On Shaky Ground, the DCAA Steps Up Threats to Potential Government Contractors
Last we heard, the Defense Contract Audit Agency was in the doghouse. And you've got to be pretty bad at your job if you're in the auditor doghouse; just look at the PwC India auditors who screwed up a $1 billion audit or the Ernst & Young geniuses who somehow missed Lehman's pending implosion. I guess that wasn't material, whatever, I'm not an auditor so maybe I'm not qualified to make such broad, uninformed assumptions.
Let it be known: the DCAA isn't playing around with contractors anymore and the following press release reminds us all that they're serious about that:
With the Defense Contract Audit Agency (DCAA) under increasing pressure as the lead auditor for government contractors, companies competing for their first federal government contracts should be prepared to pass an audit even before winning a contract.
“DCAA can audit contractors before a contract is awarded,” noted Marcelle Green, marketing director of the DCAA Resource Center. “If a company’s accounting system doesn’t pass the DCAA audit, the contract officer can choose to award the contract to someone else. Companies that look at the time and expense of making their accounting system DCAA compliant sometimes decide not to bother until they win a government contract. Then they have to scramble to get ready for a ‘make or break’ audit.”
According to Green, “DCAA can evaluate a contractor’s financial situation to ensure the contractor is financially capable of fulfilling the contract, as well as determine if the contractor’s accounting system accumulates and allocates costs based on Federal Acquisition Regulations (FAR). They also want to see that the contractor has controls and policies in place to ensure the accounting system remains DCAA compliant during the life of the contract.”
Green urges companies thinking about bidding on government contracts to visit http://www.DCAAPortal.com to see what DCAA accounting involves. She also recommends they understand the differences between a DCAA audit and audits by other government agencies, such as the IRS. “A DCAA audit is pass-fail,” she said. “The auditor generally won’t help you correct deficiencies or overlook minor issues. The auditor will either conclude your accounting system is in compliance or it isn’t. Period.”
Contractors, the DCAA Resource Portal is your go-to for getting DCAA compliant.
Check out the Project on Government Oversight for a lively discussion on what, exactly, plagues the DCAA (in comments). It could be bad leadership, excessive audit work, the need for more audit work, a lack of direction, late reports, canceled reports, or any combination of the above.