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More DCAA Problems

Posted By Paul Baumann, PDS Business Systems & Services, Saturday, September 17, 2011

This email is to alert you to a change in approach to audits conducted by DCAA. The bottom line is that the number and scope of audits is increasing. This has been brought about by a GAO audit of DCAA that was requested by Congress in 2008 and accused them of lack of being too close to contractors and not adhering to standards. DCAA's response to that report was to change the grading scale for audit reports. The old scale provided for degrees of compliance and non-compliance. The new scale is "pass/fail” and failure carries significant repercussions.

We just went through an audit with a client uses our Corp_ProSM software and that has 15 employees. It took six months and their system was declared inadequate. The findings that caused the rating were not Corp_ProSM software or the policies and procedures that come with it. Rather they were issues with not following the procedures. Even though the issues were minor and had no effect on correct billing or cost accounting they resulted in an inadequate rating because of the new pass/fail approach. Further, DCAA has indicated that they will not re-audit for at least six months. If the new audit takes six months, it may be a year before this company can again bid on CPFF or T&M contracts.

I strongly recommend that you not ignore this and, if you deal in DoD or DHS, brace for the eventuality of a system audit (even if you have been previously approved) and/or incurred cost audits.

Please let me know if you have questions about lessons learned from our experience and/or if you want a copy of the GAO report or the DCAA action plan.


Paul Baumann


Tags:  Accounting  compliance  DCAA  Indirect Costs 

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