Are you in Compliance with the Financial Rules for 8(a) Companies?
Sales Less than $1M Withdrawals exceeding $250,000 are considered excessive. Compiled financial statements are required within 90 days after fiscal year end.
Sales $1M - $2M Withdrawals exceeding $300,000 are considered excessive. Compiled financial statements are required within 90 days after fiscal year end.
Sales Greater than $2M Withdrawals exceeding $400,000 are considered excessive. Sales $2M - $10M Reviewed financial statements are required within 90 days after fiscal year end. Sales Greater than $10M Audited financial statements are required within 120 days after fiscal year end.
Withdrawals Include but are not limited to: Cash Dividend Distributions in excess of amounts needed to pay corporation or partnership taxes Cash and property withdrawals Payments to immediate family members not employed by the Participant Bonuses to officers Investments on behalf of an owner
Primary NAICS Code Can request SBA to change. Will grant if majority of total revenues during 3 year period have evolved from one NAICS code to another.
Personal Financial Information for Each Disadvantaged Owner: Adjusted gross income (3 year average) must be less than $250,000 for initial eligibility and less than $350,000 for continued eligibility. Adjusted net worth must be less than $250,000 for initial eligibility and less than $750,000 for continued eligibility. Total assets fair market value must be less than $4M for initial eligibility and less than $6M for continued eligibility.
Gross Income Gross Income is defined as the gross income shown on the federal tax return.
Joint Ventures The 8(a) firm must perform at least 40% of the work of each 8(a) joint venture contract that is awarded, including those awarded under a Mentor/Protégé agreement.
DCAA Audits Accounting System Financial Capability Audits Price Proposal Audits Labor Floorcheck Audits
Accounting Systems Audits Performed prior to or after receiving the signed contract Audit goal: give an opinion of your system It is not the software, it s your practices Pre-award audit: acceptable for the award? Post-award audit: GAAP, direct and indirect cost segregation, job cost/project cost ledger, indirect costs allocation, time keeping system, unallowable costs.
Financial Capability Audit Expect it if you are a small business starting out or your new contract is significantly larger than any previous ones One of the longer audit programs; has 2 parts 1. Financial condition risk assessment Internal controls, financial ratio trends, payment of payroll tax 2. Financial capability audit Cash flow projections, payment of A/P, loan covenants, etc.
Price Proposal Audits Two audit programs: 1. Proposals under $10 million 2. Proposals over $10 million Purpose: to evaluate the proposal for reasonableness and ascertain its acceptability for determining a fair and reasonable price. DCAA does not always agree with the contractor s definition of fair and reasonable. DCAA will use cost principles in FAR Par 31.
Labor Floorcheck Audits Were you asked to provide a listing of employees? The floorcheck is coming! Contractor s compliance with its internal controls and procedures The reliability of employee time records Are employees actually working? Are employees performing their assigned job classifications? Is time being charged to the proper cost objectives?
Prepare for DCAA audit Ask questions of the DCAA Auditor: What type of audit are you doing? Who requested the audit? What types of documents do you need me to have available when you visit? Who do you need me to have available at the visit? Do you need an office to work in, and if so, for how long? Do not hesitate to ask the auditor to explain anything you do not understand
Prepare for DCAA audit Find a trusted source who can help implement an adequate accounting system and practices Be ready to demonstrate your financial capability to perform each contract Develop and implement adequate internal controls and policies and procedures
CONTACT US Cindy Lennard, CPA, Tax Manager Email: clennard@cricpa.com Phone: 321-426-3032
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