Ten MMAS requirements for GovCons to consider
Dive into MMAS compliance requirements for GovCons. Learn how clarity and compliance in Material Management and Accounting Systems are key to your success.
by Kim Koster
In the world of government contracting, clarity and compliance are critical. This is particularly true when it comes to Material Management and Accounting Systems (MMAS), a keystone on which your business operations must be built.
For government contracting companies (GovCons), the federal government regularly audits for MMAS compliance. Let’s dive into what MMAS is and what specific requirements you’ll need to keep on top of.
What is MMAS?
Before diving into the specific requirements, here’s a bit of background on the origin of MMAS. MMAS requirements were first introduced in 1989 as part of the Defense Federal Acquisition Regulation Supplement (DFARS).
At its core, these criteria are designed to make sure contractors:
- Accurately track the age or duration of contracts
- Maintain a seamless flow in tracking, costing, and accounting for physical items or product manufacturing
The aim is to prevent any loss or misuse of materials and properly record all transactions ensuring a high level of transparency and accountability to the federal government. This ensures GovCons remain vigilant stewards of taxpayer dollars. The Defense Contract Audit Agency (DCAA) conducts audits to ensure GovCons are maintaining compliance with these requirements.
Now that we’ve defined MMAS, let’s look at the ten requirements your GovCon will need to consider to maintain compliance.
System description: Policy, procedures, and operating instructions
The first requirement under MMAS regulations is to provide an adequate system description. This includes exhaustive policy documentation, clearly defined procedures, and accessible operating instructions.
You’ll want to conduct a self-assessment of your people, processes, and tools and be ready to provide this information to the government.
Material requirements: Time-phased materials, bill of materials and planning accuracy
Material requirements, including time-phased materials and bill of materials, should be accurately outlined as well. There are two goals for this requirement: reaching 98% bill of material (BOM) accuracy and a 95% master production schedule accuracy.
Weaknesses in your system must be actively monitored and appropriate measures taken to address them promptly. Examples of system weaknesses include residual inventory, system excess, lost or found parts, and others.
Audit trails and testing
Auditors want to see systems that have integrity and reliability. The best way to do this is by showcasing your own comprehensive audit trails and processes for regularly testing your own systems.
Physical inventories, receipts, returns, cycle/physical count materials
Accurate recordkeeping is yet another way to satisfy the government’s compliance requirements. Physical inventories should be regularly performed and reconciled with book inventories. This includes tracking of receipts, returns, and cycle/physical count materials.
When transferring materials, ensure you are accurately documenting and managing these transfers per the stipulated guidelines and controls outlined in the MMAS.
Material costing and borrow/payback
Consistent costing and clear documentation of borrow/payback scenarios are key to a compliant MMAS.
Allocating common inventory
Common inventory must be allocated properly, ensuring fair and accountable distribution.
The last thing you want introduce during an audit is any semblance of disorder or confusion. Keeping your separate inventories distinctive can help you avoid this.
Preventing commingled inventories is an important compliance aspect in MMAS. Clear separation of items is crucial to maintain order and compliance.
Finally, conducting regular, thorough internal audits to validate your own compliance and address any potential issues is critical. This helps you proactively stay ahead of any problems. To put it into sports terminology: the best defense is a good offense.
Meeting these ten MMAS criteria can provide you with efficient, reliable, and compliant operations. One key way to facilitate this is by integrating your enterprise resource planning (ERP) and inventory management solutions to make this process easier and more streamlined.
To learn more about these MMAS requirements and how you can actually use them to your company’s benefit, download our new eBook titled "How to Turn MMAS Compliance into a Competitive Advantage.” Discover the strategic edge that compliance can bring to your organization.