As a direct result of meetings and conversations DCAA HQ has had with members of the joint SBTC/NDIA DCAA Committee, the DCAA recently issued a memo clarifying documentation requirements for consulting costs (read memo here). The memo, sent to DCAA Regional Directors, reminds auditors that according to FAR guidelines, businesses are not required to produce specific types of documents in order for consultant costs to be allowable. The insistence by auditors that businesses provide specific types of documents, such as invoices and contracts, in order for consultant costs to be allowed has been a major issue for small businesses undergoing DCAA audits. Previous audits have not had this requirement and many businesses did not anticipate needing to provide this information, so going back several years in some cases to track down the documentation created a huge paperwork burden, particularly for small businesses.
The memo is a big step forward for the DCAA in correcting the numerous problems small businesses have had with their auditing procedures in recent times, and shows that the DCAA is taking these problems seriously. This is a big achievement for the SBTC/NDIA joint DCAA Committee, and the committee members, particularly co-Chairs Russ Farmer and Mary Delahunty, should be congratulated for getting DCAA to take these issues seriously and taking steps to correct them. While not every problem has been solved, the signs so far are very positive that the DCAA Committee is getting through to DCAA HQ and serious changes are being made.
There are still problems with the DCAA to address, however, and the DCAA Committee will continue to work with DCAA HQ to correct any problems moving forward, and also properly instruct and train auditors working in the field. Recently the DCAA has invited a member of the DCAA committee who is a CPA to participate in a training session for field supervisors specifically focusing on small businesses and their unique audit issues. This session should go a long way towards getting DCAA auditors to understand the differences between auditing a small business and auditing a large prime contractor.