Defense Contract Audit Agency (DCAA)
The Defense Contract Audit Agency (or DCAA), is a group within the Department of Defense (the largest budget within the Federal Government) responsible for auditing contractors. Their primary guide in these audits is the FAR and the DCAA Contract Audit Manual (DCAM).
There are many different audits they are responsible for, including everything from pricing proposals, to incurred cost proposals, to full system audits. The risk of audit is up to the government, and is usually determined by a combination of the contract type, size of award, and apparent financial risk. The DCAA does do some work at the request of other agencies, but their primary responsibility is auditing contracts and financial systems/reports of contractors supplying to the Department of Defense. According to FAR requirements, they will have full access to a contractors records in order to verify that the US Taxpayer is getting value for the money they spend.
So, what does the DCAA do for you?
As a tax payer, their charge is to save you money (or at least make sure that the money that is allocated to be spent on contracts in the DoD is spent correctly). As a contractor, they are there to ensure that you are managing your contract correctly with respect to costs. The DCAA is the compliance checker for all things related to your contract. So, they are not just concerned with the bottom line, but they are also concerned with whether or not you are following general course of law as you work with the government.
There are over 580 FAR clauses that the DCAA is charged to know what is applicable to your organization, what compliance to each of these clauses mean, and whether you are compliant. They are also very interested in your accounting practices, purchasing system, inventory management system, how you care for your product, and how you treat your employees. All of these things add up to real and/or potential costs to the government, thus the need for the DCAA, and DCAA audits.
Here is a list of typical audits for the DCAA
- Pre Award Accounting System Adequacy
- Contract Pricing Proposal Adequacy
- Forward Pricing Rate Proposal Adequacy
- Incurred Cost Submission Adequacy
- Cost of Money Rates
- Incurred Cost Electronically (ICE) Model
The DCAA also audits timekeeping and performs timekeeping unannounced floor checks to government contractors.
Most firms here the word ‘audit’ and cringe, but if you have a compliant system, there is no reason to fear. The DCAA is charged to ensure that you are managing your contract correctly. So, if you are truly compliant there is nothing to fear.
If you don't know whether your system is compliant or not, contact ReliAscent today about our compliance review offerings.