Frequently Asked Questions

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DCAA Software is an integrated accounting software designed to meet all the DCAA audit requirements. It has different modules that enable government contractors to maintain project accounting, labor distribution, time management, contract management, and proper segregation of costs. The software successfully completed a DCAA audit in March 2020.

DCAA stands for Defense Contract Audit Agency, a United States government agency responsible for auditing Department of Defense (DoD) contracts. Other federal agencies can also request DCAA to audit contracts. DCAA performs audits to ensure taxpayers gets what they are paying for. DCAA’s mission statement is “Supporting the Warfighter and Protecting the Taxpayer.” Learn more about DCAA at http://www.dcaa.mil/. 

Being DCAA compliant means following DCAA’s recommendations and guidance to remain compliant with federal law and audit preparedness. DCAA audits are performed according to Federal Acquisition Rules (FAR) and Cost Accounting Standards (CAS). 

A DCAA compliant accounting system should be able to track direct and indirect costs separately, accounting costs, billing costs, and labor costs. Integrated time entry, while not a difficult requirement, can significantly improve the chance of passing a DCAA audit.

DCAA documentation at https://www.dcaa.mil/Portals/88/Documents/Guidance/Audit%20Overview/DCAAM_7641.90.pdf?ver=2019-03-07-144552-313 is designed to assist federal contractors in understanding applicable requirements and help ease the contract audit process. The process starts with your contracting officer sending you a Pre-award Surveys of Prospective Contractor Accounting System (SF1408) to be completed and sent back. Also refer to DFARS 252.242-7006, Accounting system administration, for requirements for an acceptable accounting system. The Contracting officer will determine the need for a DCAA audit and can request DCAA audit services.

Medium-sized businesses have two options: 

• Upgrade the current ERP system to meet DCAA requirements
• Replace the current ERP system with a DCAA compliant ERP system

Standard QuickBooks is not a DCAA compliant system on its own, but there are third-party applications to enhance QuickBooks to meet DCAA requirements.

Using third-party QuickBooks applications has advantages and disadvantages. It can be a quick way to become DCAA compliant, but the lack of true integration with QuickBooks can lead to future problems. Also, consider other missing features that are currently being handled using spreadsheets and the total cost of ownership including additional labor costs.  

A contractor cannot request DCAA to perform an audit of their company. Only a contracting officer will determine if a DCAA audit is required and can initiate the audit request.

DCAA does not recommend any accounting system. Neither does it insist on an integrated accounting system. Organizations can attempt to pass a DCAA audit using spreadsheets, QuickBooks, a non-DCAA compliant accounting system, or an Enterprise Resource Planning (ERP) system. We are a Department of Defense contractor, and DCAA approved our own accounting system in March 2020. From experience, there is a significant chance of failing the DCAA audit and losing the federal contract without a DCAA compliant accounting system.

DCAA has self-assessment tools on their website. These tools are available under the Checklist and Tools tab on DCAA’s website. DCAA developed the checklists based on regulatory requirements and developed a model for incurred cost submissions.

DCAA will not review proposals prior to submission because doing so would impair the auditor’s independence. Generally Accepted Government Auditing Standards (GAGAS) prohibits DCAA from providing advice to contractors on proposal estimation. DCAA auditors can provide general advice on what constitutes an adequate submission and answer general questions related to the acquisition regulations. Auditors refrain from comments that can be construed as advising the contractor on how to develop its submission to avoid any appearance of bias. 

Wide Area Workflow (WAWF) is a public website used by the federal government to pay its vendors. Vendors create invoices on the WAWF website, the invoices are processed by the government, and payments are made electronically or via check based on the WAWF invoices. We recommend contractors with a limited number of invoices to manually create them in WAWF and manually replicate the invoices in their DCAA compliant accounting system. For contractors with a large number of invoices, we highly recommend they create the invoices in their DCAA compliant accounting software so they will be automatically integrated with WAWF using Electronic Data Integration (EDI) to minimize errors and delays. 

Here are considerations for deciding whether to upgrade or replace ERP software:

• How old is the current ERP software? Older technologies tend to be more expensive due to maintenance costs, hard to find technology workers, etc.
• Is the current ERP installed on local servers or in the cloud? Cloud technology has many benefits including universal and secure access to information from desktops, laptops, and mobile devices.
• What is the total cost of owning and upgrading the current ERP software?
• What is the total cost of replacing current ERP software with a modern cloud DCAA compliant integrated system?
• Is it cheaper to upgrade or replace? 
• Is it faster to upgrade or replace?
• Will your organization benefit from modern cloud technology?
• Has your organization grown out of the current ERP system?