As you prepare for a DCAA accounting system review, be aware—the information you will need to provide may range well beyond costs and accounting practices. Your future as a federal contractor may hinge on the business ethics you promote and how you make them part of your operations.
Before we delve into ethics, a quick synopsis of our comprehensive look at DCAA accounting system reviews is in order:
The Defense Contract Audit Agency (DCAA) is responsible for reviewing GovCon accounting systems, policies, and procedures to ensure that Uncle Sam pays a reasonable price when procuring goods and services. The primary aim of these reviews is to ensure that contractors properly track costs throughout the acquisition process.
As daunting as a DCAA audit may seem, don’t forget that you can work it to your competitive advantage. When you meet the demanding accounting standards, you signal your firm’s readiness and competence to tackle the GovCon marketplace.
Ethics Policy is a Key Focus
The Federal Acquisition Regulation (FAR) Part 52.203-13 includes information on Contractor Code of Business Ethics and Conduct. Sections (A) and (B) apply to all businesses where Section (C) does not apply to small business contractors. In recent accounting system reviews, we have seen specific questions regarding ethics that do relate to small businesses. When you undergo an accounting system review, the DCAA sends out requests for information, including a Pre-Award Survey of Prospective Contractor Accounting System Checklist (stay tuned for guidance on this document in our next blog). You may receive other questionnaires such as an Accounting System Audit Information Request.
In a recent survey, one section highlights Defense Federal Acquisition Regulation Supplement (DFARS) criteria, including:
- “How has management created and maintained a culture of honesty and ethical behavior to comply with FARS 52.203-13 and/or 52.203-14, if applicable?”
- “How does management communicate code of ethics and conduct to employees?”
Since these questions cover more than your standard accounting system and policies, it’s worth thinking through your responses in advance. The DCAA seeks to examine all formal ethics policies and procedures that you have in place. Be prepared to present your policies in writing as well as in an interview. Questions to consider might include:
- How do you train staff related to ethics? Does your staff sign off that they received training?
- How do you periodically review ethics and conduct with your team?
- Do you exercise due diligence to prevent and detect improper conduct?
- Do you have a hotline or other means for staff to report questionable conduct?
- Do you have a written code of ethics and conduct in your employee manual?
- Do all employees sign a copy of your employee manual? Conveying your policies via the manual and providing employee signature pages is an excellent way to demonstrate one aspect of your communication practices related to ethics.
If you are uncertain how well your ethics policies and procedures will pass muster with the DCAA, CAVU can function as your outsourced accounting firm to guide you through this aspect of your audit. We have done so for hundreds of GovCons, as well as our own shop—we proactively provided our ethics policies, along with proof of individual employee signoffs to enable a smooth compliance review. The bottom line? Be prepared, of course. Have your documentation ready to show your ethics policies and procedures and how you communicate with your team. Call on CAVU when you need us to tap into our record of success with DCAA accounting system reviews.