Fundamentals for Government Contractors

Fundamentals for Government ContractorsBarbara Morgan | February 23, 2016

http://blogs.aronsonllc.com/fedpoint/

2© 2016 | www.aronsonllc.com | www.aronsonllc.com/blogs |

Fundamentals for Government Contractors:Accounting and Compliance Concepts

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Managing All of the “Books”







Generally Accepted Accounting Principles (GAAP)

Principles that govern when and how much is recognized, disclosed or measured for a transaction.

Why important for government contractors:1. Financing and Bonding2. Exit activities (equity raise, sale, ESOP, etc.)3. Compliance with Federal Acquisition Regulations4. Compliance with SBA 8(a) program5. Valuations6. And more..







Federal Acquisition Regulations (FAR)

The Federal Acquisition Regulations System is establishedfor the codification and publication of uniform policies andprocedures for acquisition by all executive agencies.[Sec. 1.101 of FAR]

• The “rule book” of government contracting• Rules federal agencies must and will follow to award

and administer contracts• The rules you will be expected to follow to bid and

perform contracts• Some external laws and regulations

http://www.acquisition.gov/far/index.html



http://www.acquisition.gov/far/index.html





Small Business Programs

• Know whether you are a small business– NAICS Codes (www.naics.com)

• Small Business Set Asides– Simplified Acquisition Threshold– “Rule of Two”– Set aside programs– 8(a) Program

• Subcontracting Plans– Prime contracts in excess of $550,000 require the large business

to subcontract with small businesses



http://www.naics.com/





Income Taxes (Federal and State)

• Entity choice– LLC, S corporation– C corporation, partnership

• Cash versus accrual • Compensation methods• State tax impacts – Nexus







Entrepreneurs & Shareholder Value

Most people do not go into business just to be compliant…







Key Indicators

• Working capital• Debt to equity• Tangible net worth• Labor utilization• Wrap rate• Accounts receivable DSO• EBITDA % of sales• Subcontract versus Prime contract• Cash flows and forecast• Backlog (funded & unfunded)







Financial and Accounting Systems – Goals

• Get familiar with basic rules and concepts for contractors• Set up your system the correct way







Financial and Accounting Systems – Benefits

• Prove your financial worthiness• Demonstrate your GovCon expertise to potential

partners• Understand what drives profit for your business







Direct vs. Indirect Costs

G&A

Overhead

Fringe

Indirect Costs

Proj. 1 Proj. 2

Direct CostsDirect Labor

Direct MaterialOther Direct Costs







Direct Costs

• Labor and materials needed to perform your contract







Indirect Costs

• Fringe – related to employees

• Overhead – related to contracts

• G&A – residual costs of running a business







Unallowable Costs

• Not to be confused with the income tax term

• Specifically identified in the FAR

• “Reasonableness” test







Policies & Procedures

• More than a handbook• The “why” and the “how” of

running your business• Must be in writing• Need to incorporate an

understanding of GovCon rules

• Available to appropriate employees







Processes to Document

• Timekeeping• Billing• Budgeting• Distinguishing Direct vs. Indirect Costs• Travel• Treatment of Unallowable Costs• Bonus and Compensation• Accounts Payable• More, depending on the nature of your business







Timesheets - Rules

• Employees enter time daily• Enter all time worked• Review and approval by supervisors or management• Train your employees







About Aronson LLC

Aronson LLC provides a comprehensive platform of assurance, tax, and consulting solutions to today’s most active industry sectors and successful individuals. For more than 50 years, we have purposefully expanded our service offerings and deepened our industry specialties to better serve the needs of our clients, people, and community. From startup to exit, we help our clients maximize opportunity, minimize risk, and unlock their full potential.







About Aronson LLC

• Thinking ahead for clients for more than 50 years• 225+ professionals located in Rockville, MD• 80+ professionals dedicated to supporting government contractors • Aronson helps clients rethink the way they approach their business

through innovative, industry-specific services and advice:– Audit, Assurance and Tax– Deltek Systems and Outsourcing– Financial and Contract Compliance– GSA Schedules

• www.aronsonllc.com/blogs/fedpoint/ – News and trends and insight for today’s savvy government contractor



http://www.aronsonllc.com/blogs/fedpoint/





Awards / Accolades / Affiliations

The Gazette of Politics & Business Exceptional 53 Business Award In 2012, Aronson received the PB53 award for the third year in a row. The program acknowledges the top businesses and organizations in Maryland based on criteria that includes the company’s annual revenue, employee growth, noteworthy product or service innovations, community service efforts and more.

Accounting Today Top Firm In 2013, Aronson was once again named to Accounting Today’s list of the top 100 firms in the country. Accounting Today is a leading provider of online business news for the tax and accounting community.

Washington Business Journal Top 25 Aronson is ranked #12 on the Washington Business Journal’s Top 25 Accounting Firms in the DC Metropolitan area.

INSIDE Public Accounting Top 100 Once again, Aronson has earned a spot in the top 100 of this prestigious list, released by INSIDE Public Accounting. This is the longest running, most comprehensive and accurate independent analysis focusing on management and operations of America’s large local, regional and national firms.

Washington Business Journal Best Places to Work Aronson has been recognized five times as one of the Metro area’s “Best Places to Work.” The award recognizes a company’s achievements in creating a positive work environment that attracts and retains employees through a combination of employee satisfaction, working conditions and company culture.

Montgomery County Chamber Corporate Social Responsibility AwardIn 2010, Aronson was honored to receive the MCCC’s Corporate Social Responsibility Award based on the depth and breadth of the company’s energetic commitment to support young people, in the areas of education, housing and health.







Barbara Morgan is a partner of the systems outsourcing practice of Aronson's Government Contract Services Group. She has over 25 years of experience in both public and private accounting.Barbara is responsible for integrating new outsourcing clients and implementing their accounting software systems. Her combined expertise in generally accepted accounting principles, technical software capabilities, and the government contracting industry gives her a unique perspective and a level of knowledge that is unparalleled. As an industry expert, Barbara also provides consulting services to help government contractors better understand the accounting matters affecting this complicated industry.Prior to joining Aronson LLC, she was controller and principal accounting officer for a publicly traded company in the technology services industry.In addition to conducting seminars and training classes, she is an author for the Aronson FedPoint blog and a frequent volunteer business coach for emerging government contractors.

Partner, Government Contract Services Group

301.231.6238

[email protected]

Barbara W. Morgan, CPA



http://blogs.aronsonllc.com/fedpoint/author/bmorgan/

http://blogs.aronsonllc.com/fedpoint/author/bmorgan/





301.231.6238

Contact Barbara Morgan

[email protected]

https://www.linkedin.com/in/barbara-morgan-cpa-1b64a215







Fundamentals for Government Contractors

Government & Nonprofit

Transcript of Fundamentals for Government Contractors