GovCon Bookkeeping Glossary

A DCAA evaluation of whether a contractor's accounting system meets the 18 adequacy criteria in DFARS 252.242-7006. The audit tests cost segregation, timekeeping, job costing, indirect rate allocation, and unallowable cost identification. A system found inadequate triggers payment withholding and requires a corrective action plan.

An accounting method that records revenue when earned and expenses when incurred, regardless of when cash changes hands. DCAA requires accrual-basis accounting for cost-type government contracts. Contractors must accrue costs as incurred, not when paid. Cash-basis accounting does not satisfy FAR requirements.

A contracting officer responsible for administering existing contracts after award. The ACO establishes provisional billing rates, approves accounting system adequacy, negotiates final indirect rates, and authorizes quick-closeout. The ACO also issues material weakness determinations and monitors corrective action plans.

One of the three tests a cost must pass to be charged to a government contract. A cost is allocable if it benefits the contract being charged. Costs benefiting multiple contracts must be allocated proportionally using a consistent, documented methodology. A cost that benefits Contract A cannot be charged to Contract B.

The denominator used to calculate an indirect rate. Common bases include direct labor dollars (for overhead), total labor (for fringe), and total cost input (for G&A). The choice of allocation base must be consistent, documented, and reflect the beneficial or causal relationship between the indirect pool and the contracts it supports.

A cost the government permits contractors to charge on government contracts. To be allowable, a cost must pass three tests under FAR 31.201-2: it is permitted by FAR, contract terms, and applicable CAS (allowability); it benefits the contract charged (allocability); and a prudent business person would incur it at that amount (reasonableness).

Cost Accounting Standards. A set of 19 standards governing how contractors estimate, accumulate, and report costs on CAS-covered government contracts. Administered by the CAS Board. Modified CAS coverage (CAS 401, 402, 405, 406) applies to contracts above $2.5 million. Full CAS coverage applies to single contracts above $50 million.

Consistency in Estimating, Accumulating, and Reporting Costs. Requires contractors to use the same cost accounting practices for estimating costs in proposals, accumulating costs during performance, and reporting costs in incurred cost submissions. A contractor who estimates overhead using one method but accumulates it using another violates CAS 401.

Consistency in Allocating Costs Incurred for the Same Purpose. Requires that costs charged directly to one contract cannot be allocated indirectly to other contracts for the same purpose. If engineering labor is a direct cost on Contract A, similar engineering labor cannot be an indirect cost allocated across all contracts.

Allocation of Home Office Expenses to Segments. Establishes criteria for allocating costs from a company's home office to its operating segments. Requires that allocation methods reflect the beneficial or causal relationship between the home office costs and the segments receiving the allocation.

Capitalization of Tangible Assets. Requires contractors to establish and consistently follow policies for capitalizing tangible assets. Sets rules for when acquired assets are recorded as capital items versus expensed. CAS Board proposed eliminating CAS 404 in favor of GAAP (ASC standards) in September 2025.

Accounting for Unallowable Costs. Requires contractors to identify and exclude unallowable costs from any billing, cost claim, or indirect rate calculation submitted to the government. Unallowable costs must be coded at the point of entry, not discovered during year-end close or audit preparation.

Cost Accounting Period. Requires contractors to use their fiscal year as the cost accounting period for accumulating and reporting costs. Ensures consistency in the time periods used for estimating, accumulating, and reporting costs across all government contracts.

Accounting for Compensated Personal Absence. Establishes methods for accruing vacation, sick leave, and other paid time off. Requires consistent measurement and allocation of these costs. CAS Board proposed eliminating CAS 408 in favor of GAAP (ASC 710) in September 2025.

Depreciation of Tangible Capital Assets. Requires contractors to use consistent, documented methods for depreciating capital assets charged to government contracts. Specifies rules for useful life determination and depreciation methodology. CAS Board proposed eliminating CAS 409 in favor of GAAP in September 2025.

Allocation of Business Unit G&A Expenses. Requires G&A expenses to be allocated to final cost objectives using a base that represents total activity of the business unit. The base must include all significant activities that benefit from G&A (contract work, B&P, IR&D). Prevents contractors from excluding activities to manipulate G&A rates.

Cost of Money as an Element of the Cost of Facilities Capital. Establishes the method for calculating Facilities Capital Cost of Money (FCCM), an imputed cost representing the contractor's investment in facilities used for government work. FCCM is an allowable contract cost calculated using Treasury rates applied to the net book value of facilities capital.

Allocation of Direct and Indirect Costs. Requires that indirect cost pools be homogeneous and that allocation bases reflect the beneficial or causal relationship between the pool and the cost objectives. Governs the choice of allocation bases for fringe, overhead, and G&A rates.

