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Inadequate Documentation: A Sure-fire Way to Fail a DCAA Audit

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By: Karen Farlow, CPA and Nancy Jones with Hall Albright Garrison and Associates

Inadequate documentation will prompt a failed DCAA audit in a heartbeat.  Your documentation must be complete, organized and easily accessible in the event of an audit.  The faster you produce the requested documentation, the happier the auditor will be, and the faster they’ll be out of your offices.  Below are lists of some of the various documentation needed by Government Contractors and what that documentation should entail.  The list is not exhaustive but should give you an idea of what to keep on hand.

Timesheets

  • Are your timesheets readily available for the auditors (either physically or electronically)?
  • Are they signed by the employee as well as the manager/supervisor?
  • Do you have a timesheet policy?  Are your timesheets in accordance with your timekeeping policy?
  • Do they match what’s in your accounting system and what you’ve billed?

Billing

  • Do your timesheets back up what you’ve billed?
  • Do you have documentation for everything on your bill (e.g. travel expense reports, invoices from consultants, invoices for materials and/or ODC’s)?
  • Do you have a billing policy?  Are you following your billing policy?

Travel

  • Do you have receipts to back up the expenses listed on your expense reports?
  • If charging over per diem, do you have explanations as to why the amount is over per diem?
  • Have you separated and correctly charged anything unallowable (e.g. 1st class travel)?
  • Do you have a Travel Policy?  Are your travel expense reports following your travel policy?
  • Is the contract charged on the travel expense report the same contract charged for the majority of the labor during the travel period?
  • If needed, do you have authorization from your government customer for the travel?
  • Have you listed the attendees on any Business Meeting Meals?
  • Have you separated any alcohol as unallowable?
  • If you’re traveling for a conference, have you attached a conference agenda?

Work Authorizations

  • Do your employees have a current document from management authorizing them to work certain contracts?
  • Does the document describe the work they are to perform?
  • Do you have a Work Authorization policy? Or is it part of another policy? Are you following your policy?

Subcontractors/Consultants

  • Do you have Subcontractor/Consultant policy?  Are you following your policy?
  • Are your consulting agreements up to date?
  • Are your subcontractors/consultants abiding by the agreement?
  • Do you have proper closeout documentation?

You may notice that all these categories ask if you have a policy in place.  It is much worse to have a policy and not follow it, than to have no policy at all!

As stated earlier, this is not an exhaustive listing. Rather, it is just one to get you thinking in the right direction regarding documentation that needs to be maintained by a government contractor.

Read the full article by Hall Bright Garrison and Associates HERE.

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