What Happens During a DCAA Pre-Award Accounting System Survey?

Winning a federal contract involves more than submitting a competitive technical proposal.

For companies pursuing certain cost-reimbursable government contracts, the federal government must also determine whether the contractor has an accounting system capable of properly tracking and supporting contract costs.

This requirement can create uncertainty for businesses entering federal contracting for the first time.

A company may already have accounting software, accurate financial statements, payroll records, and an outside CPA. It may have successfully managed an SBIR/STTR award or performed commercial research contracts.

But those capabilities do not automatically establish that its accounting system meets the requirements for a cost-reimbursable federal contract.

The government may need assurance that the contractor can distinguish direct costs from indirect costs, accumulate expenses by contract, maintain appropriate timekeeping records, reconcile labor distribution to payroll, identify unallowable costs, and generate the information needed for cost-based billing.

That is where a DCAA pre-award accounting system survey may become important.

The central question is whether the company's accounting system is designed to support the financial requirements of the proposed federal contract.

At Peter Witts CPA PC, we help emerging and established government contractors evaluate accounting system readiness, identify potential deficiencies, and strengthen the cost accounting procedures needed for federal contract performance.

What Is a DCAA Pre-Award Accounting System Survey?

A DCAA pre-award accounting system survey evaluates whether a prospective contractor's accounting system design is acceptable for accumulating and reporting costs under a contemplated federal contract.

DCAA stands for the Defense Contract Audit Agency.

The agency performs contract audit services for the Department of Defense and certain other federal organizations.

During an applicable pre-award survey, DCAA assesses the accounting system using criteria associated with Standard Form 1408 (SF 1408), Preaward Survey of Prospective Contractor Accounting System .

The purpose is to help the government understand whether the prospective contractor has the accounting capabilities necessary for the anticipated contract.

DCAA's pre-award survey audit program specifically focuses on whether the accounting system's design meets the SF 1408 criteria and whether the system is operating or has been established but is not yet operating.

This distinction matters for companies preparing for their first cost-reimbursable contract.

They may not yet have years of federal contract transactions to demonstrate, but they still need a properly designed accounting system capable of meeting the relevant requirements.

Why Does Accounting System Adequacy Matter Before Contract Award?

Under FAR 16.301-3, a cost-reimbursement contract may be used only when the contractor's accounting system is adequate for determining costs applicable to the contract or order.

This requirement protects the integrity of cost-based government contracting.

Unlike a firm-fixed-price contract, which generally establishes an agreed price without adjusting that price based on actual performance costs, a cost-reimbursable contract provides for reimbursement of allowable incurred costs within the applicable contractual limitations.

The contractor must therefore be able to determine which costs belong to the contract.

An accounting system that cannot reliably identify those costs may create significant problems with:

Contract cost accumulation
Reimbursement
Indirect rate calculations
Labor charging
Cost allowability
Contract invoicing
Funding limitations
Financial reporting
Government reviews

Accounting system adequacy is therefore an important pre-award consideration.

Does Every Government Contractor Need a DCAA Pre-Award Survey?

No.

Not every federal contract requires a DCAA pre-award accounting system survey.

The need for an evaluation depends on the acquisition, contract type, agency, financing arrangements, and applicable oversight requirements.

For example, a company pursuing a straightforward firm-fixed-price contract may not be subject to the same pre-award accounting system requirements as a contractor pursuing cost-reimbursable work.

However, the company's accounting system may still need to support other contractual obligations.

When a Survey May Be Relevant

A DCAA pre-award accounting system survey may be relevant when a company:

Is pursuing its first cost-reimbursable federal contract.
Is transitioning from fixed-price to cost-based contracting.
Is entering a procurement arrangement requiring adequate cost accounting capabilities.
Is seeking applicable cost-based progress payments.
Has been asked by a contracting officer to complete an accounting system checklist.
Is preparing for an anticipated government accounting system evaluation.

The contracting officer or responsible government office determines the applicable process.

Companies should not assume that DCAA will independently initiate a survey whenever a federal proposal is submitted.

What Is SF 1408?