A standardized form describing a contractor's cost accounting practices, filed with the cognizant federal agency. The DS-1 covers cost classification, indirect pool structure, allocation bases, depreciation methods, and pension treatment. Required when a single CAS-covered contract reaches $50 million or cumulative net CAS-covered awards exceed $50 million. Once filed, practices disclosed become binding commitments.

Cost and pricing information a contractor certifies as 'accurate, complete, and current' when required by TINA for proposals above the threshold ($10 million after June 30, 2026). The certification creates legal liability: defective data triggers price reductions under the defective pricing clause and potential False Claims Act exposure.

The organized list of all accounts in a contractor's accounting system. A GovCon chart of accounts must cleanly separate direct costs by contract, indirect cost pools (fringe, overhead, G&A), and unallowable costs in dedicated accounts. The structure differs significantly from a standard commercial chart of accounts.

A QuickBooks feature used by government contractors to categorize transactions by cost pool or cost type. Common classes include fringe, overhead, G&A, unallowable, and direct by contract. Class tracking enables indirect rate calculation by separating costs into the correct pools for allocation.

A unique identifier for each deliverable or service within a government contract. CLINs organize contract pricing and track costs at the deliverable level. The accounting system must trace direct costs to specific CLINs when the contract requires line-item cost tracking.

A DoD cybersecurity certification program requiring contractors handling Controlled Unclassified Information to meet specific security standards. Phase 1 enforcement began November 2025. Level 2 third-party assessments start November 2026. Compliance costs ($50K-$200K for small businesses) are legitimate indirect costs when required by contract.

The government agency responsible for overseeing a contractor's accounting and business systems, typically the agency with the largest dollar volume of contracts with that contractor. The cognizant agency assigns the DCAA audit office, reviews disclosure statements, and negotiates final indirect rates.

The annual per-employee limit on compensation the government reimburses on covered contracts, set by FAR 31.205-6(p). The 2026 estimated cap is $695,000. The cap applies to all contractor employees on contracts awarded after June 24, 2014. Compensation above the cap is unallowable and must be excluded from indirect cost pools.

The FAR 31.205-6 requirement that employee compensation charged to government contracts must be reasonable for the work performed and the labor market. DCAA benchmarks contractor pay against Bureau of Labor Statistics data and the contractor's written compensation policy. Executive compensation exceeding FAR caps or lacking documented criteria triggers audit findings.

DCAA's official audit procedures handbook. The DCAM provides step-by-step guidance auditors follow when conducting accounting system reviews, incurred cost audits, forward pricing audits, and other engagement types. Contractors use the DCAM to understand what DCAA tests and prepare accordingly. Chapter 9 covers forward pricing audits.

The administrative process of finalizing a completed government contract. FFP contracts close within 6 months of physical completion. Cost-type and T&M contracts allow up to 36 months because indirect rates must be audited and settled first. Closeout requires final invoicing, release of claims, property disposition, and deobligation of excess funds (FAR 4.804).

The government official authorized to enter into, administer, and terminate government contracts. The contracting officer makes final decisions on cost allowability, rate settlements, and contract modifications. Contracting officers are the only government representatives authorized to obligate the government financially.

Six systems the DoD evaluates for adequacy under DFARS: accounting, estimating, EVMS (Earned Value Management), MMAS (Material Management and Accounting), property, and purchasing. A material weakness in any system triggers up to 5% payment withholding. Total withholding across all six systems is capped at 10%.

Property purchased by the contractor using government contract funds, with title vesting in the government upon acquisition. CAP flows through the contractor's books as a direct contract cost. The contractor must track it in a separate property management system because the government owns it despite the contractor purchasing it.

A structured document a contractor submits after a DCAA accounting system audit identifies material weaknesses. The CAP addresses each finding with root cause analysis, specific corrective actions, responsible parties, milestone dates, and evidence of completion. Submitting an acceptable CAP within 45 days reduces payment withholding from 5% to 2%.

A grouping of indirect costs that share a common allocation base and serve a similar function. Standard cost pools for government contractors include fringe, overhead, and G&A. Costs within a pool must be homogeneous, meaning they benefit the same set of cost objectives in roughly the same proportion.

A certified financial document submitted in response to a government solicitation, built from the contractor's accounting system and governed by FAR 15.408 Table 15-2. Includes six cost elements: direct labor, materials, subcontracts, other direct costs, indirect rates, and fee. Every number must trace back to accounting records or documented projections.

