What is the DCAA, and What Audits Do They Perform?

What is a DCAA Audit? Get a better sense of what types of audits the DCAA runs and how to prepare for them.

What is the DCAA?

Let’s quickly level set on the mission of the Defense Contract Audit Agency (DCAA). Their primary function is to perform contract and financial audits for agencies that are responsible for acquisition and contract administration for the US Government. DCAA audits ONLY government contractors. They conduct these audits in accordance with the Generally Accepted Government Auditing Standards (GAGAS). The principles that GAGAS embodies are unbiased audit conclusions based on facts.

DCAA is a very vital part of the acquisition process for the Department of Defense (DOD) and certain other agencies. Their charter is to make sure that the taxpayers’ money is spent responsibly and ethically by conducting audits that ensure the validity of costs throughout the acquisition process. They have a tremendous amount of influence because they communicate with the Contracting Officer (CO) and make recommendations that have an impact on contract negotiations. The recommendations help the CO understand what the price of the contract should be. In the past, the relationship between the government contracting community and DCAA has been strained. DCAA is making a concerted effort to improve overall relationships with government contractors by improving communication and coordination.

Common DCAA Audits

Understanding the various audits the DCAA tends to run is necessary for preparing for them. In future blogs, we will dive deeper into each audit, but for now, here is a quick description of some of the most common ones:

  • Incurred Cost: The most common type of DCAA audit, an incurred cost audit exists to ensure that claimed actual costs and billed costs reconcile.
  • Forward Pricing: This audit is conducted on contract proposals, are related to a specific contract, and are conducted prior to award. The purpose of this audit is to ensure out year rates are reasonable and realistic for use in forward pricing.
  • Pre-Award: Accounting System Audit: An Accounting System Audit is performed to ensure that a government contractor’s accounting system complies with laws and regulations, is reliable, there is a minimal risk of misallocations and mischarges, and allocations and charges are consistent with billing procedures.
  • Timekeeping: This audit aims to ensure the contractor is compliant with its timekeeping practices, that the employee time records are correct, that employees perform in their assigned job classifications, and time is charged to the proper cost objective.
  • Special Audits: Special audits may be performed for a variety of reasons, but typically occurs when a Contracting Officer needs an independent financial opinion on specific portions of a contract for a contractor’s accounting business system.
  • Other Audits: These audits are usually performed for a variety of reasons, usually when there is potential for a high risk of misallocation or mischarging of costs.


Ease the Path to Compliance with Unanet

What is the DCAA? Something you don’t have to fear with the help of Unanet! Remember that there is no such thing as DCAA compliant software. It is your organization and procedures that will be assessed for compliance. That said, Unanet is uniquely designed for government contractors and has been battle-tested for compliance rules and regulations. Our compliance features are built into the tool, making compliance part of the fabric of your business. Unanet currently has over 2,000 clients using and trusting the system. Unanet supports compliant accumulation and allocation of costs utilizing time keeping, expense accounting, cost pools, indirect rates, revenue recognition, and project management all in one truly integrated system.

Whether you are a small new or a seasoned larger GovCon, you can count on Unanet for your compliance needs. Unanet is recognized by the audit agencies as being “compliant ready,” giving you an immediate advantage in the audit process.

To learn more about the DCAA, download our white paper, "A GovCon's Essential Guide to DCAA Compliance."