New government contractors must pass Defense Contract Audit Agency (DCAA) audits to achieve and remain compliant to renew their contracts. The DCAA provides recommendations based on their review of the contractor’s timekeeping, labor, and financial processes.
However, new contractors may not know how to turn the DCAA’s findings into actionable strategies to improve their workflows. Government contract consultants help new contractors accurately interpret the DCAA’s audit findings to create more compliant workflows.
As consultants, their overall goal is to help businesses stay in good regulatory standing and successfully renew their contracts.
Continue reading this brief guide on how to address DCAA audit findings as a new contractor, and how a government contract consultant can help your business succeed with a government contract.
What is the Purpose of the DCAA?
The DCAA examines government contractors to determine whether they adhere to FAR and CAS standards, properly train their staff, employ compliance monitoring protocols, and maintain compliant financial systems. A DCAA audit identifies compliance risks in existing workflows in four audit phases:
- Pre-award audit, which focuses on proposed costs
- Documentation review, which focuses on contract records
- Field audit, which is an on-site audit of timekeeping, financial, and control systems
- Final report, which is where the DCAA presents its findings
In most cases, contractors have a chance to address the DCAA auditor’s concerns before the report is officially finalized. For new contractors, this presents an opportunity to adapt their new systems to match the DCAA’s assessment and pass their first contract audit, though this is often easier said than done.
The Cost of Non-Compliance
Non-compliant contractors face numerous potential penalties, including contract termination, debarment, or even jail time. The repercussions depend on the type and severity of the offense, but new contractors who collaborate with DCAA auditors will have a better chance of fixing their systems before penalties are issued. Transparency is key for proactive new contractors to form a beneficial relationship with the DCAA.
Establishing transparency with the DCAA means organizing the required documents, appointing a compliance leader to guide employees through the process, educating staff on the audit process, and being upfront with the DCAA about known errors, discrepancies, or corrections in the records.
How to Apply Audit Findings
To apply audit findings successfully, new contractors should address more than the recorded discrepancy or timekeeping process error. Successful contractors apply the DCAA’s results to their entire workflow, either before the report has been finalized or before their next audit.
Review Guidelines
The first step is to review the DCAA guidelines to determine which compliance standard was breached. An appointed compliance leader can help by remaining up-to-date on the audit’s guidelines and advising management on necessary strategic changes based on the auditor’s findings.
Choose a leader who has a direct relationship with employees to encourage a more efficient culture of workplace compliance.
Continuous Training
The next step is to use continuous training to engage compliant practices at all levels of the contractor’s workflow. This means keeping teams informed about compliance and motivating workers to share feedback experiences to help management improve the workplace culture, build trust, and continue educating employees.
Mock Audits
New contractors should conduct mock internal audits to spot compliance gaps prior to the DCAA’s assessment. A government contract consultant, certified to help new contractors maintain regulatory compliance, will help businesses identify risks, monitor workflows, and boost stakeholder confidence as the team prepares for the real audit.
Documentation
A new contractor’s most common shortcoming in their first DCAA audit is neglecting requirements for industry and federal compliance in their timekeeping and labor documentation. Contractors still using manual timekeeping methods should upgrade to automated systems that centralize timekeeping and financial workflows into one system.
Factors to look for include how employees record time, whether overtime is being accounted for in cost estimates, how management authorizations of work hours are carried out, and whether employees are charging work time on a per-contract basis using the relevant labor categories.
Common examples of new contractor mistakes include combining expenses and income in their cost estimate records and failing to track reimbursed expenses as additional income. Classifying expenses, work hours, and income with a centralized digital paper trail allows new contractors to facilitate their DCAA audits rather than impede them.
A certified government contract consultant benefits new contractors with both the pre-audit and post-audit process by training staff, advising management, and introducing more efficient digital workflows.
Audit Preparation with Diener & Associates
DCAA compliance is an evolving process that requires a periodic review of the relevant guidelines, an exchange of information with industry peers, and an environment of continuous employee engagement.
It’s essential that team leaders understand the auditor’s specific claims and how to move forward to avoid a second offense of the same regulations. 
At Diener & Associates, we understand the numerous challenges facing new contractors when sifting through the DCAA auditor’s findings.
Our certified government contract consultants provide actionable strategies based on the DCAA’s findings to encourage a long-term culture of compliance in your workplace. Contact Diener & Associates to get started today.