DCAA Compliance

A company might choose to become Defense Contract Audit Agency (DCAA) compliant for several reasons, primarily if it intends to work with or secure contracts from the U.S. Department of Defense (DoD) or other government agencies that require DCAA compliance. The DCAA is responsible for conducting audits of government contractors to ensure that they are in compliance with various regulations and standards. 

It’s important to note that achieving DCAA compliance can be a complex and time-consuming process. It often involves preparing detailed documentation, implementing standardized accounting practices, and undergoing rigorous audits. Companies considering DCAA compliance should carefully assess the benefits against the resources required and make an informed decision based on their specific business goals and circumstances.

DCAA Compliance Check List

Becoming DCAA compliant involves adhering to specific financial and accounting standards set by the Defense Contract Audit Agency (DCAA). The process can be intricate and requires careful planning and execution. Here’s a general outline of steps to take in order to achieve DCAA compliance:

  1. Understand DCAA Requirements: Familiarize yourself with the DCAA’s requirements and guidelines. These can include the Cost Accounting Standards (CAS), Federal Acquisition Regulation (FAR) clauses, and DCAA’s Information for Contractors (DFARS) guidelines. Understanding these regulations is crucial before proceeding.
  2. Organize Internal Processes: Review and organize your company’s financial and accounting processes. Ensure that your accounting systems, policies, and procedures are aligned with the DCAA’s standards. This might involve restructuring or improving existing processes.
  3. Accounting System Review: Evaluate your company’s accounting system to ensure it meets DCAA’s standards. The system should provide accurate and reliable cost data, adhere to proper segregation of costs, and support traceability of costs to specific contracts.
  4. Cost Estimating System: If you’re engaged in cost-reimbursable contracts, your company may need a DCAA-compliant cost estimating system. This system should provide accurate cost proposals and estimates for government contracts.
  5. Timekeeping System: Implement a timekeeping system that accurately tracks employee hours, labor costs, and activities associated with government contracts.
  6. Cost Accounting Standards (CAS): Familiarize yourself with CAS, which sets guidelines for consistency and transparency in cost accounting practices. Ensure that your accounting practices align with CAS principles.
  7. Document Policies and Procedures: Create or update policies and procedures manuals that detail your accounting, financial, and procurement processes. These documents should be clear, consistent, and easily accessible to employees.
  8. Training and Education: Train your employees on DCAA compliance requirements, especially those involved in financial and accounting functions. Regular training can help ensure consistent adherence to compliance standards.
  9. Incurred Cost Submissions: For companies with government contracts, you’ll need to submit incurred cost proposals to the DCAA. These proposals detail the actual costs incurred on government contracts during a specific period. The DCAA will review these submissions to ensure compliance.
  10. DCAA Audits: Be prepared for DCAA audits. The DCAA may conduct various types of audits, including pre-award audits, post-award audits, and incurred cost audits. Have all your documentation and records organized and ready for review.
  11. Internal Controls: Implement strong internal controls to prevent fraud, errors, and non-compliance. These controls should be designed to safeguard government contract funds and ensure accurate financial reporting.
  12. Software and Tools: Invest in accounting and project management software that supports DCAA compliance requirements, such as accurate cost tracking, segregation of costs, and generation of compliant reports.
  13. Engage Professional Help: DCAA compliance can be complex, and seeking guidance from consultants, accountants, or legal professionals experienced in government contracting and compliance can help ensure you’re on the right track.

Remember that DCAA compliance is an ongoing effort. Regularly review and update your processes, stay informed about any changes in regulations, and adapt as needed to maintain compliance with DCAA standards. It’s also important to note that the specific steps you need to take may vary depending on the nature of your business, the types of contracts you’re pursuing, and other unique factors. Consulting directly with the DCAA or seeking professional guidance tailored to your situation is recommended.

Software Solutions to help with becoming DCAA Compliant