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How a Mock DCAA Audit Can Benefit Your Small Business

The following blog is an article taken from our recent ReliAscent Quarterly Newsletter (Volume 5, Issue 3), published last week.

Is My Accounting System DCAA Compliant? 

Usually a company doesn’t ask themselves this question without an external prompt.   That prompt usually comes from either the government itself or a potential new customer or job.  When the new job is a cost reimbursable type job, the customer inevitably will ask if the accounting system is compliant with government requirements.  Sometimes they will even ask if the system has been audited by a Government agency (often the  Defense Contract Audit Agency) and passed the audit.  If your company has done much government contracting, it most likely has a job cost accounting system set up to meet DCAA and FAR requirements.  You may have even been “lucky” enough to have had an audit conducted of the system by the DCAA.  But what if this is your first time?  What if you have not had a visit by the DCAA?  As a contractor, you are not allowed to request an audit from the DCAA.   How do you know if your system is compliant with government requirements?  Or, perhaps, you have had a DCAA audit but it was several years ago and you are not sure your system is still compliant?   What will you do?

Certainly, some companies simply forge ahead and assume that their system “must be” compliant.   This assumption has caught many companies off guard and resulted in a failed DCAA audit.  The consequences of a failed DCAA audit are very severe including withheld payments until the system is fixed, loss of business, or even negative impression of  contractor so that future orders are put in jeopardy. 

A less obvious risk occurs when you submit even fixed-price proposals that are over $700,000. If your estimate can’t demonstrate to government cost analysts how indirect rates are derived according to regulatory cost principles (a condition of an approved accounting system), you may not get the job.

Mock DCAA Audits

There is a way for companies in this situation to mitigate their risk.   ReliAscent has the capability to do a “mock audit” of the company’s system to verify, with a high degree of certainty, that it meets the FAR and DCAA requirements.   This can be very useful, especially if the system needs a little tweaking (the difference between passing and failing) prior to an actual DCAA audit.  ReliAscent can identify problem areas ahead of the actual DCAA audit and the company can fix these problems prior to the DCAA audit, thereby mitigating the risk of failing the  audit.  Our team of auditors  (a few of which are also former DCAA Auditors), can quickly and efficiently evaluate a company’s accounting system. 

So, the next time someone asks you if your accounting system is DCAA compliant, you can answer with confidence, as you have the “proof” in the form of a mock audit. 

- Mike Anderson
CEO, ReliAscent LLC

DCAA Audit Resources

To learn more about our mock DCAA Audit services, check out these great DCAA Audit / Compliance Audit Resources, and please do not hesitate to contact the experts at ReliAscent at any time:

If you would like to request a mock DCAA Audit, please contact us today!

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