DCAA – What is it and how can you comply?

What is DCAA? The Defense Contract Audit Agency (DCAA), under the authority,
direction, and control of the United States under the Secretary of Defense, performs
all contract audits for the United States Department of Defense (DoD). DCAA also
provides contract audit services to other government agencies. Today, the
DCAA consists of approximately 4,000 people located at more than 300 field
audit offices throughout the world. Much more data is available at www.dcaa.mil.

The purpose of DCAA, put simply, is to avoid the purchase of $500 hammers and
$2,000 toilet seats. Business consultancies, such as software and management
services firms, that sell project management and other services to government
agencies, need to comply with DCAA if they want to avoid failing an audit. US
taxpayers are all very happy that the US government has put processes in place
to avoid fraud.

In order to be compliant with DCAA and to be able to pass a potential audit, a
company must have documented procedures that are followed to the letter.
The contractor must also employ a system that includes labor charges for
hourly time, certain accounting and billing system properties, and employees
trained in compliance (such as tracking their time
on a daily basis).

Costs (especially labor hour costs) must be allocated separately by various
categories, including direct versus indirect, and per contract. Indirect costs
(such as the costs of accounting, billing and payroll, human resources (HR) and
benefits personnel) must be consistently documented and allocated across the
direct cost items. Reports must be generated at least monthly. Unallowable
expenses must be identified and excluded by policy.

There's lots to learn about DCAA but getting it all figured out will help you make more money
and keep the taxpayers happy at the same time.

You can find out more at Wikipedia or get help in complying from Journyx.

Curt's recent time tracking software book has a chapter on DCAA.