SF 1408 is the standard pre-award survey form used to evaluate a prospective contractor's accounting system against specified criteria.

The form addresses whether the accounting system can provide the cost information necessary for government contracting.

Major areas include:

Proper segregation of direct and indirect costs
Identification and accumulation of direct costs by contract
Logical and consistent indirect cost allocation
Accumulation of costs under general ledger control
Timekeeping capabilities
Labor distribution
Identification of unallowable costs
Interim determination of contract costs
Exclusion of certain costs from government reimbursement requests
Limitation of costs to authorized contract amounts
Production of appropriate cost information for billing and reporting

DCAA provides a Pre-award Accounting System Adequacy Checklist that contractors can use to document how their system is designed to meet these criteria.

The checklist is an important starting point for companies preparing for an evaluation.

Step 1: Understand How the Pre-Award Survey Begins

The process generally begins when the government determines that accounting system information is needed in connection with a prospective award.

The contracting officer may request a pre-award accounting system evaluation.

The prospective contractor may be asked to complete DCAA's accounting system adequacy checklist.

The government then uses the provided information as part of the evaluation process.

What the Contractor May Be Asked to Provide

Depending on the circumstances, the company may need to provide:

Completed pre-award accounting system checklist
Accounting policies and procedures
Description of accounting software
Chart of accounts
Project or contract coding structure
General ledger reports
Timekeeping procedures
Labor distribution methodology
Indirect cost calculation approach
Unallowable cost procedures
Sample reports
Billing procedures

The exact requests depend on the scope of the survey.

A company should respond to the specific government request rather than assume every pre-award survey follows an identical document list.

Step 2: Evaluate the Accounting System Before the Government Review

Before completing the checklist, the company should examine whether its current accounting system can demonstrate the required capabilities.

This involves more than confirming that accounting software has been installed.

The company should review:

System configuration
General ledger structure
Project cost tracking
Direct and indirect cost classification
Payroll integration
Timekeeping
Labor distribution
Indirect rates
Unallowable cost identification
Billing capabilities
Written procedures

A system may appear adequate in principle but have significant gaps in its actual configuration.

For example, software may support project codes, but those codes may not be assigned to transactions consistently.

Similarly, a company may collect employee timesheets without having a process to connect those hours to payroll costs.

The assessment should focus on whether the accounting system operates as an integrated financial process.

Step 3: Demonstrate Proper Segregation of Direct and Indirect Costs

One of the fundamental SF 1408 criteria involves separating direct costs from indirect costs.

Direct Costs

Direct costs are expenses that can be identified specifically with a particular contract or other cost objective.

Examples may include:

Direct engineering labor
Contract-specific materials
Specialized testing
Approved travel
Contract-specific consultants
Subcontractor expenses

Indirect Costs

Indirect costs benefit multiple cost objectives or support broader company operations.

Examples may include:

Shared facilities
Accounting administration
Payroll administration
General management
Shared technical supervision
Certain employee benefits
General business insurance

The appropriate treatment depends on the company's operations, accounting practices, and applicable FAR requirements.

What the Survey May Evaluate

The reviewer may examine whether the company has established accounts, codes, and procedures to distinguish these cost categories.

A common weakness occurs when companies classify nearly all operating expenses as general overhead without a clear method of identifying direct contract costs.

Another issue arises when similar costs are treated as direct on one project and indirect on another without a supportable reason.

The accounting system should apply a consistent methodology that reflects the nature and benefit of the costs.

Step 4: Show That Direct Costs Can Be Accumulated by Contract

A government contractor must be able to determine how much has been charged to each applicable contract.

For cost-reimbursable work, contract-level cost accumulation is essential.

The accounting system should support reporting by:

Contract number
Project
Cost objective
Cost category
Accounting period
Applicable contract line item or other reporting dimension

Example: Contract Cost Tracking

Consider a company performing several activities.

Cost Objective	Activity
DOD-001	Cost-reimbursable research contract
NASA-002	Fixed-price technical contract
NIH-003	SBIR grant
COMM-004	Commercial customer project
IRD-005	Internal R&D
ADMIN-006	General administration

Illustrative coding structure.

