By JaFreda Brown, CEO,
Goshen Business Group, LLC
Take a minute and think about this scenario. Your company has prepared a proposal for a contract with a federal agency. If your company wins this contract, it will be the first federal contract for your company. Within a couple of weeks after submitting your proposal, you are contacted by the agency awarding the contract to let you know your proposal is under consideration and will be requesting a pre-award audit to be performed by DCAA. Now, you begin to worry because you do not know what to expect.
Many questions will come to mind when an audit is requested … “what will DCAA do when they come for the audit?” … “what will DCAA look for when they come to audit?” In my experience as a Senior Auditor with DCAA, I was usually met with nervousness when I went to a contractor’s location to perform an audit. It didn’t matter if it was a company who had just won their first federal contract or an experienced contractor – they were always nervous!
The main objective for audits being performed on federal contractors is to protect taxpayer dollars from fraud or frivolous spending. Since pricing is the foundation of a proposal, the first thing DCAA does when beginning an audit is to assess the risk to the Government by auditing the contractor’s accounting system and financial records.
DCAA must verify that a contractor’s accounting system meets these criteria found in DFARS 252.242-7006. Also, DCAA must verify that the accounting system is in accordance with Generally Accepted Accounting Principles (GAAP). There are also several other FAR and CAS regulations that related to the pricing, accounting system, and cost basis that DCAA has to verify during the audit.
There are several moving parts that must work together in order to make sure your company is prepared for Government contracting. A big part of this is developing and maintaining compliant accounting and internal control systems. Not having this in place up front can cause a contractor to lose a contract. I’ve seen contractors lose a contract right after being awarded because their accounting system was not compliant.
Audits may also be performed at any time during the life of a contract or a final audit when the contract ends. If the accounting system isn’t compliant, a contractor can be fined or have to return funds already received from a contract. Setting up your business accounting system so survive a DCAA audit is a priority up front before even bidding on federal contracts.
www.wipp.org
Maintaining Compliant Controls for a DCAA Audit
Course Instructor: JeFreda Brown, CEO, Goshen Business Group, LLC