DCAA Compliance

Posted by Sdlconsulting on March 28th, 2019

The Defense Contract Audit Agency provides financial services for the department of defense. In particular, the DCAA performs contract audits on the proposals submitted to the federal government. The common misunderstanding is that the DCAA is a regulatory body that seeks to legislate the accounting software systems of government contractors. This is far from the truth. The reality is that the DCAA is providing financial services for the federal government and assisting the Department of Defense in the negotiation and settlement of contracts. Having DCAA compliant accounting software is more about the practices used to construct contracts and pricing than having to satisfy governmental regulations. They do not conduct the audits by themselves but are asked to do so, on behalf of different military and even some civil wings. The strict audit is done to ensure that the taxpayer's money are well spent. Thus, there are several clauses and sub-clauses to abide by to pass the audit and secure the government contract. For this, you have to prepare an account that is DCAA compliant.

Separating the indirect costs

The prime task is to determine if your company accounts are adequate in accordance with the DCAA stipulations especially concerning the DCAA indirect costs accounts. The indirect costs are rates that can be quantified in any contract. The direct cost comprises of expenditures like the cost of materials, worker wages for the project in question, expenditures for the sub-contractors and the like. The indirect costs on the other hand are specified by the FAR and have to be explained properly. Government Contractor Accounting Software

Categorizing the costs

All recognized DCAA indirect costs can be more or less categorized in three groups the benefits of employees, the total overhead costs, and the general administrative costs. Employee benefits like those of the health, pension plans, paid leave allowances have to be clearly maintained in records so that there is no discrepancy when the audit comes. This is usually done by way of good time-keeping that can be either manual or electronic. Such records must have a consistency for at least a period of time and not made overnight for the audit.

ERP System Benefits

The benefits of integrating enterprise resource planning software into account practices even go beyond mere compliance. Generating the information that the Defense Contract Audit Agency is looking for is also an excellent way to better understand your own company's situation. Interconnecting the front-end of a business with the finished deliverable is a boon by itself. Allowing communication between technologies, people, and departments greatly enhances productivity, reduces waste, and eliminates mistakes due to miscommunications. Government Contractor Accounting

ERP systems are about centralization of resources and companywide accessibility. Technology can create a bridge between design, manufacturing, and accounting. The entire revenue cycle can be laid out from invoicing all the way to cash receipts. The increased transparency that the DCAA is using as a criterion for bid selection will also make a company run more efficiently and generate better profits through cost reduction.