The company should be able to distinguish costs for the DoD contract from the NASA contract, NIH grant, commercial work, and internal projects.

If expenses cannot be accumulated by contract, the company may struggle to establish the actual cost of performing cost-reimbursable work.

What a Reviewer May Ask

A reviewer may ask the company to demonstrate how a transaction is assigned to a particular contract.

The company should be able to show the project coding and corresponding general ledger or cost report.

Step 5: Review the Chart of Accounts and General Ledger

An adequate accounting system should operate under general ledger control.

The chart of accounts should support the cost classifications necessary for federal contract accounting.

Typical categories may include:

Direct labor
Direct materials
Direct travel
Consultants
Subcontracts
Fringe benefits
Overhead
General and administrative expenses
Unallowable expenses
Internal R&D
Commercial activities

The accounting system should be capable of producing reliable financial reports from these records.

Why General Ledger Reconciliation Matters

The general ledger should serve as the control record for accounting activity.

Project-level reports, labor distribution schedules, and indirect cost calculations should reconcile to the corresponding ledger accounts.

For example, if the labor distribution report shows $75,000 of direct labor during a period, the company should be able to reconcile that amount to the appropriate payroll and ledger information.

The reviewer may evaluate whether the system is designed to support these reconciliations.

Step 6: Explain How Indirect Cost Pools and Allocation Bases Work

Government contractors often accumulate indirect expenses into cost pools and allocate those expenses using appropriate bases.

Depending on the company, the structure may include:

Fringe benefit pool
Overhead pool
General and administrative pool

Not every contractor needs the same number of cost pools.

The structure should reflect the company's operations and an appropriate allocation methodology.

Example: Indirect Cost Calculation

Suppose a contractor maintains an overhead pool of $180,000.

Its eligible direct labor allocation base is $360,000.

The calculated overhead rate would be:

$180,000 ÷ $360,000 = 50%

If a particular contract has $80,000 of eligible direct labor, applying that supported overhead rate would produce $40,000 in overhead allocation.

Illustrative example only. Actual allowable allocations depend on the applicable cost pools, bases, rate periods, and contractual requirements.

The accounting system should support the source amounts used in the calculation.

Common Indirect Rate Problems

Potential issues include:

Costs assigned to the wrong pool
Inconsistent allocation bases
Missing direct labor costs
Unallowable costs included improperly
Unsupported allocations
Shared expenses charged entirely to one contract
Inability to reconcile calculations to the ledger

These problems may affect the system's ability to determine costs applicable to individual contracts.

Step 7: Demonstrate an Adequate Timekeeping System

Timekeeping is one of the most closely examined elements of federal contract cost accounting.

Employees may divide their time among different contracts, indirect activities, internal development, and commercial work.

The company needs a process for recording and reviewing those activities.

What Timekeeping Procedures Should Address

An appropriate process should consider:

Employee identification
Work dates
Hours recorded
Contract or project codes
Direct and indirect activities
Employee responsibility for accurate entries
Supervisor review
Correction procedures
Record retention

The specific controls should align with the applicable requirements and the company's accounting system design.

What a Reviewer May Ask

A reviewer may ask:

How do employees record hours?
How are project codes assigned?
Who reviews time records?
Can employees charge time to multiple projects?
How are errors corrected?
Does the system preserve correction history?
How are time records transferred into labor distribution?

The company should be able to explain and demonstrate its process.

Avoid Informal Timekeeping

A startup may initially estimate employee time using monthly budget percentages.

However, a prospective cost-reimbursable contractor needs a process capable of supporting labor charges by cost objective.

Budgeted effort does not automatically establish actual labor incurred.

Step 8: Connect Timekeeping to Labor Distribution

Timekeeping records employee work.

Payroll records compensation.

Labor distribution assigns payroll costs to the relevant cost objectives.

These records should be connected.

Example: Labor Distribution

Suppose an engineer receives $6,000 in gross compensation during a pay period.

