The federal government is committed to supporting businesses by taking steps to ensure that government contracts are awarded to companies of all sizes. A critical part of government contracting is making sure your business accounting policies and procedures are DCAA compliant. That means following DCAA’s recommendations and guidance so that you remain in line with federal law and are prepared for audits.
The DCAA, which stands for Defense Contract Audit Agency, is the governmental oversight agency that evaluates whether contractors’ financial policies, procedures, and internal controls are compliant with the regulations of FAR (Federal Acquisition Regulations) and CAS (Cost Accounting Standards).
What is FAR and CAS?
FAR is the primary regulation for use by most agencies in their purchase of supplies and services with appropriated funds. CAS tells you how you can charge to contracts, what gets charged to which contracts, dictates how to maintain your accounting systems, and tells you how the costs have to flow from incursion to the final costs. It basically instructs contractors on how to account for certain types of costs.
The Pre-Award Survey and Audit
To be granted a government contract, the DCAA will conduct a pre-award survey of your business to ensure you can perform all the duties the contract specifies. The pre-award survey is not as extensive as an actual audit, but it is a milestone for earning the contract.
The pre-award survey focuses on two main areas:
- The DCAA needs to confirm that your company has the financial means to complete the job. They will look at cash flow forecasts, bank documents, SEC filings, loan agreements, payroll tax returns and more.
- The DCAA will check your accounting system and confirm that it is acceptable and can keep track of costs properly.
The primary purpose of the audit is to review costs. If the DCAA elects to audit your business, be prepared to produce documentation supporting the information included in the proposal. Some of the items being scrutinized during an audit are: allowable costs, unallowable costs, direct costs, indirect costs, cost pools, and pooling of indirect costs.
Professionals Can Help
The requirements to becoming DCAA compliant are rigorous and complicated. Not only is there room for error, but there is the issue of such errors looking like you are attempting to commit fraud. Such an event can terminate your contract and may impact your ability to secure other contracts. The team at Sousa & Weber has extensive experience working with the DCAA and helping businesses become—and stay compliant. We can also assist you in implementing software solutions to meet those compliance requirements.