SBIR Government Contract Accounting – Need A System Overhaul?

Have you experienced the following scenario?

A Department of Defense (DOD) SBIR awardee undergoes an accounting system adequacy review and is told by the government that their system failed and that the funds should not be awarded until such time as the accounting system is deemed adequate by a Defense Contracting Audit Agency (DCAA) auditor.

What is an adequate accounting system?

At a minimum, your accounting system must be able to track all costs by direct, indirect (by indirect pool), and unallowable cost pools. Allowable costs are costs that are allocable and reasonable and not specifically unallowable in the Federal Acquisition Regulations (FAR) Part 31.2. In addition, an adequate system must have the ability to track costs by federal award (by Contract Line Item – CLIN – or  Task if applicable), as well as source documents (timesheets, vendor invoices, billings, expense reports, etc.) follow the tracking system. These are a few of the major key requirements.

Can I fix my current system to be adequate?

Absolutely! Your current accounting system can be restructured to meet the requirements of an adequate system. Coupled with strong accounting policies, timekeeping, and other compliance procedures, your accounting system can be fixed.

When should I fix my system?

The sooner the better. For existing companies, having evidence that the accounting system works in a manner that you describe supports adequacy. Awardees may have a wait and see attitude increases risk in the process and becomes more costly as there are more transactions and less time for corrective action.

Is Quickbooks strong enough to have an adequate system?

Absolutely. Quickbooks allows you to meet the requirements of an adequate accounting system provided that policies are documented and followed and timekeeping and source documents are compliant with audit requirements.

For more information, visit us at or email us at for a free 30-minute consultation of your system.



This entry was posted in FAQs, Finance, General Accounting, SBIR, Small Business, Start-Ups, Uncategorized. Bookmark the permalink.

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