Their supported activity allocation is:

Activity	Labor Cost
DoD Contract	$3,600
NASA Contract	$1,200
Internal R&D	$600
General Administration	$600
Total	$6,000

llustrative example using an appropriate compensation allocation method.

The accounting system should support the allocation and reconcile it to payroll.

What the Survey May Evaluate

The reviewer may consider whether the company's labor distribution process can:

Assign direct labor by contract
Assign indirect labor appropriately
Reconcile to timekeeping
Reconcile to payroll
Reconcile to the general ledger
Maintain appropriate supporting records

A company that collects timesheets but does not distribute payroll expenses to cost objectives may have an important accounting system gap.

Step 9: Demonstrate Procedures for Identifying Unallowable Costs

Federal contracts may contain costs that are not allowable for government reimbursement.

FAR Part 31 establishes cost principles relevant to many government contract arrangements.

The accounting system should be capable of identifying and excluding expressly unallowable costs from applicable billings, claims, and proposals.

Depending on the circumstances, examples may include certain entertainment expenses, lobbying costs, penalties, and other expenses subject to restrictions.

The exact treatment depends on the cost, contract, and applicable cost principles.

Why Unallowable Cost Identification Matters

A company may record an expense for financial statement or tax purposes even though it cannot charge that expense to a federal contract.

For example, certain expenses may be legitimate business expenditures but not allowable for government reimbursement.

The accounting system should distinguish those costs rather than treating every recorded expense as federally allowable.

Common Deficiencies

Potential problems include:

No accounts for unallowable costs
Unallowable expenses included in indirect pools
Unsupported cost allowability decisions
No written procedures
Inconsistent classification
Unallowable costs included in cost proposals or billing calculations

The company should evaluate cost allowability as a regular accounting process rather than only when an auditor asks.

Step 10: Demonstrate Interim Contract Cost Reporting

The SF 1408 criteria address whether the accounting system can support interim determination of costs charged to a contract.

This means the company should be capable of producing useful cost information during contract performance.

A practical contract cost report may show:

Direct labor
Direct materials
Consultants
Subcontractor charges
Other direct costs
Applicable indirect costs
Total costs incurred
Contract budget
Remaining funding

The precise reporting requirements depend on the proposed contract.

Why Monthly Cost Reports Matter

A contractor should not need to wait until fiscal year-end to determine the cost of performing a contract.

Monthly reporting can help identify:

Cost overruns
Incorrect labor charges
Indirect rate issues
Billing differences
Funding limitations
Unexpected subcontractor costs

During a pre-award survey, the company may be asked to demonstrate the type of interim cost information its system can produce.

Step 11: Explain How the System Supports Contract Billing

Cost-reimbursable federal contracts may require invoices or vouchers based on allowable incurred costs.

The accounting system must therefore support the information necessary to prepare appropriate billings.

Depending on the contract, billing support may include:

Direct labor costs
Payroll and labor distribution
Materials
Travel
Subcontractor costs
Other direct costs
Indirect rate calculations
General ledger detail
Applicable adjustments

What the Reviewer May Evaluate

A reviewer may examine whether the system can produce the cost information needed for contract billing and identify amounts that should not be included.

This does not necessarily mean that a company must have submitted prior cost-reimbursable invoices before its first contract.

However, the system should be designed to provide the required information when contract performance begins.

Billing Must Follow Contract Terms

A company should not assume that all federal contracts use the same invoice format or payment process.

Billing requirements depend on contract type, clauses, agency instructions, and payment arrangements.

Step 12: Review Contract Funding and Cost Limitation Controls

An adequate accounting system should help contractors monitor costs in relation to applicable contract limitations.

For cost-reimbursable contracts, the company must understand the difference between:

Estimated contract cost
Contract funding
Costs incurred
Outstanding commitments
Forecasted costs to complete
Remaining funds

Some contracts contain limitation-of-cost or limitation-of-funds provisions.

These may create notice obligations when costs approach specified thresholds.

Example: Contract Funding Review

Suppose a contract has $500,000 in authorized funding.

