Dilutive Funding Types of Awards Terms and Conditions of the Award Lots of Regulations to Comply with Job Cost Accounting on Steroids Fixed Amount of Profit (or Fee) Specialized way to Invoice & Get Paid Reporting Requirements

4 Small Business Awards (SBIR/STTR) Contracts DoD NASA EPA DOT Ed (Some) DoC HHS/NIH (Some) Grants HHS/NIH NSF USDA Ed DoE

5 Grants vs. Contracts GRANT Flexible funding mechanism to support public purpose More freedom to adapt project and less responsibility to produce results Flexibility to change SOW, budget, etc. Usually governed by OMB regulations Usually only annual report Failure to perform not likely to result in legal action or financial consequences CONTRACT Used as a procurement funding mechanism for direct benefit of the US Government May be unilaterally awarded at proposal stage without ability to negotiate terms and conditions Relatively inflexible as to SOW, budget and other changes Governed by statutes, rules & regulations (FAR & CFR) Require Frequent Reporting (Monthly) Failure to perform can result in potential legal action or financial consequences

6 Contract Agency Accounting Structure Extensive for-profit organizations DOD & NASA use the Defense Contract Audit Agency (DCAA) Conform and governed by FAR 31 Overhead allocated to Direct Labor Fringe benefits Facilities Indirect support G&A Allocated to all above costs General business activities IR&D and B&P (Bid & Proposal) Allowable if reasonable 6

7 Types of Contracts Buyer s Risk Cost Reimbursable type contract High Risk to Government Seller s Risk T & M type contract Fixed Price type contract High Risk to Contractor

8 Accounting Requirements by Award Type Firm Fixed Price (FFP) Primarily for delivery of standard items May or may not require approved accounting system Scheduled & milestone payments no requirement Progress payments requires approved accounting sys. Time and Material (T&M) Combination of FFP and Cost Reimbursed Requires approved accounting system Cost Reimbursed Requires approved accounting system Government pays for direct costs and their share of indirect 8

9 Grant Agency Accounting Structure Primarily non-profit participation More collegial environment Much less formal than contracts All Agency CFRs lead to FAR 31 for accounting Typically one indirect cost pool Facilities and Administration (F&A) Allocated to all direct costs Inconsistent with FAR definition for allocation Agencies are each different as to what they expect and measure (audit) Self certify as to adequate accounting system 9

10 Agency Accounting Differences Contract agencies Overhead allocated to direct labor General & Administrative (G&A) allocated to all other costs Some exceptions with DOD medical community Allow recovery of all reasonable costs (FAR 31) Grant agencies Facilities & Administration (F&A) allocated to all direct costs (generally) Refer to FAR 31 but with recovery restrictions IR&D (Independent Research & Development) Allowable to contract agencies but not NIH & NSF 10

11 What Does the Government Need From a Contractor s accounting system? Focus on Expenses (Cost) Expenses Classified Certain Ways Separation of Direct and Indirect Expenses Expenses Grouped Certain Ways Job Costing Capability Segregation of Certain Unallowable Expenses Ability to Compute Indirect Rates 11

12 Job Costing The guts of successful government contractors and most other non-retail businesses Need to accumulate ALL costs (direct and indirect) Accumulate in the same format as proposed (propose in accumulation format) (some exception here) Compare to proposal and to budget Identify opportunities (problems) early In general, required on all cost type Government contracts and grants. 12

13 Standard Form 1408 :Section II - Evaluation Checklist

14 Costs FAR Allowable Reasonable Does Not Exceed That Which Would be Incurred by a Prudent Person in the Conduct of Competitive Business Allocable Assignable or Chargeable to One or More Cost Objectives on the Basis of Relative Benefits Received GAAP (or CAS Board if above Threshold) Terms of the Contract

15 Cost Objective A Contract or Other Work Unit for Which Cost Data are Desired and Provisions Made in the Accounting System to Accumulate and Measure Costs

16 What are Direct Costs? A cost that can be tracked directly to only one specific cost objective.

17 Typical Direct Costs Black and White Direct Labor Direct travel Subcontracts Consultants Direct Materials Specific Identifiable Supplies Dedicated Equipment (non-standard) Shades of Gray Supervision Time Support Labor Fringe Benefits (except for NIH, NSF sometimes) Certain Facility Costs 17

18 What are Indirect Costs? A cost not directly identified with one specific cost objective

19 Recovery Of Indirect Costs Establish Pools based on a Causal or Beneficial relationship Fringe benefits are caused by employees Facility costs are caused by employees Technical training benefits technical personnel G&A expenses benefit the entire company Allocation base represents the costs which will bear a proportional amount of indirect costs. Indirect Rate is the cost pool divided by the allocation base, e.g. the indirect fringe rate is the Fringe Pool divided by all productive labor. 19

20 Indirect Cost Types Overhead Costs Indirect Costs that Support a Specific Part or Function of the Company but not the Entire Company General & Admin (G&A) Costs A Broad Type of Expense Incurred by or Allocated to a Business Unit for the General Management and Administration of the Business as a Whole

21 Typical Indirect Costs Fringe Benefits (except NIH & NSF) Facility Type Costs Facility Leases Utilities Telephone Photocopier Office Supplies Sales and Marketing Expenses General and Administrative Expenses (G&A) Independent Research and Development (IRAD) Bid and Proposal Costs (B&P) 21

22 Indirect Cost Pools Indirect Costs Overhead Pool G&A Pool Facilities Pool Fringe Pool Admin Pool Mkt Pool B&P Pool

23 Allowability of Costs The Government allows a contractor to recover all costs (both direct and indirect) that the Government deems Allowable (by their rules)!!! Direct Costs Indirect Costs Unallowable Costs 23

24 Simple Indirect Rate Indirect Rate = 1/14/2015

25 Government Contract Pricing (2 Rate) Pricing Structure Direct Costs + Indirect Overhead Costs = Total Direct Labor & Overhead + General & Admin (G&A) Costs = Total Operating Expenses + FEE = TOTAL PRICE

26 Summary of Contractor Accounting Regardless of Government Requirements, Focus Should be on Valuable Management Information Accrual Basis Capture Direct Costs in Job Cost System Capture Indirect Costs in Specific Pools Allocate Indirect Cost Pools Based on Causal or Beneficial Relationship Segregate Unallowables Be Able to Compute Indirect Rates 26

27 Enforcement of Regulations DoD, NASA, Some Others Defense Contract Audit Agency (DCAA) Defense Contract Management Agency (DCMA) HHS (Including NIH), NSF Independent CPA Audit (Awardee pays) DoE Some DCAA Some Independent CPA Some DoE Subcontractor

28 Defense Contract Audit Agency Created 1965 Provides Audit Services Financial Advisory Services For DoD & other Agencies Ensure Taxpayer $ Spent on Fair & Reasonable Contract Prices

29 Contact Info Mike Anderson ReliAscent LLC 9035 Wadsworth Pkwy, Ste 2275 Westminster, CO