As announced two weeks ago, we had the opportunity to sponsor the National HUBZone 2019 Conference in Chantilly, VA. There were many great presentations and industry updates, all of which could have a direct impact on HUBZone business in the near future.

Of these presentations, the U.S. Small Business Administration’s agency and regulatory update had potentially the greatest impact on HUBZone contractors. Led by Associate General Counsel, John Klein, the SBA’s team commented on many major changes to legislation that they feel will be made into law by 12/31/21.

Below are our 5 main takeaways from this update, which all focus on proposed changes to HUBZone requirements. It’s important to note that this information is all speculative at this point in time, but these were heavily emphasized throughout the 90-minute presentation:

1) HUBZone status is no longer required at all phases of attaining contract.

Prior requirement – Contractor must be HUBZone certified from the time of offer through time of award.

Proposed change – Contractor only has to be HUBZone certified at either the time of offer or time of award. No longer required for both steps.

Interpretation – Contractors in danger of losing HUBZone certification can still bid on work before losing status, which helps continue cash flow while management readdresses company status. New companies can also bid on work while attempting to become HUBZone certified rather than having to wait for the process to complete. This change should smooth out the work opportunities of companies on both ends of the spectrum. 

2) HUBZone status to drop the minimum requirement from 35% to 20% HUBZone designated employees.

Prior requirement – Contractor must have at least 35% of its employees live in a HUBZone designated area.

Proposed change – Contractor only has to have at least 20% of its employees live in a HUBZone designated area.

Interpretation – The 35% rule is being loosened for HUBZone certification. This could allow for more companies to attempt to become HUBZone certified, as well as HUBZone work to become more competitive. The drop in percentage allows for current certified contractors to have some leeway in employee status.

3) Employees must live in HUBZone designated area for at least 180 days to be considered towards the new 20% requirement. Registering for a voter ID can no longer expedite process.

Prior requirement – Employees could either live in HUBZone designated area for 180 days or register for voter identification to be considered towards the 35% requirement.  

Proposed change – Employees must live in HUBZone designated area for 180 days to meet the new 20% requirement.

Interpretation – While the 35% rule is being loosened, employee status is being tightened. This is mostly done to cut down on any loopholes being exploited in filing for voter registration. Contractors that depend on employee hirings to impact their percentage immediately will have to build in a 180-day buffer. 

4) Employees do not lose HUBZone certification after 180 days, even if they move. However, status is lost once they leave the company.

Prior requirement – In order to count towards the 35% requirement, employees must live in a HUBZone area.

Proposed change – Employees can now move out of HUBZone area as long as they achieved HUBZone status after 180 days. This status is continuous only for that specific employer, and once employment ends, the status is lost.   

Interpretation – SBA mentioned that one of the goals of HUBZone work is economic advancement for employees. They do not want to penalize companies for having employees advance in their careers and afford to move out of economically challenged areas. As long as the company still resides in the economically challenged area, and the employee stays with that company, they feel it is a beneficial to all parties to allow advancement and career growth.

5) The areas determined to be HUBZone designated will be unfrozen after the 2020 Census.

Current Status – The HUBZone map that defines the lines for which areas are economically challenged is currently frozen. SBA is waiting for 2020 Census information before unfreezing the maps.

Once Unfrozen – The estimated timeframe to be unfrozen is 12/31/21. HUBZone certification will continue as it was before the HUBZone map was frozen on 12/07/17. For example, if your company was in an area set for redesignation 3 months after being frozen on 12/07/17, you can expect the redesignation to occur 3 months after 12/31/21 on 03/31/21.

Follow Up Information

If any of the above points interest you or your company, we highly recommend attending this event next year. These are just 5 of the many important updates covered by the Council that effect HUBZone businesses in the near future. For more information, be sure to check in with the HUBZone Council here.

For frequently asked questions about current HUBZone rules and regulations, SBA’s HUBZone information can be found here.

For more information related to these potential changes, SBA has a blog they update regularly with more interpretations and concepts related to updates.

We will be a sponsor of the 2019 National HUBZone Conference on September 4-5^th in Chantilly, VA.

For any clients that are HUBZone certified, this is a great opportunity to network with industry leaders including large prime contractors and federal agencies related to HUBZone designated contracts and subcontracts. The primary focus of the event includes updates to government contracting, specifically related to small business and HUBZone work, as well as matchmaking opportunities with these industry leading organizations.

For those interested, click here to check out the full agenda of the event.

We will have a vendor table set up in the Washingtonian section of the Westfield Marriott towards the center of the room. Feel free to stop by when you have some spare time!

Being the largest purchaser of goods and services in the world, it is no wonder that businesses large and small want to work with the United States Federal Government. With an average of $500 billion spent annually, many view federal contract procurement as a potential revenue stream to grow their business. However, many of these companies do not consider all of the rules, requirements, and oversight that come with that potential revenue. Before jumping headfirst into government contracting, let’s take a look at the types of oversight a company can expect when doing business with the government.

What is a DCAA audit?

