Ensuring DCAA Audit-Ready Compliance
As a government contractor, staying DCAA (Defense Contract Audit Agency) compliant isn’t just a recommendation—it’s a requirement for maintaining and securing lucrative federal contracts. But what exactly does it mean to be “DCAA-compliant,” and how can you ensure your organization is always audit-ready?

What Government Contractors Need to Know About DCAA Compliance:
- Accurate Timekeeping
The DCAA puts a strong emphasis on labor costs. Ensure your timekeeping system is precise, and employees properly document their time worked. Each hour must be traceable, correct, and properly allocated. - Cost Accounting Standards (CAS)
Contractors must follow detailed guidelines on direct vs. indirect costs. Make sure your cost accounting practices align with DCAA standards to avoid costly disallowed charges. - Adequate Internal Controls
Effective policies and procedures must be in place to monitor compliance across the board. A lapse in internal controls can raise red flags during an audit. - Timely Financial Reporting
Financial reports, including incurred costs and progress payments, need to be accurate and submitted on time. A delay or discrepancy could lead to audit complications or penalties. - Audit Readiness
Being DCAA compliant isn’t just about passing a single audit—it’s about being audit-ready at any time. Are you prepared to meet DCAA’s standards during both pre-award and post-award audits?
Frequently Asked Questions
Can I request a DCAA Audit?
No. DCAA does not perform audits requested by a contractor. DCAA only performs audits based on a request or established need from a federal entity.
What triggers a DCAA audit?
The rights of the Government to perform an audit are established by the terms and regulations incorporated into your agreement or contract. DCAA audits are trigged by a contracting officer’s or administrative contracting officer’s need for audit service to make decisions or regulatory requirements.
How long does a DCAA audit take?
Each audit will have a different timeline based on many factors. Each DCAA auditor will perform a risk assessment to determine the scope of the audit. The time, length and duration of each audit will depend factors such as risk, materiality, and willingness of contractor to support the audit to name a few.
Is QuickBooks an acceptable accounting system?
An accounting system is more than just a software package. It includes accounting methods, procedures, and controls. Many accounting software applications can be part of an acceptable accounting system or set up in a manner that fails to meet the requirements of an acceptable system.
How do I get a DCAA approved accounting system?
You cannot. There is no such thing as a DCAA approved government accounting system.
How do I ensure my accounting system will meet DCAA requirements?
You can use the DCAA Preaward Accounting System Adequacy Checklist. This checklist is used for contractors new to government contracting that have cost reimbursement contracts, or for contractors that are receiving progress payments based on cost. The checklist assesses whether the requirements for an adequate accounting system have been met.
DCAA Audit Resources
[DCAA Guide] A helpful guide that provides an overview of the types of audits DCAA conducts, links to checklists, and what you can expect in a DCAA audit.
[DCAA Presentations] Targeted information to assist with audit issues that relate to small businesses.
[DCAA Workshops & Seminars] Workshops and seminars by DCAA geared to small businesses.
How We Help You Stay Audit-Ready:
At Iuvo Systems, we understand the complexities of DCAA compliance and the risks of non-compliance. Our proven processes and systems help government contractors like you maintain compliance effortlessly. Here’s how we support your audit readiness:
- Automated Timekeeping Solutions:
Reduce manual entry errors with our DCAA-compliant timekeeping systems. - Cost Accounting Guidance:
Ensure accurate cost segregation and alignment with DCAA standards. - Internal Controls Consultation:
We help implement robust policies to safeguard your business. - Real-Time Financial Reporting:
Stay ahead with timely, accurate financial reporting to meet DCAA requirements. - Ongoing Compliance Monitoring:
We continuously monitor your processes, ensuring you’re ready for an audit at any moment.
Whether you’re preparing for a pre-award audit or ensuring compliance for a post-award review, our team has the tools and expertise to ensure your organization stays compliant, audit-ready, and focused on what you do best—winning contracts and delivering quality services to the government.
Please reach out, we are happy to chat further and assist your organization with all your GovCon related accounting needs, from Outsourced Accounting, ERP System Support and CFO Advisory Services.
Book a free consult call with us!
P.S. Don’t wait until an audit is on the horizon—be proactive and ensure your compliance today!
About Iuvo Systems
Iuvo Systems is the premier GovCon accounting services firm that provides DCAA compliant outsourced bookkeeping, consulting, implementation and staffing to government contractors. In addition to working with large prime contractors we specialize in working with 8(a), SBA, HUBZone, Women, Minority and Veteran owned firms utilizing QuickBooks, Deltek Costpoint and other industry specific applications.
