dcaa compliance

Is Your Quickbooks DCAA Compliant?

If you’re a government contractor, you know all about DCAA compliance, right?  Or, perhaps you have just recently won a government contract and wondering, “Is your Quickbooks DCAA compliant?”

What is DCAA Compliance?

When you enter the world of government contracting, you must pay careful attention to the internal controls of your business, and you are subject to DCAA compliance.  This agency is responsible for evaluating contractor’s financial policies, procedures, audits, and internal controls.  Ultimately, the goal is to help contractors minimize costs.


DCAA involvement will depend on the type of contract awarded.  Is your contract:  Fixed Price, Cost Reimbursable or Time & Materials?  Contractors need to spend time and effort identifying exactly which costs are direct, because whatever is leftover, is of course, indirect.  So, you’ll need an Accountant or accounting system that is methodical about identifying and properly classifying these costs.


Some companies think they can run one set of books for their government contracts and another set for their commercial business, but if you have a government contract, your entire system must use the same process.  This rule flows to the timekeeping methods, overhead, customer jobs, and more.  Your chart of accounts will need to be separated into two major expense components:  Direct and Indirect.   You must create an Accounting Manual to document the policies and procedures of the business.  Your chart of accounts will need a new profit and loss account structure. and you will need to start accumulating costs under the new structure.  Project Accounting will also need to be implemented.

TimeKeeping & Payroll

Because Quickbooks doesn’t have a built-in, compliant time-tracking system, it is often necessary to use an external system that integrates with Quickbooks.  This system would need to track time (worked, paid & unpaid) on a daily basis, project numbers, contract names and documentation of any changes in the records along with other requirements.  Because Quickbooks distributes labor dollars to projects, you’ll need to establish a separate system to house all labor distribution, project accounting and general ledger accounting.


Quickbooks offers many add-ons and options to serve as a DCAA-compliant system, but it’s a good idea to have an experienced Accountant guide you through the setup and maintenance of this system.  Emerald Financial Partners has worked with government contractors, for DCAA compliance, for over 25 years!  Contact us today to schedule a consultation and we’ll help you get you organized and up-to-speed!

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