The Defense Contract Audit Agency is the auditing branch of the federal government. Under control of the Secretary of Defense, the branch’s main purpose is to make sure federally procured funds are being spent accurately and appropriately.

According to DCAA’s Information for Contractors publication, “DCAA performs all necessary contract audits for the Department of Defense and provides accounting and financial advisory services regarding contracts and subcontracts to all DoD Components responsible for procurement and contract administration.”

Essentially, what this means is that their primary goal is to ensure taxpayer dollars are spent on fair and reasonable contract prices. It is DCAA’s responsibility to serve public interest first and foremost.

In order to accomplish this, DCAA has a multitude of audit procedures to ensure that government contractors are kept in line. DCAA is especially concerned with contractors working on cost reimbursable contracts as opposed to those who provide fixed price work. This is because there is more room for error (and even fraud) when billing at cost.

Common DCAA Audit Types

Some of the most common DCAA audit types for companies providing cost-type work are as follows:

1. Accounting System Requirements (Pre & Post Award) Audit
2. Real-time Labor Evaluation Audit
3. Provisional Billing Rates Audit
4. Public Vouchers (Progress Payments) Audit
5. Incurred Cost Submissions Audit

We will break down the first 4 of these common audit procedures below.

Notes:

• Incurred Cost Submissions are too involved to cover in an overview post. This audit type will be covered in a detailed post to follow.
• There are many more types of audits that do take place, such as financial capacity, proposal adequacy, contract briefs, monitoring subcontracts, contract close outs, etc. The above 5 were selected for the accounting heavy folks in your organization!

1. Accounting System Review

Government agencies want to make sure your company is operating using proper accounting policies and procedures before providing funding for any cost type work. To do this, a contracting officer from said agency for said contract will request DCAA perform an accounting system audit on your company, which is broken down into two phases – the pre-award & post-award audits.

         Pre-Award DCAA Audit

The pre-award audit takes place before any cost type contracts are awarded to your company. This is the preliminary check that DCAA reviews to see if you have a proper accounting system in place to be able to handle the proposed contracts.

To start the process, a contacting officer or DCMA (Defense Contract Management Agency) will have you complete standard form 1408, which lists what’s required for your accounting system. Some requirements include segregation of direct costs from indirect costs, identification and accumulation of direct costs by contract, ability to allocate indirect costs consistently across cost objectives, etc. For a full list of what is required, please see our prior blog post How PROCAS Addresses the SF1408.

Once the SF1408 is completed and returned to the contracting officer/DCMA, DCAA will meet with your company to see if you have the capacity to perform on what was completed in the form. This is an upper level review that does not get into the nitty gritty of the system, but ensures you have the proper policies and procedures included with your accounting system. For more on what DCAA audit requirements will be necessary of your system, please see their related documents here.

         Post-Award DCAA Audit

The post-award audit takes place after your company has been performing on the awarded contract for some time. Typically, this is not too long after being awarded and is around 3-6 months (but can be earlier or later). The purpose of this phase of the audit is to make sure you are complying with the accounting policies and procedures specified in the pre-award.

During the post-award audit, you can expect the auditors to dig around your system more than the pre-award. This is a total accounting system review, which will include testing of your policies and procedures as well as data entry. Some examples of areas they could test include: segregation of duties, proper levels of access to data, correct revenue and expense recognition, trailing transactions from general ledger to invoicing, accurate labor distribution from timesheets to general ledger, etc. 

At the end of the day, DCAA wants a vote of confidence that you are operating as you said you would in the pre-award. Therefore, the auditor will take their time and conscientiously look through your system to make sure it does not have any holes.

2. Real-time Labor Evaluations

Also known as the “Help! DCAA auditors showed up at my door unannounced, and I don’t know what to do!” audit, real-time labor evaluations are checks to see if your people are working when they say they are working. For service-based contractors, labor is the largest piece of what is billed to the government, so it is of major concern to be monitored by the DCAA.

In these time check or “floor check” audits, the auditors are going to randomly select employees of your company and ask them simple questions to see how timesheet procedures are performed. Some of these procedures include completing time entries, determining how charge codes are created/selected, submitting timesheets, correcting/adjusting time entries, the approval process, access to employees’ timesheets, etc. Once these are confirmed, the auditors will meet with the accounting staff to see how timesheets are collected and labor is distributed with cost. They will want to see that specific cost journals in the general ledger match historic timesheets!

Some common deficiencies in timekeeping compliance that can lead to the failure of a real-time labor evaluation include:

• The ability of more than 1 person to access an employee’s timesheet to record time
• Improper selection of charge codes for work being performed (inaccurate use of labor categories, projects, etc.)
• Inconsistent charging of time across contracts
• Failure to track changes to employees’ time by audit trail (without reason)
• Approvers overriding subordinate time without employee consent
• Inconsistent method of applying labor cost to employee timesheets

In this DCAA audit, there is no warning for when the auditors are going to stop by. Therefore, it is important that your employees know your company’s policies and procedures at all times. We recommend having supervisors and management review these policies with your staff as frequently as possible. For more information to prepare for this surprise DCAA audit, please see click here.

