Nearly all enterprises face the challenge of complying with government regulations, but those that do business with the government directly face an additional layer scrutiny. In terms of financial practices and transparency, many government contractors find themselves struggling to consistently maintain compliance with the Defense Contract Audit Agency (DCAA).
A key part of DCAA compliance is utilizing robust financial software that enables transparency regarding the costs of government contracts. Microsoft Dynamics 365 helps contractors achieve this.
What is the DCAA?
The Defense Contract Audit Agency (DCAA) oversees the auditing of contractors who do business with the Department of Defense, and other government agencies often recruit them to provide audit consultations. The agency verifies that contractors are financially capable of delivering products and services, and that they are accurate in the costs they bill to the government. To achieve this, the DCAA provides recommendations and guidance based on Federal Acquisition Regulations (FAR), Cost Accounting Standards (CAS), and the Generally Accepted Government Audit Standards (GAGAS).
Federal Acquisitions Regulations (FAR) and Cost Accounting Standards (CAS)
FAR is the primary set of requirements that government agencies use when acquiring goods and services. It dictates contract clauses and solicitation provisions (such as certifications, notices and instructions) that businesses must prove they can adhere to when competing for a contract.
CAS was established in 1968 to create a set of consistent standards for contractor’s accounting activities. These standards direct contractors on how to charge to government contracts, what should be charged to specific contracts, maintaining their financial systems, directing the flow of costs from incursion to final costs and how accounting should be done for specific types of costs.
Generally Accepted Government Audit Standards (GAGAS)
GAGAS provides guidelines for both financial and performance audits of government contractors. Provided by the Government Accountability Office, these guidelines set the auditing standards for government agencies and non-government agencies that receive government assistance.
GAGAS aids the government by:
- Establishing the unique requirements of specific government agencies
- Determining standards for government and non-government auditors who perform audits in accordance with GAGAS
- Enforcing AICPA (American Institute of Certified Public Accountants) auditing standards
- Forming fieldwork and reporting guidelines for performance audits
As mentioned above, the purpose of DCAA audits is to monitor the costs of government contracts. For government contractors, costs are accounted for in significantly different ways as opposed to commercial firms. The types of costs that the DCAA focuses on include:
- Allowable costs
- Unallowable costs
- Direct costs
- Indirect costs
- Cost pools and indirect cost pooling
The DCAA performs a variety of audits including:
- Forward pricing
- Incurred costs
- Compensation and benefits
- Contractor Purchase Systems Review (CPSR)
- Labor charging / floor checks
- Independent audits on specific contract elements
Microsoft Dynamics supports DCAA compliance
With so many standards and practices to adhere to, the last thing people who work with the government need is unreliable financial software that jeopardizes their contracts. Thankfully, Microsoft Dynamics 365 supports DCAA compliance while also having the ability support day-to-day operations and integrate with other platforms.
Dynamics 365 allows contractors to track and segment their costs properly, and its data storage and reporting features enable the retrieval of financial data auditors might request. It allows contractors to track separate costs such as indirect costs, accounting costs, billing costs, and labor costs, and it can also integrate with timekeeping systems for labor cost audits.
In addition to DCAA compliance, Microsoft Dynamics 365 supports compliance with a wide variety of other government agencies and regulations. Turnkey specializes in implementing Dynamics 365 for government contractors and right-sizing for individual organization. We can also integrate the solution with tools like Microsoft Dynamics 365 for Customer Engagement Applications, Office 365 and other platforms government contractors rely on for success, such as the General Service Administration portal.