Do You Know if Your Project Reports are Complete?

The information you need to plot a winning strategy for your GovCon is not complete without the data provided by a top-notch project reporting system. This data is critical to your firm’s overall financial management, particularly when you make program decisions.

Here are just two of the many reasons why:

  1. Without a project reporting system, you may not pick up all of the revenue earned on your income statement.
  2. Conversely, a careful review of program profit may provide visibility into missing costs and highlight a needed accrual so that costs are booked based on the matching principle in conformance with generally accepted accounting principles (GAAP).

A good project reporting system:

  • Provides accurate information on project performance on a monthly, year-to-date, and contract-to-date basis.
  • Provides reporting to view performance by project through gross profit and contract profit on an accounting period and year-to-date basis.

It is surprising how many companies skip the steps of running project reports, then comparing these reports to financials. This comparison is the only way to ensure that your project reporting is set up properly and includes all costs. This comparison is also reviewed by the DCAA and independent auditors, so make sure these reports match. If done correctly, each month:

Project Profit on your project report = Operating Profit on your income statement*

*You may see a slight difference due to rounding.

If you are not making this comparison part of your closing process each period, consider adding it now. You will confirm revenue, each direct cost element, and total indirect costs between your project report and general ledger (GL).

Job Report

Below is a sample job report from Unanet’s project reporting system:

Sample Job Report
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If your firm uses QuickBooks, you can use the Profit and Loss by Customer or Class or generate reporting based on how you are tracking projects. Ensure that there is no data in the “Not Specified” column for all revenue and direct cost accounts. You can then apply your actual calculated indirect rates to arrive at contract profit.

Income Statement

Below is a sample income statement from Unanet’s project reporting system:

Income Statement
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Project to GL Reconciliation

GL Reconciliation
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Reconciliation Troubleshooting

When the project report fails to reconcile to the income statement, the reasons may vary by the accounting system used. Below are some common causes:

  • Revenue – If revenue is higher on the project report, revenue may need to be posted to the GL. This is done in Unanet through the Billing & Revenue Post. If revenue is higher on the income statement, you may be missing projects on the cost report. If using Unanet, ensure that all direct projects are associated with a Cost Structure. Check to see if you posted journal entries to revenue.
  • Direct Labor – If labor is missing on the job report, make sure all labor cost elements are included in the cost report definition and that journal entries without projects are not posted. If labor is lower on the income statement, make sure all labor postings are complete.
  • Direct Non-Labor – If the income statement is higher than project reports, accounts payable invoices may be posted without an associated project. Also, confirm if you posted journal entries to direct costs without a project. In Unanet, expense types and cost elements play a big role in correct reporting.

If you are using Unanet, refer to the checklist in the Unanet Processing: Common Entry and Setup Issues.

In QuickBooks, make sure all direct costs and revenue have a class/customer or associated project. There should be no revenue or direct costs in the “Not Specified” column.

  • Indirect Costs – This may be an indication that your pool cost setup is not correct. You may also need to post cost pool calculations in the system before running reports based on actual costs. When complete, ensure all costs are allocated except for general and administrative (G&A) unallowable costs. In all cases, make sure your indirect rates tie out to your GL. If this does not reconcile, you will see similar issues when reconciling project reports. Refer to the blog Do You Know if Your Indirect Rates are Complete?

When your reconciliation is complete, your revenue and direct costs should be an exact match. Your total indirect costs may be off by an insignificant amount due to calculation rounding. Your reconciliation may look like the example below:

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Data gleaned from a project reporting system is an invaluable strategic asset. Call on the GovCon accounting experts at CAVU to help troubleshoot your problem areas and ensure that you get the most from your project reporting system.