3. Provisional Billing Rates

If specified in the provisions of a cost-type contract, contractors are allowed to be reimbursed for indirect costs via interim payments as opposed to waiting until the end of the contract. FAR 42.704 governs the procedures and guidance for establishing provisional billing rates, which is the effective way to approximate a contractor’s final year-end rates (adjusted for any unallowables). Provisional billing rates pose as an estimation of these final year end rates, which are trued up to actual indirect rates at the end of the contract’s fiscal year. More information on FAR 42.704(b) can be found here.

One major criterion for an adequate accounting system is that it provides for billings that can be reconciled to cost accounts for current and cumulative amounts claimed. The auditor is going to check to make sure your system can handle this process within the Accounting System Review audit. However, once approved, the contractor is still going to have to submit provisional billing rates to its DCAA Office or administrating contracting officer every fiscal year included in the contract.

According to DCAA audit requirements, provisional billing rates should be:

• Submitted at the beginning of each fiscal year or when established billing rates are no longer accurate in representing final year rates (unforeseen circumstances)
• Representing a 12-month period (contractor’s fiscal year)
• Submitted at least annually and electronically (if possible)
• Provided in an Excel format

According to DCAA audit requirements, provisional billing rates should contain:

• Proposed billing rate calculations (including rationale)
• Prior fiscal year pool and base
• Current fiscal year to date pool and base
• Current fiscal year budget pool and base (if available)
• Comparative analysis with explanation of significant differences (if applicable)

Penalty: If the above measures are not taken, vouchers and progress payments can be held/returned until appropriate measures are taken to adjust billing rates. This not only hurts your cash flow but can affect all future invoices!

4. Public Vouchers (Progress Payments)

Following the same thought process described above, contractors can claim interim payments on work performed throughout their fiscal year. According to DCAA, cost type contracts allow for payments for costs on a Standard Form 1034 public voucher or equivalent. Typically, contracting officers have slight variations on how they would like their invoice to look, however the audit process will look similar for checking how the records of each invoice are maintained. For a look into all of the contractor’s and DCAA’s responsibilities in establishing progress payments, please click here.

Voucher audits are conducted by DCAA to determine the accuracy of costs billed to the government. DCAA auditors will use sample testing to track individual invoices from submitted government invoice in WAWF to the general ledger and job cost report and eventually to the source documents supporting the billed voucher.

Looking at your accounting records, an auditor will check for:

• Compliance between the invoice and contract terms
• Accuracy of billed costs to recorded costs (current and cumulative)
• Consistent application of labor distribution
• Consistent allocation of indirect rates using established provisional billing rates
• Segregation of unallowable costs from allowable costs (unallowables cannot be invoiced)
• Timely payments to vendors and subcontractors
• Appropriate source documentation for billed costs

Penalty: If the above measures are not taken, vouchers and progress payments can be held/returned until appropriate measures are taken to adjust your invoices. This not only hurts your cash flow but can affect all future invoices!

At the end of the day, DCAA wants to make sure the public’s money is being spent appropriately. The above measures can seem very intimidating, so it is important that your company is aware of all the rules and regulations that need to be followed. Remember, you always have the right as a contractor to ask why an auditor needs what they are requesting from you. If anything appears to be unrelated to the measures described in each audit above, you have the right to know why it is required. If any PROCAS clients need help through any of the above audits, feel free to reach out to our consulting team at consulting@procas.com.

Time collection is one of the most important processes for service-based government contractors. In order to effectively collect employees’ time, apply labor distribution, and bill the government accurately, you first need to make sure employees know how to access their timesheets. This is the simplest, yet most important step of implementing a DCAA compliant timekeeping system.

In PROCAS, employees can access their timesheets from any web browser on any device with internet access. This includes laptops, mobile devices, tablets, home computers, and even TV’s.

Let’s take a look at how you can access your timesheet in PROCAS. The following post will be broken down into 4 sections:

• Upgraded Version, Returning User
• Upgraded Version, New User
• Legacy Version, Returning User
• Legacy Version, New User

To determine which category you belong to, please look at the integrated screenshots below to see which login screens look familiar.

As of 04/14/2020 - If you are using a mobile device, instructions for login and usage can be found here. The following post assumes you are using a desktop or laptop computer.

PROCAS Timesheet – Upgraded Version, Returning User

If your company has upgraded to the most recent version of PROCAS, you have the easiest journey to accessing your timesheet. Everyone logs into the same web address, so all you have to do is click here and enter your username and password.

If you forget your username and/or password, please select the “Reset Password” link and enter the email assigned by your administrator to begin the reset process.

Note: If you cannot remember this email either, the accounting admin of your company can look it up under Accounting --> Setup --> Time and Expense Users.

PROCAS Timesheet – Upgraded Version, New User

If your company has upgraded to the most recent version of PROCAS, and this is your first time logging in to record your time, you will need to establish a username and password via an email invitation. Your company’s administrator will determine your level of access in PROCAS and send an email from invites@procas.com to get the login process started.

