The Best Defense Strategies for DCAA Audits

Nobody in the world of GovCon really *enjoys* DCAA audits. They’re the scourge of CFO blood pressure, and they’re also just something we have to accept as a part of this career path we’ve chosen. 

But here’s the thing about DCAA audits – They don’t actually have to be all that stressful. With a little bit of planning and forethought, you can get through your next audit with a smile. Well, maybe not a smile, exactly. 

Below, we’ll talk about some general tips to help things go smoothly in future DCAA audits. 

Understand the Kind of Audit You’re Getting

DCAA auditors are usually focused on the allocation, reporting, segregation, and classification of incurred costs. They’re usually examining allowable vs. unallowable costs, direct and indirect costs, cost pooling, and the always fun pricing audits. 

When your government contract business is facing a DCAA audit, they’re going to be honing in on one or more areas. It’s important to know which type of audit you’re looking at. 

There are a lot of different kinds of DCAA audits. However, there are two that are much more common than the rest:

Pre-Award Audits: These involve examining your accounting systems, policies, and procedures. Your cost accounting system has to be in compliance with federal guidelines, meaning you’re following specific accounting practices that address everything from billing vouchers to employee timesheets. 

Incurred Cost Audits: These audits are basically just to assess the validity of any submitted or anticipated vendor costs. The auditors are looking to make sure that the costs are allowable, reasonable, and properly allocated. 

Know Your Rights During a DCAA Audit

Under DCAA 10-PAS-024(R), every government contractor is entitled to the following during a DCAA audit:

Entrance Conference – You can expect a meeting with DCAA to discuss the details of the audit and set objectives. You’ll want to ask about things like the reason for and the timeliness of the audit, the scope of the audit (time period and process-wide), and what documentation needs to be provided. 

The more specific and detailed information you gather, the better you’ll be able to prepare materials for the auditor and notify stakeholders and internal team members. Also, it’s best to be proactive and work with any DCAA requests for privileged documents to avoid a Denial of Access finding. 

Regular Communications During the Audit – You’re entitled to, and absolutely should, set up regular meetings with the auditor to discuss any questions or issues. Communicating regularly allows you to spot and fix potential data errors, missing information, or other problems before the final report. 

Denial of Access – We’re going to be blunt with this one. Refusing the DCAA auditor access to documents and information is not a great idea, and will probably lead to a Denial of Access finding. A better option in most cases is to handle any concerns about access during the entrance conference. 

Preliminary Findings Report – If you want, you’re able to request a preliminary findings report when the audit is completed, but before the report is finalized. It’s highly recommended to review this report and to discuss any dissenting opinions with the auditors before the exit conference. 

Exit Conference – Here is where you can discuss the DCAA audit findings with the auditor. You’ll have the opportunity to ask questions about findings, validate their accuracy, and solidify the agreements. 

Work Effectively With Your DCAA Auditor

It can sometimes be hard to not feel a little cranky during any DCAA audit. However, it’s best to keep in mind that the auditor is not your enemy. Like you, they’re just looking to do their job to the best of their ability. The more willing you are to work with them, the more smoothly it’s going to go for both of you. 

Instead of meeting them with defensiveness and excuses, be collaborative and do these things to help your audit be as painless as possible:

• Suggest weekly status meetings where you can address any outstanding items or questions that arise. 
• Be sure to track and check all requested items, including any requested follow-ups. 
• Ensure you provide what is requested in its entirety. Nothing gives auditors more of a reason to dig deeper than incomplete or missing data.
• Request real-time feedback as the audit progresses. 
• Identify a point of contact who will be put in charge of audit follow-ups. 
• Make a copy of anything you send to the auditors and keep it for reference. 
• Try and stay positive towards the audit and any requests that are made of you. Delaying or withholding any requested information is only going to be a drag for everybody involved. 

We Can Help You Prepare for a DCAA Audit

One of the best tips for dealing with a DCAA Audit is to hire a team of professionals to deal with it for you. 

DCAA Audits are exactly the kind of back-office situations that we excel at here at BOOST. We’re a team of experts in HR, Accounting, Recruiting, Pricing and more. Our specialization is helping government contractors like you excel in all of those areas. 

If you or your company are facing a DCAA Audit, and you’d like some expert help, Contact Us today, and let’s talk about how we can assist.