The federal government has imposed compliance requirements and escalating fines for businesses that refuse to adhere to procurement standards, such as those imposed by the DCAA to reduce abuse and fraud. Compliant operations are now a mandate rather than a recommended practice and making it a reality can be difficult and time-consuming.
Diener & Associates DCAA compliance support services offer you the financial and accounting management assistance required to meet DCAA compliance and prevent the consequences of a failed audit.
Everything You Need To Achieve DCAA Compliance Under One Roof
We leverage our understanding of an auditor’s thought processes to your advantage. Our experience working with federal contract holders, and those seeking to acquire contracts, enables us to streamline your procedure, lower the compliance costs and increase accuracy.
By including us as a member of your team or as a tool to educate your team, we will do everything we can to ensure that your contract is compliant.
Diener & Associates is well-versed in the policies and can assist your company in conforming to the following compliance guidelines and agencies:
- Federal Acquisition Regulation (FAR)
- Code of Federal Regulations (CFR)
- Cost Accounting Standards (CAS)
- Defense Contract Audit Agency (DCAA)
- General Services Administration (GSA)
- Department of Defense (DOD)
- Defense Federal Acquisition Regulation Supplement (DFARS)
How We Help You
Diener & Associates create an adaptable strategy for part-time, full-time or project-based support, either on-site or off-site.
Our DCAA compliance experts and services include:
- DCAA Compliance
- DCAA Audits
- Government Contract Accounting Systems
- FAR, CAS and other regulations
- Indirect Rates and Incurred Cost submissions
- Compliance and Cost-Recovery assessments
- Certified Systems or Indirect Rates
- Equitable Adjustments or Claims
- Government Contract Proposals
- Audits and reviews of timekeeping systems
- DCAA training and assistance
- Assessments and implementation of DCAA approved accounting systems
- Development of Cost Accounting Standards (CAS) disclosure statements
- Implementing compliant procedures and processes
- Preparation of Incurred Cost submissions
What Is DCAA Compliance?
The Defense Contract Audit Agency (DCAA) delivers audit and financial advising services to federal agencies such as the Department of Defense. To ensure that a government contractor is adhering to Federal Acquisition Regulations (FAR) and other guidelines set forth by government agencies, the DCAA conducts an audit of the contractor’s performance.
These regulations establish the procedures and specifications for how the government purchases products and services.
Any contractor working for the federal government must adhere to DCAA compliance requirements, which can only be demonstrated through an audit. Contractors who do not adhere to the Federal Acquisition Regulation (FAR) may be barred from future federal contracts and contracts with other government contractors.
Additionally, government bodies reserve the right to void contracts if the contractor’s compliance status is removed while they are still working on it. All federal contractors, regardless of size, must comply with DCAA.
For contractors, the Federal Acquisition Regulations (FAR) provide the rules of engagement during the procurement process regarding:
- Sales to the government
- Contracts that stipulate how and under what conditions the government obtains title to and control over the purchased goods and services
- Specifications, payment and conduct rules
- Actions taken to solicit bids
- Invoices paid
As a government contractor, you can benefit from the experience of the experts at Diener & Associates. We will provide you with the resources necessary to succeed in a DCAA audit, helping you to achieve or maintain DCAA compliance.
What Are The Different Types Of DCAA Audits?
A DCAA audit is more than a one-off event. Various audits are performed, and a DCAA audit is available for nearly every type of accounting circumstance.
Some of the more prevalent audits are as follows:
Review of the Accounting System
Before approving money for any cost-type task, government agencies want to ensure that your organization operates according to established accounting standards and procedures. DCAA will conduct a pre- and post-award audit of your company’s accounting system.
DCAA Pre-Award Inspection
A pre-award audit is conducted before your organization is awarded any cost-type contracts. DCAA performs this preliminary review to confirm that your accounting system can manage the proposed agreements.
DCAA Post-Award Inspection
The post-award audit occurs after your organization has worked on the granted contract for a period of time. Typically, this happens within the first three to six months of receiving the award, although it can also occur a bit earlier or later. This portion of the audit confirms that you are adhering to the pre-award accounting rules and procedures.
Real-Time Evaluations Of Work Performance
Using real-time labor evaluations, you can verify that your employees are working the actual hours they claim. Because labor is the largest portion of what contractors charge the government, the DCAA’s oversight is critical for service-based contractors.
Provisional Billing Rates
According to FAR 42.704, setting provisional billing rates is the best way to estimate the year-end charges for a contractor. Estimates of these final year-end rates, known as indirect rates, serve as the basis for calculating provisional billing rates. Interim payments for indirect costs can be made to contractors in cost-type contracts, as outlined in the contract’s specifications. Visit this page to learn more about FAR 42.704(b).