Click on the first link at the bottom of the email as displayed in the screenshot above. From here, you will be able to establish your login credentials as displayed in the screenshot below.

Follow the instructions defined in the email sent from invites@procas.com to complete the fields required for login.

Note: Your email address will be your official username, which is set by your administrator and cannot be changed by you once this process is completed.

PROCAS Timesheet – Legacy Version, Returning User

If your company is on a Legacy version of PROCAS time, the path you will take to access your timesheet follows the sequence --> www.procastime.com/ + Company Code. In this sequence, the first portion of the web URL stays consistent, however the “Company Code” portion is a code assigned specifically to your company. The following example illustrates this:

Ex. LJ’s Maintenance Shop has been a PROCAS client for 5 years. When implemented, LJ’s Maintenance Shop was assigned the company code of LJMAIN. Therefore, all employees (new and existing) will login to www.procastime.com/ljmain until upgraded to the newest version of PROCAS.

If you forget your username and/or password, please click the “I Forgot My Password” button and enter the email assigned by your administrator to begin the reset process.

Notes:

• If you cannot remember this email either, the accounting admin of your company can look it up under System --> Time and Expense --> Web Users.
• If you are using the correct email, and the system replies with User could not be found, please try logging into this link, or contact your administrator.

PROCAS Timesheet – Legacy Version, New User

If your company is on a Legacy version of PROCAS time, you will first need to set your password before you can log in to the timekeeping system. Following the example in the above section, please navigate to your company’s timekeeping link using the sequence --> www.procastime.com/ + Company Code.

Once you’ve made it to timekeeping, select the “I Forgot My Password” link and enter the email assigned by your administrator upon onboarding. This will generate a system email, which will provide a link to set and confirm the password required to log in. 

Note: If you are using the correct email, and the system replies with “User could not be found”, please try logging into this link, or contact your administrator.

If you bump into any issues attempting any of the above login processes, feel free to contact our Support team at support@procas.com.

As always, running DCAA compliant timekeeping software not only incorporates the software itself, but how it is used. Please be sure to check with your administrative staff for an explanation of how your policies and procedures align with our government contract timekeeping system.

One of the biggest challenges government contractors face is putting together a compliant system that passes DCAA requirements. As most know, developing a DCAA compliant accounting system is a little more complicated than just purchasing accounting software. It is the total incorporation of a company’s best practices, policies, and procedures into a system that allows contractors to be consistent and appropriate in their tracking of costs.

This can be very daunting for the new contractor, who not only is worried about landing their first government contract, but also has to establish those company policies and procedures. The below post will identify the preaward audit process and how PROCAS meets the requirements of the SF1408 form.

Preaward Audit Process

Before being awarded a cost type contract, the DCAA is going to want to verify that the appropriate measures were taken in order to prove the contractor’s ability to adequately track the costs for that proposed contract. This process is known as the preaward audit or preaward survey.

Typically, an auditor will meet with the contractor first to review the established system and procedures, and then again in the future to make sure that system is being followed consistently (post award audit). However, before that takes place, the contracting officer on the proposed contract will require that Standard Form 1408 be completed. This form will be submitted to the DCAA when they request the initial audit of your system. This piece is very important because it gets the entire process started.

Standard Form 1408 is the Preaward Survey of Prospector Accounting System used by the DCAA as an evaluation checklist to determine if your system is sufficient in supporting the proposed contract(s). According to the DCAA, the audit scope will consist of understanding the design of the contractor’s prospective accounting system as well as the procedures essential to reach an informed opinion if that system is acceptable in accumulating and generating required cost information. Having an accurately completed SF1408 is the first step in conquering this audit scope.

For DCAA’s official explanation of the preaward process, please click here.

PROCAS Addresses Standard Form 1408

Below are our answers for how PROCAS addresses the standards that the auditor will be concerned about when evaluating your prospective accounting system. All SF1408 requirements are broken down in detail.

A downloadable version of the below sample SF1408 can be found here.

1. Except as stated in Section I Narrative, is the accounting system in accord with Generally Accepted Accounting Principles applicable in the circumstances?

The PROCAS project accounting software (PROCAS Accounting) is designed to be operated in accordance with Generally Accepted Accounting Principles (GAAP), including maintaining the books of record on the accrual basis of accounting.

2. Accounting system provides for:

a. Proper segregation of direct costs from indirect costs.

In PROCAS Accounting, expense accounts in the chart of accounts are identified as either direct or indirect, which provides for the proper segregation of direct costs from indirect costs. Additionally, PROCAS assigns specific account types to further segregate these costs.

b. Identification and accumulation of direct costs by contract.

In PROCAS Accounting, the identification and accumulation of direct costs requires the assignment of direct costs to a corresponding project code. The project code corresponds to a contract.

c. A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives. (A contract is a final cost objective.)

