No More DCAA Performing ICS Audits?

January 15, 2018

No more Defense Contract Audit Agency (“DCAA”) auditors auditing your company’s incurred cost submission? It could happen! As a result of the 2018 National Defense Authorization Act (“NDAA”) signed by President Trump on December 12, 2017, it is a real possibility for an independent accounting firm to audit your incurred cost submission instead of auditors from the DCAA.

Under the NDAA, which outlines defense spending priorities for the new fiscal year and established federal funding levels, there is a provision for the Department of Defense (“DoD”) to start using private auditors to perform some incurred cost audits. The idea is to help DCAA catch up on its current backlog of incurred cost audits and to redeploy DCAA auditors to focus on more complex audits or audits that create a higher yield, such as forward pricing rate audits.

Per the NDAA, the use of private auditors shall be used to eliminate by October 1, 2020, any backlog of incurred cost audits by DCAA. As this directive is rolled out, DoD is to submit a plan to Congress by October 1, 2018, and award contracts to two or more qualified private auditors to perform the audits by April 1, 2019. All audits performed by private auditors are to be performed by Generally Accepted Government Auditing Standards and work papers would be considered the property of DoD. Stand by as more information is sure to come forward as DoD approaches the October 1, 2018, deadline.

Another interesting provision in the NDAA is one that requires DCAA to complete an incurred cost audit within one year of receipt of an adequate submission. If the audit is not completed within the one-year period, the proposed final rates will be accepted as the actual rates.

Cherry Bekaert is hosting a free webinar, “DCAA Hot Buttons,” on Thursday, January 17, which will cover many topics related to the 2018 NDAA. Registration for the event is open on our website until Wednesday. If you’re unable to attend, you can still participate on demand at the conclusion of the event. Please include/keep the hyperlink to the Hot Buttons webinar registration, as provided in this blog post.