How Working with Nonprofits is Beneficial for Design Engineers (or Professional Services Firms)

   It is literally true that you can succeed best and quickest by helping others to succeed.” - Napoleon Hill

Choosing any professional for a job is never easy. Most people don't know exactly what design engineers do, and they certainly don't know how to judge how competent they are.

But your potential clients might one day need the services of an A/E firm (don't leave out professional services firms) and wonder how they'll be able to choose the best one. While experience and skill in the industry are understandably important, not being deliberate enough in this selection process can have serious ramifications.

Maybe a business chooses an A/E firm based on a recommendation, but there's no innovation or creativity. Or a selected design engineer lacks dedication to the project, leaving the client wishing they could ditch the contract for someone else.

     How can a potential client see into the heart and mind of a design engineer professional whose work is done largely behind the scenes?

These are difficult scenarios, but not uncommon. How can a potential client see into the heart and mind of a design engineer professional whose work is done largely behind the scenes?

While past projects are one way to accomplish this, so is the right kind of work with nonprofits.

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What FDOT Consultants Need to Know About Job Cost Accounting Systems

What-FDOT-Consultants-Need-to-Know-About

Professional Consultants seeking to provide services to the Florida Department of Transportation must be certified as “qualified” annually in accordance with Chapter 14-75 of the Florida Administrative Code.

The First & Primary Requirement

Regardless of whether the “Request for Qualification Package for Professional Consultants” is the initial submission or an annual renewal, the package must include evidence that you (the Consultant) maintains an accounting system adequate to separate and accumulate direct and indirect costs and to support billings to the FDOT Department and other clients.

The capability to identify and separately report direct and indirect costs is the first and primary Departmental requirement for your accounting systems.

When you (the Consultant) has the expectation of billing for direct labor by the hour, a job cost accounting system is required in order to “support billings to the FDOT Department.”

The Audit

Most Consultants provide the required accounting system assurances by submitting an audit prepared by an independent Certified Public Accountant which contains certain specific and general schedules and assurances.  (We would be happy to perform an audit for you.)

Less than One Year?

If you have been in business for less than one complete year, or have not previously needed an audit, you may submit estimates or unaudited reports of costs and request an Accounting System Review in lieu of an audit report. (We have FDOT specialists available to help you with this.)

The Accounting System Review

When the “Request for Qualification Package” includes a request for an Accounting System Review, the FDOT Procurement Office will perform the review.

When the FDOT Procurement Office has been requested to perform an Accounting System Review, your initial contact will normally be by e-mail.

Accounting Systems Functionality Confirmation

In order to demonstrate your accounting system function as required, you (the Consultant) are required to submit a number of reports from the system.

NOTE: If your firm, and accounting system, have not been in operation long enough to have meaningful accounting data, it is a difficult task to enter enough “dummy” data in payroll registers and timesheets to produce representative reports.

When entering “dummy” data the you (the Consultant) will be asked to envision or project your expected operations in the next year and to:

  • Produce timesheets for each individual envisioned to be “on board” for at least one full pay period.
  • Charge time to at least three (3) separate jobs and to indirect “projects”.
  • Post these timesheets to the system.
  • Submit these timesheets along with a Payroll Register and a Payroll Summary Report.

After the “dummy” data is in the system, the system must prepare and print:

  • A Labor Distribution Report.
  • Labor Distribution Summary.
  • Job Cost Report.
  • A Job Cost Summary Report.

About the Reports

If you (the Consultant) are utilizing a commercial accounting package, such as QuickBooks or Peachtree, these reports may have different names and titles than those show above or in the “Primer.” It is, therefore, important that you (the Consultant) review the “Primer” and understand the information to be shown in each report in order to recognize the closest standard report.

NOTE: It is not necessary to rename the accounting software reports. However, it is very important that both hours and dollars appear together on some reports; this will often require modification of the standard report formats. The final full pay period represented on the timesheets submitted should appear as the current pay period in the reports.

Finally, the submission to the FDOT Procurement Office must include some general information reflecting the accounting system “set up.” This “set-up” information includes a complete printout or listing of the Chart of Accounts, including account number designations, if any.

Along with the Chart of Accounts, you (the Consultant) must prepare a printout or copy of the General Ledger; the General Ledger should show a level of detail adequate to allow tracing to the required reports.

In addition, you (the Consultant) must complete, sign, and return the Internal Control Questionnaire, available here.

Submission Timing & Expectations

The FDOT Procurement Office commences review of the submitted materials upon receipt. The need for returns, corrections, and required resubmission is far more common than acceptance on initial submission.

Within reason, the FDOT Office has significant patience with professional services providers who are attempting the initial establishment of a business accounting system.

The FDOT is aware that It is unusual for professional engineers or professional architects will successfully establish and implement an acceptable accounting system without the assistance and advice of an accounting professional.

NOTE: This is a specialty service Hunter & Associates provides.

If you (the Consultant) are considering how you will meet the accounting system requirements, as well as other qualification requirements, we can help you understand the accounting system requirements discussed in the Reimbursement Rate Audit Guidelines, before undertaking the establishment of an accounting system without professional advice.

When the FDOT Procurement Office determines your (the Consultant’s) accounting system is adequate, they next assign interim overhead and direct expense rates for use in contracting with the Department prior to submission and review of your (the Consultant’s) first audit by a Certified Public Accountant.

Interim overhead and direct expense rates are based on the unaudited reports or projections of costs submitted with the “Request for Qualification Package.” These projections should include both direct and indirect labor estimates, fringe benefit estimates, and all other anticipated indirect or direct operating costs.

Interim reimbursement rates are subject to “caps” established by the Department’s  Procurement Office. Reimbursement rates based on the audit of an independent CPA, such as our team, will be due after the initial period of operation using interim rates, and are not subject to Departmental caps.

The “Job Cost Accounting System Primer” illustrates the required elements and some of the capabilities of an acceptable accounting system.

The newly established system does not need to produce reports identical to the examples; the Primer describes the important elements illustrated and the capabilities that are expected to be found in an acceptable system. The overall information flow through an acceptable accounting system can be observed in the “Flowchart for Operating Costs.”

Resources:

>  Reimbursement Rate Audit Guidelines can be found here.

>  The AASHTO Uniform Audit & Accounting Guide can be accessed here.

>  Job Cost Accounting System Primer

>  Internal Control Questionnaire is available here.

>  Request for Qualification Package for Professional Consultants

Need help?

As you can see, it can be a painstaking process to manage the many pieces and as you do, you may be missing opportunities. We are very familiar with the process and requirements and we enjoy working on FDOT projects.

If you are a Professional Consultant seeking to provide services to the Florida Department of Transportation and need to be certified as “qualified” in accordance the Florida Administrative Code, take a moment to contact us here.

Lewis Hunter
ABOUT THE AUTHOR | Lewis Hunter
Lewis founded Hunter & Associates in 1990 to help small-business owners achieve their potential. He manages the firm’s client relationships, regularly soliciting assessments of our team’s progress and seeking feedback on our performance and value-added services. He is an expert in cost accounting, overhead rate management and transition planning for architecture and engineering firms. Lewis also manages or performs all examinations of overhead rates that are reported to state transportation departments, including indirect cost rate audits for firms qualified as disadvantaged business enterprises (DBEs). He has managed the attestation services for applicants seeking reimbursement from the Florida Department of Environmental Protection for costs incurred in remediation of petroleum contamination of underground storage tanks as well.
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