Government Contract Accounting
We spent 12 years auditing for DCAA. Now we prepare contractors for it.
M2 CPA is led by a former DCAA supervisory auditor who examined more than 100 defense contractors, then spent two years running government compliance inside one. We know how your audit will be worked, because we used to work it. We’re built for contractors with 3 to 50 employees and no full-time controller or CFO: we do the monthly accounting, and a CPA reviews every month-end close.
- 12 years inside DCAA
- 100+ DoD contractors audited
- CPA led
- GovCon accounting from $800/mo
- QuickBooks, Costpoint, SAP & NetSuite
- Remote, nationwide
Why Us
We have sat on both sides of the table
Most firms that advise on DCAA compliance have only ever seen it from the contractor’s chair. That is a meaningful difference when the question is not what the regulation says, but how an auditor will actually apply it to you.
Inside the agency
Twelve years with the Defense Contract Audit Agency across the Denver, European, and Afghanistan branch offices, finishing as a Supervisory Auditor leading a team of six.
Contractors audited
Forward pricing proposals, business system reviews, incurred cost audits, and mandatory annual requirements across DoD contractors ranging from small businesses to major primes.
Inside a contractor
Senior Manager of Government Compliance at a defense technology company, serving as the primary DCAA and DCMA liaison and building the FAR, DFARS, and CAS compliance program from the inside.
Alexander Mungov, CPA. Executive MBA, University of Wyoming. B.S. Accounting & Finance, University of Colorado. Prior service with DCAA is described for professional background only and does not imply any endorsement by DCAA or the Department of Defense.
The Problem
Most small contractors fail for the same three reasons
A DCAA finding is rarely about dishonesty. It is almost always about a system that was designed for commercial work and then pointed at a federal contract it was never built to support.
The system cannot segregate cost
QuickBooks out of the box cannot reliably separate direct from indirect cost, pool and allocate overhead and G&A, or produce the job-cost trail an auditor expects. It is excellent software. It simply was not built for cost-reimbursable work without deliberate configuration.
Timekeeping will not survive a floor check
DCAA cares as much about how hours are recorded, corrected, and approved as it does about the totals. Daily entry, documented corrections, and supervisor approval are the difference between an adequate system and a finding.
Rates are set once and never revisited
Provisional billing rates drift away from actuals over a year. Nobody notices until the incurred cost submission forces a true-up, and what should have been routine becomes a repayment you did not budget for.
What We Do
Compliance work, end to end
Engage us for one deliverable or for the whole back office. Most clients start with a single blocking problem and expand once the system is stable.
DCAA-compliant accounting systems
Design, configure, and document an accounting system that meets DFARS 252.242-7006 and stands up to a system review. QuickBooks and Deltek Costpoint.
SF 1408 pre-award surveys
You cannot win a cost-type award until your system is judged adequate. We get you ready for the survey and sit with you through it.
Incurred cost submissions
Complete, adequate ICE submissions filed within six months of fiscal year end, built so the schedules reconcile the first time.
Indirect cost rate structures
Pool design, allocation bases, provisional billing rates, and the annual true-up. Structured so your rates stay competitive and defensible.
Contract pricing & proposal support
Cost volumes, basis of estimate, and pricing models for FFP, cost-reimbursable, and T&M solicitations. Priced to win and to survive review.
Government audit support
Representation and preparation for DCAA and DCMA audits and buying command cost analysis. We handle the data requests and the room.
Post-award & business system reviews
DFARS 252.242-7006 reviews after award, material weaknesses, payment withholding, and corrective action plans.
Forward pricing rates (FPRP & FPRA)
Forward pricing rate proposals and agreements, so your rates stop being re-argued on every bid you submit.
CAS Disclosure Statements
Coverage determination, Form CASB DS-1 preparation, cost impact analysis, and disclosed practice compliance.
Terminations, REAs & claims
Termination settlement proposals and requests for equitable adjustment, through negotiation, dispute, and litigation support.
Purchasing system reviews (CPSR)
Purchasing policies, subcontract files and a mock review before DCMA’s Contractor Purchasing System Review.
DFARS business systems
Accounting, estimating, purchasing, MMAS, EVMS and property systems, and what a disapproval does to your payments.
Certified cost or pricing data (TINA)
Proposals that disclose correctly under the Truthful Cost or Pricing Data Act, and support against defective pricing findings.
