As a government contractor, you may be subject to compliance with Defense Contract Audit Agency (DCAA) guidelines. Therefore, it’s important that government contractors are aware of what DCAA is and what it does.
DCAA, a federal agency operating under the Department of Defense (DoD), was founded in 1965. Its mission is to provide audit and financial advisory services regarding contract acquisition and administration for the DoD and other federal agencies involved in procurement and contract administration. DCAA’s involvement in government contracting financial oversight is critical to ensuring that the DoD gets the best bang for its buck. The Agency’s major purpose is to perform contract audits and provide financial advisory services. DCAA also determines whether contract costs are allowable, allocable, and reasonable.
What Does DCAA Do?
DCAA operates under the authority, direction, and control of the Under Secretary of Defense (Comptroller)/Chief Financial Officer. DCAA’s work is vital to the DoD as it benefits our men and women in uniform and the American taxpayer. Some key points about DCAA include:
- DCAA provides audit and financial advisory services to DoD and other federal entities responsible for acquisition and contract administration.
- DCAA’s role in the financial oversight of government contracts is critical to ensure DoD gets the best value for every dollar spent on defense contracting.
DCAA’s Strategic Focus
DCAA’s Strategic Plan Focus (2021 to 2025) is on the following goals:
- Better Serve the Department by Strengthening Strategic Alliance
- Align Products and Services to be Flexible and Responsive to Customer Needs
- Recruit, Cultivate and Retain a Highly Skilled, Flexible, and Empowered Workforce
Some Common DCCA Services
Preaward Contract Audit Services
- Preaward Accounting System Surveys
- Contract Price Proposals
- Forward Pricing Rate Proposals
- Cost Accounting Standards (CAS) Disclosure Statement
Postaward Contract Audit Services
- Incurred Costs/Annual Overhead Rates
- CAS Compliance & Adequacy
- Truth in Negotiation Audit
- Provisional Billing Rates
- Real-time Labor and Material
- Equitable Adjustment
- Termination Settlement Proposal
Business System Audits
- Accounting System
- Estimating System
- Material Management & Accounting System
It is feasible to stay on top of your game, maintain a long-term business relationship with the government, and avoid costly penalties by following DCAA guidelines.
A government contract will have to pass DCAA audits in order to be compliant. To pass DCAA audits, your business processes, accounting systems, and estimating system will have to be DCAA compliant. DCAA compliance is the process of ensuring DCAA auditors will find no issues with your business while they review and monitor your government contract. DCAA audits are performed in order to ensure that a company’s accounting systems, estimating system, and processes meet DCAA guidelines.
In order for DCAA audits to be completed efficiently and effectively, it may be in your company’s best interest to be DCAA compliant. DCAA audits could take place any time during the term of a government contract, so it is important that DCAA compliance be completed before DCAA begins its audit/review process.
Some DCAA guidelines and compliance requirements include:
- All accounting systems must follow generally accepted accounting principles (GAAP)
- DCAA audits must be completed every year, or at any other time deemed necessary by DCAA
- DCAA compliance is the responsibility of top management in your company, which should include a CFO and CEO. It’s important for all parties to understand what DCAA guidelines are and how they will affect
DCAA has a library of resources that government contractors can use for self-assessment. The DCAA’s website provides a variety of resources, including an overview of the DCAA’s mission, products and services, news and events, and more. You can also find helpful information on becoming DCAA compliant in the DCAA Compliance Library. The library includes topics such as accounting systems audits, CAS disclosure statement preparation, and DCAA requirements for proposal pricing.
Federal Acquisition Regulations (FAR) and The Department of Defense Federal Acquisition Regulation (DFAR) are the primary laws governing government procurement. DCAA compliance is an essential component of government contract administration. Compliance necessitates a deep understanding of government regulations and standards. The DCAA rules don’t ask you to do anything out of the ordinary. It’s staying on top of all the criteria, many of which are not DCAA rules per se, but DCAA guidance. DCAA compliance is simply a prerequisite for doing business with the government and avoiding penalties in the future. The key for government contractors is to know what rules and regulations they are subject to, implement and maintain that compliance. Successfully maintaining DCAA compliance requires the support of top management to ensure everyone understands what is required and implements these guidelines effectively.