DCAA compliance is one of the trickier components of being a government contractor. Working with a CPA professional who understands and has experience with DCAA compliance is the best way to ensure that all rules are followed. However, it is still important for contractors to have a clear understanding of DCAA compliance, and this review offers answers to some of the more frequently asked questions.
DCAA Compliance: 7 Frequently Asked Questions And Answers
The most common questions CPA professionals receive from government contractors about DCAA compliance is in regard to how they can ensure that their employees are able to follow the necessary guidelines, the best method for organizing accounting tasks, and what to expect if they are audited by the DCAA, among other questions that are discussed below.
How Do I Ensure That My Employees Understand The Importance Of DCAA-Compliant Timekeeping Practices?
Communication is of the utmost importance when it comes to ensuring that your employees understand their responsibilities as it pertains to timekeeping practices. Be sure to make yourself available to your team and encourage them to ask any questions they may have about timekeeping.
It can also be helpful for them to read through a handbook that explains DCAA compliance and the role of employees. Generally speaking, it is imperative that your employees record all the time that they work each day as required; a supervisor cannot do so on their behalf.
How Do I Differentiate Between Direct And Indirect Time And Costs Associated WIth Government Contracts?
One of the more confusing aspects of DCAA compliance for many government contractors is differentiating between direct and indirect time and costs that are associated with the government contract(s). A general breakdown between the two is as follows:
- Direct costs – Expenses that can be traced directly to a cost objective associated with the government-issued contract
- Indirect costs – Expenses that cannot be assigned to a direct cost objective
For example, time charged working specifically on the job is a direct cost, and paid time off for the employee should be charged as an indirect cost. It is important to keep in mind that contracts that require DCAA timekeeping obligate employees to track and record all time to direct and indirect cost accounts.
Can Supervisors Update Or Correct Timesheets For Employees?
The short answer is no, supervisors are not allowed to update an employee’s timesheet themselves. On the very rare exception to this rule when an employee is not able to update their own timesheet, a supervisor must get consent to update or correct a timesheet, and they should make a clear and highly detailed note of why exactly the change was made. Employee timesheets are reviewed closely during a DCAA audit, and any altering of employee timesheets without permission could become a concern.
Do I Have To Purchase An Electronic Timekeeping System?
An electronic timekeeping system is not required by the DCAA. However, it is generally considered to be a superior and more reliable method than written format. In general, the DCAA simply wants to confirm that the contractor is in compliance with timekeeping and cost tracking requirements, and organization is key to being able to provide the DCAA with the records they need during an audit.
Are All Contractors That Work On Government Contracts Audited By The DCAA?
No, not all government contractors are audited by the DCAA. However, anyone who works on government-issued contracts (i.e. Department of Defense) is subject to a DCAA audit and must comply with the guidelines established in the Federal Acquisition Regulation (FAR). Additionally, being audited by the DCAA does not mean that you are suspected of doing anything wrong, and who is (and is not) audited is primarily based upon the types of contracts you receive and the agencies with which you work. Ultimately, the goal of the DCAA is to simply verify that the government agencies are receiving a fair price for the goods and services you provide.
What Can I Expect During A DCAA Compliance Audit?
A DCAA compliance audit is not as scary as it may at first seem as long as you are prepared and have done a good job of staying on track with compliance requirements. During an audit, a floor check is conducted, which involves a visit from a member of the DCAA who interviews a handful of employees, often at random. They will also check all of your accounting records as well.
What Happens If My Business Fails A DCAA Audit?
Failing a DCAA audit can be disastrous for a contracting business, and it can lead to an inability to procure future government contracts if the DCAA determines issues with your accounting and timekeeping systems. In lesser scenarios, a failure to properly keep detailed records could lead to an inability to collect on payments you otherwise should have earned.
Contact Diener & Associates To Ensure Your DCAA Compliance
Government contractors often work with professional certified public accountants to ensure full DCAA-compliance and a successful audit. Knowledgeable CPAs understand the necessary and ever-evolving requirements associated with DCAA compliance. If your government contracting business has questions about the DCAA auditing process, it is best to reach out to a certified public accountant that specializes in government contractor consulting and DCAA compliance.