New government contractors can face a DCAA audit even before a contract is awarded, notes the DCAA Resource Center

Glen Burnie, MD -- (SBWire) -- 03/08/2011 -- With the Defense Contract Audit Agency (DCAA, under increasing pressure as the lead auditor for government contractors, companies competing for their first federal government contracts should be prepared to pass an audit even before winning a contract.

“DCAA can audit contractors before a contract is awarded,” noted Marcelle Green, marketing director of the DCAA Resource Center. “If a company’s accounting system doesn’t pass the DCAA audit, the contract officer can choose to award the contract to someone else. Companies that look at the time and expense of making their accounting system DCAA compliant sometimes decide not to bother until they win a government contract. Then they have to scramble to get ready for a ‘make or break’ audit.”

According to Green, “DCAA can evaluate a contractor’s financial situation to ensure the contractor is financially capable of fulfilling the contract, as well as determine if the contractor’s accounting system accumulates and allocates costs based on Federal Acquisition Regulations (FAR). They also want to see that the contractor has controls and policies in place to ensure the accounting system remains DCAA compliant during the life of the contract.”

Green urges companies thinking about bidding on government contracts to visit http://www.DCAAPortal.com to see what DCAA accounting involves. She also recommends they understand the differences between a DCAA audit and audits by other government agencies, such as the IRS. “A DCAA audit is pass-fail,” she said. “The auditor generally won’t help you correct deficiencies or overlook minor issues. The auditor will either conclude your accounting system is in compliance or it isn’t. Period.”

A mock audit by an outside firm, Green added, can identify potential issues in time to correct them before an audit. And if DCAA plans to audit a contractor, “the audit will normally include an entrance conference where the auditor tells the contractor what records and information are needed, what the auditor intends to review, and the overall plan for the audit. The auditor should communicate with the contractor throughout the process, and hold an exit conference at the end of the audit to discuss the auditor’s findings. Normally the contractor will receive a draft copy of the auditor’s report and have the opportunity to add a written response to the final report.”

For more information, visit http://www.dcaaportal.com.

About THE DCAA RESOURCE CENTER
The DCAA Resource Center is a new on-line resource for government contractors and the accounting firms and other consultants that service them. The center is the first comprehensive, unbiased resource for all things related to DCAA, and includes information about every aspect of government cost accounting and resources for both government contractors and accountants, as well as news and other resources. For more information, visit http://www.DCAAPortal.com.