Josef Kamara CPA, CISSP, CISA, ACCA

Every dollar your company spends falls into one of two buckets under federal contracting rules: direct or indirect. Classify it wrong, and that single mistake inflates your rates, triggers DCAA findings, and puts your billing at risk.

Over 10,000 federal contracts have been terminated since early 2025. If a termination for convenience notice hits your inbox, the accounting decisions you make in the first 30 days determine how much money you recover.

CMMC compliance costs hit government contractors hard, but the accounting treatment determines whether you recover those dollars or absorb them. Misclassifying a single cost pool turns a recoverable investment into a questioned cost finding.

The Revolutionary FAR Overhaul took effect February 1, 2026, with 37 class deviations reshaping how government contractors handle cost accounting, indirect rates, and compliance documentation. This article translates the legal changes into specific accounting actions your firm needs to take now.

DCAA requires government contractors to maintain specific written accounting policies before the first audit. This checklist covers the 9 policies auditors expect, what each one must contain, and what a deficiency looks like.

The government contractor year-end close is not a bookkeeping exercise. It is the first phase of your incurred cost submission. Every adjusting entry, rate pool reconciliation, and cost reclassification in December through February determines whether your ICS filing six months later survives DCAA review.

The FY2026 NDAA raises the full CAS coverage threshold from $50M to $100M and the TINA threshold from $2.5M to $10M. Mid-size government contractors face a narrow window to update their accounting systems, disclosure statements, and pricing strategies before the June 2026 effective date.

Small government contractors running QuickBooks need a specific set of monthly financial reports to monitor profitability, indirect rate variance, and DCAA compliance. Amerifusion Bookkeeping breaks down the 8 reports, the KPIs inside each one, and the warning signs that signal trouble before an auditor does.

DCAA floor checks now extend to remote and hybrid employees through phone and video interviews. Government contractors need documented work-at-home policies, trained staff, and virtual-ready timekeeping systems to pass.

QuickBooks works for early-stage government contractors, but growth creates gaps it was never designed to fill. Eight warning signs signal the need for purpose-built GovCon software.