PROCAS Accounting provides logical and consistent methods for the allocation of indirect costs to intermediate and final cost objectives. Indirect rates can be calculated automatically for Fringe Benefits, Facilities, Material Handling, Subcontract Administration, Overhead and G&A. Bid and proposal and internal research and development costs are also treated appropriately. The indirect rates can be further segregated by division, location and work-site. Indirect rates are automatically applied to contracts in direct correlation/proportion to the respective allocation base.

d. Accumulation of costs under general ledger control.

PROCAS Accounting accumulates costs directly to the general ledger, which is the basis for financial and job cost reports.

e. A timekeeping system that identifies employees’ labor by intermediate or final cost objectives.

PROCAS provides online timesheet software (PROCAS Time) in which employees record their time to intermediate or final cost objectives. Employees are assigned appropriate intermediate and/or final cost objectives for recording their time and can only record their time to their authorized work assignments.

f. A labor distribution system that charges direct and indirect labor to the appropriate cost objectives.

In PROCAS Accounting, the distribution of direct and indirect labor costs are recorded automatically from the employee timesheets created in PROCAS Time to the appropriate cost objectives. PROCAS Accounting supports the calculation of effective hourly rates associated with total time accounting.

g. Interim (at least monthly) determination of costs charged to a contract through routine posting of books of account.

In PROCAS Accounting, direct costs are posted in the general ledger and job cost ledger in real time and do not require the use of batch processing or summary entries. Indirect rates can be automatically calculated and applied at any time.

h. Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31, Contract Cost Principles and Procedures, or other contract provisions.

In PROCAS Accounting, expense accounts are identified as being either allowable or unallowable. Unallowable expenses are excluded from indirect cost pools when automatically calculating and applying indirect rates.

i. Identification of costs by contract line item and by units (as if each unit or line item were a separate contract) if required by the proposed contract.

PROCAS Accounting has the capability to incorporate logical project assignments that will track costs by unit and/or line item.

j. Segregation of preproduction costs from production costs.

In PROCAS Accounting, pre-production costs are segregated from production costs through the use of project assignments and/or separate expense accounts.

3.Accounting system provides financial information:

a. Required by contract clauses concerning limitation of cost (FAR 52.232-20 and 21) or limitation on payments (FAR 52.216-16).

In PROCAS Accounting, reports are available to assist with managing the limitation of costs and/or limitation of payments.

b. Required to support requests for progress payments.

PROCAS Accounting supports cost type, time and materials and fixed price invoices which are generated automatically from the accounting records. Requests for progress payments can be generated for interim time periods, by percentage of completion or by deliverables as specified by the contract.

 4. Is the accounting system designed, and are the records maintained in such a manner that adequate, reliable data are developed for use in pricing follow-on acquisitions?

Yes. In PROCAS Accounting, records are designed to be maintained so that adequate, reliable data can be developed for use in pricing follow-on acquisitions.

You’ve probably been wondering what we’ve been up to the past year. It’s been a really busy time as we’ve been migrating clients to our new software, listening to your ideas for system improvements, and implementing those changes to better our service!

To the clients that have migrated already, we would like to thank you for taking the plunge and providing excellent feedback. To those still operating on our legacy system, we appreciate your patience and will be keeping you updated with more information at a later time.

Restructured Blog

As we’ve been navigating these rapid waters, we felt it was appropriate to revamp this platform as well. Before, we used this blog environment solely to post monthly entries to help our clients use our product. While we still hope to accomplish that, we are also looking to promote value to our clients in other ways.

Our New Approach

Former Support Staff member and current Blogger-In-Chief, LJ, will be posting regular content related to issues all GovCon accountants face; such as FAR interpretations, Accounting system tutorials, DCAA audit recommendations, and much more. These posts are intended to be written by common accountant for common accountant and will hopefully make some of the more complicated topics seem just a little less scary.

Content Layout

All content will be categorized in sections that can be easily navigated to at a future point in time and will be broken down as follows:

1. Government Contract Accounting
2. PROCAS System Training
3. PROCAS System Improvements
4. Industry Topics
5. Accounting Education
6. PROCAS Sponsored Events

As this platform grows and more entries are published, the above list will expand/contract as needed. If there any topics that you would like to see covered, please email feedback@procas.com, and we will take it into consideration!

Meet the Author

Because we will be spending a lot of time together, it is only fair that you get to know me a little. As mentioned above, my name is LJ, and I have worked at PROCAS for about 5 years now. When I’m not at work assisting clients, I enjoy being with friends/family, taking a swing at social softball, finding the best crab cake Maryland can offer, and most importantly, taking life one step at a time.  It is a pleasure to virtually meet you, and I look forward to sharing our thoughts on anything and everything Government Contracting.

For more information about me, feel free to check out my LinkedIn profile here.

Have you ever wondered how to set up your indirect rate structure in PROCAS? The good news is, if you’re a new contractor, and you don’t have a rate structure yet, the system already has a default setup that works for most of our clients. It’s a standard 3-tiered structure with (1) fringe, (2) overhead applied to direct labor plus fringe, and (3) G&A.

