Ace Your Next DCAA Audit by Understanding the 32 Most Common Audit Findings

By October 21, 2020 No Comments

While DCAA audits can have a CFO shaking in their boots, they don’t have to be the source of endless consternation. However, you should take DCAA Audits seriously because auditors give a grade of pass or fail only with no feedback as to where your company can improve.  While that can seem daunting, when you understand what auditors are looking for in each type of audit, you’ll gain confidence in your company’s ability to secure that highly sought pass rating. Read below to understand some of the most common audit findings so you can prepare your company, regardless of the type of audit you’re facing.


The DCMA performs Contractor Purchasing System Reviews (CPSR) to ensure that a government contractor’s purchasing system is efficient and complies with contract requirements and government policies, particularly regarding subcontracting expenditures. As a result of the pass/fail status, your contracting officer can grant, withhold, or withdraw approval of your purchasing systems. Common findings include:

  • Federal Funding Accountability and Transparency Act (FFATA) non-compliance, likely due to a lacking subcontractor certification or a certification obtained post-award
  • Improper certification and disclosure regarding payment to influencing (lobbying) certain federal contracts and financial transactions
  • Use of subcontractors debarred or proposed for debarment (entities must declare in writing in their subcontract agreements that they are not debarred or suspended from contracting with the federal government )
  • Noncompliance with the Truthful Cost or Pricing Data Act, (formerly known as Truth in Negotiations Act (TINA), typically due to a missing certificate of current cost or pricing data
  • Inadequate price analysis
  • Improper use of templates or forms for consistency


According to DoD policy, large business contractors must have an acceptable estimating system. Moreover, large contractors, or those with DoD prime and subcontracts of at least $50M, must disclose their estimating systems. However, procurement contracting officers and administrative contracting officers may request reviews for contracts worth $10M to $50M if needed. Common estimating system audit findings include:

  • Inadequate documentation of review and approval of cost estimates
  • Incorrect use of historical data when preparing cost estimates
  • Cost estimate updates not adequately documented and/or performed prior to negotiations
  • Noncompliance with the requirements of FAR 15.408, Table 15-2 when preparing a proposal
  • Inadequate cost/price analysis performed on subcontracts (qualitative vs. quantitative)


DCAA Auditors typically do an audit of down-selected proposals to ensure compliance before awarding contracts. Common proposal audit findings include:

  • Not following the RFP
  • Noncompliant indirect rates due either to impact of award or escalation rates on indirect rates
  • Proposing subcontractors without using them to cost buildup/rate buildup
  • Accounting policy disclosures or cost accounting standards (CAS) do not match proposed rates
  • Unsupported costs or subject matter expert (SME) judgments
  • Improper accounting of sales tax or other adders or multipliers (freight / gross receipts / etc.)
  • Using assumptions that do not apply to the circumstances
  • Failure to notate in the basis of estimate any technical approach affecting cost factors
  • Escalating historical prices to BY of contract
  • Improper cost-price analysis
  • Math errors from offline calculations


To be successful as a government contractor, generally your company must have a compliant accounting system, starting with a properly formatted chart of accounts that breaks out direct costs, indirect costs, and unallowable costs. You must also have clearly documented accounting and timekeeping policies and procedures. The DCAA typically performs a pre-award accounting system audit (SF-1408), although they often perform post-award audits as well. Common findings for these audits include:

  • Inadequate or incomplete policies and procedures
  • Actual procedures are not consistent with written policies and procedures
  • Lack of consistent evidence of approvals
  • Lack of proper supporting documentation
  • Improper treatment of unallowable costs or directly associated costs
  • Improper rate composition
  • Inadequate maintenance of contract briefs
  • Improper adherence to billing terms
  • Lack of consistent timesheet controls
  • Time overrides are not approved or are done through journal entries

The adage “preparation is half the battle,” doesn’t apply to DCAA Audits because, when it comes to government contracting, preparation is nearly all of the battle. By configuring your accounting system and business processes for compliance, your DCAA audits can be a breeze. Better yet, as a result, you’ll have stronger processes and a more efficient company across the board.

At WiJit, we help government contractors prepare for audits, upgrade accounting systems, and build better businesses. Please contact us today to see how we can help you grow your GovCon.