DCAA Accounting Compliance Readiness Assessment
This free DCAA compliance readiness assessment scores your accounting system against the SF 1408 preaward survey criteria and the areas DCAA auditors examine most closely, and is built for controllers, CFOs, and contract managers at defense contractors and aerospace suppliers. Answer eleven questions covering timekeeping, cost segregation, job cost accumulation, unallowable cost screening, indirect rate structure, billing rates, labor reconciliation, incurred cost readiness, funding limits, written policies, and material charging. You will get a readiness band with specific remediation priorities ranked by audit exposure rather than by effort.
1. Does your timekeeping system capture daily hours by employee across every direct and indirect charge code?
Total time accounting is the foundation of DCAA compliance. Recording only direct hours is one of the fastest ways to fail a system review.
2. Are direct and indirect costs segregated in the general ledger chart of accounts?
SF 1408 requires the accounting system to demonstrate segregation on its face, not through spreadsheet reclassification.
3. Does your system accumulate costs by contract, task order, and CLIN?
4. How do you identify and exclude FAR 31.205 unallowable costs?
Expressly unallowable costs claimed in a proposal or invoice can trigger penalties under FAR 42.709, not just disallowance.
5. Is your indirect rate structure formally defined with documented pools and allocation bases?
Most small contractors use fringe, overhead, and G&A. The structure must be consistently applied and disclosed.
6. Do you submit and monitor provisional billing rates against actual indirect rates?
7. Can you reconcile labor from timekeeping to job cost to the general ledger to payroll?
The labor reconciliation is one of the first things a DCAA auditor requests. Breaks in the chain are treated as a system deficiency.
8. How ready are you to file an Incurred Cost Submission within six months of fiscal year end?
9. Do you monitor funding limits and notify the contracting officer under the Limitation of Cost and Funds clauses?
FAR 52.232-20 and 52.232-22 require written notice at defined thresholds. Missing the notice can make costs unrecoverable.
10. Are written accounting policies, procedures, and audit trail retention documented and current?
11. Are material and subcontract costs charged directly to jobs at the point of transaction?
What DCAA actually evaluates
The Standard Form 1408 preaward survey asks whether your accounting system is adequate for accumulating costs under a government contract. In practice, auditors concentrate on a small number of controls. Can you show total time accounting where every hour an employee works is charged somewhere? Does the general ledger segregate direct from indirect costs without spreadsheet intervention? Do costs accumulate by contract and CLIN as transactions occur rather than through after-the-fact allocation? Are expressly unallowable costs identified before they reach a proposal or invoice? An accounting system can be well run by commercial standards and still fail on these points, because the requirement is about demonstrable structure, not about accuracy alone.
How this assessment is scored
Each of the eleven questions carries four options scored zero through three, where zero reflects no control at all and three reflects a mature control that is documented, operating, and supported by retained evidence. Your total is converted to a percentage of the maximum possible score and mapped to one of three readiness bands. The questions are weighted equally on purpose. DCAA does not grade on a curve, and a single structural gap such as missing total time accounting or an unsegregated chart of accounts can sink an otherwise strong system regardless of how well the rest performs. Read your band for direction and your individual zeros and ones for the actual work list.
- Below 40% indicates material deficiencies that would fail a preaward survey and put cost-type awards at risk.
- 40% to 69% typically passes with conditions but generates findings during an incurred cost audit.
- 70% and above reflects an audit-ready system where the remaining work is evidence and monitoring.
- Any single question scored zero deserves attention regardless of your overall band.
Interpreting your result and sequencing the work
Do not remediate in question order. Fix timekeeping first, because it is the most scrutinized control, the most visible to auditors, and the least expensive to correct. Chart of accounts restructuring comes second, since cost segregation is the foundation every other control rests on. Indirect rate structure follows, because pools and bases determine both your billing rates and your incurred cost submission. Labor reconciliation and unallowable screening can run in parallel once the structure exists. Written policies come last in effort but must exist before an audit, since auditors test practice against documentation and score the gap between them.
How Netray builds DCAA-ready ERP systems
Netray configures Infor SyteLine, Infor LN, and M3 so DCAA-relevant controls live in the system rather than in spreadsheets: segregated account structures, project and CLIN cost accumulation, unallowable coding enforced at point of entry, and automated labor reconciliation across timekeeping, job cost, the general ledger, and payroll. We build indirect pool calculations that reconcile monthly and produce incurred cost submission schedules directly from system data instead of from a year-end assembly exercise. Because we deploy AI and reporting infrastructure on-premise, CUI and ITAR-controlled contract data never leaves your network, which keeps your CMMC posture intact while the accounting system improves. Most engagements move a contractor a full readiness band within two quarters.
Frequently Asked Questions
Does DCAA certify or approve accounting systems?
DCAA does not issue a certification. It performs audits and reviews, such as the SF 1408 preaward accounting system survey, and reports findings to the contracting officer, who makes the determination of adequacy. There is no such thing as DCAA-certified software either, despite frequent marketing claims. What matters is whether your configured system, policies, and actual practice together satisfy the criteria when examined, which is a question about implementation rather than about the product logo.
Do fixed-price contractors need a DCAA-compliant system?
Firm fixed price work without progress payments generally does not trigger an accounting system review. But the moment you pursue cost-reimbursable work, time and materials contracts, progress payments, or a contract above the certified cost or pricing data threshold, the requirement applies. Most defense suppliers eventually cross one of those lines, and building the structure while you are small is dramatically cheaper than retrofitting it under the pressure of a pending award.
How long does it take to become audit ready?
For a manufacturer with a functioning ERP, expect six to twelve months if you start from the developing band and nine to eighteen months from a low score. Timekeeping can be fixed in weeks. Chart of accounts restructuring and indirect pool design take a quarter or more because they touch reporting, billing, and history. The long pole is usually evidence: auditors want to see controls operating consistently over time, which no amount of configuration can accelerate.
Get a personalized DCAA readiness report and a sequenced remediation roadmap from Netray's government contract systems specialists.
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