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 DCAA consulting

  • DCAA Audits
  • DCAA Compliance
  • FAR, CAS and Other Regulations
  • Government Contract Accounting Systems
  • Indirect Rates and Incurred Cost Submissions
  • Certified Systems or Indirect Rates
  • Government Contract Proposals
  • Equitable Adjustments or Claims
  • Or Just Want to Understand the Rules of the Game?



I am a DCAA/Government contract consultant with 29 years top shelf experience specializing in DCAA, the Federal Acquisition Regulation (FAR) and the Cost Accounting Standards (CAS).  I have been serving government contractors since 1986.  The scope of my services includes all subjects involving the DCAA, the FAR and government contracting in general.  My expertise encompasses practically any industry including all forms of government contracts.  Most of my work involves DoD contracts but I have worked on contracts with practically every civilian government procurement agency.  I have also worked on projects involving numerous state and municipal agencies as well.  Most common projects I perform include the following subjects:

  • DCAA audits
  • Accounting system and  DCAA compliance, government approval of contractor accounting systems
  • DCAA accounting system set up and implementation
  • Compliance and cost recovery assessments
  • Refuting and resolving government actions or inactions including DCAA
  • Indirect rates, forward pricing and incurred cost submissions
  • FAR assessments and interpretations
  • Government contract proposals/GSA schedule proposals
  • Compliant systems, procedures and processes
  • Cost Accounting Standards (CAS)
  • Equitable adjustments, terminations, claims, etc.

I have expertise in the most notable government contracting accounting systems, such as Deltek GCS and Costpoint.  For small businesses I have experience with Quick Books.  I have implemented QuickBooks in a manner that is DCAA compliant and have passed objective DCAA audits on numerous occassions. I help make contractor accounting systems compliant, I get them through the audit and I get them approved. 

I particularly prefer working with small and medium sized businesses helping them win contracts, overcome DCAA requirements and challenges, maximize cost recovery and cash flow.

I work with large businesses as well offering an expert resource.

DCAA/Government Contracting Experience

My 29 years of government contracting experience includes working as a "decorated" senior auditor for DCAA.  It also includes a long tenure as a Manager for KPMG, a large public accounting and consulting firm (aka Peat Marwick) in its government contracting consulting practice. In this role I helped clients resolve DCAA and government contracting challenges.  I also worked for many years in management positions for government contractors as a CFO, Controller and Contracts Manager.  This experience provides me the expertise to provide comprehensive solutions to government contracting challenges taking into account the government's regulatory oversight role and the contractor's objectives.

It is impossible to describe these 29 years of accomplishments and experience in DCAA and government contracting in a few paragraphs.  So please view the links or contact me for more detail.

If you have a government contracting problem, I most likely have a best business practices solution.



Edward D. Moore, CPA
dcaaConsulting LLC
Mobile: 336-880-9040
E: dcaaconsulting@gmail.com   Alternate Email: emoore@dcaaconsulting.com
W: www.dcaaconsulting.com


May 5, 2014

Professional and Consultant Costs Update

There has been some movement on the allowability of professional services and consultants costs.  DCAA seems to be tweaking its audit guidance to better reflect the FAR rule (FAR 31.205-33). I think it is a good move by DCAA.  In summary I have provided below the criteria to meet this standard.

The government auditors need to understand what the professional services are for, the work product and the reasonableness of the compensation.  Below I have highlighted some pointers.

1.       This rule applies to professional services and consultant costs.  This rule does not apply to contract labor.  It applies to those that are members of a particular profession meeting the definition contained in FAR 31.205-33 it excludes temporary assignments or contract labor as well as employee relationships.

2.       Secure evidence that there was an agreement.  A written agreement is preferred.

3.       Maintain evidence of the services provided by the consultant  such as a scope of work and work product.

4.       Acquire evidence of the compensation or billing rate.

5.       Verification that the consultant met the terms of the agreement.

6.       Provide evidence or explanation of what was accomplished for fees paid.

The DCAA audit guidance seems to emphasize that the form of the evidence is not controlling, it is the substance of the evidence that matters.  It recognizes the special circumstances of the contractor may warrant differing forms of evidence.  The bottom line is there must be evidence to support the above items.  However, DCAA is now not requiring any specific form of evidence.   DCAA is instructing its auditors to question costs under FAR 31.205-22 when this evidence is not available or not provided. 

My advice is this.

1.       Have agreements with all professional consultants, accountants and attorneys.   These agreements should spell out scope of work, work product and compensation. 

2.       Maintain evidence of the scope of work, work product and compensation especially where this is not clearly spelled out in agreements or invoices.

