DCAA Approval vs. DCAA Compliance

We get a lot of people that call us and ask if we can help them with DCAA approval of their company or accounting system.  This is a bit of a misunderstanding as the DCAA does not "approve" accounting systems, they review them for adequacy.  If you look at the Defense Department Directive Number 5105.36, p5.e, you will see that the DCAA mission is to determine the adequacy of an accounting system, not approve it.  If you look at their mission statement (found in Para 3) you will see that:

The DCAA, while serving the public interest as its primary customer, shall perform all necessary contract audits for the Department of Defense and provide accounting and financial advisory services regarding contracts and subcontracts to all DoD Components responsible for procurement and contract administration. These services shall be provided in connection with negotiation, administration, and settlement of contracts and subcontracts to ensure taxpayer dollars are spent on fair and reasonable contract prices. DCAA shall provide contract audit services to other Federal agencies, as appropriate.

So their primary mission is to provide financial advisory services to the procuring agency.  So when someone says that they want their system approved by the DCAA, that is a bit of a misnomer.  The correct terminology is to say that the DCAA will review their system for adequacy, or in plain English, to review their system for compliance with government requirements.

Another mis-conception seems to be that a contractor can develop their business systems and then request that the DCAA come in and perform an audit.  The DCAA website gives some guidance on this:

Government acquisition officials can request DCAA audit services based on contracting needs. Before requesting an audit, contractors' proposals, claims, or other submissions should be adequately supported in order to fully protect the Government's interests and to ensure receipt of timely and effective audit services. The How to Request an Audit Guide has specific instructions for contracting officers to prepare an audit request and submit the request to the appropriate DCAA office.

In the referenced "How to Request an Audit Guide" above, one of the first instructions involves the requester information.  It clearly states that this should be the PCO, DACO, ACO, Cost/Price Analyst, etc. or more specifically a government employee.  The instructions further identify:

Audit requests should be sent by Government employee and audit reports will only be sent to Government employee.

Clearly, a contractor cannot request an audit directly from the DCAA.  The contractor can make a request to their contracting officer that the agency request the DCAA audit the contractor.  Clearly the decision is up to the procuring agency however.  They must evaluate the risk of the specific contract, among other issues, in determining if they will request a DCAA audit of the Contractor. 

So when you hear somebody saying "We are DCAA approved" or "We would like to be DCAA approved", you will know that this person is slightly mis-informed.  They should really be saying "We are DCAA compliant" or "We have been audited by the DCAA and found adequate".  The problem with an audit, however, is that the audit is just a "snapshot" of a portion of the system in a specific time.  No audit can cover every detail in a system nor can it verify if something might change tomorrow that would develop into a non-compliant practice.  I think you can begin to see the complexity of being DCAA compliant.  Having experts to rely on is the best assurance to maintain continual compliance.  ReliAscent specifically does this for our clients


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