Standard Form 1408 (SF 1408)
Below are 12 of the key elements of a DCAA compliant accounting system as identified on the Standard Form – SF 1408.
· SF 1408 1 Demonstrate compliance with generally accepted accounting principles (GAAP)
· SF 1408 2a Segregate direct costs from indirect costs
· SF 1408 2b Accumulate contracts costs by cost element and by contract
· SF 1408 2c Logical & consistent method to allocate indirect cost pools and allocation bases
· SF 1408 2d Accumulate costs under general ledger control
· SF 1408 2e Use of a timekeeping system to identify labor by direct or indirect cost objectives
· SF 1408 2f Maintain a labor distribution system that appropriately applies labor to direct and indirect cost objectives.
SF 1408 2g Prove transactions are entered on at least a monthly basis
· SF 1408 2h Properly identify and account for unallowable costs
· SF 1408 2i Track costs by contract line item (CLIN) as applicable
SF 1408 2j Segregate preproduction costs from production costs
SF 1408 3a Provide financial information required by contract clauses concerning limitation of cost (FAR 52.232-20 and 21) or limitation on payments (FAR 52.216-16)
SF 1408 3b Provide financial information required to support requests for progress payments
SF 1408 4 Ensure adequate, reliable data for use in pricing follow-on acquisitions
An adequate accounting system subject to DCAA audit is most relevant to cost reimbursable contracts. Under cost reimbursable contracts, the DCAA compliant accounting system must be adequate and approved by the government under FAR Subpart 16.301-3(a)(3).
In some cases, the government requires a DCAA compliant accounting system under the time and material contracts on a case by case basis. It depends on how significant the “Materials” portion of the T&M are. “Materials” in this case includes all non-labor direct costs including travel, material, equipment, and ODCs.
If you have a negotiated fixed price contract, you are not required to have a DCAA compliant accounting system. A contractor must only ensure that their proposal pricing data meets the cost or pricing data requirements.