Mapping

FINANCE AND ACCOUNTING MANUAL GENERAL BACKGROUND Introduction This manual was developed to provide guidance through policies and specific procedures to be followed so that ’s Accounting and Finance Records are reliable, in accordance with Federal Acquisition Regulations (FAR), and are current, and accurate. Throughout the manual the reader will see numerous examples of a sound internal control environment capturing the organizational structure, segregation of duties, multiple control points with multiple layers of approval, training, and management reviews and oversight.

llc uses the accrual system of accounting and adheres to all generally accepted accounting procedures of the accrual system and abide by the Federal Acquisition Regulation (FAR).

Accounting Software

Paychex, a third-party payroll-processing firm, performs the payroll functions. Contacts

POLICY OVERVIEW Policy Changes Finance and Accounting policies and procedures will evolve. ll strictly control version changes. . ACCOUNTING PRINCIPLES ’s fiscal year commences on January 1 and ends on December 31. Indirect expense rates for government contracts are computed based on ’s fiscal year.

GAAP and Accrual Basis Accounting ’s accounting records are maintained on a GAAP basis, using accrual accounting.

Revenue Recognition Revenue recognition is a generally accepted accounting principle (GAAP) that identifies specific conditions in which revenue is recognized. Revenue is typically recognized as it is earned, not when is paid. It is recognized when a critical event has occurred, when a product or service has been delivered, when work has been performed and earned, and the dollar amount is easily measurable to the company.

Examples of revenue recognition at may be different depending on a particular contract. For example a cost type contract, revenue would be recognized each month compiling all cost of the contract for that month with the applicable fee or profit. Other examples would be when a milestone is reached or a percentage of completion is measurable and assignable. For example, a $100,000 contract is expected to last 2 months, with each month containing equal amounts of costs of $40,000. Each month, $50,000 would be recognized as revenue.

Job Cost Ledger ’s job cost ledger of direct project costs is incorporated into its General Ledger. All expenses are classified as direct or indirect. Direct expenses are identified and classified to projects (contracts). Indirect expenses are accumulated into indirect expense pools and allocated to contracts.

GENERAL LEDGER

utilities Accounting System. That system also has a project module that allows for the posting of subsidiary ledger cost to the general ledger.  

Chart of Accounts The chart of accounts allows for the capture of cost by category/cost element. That capture is done through the numbering system/schema shown below. It allows for the capture of cost related to homogenous cost pools in alignment with indirect rates, for the easy and quick calculation of indirect rates. It also provides for unallowable associated with Overhead and G&A type costs.

Chart of Accounts Number System/Schema 1000 Assets 2000 Liabilities 3000 Owners Equity 4000 Revenue 5000 Direct Expenses 6000 Fringe Expenses 7000 Overhead Expenses 8000 G & A Expenses 9000 Unallowable Expenses 9100 Unallowable OH Expenses 9500 Unallowable G&A Expenses

Periodic/Monthly Reports, Controls, Requirements and Reconciliations

• Payroll During each payroll, Accounting must run a labor distribution report. That report from the accounting software captures cost by cost objective but only captures hours. A labor distribution report capturing hours and distrusting labor cost by cost objective must be created.

The labor distribution report with labor dollars must reconcile to the report by hours and must reconcile to the Payroll report by dollars.

• Bank Reconciliations

• Billings

A Job Cost Report must be created either during a billing cycle or monthly. That report is created by pulling project costs from the system and applying indirects (via Excel).

The Job Cost Report looks like this. It is done in two snips for fit within the page. The Job Cost Report shows Inception to Date of contract costs. Each month a new section is added below the previous month allowing for inception to date of contract costs to be captured.

Monthly Reports Each month at the end of the month prints copies of the Labor Distribution Reports, Job Cost Reports, Trail Balance, Statement of Indirects, P/L statement and the Balance Sheet and retains a hard copy.

ACCOUNTS PAYABLE Accounts payable consist of the amounts billed by vendors, plus amounts accrued for anticipated billings that relate to goods and services delivered during the current accounting period. Accounts payable represent the amounts is obligated to pay within the agreed terms and conditions of the purchase.

