PBMares Accounting Blog

"Hi! I’m From DCAA and I’m Here to..."

Posted by Neena Shukla, CPA, CFE, CGMA, FCPA on Jul 25, 2017 9:03:00 AM

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If you have proposed on or been awarded a contract with the Federal government, and especially with the Department of Defense, you probably have been the recipient of a visit from the Defense Contract Audit Agency (DCAA).  While these visits to perform a multitude of audits and evaluations are not the end of the world, they should be taken and reacted to seriously.

Be prepared.  When you are made aware of a pending audit, it is important to become familiar with DCAA’s established audit procedures and compliance checklists through their website at WWW.DCAA.MIL.  Ensure that your proposals and infrastructure meets all of the requirements of the applicable Federal Acquisition Regulation (FAR) or, if applicable, the Cost Accounting Standards (CAS).

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Before DCAA begins the audit, demand an entrance conference to determine: (1) what is the scope of their audit; (2) why they are performing the audit (i.e. is it to be performed based on their own initiative or at the request of the Administrative Contracting Officer (ACO) or other government agency); and (3) how long will they be performing the audit with a projected specific completion date.  Assurance should also be obtained that they will provide an exit conference before preparation of a final report.  Results of these entrance and exit conferences, should be documented in writing by both you and, if possible, by DCAA. 

As the audit progresses you must establish the practice of requiring written documentation of each of their significant data requests along with what you provide in response to these requests and when it was provided.  You should be prepared to provide requested data promptly.  Audits of current proposals and billings should have all supporting documentation immediately available for direct costs and indirect rates.  If the supporting information requested is not immediately available explain why it will be delayed and when it will be provided and then meet the promised availability date.  If DCAA feels that you are “stonewalling” them they may stop the audit and report you as non-cooperative.  This is especially important if they are auditing a proposal or billing where the contract might be awarded to a more responsive contractor or an invoice not paid.

When you provide requested information be sure to explain what you are providing and how it supports or impacts the subject of the audit.  If their data request will not provide them with an answer to their audit issues explain why it won’t and what information can be provided to satisfy their audit needs.

Do not leave the auditors completely unattended.  Left alone they may come to erroneous conclusions relative to the data provided.  Be sure to monitor what they are doing and how they are progressing.  If you determine that they are veering off course, staring to audit things outside of the established audit scope, or delaying audit completion, then be sure to bring it to the attention of the audit supervisor and your cognizant ACO.

Remember that these auditors are professionals trying to do a job.  Treat them and the process with respect and with your help the audit and the end results will be successful.

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Topics: Government Contracts

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Neena Shukla, CPA, CFE, CGMA, FCPA

Neena is an assurance partner and government contracting niche leader at PBMares, LLP, in Fairfax. She is also the leader of the firm’s technical and emerging issues group.

For more information, please contact the author at nshukla@pbmares.com or visit: www.pbmares.com.

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