Government Contractor Accounting

    Government Contractor Accounting Services

    Government contracting demands an accounting system that can withstand DCAA scrutiny. We set up and maintain compliant cost accounting systems, develop indirect cost rate structures, prepare incurred cost submissions, and keep your records organized from pre-award through closeout. Whether you hold your first small business set-aside or manage a portfolio of cost-type contracts, our team ensures every dollar is properly allocated, allowable, and documented.

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    Free initial consultation · No obligation

    • Best for contractors with cost-type contracts or a first DCAA review ahead
    • Licensed CPA firm
    • Fees quoted upfront, in writing

    Who sets up DCAA-compliant accounting for government contractors?

    Your Virtual CPA is a licensed CPA firm that sets up and maintains accounting systems for government contractors: job cost tracking, timekeeping, indirect rate pools and incurred cost submissions, aligned with DCAA expectations. We work with new contractors and growing firms. Request a free consultation to review your system.

    What's Included

    DCAA-compliant accounting system setup and maintenance
    Indirect cost rate structure development (fringe, overhead, G&A)
    Annual incurred cost submission preparation (ICE model)
    FAR Part 31 cost allowability analysis
    SF 1408 pre-award accounting system survey preparation
    Job cost accounting and contract-level profitability tracking
    Timekeeping system review and compliance verification
    Provisional billing rate calculation and monitoring
    Contract closeout and final rate reconciliation
    DCAA audit support and response
    Government contract budgeting and forward pricing

    Who This Is For

    First-Time Government Contractors

    You have won or are pursuing your first federal contract and need to establish a DCAA-adequate accounting system before the pre-award survey. We set you up correctly from day one so you pass the SF 1408 review.

    Small Business Set-Aside Holders

    You hold 8(a), HUBZone, SDVOSB, or WOSB contracts and need compliant accounting without the overhead of a full in-house finance team. We serve as your outsourced government contract accounting department.

    Cost-Type & T&M Contractors

    Your contracts require provisional billing rates, incurred cost submissions, and the ability to demonstrate that every charged cost is allowable, allocable, and reasonable under FAR Part 31.

    Growing GovCon Firms

    You are scaling from one contract to multiple awards across agencies and need indirect rate structures that maximize recovery without triggering compliance issues during rate audits.

    Our Process

    1

    Compliance Assessment

    We evaluate your current accounting system against the SF 1408 criteria and FAR 16.301-3 requirements. You receive a detailed gap analysis showing exactly what needs to change for full DCAA compliance, along with a prioritized implementation plan.

    2

    System Setup & Rate Structure

    We configure your chart of accounts, cost pools, and indirect rate structure in QuickBooks or your ERP. This includes establishing fringe, overhead, and G&A pools, defining allocation bases, and setting up job cost tracking by contract and CLIN.

    3

    Ongoing Compliance & Reporting

    Each month we reconcile your books, verify labor distributions, review cost allowability, and produce contract-level financial reports. We monitor provisional versus actual rates and alert you to variances that could affect billings or cash flow.

    4

    Incurred Cost Submission & Audit Support

    We prepare your annual incurred cost submission within the six-month deadline, reconcile all schedules to your general ledger, and represent you through DCAA desk reviews or full audits.

    Why Choose Your Virtual CPA

    Specialized experience with DCAA audits, incurred cost submissions, and rate negotiations
    Deep knowledge of FAR Part 31 cost principles and CAS requirements
    SF 1408 pre-award survey preparation with a track record of first-time approvals
    Indirect rate structures designed to maximize cost recovery while staying compliant
    Seamless support from pre-award through contract closeout
    Remote service delivery so you get GovCon accounting expertise without geographic limitations

    Frequently Asked Questions

    DCAA evaluates your system against the criteria in Standard Form 1408, which covers segregation of direct and indirect costs, consistent labor charging, a logical and consistent method for allocating indirect costs, a timekeeping system that records hours daily, the ability to track costs by contract, and accumulation of costs under general ledger control. You also need written accounting policies that align with FAR Part 31 cost allowability rules. Our setup process addresses each of these requirements so your system is audit-ready from day one.

    Any contractor with a cost-type, time-and-materials, or labor-hour contract that includes a flexibly priced element must submit an incurred cost proposal within six months of their fiscal year end. If you miss the deadline, DCAA can issue a notice of inadequacy, your billing rates may be questioned, and the contracting officer can withhold or reduce payments. Persistent non-compliance can even lead to the inability to receive new cost-type awards. We track these deadlines proactively and begin preparation well in advance.

    We start by performing our own internal assessment using the same SF 1408 criteria that the DCAA auditor will use. We then remediate any deficiencies in your chart of accounts, cost allocation methodology, timekeeping procedures, and written policies. Before the actual survey, we conduct a mock review so your team knows what to expect and can answer auditor questions confidently. Most of our clients pass the pre-award survey on the first attempt.

    FAR 31.205 lists specific cost categories that cannot be charged to government contracts. Common unallowable costs include entertainment, alcoholic beverages, bad debts, contributions and donations, fines and penalties, lobbying costs, interest expense in most cases, and the portion of executive compensation exceeding the FAR cap. We flag these costs in your accounting system so they are automatically excluded from indirect rate calculations and billings.

    Related Services

    Audit & Assurance

    Financial statement audits and reviews required by federal agencies, bonding companies, or prime contractors.

    Bookkeeping & Accounting

    Day-to-day bookkeeping that integrates seamlessly with your government contract cost accounting requirements.

    Virtual CFO Services

    Strategic financial guidance including contract profitability analysis, cash flow forecasting, and growth planning for GovCon firms.

    Serving clients nationwide

    Virtual CPA services for clients anywhere in the U.S. Local tax guides:

    Washington DCMarylandVirginia

    Ready to talk it through?

    Schedule a short call to discuss your government contractor accounting needs.

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