When you are in the running to win a government contract the DCAA will perform a preaward survey of your business to determine if it is capable of perform all the duties that the contract entails.
Their main focus will be on two categories. First, they will want to ensure that if your company is awarded the contract that it has the financial means to complete all the tasks that are required. Second, they want to check if your accounting system is good enough to keep track of all the costs properly that are required by the contract.
Preaward Financial Survey
To determine if your company is financially viable to complete the contract the DCAA will want to look at certain documents to include cash flow forecasts, the company’s financial history, financial reports given to stockholders and banks, SEC fillings, any loan agreements with statements showing your good standing, and employee federal payroll tax returns. After fully reviewing this information the auditor will make their recommendation of whether they feel that your company is financially stable enough to fulfill the contract. If your company is considered not to be financially viable, you will be notified immediately and you will told of where you need to correct the deficiencies that the auditor found.
Preaward Accounting Survey
A DCAA preaward accounting survey will consist of the auditor determining if your company’s accounting system for accumulating costs complies with what the government requires when awarding a contract. The preaward survey is not as in depth as an actual audit, it will be limited to the auditor getting a working knowledge of your accounting system to see if it is acceptable under the governments standards for cost accumulation.
If your accounting system is deemed unacceptable for use the auditor will notify your company and the DCAA along with recommending solutions so that your accounting system will become acceptable. It is up to you to make the necessary adjustments to your accounting system to make it acceptable. Once you have followed through on the auditor’s recommendations you will need to contact the DCAA so they can perform a follow up audit.
It is up to you to be prepared for the DCAA. You know when you are going to be bidding on government contracts, so why not get everything you need in order before you bid on any contracts? This will save you time and money in the long run and make any preaward surveys go much smoother than if you are trying to get your company in compliance at the same time as being surveyed. That will only reflect badly on your company and perhaps decrease your chances of winning a government contract in the future if your company becomes known to DCAA auditors as one that does not have it together. Become familiar with the process and you will find that it is not as daunting a process as it appears.
Pre-Award Audit of Financial Accounting System
Contracting officers request a Preaward Audit in order to understand the accounting system which is being used by a government contractor. Many government contractors are stupefied to find out that their accounting system isn’t adequate, even if the books are being meticulously kept.
For the DCAA, it isn’t enough just to keep good records though. The DCAA wants to make sure that government contractors are keeping accurate records in a reliable manner. The DCAA Preaward Survey will be looking at the government contractor’s accounting in four areas:
• Proper tracking and segregation of costs
• Billing and timekeeping systems
• Internal controls
• Accounting performed in accordance with GAAP
The SF 1408 evaluation checklist gives a detailed list of what DCAA auditors are looking for in an accounting system. However, this is not the only system used to determine whether a contractor’s accounting system is adequate. The DCAA auditor must determine whether the accounting system will be able to give reasonable information in terms of cost projection for the completion of the project.
Potential government contractors should be aware that their present accounting system is taken into use. However, it is acceptable to DCAA to plan for the use of a different accounting system if the contract is awarded. This is because DCAA realizes that the contractors’ current projects might not require such a detailed accounting system as a government project.
In this case, the contractor must be able to show in the Preaward Audit that the accounting plan is operable. That means that it can quickly be put into use and that the employees are capable of using it. Unless you are hiring outside help for the DCAA Preaward Audit, it is recommended that you simplify the requirements by already having the accounting system planned for use during the DCAA contract in use.
If the accounting system used by the contractor is not DCAA satisfactory, DCAA will notify the contractor as well as the procurement official. While DCAA often will recommend how to correct any deficiencies with the accounting system, it is up to the contractor to fix the problems and come up with a new accounting system. A new Preaward Audit can be requested once these deficiencies have been corrected.
In some situations, a DCAA Preaward Audit is not done of the accounting system. However, an audit of the accounting system can still be performed even after the contract has been awarded. Also, even if you pass a DCAA Preaward Audit and are granted a government contract, always be prepared for additional auditing at any time. The DCAA auditor may decide to initiate another audit if he/she decides that additional auditing is necessary to make sure the contract is being fulfilled.
– DCAA News