The Defense Contract Audit Agency (DCAA), the agency that performs audits on jobs handled by contractors and subcontractors that work for the government, is expected to implement some changes in the upcoming fiscal year.

DCAA audits are aimed at preventing fraud and checking whether the contractors are capable of completing their government contracts by answering such questions as:

  • Do they have the financial resources?
  • Is the staff properly qualified or skilled?
  • Do they have a clean work background?
  • Do they follow the working codes of the state?

To carry out audits, the DCAA is staffed with about 4,000 auditors from 300 field audit offices and sub-offices throughout the United States and overseas.

Changes on the Horizon

According to Law360, anticipated DCAA changes will affect the statute of limitations of audits, pushing for audits to be more accurate, and establishing measures to have audits completed in a more timely fashion.

The Statute of Limitations

The DCAA will be pushing for audits to be completed in less time. The agency continues to push for access to internal audit reports and contractor employees. Contractors have to be more careful because this will now be a term in the contract agreement while bidding, and they’ll be bound to follow it and give access to DCAA auditors. If the contractors agree to the terms, the employees will need to be prepared for interviews by DCAA auditors.

The DCAA doesn’t have any internal access yet, but are pressuring contractors to gain it. The legislation for this authority has not yet been approved, but the DCAA is not backing down. They are still pushing for their requests to be accepted before FY2016 and are already taking the measures needed to do so.

Accurate and Faster Audits

With access to internal reports, the DCAA will be able to complete auditing tasks faster and with more accuracy. Government contract accountants will presumably be interviewed which will give the DCAA auditors more insight into the financial planning or projects. These new trends will give the contractors a difficult time managing their financial reports and won’t save them any time to think about fraud. This surprising turn is expected to bring a lot of change in the auditing system and make it faster than ever.

Risk Factors for Contractors

Government contractors will now be facing more risk. Before sending out proposals for contracts, they have to do a check and balance of both their financial strengths as well as employee capabilities in preparation for the possibility of DCAA gaining access to internal audit reports and employees. If DCAA does gain access, not only will the contractors’ financial reports be audited but, CPAs, accountants, and company auditors may be included in the process. Anyone can be subject to an interview.

With the commitment that DCAA is showing to faster, more in-depth audits, it is highly plausible that legislation will provide them access to internal audit reports and contractors’ employees. In order to prepare for these likely changes, government contractors should prepare for them now. If you would like to discuss how your company should remain compliant with upcoming DCAA changes, contact Cheryl Jefferson & Associates.