Accounting System & Internal Controls
Cost control is only as good as the record underneath it. This page describes how costs are accumulated, how labor is charged, how indirect costs are allocated, and the internal controls that make each of those defensible to a contracting officer or an auditor.
Accounting System Structure
The accounting system is organized against the DFARS 252.242-7006 criteria a government auditor applies: costs accumulated by contract, direct and indirect costs segregated, and results produced from the books of record rather than from a side spreadsheet.
- Job-order cost accounting with costs accumulated by contract, task order, and WBS element
- Direct costs identified to the final cost objective; indirect costs accumulated in logical pools
- General ledger control accounts reconciled to the job cost subsidiary ledger every period
- Interim cost determination at least monthly, supporting timely reporting and billing
- Exclusion of unallowable costs from any billing, claim, or proposal to the government
Timekeeping and Labor Distribution
Labor is the largest cost and the most scrutinized control. The timekeeping system is built so that the record of an hour is made by the person who worked it, on the day they worked it.
- Daily time entry by the employee performing the work, to the specific charge number
- Supervisory review and approval of time records each period
- Corrections made by documented adjustment with reason recorded — never by overwriting history
- Labor distribution reconciled to payroll and to the general ledger every period
- Written timekeeping policy issued to every employee, with training at hire and annually
- Zero tolerance for mischarging, and a protected channel for reporting pressure to mischarge
Indirect Rate Structure
Indirect costs are allocated through a disclosed, consistently applied structure. Rate values are competition-sensitive and are provided to the contracting officer or auditor rather than published; the structure and its discipline are described here.
- Logical pools with allocation bases bearing a causal or beneficial relationship to the cost objectives
- Consistency between how costs are estimated, accumulated, and reported, per Cost Accounting Standards principles
- Provisional billing rates monitored against actuals during the year and adjusted when they drift
- Annual reconciliation of provisional to final rates with the resulting adjustment settled promptly
- Rate stability treated as a partner obligation: no surprise year-end true-up on a teammate's program
Cost Allowability Screening
FAR Part 31 allowability is applied at the point a cost enters the system, not at the point an auditor asks about it. Expressly unallowable cost categories are identified in the chart of accounts and screened continuously.
- Chart of accounts segregating unallowable cost accounts by category
- Screening at requisition, expense report, and journal entry against FAR 31.205 cost principles
- Directly associated costs of unallowable activity identified and excluded with the principal cost
- Documented review before any incurred cost submission, claim, or certified cost or pricing data
- Training for anyone with purchasing or expense authority on what is and is not allowable
Purchasing and Subcontract Controls
Costs incurred through suppliers are controlled with the same discipline as internal costs, because the government evaluates them as the institution's costs.
- Competition sought where practicable; sole-source justification documented where it is not
- Price or cost analysis performed and documented before subcontract award
- Flow-down of applicable FAR, DFARS, and NASA FAR Supplement clauses to subcontracts
- Receipt and acceptance verified before a supplier invoice is paid or billed onward
- Subcontractor cost performance monitored against the subcontract baseline
Internal Control Environment
Controls are structural, not personal. Where the institution is small enough that separation of every duty is impractical, compensating controls and independent review are documented explicitly rather than assumed.
- Segregation of duties across authorization, recording, custody, and reconciliation
- Documented compensating controls and independent review where full segregation is not practical
- Defined approval authorities and thresholds for commitments, expenditures, and payments
- System access controlled by role, with change logs retained
- Written accounting policies and procedures maintained under version control
- Periodic internal control self-assessment reported to executive leadership
Audit Readiness and Records
The institution operates so that an audit request is answered from the system rather than reconstructed for the occasion. Readiness is a continuous state, not a project undertaken when a letter arrives.
- Records retained for the period FAR 4.7 and the contract require, with defined retrieval procedures
- Incurred cost submission prepared on the schedule the contract establishes
- Support for certified cost or pricing data preserved with the proposal file
- Independent financial review and support for any audit, review, or pre-award survey the acquisition requires
- Findings, if any, tracked to closure with root cause and corrective action recorded
Where This Connects
The regulatory framework behind these controls is set out in financial compliance. Ethical obligations around charging and reporting are covered in ethics and business conduct, and the information-protection posture around cost data is described in data protection. Purchasing and subcontract controls are described in full in the procurement and supply chain program. Because access decisions, document signature, and administrative actions are recorded by the systems that perform them, audit evidence is a by-product of the work rather than a separate documentation effort — part of the automated operations posture that keeps compliance from becoming an indirect-cost center.
Alignment Disclosure
Monarch Space Systems describes its cost estimating, accounting, and cost control practices as aligned with the cited federal regulations, agency guidance, and consensus standards. Alignment is not a determination. The institution does not claim an approved or audited accounting system, an approved estimating or purchasing system, an EVMS validation, a Cost Accounting Standards coverage determination, negotiated forward pricing or final indirect rates, or a completed incurred cost audit. Rate values, pricing data, and cost performance figures are not published; they are furnished to a contracting officer or auditor through the channel the acquisition requires.
Cost policy documentation, procedures, and control descriptions are available to customers and prospective teammates through the confidential engagement pathway or by request through institutional contact.