Contractors can seek interim compensation for work done during their fiscal year. Per DCAA, payments can be made using a Standard Form 1034 public voucher or an equivalent. This link provides a comprehensive look at all aspects of progress payments from the point of view of both the contractor and the DCAA.
Why Is Compliance With The DCAA So Crucial For Government Contractors?
Contractors who do not adhere to the FAR may be barred from participating in future government contracts or joint ventures. The DCAA may also recommend to the Contracting Officer that payments be halted, or expenditures be denied on completed contracts, depending on the circumstances. All contractors, regardless of size, must comply with the FAR.
How Does DCAA Compliance Work For Business Contractors?
DCAA compliance and passing a DCAA audit are critical for contractors. Here’s what you need to prepare for:
Have DCAA Observe Your Accounting System Requirements
The DCAA examines your accounting system to confirm that it meets the federal contract requirements. For the system to pass the audit, it must:
- Have a compliance cost structure (segregate direct and indirect expenses, record pre-contract costs, etc.)
- Assure compliance with DCAA audit requirements via policies (cost reporting, unallowable cost accounting, invoicing, project accounting, etc.)
- Proper time and labor accounting
- Provide for Cost and Funds/Invoicing Limitation Clauses
Contract status reports and indirect cost rate statements are two examples of DCAA-required data to which small businesses typically do not have access. Although the DCAA defines and explains each accounting system’s needs, it could take some time to have everything in order in terms of documentation and procedures for compliance.
Prepare A Contract Briefing
A contract brief is a list of all the clauses in a contract that are relevant to one another. This document summarizes the terms, conditions and criteria mentioned in the federal contract.
Since a contractor must have a thorough awareness of its duties, creating a detailed contract brief is essential. During the contract term, the brief may be revised as required.
Submit An Incurred Cost Proposal
Any contract or subcontract in which the FAR Clause 52.216-7, “Allowable Cost and Payment,” is included necessitates the submission of an incurred cost proposal. The proposal aims to determine indirect rates and direct contract costs.
The government contractor must submit incurred cost recommendations within six months of the conclusion of its fiscal year.
The government contractor cannot automatically subcontract work; the subcontracting initiative requires government approval. Additionally, the work and compliance of the subcontractor is the direct responsibility of the contractor.
An eSRS (Electronic Subcontract Reporting System) subcontract report must be submitted regularly by the prime contractor to track all subcontractors.
Verify The Adequacy Of The Price Proposal
The contractor should review the proposal checklist to make sure the proposal is adequate. Cost components of the proposal include:
- Indirect Rates
- Direct Labor
- Other Direct Costs (ODC)
There should be sufficient data to support the contractor’s price proposal.
Preparation Of Provisional Billing Rates (PRBs)
Using PRBs for interim payments to contractors, the indirect costs of cost-type contracts can be reimbursed. Ideally, your PRBs should be as close to your fiscal year’s final indirect cost rates as practicable.
For the most part, PRBs are created after a thorough review of past audits or other relevant data. To establish provisional billing rates, you can submit a PRB proposal to the responsible auditor (or administrative contracting officer) before the fiscal year starts.
Make Use Of Public Funds
The contractor is responsible for preparing and submitting reimbursement claims following the contract’s provisions.
All public reimbursement vouchers must be prepared using official government forms. As part of DCAA billing audits, auditors inquire about the most recent vouchers and can provide helpful guidance on their presentation.
Be Ready To Conduct Real-Time Labor Evaluations
In most cases, real-time audits are conducted at random. An auditor may:
- Analyze your company’s timekeeping practices
- Talk to your workers
- Study how business operations are managed
- Perform an audit of the company’s internal control systems
- Analyze whether or not the cost objectives for labor are being assigned correctly
A contractor must keep updated records and document internal control systems and accounting systems to be prepared for a real-time labor audit.
Maintaining DCAA Compliance
Despite their intimidating appearance, the DCAA guidelines don’t require anything unusual. In-depth knowledge of the rules and regulations of the government is required to maintain compliance which is a necessity for contracting with the government.
Diener & Associates partner with the top DCAA-compliant ERP systems to make DCAA compliance less complicated and more achievable.
Located in Northern Virginia, Diener & Associates have years of experience working with federal contract accounting. With the help of our accounting and auditing experts, we create precise and dependable accounting models consistent with DCAA and other government agencies.
Call 703 386 7864 to schedule a consultation with the industry-leading accountants at Diener & Associates to better realize your project potential.