If you are more experienced, you may want to make changes to your rate structure from one year to the next but don’t know what options to pick in the system. One nice thing about how it works in PROCAS is that it is easy to use our ‘point and click’ setup to make changes and then test the calculation.

There are 2 basic setup elements the system needs to calculate the rates—(1) selections on the Rate Calculation Setup form and (2) the Cost Pool assigned to each expense account in the Chart of Accounts. Generally, your selections determine how many rates you have, what intermediate rate allocations are made, and what makes up the bases for each rate. Every expense account you use is assigned to a cost pool on the Chart of Accounts form. The Cost Pool assigned determines what type of expenses is being accumulated in that account.

Since the default chart of accounts already has appropriate cost pools established for each expense account, I will focus on the options on the Rate Calculation Setup form.

Rate Calculation Setup form – Tab 1:

Establishes defaults used when calculating rates.

Date Range – we recommend selecting Accounting Year since you must calculate your indirect rates for the accounting year-to-date for DCAA compliance. Management may want to see rates by Accounting Period but that should be for internal purposes only.

Costs to include in Pools – we suggest using Allowable Only as your default. This selection will exclude unallowable costs from the pools for calculating your claimed rates. When Allowable & Unallowable is selected, you are calculating your full rates which include all your costs. While you need to know your full rate to make informed business decisions, you cannot claim your full rate for reimbursement from the government.

Transactions to include – using Posted & Unposted transactions as your default will ensure everything recorded in the general ledger is included when you calculate your rates. Choosing Posted Only will ignore any transactions that are not posted within the period and could be misleading.

Rate Calculation Setup form – Tab 2:

Determines how many rates you have for each cost pool.

We always recommend keeping your rate structure as simple as you possibly can, for as long as you can. Using all consolidated rates means you have only one rate per cost pool. However, at some point, you may need to make some changes. This tab gives you the flexibility of establishing rates by division, location, and/or work site, in any combination.

Most often, we see clients moving from a consolidated Overhead rate (pictured above) to Overhead calculated by Site. This allows for more than one overhead rate—typically one for company site and one for client site. Keep in mind, that you will have to track your costs at whatever level you select. Since switching to a 2 Overhead rate structure is common, we start our clients off on day one by tracking direct and overhead expenses by company site (e.g., 100 cost center) and client site (e.g., 105 cost center). This makes the transition to the 2 Overhead rate structure seamless. All you have to do is select the Site checkbox in the Overhead row and you are ready to go.

Rate Calculation Setup form – Tab 3:

Determines whether you have a dollar or hour/unit base for each cost pool.

Most commonly, we see clients using a $ Base for each cost pool. Using a dollar base is simplest. It does not require any additional work on your part. The system will just need the amounts you’ve already recorded in the general ledger.

However, quite frequently we see Facilities with an Hour/Unit Base. In many cases, it makes sense to use square footage or head count as the base for Facilities rather than dollars. Note that if this is your selection, you will also need a Triggers Journal entry dated the first day of your accounting year, so the system knows how many units to use and how to allocate the office-related costs to Overhead and G&A. We have special accounts already established in the default Chart of Accounts to use for this purpose.

Rate Calculation Setup form – Tab 4:

Determines what pool to put your Material Handling and Subcontract Administration costs in.

In PROCAS, you can track your Material Handling (MH) and Subcontract Administration (SA) costs in your general ledger separately by account while keeping the costs in either the Overhead Pool or G&A Pool for rate calculation purposes. Tracking the costs will provide management with valuable cost information and have you set up to easily transition to a Value-Added G&A rate.

The selections in the screenshot above are a great place to start. Keep the material handling and subcontract administration costs in your G&A pool for now. If you ever need it, you can easily change it.

Rate Calculation Setup form – Tab 5:

Determines what makes up your Facilities base and what to include in your Overhead Pool and Base.

There’s a lot more to the options on this screen so let’s tackle them one at a time.

Facilities

Include Employee Labor in Facilities Base – if selected, productive employee company site labor is your base. If you selected a $ Base on Tab 3, the system will use the total employee labor dollars. If you selected Units/Hours Base, the system will use the total employee labor hours.

Include Contract Labor in Facilities Base – I don’t see this often, but if you have contractors that use your facilities, you can include those labor costs in the base to bear some of the facilities burden. Again, the $ or Units/Hours base selected on Tab 3 is a factor in the calculation.

Include Non Labor Facilities Base in Facilities Base – if selected, you must also have the Units/Hours base selected on Tab 3. This means you are using something like square footage, head count, or some other percentage to allocate the facilities costs to Overhead and G&A. You also must create a Triggers Journal transaction dated the first day of the year to record the unit allocations.

Overhead

Include Fringe Benefits on Direct Labor in Overhead Pool – if selected, you have a 2-tier rate structure—overhead and G&A. Fringe is an intermediate rate and is not stated separately on invoices to your clients.

Include Facilities Costs Related to Direct Costs in Overhead Pool – if selected, the facilities costs allocated to direct company site labor are allocated in the Overhead Pool. This is the most common selection.

Include Direct Labor in Overhead Base – this option should always be selected. Direct labor is the standard overhead base.

