A CPA (Certified Public Accountant) can assist government contractors in various ways, including ensuring compliance with government regulations, providing guidance on accounting systems and processes, and performing audits.
In terms of provisional rates, a CPA can help contractors establish and negotiate reasonable rates with the government, ensure compliance with regulations, and perform audits to ensure accuracy of rates and costs. Overall, a CPA can provide valuable financial and accounting expertise to government contractors to help them operate efficiently and effectively.
What Are Provisional Billing Rates?
Provisional billing rates are a company’s estimates of its final year-end rates. These rates apply until settlement is reached on specific indirect rates for the fiscal year, ensuring the necessary adjustments are made for any unallowable costs.
Government organizations such as the NSF and NIH may refer to provisional billing rates as indirect cost rates (ICR), while other organizations including the DOE will ask for your indirect rates. With the use of multiple names for provisional billing rates, government contractors can find it difficult to understand the specific contract requirements and other issues. Hiring a certified public accountant with government contracting expertise, ensures your business comprehends and complies with government contract requirements.
How CPAs Can Help Government Contractors With Their Provisional Rates
Government contractors should fully understand FAR 42.704 and 52.216-7 which includes the process outline for the provisional billing rate proposal. Often, government contractors have difficulty understanding the guidelines or policies, which can cause them to overlook essential details within the contract. Government contracts are sophisticated and require that every element is addressed by the business.
Bringing in a CPA will help you understand the process and establish a billing rate for the contractor’s fiscal period. Provisional billing rates include all indirect rates for reimbursement on time and material contracts, cost type contracts and other flexibly priced cost reimbursable contracts.
With a qualified CPA, you can set the annual indirect billing rates that will benefit you and the government entity. A CPA will help you monitor the actual rate and report on any variances from the provisional rates. Moreover, they also help your business adhere to the agreed-established billing rates. If you attempt to adjust the rates yourself, you will need to calculate the indirect rates each month and adjust YTD bills concerning these rates.
A CPA Will Keep Costs Separated
A certified public accountant (CPA) can help keep costs separated for billing under Federal Acquisition Regulation (FAR) 52.216-7 by establishing an accounting system that meets the requirements of the regulation. The CPA can ensure that the system properly identifies and segregates costs into their respective cost categories, such as labor, materials, and indirect costs.
Additionally, the CPA can help ensure that the accounting system follows generally accepted accounting principles (GAAP) and complies with government accounting standards. By having a properly established accounting system, the CPA can help ensure accurate and compliant billing under FAR 52.216-7.
Avoid Rejection From DCAA
Contracts that are cost-plus types have a high rejection rate. One of the main reasons the DCAA rejects invoices is that contractors failed to obtain approval for the provisional billing rates prior to invoicing. It is best to establish the indirect rates during the contract proposal and negotiation phase.
Maintaining records of provisional rates is imperative for a healthy contract and CPAs are the ideal solution for this task. Your business must use the same proposed indirect rates to DCAA that were submitted to the procuring or other officers. Prepare the provisional billing rates allowing the DCAA to review and approve the rate quickly to reduce or eliminate issues with billing.
Benefits Contractors Gain From CPAs Specializing in Government Contracting
Many contractors are unable to navigate complex government accounting and auditing requirements, as well as provide guidance on cost accounting standards and compliance with Federal Acquisition Regulation (FAR) clauses. CPAs experienced with government contracts can assist with preparing proposals, negotiating contracts, and ensuring compliance with government regulations including provisional billing rates.
Additionally, specialized CPAs can help contractors avoid potential legal and financial risks and maximize profitability. By leveraging the expertise of CPAs specializing in government contracts, contractors can achieve greater success in the competitive government contracting marketplace for future awards.
Get The Best Accounting Services With Diener & Associates
This article has presented only one part of many of the Government regulations and requirements for contractors. Provisional billing rates can be challenging for contractors who have just entered the market without experience with the DCAA.
Diener & Associates have extensive experience with government contracts and regulations, and can also assist with your overall accounting, risk, and financial issues. Schedule your consultation with Diener & Associates today, or call us at 703.386.7864 to learn more.