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DCAA Compliance Quiz: Bookkeeping for Government Contractors


DCAA Compliance Quiz: Bookkeeping for Government Contractors


Business man pointing to transparent board with text Take Our QuizPop quiz: Your business recently landed a $50 million Department of Defense contract. You've let a couple of smaller jobs expire in anticipation of taking on the government work. You've invested in materials and lined up a series of subcontractors to help you meet the contract terms. Everything's humming along beautifully.

Then the Defense Contract Audit Agency (DCAA) pays a surprise visit and determines your accounting system isn't in compliance with their standards. What happens next?

A: The DCAA immediately terminates the contract.

B: The DCAA sets a reasonable deadline for bringing your system into compliance, and the work continues.

C: The DCAA suspends the contract until you come into compliance. You're solely liable for any lost revenue and for any money invested in materials and subcontractors to date, as well as the costs of reaching compliance.

D: None of the above.

The answer is C. While landing a government contract can go a long way toward helping your company grow, proceeding with the work before you've brought your accounting system into DCAA compliance can leave you in financial limbo. That's why it's so important for you to understand what you're getting into before you bid.

Truth or Consequences
How well do you understand DCAA compliance standards? Here are five "true or false" questions to help you find out.

  1. If your company is merely a subprime contractor that's supporting the prime government contractor on a given project, your accounting system doesn't need to meet DCAA compliance standards.
  1. DCAA compliance standards apply only to your government contracts; you're free to use your existing bookkeeping and accounting system for non-government contracts.
  1. QuickBooks cannot be integrated into a DCAA-compliant accounting system.
  1. All tangible assets that your company purchases under a government contract are considered government property.
  1. Companies must meet a minimum standard of annual revenue to be considered for a government contract.

Did You Pass the Test?
The answer to each question above is: False.

There is cause for hope as well as concern. Even a small company with a basic QuickBooks bookkeeping system can win a government contract and meet DCAA compliance standards — provided they have adequate back-office support to avoid the many possible pitfalls.

Read our case study to learn how a government contractor that creates modular shelters for the military finds specialized bookkeeping services for DCAA compliance with Supporting Strategies.
Jim Rice


Jim Rice

Legal and Tax Disclaimer

This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.