Government Contractors can pass a DCAA Accounting System Review using QuickBooks

While attending a conference, an 8(a) small business government contractor told us they were advised that QuickBooks® cannot be deemed DCAA compliant. This is flat out false.

Countless businesses have passed the DCAA accounting system review using QuickBooks as their accounting system backbone. Under FAR 16.301-3(a)(3), a cost-reimbursement contract may only be awarded when "the contractor's accounting system is adequate for determining costs applicable to the contractor or order." A preaward review evaluates whether the accounting system design is consistent with the requirements outlined in DFARS 252.242-7006. The auditor will verify the accounting system is capable of accumulating costs under the prospective contract, and capable of generating the specific cost information required under the contract.

The specific requirements of an adequate accounting system are defined in DFARS 252.242-7006, and conveniently articulated in the Standard Form 1408. This checklist is used in the accounting system evaluation process.

What you won't find in the SF1408, or anywhere for that matter, is a list of endorsed software for GovCon accounting. In fact, no software is "DCAA compliant" out of the box.

What does the "DCAA Compliant" designation mean?

An adequate accounting system entails more than just software, though software plays a critical role. It's how you implement and use that software as part of the broader accounting system that matters. The system components necessary for DCAA Compliance include:

  • Properly configured accounting system
  • General ledger system with adequate internal controls
  • Written policy and procedure statements
  • Compliant timekeeping
  • Labor distribution
  • Indirect rates and indirect cost allocation
  • Contract cost reporting

It is true that QuickBooks on its own does not have the full capabilities to meet the requirements enumerated on the SF1408. A contractor must go outside the system to complete certain functions. For some, Excel is sufficient. For many, it makes sense to use a software add-on to QuickBooks, such as ICAT, to automate the contract cost functions and efficiently generate cost data.

Again, compliance comes back to system design, policies and procedures.

The Bottom Line - You can pass the DCAA Accounting System Review

Each GovCon business has a unique set of needs, and the factors driving their success will evolve over time. For small and growing businesses, it is important to implement an accounting system that matches your business's needs. Expensive, complex software is not always necessary. With ICAT or Excel, the accounting system compliance objectives can be easily achieved using QuickBooks.

Learn how to Make QuickBooks® DCAA Compliant for Government Contracts with on-demand training: