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Does My Accounting Software Meet DCAA Compliance?

This article was updated and republished on Jan 10, 2022.

To be a successful government contractor, your business processes need to be Defense Contract Audit Agency (DCAA) compliant. Successfully completing a DCAA audit ensures the legality of your operation and helps you continue acquiring government contracts. You can make your life easier and guarantee smooth audits by using accounting software for government contractors that’s DCAA compliant. 

What Does DCAA Compliant Mean?

Being DCAA compliant means that the organization has systems and procedures in place to comply with the DCAA audit. However, the DCAA doesn’t actually certify or award a formal statement that your business is DCAA compliant. Instead, DCAA audits check if your organization meets: 

You must verify that your financial management meets DCAA standards regarding financial data security and accountability. Additionally, you must clearly document how you’re using the contract money, as well as the results achieved. 

The Truth About ‘DCAA Approved’ Accounting Software

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 requirements of various audits. The DCAA doesn’t give accreditation or approval to these systems. Bear this in mind as you see advertisements declaring accounting systems as ‘DCAA approved.’ The solution might be suitable for DCAA audits, but the company is trying to attract your business with false information.

The reality is that DCAA compliance is based on a combination of accounting practices and accounting software features. No matter what software you use, policies and procedures documenting your finances efficiently are key. All of this requires highly flexible and automated accounting software.

Overview: DCAA Compliance Accounting Features

The overarching themes in government contract accounting are transparency and detail. All the data involved with your accounting, from time-tracking to payables, should have audit trail and drill-down functionalities. As a contractor, you must provide a complete record of all financial activities and amounts relating to the contract. Let’s look at a few central features. 

Time tracking

Time tracking must be highly secure. 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

Audit trail functionality provides a straightforward data trail. This means all the processes and persons attached to contract-related transactions and ledgers are easily accessible and financially visible. With a system like Accounting Seed, the approval process can be configured around whatever stages you define. 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

Drill-down functionality lets you and auditors examine the finances and break down specific data attached to contract accounts. It’s not enough to know the transaction amounts, your accounting software must track the persons and activities involved, too. You 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.


Project Accounting

Government contracts entail multiple components and resources such as time and materials. These components require project accounting. Therefore, use an accounting system that is optimized to manage project variables and can clearly track and document them. Another key feature you should look for is a work breakdown structure functionality. This lets you and your team seamlessly organize your projects by different phases or tasks. Subsequently, this organizes the time, costs, and resources per project stage needed for audits. 

Internal Controls

Besides these core features, you’ll need to implement internal controls to secure the accounting data. Internal control features serve the dual purpose of protecting accounts from tampering and ensuring processes are done correctly. DCAA regulations require specific timestamps, documentation, and procedures that if not done properly, can delay the audit. Or, you can fail the audit. 

*Accounting Seed lets you create established and customizable internal controls to ensure every accounting process meets DCAA compliance. 

DCAA Compliance Starts with the Right Accounting Solution

DCAA compliance isn’t an option in Federal contracting, it’s required. Poor technology decisions delay and/or jeopardize your entire contract. On the other hand, proper accounting software makes financial compliance much easier to manage. And secondly, your position as a federal contractor will be more secure, allowing you to gain more work. 

Check out our free guide on DCAA Accounting Compliance for help choosing the best software to manage your government contract’s finances. We also cover more details on the DCAA audits themselves.

Understanding Accounting Software DCAA Compliance Guide

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.

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