• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Client Portal

125 Rowell Court, Falls Church, VA 22046

About

Blog

Careers

Contact

703.386.7864

Schedule Consultation

diener-site-logo

Diener & Associates

Northern Virginia CPA Firm

  • About
  • Industries
    • Government Contractors
    • Nonprofits
    • Small Businesses
  • Consulting & Advisory
    • Business Valuation
    • Corporate Restructuring
    • Mergers & Acquisitions
    • Process Improvement
    • Risk Management
    • Succession Planning
  • Outsourced Accounting
    • Accounts Payable
    • Accounts Receivable
    • Bookkeeping
    • Cash Disbursement
    • Financial Planning
    • Financial Reporting
    • Payroll Services
  • Tax Services
    • Compliance
    • Consulting
    • Planning
    • Preparation
  • Blog
  • Contact

The Top DCAA Compliance Challenges for First-Time Government Contractors

August 22, 2022, by Michael Diener

contract helmet on us flagThe United States Federal Government constantly pushes for better policies to benefit the people. The Defense Contract Audit Agency, or DCAA, is a part of this drive, auditing government contractors to ensure they can be trusted and are suitable for the job.

Government contractors must pass a challenging DCAA audit to qualify for government contracts. Being a DCAA-approved contractor has many benefits, as it opens the gate for government contracts.

Let’s explore DCAA in further detail and understand the required compliance.

What Is The DCAA And What Does Compliance Entail?

The Defense Contract Audit Agency is a federal government organization responsible for conducting audits and providing financial advice to the Department of Defense and other federal departments.

The primary role of DCAA is to overview the contract acquisition and perform audits to ensure that the budget is allocated to a contractor that will give maximum benefit to American taxpayers and the armed forces.

The DCAA is the largest government auditing agency in the United States. When a government contractor allows the DCAA to audit, they give the agency access to their accounting system to thoroughly examine it and ensure that they are following all required accounting standards and guidelines.

In particular, contractors should expect a detailed audit of the cost accounting system. The DCAA does not officially declare any contractor as DCAA approved or certified. Instead they are determined to be compliant, meaning that the contractor has passed the audit and fulfilled the DCAA guidelines and regulations.

DCAA Compliance Challenges for First-Time Government Contractors

female accountants counting on calculator income for taxAs a new contractor, you should be aware of the DCAA audits. The DCAA can conduct an audit before or even in the middle of the contract. They aim to make sure the contractor works according to the guidelines.

If your business can pass the DCAA audits, it is eligible for government contracts. Contractors will be subject to the following types of audits:

1. Forward Pricing Audits

The most common challenge contractors face is the forward pricing audit. This audit analyzes the cost and prices given by the contractor. The DCAA examines the pricing and benefits prior to the contract.

2. Incurred Cost Audits

Incurred cost audits apply when there are no fixed costs, and the prices vary throughout the contract. With such complexities, DCAA takes specific measures to assess the accuracy of the proposed cost.

3. Special Audit

Special audits are those which can be done before, during or after the contract. In this type of audit, the DCAA can review specific elements of the audit.

4. SF-1408 Form

SF 1408 is a DCAA pre-award survey form that the DCAA requires from government contractors. The purpose of the form is to assess the accounting system of the contractor to determine if the accounting system is DCAA compliant or not. The SF 1408 includes the following elements:

  • Billing
  • Labor distribution
  • Timekeeping
  • GAAP (generally accepted accounting principles)
  • All indirect cost, cost allocation and unallowable cost

5. Frequent Change in Government Request

contractors file in recordsOne of the most common challenges in DCAA compliance is being up to date with the constantly changing government requests. The auditing and accounting requirements for government contractors are far more stringent than for any other sector.

At any time, the government may change the requirements and regulations for the DCAA audits and compliance rules. The regulation and accounting requirements are set forth by the Financial Accounting Standard Board (FASB). The DCAA instructs the contractors to work according to the FSBA standards, Cost Accounting Standards (CAS) and Federal Acquisition Regulations (FAR).

The ideal solution for government contractors, both established and new, is to constantly monitor these regulations for changes to be adequately prepared for any audit.

6. The Need For Excessive Documentation

dcaa compliance Defense Contract Audit Agency is shown on the photoWith constant changes in government requests and policies, contractors have to maintain detailed documentation for every aspect of the accounting system and compliance with updating regulations. Company documentation is essential for the contractors as the DCAA examines every element of regulations and loopholes you may have overlooked.

New government contractors find it extremely difficult to stay current with the continuously changing policies and regulations. If you are working to become a DCAA-compliant contractor, be prepared to successfully manage consistent standards and policy changes.

Become DCAA Compliant With Guidance From Diener & Associates

Many new government contractors struggle to maintain the constant change of compliance requirements and policies. Engaging the services of professionals who have years of experience navigating DCAA audits and government accounting policies will greatly enhance your preparedness and help you achieve compliance. Contact us today and schedule a consultation with our experts.

About Diener & Associates CPAs LLC

Diener & Associates CPAs LLC has been a leading provider of professional CPA services in the DC metropolitan area since 1989. We offer a range of consulting/advisory, outsourced accounting, and tax services to assist businesses with their most challenging processes. Regardless of your industry of operation, Diener & Associates CPAs LLC can maximize your organization’s efficiency, scalability, and profitability.

Reach Out to Us Today

Category iconGovernment Contract Consulting

Primary Sidebar

Get in touch

  • This field is for validation purposes and should be left unchanged.

Footer

diener-site-logo
Diener & Associates CPAs LLC
125 Rowell Court Falls Church, VA 22046 703.386.7864

Company

  • About
  • Blog
  • Careers
  • Client Portal
  • Contact

Our Services

  • Consulting & Advisory
  • Outsourced Accounting
  • Tax Services
© 2023 Diener & Associates CPAs LLC · Powered by 321 Web Marketing · Website Privacy Policy & Terms of Use