A government contract type where the government reimburses the contractor for all allowable costs incurred plus a fee. Subtypes include Cost-Plus-Fixed-Fee (CPFF), Cost-Plus-Incentive-Fee (CPIF), and Cost-Plus-Award-Fee (CPAF). CR contracts require full DCAA-compliant accounting, daily timekeeping, and annual incurred cost submissions.

A bookkeeping service model where a Certified Public Accountant oversees the entire accounting system, from chart of accounts structure to indirect rate calculations to audit preparation. Differs from standard bookkeeping by adding professional judgment on cost classification, FAR compliance, and DCAA readiness. Critical for government contractors.

Government-created or government-owned information requiring safeguarding under federal regulations but not classified. Contract values, labor rates, indirect rate calculations, and cost data stored in contractor accounting systems often qualify as CUI on defense contracts. Handling CUI triggers CMMC Level 2 certification requirements.

Federal law (40 U.S.C. 3141-3148) requiring prevailing wages on federal construction contracts over $2,000. Covers building, alteration, and repair of public works. Mutually exclusive with the Service Contract Act: a contract falls under one or the other, not both. Wage determinations are published on SAM.gov.

Defense Contract Audit Agency. The federal agency that audits government contractor accounting systems, indirect rates, incurred costs, and forward pricing proposals. DCAA protects the government's financial interests by verifying contractors charge only allowable, allocable, and reasonable costs. DCAA conducts thousands of audits annually and reports questioned costs to contracting officers.

A publicly available checklist at dcaa.mil that DCAA uses to screen incurred cost submissions before substantive audit begins. An ICS that fails the adequacy check is returned for correction. Contractors who use the checklist as a final QA gate before filing have lower rejection rates.

A formal examination of a government contractor's financial records, accounting system, or cost claims by the Defense Contract Audit Agency. Common audit types include pre-award audits, accounting system audits, incurred cost audits, and floor checks. Audit findings result in questioned costs, corrective action requirements, or payment withholding.

Electronic timekeeping systems that meet DCAA requirements for daily employee time entry, supervisor approval, audit trail for corrections, and project-level charge coding. Examples include QuickBooks Time (formerly TSheets), Hour Timesheet, Unanet, and PROCAS. Spreadsheet-based systems create significant audit risk.

The DoD agency responsible for contract administration, including property system audits (DFARS 252.245-7003), purchasing system reviews (DFARS 252.244-7001), and contract closeout management. DCMA works alongside DCAA but focuses on contract administration rather than financial auditing.

Contract Completion Statement. A DoD form required for contract closeout documentation. Confirms the contract is physically complete and identifies remaining administrative actions. Missing this form pauses the entire closeout process.

A rate adjustment DCAA applies unilaterally when a contractor fails to submit an adequate incurred cost submission on time. The decrement factor typically reduces billable indirect rates, almost never in the contractor's favor. Filing the ICS within six months of fiscal year end avoids this penalty.

A finding that a contractor submitted cost or pricing data that was not accurate, complete, or current as certified under TINA. Results in a mandatory government price reduction equal to the overstatement plus interest. Willful defective pricing triggers False Claims Act investigation with treble damages.

The industry-standard ERP system for large government contractors, typically serving firms with $50 million or more in revenue. Provides full cost accounting, project management, timekeeping, purchasing, and government compliance features including automated business system reporting and EVMS support.

Defense Federal Acquisition Regulation Supplement. Additional acquisition regulations specific to Department of Defense contracts. DFARS supplements the FAR with DoD-specific requirements including business system adequacy criteria (DFARS 252.242-7006), cybersecurity requirements, and accounting system administration rules.

The Defense Federal Acquisition Regulation Supplement clause defining 18 criteria for an adequate contractor accounting system. Criteria include cost segregation, timekeeping, job costing, indirect rate allocation, and unallowable cost exclusion. Failure on any criterion where the deficiency rises to a material weakness triggers corrective action and payment withholding.

Expenses tied to a specific contract. Direct costs include labor hours charged to a contract, materials purchased for that contract, travel to the contract site, and subcontractor costs. Each direct cost must trace to one contract, and the accounting system must prove the connection through job cost records.

An executive branch entity that initiated significant federal contract terminations beginning in early 2025. DOGE triggered terminations on approximately 9,500 federal contracts. Terminations follow standard FAR Part 49 procedures. Affected contractors retain full settlement and recovery rights under existing federal acquisition law.

A Bureau of Labor Statistics measure of total compensation growth for civilian workers. The ECI drives the annual escalation of the FAR 31.205-6(p) compensation cap. Contractors use the September-to-September ECI change to project next year's cap. Also used by DCAA to evaluate proposed labor rate escalation in forward pricing proposals.

A price adjustment to a continuing contract when a government action (such as a partial termination) increases the contractor's costs on the surviving work. Authorized by FAR 49.208 for partial terminations. The contractor files the request with before-and-after cost data showing how the government action changed the cost structure.

