ACCOUNTING SYSTEMS for SBIR/STTR AWARDS · –May or may not require approved accounting system •Scheduled & milestone payments –no requirement •Progress payments –requires

Copyright ReliAscent 2017

ACCOUNTING SYSTEMSfor

SBIR/STTR AWARDS

Presented by:Mike Anderson


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Seminar Objectives

• What is the Difference Between a Grant and a Contract

• Accounting Requirements For Cost-Type Awards

• What are Audit Requirements

Government Contracts


“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


Small Business Awards (SBIR/STTR)

• Contracts

– DoD

– NASA

– EPA

– DOT

– Ed (Some)

– DoC

– HHS/NIH (Some)

• Grants

– HHS/NIH

– NSF

– USDA

– Ed

– DoE


Grants vs. ContractsGRANT CONTRACT

Flexible funding mechanism to support public purpose

Used as a procurement funding mechanism for direct benefit of the US Government

More freedom to adapt project and less responsibility to produce results

May be unilaterally awarded at proposal stage without ability to negotiate terms and conditions

Flexibility to change SOW, budget, etc. Relatively inflexible as to SOW, budget and other changes

Usually governed by OMB regulations Governed by statutes, rules & regulations (FAR & CFR)

Usually only annual report Require Frequent Reporting (Monthly)

Failure to perform not likely to result in legal action or financial consequences

Failure to perform can result in potential legal action or financial consequences


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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


Types of Contracts

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Buyer’s Risk

Seller’s Risk

Cost Reimbursable type contract

High Risk to Government

T & M type contract

Fixed Price type contract

High Risk to Contractor


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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


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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


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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


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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


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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”.


Standard Form 1408 :Section II -Evaluation Checklist


Costs

• FAR 31.201-2

• 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


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


What are Direct Costs?

A cost that can be tracked directly to only one specific cost objective.


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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


What are Indirect Costs?

A cost notdirectly identified with one specific cost objective


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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.


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


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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)


Indirect Cost Pools

Indirect Costs

FacilitiesPool

Fringe Pool

OverheadPool

G&APool

AdminPool

Mkt Pool

B&PPool


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Allowability of Costs

• The Government allows a contractor to recover all costs (both direct and indirect) that the Government deems “Allowable” (by their rules)!!!

DirectCosts

IndirectCosts

UnallowableCosts


“Simple” Indirect Rate

1/14/2015

Indirect Rate =


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


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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


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


Defense Contract Audit Agency

• Created 1965

• Provides

– Audit Services

– Financial Advisory Services

• For DoD & other Agencies

• Ensure Taxpayer $ Spent on Fair & Reasonable Contract Prices


Contact Info

Mike Anderson303-999-3802

[email protected]

www.ReliAscent.com

ReliAscent LLC9035 Wadsworth Pkwy, Ste 2275

Westminster, CO 80021303-999-3800

mailto:[email protected]

http://www.reliascent.com/

Documents

ACCOUNTING SYSTEMS for SBIR/STTR AWARDS · –May or may not require approved accounting system •Scheduled & milestone payments –no requirement •Progress payments –requires