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Engineering & Computer Simulation, Inc. – ECS |
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| The Client | ||
ECS is small, high growth, software oriented, research and development Defense Contractor that provides simulations and courseware to a variety of sectors. |
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| The Issues | ||
ECS struggled the last couple of years with its DCAA audit opinion. The company’s last audit by DCAA (Defense Contract Audit Agency) resulted in a letter of “growing concern” citing significant timekeeping and accounting system issues |
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| The Facts | ||
Even though the company had grown and profitability had improved, President Waymon Armstrong was very concerned about the next DCAA audit. “We’d experienced double digit growth the last few years, but without the ability to meet the DCAA requirements, that growth was in jeopardy,” said Armstrong. Armstrong knew he needed CFO expertise for the company. “I had been wearing the CFO hat on a part time basis trying to get a handle on the spread sheets and accounting reports. We realized that in order to be DCAA compliant, we’d need more expertise and time than I could devote,” continued Armstrong. His search led him to Nperspective and Wayne Leland, a managing partner with Nperspective. “I interviewed Wayne and hired him on the spot when I discovered he was a former DCAA auditor with experience in small business technology. He started the very next week and has been with us ever since,” says Armstrong. Armstrong explained that ECS needed help and guidance on how to convince the DCAA auditor the company was profitable and systems were improving. That was the good news. The bad news was the systems had not changed significantly and ECS had recently received negative feedback from a DCAA floor check regarding their old Excel spreadsheet timekeeping system. ECS was concerned about the pending DCAA audit. If the systems are not auditable, DCAA cannot give a favorable opinion. |
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| Solutions by Design | ||
Nperspective’s first task was to get a handle on the status of the current DCAA audit and assess the issues. Fortunately, as a former DCAA auditor, Wayne Leland was quickly up to speed. Wayne completed a review of the prior DCAA audit reports and a current system analysis to determine why DCAA had issues. “Partnering with Wayne and Nperspective was one less headache for me to worry about,” explains Armstrong. The next step was to design a new system. Wayne asked for ECS’s approval to contact the DCAA auditors for their input to help. They had never heard of such a thing. Wasn’t that like contacting the enemy with your battle plan? The answer was yes; however, unlike dealing with the IRS we were not in an adversarial relationship with DCAA whom represents ECS’s largest customer. ECS agreed and Nperspective contacted all the DCAA auditors and added their requested reports to the design and output of the new system. |
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| Implementing a New System | ||
We designed a new system and researched several software packages with the potential to automate the system, which was critical to success. We recommended a front-end software product for their current accounting software that allows all employees to enter time from anywhere in the world via the Internet. This particular software was developed by a Defense Contractor and complied with all DCAA internal control criteria. Employee time is then exported to the current accounting software and the new system automatically allocates all costs to the appropriate jobs and updates all payroll information without any input by the accounting staff. All reports needed for the COO and DCAA are produced every time the COO approves time sheets and imports them into the current accounting system. Meanwhile, Nperspective rolled out the new system, in concept, with DCAA and had several meetings with the auditor to resolve his current concerns. With his concerns mitigated, the auditor recommended a “clean” (the highest) opinion in the current audit. However, there was one large obstacle. DCAA wanted forecasted financial statements by month for the next 12 months with cash flows showing defendable growth and stability, within 2 weeks. In typical “roll up our sleeves” fashion, Nperspective went to work and produced the reports using a third party forecasting software product. The auditor then wrote up his “clean” opinion. “In a very short period of time, Nperspective helped us achieve the needed transparency with the DCAA to insure our growth as a defense contactor,” says Armstrong. |
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| The Future | ||
The new systems are so successful that DCAA states the next audit will be likely be a desk (correspondence) audit. ECS will now be qualified to bid on the more profitable Fixed Price Contracts with the government. Currently all employees are entering their time via the Internet and the accounting and job cost systems are updated automatically. As an added bonus, Nperspective was also able to help ECS recover billings in excess of $26K and expects improved collections in the future. “With Nperspective’s help we could grow to a 5.5 million dollar company in 2007,” President Waymon Armstrong happily reports. “These are great issues to be working on." |
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For more information about ECS, please visit their website. |
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