3.       It is my opinion that to play it safe have all consultants provide invoices of hours, rates and reimbursed expenses. with detail regarding the services provided.  In the event of fixed priced services, require that the pricing for these services be spelled out with scopes of work.

4.       Secure work product information and be able to answer the question of what was the end result of the fees paid.

5.       The form of all of the above may vary, but it is very important that you have the evidence and be able to provide it to DCAA when requested.  That is answer the questions, what were the services for, what was the work product, what was the end result as compared to the fee paid and what was the rate of compensation.

In summary, DCAA is no longer instructed to  dictate the form of evidence, just that the evidence be provided to permit government evaluation of the services provided and the cost.



Mon, May 5, 2014 | link 

February 7, 2014

DCAA Waiving Incurred Cost Audit in Certain Cases For Small Contractors

A number of my clients have been advised that DCAA is waiving the incurred cost audit for cost reimbursable contracts. This appears to be limited to small business contractors.  One contractor had 5 years waived.   It appears that DCAA (in some of its offices in certain parts of the country) is making a risk assessment of small contractors. If they conclude the contractor imposes limited risk, DCAA has waived the audit and has accepted the incurred costs and indirect rates as proposed in the contractor's incurred cost submission.  I have seen in the last 6 months over ten such waivers.   It seems this waiver approach is in response to the fact that DCAA is substantially behind in its incurred cost audits of contractors. 

My observation is an important criteria for waiver is the quality and adequacy of the contractor's incurred cost submission or proposal.  Compliance in making the submission seem to be more important than ever.  It seems DCAA is placing reliance on the quality and adequacy of the contractors incurred cost submission.

There is no guarantee that any small business contractor will receive the waiver, as the waivers I have observed are subject to DCAA discretion.  DCAA audit decisions are inconsistent from office to office depending on the circumstances. I recommend that the contractor submit a compliant and quality incurred cost submission on time that meets the DCAA adequacy criteria. This should improve your chances.   

Fri, February 7, 2014 | link 

November 1, 2013

Deferred Compensation

A common question I am asked recently involves deferred
compensation under government contracts. 
Often small businesses and especially small R&D business find the
need to defer the payment of compensation to owners and employees.  The answer to the question is yes you can
charge or accrue deferred compensation under government contracts.  However, as one might expect there are rules
that must be followed.  I would only move
forward with caution on deferred compensation plans as the rules are very
specific and auditors will consider it an item of interest.    It
will be very important to follow the rules carefully.  These rules include:

Must have a policy on this subject.  The actual terms of the awards are normally
in the form of an agreement.

Must make an award before the service is
provided.  After the fact awards in
periods subsequent to when the service was provided are unallowable.

Must comply with the CAS 415, Accounting for
the Costs of Deferred Compensation.  The requirements

  • There is a
    requirement to make the future payment(s) which the contractor cannot unilaterally

The deferred
compensation award is to be satisfied by a future payment of money, other
assets, or shares of stock of the contractor.

The amount of the
future payment can be measured with reasonable accuracy.

The recipient of
the award is known.

If the terms of
the award require that certain events must occur before an employee is entitled
to receive the benefits, there is a reasonable probability that such events
will occur.

For stock options,
there must be a reasonable probability that the options ultimately will be

  • For plans other than ESOP's, amounts must
    be discounted to the present value of the future payments to be made. Under ESOP plans the amount assignable is the
    amount contributed and incurred in the year contributed.

Of course there are special provisions for payment
arrangements including principle and interest, forfeitures, nonmonetary
compensation, etc. In these special rule cases 48 CFR 9904.415-50 should be

If any of these conditions are not met then the cost will
be assigned to the cost accounting period that cost is actually paid.

Fri, November 1, 2013 | link 

June 9, 2013

Client Remarks


I just got off the phone with DCAA and he has approved our
time/accounting system for cost-type contracts. Ed ....., I want to thank you for
your hard work and assistance on this. This was a major strategic initiative
for our company and we couldn't have done it without your help.

Warmest regards,

JC, Richmond, Va." 

Sun, June 9, 2013 | link 

May 21, 2013

What Are Unallowable Costs For Small Business Government Contractors?

Unallowable costs are defined by FAR 31.2.  Costs can also be deemed unallowable by contracting officer decision.  This regulation, FAR 31.2, defines costs as unallowable in two broad categories.  One is expressly unallowable costs.  This one is manageable it includes those costs that are unallowable 100% under all circumstances.  This is a relatively short list.  The second is what is called circumstantial unallowable costs.  In other words, it depends on the specific circumstances.  It depends on a number of criteria.  As they say, for every rule there are exceptions and limitations. This is definitely the case in government contracting.  The circumstantial unallowable costs fit this criteria quite well.  The majority of FAR 31.2 focuses on this latter category defining rules, exceptions and criteria for allowability.  However most small businesses do not incur costs often falling into this latter category.  In circumstances where the contractor incurs a circumstantial unallowable cost it is advisable to do the research and possibly get an opinion from an expert. 

