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Formal policies and procedures are expected by DCAA. They are written, apply to the organization as a whole (not just to Jobs with U.S. Government funding), and show an original, dated, signature from applicable management. They may be photocopied or scanned for distribution, and show some method to supersede old and replace with new versions, including clear implementation dates.
In addition to policies and procedures, DCAA expects an Ethics Statement (or policy) and a Mission Statement. The Ethics Statement describes the overall attitude and integrity that executive management flows down to all staff, and state that prohibited actions have consequences. The Mission Statement pin-points the main purpose for the existence of the organization.
The Accounting System policies and procedures include three key topics, among many. These three are:
All hours (including unpaid overtime) are recorded, timely, and certified by the employee plus another person within the organization. See the article, Legacy of a Timecard for more information. Lodging plus Meals and Incidental Expenses are calculated using per diem rates. Reasonableness of other expenses might be documented with competitive prices. The cost of Business Meetings ranks as important because it would take place, whether on travel or not, so might replace a meal at the per diem rate; this typically increases allowable costs.
Having guided clients to many approvable systems, we built templates that can be tailored to a particular organization. Drafts are edited or approved by management. Our template forms ease adherence in actual practice.
Shown below is a partial list of topics of policies and procedures, for which we tailor templates to specific clients. If the accounting records are in compliance with regulations, that information can be easily converted to customer invoices. To address concerns of DCAA, a separate policy and procedures on Billings (i.e., invoices to customers) might detail price differences among contract types (e.g., Fixed Price, Cost Plus Fixed Fee, etc.).
Note that the form, which certifies that the employee read and understands all policies and procedures for the organization, is signed upon new-hire orientation and once annually by all employees. We recommend documenting each attendee, by date, for training on the current policies and procedures plus the original, dated, signature of each employee on the certification form. This demonstrates management’s intent to implement approved policies and procedures.
Policies and procedures reflect compliance with regulations plus contract terms and conditions. Source documents (e.g., timecards, expense reimbursement request forms, and detailed receipts) reflect actual practices that comply with policies and procedures. The responsibility for enforcing actual, operational compliance lies with management. When employees understand how the organization does things, use related forms to verify applicability and completion, and recognize consequences of deviation – they more easily accept implementation.
The Accounting System is not just the General Ledger software, but the actual, operational practices that lead to the transaction records in the General Ledger. DCAA pays particular attention to internal controls, such as segregation of incompatible duties (e.g., the employee that makes bank deposits also reconciles the bank statement). Implementation of compliant policies and procedures embody an important tool for an approvable Accounting System.