The accounting reports show:

Financial Measure	Amount
Authorized funding	$500,000
Costs incurred	$330,000
Remaining authorized funding	$170,000
Forecast additional cost to complete	$190,000
Forecast funding shortfall	$20,000

Illustrative example excluding any commitments not already incorporated into the forecast.

The system should allow management to identify the potential shortfall in time to take appropriate contractual action.

A company should not wait until funding has been exhausted before reviewing its financial position.

Step 13: Prepare Written Accounting Policies and Procedures

Accounting policies help explain how the company maintains the system evaluated during the survey.

A contractor should consider written procedures covering:

General ledger maintenance
Contract setup
Project coding
Direct and indirect costs
Timekeeping
Labor distribution
Payroll reconciliation
Indirect rate calculations
Unallowable costs
Purchasing
Subcontractor expenses
Contract billing
Financial reporting
Accounting corrections
Record retention

The procedures should describe how the company actually operates.

A policy manual copied from another contractor may not reflect the company's software, staffing, or accounting processes.

Policies Should Match Actual Practice

For example, a timekeeping policy may state that employees record time each day.

If the company actually estimates hours at the end of the month, its described process may not match its operations.

The company should address the underlying process rather than simply revise the wording provided to a reviewer.

Step 14: Understand What DCAA May Ask During the Survey

A pre-award survey can involve discussions with accounting personnel and examination of system documentation.

The reviewer may request descriptions or demonstrations of how the company's accounting process works.

Potential questions include:

Which accounting software does the company use?
Can direct costs be accumulated by contract?
How are indirect costs separated and allocated?
How are employee hours recorded?
How does labor distribution connect to payroll?
How are unallowable costs identified?
Can costs be determined during the accounting period?
How does the company support contract billing?
How are corrections documented?
Can management monitor contract costs against funding?

The company should respond clearly and accurately.

If the system is configured but has not yet been used for an actual cost-reimbursable contract, explain that status.

DCAA's pre-award survey procedures distinguish between an operating system and a system established but not yet in operation.

Step 15: Prepare an Accounting System Demonstration

An effective preparation exercise is to walk through sample transactions from beginning to end.

For example, demonstrate how the system would handle:

Direct Labor

Employee time entry → approved time record → payroll → labor distribution → contract cost report → general ledger.

Vendor Invoice

Vendor invoice → expense approval → project code → general ledger → contract cost report.

Indirect Cost

Indirect expense → cost pool → allocation base → indirect rate calculation → contract allocation.

Contract Billing

Supported contract expenditures → applicable indirect costs → invoice preparation → billing reconciliation.

These demonstrations help identify whether the accounting system's components operate together.

They also reveal potential deficiencies before an official government review.

Step 16: Identify Common Pre-Award Accounting System Deficiencies

Several deficiencies can affect the system's readiness.

1. No Reliable Contract-Level Cost Tracking

The company cannot distinguish costs belonging to individual contracts.

2. Direct and Indirect Costs Are Not Properly Separated

Shared expenses may be assigned directly to contracts without a supportable methodology.

3. Indirect Cost Pools Are Not Defined

The company may lack appropriate pools or allocation bases.

4. Inadequate Timekeeping Procedures

Employee labor records may not identify actual work by cost objective.

5. Labor Distribution Does Not Reconcile to Payroll

The company may be unable to demonstrate how employee compensation was assigned to contracts.

6. Project Reports Do Not Reconcile to the General Ledger

Contract cost reporting may rely on disconnected spreadsheets or unsupported calculations.

7. Unallowable Costs Are Not Identified

The system may include unallowable expenses in contract cost calculations.

8. No Interim Contract Cost Reporting

Management may be unable to determine contract costs during performance.

9. Insufficient Billing Support

The system may not generate reliable information for cost-based invoices.

10. Weak Accounting Correction Controls

Journal entries and project corrections may lack appropriate supporting explanations or approvals.

11. Procedures Are Not Documented

The company may have useful accounting practices but no clear written process explaining them.

12. Procedures Do Not Match Actual Operations

The company may describe controls that have not been established or implemented.

These issues should be addressed before relying on the system for a prospective cost-reimbursable award.

Step 17: What Happens If the System Is Found Inadequate?