The typical expressly unallowable costs for small businesses in most situations include the following:

·         Promotional Advertising (FAR 31.205-1)

·         Promotional activities of any kind (FAR 31.205-1)

·         Bad debt expense (FAR 31.205-3)

·         Federal income tax (FAR 31.205-41)

·         Contingencies (FAR 31.205-7)

·         Interest expense, other financing costs and professional services related to financial costs. (FAR 31.205-20)

·         Recreation, entertainment, and amusement (FAR 31.205-14)

·         Fines and penalties (FAR 31.205-15)

·         Organizational and re-organizational costs (FAR 31.205-27)

·         Charitable contributions and political contributions (FAR 31.205-8)

·         Certain types of travel costs such as first class air fare, hotels and meals over the Federal Per Diem Rates.  There are exceptions to this rule of course. (FAR 31.205-46)

·         Expenses representing a distribution of profits (FAR 31.205-6 and others)

·         Alcoholic beverages (FAR 31.205-51)

·         Good will (FAR 31.205-49)

·         Losses on contracts (FAR 31.205-48)

·         Personal use of anything, as compared to allowable documented business use (FAR 31.205-46/31.205-6)

·         Asset write-ups from business combinations, contractors are prohibited from charging depreciation for the write-up.  This item rarely effects small businesses (FAR 31.205-52).


There are certain circumstantial unallowable costs that small business contractors commonly incur that DCAA likes to target and question.  Some of these include:


Compensation, if considered unreasonable it will be questioned.  This is especially a focus area of DCAA for the compensation paid to owners and executives of closely held small contractors. (FAR 31.205-6)

Bonuses and incentive compensation.  Bonuses and incentive compensation must be based on a written plan or policy implying an agreement with the employee.  These plans should be performance based to the extent possible.  DCAA frowns upon profit sharing. (FAR 31.205-6)

Legal costs:  Certain legal costs are unallowable.  Some of these include legal costs associated with organization and re-organizations, costs associated with patents not required by a government contract, patent infringement, legal costs to defend against allegations of fraud or noncompliance, etc. (FAR 31.025-47)

Consultant costs:  This is a DCAA cherry picking target.  The substantiation now required for allowable consultant costs is significant.  DCAA is very much focused on this item in audits of small contractors.  Need a well-documented agreement that spells out scope of work, contractor need, rates, period of performance, detailed accounting on invoices, work product, etc.  Failure to provide this documentation will put the allowability of these costs in jeopardy. (FAR 31.205-33)

Related Party Rental Costs:  This is another cherry pick target for DCAA.  If the contactor and its landlord or lessor are under common management, ownership or control in most cases the allowable rent costs are limited to ownership costs.  Ownership costs include depreciation, property taxes, insurance, other facility costs and cost of money.  Small business owners that purchase a building with the intent to lease it back to the owner’s government contracting business is not a good idea if the owner has more than 50% ownership of both the lessor and lease or executes common control.  The costs will be limited to ownership costs in most cases. (FAR 31.205-36)

Travel Costs:  Allowable costs limited to lowest available coach air fare.  In some situations business class is appropriate and provided for in the regulation. Hotel and meals are limited to the Federal Travel Regulation Per Diem Rates.  The lodging rate is a not to exceed, receipt required, the meals/incidental per diem is a fixed rate.  (FAR 31.205-46)

Auto Expense:  If the contractor does not keep a mileage log it is likely DCAA will question the cost on lack of business purpose grounds.  Need to document business mileage to win on this one. (FAR 31.205-46 and FAR 31.205-6).

Of course the government can make a case for unallowable cost for any cost that it perceives to be unreasonable. Burden of proof for reasonableness rests with the contractor (FAR 31.201-3).

This document is not intended as a complete discussion on the subject.  The subject of unallowable costs is a large and complex one.  The intent of this document is to identify those costs that a small business contractor is likely to incur and to point out the DCAA cost challenges a small business contractor is likely to encounter.



Edward D. Moore, CPA 


T: 336-880-9040

F: 336-905-7524




dcaaConsulting is a professional consulting company specializing in Defense Contract Audit Agency audits and related matters, government contract proposals  and pricing, the Federal Acquisition Regulation and the Cost Accounting Standards.

Tue, May 21, 2013 | link 

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