Some of the ongoing challenges of working in GovCon involve complying with and understanding federal government agency regulations. One of the agencies that commonly interacts with GovCon companies is the Defense Contract Audit Agency (DCAA). Headed by the Undersecretary of Defense, DCAA began operations in 1965 and remains a powerful presence today.
Mission and purpose
Part of DCAA’s mission: Perform contract audits on behalf of the Department of Defense (DoD). It also serves as a DoD financial advisor, ensuring that the DoD “gets the best value for every dollar spent on defense contracting.”1
DCAA seeks to determine if contract costs – from a full range of contractors, large and small – are allowable, allocable, and reasonable.
Vital to GovCon business
When you avoid issues with DCAA compliance, you’ll accomplish at least a couple of worthwhile tasks. First, your recordkeeping and accounting will be well organized and current. And should you be selected for a DCAA audit, your compliance with agency standards will help get you through the process unscathed.
Selecting the right app
One of the key components to meeting DCAA standards lies in the application you use to track your GovCon activities. Not surprisingly, this is not a job for off-the-shelf accounting software. Industry analysts typically recommend using an Enterprise Resource Planning (ERP) application such as WrkPlan.
In an integrated ERP, app modules communicate with one another. For example, the basic WrkPlan app includes three interconnected modules: project accounting, contract management, and a time and expense portal. Data in one module is always available to the others.
Designed specifically for GovCon work, WrkPlan is DCAA compliant, so it helps you remain within DCAA guidelines.
Three areas of vulnerability
In everyday use, three areas of your current GovCon record keeping program may be most prone to user error. They include:
Let’s briefly examine each.
Regardless of your knowledge of accounting practices, DCAA regulators expect compliance. For instance, your accounting system must meet standards described by Generally Accepted Accounting Principles (GAAP). In addition, your system should accommodate:
- Rules for revenue recognition
Revenue recognition should conform to Accounting Standards (ASC) 606, the standard developed by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB).
- Complications that arise in revenue recognition
Revenue recognition focuses on agreed-upon deliverables under contract. Even with well managed books, revenue recognition may become complicated by factors such as:
- One contract that contains several deliverables
- A combination of two or more contracts
- Varied contract types: Firm fixed price, time and materials, and cost plus fixed fee
Using proven, integrated software makes documentation a relatively easy matter. Areas worth double-checking include statements of policy for all internal business systems, consistent record reporting, FAR documents, and ease of tracing.
- Keep updated statements of internal business policies (including those used for documentation, timekeeping, and accounting)
- Be sure to save and record all relevant receipts and reports
- Keep track of all instances in which Federal Acquisition Regulation (FAR) stipulations necessitate additional contract documents
- It should be easy to trace records back to point of origin, expense report, and payment
Audits without notice
WrkPlan helps you stay on top of all timekeeping records. This feature is especially valuable because DCAA may audit your timekeeping without any advance notice.
Some timekeeping rules
Here are a few representative DCAA timekeeping requirements:
- You must track hours for each employee and project
- All timesheets must be signed off and approved
- DCAA forbids an employee from entering hours worked until the work is done
- You must charge time precisely against every appropriate charge code
You’re most likely to be in sync with DCAA rules when you use an application that’s already DCAA compliant: WrkPlan. It can help you transition to DCAA compliance or keep you in good stead if you are already there. WrkPlan users typically circumvent any issues (including the ones noted in this article) with DCAA compliance.
Partner with DCAA experts
WrkPlan has all the tools you need to prepare for and pass a DCAA audit. While DCAA does not endorse software, its auditors have regularly evaluated and approved contractors who use the WrkPlan accounting system.
We specialize in working with GovCon businesses and offer world-class support services plus competitive pricing. We look forward to working with you
To learn more visit us at www.wrkplan.com.