By failing to prepare, you are preparing to fail. The adage rings as true now as ever, especially for government contractors preparing for an audit.
DCAA compliance can make or break a Government Contractor’s success, which makes failing to prepare for your upcoming audit akin to walking into a job interview without a resume or any knowledge of the company. You’ll want to arm yourself with common audit findings, best practices for making your audit easier, and you’ll need to address whether or not you’re ready for a DCAA audit.
Keep an Eye on Your Current Systems
Your accounting and business systems must be compliant, no matter what. If you use an accounting system designed for Government Contractors, if your policies and procedures are documented and followed, you may already be on the right track to passing your next audit.
Regardless of which system you use, it must serve your needs now and be ready to help your company grow. So as you prepare for your audit, we recommend you also consider how your systems will grow with your changing needs in the coming five years or longer. Consider asking yourself things like:
- Will our company go from sub to prime?
- What will the business systems requirements likely be for large bids or schedules coming up for recompete?
- Are our business system audits out of date or stale for any upcoming RFP needs?
- Are there any potential contracts subject to Cost Accounting Standards (CAS) on the horizon?
Is there any Mergers & Acquisitions (M&A) activity on the horizon?
Think carefully before answering, and if any of these answers are yes, you may have some additional work to do to prepare for your audit.
Moreover, you’ll also want to consider whether you can rely on your accounting or estimating system if you are thinking of bidding on flexibly priced contracts. If you’re not sure either system is designed to handle various types of contracts, then we recommend working with a consultant to help you identify your needs moving forward. That may mean large-scale changes like implementing a new project-based accounting system, or it may merely require some fine-tuning of your systems and processes.
Ready, Set, Audit?
If you’re confident that your accounting and business systems are built to last, or at least sufficient to support your business through your 5-year plan, then it’s time for the next steps of audit preparation.
Perform Mock Audits
By performing mock audits, you can ensure that your company meets the standards required by the DCAA to achieve a passing grade. At a minimum, you’ll want to do a mock Contractor Purchasing System Review (CPSR). These typically have a high fail rate, so you’ll want to ensure your purchasing system complies.
Perform Internal Audits
In addition to setting a rigorous standard internally, we recommend that you bring in a neutral third party to perform audits of your accounting system to ensure that your documentation and reporting passes muster so that you are confident going into your next DCAA pre-award audit.
Review Business Systems, Policies, and Procedures
While the DCAA is primarily concerned with accounting, purchasing, and estimating systems, your business process documentation is another critical factor in whether your company passes or fails. We recommend all of our clients perform an extensive internal audit of processes, policies, and procedures at least once a year to ensure that practices match documentation.
Review Termination Claims
You must have consultants, lawyers, or an accounting firm to help prepare your termination claims. If the claim is done incorrectly, it can cause a significant delay. Where normal claims take 12-18 months, those needing adjustments take 4-6 years!
Review Your RFP
Passing your pre-award audit means paying attention to the RFP. We recommend taking a look early on to see what types of business systems requirements the RFP calls for so that you can put them into place well before your audit.
The Bottom Line
Ultimately, ensuring that you are audit ready boils down to three things: knowing what to expect, following best practices for making your audit easier, and preparing for your audit. Grab our free downloadable checklist here so that you can check off the boxes and prepare to make your next audit a breeze.
We help government contractors like you get ready for—and pass—DCAA audits every day. To learn more about how we can help you, reach out to us today.