The Defense Contract Audit Agency (DCAA) performs audits of prime contractor, subcontractor, and grantee (contractor) organizations. A DCAA audit does not negotiate or administer any contracts, but advises Contracting Officers who do. The financial and operational nature of a DCAA audit considers internal controls – in addition to compliance with the Federal Acquisition Regulations (FAR), applicable (DoD, NASA, etc.) supplements, plus other contract terms and conditions (Acts and other regulations). Because DCAA is an independent agency, audits benefit more than armed services contracts, but may include those of all DoD components, NASA, Foreign Military Service (contracts administered by the U.S. Government), and other federal government agencies.
Some audit topics include:
- Pre-award and Post-award Accounting System, to evaluate whether the contractor can determine compliant costs;
- Estimating System, to evaluate whether the contractor consistently develops cost estimates that are compliant;
- Cost Volumes/Proposals, to analyze the build-up of components for each cost element, then report exceptions as questioned (amount concluded to be over- or under-estimated) and unsupported (amount with insufficient supporting documentation to draw a conclusion);
- Initial and Revised Disclosure Statement, to contrast descriptions in the written Statement against applicable regulations and against actual practices (based on source documents, observations, and other evidence).
A DCAA audit might focus on a cost proposal for a terminated contract, the Earned Value Management System, interface between material management and accounting, and other topics. Information about many types of DCAA audits with their specific steps and objectives can be found on their web site at: www.dcaa.mil/audit_program_directory.html. Checklists to prepare for DCAA Audits can be found at: www.dcaa.mil/checklist_and_tools.html.