Include Contract Labor in Overhead Base – this option is rare, but if you have contractors that use your company’s contract support resources, you can include those labor costs in the base to bear some of the overhead burden.

Include Fringe Benefits on Direct Labor in Overhead Base – this option should be selected if you have a 3-tier rate as described in the beginning of this article. Fringe is stated separately on invoices to your clients and overhead is applied to direct labor plus the allocated fringe. If this option is not selected, you also have a 3-tier rate. Fringe is stated separately on invoices to your clients, but overhead is only applied to the direct labor costs.

Rate Calculation Setup form – Tab 6:

G&A Base options

As you can see in the screenshot above, there are several selections to choose from for your G&A base.

Total Cost Input Base – this is the most common selection. Select this when all your costs (excluding G&A) are the G&A base. What you get with this option is all your direct costs plus the allocated facilities, fringe and overhead costs as your G&A base.

Value Added – No Materials – if your rate structure includes a separate Material Handling rate (Material Handling Pool option is selected on Tab 4), you must select this option. This will exclude the direct materials from the G&A base. Instead, the direct materials are the base for the MH rate.

Value Added – No Subcontracts – if your rate structure includes a separate Subcontract Administration rate (Subcontract Admin. Pool option is selected on Tab 4), you must select this option. This will exclude direct subcontract costs from the G&A base. Instead, the direct subcontract costs are the base for the SA rate.

Total Direct Cost – I can honestly say that I have never seen a client select this option. That doesn’t mean it’s not right. It’s there if you need it. Only direct costs will be your G&A base. This means that you don’t have a separately stated fringe or overhead rate. Basically, everything ends up in the G&A pool with this option.

Direct Labor Base – I have seen this option selected one time in my career. Again, it could make sense in certain circumstances.

The default chart of accounts is already set up with the appropriate Cost Pools for each expense account. This is how the system knows what type of cost each account contains (direct, fringe, facilities, overhead, G&A, material handling, subcontract administration, etc.). That, along with the selections on the Rate Calculation Setup form, informs the system of where each amount goes in the various pools and bases when the rates are calculated.

I cannot stress enough how important it is for DCAA compliance to be consistent with how you accumulate and allocate your costs. The way you bill the government for reimbursement of your direct and indirect costs must match how your rates are calculated. If you are ever unsure of what selections to make, please reach out to one of our PROCAS consultants for help.

PROCAS Time & Expense has a wide variety of reports to offer. These reports span from showing who has requested PTO, to checking if employees are logging their time daily, to direct labor utilization. The four reports we receive calls asking about the most are the labor utilization, PTO authorization, labor hour summary, and floor check reports. All these reports can be accessed through the Administration or Approvals menus in PROCAS Time.

Labor Utilization Report

The labor utilization report is a great way to see what portion of employees’ time is going to direct work. To run this report, look under the Administration or Approvals menus --> Timesheet section --> Reports subsection --> “Labor Utilization Report.”

You can select date ranges, tasks, accounts, or even employee approval groups to search by from the parameter screen. At the bottom of the parameters are options labelled “Direct hours/Total hours” and “User defined base hours.” If you select “Direct hours/Total hours”, the report will show a direct utilization percentage that is calculated by dividing the number of direct hours an employee worked in the selected time period by the total amount of hours worked in that period. The user-defined base hours selection defaults to 2080 hours (the total standard work hours in a year) but can be changed to a custom amount. This selection will calculate the direct utilization percentage by dividing the direct hours worked by the base hours entered.

PTO Authorization

A great place to find out how much PTO the employees of your company have is through the PTO authorization report. It can be accessed through the Administration or Approvals menus --> Paid Time Off Request section --> Reports subsection --> “PTO Authorization.” You can select what date to run the report through as well as task, account, and approval group.

Once you’ve run the report, you can see each employee, organized by approval group, and all their information regarding PTO including budgeted hours, PTO hours used, and PTO hours remaining. This report also has the option of being exported to a .csv file on the parameters screen.

Labor Hour Summary Report

It can be tough to keep track of employees working overtime in periods that aren’t exactly one week. This report can be run on any date range (up to three months), and can include data from multiple pay periods. To find the report, go to the Administration or Approvals menus --> Timesheet section --> Reports subsection --> “Labor Hours Summary Report.”

This report has similar parameters to the previous ones, but there is an additional “Hours Threshold” option. In this field, enter the number of hours you expect employees to work during the range of time selected. When the report is created, any employee that worked over the threshold value will be shown. The variance column will show how many overtime hours these employees worked. You can choose to View Details for more information about their time charges.

Floor Check Report

As FAR policy states, employees must log their time daily. A good way to check if employees are, in fact, filling out their timesheets each day is to run the floor check report. This report will show you which employees haven’t filled out time for a specific date chosen. You will find the report under the Administration or Approvals menus -->Timesheet section --> Reports subsection --> “Floor Check Report.”