It is policy to record and pay only valid and authorized invoices, which represent legitimate Company obligations. The Accounts Payable (AP) function is the sole area responsible for releasing checks and initiating requests for electronic payments to third-party vendors. All payments processed through AP must be identified as to their government contracting nature in addition to their functional aspect (rent, supplies, subcontracts, etc.). All payments are identified as Direct or Indirect and Claimed or Unclaimed. All direct costs are further identified as to specific job or project. All indirect costs are further identified as to Pool, Overhead or G&A.

All amounts paid should be based on approved and valid vendor invoices and/or check requisitions supported by a valid/current Purchase Order (PO) (if applicable) and evidenced by receipt of goods and/or services.

FIXED ASSETS AND DEPRECIATION EXPENSE

Property and equipment are recorded at acquisition cost. Expenditures for maintenance and repairs are expensed when incurred. Furniture, fixtures, office equipment, computers, and software are depreciated for financial reporting over their estimated useful lives, ranging from three to ten years, using the straight-line method.

Capitalization Policy

operates in multiple disparate industries, and as such utilizes different capitalization standards appropriate for those industries:

Generally, Expenditures, tangible or intangible, with an acquisition individual cost (or combined cost) in excess of $2,500 and a useful life of more than one year are capitalized.

Definition of Acquisition Cost

Acquisition cost includes all expenditures necessary to place an asset in location and bring the asset to a condition for normal or expected use. These costs include: • Invoice price less directly identifiable discounts or rebates. • Sales or Use taxes paid upon acquisition. • Freight and insurance

Useful Lives and Depreciation Methods

The following exhibit reflects the Asset Classification, Depreciation Methods, and Estimated Useful Lives for cost accounting and financial statement presentation.

Asset Classification Depreciation Method Estimated Useful Lives Computers & Software Straight Line 3 Years Furniture and Fixtures Straight Line 7 Years Vehicles Straight Line 5 Years Leasehold Improvements Straight Line Life of Lease Specialized Equipment Straight Line 7 Years

Disposal of Fixed Assets

Any gains or losses are credited or charged to the same indirect pools to which the depreciation of the asset was charged. The gain or loss that is recognized upon disposition of an asset is assigned to the accounting period in which the disposition occurs.

COST ACCOUNTING

General

As a government contractor, must comply with Federal Acquisition Regulations (FAR) and the terms and conditions of its federal contracts and subcontract agreements. Government contracts awarded to The following provides an overview of key cost accounting policies.

Criteria for Direct versus Indirect Costs Classification

’s criteria for direct versus indirect costs determines which project-related costs are charged directly to Government contracts or similar cost objectives. All cost items (labor, subcontracts, consultants, materials, travel, and other direct costs) which are incurred specifically for the performance of a specific final cost objective are recorded as direct charges to that cost objective.

Direct Costs

directly traces and charges all costs, which can be identified to a specific job within the accounting system.  These direct costs are treated in the system within the Project Module system, identified by contract, or clin as appropriate.

Direct Labor

Direct labor hours are time expended by staff on activities undertaken in direct support of the statement of work or project deliverables, provided the benefits may be identified to a single cost objective (contract, Order, CLIN or WBS).

Travel time incurred in traveling to or from a direct charge site and activity is a direct charge to the activity that necessitated the travel, excluding any travel time where the traveler is productively engaged in work on another final cost objective or indirect activity.

Other Direct Costs

Costs other than direct labor that are charged directly to the benefiting contact, or CLIN as appropriate and include: • Subcontracts: Contract related goods and/or services that are delivered by other organizations in accordance with the Scope of Work within the subcontract. • Consultants: Services that are performed by consultants. • Travel: Airfare, transportation fees, lodgings, per diem and other costs related to travel and transportation undertaken in contract performance. • Materials: Parts, hardware, equipment, software, software licenses, purchased data, etc.

Subcontract Costs

Subcontractors are an important aspect of ’s business as such, awards must be based on fair and reasonable prices to , that can then be passed on to the government. Subcontractor invoices must meet the same standard as requirements to the government. They must show the service or product provided and must be in accordance with terms and conditions of their contract.