Earned Value Management System. A project management tool that integrates scope, schedule, and cost data to measure contract performance. Required on major defense acquisition programs. EVMS tracks planned value, earned value, and actual cost to calculate schedule and cost variances. One of the six DFARS contractor business systems.

A legal principle established by Agency Boards of Contract Appeals holding that contractors should not absorb legitimate business costs because the government chose to end a contract. Allows reclassifying stranded indirect costs (facilities, supervision, utilities proportional to lost work) as direct termination charges in the settlement proposal.

Federal law (31 U.S.C. 3729-3733) imposing liability on contractors who knowingly submit false claims to the government. Penalties include treble damages plus $14,308 to $28,619 per false claim. Applies to knowingly charging unallowable costs, defective pricing, and selling non-TAA-compliant products through GSA Schedules.

The primary rulebook governing all federal government contracting. FAR Part 31 covers cost principles (allowable, allocable, reasonable). FAR Part 15 covers contracting by negotiation. FAR Part 42 covers contract administration. FAR Part 49 covers terminations. Published and maintained at acquisition.gov.

The FAR-prescribed format for cost and pricing data submissions in government contract proposals. Requires six cost elements (direct labor, materials, subcontracts, ODCs, indirect rates, fee) with basis of estimate for each. Contracting officers use the Proposal Adequacy Checklist to screen submissions against Table 15-2 before evaluation.

The FAR section listing specific cost categories with individual allowability rules. Contains over 50 subcategories. Key sections include 31.205-6 (compensation), 31.205-14 (entertainment, always unallowable), 31.205-22 (lobbying, always unallowable), 31.205-46 (travel), and 31.205-51 (alcoholic beverages, always unallowable).

A contract clause applying to contracts over $650,000 that imposes financial penalties when a contractor includes unallowable costs in a billing or claim. The penalty equals the disallowed amount plus interest. Contractors must segregate unallowable costs proactively to avoid this penalty.

The section of the Federal Acquisition Regulation governing cost principles and procedures for government contracts. Establishes the three tests every cost must pass: allowability, allocability, and reasonableness. FAR 31.205 lists roughly 50 specific cost categories with individual allowability rules.

Facilities Capital Cost of Money. An imputed cost representing the contractor's investment in facilities used for government contract work, calculated per CAS 414. FCCM is an allowable contract cost but is not included in the indirect cost pools for rate calculation. Typical range: 0.5-2% as a separate line item in cost proposals.

The contractor's compensation above cost on government contracts. Statutory limits apply: 10% for CPFF supply contracts, 15% for CPFF R&D and service contracts, 6% for architect-engineer contracts (FAR 15.404-4). Fee is calculated on total estimated cost, not total price. Proposing above the statutory maximum results in automatic rejection.

The actual indirect rate for a completed fiscal year, determined after DCAA audits the contractor's incurred cost submission and the contracting officer negotiates settled rates. Final rates replace provisional billing rates and trigger billing adjustments (refunds if overbilled, additional payment if underbilled) on cost-type contracts.

A government contract type where the contractor delivers at a set price regardless of actual costs. The contractor absorbs cost overruns and keeps savings. FFP contracts require the least cost accounting infrastructure and face the lowest DCAA audit risk. DCAA rarely audits FFP contracts unless they are CAS-covered.

An unannounced DCAA visit to a contractor's work site to verify timekeeping practices. Auditors compare employees' current time entries against the labor distribution report to confirm employees record their own time daily and charge it to the correct contracts. Employees must know the timekeeping procedure before the auditor arrives.

Federal Acquisition Regulation clauses that prime contractors must include in subcontract agreements. Clauses do not automatically apply to subcontractors; the prime must actively pass them down. Critical flow-downs include FAR 52.215-2 (Audit and Records), FAR 52.222-26 (Equal Opportunity), and FAR 52.216-7 (Allowable Cost and Payment).

A projected indirect rate used to price future government contracts. Forward pricing rates differ from provisional billing rates: they project costs into a future performance period, while provisional rates reimburse during current performance. DCAA audits forward pricing rate proposals under FAR 15.407-3. Using provisional rates in proposals is documented noncompliance.

A negotiated agreement between a contractor and the contracting officer establishing indirect rates accepted government-wide for contract pricing. The FPRA results from DCAA's audit of the contractor's FPRP. Once in place, an FPRA eliminates the need to negotiate rates on each new proposal, typically lasting one to three years.

A contractor's formal submission of projected indirect rates and direct labor rates for pricing future government contracts. DCAA audits the FPRP against historical cost trends, volume projections, and disclosed practices. FAR 42.1703 requires annual submission or when rates change significantly.

