Here is how I setup my K12LTSP server to authenticate against a postgres database.

Squid Configuration

Squid has the following settings:
#This makes it so that they can't bypass Dansguardian unless they are on the local computer.
http_port localhost:3128

#Look for a password found in the postgres database system.
auth_param basic program /usr/lib/squid/pgsql_auth auth_param basic children 5 auth_param basic realm Squid proxy-caching web server auth_param basic credentialsttl 1 hours auth_param basic casesensitive off

#Require a password to access the internet
acl password proxy_auth REQUIRED

#Allow http access if you have a password.
http_access allow password

Dansguardian

proxyport = 3128
usernameidmethodproxyauth = on