Success in the government contracting industry hinges heavily upon meeting compliance regulations. To be a successful government contractor, your business processes need to be Defense Contract Audit Agency (DCAA) compliant. Being able to successfully complete a DCAA audit not only ensures the legality of your operation but also helps you continue acquiring government contracts. You can make your life easier and guarantee smooth audits by using accounting software optimized for DCAA compliance. But what does it really mean to be DCAA compliant?
What Does it Really Mean to be DCAA Compliant?
In a nutshell, being DCAA compliant means that the organization simply has systems and procedures in place to comply with the DCAA audit. The DCAA doesn’t actually certify or award a formal statement that your business is DCAA compliant. Instead, DCAA audits check if your organization meet Cost Accounting Standards (CAS), Federal Acquisition Regulation (FAR), and other government rules.
To pass these audits, you must verify that your financial management and behavior meet the standards set forth by the DCAA. This means clearly documenting how you’re using the contract money, as well as the results achieved. To be DCAA compliant, you must prove that your finances align with their rules and regulations.
The Truth About ‘DCAA Approved’ Accounting Software
While accounting systems can possess features that make them compliant with DCAA audits, there are no accounting systems that are formally approved by the DCAA. Even saying that a system is DCAA compliant just means it has features that meet the particulars of various audits. The DCAA doesn’t give accreditation or approval to these systems. Bear this in mind as you see advertisements declaring their accounting systems are ‘DCAA approved.’ They might be suitable for the DCAA audits, but they’re also trying to attract your business by claiming to be DCAA approved – hooking you with false information.
The reality is that DCAA compliance is based on a combination of accounting practices and accounting software. No matter what software your team uses, you need to adopt policies and procedures that let you document your finances efficiently. To do this, the right accounting software is a major asset.
Overview of DCAA Compliance Accounting Features Scope
The overarching themes in government contract accounting are transparency and detail. All the info involved with your accounting, from time-tracking to payables should have audit trail and drill-down functionalities The burden is on the contractor to provide a complete record of all financial activities and amounts relating to the contract. For example, time tracking must be highly secure and detail-oriented. The system must include timestamps for all entries and, if there are corrections, the approver must also have an approval time stamp included in the entry.
Audit trail is highly valuable because this function allows you to have a straightforward data trail. All the processes and persons attached to contract-related transactions and ledgers are easily accessible and visible. With a system like Accounting Seed, the approval process can be configured around whatever stages you define, distinguishing approvals for any data records in the application. This approval process will also show an audit trail of who approved the record and when. These are details auditors must be able to examine and validate.
Drill-down functionality is critical because you and DCAA auditors need to be able to analyze the finances and breakdown specific data related to the contract accounts. It’s not enough to know the transaction amounts, your accounting software needs to be able to track and isolate the associated dates and activities involved. You also need to justify the time and costs spent on the contract. This means breaking down and analyzing the return-on-investment of these project finances throughout the contract’s lifecycle.
Be DCAA Compliant. Choose the Right Solution
As you continue to investigate DCAA compliance, be sure to check out our free guide on DCAA Accounting Compliance for guidance on choosing the best software to manage contract finances. We’ll also cover more details on the DCAA audits themselves.
Remember, DCAA compliance isn’t an option in Federal contracting, it’s required. The last thing you need is to delay and/or jeopardize your entire contract. With the proper accounting software, your journey to compliance will be a lot easier and your position as a federal contractor will be more secure.
In addition to having the key features you need to pass the DCAA audits, a flexible accounting solution will prove invaluable for managing your business as a whole. Salesforce user or not, Accounting Seed offers the flexible, automated accounting solution you need to maximize your contract’s financial management. Schedule a free demo today or contact us to learn more and start our conversation.