Commercial items and OTAs
Commercial item determinations, price reasonableness support and OTA cost-share tracking for defense tech and dual-use companies.
Non-US defense contractors
FAR cost accounting, incurred cost and proposal support for foreign companies with US defense prime contracts or subcontracts.
OASIS+ cost-reimbursement orders
Accounting system adequacy so OASIS+ holders can compete for and accept cost-reimbursement task orders.
Contract-Type Fluency
Your contract type changes everything
The same company needs a different accounting posture depending on what it signed. We price, bill, and structure to the contract in front of you.
Firm-fixed-price
Your risk is entirely in the estimate. The work is in the basis of estimate and a rate structure that protects margin, because there is no adjustment later if you priced it wrong.
Cost-reimbursable
The government pays allowable, allocable, reasonable cost, which means your system carries the burden of proof. This is where an inadequate system stops you from bidding at all.
Time & materials
Labor category mapping and qualification evidence drive billing. Mismapped hours are one of the most common and most expensive findings we see.
How We Work
A defined path, not an open-ended retainer
Compliance review
We assess your current system against the criteria an auditor will actually apply, and tell you plainly what is adequate, what is exposed, and what is urgent. You get a written findings memo whether or not you continue.
Remediation plan
A prioritized, costed plan with dates. We separate what must be fixed before your next award from what can wait until the next fiscal year.
Build and document
We configure the system, write the policies and procedures an auditor will ask for, and train the people who have to live in it. Documentation is a deliverable, not an afterthought.
Run and defend
Ongoing monthly accounting from $800 a month: bookkeeping, billing, provisional rate monitoring, and the annual incurred cost submission (quoted separately). When an audit comes, we are the ones answering the data requests.
Fit
Who we are built for
A good fit
- Contractors with 3 to 50 employees and no full-time controller or CFO
- Owners who want the accounting done for them, not a memo telling them what to do
- Companies bidding their first cost-type or T&M award
- Contractors on QuickBooks who have outgrown a commercial setup
- Deltek Costpoint shops that need rate and compliance expertise, not software support
- Firms with an incurred cost submission coming due
- Anyone who has just been notified of a DCAA or DCMA audit
Probably not a fit
- Large contractors with a full in-house government accounting department
- Companies looking only for the cheapest possible bookkeeping
- Purely commercial businesses with no federal work
Questions
Frequently asked
Does QuickBooks work for a government contractor?
Yes, with deliberate configuration. QuickBooks is not DCAA-compliant out of the box, but it can be made adequate for most small contractors through proper chart of accounts design, class or job structure, indirect cost pools, and a compliant timekeeping process alongside it. We do this regularly. The software is rarely the limiting factor; the configuration and the written procedures are. Our QuickBooks guide shows the setup.
When is my incurred cost submission due?
Under FAR 52.216-7, within six months after the end of your fiscal year. For a December 31 year end that means June 30. Extensions must be requested in writing from the cognizant contracting officer before the deadline passes, and they are not guaranteed.
What actually happens in an SF 1408 pre-award survey?
DCAA evaluates whether your accounting system is designed to accumulate cost properly for a prospective cost-type award. It is a design review more than a historical audit, which means preparation matters enormously and a young company with a well-built system can pass comfortably.
We just got an audit notification. Can you help on short notice?
Often yes, and this is a common way clients start with us. Tell us the audit type, the notification date, and the data request, and we will tell you honestly what is achievable in the time available.
Do you work with contractors outside your state?
Yes. We work with federal contractors nationwide and the engagement is fully remote. Federal compliance requirements do not change by state.
Can you do our regular bookkeeping and tax work too?
Yes. We are a CPA-led firm, so bookkeeping, payroll, business and individual tax, and CFO-level advisory can all sit under the same engagement. Many clients consolidate once the compliance work is done.
How much does government contract accounting cost?
Monthly GovCon accounting starts at $800 a month (Core) for up to about 7 employees and one or two contracts, $1,500 (Cost-Type) for cost-type or T&M work, and $2,500 (Controller) for up to 50 employees with several cost-type contracts. Fixed project fees start at $1,200, and other work bills at $160 an hour. Every price is on our pricing page.
Start with a compliance review
Tell us your contract types, your accounting system, and what is coming due. We will tell you where you stand before you commit to anything.