Can Federal Government Contractors Use QuickBooks?
DCAA Compliance NewsNovember 21, 2022
Is QuickBooks DCAA Compliant?
QuickBooks is undoubtedly one of the easiest and most affordable software programs. But as a government contractor, you must be wondering if QuickBooks is DCAA (Defense Contract Audit Agency) compliant as well.
In a nutshell, QuickBooks can become DCAA compliant if you configure the software correctly. Although, the general QuickBooks software does not come with settings that make it DCAA compliant, it can be modified to ensure DCAA compliance.
Below are the necessary steps to take.
1. Account Settings
Your chart of accounts must be formatted as per the DCAA standards. The QuickBooks default settings simply show a list of general ledger accounts; to make them DCAA compliant, you must change the following:
- The accounting system should be set up to follow Generally Accepted Accounting Principles (GAAP)
- The direct costs need to be separated from the indirect costs
- All costs must be accumulated under general ledger contro
- Non-allowable costs (as per FAR 31) must be excluded
2. Separate Costs for Each Contract
The default QuickBooks settings show information segregated for each customer, so one must find the customer’s name to view all the contracts. The DCAA requires that information must be segregable by contracts; therefore the settings must be reconfigured to track direct cost projects by project.
3. Set up Timesheets
DCAA requires that timesheets are prepared for each employee.
4. Built-in Payroll Journal
A payroll journal must be present within the government contractor’s accounting system as per DCAA standards. This requirement is outlined specifically in the DCAA standards because many government contractors use a third-party service for payroll disbursement; the payroll data is also maintained by the third-party service.
For DCAA compliance, the payroll data must be present in the government contractors’ books of accounts. Additionally, the accounting system must also have the functionality to generate labor distribution processes and reports for audit checks.
5. Other Compliance Standards
Some other accounting records such as indirect rate calculation and revenue recognition along with several others, need to be calculated on a spreadsheet.
To verify that your QuickBooks software is DCAA compliant, refer to the audit list SF-1408. There are several other items which need to be customized in your accounting system to make sure it is DCAA compliant. Most accounting systems are not compliant with DCAA requirements, including QuickBooks; but it does not mean they cannot be set up to be compliant and used by government contractors.
QuickBooks is exceptionally easy to use with a self-intuitive interface. This also allows easy setup to ensure DCAA compliance. Our accountants have vast experience in helping government contractors meet all the compliance rules that otherwise might be overlooked. To ensure that your system is prepared for a potential DCAA audit, we encourage you to consult with one of our specially trained team members.