The Project Manager or designee is responsible for monitoring the technical, financial and contractual performance of consultants and subcontractors.

IR&D and B&P Costs

IR&D and B&P cost should be assigned individual project numbers so that these costs are segregated from other costs and can be expensed appropriately. These costs should be treated Direct Cost, and as such included in the OH allocation base. When calculating G&A rates, these cost benefit the organization as a whole, and shall be included in the G&A pool. They are now moved from the OH allocation base to the G&A pool, where they benefit the corporation as a whole.

assigns project numbers to IR&D and B&P numbers so that these projects are segregated, included in the OH base and transferred to the G&A pool as appropriate.    

Indirect Costs

Indirect costs are similarly captured in the accounting system by account and grouped by indirect rate pool. These costs are then allocated to other indirect rate pools and/or final cost objectives.

Overhead

maintains one overhead pool that include the customary labor cost and expenses attributable to overhead type activities as allowed by the FAR cost principles. 

Overhead costs include the labor costs associated with indirect activities of personnel performing services at Onsite or Customer site, along with their related overhead expenses such as indirect travel, bonus, conferences, and training, sies, specific facility cost and facility IT & FSO service Center allocation, among others. The costs accumulated in these overhead pools are allocated to their respective contracts based on direct labor of the related staff performing contract services.

Pool: Includes labor cost and expenses attributable to overhead-type activities as allowed by the FAR cost principles. Overhead costs include the labor costs associated with indirect activities of personnel performing services at

Base: The costs accumulated in the overhead pool are allocated to contracts based on the direct labor.

G&A Expense

G&A includes the indirect costs incurred in managing that benefit the corporation as a whole. Costs include accounting, business development, contracts, executive, finance, human resources, and functions.

Pool: G&A labor; fringes, ; B&P costs (B&P labor applied overhead, and B&P ODCs and Independent Research and Development, (IR&D costs); business development costs; audit and accounting fees, and other G&A costs. Base: Total Cost Input

Unallowable Costs

Certain costs are specifically non-reimbursable under the Federal Acquisition Regulations (FAR). identifies such costs at the time transaction classification and segregates them from billable direct costs and from the indirect expense pools. A review is performed by the submitter of the costs and by A/P during transaction processing. The listing of unallowable costs most common to are reflected in the Chart of Accounts as 95 series accounts in the general ledger that are identified in FAR 31.2 as specifically unallowable include the following items:

• Advertising (other than recruitment advertising) and public relations (FAR 31.205-1) • Promotional items, clothing and samples (FAR 31.205-1) • Bad debt and debt collection costs (FAR 31.205-2) • Gifts, including items given to employees (FAR 31.205-13) • Entertainment (FAR 31.205-14) • Penalties and fines (FAR 31.205-15) • Interest expense, late fees (FAR 31.205-20) • Airfares that are the lowest available airfare. (FAR 31.205-46) • Travel costs in excess of applicable travel regulations (FAR 31.205-46) • Alcoholic beverages FAR (31.205-51)

This list is not exhaustive but captures common potential unallowable cost may encounter. If other costs are encountered please use DCAA’s Selected Area of Cost Guidebook: FAR 31.205 Cost Principles. The link can be found here:

https://www.dcaa.mil/Guidance/Selected-Area-of-Cost-Guidebook/

Within the table, click “Title” of the cost that you are seeking guidance on.

LABOR REPORTING

General

Employees enter their timesheet to record their time, which is submitted for approval, and processed by the accounting staff. Timesheet accuracy is essential. It is imperative that all employees charge their time worked to the correct project number for the work performed or assignment on the correct day. In all cases, all hours worked must be recorded on the timesheet in the period in which the hours were expended.

The timekeeping system identifies, captures, and reports employee labor by direct costs, and indirect costs.

Timesheet Procedures employees record their time daily using the ’s Timekeeping System.

Employees using electronic timekeeping systems must protect their username and password information so that timesheet data is not compromised.

Record all hours worked. This includes all hours worked during the normal workday and any overtime, weekend or holiday hours.

