What the auditor checks
An adequate accounting system separates direct and indirect cost, validates timekeeping, and applies a consistent indirect-rate structure across programs. Gaps surface as audit risk and as rate adjustments that claw back margin.
Keep rates and records reconciled
Indirect cost rates are each pool over its base, and provisional billing rates must reconcile to actuals in the year-end incurred-cost submission. Large variances trigger audit risk. The DCAA standards define what adequate means and how the submission is examined.
Where the ERP closes the loop
On Hudace, direct and indirect cost separate at entry, timekeeping is validated daily, and indirect rates and submission schedules generate at year-end rather than by hand. Xenon AI flags mischarged labour, anomalous allocations, or rate drift for a cost accountant to resolve.
It does not set rates or sign the submission. The trail behind every cost practice stays defensible.
The numbers to watch
Keep the audit-ready numbers reconciled all year, not at close.
Indirect cost rates
Each pool / its base. Provisional rates must reconcile to actuals.
Provisional-to-actual variance
Billed rate vs actual. Large gaps trigger adjustments and audit risk.
Timekeeping compliance
Daily time recorded to standard. A core audit area.
Cost variance
Earned value - actual cost. Program health, tied to the audited ledger.
See DCAA-ready finance on Hudace
Talk to our team about cost accounting that stays audit-ready all year.