GovCon Wednesdays
Estimated Read Time: 5 minutes
Once your accounting system is ready and your team has connected with auditors and tax professionals, it’s time for one of the most critical parts of year-end closing: reconciling and analyzing your accounts.
Reconciliation is more than a bookkeeping task it’s how you prove that your financials are accurate, your records are complete, and your company is audit-ready under DCAA and GAAP standards.
Why It Matters
Government contractors operate in a highly regulated environment. A small discrepancy between your accounting system and your supporting documentation can raise questions during an audit or delay your financial review.
Reconciliations ensure every balance on your books matches reality what’s in your bank, owed by customers, or payable to vendors. Account analysis then helps you understand why those balances look the way they do, so you can identify errors, timing differences, or potential compliance risks.
Step 1: Reconcile All Balance Sheet Accounts
Start with the basics make sure every account on your balance sheet ties to supporting documentation:
- Cash & Bank Accounts: Reconcile every bank and credit card statement. Match deposits and withdrawals to your general ledger and resolve any timing differences.
- Accounts Receivable (A/R): Verify that all invoices have been issued and applied correctly. Confirm aging reports reflect actual customer balances.
- Accounts Payable (A/P): Ensure all vendor bills are entered and paid accurately. Check for duplicate or missing invoices.
- Payroll Liabilities: Confirm that withholdings and employer taxes have been remitted.
- Accrued Expenses & Deferred Revenue: Review manual entries and ensure they align with contract performance and incurred costs.
A good rule of thumb: if an account doesn’t have documentation to back it up, it’s not ready to close.
Step 2: Validate Indirect Rate Allocations
For GovCons, indirect costs fringe, overhead, and G&A are central to compliance.
Before closing, verify that your indirect rate calculations are applied correctly and match the methodology you submitted in your Provisional Billing Rate (PBR).
Check for:
- Correct cost pool assignments (no unallowable costs mixed in).
- Allocation bases that reflect actual costs.
- Consistency between project reporting and general ledger accounts.
This ensures your rate calculations are accurate and defensible during DCAA review.
Step 3: Analyze Account Balances
Once reconciled, step back and analyze your numbers.
- Compare this year’s balances to prior years and your budget.
- Investigate unusual variances large swings could signal posting errors or revenue timing issues.
- Review contract-level revenue and costs for reasonableness.
This analytical step helps management confirm financial health and ensures the financials align with operational performance.
Step 4: Document and Retain Your Work
Keep a record of all reconciliations, supporting schedules, and variance analyses. Save PDFs or electronic workpapers showing how balances were verified.
This documentation is vital if DCAA or your auditors request proof later it demonstrates diligence, consistency, and internal control strength.
Common Pitfalls to Avoid
⚠️ Rushing the process. A quick close can miss unreconciled accounts or duplicate entries.
⚠️ Ignoring stale balances. Old, unresolved items should be reviewed and cleared.
⚠️ Not documenting your work. Without clear backup, even accurate numbers can be questioned during an audit.
⚠️ Misclassifying indirect costs. This can distort rates and affect cost recovery.
Accurate Reconciliations = Audit Confidence
Accurate reconciliations are the foundation of financial integrity.
They protect your business from compliance risks, support audit readiness, and give leadership the confidence to make data-driven decisions.
VSINGH CPA helps GovCons build strong closing processes from account reconciliations to indirect rate validation so your books stay accurate, compliant, and audit-ready year after year.
👉 Check out our YouTube Shorts for quick GovCon year-end tips: https://www.youtube.com/@vsinghcpallc
Need help reviewing reconciliations or indirect rates? Contact VSINGH CPA today.
Coming Up in the GovCon Year-End Closing Series
- ✅Tip #1: Know Your Accounting System & Year-End Checklist
- ✅Tip #2: Communicate Early with Tax Professionals & Auditors
- ✅Tip #3: Reconcile and Analyze Accounts
- 4️⃣Tip #4: Validate Revenue & Lease Entries (ASC 606 & ASC 842)
- 5️⃣Tip #5: Prepare 1099s & Charitable Contributions
- 6️⃣Tip #6: Review Contract Status Reports & Submit Data to Tax/Audit Teams
- 7️⃣Tip #7: Final Wrap-Up — Year-End Complete, What’s Next?