What is Costpoint FAR Compliance?

Definition

Costpoint FAR Compliance is the use of Deltek Costpoint accounting and project controls to help government contractors apply Federal Acquisition Regulation requirements to contract costs, accounting records, billing, procurement, and supporting documentation. FAR Part 31 establishes cost principles for determining whether costs charged to applicable government contracts are allowable, including requirements concerning reasonableness, allocability, applicable accounting standards, contract terms, and specified limitations. :contentReference[oaicite:0]{index=0}

Costpoint supports this environment by connecting contracts, projects, labor, vendors, expenses, indirect cost pools, general-ledger activity, and billing records. The objective is to make cost classification and supporting documentation consistent enough for finance teams to substantiate amounts included in government contract claims.

Table of Contents

FAR Cost Principles in Costpoint

For applicable commercial organizations, FAR 31.201 establishes that total contract cost includes direct and indirect costs allocable to the contract, subject to the rules governing allowability. A cost must satisfy applicable requirements for reasonableness, allocability, accounting standards, contract terms, and other limitations before it can be treated as allowable. :contentReference[oaicite:1]{index=1}

  • Reasonableness: The nature and amount of a cost should be consistent with what would ordinarily be incurred in conducting the business or performing the contract.
  • Allocability: Costs should be assignable to cost objectives based on relative benefits received or another equitable relationship.
  • Accounting consistency: Applicable Cost Accounting Standards or appropriate accounting practices must be considered.
  • Contract requirements: The specific terms and conditions of the contract can affect whether a cost is allowable.

Costpoint can organize transaction-level information around these principles so finance teams can distinguish direct costs, indirect costs, credits, and other accounting classifications.

Direct, Indirect, and Unallowable Costs

Costpoint FAR compliance depends heavily on correctly identifying the relationship between costs and cost objectives. A cost incurred specifically for a contract can generally be assigned directly to that contract when the applicable requirements are satisfied. Costs benefiting multiple activities may require an appropriate allocation based on the benefits received. :contentReference[oaicite:2]{index=2}

Contractors also need processes for identifying and segregating unallowable costs. Cost Accounting Standard 9904.405 addresses the accounting treatment of identified unallowable costs and emphasizes their identification when they become defined or authoritatively designated as unallowable. :contentReference[oaicite:3]{index=3}

This makes accurate project coding, cost-center structures, indirect pools, and supporting documentation important components of a Costpoint environment.

Transaction Processing and GL Coding

FAR-oriented accounting starts with reliable transaction capture. An invoice workflow can extract information, validate fields, match supporting records, apply accounting classifications, obtain approval, and post the resulting transaction. The chart of accounts provides the accounting structure needed to classify these transactions consistently across projects, contracts, departments, and cost categories.

Costpoint can connect transaction-level records with project and contract structures, allowing finance teams to trace costs from source documentation through the general ledger and into contract reporting. This supports accurate financial records and creates a stronger foundation for audit-ready documentation.

ERP Integration and Compliance Workflows

FAR compliance processes often depend on information arriving from payroll, procurement, expense, accounts payable, banking, and other systems. An ERP integration strategy should preserve project identifiers, accounting classifications, vendor information, labor data, and transaction details as information moves into Costpoint.

Organizations evaluating ERP architecture can examine deltek and alternative ERP approaches with attention to integration design, migration requirements, clean-core architecture, and the finance workflows that must remain connected to the ERP.

Compliance is not limited to a single accounting module. Compliance broadly describes adherence to applicable laws, regulations, contractual requirements, policies, and established controls, making it a foundational concept for government-contract finance.

Compliance Controls and Supporting Records

FAR 31.201-2 places responsibility on contractors to account for costs appropriately and maintain supporting documentation adequate to demonstrate that claimed costs were incurred, are allocable, and comply with applicable cost principles and agency supplements. :contentReference[oaicite:4]{index=4}

A strong Costpoint environment therefore connects transaction records with source documents, approvals, project codes, vendors, employees, cost classifications, and accounting entries. This creates an evidence trail that finance teams can use when reviewing costs and preparing for audits or government inquiries.

Corporate Compliance extends this idea to the broader organization by covering the policies, controls, governance practices, and responsibilities used to meet legal, regulatory, contractual, and internal requirements.

Compliance Recordkeeping is particularly relevant because government contractors need organized records that demonstrate how transactions were originated, classified, approved, allocated, and ultimately included or excluded from contract costs.

Automated Compliance Checks

Finance automation can strengthen Costpoint workflows by applying consistent validation rules before transactions reach downstream accounting or billing processes. For example, sales tax verification can review tax classifications, jurisdiction information, and potential discrepancies before an invoice is posted.

For electronic disbursements, Payment Processing By ACH can support automated file generation, bank-format compliance, access controls, and audit trails, creating documented payment workflows that complement broader financial controls.

Tax-related controls may also involve an Economic Nexus Threshold when organizations need to determine whether applicable economic activity creates a state tax obligation. Separately, Notifications For Sales Tax Verification can provide alerts when invoice matching identifies sales-tax discrepancies requiring review.

Accrual accounting also benefits from documented control steps. Audit Trails For Accruals can preserve information about accrual creation, automation, review, and approval, supporting the evidence requirements associated with financial controls and audit activities.

Cash, Billing, and Contract Financial Reporting

FAR compliance connects with the broader contract-finance lifecycle. Once costs are correctly classified and supported, they can feed billing, revenue analysis, project reporting, and financial management processes.

For receivables, cash application helps finance teams match customer payments and remittances with outstanding invoices, resolve unapplied cash, account for deductions, and post receipts accurately. Keeping these records connected to contract and customer information supports a consistent financial trail from billing through collection.

Tax controls should likewise be integrated into transaction workflows. Effective tax compliance processes can validate jurisdiction rules, exemptions, tax treatment, and potential overcharges while providing supporting information for financial reporting and audit review.

Best Practices for Costpoint FAR Compliance

  • Define cost structures clearly: Establish consistent project, contract, account, labor, and indirect-cost classifications.
  • Separate allowable and unallowable activity: Maintain accounting treatments that identify costs requiring exclusion or special handling.
  • Preserve supporting documentation: Connect transactions with source records, approvals, allocations, and accounting entries.
  • Review indirect allocations: Apply documented allocation methods consistently across relevant cost objectives.
  • Monitor transaction controls: Validate coding, tax treatment, procurement activity, accruals, and payment information before final posting.
  • Maintain audit readiness: Retain records that demonstrate how costs were incurred, classified, allocated, and reported.

Summary

Costpoint FAR Compliance combines Costpoint's project and financial controls with the cost-accounting principles applicable to government contracts. The most important areas include reasonableness, allocability, accounting consistency, contract-specific requirements, unallowable-cost treatment, supporting documentation, and traceable transaction processing. By connecting these controls across accounting, procurement, billing, tax, accrual, and cash workflows, government contractors can maintain stronger financial reporting and more structured contract-cost management.

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