A Beginner's Guide to Understanding the DCAA Audit Manual

The Defense Contract Audit Agency (DCAA) provides accounting and financial advisory services to components of the Department of Defense (DoD) that handle procurement and contract administration. The DCAA sets several guidelines, policies, and procedures that make sure their contractors are using procedures that are up to code. This ensures the funding being used by the DCAA is spent efficiently and effectively for the taxpayers they represent. These codes are outlined in the DCAA Audit Manual, which is a helpful guide for any firm looking to start working with organizations that require DCAA compliance.

If a government agency hires your firm, then you are a government contractor. Contractors hired by the DoD and other government agencies that require DCAA compliance must follow parameters that are set by the DCAA, which requires detailed labor and cost center tracking.

What is the DCAA audit manual?

The DCAA audit manual's full name is the DCAA Contract audit manual and is often referred to as "CAM." The manual is officially published by the DCAA. Inside, it states the DCAA's auditing policies and procedures. This will be helpful when updating your accounting system to make sure it meets DCAA compliance guidelines, and it lets you know what to expect when working with the U.S. Government and DCAA auditors.

The DCAA audit manual also gives information that auditors working for DCAA can refer to, which can be a great resource for accountants and other members of your firm as they can know what may come up in a DCAA audit. The DCAA audit manual was made so that all of the DCAA's requirements are in one place to minimize the need for firms and other government contractors working with them to refer to other publications. They don't issue any other technical supplemental guidance or instructions unless authorized by the director of the DCAA.

The DCAA updates the online DCAA audit Manual continually and issues a print version annually. The electronic version is the most current version that firms contracted by the government should refer to.

What's inside the DCAA audit manual?

The DCAA audit manual gives a complete rundown on what a potential contractor must do to work with the DCAA. During an audit, the DCAA is concerned with identifying and evaluating all activities that either contribute to or have an impact on, proposed or incurred costs of government contracts. They regularly evaluate contractors' financial policies, procedures, and internal controls and also perform operations audits that identify ways firms can reduce or avoid some of its costs.

According to the DCAA audit manual, the DCAA places special emphasis on assessing business systems, management policies and procedures, the accuracy and reasonableness of contractors' forward pricing and incurred cost representations, the adequacy, and reliability of records and accounting systems and contractor compliance with contractual provisions having accounting or financial significance.

How does the DCAA perform audits?

DCAA audits are typically restricted to pricing actions and contracts which fall under FAR Part 15, which deals with Contracting by Negotiation. Their involvement in the contracting process will depend on what kind of contract has been agreed on, according to the DCAA Audit Manual. Usually, the DCAA will assess firm-fixed-price type contracts while they're in the proposal stage as opposed to the incurred cost stage. However, for cost-reimbursable contracts, it would be the opposite.

The DCAA performs its audits by evaluating the records of the firms they contract. The required retention period for records required by the DCAA can vary depending on what type of record it is. Contractors need to make records readily available, including their books, documents, accounting procedures and practices, and other data.

Although the DCAA Audit Manual is a great reference, it can be hard to keep up with the constantly changing regulations. Software solutions, like BillQuick, helps firms stay within the guidelines needed for DCAA compliance, and makes it easy to automate your processes.

DCAA Compliance Can Be Easy!

DCAA compliance isn't something you should stress over. Investing in software can help you ensure that your firm is DCAA compliant and continues to stay that way. Using software that complies with DCAA regulations streamlines the process of becoming DCAA compliant for your firm with little work required on your end. Click here to see some examples of DCAA audit manual requirements and how software can address it.

In addition to expanding the number of government agencies you can work with, DCAA compliance can give your system additional security, streamline your procedures for labor approvals and correction records and offer effective procedures for labor cost accounting. This will effortlessly make you ready for any DCAA compliance audit and organize your data so that you're ready for any other form of audit as well.

An acceptable accounting system is defined by DFARS 252.242-7006(a)(1) as one that provides reasonable assurance that applicable laws and regulations are complied with, the accounting system and cost data are reliable, risk of misallocations and mischarges are minimized and that contract allocations and charges are consistent with billing procedures.

Integrating accounting software into your firm's operations can be seamless with a program that can be fit to match the size of your operations, like BQE CORE. Click below to try it for yourself and see if it’s easier than reading through the entirety of the DCAA audit manual.