Over the years we have had many inquiries from government contractors about evaluating their accounting systems for adequacy before they actually undergo a DCAA audit. This actually makes sense in today's environment. The risks associated with failing a DCAA audit are greater today than they were even 5 years ago. The DCAA is also less forgiving today than it was 5 years ago and the combination can have a disastrous impact on a small government contractor. (Actually it can have a bad impact on a large government contractor too). The risks of failing the audit include delayed payments (cash flow problems can be the "kiss of death for a small business"), reduced contract opportunities and even barred from further contracting with the government. So it makes sense to evaluate your system prior to the DCAA evaluating the system, identify gaps in compliance and then fixing these gaps. Then you can feel confident that when the DCAA does come in to audit the system that it will pass. Any system evaluation (we call this an Adequacy Audit) should include a look not only at the accounting system but also a look at the written policies and procedures, the timekeeping system, the purchasing system, indirect rate determinating system and the invoicing system. This simple evaluation and resulting corrective actions could save many government contractors the pain and problems of failing a DCAA audit. Visit the Tech Biz Adequacy Audit page to learn more.
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