Obtaining government contracts can be quite tricky. Competition with other contracting firms, coupled with the struggle of staying on top of DCAA compliance rules, can make obtaining government contracts challenging.
The first step to becoming fit to fulfill contracts is passing the pre-award survey. This indicates that you are financially stable to take on government contracts. Moreover, it’s a signal to the DCAA that your accounting system can handle their scrutinization.
Learn more about the DCAA, what DCAA compliance looks like, and the types of compliance tools you can employ to stay ahead of the game.
What Is The DCAA?
The government must ensure that contractors spend funds properly. A great way to do this is through audits. These essentially analyze whether contract costs are allowable, allocable, and reasonable.
The Defense Contract Audit Agency (DCAA) audits contracts for the U.S. Department of Defense and other federal agencies. While the DCAA does not influence which firms are awarded defense contracts, it provides recommendations to government agencies that select contractors and negotiate prices for the products and services offered.
What Is DCAA Compliance?
While the role of the DCAA is limited to auditing contractors, it does provide recommendations to contracting officers, who work with nearly 7,500 contractors a year. They make use of the DCAA recommendations when negotiating prices and drafting contracts. Thus, as a contractor, you must remain DCAA compliant.
But what does it mean to be DCAA compliant? While the phrase is widely used throughout the industry, agencies do not have to obtain a “certificate of compliance.”
Instead, being DCAA compliant means that you follow the federal agency’s recommendations and guidance for contractors. This ensures that you remain compliant with federal laws and are prepared for audits.
Tips On Staying DCAA Compliant
The three main areas necessary to track DCAA compliance are your accounting, timekeeping, and labor systems. Perhaps the best way to remain DCAA compliant is to ensure detailed accounting within each department for all the funds the company pays you (the contractor). Consider the following tips to ensure that you maintain compliance.
Evaluate Your Accounting System For DCAA
A DCAA-compliant accounting system must follow the Generally Accepted Accounting Principles (GAAP) which detail how financial transactions should be accounted for and recorded.
Additionally, when evaluating your accounting system for DCAA compliance, ensure that your systems and procedures follow Federal Acquisitions Regulation (FAR) 31.
Here are some considerations to determine DCAA accounting compliance:
- Monitor the actual indirect cost rates monthly
- Maintain the cost pools for indirect costs
- Track costs as either direct, indirect, or unallowable expenses
- Reconcile job cost reports to the general ledger and the billing system
Practice DCAA Compliant Timekeeping
As a contractor, you are required by the government to follow specific timekeeping guidelines. This essentially lets these federal agencies know that they are paying reasonable amounts of money for the products and services provided by contractors.
Follow these tips to optimize your timekeeping practices:
- Use an electronic timekeeping system
- Charge employee time to the appropriate contract
- Establish policies to encourage DCAA compliant time charging practices
- Track changes and approvals on all timesheets
- Sync data between timekeeping and accounting software
- Work with a licensed CPA professional
Evaluate Your Labor System For DCAA
As the performance of your accounting system hinges on the accuracy of the underlying labor information, it’s essential to ensure that it is correct. Check out some of the tips provided below to encourage a robust labor system.
- Charge direct and indirect labor to appropriate contracts.
- Ensure that your labor information systems operate hand and hand with each other. They should reconcile with one another.
- Reconcile labor cost records with payroll.
- Reconcile labor distribution records with general ledger accounts and job cost reports.
Make Use Of DCAA Compliance Tools
DCAA compliance tools are an excellent way for any contractor to navigate the rules and regulations of the organization. Numerous time-tracking software options claim to be DCAA-certified — however, it is essential to remember that the agency doesn’t have an official certification process.
Settle on a DCAA compliance tool that allows you to track:
- Detailed records in real-time
- Employee’s vacation time spent
- Sick leave
- Training periods
Moreover, invest in a compliance tool that notifies you when specific tasks are completed on time and within the deadline.
Contact A CPA Firm For All Your DCAA Compliance Concerns
While there isn’t a standard or official checklist to maintain DCAA compliance, it always helps keep your operations aligned with compliance standards. Following the guidelines above can help you do just that.
If you are looking for third-party support to ensure your government contracting business complies with DCAA regulations, get in touch with a certified public accountant. They can help with planning and strategizing solutions to any problems your business may be facing.