The Defense Contract Audit Agency (DCAA) wants to re-connect with you. About four years ago, DCAA was looking around and evaluating its workload and saw a problem: it was going away. With a previously perennial favorite of the incurred cost backlog finally going away and few incurred cost audits due to sampling, DCAA had to look for how it can still be important to the acquisition community.
Well, it looked back to reconnecting with contractors that were, in a way, forgotten. So, in comes the Contractor Information Survey (CIS). DCAA’s Memorandum for Regional Directors back in September 2020 identified the CIS as a “tool” for getting information about contractors to assist in identifying potential areas where future audits may be warranted. Additionally, it assists DCAA in understanding the contractor’s organization, business structure and internal controls. DCAA’s primary focus is smaller contractors where there has been little or no audit effort for 3 to 5 years. In other words, DCAA lost contact with those smaller contractors.
DCAA did not want this CIS to be a perfunctory checklist filled or completed by the contractors and merely submitted back to the DCAA auditor to file away never to be seen again. The CIS instructions urge DCAA auditors to do an in-person meeting and the DCAA auditor to complete the CIS from information gained from the contractor. The CIS has three parts:
- Part A – Organizational background, size, and complexity of business. This asks a range of questions such as points-of-contact, email and phone numbers, products and services rendered, sales breakdown, to whether the contractor has a Cost Accounting Standards disclosure statement. These are pages of detailed questions for discussion but are rather benign background questions.
- Part B – Design of contractor’s accounting system and basic internal controls. These are more detailed questions about the contractor’s accounting system, billing, indirect rates, labor accounting system, purchases, and employee compensation. These are questions where perhaps, depending upon the contractor’s complexity, the contractor employees knowledgeable in these areas may need to be present for the DCAA discussion.
- Part C – Identification of potential future audits. This is the auditor’s conclusion on future audits.
As you can see above, Part C is where the rubber meets the road.
What is DCAA Looking to Audit in the Future?
If your contracts have the FAR 52.215-2, Audit and Records - Negotiation clause, it allows the Government access to your books and records supporting contract costs and performance. In other words, you cannot stop DCAA from planning what it thinks are their future audits. However, you can try to ensure DCAA has a good understanding of your company. There is nothing worse than DCAA starting its audit only to find out after it began that the audit is not applicable. Yes, that has happened.
What Can You, as a Contractor, Do?
Well, be prepared and get a copy of the CIS to see what questions will be asked. If DCAA inquires about a CIS, prepare your team, ask DCAA what questions they will ask so you can be prepared and have access to personnel you need, have information regarding your contracts/subcontracts readily available and associated background company information. At the end of the discussion, ask DCAA what future audits they are contemplating. You want to ensure their understanding, as well as yours, as to what the future holds. This DCAA “reconnection” though the CIS should result in a common understanding of both parties, contractor and DCAA, in what are applicable future audits.
What Can Redstone Do for You?
At Redstone GCI, we offer comprehensive support to meet your needs. We assist in preparing or reviewing your CIS survey, ensuring you are well-prepared for the CIS discussion. Additionally, we provide staff training on government contracting and can review your accounting system for Government contract compliance.
David (Dave) Fix is a Director with Redstone Government Consulting, Inc. He provides Government Contract Consulting services to our Government contractors primarily related to compliance with Federal Acquisition Regulations and Cost Accounting Standards, equitable adjustment claims, and business systems. Prior to joining Redstone Government Consulting, Dave served in a number of capacities with DCAA for over 35 years. Upon his retirement, Dave was a Regional Audit Manager with DCAA. Dave began his DCAA career in 1986 as an auditor-trainee with the General Electric Suboffice in Pittsfield, Massachusetts. He progressed from auditor to DCAA management ranks serving in DCAA offices in Upstate New York, Columbus, Ohio and Greensboro, North Carolina in audits of major and non-major contractors. Dave served DCAA in three overseas tours, all as Branch Manager, in Kuwait/Iraq (2007), Afghanistan (2010-2012) and Kuwait (2014). Dave was promoted to Regional Special Programs Manager (RSPM) in 2015 before ultimately becoming a Regional Audit Manager (RAM) in October 2019. While a RSPM, Dave worked with DCAA’s other three RSPMs with updating the Agency-wide audit planning process including assigning priorities and determining funded/unfunded audits that is currently being used by DCAA. While a RAM, Dave had overall management responsibility for audits performed by approximately 140 employees including one of DCAA’s largest shipyards. During his career, he served as guest instructor at DCAA’s Defense Contract Audit Institute (DCAI) bringing field perspective to “Advance Auditing Issues” and “Supervisors’ Course” as well as served as a DCAI adjunct instructor over DCAA auditors’ initial two-week training course prior to his retirement. Dave served 36 years in the Air Force Reserve/Air National Guard in both enlisted and officer positions retiring at the rank of Lieutenant Colonel. His last duty station was Air Force Reserve Command (AFRC) Headquarters, Robins Air Force Base, Inspector General Office serving as the Chief, Contracting Inspections leading inspections of AFRC’s 10 contracting offices as well as assisting in inspections of AFRC finance offices. Dave currently specializes in preparing clients for more complex DCAA audits, providing advice on FAR cost principles and contracts regulatory provisions and in assisting clients in anticipating and addressing audit.