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The DCAA jurisdiction

The Defense Contract Audit Agency (DCAA) was formed to provide oversight on Federal Government procurement activity. The DCAA performs all of the audits for the Department of Defense (DOD), which is the largest procuring agency, but also is responsible for performing audits for every other government agency. Regardless of the size of your contract, the most important point to take note of is:

  • ALL businesses that enter into contracts with the federal government are subject to DCAA auditing. These audits may occur at any time throughout the contracting process.

DCAA’s recent audit rule changes

Oversight of the DCAA falls under the responsibility of the Government Accounting Office (GAO), which recently cited several major issues in the way the DCAA operated. In order to combat these issues, the GAO forced the DCAA to change many of its government auditing practices. The MAJOR CHANGES include:

  • Prior to the changes, the DCAA was able to critique a government contractor’s internal accounting systems as “deficient in part,” which meant that only some minor changes needed to be made. NOW, the DCAA is forced to report a contractor’s internal accounting system as either “wholly adequate” or “inadequate.”
  • When an Auditor deems a system to be inadequate, the DCAA auditor is required to recommend that payments be suspended on any affected contracts.
  • Auditors are no longer allowed to provide a government contractor with suggestions for improvement to their internal control systems.
  • The DCAA is now required to define any “significant deficiency/material weakness” as a “failure to accomplish control objectives.” The identification of just one significant deficiency will result in an opinion that the related system is inadequate.
Avoid problems that may occur from regular DCAA audits

What does this rule change mean to government contractors?

Countless government contractors lose their procurement opportunities because of their inadequate accounting and internal control systems. As the audit environment changes, becoming stricter, government contractors are finding competitive advantages by simply having an adequate accounting system. Failing to become DCAA compliant will result in lost contracting opportunities.

The XcelHR Value

Any time you need it, any one of your branches can take part in a full accounting system audit. An independent auditor will justify or recommend solutions to your accounting process needs. Improve your chances of winning government contracts by fulfilling what should be one of your first requirements in seeking out procurement activities… Take advantage of these XcelHR benefits:

  • Software Solutions: Our premium software packages are used to uncover and compare DCAA compliance to your  existing system.
  • Time Management Systems: We provide several DCAA audited time management systems to ease the transition into  DCAA compliance.
  • Payroll and Payroll Tax Solutions: Use payroll and tax professionals to overlook and keep records of important  documents.
  • Expert Advice: Our experts in payroll and accounting provide invaluable insight on quality control and internal control systems.