Maximizing DCAA Compliance as a Government Contractor

Do you currently have government contracts? How about looking to secure your first contract? Whether you are a seasoned contractor or just getting started, DCAA compliance is non-negotiable.

In this article, we’ll cover the basics of DCAA compliance, including the types of audits the DCAA can conduct, the importance of compliance, and how to improve your internal processes to avoid noncompliance.

What is DCAA Compliance?

DCAA stands for Defense Contract Audit Agency, which is the government body tasked with providing audit and financial advisory services to Federal entities. DCAA compliance involves meeting the standards and requirements set out by the DCAA. This agency will frequently conduct audits and checks of government contractor’s accounting systems to ensure compliance.

Although government contractors refer to processes and procedures as DCAA-compliant, the DCAA does not actually deem businesses compliant or noncompliant. Instead, being DCAA compliant means you follow the agency’s recommendations and guidance within your job costing, billing, and other financial policies.

Compliance is essential as a government contractor. If the DCAA finds that your accounting system is noncompliant, you could lose out on future awards. This can be detrimental if your business relies on government contracts as your primary source of income. Not to mention that the DCAA can require your business to pay back instances of excess billing, hurting your cash flow and profitability.

What Types of Audits Does the DCAA Perform?

The DCAA has a few different audit types, which can be random or pre-selected based on the contract specifics. Here are a few of the common audit types:

·         Forward Pricing – This audit type is generally completed before contracts are awarded. The DCAA will analyze the line items in your contract based on market prices to determine reasonableness.

·         Special Audits – The scope of special audits can vary. For example, the DCAA might audit a specific area of your accounting system or a specific line item in the contract.

·         Pre-Award Surveys – This audit looks to help the DCAA understand your accounting system and form an opinion on whether your controls are operating according to the DCAA’s recommendations.

·         Incurred Cost – In contracts that don’t have a fixed price, the DCAA will perform an internal audit on the legitimacy of your billed costs.

·         Other Audits – Other audits are commonly performed after contract awards that are deemed high risk.

Being a government contractor opens the door to each of these audits. Oftentimes, the DCAA will not warn you when these audits occur, making it important to keep an agile and compliant accounting system at all times.

How to Maximize Compliance

The good news is that there are ways you can improve the compliance of your accounting system. First, revisit the DCAA’s recommendations for a compliant accounting system. This might include job costing, proper cost accounting best practices, and information surrounding billing the government.

Another way you can promote compliance is to enlist the help of an expert. Our team at BUSINESS understands that compliance isn’t always clear-cut, which is why we work alongside you to improve your internal controls. Reach out today to schedule your free consultation.