The indirect rate capturing employee benefit costs applied on top of labor. The fringe pool includes health insurance, payroll taxes (FICA, FUTA, SUTA), retirement contributions, PTO, workers' compensation, and life insurance. Calculated by dividing total fringe costs by total labor (direct plus indirect). Typical range: 30-45% of direct labor.

The indirect rate covering the cost of running the business itself. The G&A pool includes executive compensation, accounting, legal, HR, business development, and corporate insurance. Calculated by dividing G&A costs by total cost input (all direct costs plus applied fringe and overhead). Typical range: 10-25% of total cost input.

The standard framework of accounting principles, standards, and procedures used in commercial financial reporting in the United States. Government contractors must follow GAAP unless a specific FAR or CAS provision requires different treatment. CAS Board proposed eliminating four CAS standards in favor of GAAP equivalents in 2025.

Government Contracting. The industry of providing goods and services to federal, state, and local government agencies. Federal contract spending exceeds $700 billion annually. GovCon accounting differs from commercial accounting in its cost tracking, audit requirements, and regulatory compliance obligations under FAR and CAS.

Equipment, materials, special tooling, or facilities the government provides to a contractor for use on a contract. GFP does not appear on the contractor's balance sheet because the contractor does not own it. The obligation is custodial: track it, maintain it, protect it, and return or dispose of it per government direction under FAR Part 45.

Multiple Award Schedule. A long-term government-wide contract vehicle that allows federal, state, and local agencies to purchase products and services at pre-negotiated prices. GSA Schedule holders pay a 0.75% Industrial Funding Fee on quarterly sales, file mandatory sales reports, and comply with Transactional Data Reporting requirements.

Historically Underutilized Business Zone. An SBA certification program for small businesses operating in economically distressed areas. HUBZone firms receive a 10% price evaluation preference on full and open competitions and access to HUBZone set-aside contracts. Requires proof of principal office location and 35% employee residence in a HUBZone.

Incurred Cost Electronically model. A free workbook published by DCAA for preparing incurred cost submissions. The ICE Model provides a standardized format for Schedules A through O. Custom submissions following the same structure are accepted, but the ICE Model format is rigid and widely used by small contractors.

A contract vehicle providing for an indefinite quantity of supplies or services during a fixed period, with individual task orders placed as needs arise. IDIQ contracts set minimum and maximum order quantities. Each task order functions as a separate cost objective for accounting purposes.

A DCAA examination of actual costs a contractor claimed on flexibly-priced contracts during a specific fiscal year. The audit verifies costs are allowable under FAR Part 31, properly allocated, and supported by documentation. DCAA compares claimed costs against the contractor's incurred cost submission schedules.

An annual filing required from contractors holding flexibly-priced contracts (cost-reimbursement, T&M). The ICS reports actual direct and indirect costs for the fiscal year, organized in Schedules A through O. Contractors must submit an adequate ICS within six months of fiscal year end. Late submissions trigger decrement factors and payment withholding.

Expenses that benefit multiple contracts or the business as a whole and cannot be tied to a single contract. Examples include rent, utilities, administrative salaries, and insurance. Indirect costs accumulate in pools (fringe, overhead, G&A) and are allocated to contracts using rates based on an appropriate allocation base.

A percentage used to allocate shared costs to individual contracts. Calculated by dividing an indirect cost pool by its allocation base. Government contractors typically maintain three indirect rates: fringe (benefits over labor), overhead (operational costs over direct labor), and G&A (administrative costs over total cost input).

The cascading effect on indirect rates when a contractor loses a major contract. The indirect cost pools remain roughly constant while the direct cost base shrinks, causing rates to spike across all surviving contracts. Fixed-price contracts absorb higher costs as reduced margin. Cost-type contracts pass higher rates to the government, inviting scrutiny.

A 0.75% fee GSA charges on all sales made under a GSA Schedule contract, paid quarterly within 30 days of the quarter's end (GSAR 552.238-80). The fee covers GSA's operating costs. Late payments accrue interest. Repeated late payments trigger audit referral and potential contract cancellation.

An accounting method that tracks every dollar of direct cost to the specific contract it benefits. In QuickBooks, each contract is a 'customer:job.' Job cost reports show costs by contract, by cost element (labor, materials, travel, subcontracts), and by period. Required for all government contractors billing direct costs.

A QuickBooks feature where each government contract is set up as a 'customer:job.' All direct costs (labor, materials, travel, subcontracts) post to the specific job. Job cost reports show total costs by contract and cost element. Required for government contract accounting to trace every direct dollar to its contract.

