Understanding the 1408 Accounting Assessment

Government contracting can open up a world of opportunities. However, diving into the world of government contracts can be complex and daunting, especially when it comes to understanding the rules and regulations that govern the legal commitment. One crucial step in preparing for Federal Contracting, is the Accounting Assessment, known as the (Standard Form) “1408”, which outlines the criteria detailed in Defense Federal Acquisition Regulation Supplement (DFARS) 252.242-7006, Accounting System Administration. This assessment is required by the Federal Government and usually performed by the Defense Contract Audit Agency (DCAA). The purpose of the 1408 assessment is to evaluate the policies, procedures and processes of the contractor's accounting system to ensure that it complies with Federal Regulations. 

So, what exactly does the 1408 accounting assessment encompass? The 18 Criterion can be broken down into 4 groups addressing the following topics (with the criteria reference):

• Overall setup of the accounting system and related processes (Ref: 1, 2, 3, 4, 5, 9, 10, 14)

• Proper functionality of the system and consistently followed processes (Ref:  6, 7, 8, 16)

• Accuracy of cost collection, accumulation and application and representative of those costs billed within the requirements of each Government contract. (Ref: 9, 10, 11, 12, 13, 15, 17)

• BONUS – follow all criteria and GAAP ☺  (Ref: 18)

There are important steps to take before your system is officially evaluated:  

• Perform a self-assessment of the requirements, which may involve updating accounting policies and procedures, implementing internal controls, and ensuring financial records are organized.

• Ensure written documentation is current and accurate. Organizational charts, policies and procedures, journal entry support and of course, financial statements are key to demonstrating both the company’s compliance with government accounting requirements, and that there are controls and processes in place to maintain consistency.

deClermont Consulting can proactively assess compliance with the DFARS Accounting System criteria, identify needed improvements and help correct any related processes, allowing your company to correct any potential deficiencies prior to the Government’s audit.