• Employees must make daily entries for time worked. They submit the timesheet, or release the completed electronic timesheet, for supervisor approval promptly by the last day of the pay period. • Any timesheet information returned by the supervisor unapproved must be corrected by the employee and promptly resubmitted. • Charge the correct project numbers (direct and indirect) for all hours worked during each day. • Direct any questions regarding: the proper charge number, computing the hours worked, entering time in the systems, or other aspects of timekeeping to Accounting or their project supervisor. • Charge time in increments of one-tenth hour (1 decimal place).

The accurate and complete preparation of timesheets is the employee’s responsibility. Failure to follow ’s policies for accurate timekeeping is grounds for corrective measures up to and including termination of employment.

Approval of Timesheets

The project supervisor shall approve all labor charges of the staff assigned to them, or for their assigned project codes. Supervisors may accept or reject employee time on a line-item basis. Supervisors are prohibited from completing an incomplete employee timesheet unless the employee is absent for a prolonged period of time or on authorized leave. In this event the employee’s Supervisor must complete the employee’s timesheet, and the appropriate Vice President will approve it. A note must be attached to the timesheet explaining the circumstances of the Supervisor’s completion of the employee’s timesheet.

Timesheet Due Dates and Overdue Timesheets

All timesheets must be completed, signed and submitted for processing by Accounting by COB the 15th and the last day of the month for processing. If timesheets have not been approved by noon on the next business day, the Accounting Manager or Payroll Specialist will notify the supervisor regarding missing timesheets.

Corrections to Timesheets

If a correction is detected on a timesheet, the employee that submitted the timesheet must initiate the correct. Once the timesheet is corrected, it must be approved by that employee’s supervisor.

PROJECT COSTS

General

captures all costs in the general ledger. Project codes are set up in the GL to capture direct costs.

Assignment of Project Numbers

The issuance of a job number is based on receipt of an executed contract, task order, or other written (email) authorization. These project number is created in the Project Ledger module. The Accounting Manager is provided with a copy of the executed contract, subcontract agreement, and/or Order. The PM describes in an email the charge number sequence and the CLIN, Order, Task or billing arrangement for the new charge numbers. The Accounting Manager reviews the contract to ensure that the PM information agrees with the contract and the accounting codes. The Accounting Manager opens one or more project numbers and sends an email informing the Project Manager and any employees assigned to work on the contract.

If a roll-up of project codes is required under the contract, Accounting will work with the PM to establish a project number structure that satisfies the requirements. Task Order codes may be established as subsidiary codes under a single contract charge code.

Financial Monitoring of Projects

The Project Manager is responsible for monitoring the financial performance of projects and should notify the Accounting Manager at any time during contract performance that it becomes apparent that the contract will be substantially overrun or underrun. In addition, Accounting is responsible for monitoring projects that exceed contract limitations or any other monitoring on contracts is responsible for notifying the Project Manager of issues related to contract limitations.

EMPLOYEE EXPENSE REPORTS

Completion of Expense Report

An expense report must be completed by employees for all expenses to be reimbursed by Expenses incurred by staff may be paid by the employee or charged to a company credit card in the employee’s name, if the employee has had a company credit card issued. Employee expenses charged to a company credit card are the responsibility of the employee. The expense report form is used to process both the employee reimbursement for expenses paid by the employee and charges to credit card charges. Employees will not be reimbursed for business expenses unless a completed and approved expense report with original receipts is received by the Accounting Department.

Due Dates

Expense reports may be submitted at any time in the month. Expenses must be submitted to the Accounting Department for processing within 15 days of completion of the travel.

Receipts

Receipts are required for every expense in excess of $75.00. Original receipts must be attached to the expense report. Itemized receipts are required - credit card slips, or monthly statements are generally not sufficient. In the event of a missing receipt, the employee must explain the nature of the charge, why the charge was incurred and have evidence that the charge was incurred and incurred for business purposes.

For instance, If an employee was visiting Washibowell , flew into Denver and took a cab to LowelWashinbor l, but lost the receipt, the facts should show that he/she did not rent a car, that the charge shows up on the credit card statement, and the employee stated the circumstances in line with the facts. In this case, the CFO could approve the expense as allowable and reasonable that the government should reimburse for the expense.