A separate legal entity formed by two or more companies to pursue government contracts. Requires its own EIN, bank account, chart of accounts, and DCAA-compliant accounting system. Can be populated (with its own employees) or unpopulated (partners provide all labor). The small business partner must perform at least 40% of contract work.

An accounting report showing how employee labor hours and costs are distributed across contracts and indirect cost pools. DCAA compares the labor distribution report against individual timesheets as the first test in most incurred cost and floor check audits. Discrepancies between the two trigger detailed investigation.

The improper recording of employee labor hours to the wrong contract, the wrong cost category (direct vs. indirect), or for work not actually performed. DCAA identifies labor mischarging through floor checks, labor distribution report analysis, and comparison of timesheets to work schedules. A common finding that triggers system-wide labor audits.

An indirect rate applied to direct material costs to cover procurement, receiving, inspecting, storing, and issuing materials. Only used when material procurement activities are significant enough to warrant a separate cost pool. Typical range: 1-5% of direct material costs.

A deficiency, or combination of deficiencies, in internal controls where a reasonable possibility exists of a material misstatement going undetected. Replaced the term 'significant deficiency' in DFARS business system evaluations as of January 2025 (DFARS Case 2021-D006). A material weakness determination triggers payment withholding of up to 5% of billings.

An SBA program pairing experienced government contractors (mentors) with small businesses (proteges) to build the protege's capability. Participants often form joint ventures to bid on set-aside contracts. The protege must perform at least 40% of the work. JV accounting records must be maintained at the protege's office.

The dollar limit below which federal agencies purchase goods and services without competition. Raised from $10,000 to $15,000 effective October 1, 2025 (FAR Case 2024-001). Purchases below the MPT are processed with minimal documentation and no competitive bidding requirement.

Annual legislation authorizing Department of Defense programs and spending. The NDAA frequently changes procurement thresholds affecting government contractors. The FY 2026 NDAA raised the CAS applicability threshold from $2.5 million to $35 million and the TINA threshold from $2.5 million to $10 million.

Costs charged directly to a contract that are not labor, materials, or subcontracts. ODCs include travel, computer services, consultant fees, and special tooling. Each ODC needs its own line item with quantity, unit cost, and basis of estimate in cost proposals. Bundling ODCs into a single line fails adequacy review.

The difference between costs billed at provisional indirect rates and what would have been billed at actual rates. Overbilling occurs when provisional rates exceed actual rates; the contractor must refund the difference at closeout. Underbilling means the government owes additional payment. Monthly monitoring prevents surprises.

The indirect rate capturing costs related to supporting contract work that cannot be tied to a single contract. The overhead pool includes facility costs, indirect project support labor, IT infrastructure, and equipment. Calculated by dividing total overhead costs by the direct labor base. Typical range: 80-150% of direct labor.

SBA's rule that the small business partner in a joint venture must perform at least 40% of the contract work, measured in dollars. The mentor or large business partner performs no more than 60%. Annual POW statements are due within 45 days of each operating year. Noncompliance triggers suspension or debarment.

A joint venture that employs its own staff, runs payroll, administers benefits, and develops its own indirect rate structure. Functions like a standalone contractor. Files its own incurred cost submission, establishes provisional billing rates, and faces DCAA audits as an independent entity.

A DCAA review of a contractor's proposed rates, cost estimates, and accounting system before the government awards a contract. The audit assesses whether the contractor's proposed costs are fair, reasonable, and supported by an adequate accounting system. Results affect contract award decisions.

Federal law (31 U.S.C. 3901-3907) requiring the government to pay contractors within 30 days of receiving a proper invoice. Late payments accrue interest automatically at the Treasury rate. The contractor does not need to request interest; it is a legal entitlement. Implemented in FAR Subpart 32.9.

A screening tool (DFARS 252.215-7009) contracting officers and DCMA use to verify cost proposals meet FAR 15.408 Table 15-2 requirements before substantive evaluation begins. A proposal failing the checklist is returned for correction, not scored. Common failures include missing subcontractor breakdowns and lump-sum ODC lines.

An estimated indirect rate used to bill the government during contract performance, before final rates are determined. The contracting officer establishes provisional rates based on the contractor's projected costs. At fiscal year end, the contractor reconciles provisional rates against actual rates through the incurred cost submission. Differences create billing adjustments.

A contractor's procurement policies and procedures for acquiring goods and services. DCMA evaluates the purchasing system for documented source selection, price reasonableness determinations, subcontract consent compliance, and flow-down clause inclusion. A system disapproval triggers a 5% payment withhold.

