Having a Defense Contract Audit Agency (DCAA) compliant financial system can be a crucial prerequisite to winning certain defense contracts. In many cases you cannot even respond to a proposal if your system is not compliant. The DCAA performs all necessary contract audits for the Department of Defense, and provides accounting and financial advisory services regarding contracts and subcontracts. Through auditing contractors, the DCAA works to ensure that government contracting officers have the information they need to establish fair and reasonable contract prices and to ensure that contractor accounting systems comply with applicable rules, regulations and contracting terms. In the government contracting world, the ability to calculate indirect rates is now a basic requirement. Most contract vehicles require a DCAA compliant system for all awardees and most government issued Task orders require the ability to calculate indirect rates. In order to be competitive in providing services to DoD customers, a company needs a DCAA compliant system.
As we grew and were able to compete for larger contracts and ID/IQs (Indefinite Delivery, Indefinite Quantity contract vehicles), Segue saw an increasing need to be DCAA compliant. Since Government Contracts account for 70% of our revenue, our top priority was finding a solution that would enable us to pass an audit, with the ability to calculate indirect rates, segregate costs, and align our accounting practices with DCAA standards. After a very detailed requirements process and many demos and discussions with various vendors, we ultimately chose Deltek GCS (the most highly regarded DCAA compliant system in the industry). We began our search for a new accounting system in 2010 and implemented our new system on January 1st of 2011, so it is a process that takes time and should be done well in advance of having to face a DCAA audit.
As luck would have it, 10 days after implementing our new accounting system we received a request from DCAA for a Pre-Award Accounting System Survey for a major ID/IQ proposal, NETCENTS-2. Most organizations would have been nervous — the word “audit” alone is enough to make people uncomfortable, but at Segue, we were prepared. We had already established generally accepted accounting practices, performed monthly reconciliations, tracked all of our costs to a final cost objective, and had our new system in place that was set up to meet all of DCAA’s requirements. All of these factors lead to us not just passing, but receiving the highest rating possible. This is all thanks to purchasing the right system and the extreme thoughtfulness we used during implementation process. We put a lot of consideration and energy into every decision we made, as we knew that what we did during implementation would set the standard for years to come and impact our ability to be DCAA compliant with such items as:
- Calculating indirect rates every month in conjunction with our monthly closing process
- Development of indirect rates each year based on our annual budget
- The ability to receive and bill for Cost Contracts at any time
We are frequently asked by customers and teaming partners if our system is DCAA compliant, and are proud to say that it is. We are also often asked by DoD customers during the bidding process if our system has been audited; we love checking that “yes” box as well. Now that our system is in place and supports DCAA approved accounting practices, instead of being nervous about another potential audit from DCAA, we look forward to the next one! Our system is extremely organized, consistent, documented and meets all of the DCAA requirements.