BILLING AND INVOICING

Invoicing Schedule

issues invoices at the beginning of each month for charges incurred through the end of the preceding month, or in accordance with specific contract requirements.  Invoices are mailed or electronically submitted when prepared.

Contract Billing Information

A copy of the contract folder is maintained in accounting. Each folder contains the cost/price proposal, the contract, modifications, Orders, and contract-related correspondence. Copies of invoices are maintained in accounting. Billing instructions are included in the folder. Any special instructions regarding the billing of fees, such as the computation of fee rate, fee withholding, or maximum fee billable are highlighted.

Verifying Billing Information

During the invoice process, the Accounting Department checks the contract folder maintained by accounting to verify that: • Inception-to-date costs do not exceed the authorized contract value or funding levels • The project completion date has not passed.

Invoice Preparation

All invoices are prepared according to the contract's billing instructions. During invoice preparation, the Accounting Department reviews the accounting records and contract files for that contract to determine billable amounts in accordance with the contract type and terms.

All fixed price contract invoices are prepared per contract billing instructions using milestone payments or partial deliveries, or percentage of costs incurred.

T&M contract invoices are prepared using the direct labor hours recorded in the electronic timesheet system and reconciled to the direct labor hours in the job cost ledger. Expenses are billed according to the itemized Other Direct Costs from the job cost ledger. Time is billed at the labor hours incurred by labor category times the corresponding labor category billing rates. ODCs are billed according to the contract terms (actual costs plus applied indirect costs, plus fee if applicable).

Cost reimbursement contract invoices are prepared using the direct costs from the Project Module. The indirect cost amounts included in the invoice are determined utilizing current approved billing rates. Invoice Review All invoices are reviewed by the Accounting Manager to verify that: • Funding and contract values were not exceeded. • The expenses were incurred within the contract period of performance. • All calculations are mathematically correct.

Interim Vouchers

The Project Manager is responsible for monitoring the financial performance of projects and should notify the Accounting Manager at any time during contract performance that it becomes apparent that the contract will be substantially overrun or underrun.

Interim Vouchers may only include costs that have been incurred. The interim voucher must show direct costs with indirect cost applied (at approved provisional billing rates) and the applicable fee.

Contracts may include the Limitation of Costs clause (FAR 52.232-20) that requires to notify the customer when total contract costs within the next 60 days (or other number of days specified in the contract) are expected to exceed 75% (or other percentage specified in the contract) of the total estimated costs in the contract.

Contracts may include the Limitation of Funds clause (FAR 52.232-22) that requires to notify the customer when total contract spending within the next 60 days (or other number of days specified in the contract) are expected to exceed 75% (or other percentage specified in the contract) of the total funds obligated under the contract by the Government.

Contracts may include the Allowable Cost and Payment Clause, (FAR 52.216-7) that requires to submit final indirect rates to the government via an Incurred Cost Submission (ICS) within the 6 month period following the expiration of its fiscal year. The Project Manager is responsible for communicating to Accounting any contracts that contain this clause, and Accounting is responsible for preparing the ICS.

Public Voucher Preparation & Approval Public Vouchers must be completed on Forms SF1034 and 1035. SF1034 is the voucher cover page, and SF1035 is the continuation page. SF1035 must be completed first, and amounts in total are transferred to the cover page. SF1034 shows the details of the cost with descriptions, item numbers, and any other information that is necessary. Once that is completed, then the totals are transferred to the SF1034.

Indirect rates applied to direct costs must be at the approved provisional billing rates.

Billing requires approve by either the Project Manager or the CFO. That approval is based upon a review of the voucher, amounts being billed, whether it is within contract terms, and whether it is mathematically correct. must maintain a copy of the voucher with the approval on the voucher. The government’s copy does not need the internal approval of the voucher.

The billings and cost from SF1035 must match the costs from the accounting system and must include the information in “Red” capturing cumulative billing, cost limitations or funding information, so that the % of dollars expended in managed and proper notifications are given to the government regarding cost will exceed 75%.