Costs a DCAA auditor identifies as potentially unallowable, unallocable, or unreasonable during an audit. Questioned costs appear in the audit report as recommendations to the contracting officer, who makes the final determination on allowability. Questioned costs are not automatically disallowed but require contractor response and documentation.

A procedure that settles indirect costs on individual contracts before the government determines final company-wide rates. Available when the contract is physically complete and unsettled costs are under $2 million or 10% of contract value, whichever is less. Contractors request it from the ACO. Most small contractors qualify but never ask.

The process of configuring QuickBooks Desktop or Online for government contract accounting. Requires creating separate accounts for direct costs by contract, indirect cost pools (fringe, overhead, G&A), and unallowable costs. Uses job costing (customer:job), class tracking for cost pools, and location tracking for contracts.

One of the three tests a cost must pass to be charged to a government contract. A cost is reasonable if a prudent business person in similar circumstances would incur it at the same amount. DCAA applies this standard with more subjectivity than contractors expect, comparing costs against market data and industry norms.

A legal document the contractor signs during contract closeout stating no further claims exist against the government for the contract. Once signed, the contractor surrenders the right to submit additional invoices or dispute amounts. Review carefully before signing. Applies to every contract closeout under FAR 4.804-5.

System for Award Management. The federal government's official registration database for contractors. Registration is required before receiving any federal contract. SAM.gov also publishes wage determinations (for SCA and Davis-Bacon compliance), contract opportunities, and entity exclusion records.

A Small Business Administration program providing business development assistance to socially and economically disadvantaged small businesses. The program runs nine years: four developmental and five transitional. Participants receive sole-source contracts but must meet annual review requirements including financial statement tiers and owner withdrawal limits.

Personal Financial Statement. Filed annually by the disadvantaged individual in the 8(a) program to verify continuing economic disadvantage. SBA checks adjusted net worth (below $850,000), average adjusted gross income (below $400,000 over three years), and total assets (below $6.5 million). Business distributions directly affect all three calculations.

A document issued by the Department of Labor listing minimum hourly wage and fringe benefit rates for specific job classifications in a specific geographic area. Attached to every SCA-covered contract. Wage determinations update annually, and multi-year contracts must incorporate current rates on each contract anniversary date (FAR 52.222-43).

The schedule within the incurred cost submission detailing claimed direct costs by contract. Shows direct labor, materials, subcontracts, travel, and other direct costs for each contract during the fiscal year. DCAA verifies Schedule H totals against the contractor's general ledger and job cost reports.

The schedule within the incurred cost submission showing cumulative direct and indirect costs claimed and billed on each contract. Reflects settled indirect rates applied to direct costs. The contractor updates Schedule I within 60 days of rate settlement to show final amounts.

The schedule within the incurred cost submission listing all subcontract costs by subcontractor, by contract. DCAA reviews Schedule J to verify subcontractor consent was obtained, costs were properly classified, and flow-down clauses were included in subcontract agreements. Undisclosed subcontracts on Schedule J trigger audit questions.

Service-Disabled Veteran-Owned Small Business. A socioeconomic category eligible for set-aside contracts under the federal government's 3% SDVOSB prime contracting goal. Requires ownership and control documentation. Does not carry the annual financial review burden of the 8(a) program.

Federal law (41 U.S.C. 6701-6707) requiring government service contractors to pay prevailing wages and fringe benefits on contracts over $2,500. Covers janitorial, security, maintenance, and food service workers. Violations trigger back pay, contract termination, and three-year debarment. Each contract includes a DOL wage determination.

A government contract reserved for a specific category of small business: 8(a), HUBZone, Service-Disabled Veteran-Owned (SDVOSB), or Women-Owned (WOSB). Set-asides support the government's small business contracting goals (23% of prime contract dollars). Each program has specific eligibility and accounting requirements.

A formal cost claim the contractor submits after a termination for convenience, documenting all recoverable costs. Uses SF 1435 (inventory basis) or SF 1436 (total cost basis). Covers costs incurred, continuing costs, startup costs, settlement expenses, and profit on completed work. Must be filed within one year of the effective termination date under FAR 49.206-1.

Standard Form 1408, the Pre-Award Survey of Prospective Contractor Accounting System. DCAA uses this form to evaluate whether a contractor's accounting system meets minimum adequacy standards before contract award. Passing the SF 1408 determines whether the contractor receives the contract. Contractors use it as a self-assessment tool.

Standard Form 1435, Settlement Proposal (Inventory Basis). The preferred format for termination settlement proposals. Itemizes materials, work-in-process, and finished goods at cost. Used by most construction, janitorial, and security contractors where tangible materials and supplies are the primary terminated costs.

