Sarah Glass is the President and CEO of AimSourcing, Inc.  AimSourcing specializes in outsourced accounting services, management information systems and business consulting.  AimSourcing helps Journyx customers integrate with QuickBooks, which automates the flow of time data into customers’ billing, project management and payroll processes.  This is an excerpt from Glass’s webinar “How to Modify QuickBooks for DCAA Compliance” where Glass explains how to configure your business software for a DCAA audit.

The DCAA, or Defense Contract Audit Agency, supports government agencies that request their services. Essentially, they serve to make sure that contractors are working within the set guidelines of the government when it comes to the financial interactions between their company and that of their contracting agency. Many individuals view the DCAA as a mysterious and unapproachable government agency, but the truth is their operations are relatively transparent if you know where to look. The following are a few things you should know about the DCAA if you are planning to work as a government contractor.

1. They Are Paid by the Government Agency

DCAA services are paid for by the government agency sponsoring the contractor. If a business is audited or otherwise examined by the DCAA, they are not responsible for the costs associated therein. This means that, although a DCAA audit may be inconvenient for your company, it will not be financially burdensome. This can potentially be a double-edged sword, however. Surprising as it may sound, there are instances where you would like the help or review of the DCAA. Unfortunately, it is impossible for a contractor to request assistance from them. They can only be requisitioned by government contracting officers.

2. They Only Have a Few Major Areas of Emphasis

The DCAA focuses primarily on a few areas of emphasis. These include internal control systems, management policies, accuracy and reasonableness of cost representation, adequacy and reliability of records and accounting systems, financial capacity and the contractor’s compliance with contractual provisions having accounting or financial significance. This knowledge can be useful if the DCAA wants to look over your records. You can prepare for an audit by arming yourself with a compliant, automated time-tracking system that will make a potential audit simple and painless.

3. Extent of DCAA Involvement Depends on the Type of Contract

The three primary types of government contracts are fixed price, time and materials, and cost reimbursable. In general, DCAA involvement on fixed price contracts occurs during the proposal stage rather than the incurred cost stage of the contract. Conversely, the more flexibly priced contracts are audited by the DCAA to determine the final cost of the contract after primary costs are incurred. This means that the DCAA will have a very different interaction with your company, should they get involved at all, depending on whether you will determine your pricing up-front or after you have completed your work.

These facts should help you begin to understand a bit more about the DCAA, and clear away the fog that seems to shroud the agency. For more in-depth look at the DCAA, as well as tips to prepare you for an audit, check out Sarah Glass’ webinar, “How to Modify Quickbooks for DCAA Compliance.”