DCAA Accounting System Audit Checklist

DCAA audits come in many different forms; pre-award surveys review internal controls before contracts are awarded and incurred cost audits evaluate billed expenses, among others. While DCAA audits can be stressful for government contractors, pre-award surveys provide essential review.

However, there are a few steps that can be taken to reduce stress during both preparation and audit itself. Here are five key points about the DCAA accounting system audit checklist.

1. SF 1408 Checklist

Are You Entering Government Contracting on a Cost Reimbursable Basis, or Expand Your Portfolio of Federal Contracts? To do so successfully, completing SF 1408 and passing a Pre-Award DCAA Accounting System Review are two key requirements.

The SF 1408 survey is a questionnaire that helps you document whether your accounting system satisfies DCAA requirements. It includes a set of criteria that evaluate your company’s accounting practices, internal controls and timekeeping/labor distribution systems.

Acquiring an outstanding evaluation on SF 1408 is critical to your success in the government market, especially when seeking cost-reimbursement contracts from the Department of Defense. Failing to comply with all SF 1408 requirements can mean missing out on vital business opportunities with them.

2. Monthly Closing Checklist

While society often praises those who make a grand statement, true success often results from consistently doing the small things right – one such step being creating a month-end closing checklist.

Implementing data cleansing requires your accounting and finance teams to record, review, reconcile and save information from previous periods in order to reduce errors, enhance reporting results, increase efficiency and prepare for audits.

Your team should review and reconcile vendor statements against accounts payable balances to verify all customer invoice payments have been recorded, while also taking this opportunity to assess prepaid expense entries and amortization records.

The Checklist Approach This type of checklist is an effective way to build collaboration, accountability and transparency among your team and shop, while simultaneously revealing areas where they could improve processes to increase work efficiency.

3. Contract Backlog Report

Contract Backlog Report is the quickest and easiest way to quickly assess your on-account backlog of fixed price projects, and understand its changes from period to period due to additions, cancellations, and amounts recognized as revenue.

Contract Backlog Management The ability of contractors to track and manage their backlog of projects is a key indicator of future performance, while providing customers with valuable customer communications tools.

DCAA audits can range from simple reviews of your chart of accounts to in-depth accounting system reviews including forward pricing rate adequacy checks, voucher verification checks (VVCs), and internal controls reviews. Being prepared for these audits with all necessary reports helps the entire audit process go more smoothly.

4. Labor Distribution Report

The Labor Distribution Report displays earnings information entered for individual labor codes during Payroll Data Entry. This includes employee number and name, earnings code and hours worked – making this report useful when used alongside Job Cost Report.

DCAA auditors will need access to reports such as your Chart of Accounts, Books Vs Billed Report, Labor Distribution Analysis Report and Contract Backlog Analysis report in order to assess whether you will pass their audit quickly and easily. Have these ready for print so your auditor can quickly make his or her determination about passing or failing the audit quickly and easily.

Time tracking software that directly integrates with your accounting system and meets DCAA compliance requirements is vital for meeting compliance obligations, helping to minimize costly errors such as misfiling timesheet entries into incorrect accounts.

5. Profit & Loss by Job Report

DCAA auditors will closely scrutinize how you allocate indirect costs to contracts, track employee hours incurred on government contracts, and support your annual incurred cost submission. In order to accomplish this task, a DCAA-compliant chart of accounts and accounting system that generates profit and loss reports are essential components.

Profit and loss by job reports enable you to quickly identify transactions related to specific jobs or clients. The report displays each individual job’s net income percentage and gross profit percentage–two key performance indicators necessary for compliance monitoring. Furthermore, DCAA-compliant software includes an automated column that calculates each job’s percentage of total income to make this task simpler, saving both time and effort!