Select the date you would like to perform the floor check for and fill out other optional search parameters. On the next screen, you will see each employee that has not yet filled out time on the chosen day. The report will also show the PTO status if they have submitted a PTO Request for that date (pending approval, approved, disapproved, or blank).

There is also a check box next to each employee that, if checked, will send an email notification to the employee reminding them to fill out their timesheet for the day.

These are just a few of the many helpful reports PROCAS Time features. Should you have any questions about specific reports you see, or are wondering if there is a report for a function you need, please contact us via email at support@procas.com or by phone at (410) 730-4011 option 2.

The Project Status Report (PSR) is a helpful and informative tool that can be used to view amounts earned on a contract. The report compares the amount earned to the amount funded in order to show how much funding remains on a contract, also referred to as contract backlog.

The PSR gives you a good idea of what to expect on your current period invoice. We recommend running the PSR during your normal invoicing process. The report can be found under Projects → Project Status Report. Occasionally, you may come across a situation where the current amount on your PSR does not match your current period invoice. Read on to find out what the cause of this difference may be.

By default, the PSR looks at transactions that are both posted and unposted. When calculating an invoice, the system only looks at transactions that are posted. If your PSR is not matching your invoice, first check to make sure all transactions through the current period have been posted (locked). After verifying that all previous and current period transactions are posted, try running your PSR and invoice again. If the 2 reports still do not match, there is most likely a prior period adjustment being applied to your invoice that is not being picked up on the PSR.

The PSR takes current period actual direct hours and costs in the general ledger and applies billing setup information to calculate Current Period, Current Year and Inception to Date values. The invoice calculation process also takes current period actual direct hours and costs in the general ledger and applies billing setup. Next, the system applies year-to-date invoice history transactions to come up with the bottom line amount displayed on the invoice. If there was a change in prior period direct hours or costs, the effect of the change will be incorporated in the current period invoice. The effect will not be incorporated on the PSR since the PSR only looks at current period direct costs/hours applied to live billing setup.

In the example below, we are calculating for the period 03/01/2018 – 03/31/2018. Our current amount earned per the PSR is $37,018.72 with current hours of 576. Our current amount due per the invoice is $39,663.52 with current hours of 616.

To verify that the difference in the PSR and invoice is coming from a prior period adjustment, try running your invoice for the previous period. If all is well, your current period invoice should display $0 since the invoice has already been finalized. If you see an amount on your prior period invoice, there must be a change in direct hours or costs that impacts revenue for the prior period. This can be due to a change in labor hours, labor category, travel costs, billing setup, etc. Let’s run the invoice for prior period (02/01/2018 – 02/28/18) to see if there are any unbilled costs.

You can also run the template INVOICE_MAPPING.RPT for the current period to get transaction level detail of what is being incorporated in the invoice amount. If you see a transaction with a prior period date and current amount, this indicates that a prior period adjustment is being applied.

Although it may be an added step to run the Project Status Report during your normal invoicing process, there is a great benefit to knowing what the amount on your invoice means. After all, no one wants to have their invoice denied by a contracting officer over an issue that could have easily been resolved. Feel free to reach out to us at 410-730-4011 if you need any assistance running the PSR. For troubleshooting invoice errors, refer to Appendix C of the User’s Manual “Client Invoice Troubleshooting Quick Reference.”

If you work in the system with multiple users or tend to open several screens at a time you may run into a loop of error messages as you try to add, change, or edit something in a journal. Read on to find out what the messages mean and how to get them to go away so you can continue working (and prevent them from occurring in the future).

Do the following loop of error messages look familiar to you?

If so, then what’s important is identifying which type of error (out of the two possibilities) you are receiving. To troubleshoot the cause of the error, you should click "OK" on image 1, which then brings you to image 2. From here press the highlighted arrow that is shown on image 2, which will take you to one of the following two screens that provides the reason for your session being locked.

Option 1: Record already locked by this session

When it reads “Record already locked by this session,” it tells us that you (the user) are trying to edit the same transaction twice. You essentially have locked yourself out. When you are attempting to edit a transaction that is already open, the system doesn’t know where to look.

To resolve:

To get yourself unlocked, you must log out completely by using the start menu at the bottom left hand corner. This is the only way to log off of the server completely (see our previous blog post “How to Properly Log Off the PROCAS Server, and the Benefits of Doing it Properly”). Hitting either of the “X’s” at the top of the screen will not work, as it just disconnects you for the time being. Once you get logged back in, the transaction you were editing may or may not have saved your changes. We have found in most cases that the journal is left how it was, and it may be sitting out of balance.  

Option 2: Record already locked by user

If it reads “File is locked” then this tells us that a different user has the same transaction open. Line two of the message on image 4 will let you know which user is attempting to edit the same entry.

To resolve:

In this case, logging out wont fix the issue. To get unlocked you will need to have the user listed on the screen close down the window you are trying to access. So in this instance,  I would ask “smartin,” the user listed on image 4, to close the window that is locking me up, as we both shouldn’t be editing the same entry at the same time. Once they have finished what they are doing and have closed their window, you shouldn’t have a problem accessing the journal.