Standard Form 1436, Settlement Proposal (Total Cost Basis). An alternative format for termination settlement proposals used when the inventory basis is impractical. Common for professional services firms where labor is the primary cost. Requires advance approval from the Termination Contracting Officer before use.

The dollar limit below which simplified acquisition procedures apply. Raised from $250,000 to $350,000 effective October 1, 2025. Contracts below the SAT require less documentation, fewer clauses, and faster processing for both the government and the contractor.

The contracting officer's approval required before a prime awards certain subcontracts. Required for cost-reimbursement, T&M, or labor-hour subcontracts over $750,000. Fixed-price subcontracts over $750,000 also require consent if the prime lacks an approved purchasing system. Missing consent puts the entire subcontract cost at risk of disallowance.

A contracting officer assigned to handle a terminated contract's settlement process. The TCO reviews the contractor's settlement proposal, negotiates the settlement amount, and authorizes partial payments during the settlement period. Assigned upon contract termination under FAR Part 49.

The government's right under FAR Part 49 to end a contract when continued performance no longer serves the public interest, without requiring justification. The contractor recovers costs already incurred, continuing costs, settlement preparation expenses, and a reasonable profit on completed work. The contractor must submit a settlement proposal within one year.

A government contract type paying a fixed hourly rate for labor plus materials at cost. The hourly rate includes direct labor, indirect costs, and profit. T&M contracts require DCAA-compliant timekeeping and material tracking by contract. DCAA reviews labor hours, rates, and material costs during audits.

The set of DCAA requirements governing how contractors record employee labor hours. Employees must record their own time daily (not weekly or retroactively), by specific project or contract. Supervisors review and approve timesheets. Corrections follow a documented audit trail with no erasures. Total hours recorded must equal total hours compensated.

Federal law requiring contractors to submit certified cost or pricing data for contracts above the threshold (raised to $10 million by the FY 2026 NDAA, effective for contracts after June 30, 2026). Certified data must be 'accurate, complete, and current.' Defective pricing (certifying wrong data) triggers price reductions and potential False Claims Act liability.

The allocation base most commonly used for calculating the G&A rate. Total cost input includes all direct costs (labor, materials, subcontracts, ODCs) plus applied fringe and overhead. The G&A pool divides by total cost input to produce the G&A rate. Some contractors use a value-added base instead, which excludes subcontractor and material pass-through costs.

Federal law requiring products sold through GSA Schedules to be manufactured or substantially transformed in the United States or a TAA-designated country. Selling non-compliant products through a GSA Schedule is a False Claims Act violation with penalties starting at $14,308 per claim and reaching treble damages.

GSA's pricing compliance model that replaced the legacy Price Reduction Clause in September 2025. Under TDR, contractors report transaction-level pricing data for every GSA sale. GSA uses statistical analysis to identify pricing anomalies instead of relying on self-reporting against a single Basis of Award customer.

An expense the government refuses to reimburse on government contracts. FAR 31.205 lists specific categories: entertainment (31.205-14), alcoholic beverages (31.205-51), lobbying (31.205-22), fines and penalties (31.205-15), and bad debt (31.205-11). Unallowable costs must be flagged at the point of entry in the accounting system, not at year end.

A mid-market ERP system built specifically for government contractors, typically serving firms with $5-50 million in revenue. Integrates project accounting, timekeeping, expense management, and billing. Includes automated ICS preparation and indirect rate calculation. A common upgrade from QuickBooks for growing GovCon firms.

A joint venture with no employees performing substantive contract work. Each partner company provides labor and resources, billing the JV for their contributions. The JV acts as a pass-through for billing. Uses partner companies' indirect rates. Far more common in small business GovCon, especially mentor-protege arrangements.

The Department of Defense's electronic invoicing system. Government contractors submit invoices, receiving reports, and payment requests through WAWF. Required for DoD contract billing. Final invoices during contract closeout are submitted as zero-dollar entries marked 'final' when no balance remains.

Women-Owned Small Business. A socioeconomic category eligible for set-aside contracts under the federal government's 5% WOSB prime contracting goal. Includes the Economically Disadvantaged WOSB (EDWOSB) subcategory for additional set-aside eligibility. Requires ownership and control documentation but minimal ongoing financial reporting.

The full multiplier that converts one dollar of direct labor into total cost. The wrap rate includes fringe, overhead, and G&A applied sequentially. If fringe is 30%, overhead is 50%, and G&A is 15%, one dollar of labor costs approximately $2.07 fully loaded. The wrap rate determines competitiveness in pricing and true project margins.

Documented procedures governing a contractor's cost accumulation, timekeeping, compensation, travel, purchasing, and unallowable cost identification. DCAA expects written policies before contract award and audits contractors against their own documented procedures. Verbal practices do not qualify as policies.