A pre-award survey may identify concerns with the accounting system design.

The auditor's work supports the government's evaluation of the prospective contractor.

The contracting officer or responsible acquisition authority uses the information in making the applicable contract award determination.

The contractor should not assume that a survey result is a universal certification or permanent approval applicable to every future contract.

Responding to Identified Deficiencies

If the review identifies weaknesses, the company should:

Obtain and understand the reported concerns.
Determine which accounting processes are affected.
Identify the root causes.
Develop corrective actions.
Update system configurations or procedures.
Prepare supporting documentation.
Coordinate with the responsible government officials as appropriate.

Example: Labor Distribution Deficiency

Suppose the company maintains timesheets but does not have a process to assign payroll expense to direct and indirect cost objectives.

The corrective action may require:

Establishing payroll allocation procedures
Configuring project and indirect labor codes
Creating a labor distribution report
Implementing payroll-to-ledger reconciliation
Documenting employee and supervisor responsibilities
Demonstrating how corrections are handled

Simply purchasing new timekeeping software may not resolve the issue unless the entire process works properly.

Step 18: How to Prepare Before the Survey

Preparation should begin before the government requests documents.

A practical readiness review should include five phases.

Phase 1: Accounting System Assessment

Evaluate the current system against SF 1408 criteria.

Identify gaps in cost classification, project tracking, timekeeping, labor distribution, and reporting.

Phase 2: System Configuration

Establish appropriate accounts, project codes, cost pools, and reporting structures.

Phase 3: Procedure Development

Document how employees record time, accounting personnel classify costs, and management reviews financial activity.

Phase 4: Internal Testing

Use sample transactions to test labor distribution, indirect cost calculations, general ledger reconciliation, and contract reporting.

Phase 5: Readiness Review

Evaluate whether the system is capable of demonstrating the applicable requirements and whether the company can explain its procedures accurately.

This process allows management to identify problems before they affect an active contract opportunity.

Step 19: Understand the Difference Between Pre-Award and Post-Award Accounting Reviews

A pre-award accounting system survey focuses primarily on system design and the capability to accumulate contract costs.

A post-award accounting system audit may evaluate how the system is operating and whether applicable requirements are being met in practice.

These are related but distinct activities.

A favorable pre-award survey does not eliminate the contractor's responsibility to maintain adequate accounting procedures during performance.

The company should continue reviewing:

Contract costs
Payroll and labor distribution
Indirect cost allocations
Unallowable costs
General ledger reconciliation
Billing support
Accounting corrections
Financial reporting

System readiness should become an ongoing financial management responsibility.

DCAA Pre-Award Accounting System Readiness Checklist

Before an anticipated accounting system survey, review the following:

The proposed contract's accounting requirements are understood.
The company has reviewed the SF 1408 criteria.
The DCAA pre-award checklist has been reviewed.
Accounting software is appropriately configured.
The chart of accounts supports government contract accounting.
Direct and indirect costs are distinguishable.
Direct costs can be accumulated by contract.
Project codes are established.
Indirect cost pools are defined.
Allocation bases are documented.
Indirect rates can be calculated from accounting records.
General ledger control is established.
Project reports can be reconciled to the ledger.
Employee timekeeping procedures are documented.
Timekeeping records identify applicable cost objectives.
Labor distribution connects timekeeping to payroll.
Labor distribution reconciles to the general ledger.
Unallowable costs can be identified and excluded appropriately.
Interim contract costs can be determined.
Contract cost reports can be produced.
The system can support applicable cost-based billing.
Contract funding can be monitored.
Accounting corrections preserve an audit trail.
Written policies and procedures reflect actual practice.
Responsible personnel understand the accounting process.
Sample transaction walkthroughs have been completed.
Potential accounting system deficiencies have been identified.
Corrective actions have been documented.
Supporting materials are organized for government review.

If several items remain incomplete, the company may benefit from an independent pre-award accounting system readiness assessment.

Frequently Asked Questions About DCAA Pre-Award Accounting System Surveys

Is a DCAA Pre-Award Accounting System Survey Required for Every Federal Contract?

