DCAA compliance is one of the most demanding elements of government contracting, along with contract fulfillment. Many regulations must be followed, and these requirements are frequently updated or changed. Quite often, government contractors find keeping track of all DCAA regulations difficult and taxing.
Maintaining an in-house DCAA compliance team may seem to be the best solution, but significant effort goes into laying the groundwork. The right tools and talents must be sourced, brought together, and trained. Below is a brief overview of DCAA requirements and how to train your team on them.
DCAA Timekeeping Requirements
DCAA timekeeping requirements have been set to maintain the integrity of government-funded contracts by preventing fraudulent billing of labor costs and wasting of government resources. These requirements are in place to ensure that all labor costs charged to government contracts are accurate, reasonable, and allowable.
DCAA timekeeping requirements entail:
- Accurate and detailed record keeping: TheDCAA requires that all employees accurately record the number of hours put into specific tasks or contracts. There should be a clear indication of employee names, date and time worked, and contract/task each hour was spent on.
- Proper classification of labor costs: According to the DCAA, labor can be direct (spent directly on contracts) or indirect (spent on tasks supporting said contracts). For a timekeeping system to be DCAA-compliant, it must enable accurate classification of labor into these categories.
- Approval process: There must be a systematic approval process, starting with employee certification and ending with review and approval by a supervisor before submission to accounting.
- Record retention: Timekeeping records must be maintained for at least three years.
How to Set a Strong Foundation for DCAA Compliance
A strong compliance-oriented culture can align your team with the DCAA’s requirements and motivate them to work diligently to identify and eliminate errors. Establishing such a culture and getting your compliance team to conform to it takes significant and continuous effort. But if several key steps are followed, the process can become smoother.
Establishing a good culture involves:
- Enforcing accountability by setting clear expectations and consequences for laxity
- Fostering collaboration where team members can consult each other on matters of DCAA compliance and share insights
- Encouraging transparency and open communication where team members can comfortably report mistakes or raise concerns
- Regular training and education on company values, DCAA regulations, and compliance procedures
How to Design Effective Training Programs
The best approach is to outsource training services to DCAA compliance experts with experience in accounting for government contracts. These professionals will:
Incorporate interactive learning into your training modules, including mock audits, case studies, group discussions, and simulations- Provide ample and resourceful training materials for comprehensive coverage
- Deliver tailor-made training programs for your government contracts
- Target specific loopholes in your company’s cost tracking, allocation, and billing procedures
- Provide regular updates on new DCAA regulations and changes to existing ones.
- Organize periodic evaluations to assess the effectiveness of the training programs to identify areas for improvement
Leverage Technology for DCAA Compliance
Manual timekeeping using paper documentation and spreadsheets may be allowed by the DCAA but is often impractical. The large amount of paperwork often translates to many errors. Manual timekeeping can also hamper managerial oversight and auditability, which are integral in compliance.
Outsourcing timekeeping and accounting to DCAA compliance firms allows government contractors to gain access to industry-standard timekeeping and cost accounting systems. These systems will help streamline timekeeping and cost accounting by preventing errors, reducing paperwork, and enhancing auditability.
Monitoring and Reinforcement Strategies
Training and DCAA compliance are ongoing processes that require constant monitoring and reinforcement. Below are ways to ensure that the training remains relevant, and that compliance is maintained:
- Schedule periodic refresher training to inform every team member of new and updated regulations
- Conduct internal audits for checks and balances
- Strengthen the company culture by giving recognition for exemplary compliance efforts or other commendations
- Incorporate checkpoints and reviews into the approval process to catch mistakes before submission to accounting
Preparing for DCAA Audits
The above processes and strategies lead to one final goal: passing a DCAA audit and maintaining compliance. To complement these efforts, ensure that your accounting system is DCAA-compliant. Also, all documentation must be, at any time, ready for audit. These documents include timekeeping records, policies and procedures, accounting records, contracts, and invoices.
Legal Implications of Non-Compliance
Failure to exercise the above measure would result in failed DCAA audits. This may attract severe penalties such as:
Contract termination- Loss of eligibility for future government contracts
- Interest on fraudulent billing amounts
- Damage to company reputation
Partner With the CPAs at Diener & Associates for Expert DCAA Compliance Training
The DCAA compliance and accounting CPAs at Diener & Associates are experienced in training in-house compliance teams on DCAA’s regulations, automation systems, and best practices. Small and medium-sized businesses will find time and cost efficiency, and compliance by entrusting all their accounting and DCAA compliance needs to Diener & Associates.