No.

The need for a survey depends on the contract type, agency, financing arrangements, and acquisition requirements.

Cost-reimbursable contracts generally require an adequate system for determining contract costs before award.

What Is SF 1408?

SF 1408 is the standard form used to evaluate a prospective contractor's accounting system against specified pre-award criteria.

It addresses matters such as direct and indirect costs, contract cost accumulation, timekeeping, labor distribution, and other cost accounting capabilities.

Does DCAA Certify Accounting Software?

No.

DCAA does not provide universal certification of commercial accounting software.

The government evaluates the contractor's accounting system design and relevant processes, rather than certifying a software brand.

Can a Company Use QuickBooks for Government Contract Accounting?

Potentially.

The critical question is whether the overall accounting system—including software configuration, project coding, timekeeping, labor distribution, indirect cost calculations, and supporting procedures—can meet the applicable requirements.

The software name alone does not determine adequacy.

Does the Company Need to Have an Existing Cost-Reimbursable Contract?

Not necessarily.

A pre-award accounting system survey may evaluate a prospective contractor's system before its first cost-reimbursable contract.

The system should be properly designed and capable of producing the required cost information.

Will DCAA Review Every Historical Expense?

Not necessarily.

The primary objective of the pre-award accounting system survey is to evaluate the system's design against the relevant criteria.

A separate audit may involve a different scope.

What If Our Timekeeping System Is Not Fully Implemented?

The company should evaluate the gap and determine what is necessary to establish a properly designed and demonstrable process.

Whether the system is operating or merely configured is relevant to the survey.

Do not represent unimplemented procedures as established operating controls.

Can a Company Correct Deficiencies Before Contract Award?

Potentially, depending on the deficiency and acquisition schedule.

The company should identify necessary corrective actions and coordinate with the responsible government officials.

No particular remediation timeline or award outcome is guaranteed.

Does Passing a Pre-Award Survey Mean the Company Will Never Be Audited Again?

No.

The company may be subject to later accounting system reviews, incurred cost audits, billing reviews, or other government oversight as applicable.

Can an Outside Accounting Firm Help With SF 1408 Readiness?

Yes.

A specialized government contract accounting firm can help assess system design, implement cost accounting structures, establish procedures, and identify potential deficiencies before the government review.

The official survey and contract award determinations remain government responsibilities.

Final Thoughts: Accounting System Readiness Should Begin Before the Contract

A DCAA pre-award accounting system survey can be a significant step for businesses entering cost-reimbursable federal contracting.

It requires contractors to demonstrate that their accounting systems are designed to identify, accumulate, allocate, and report contract costs appropriately.

That includes direct and indirect cost segregation, contract-level cost tracking, timekeeping, labor distribution, indirect rate calculations, general ledger control, unallowable cost identification, and reliable cost reporting.

Companies that establish these capabilities before pursuing a cost-reimbursable contract are better positioned to identify accounting weaknesses and address them before an official evaluation.

At Peter Witts CPA PC, we help emerging and established government contractors strengthen accounting system design and financial processes throughout the federal contracting lifecycle.

Founded by a former DCAA auditor, our firm brings decades of specialized government contract accounting experience to the accounting system, compliance, and financial challenges federal contractors face.

Need Help Preparing for Your Pre-Award Accounting Review?

If your company is pursuing its first cost-reimbursable government contract or has been asked to prepare for an SF 1408 accounting system evaluation, now is the time to assess whether your accounting system can support the applicable requirements.

Peter Witts CPA PC can help review your chart of accounts, contract cost tracking, direct and indirect cost classification, timekeeping, labor distribution, indirect rates, general ledger reconciliation, cost reporting, and accounting procedures.

Whether you are establishing a government contract accounting system from the ground up or evaluating an existing system for potential deficiencies, our team can help identify gaps and strengthen your readiness.

Prepare for Your Pre-Award Accounting Review

Schedule a consultation with Peter Witts CPA PC to evaluate your accounting system against applicable pre-award criteria and prepare for the financial requirements of cost-reimbursable government contracting.