ERP and the Defense Contracting Audit Agency

Defense manufacturing is a highly specialized business sector. The regulations regarding procurement, cost expenditure and contracts are exacting. The Defense Contract Audit Agency (DCAA) is responsible for auditing service and rendering financial advisory guidance regarding these contracts. It acts as a watchdog for the taxpayer.

Companies dealing in defense manufacturing must be able to withstand the scrutiny of a DCAA audit. Enterprise Resource Planning (ERP) software that can support a DCAA audit is essential.        

Things To Look For:

For seasoned companies doing business in defense manufacturing, ensure your ERP software can help you show DCAA compliancy - this will help keep you operating within defense contracting financial regulations and federal law.

Companies that plan on entering the defense manufacturing arena should do their research and find ERP firms that can support the requirements and a client list filled with defense sector manufacturers. The nuances involved in defense contracting demand specific knowledge and expertise from your ERP software and the supplier. 

DCAA Standards, Regulations and Audit Manual:   

Cost Accounting Standards (CAS) – Encompasses federal laws that some contractors and subcontractors are subject to when executing contracts.

Financial Accounting Standards (FAS) – Covers ways to deal with different types of costs in defense contracting (pension, lease, etc.).

Federal Acquisition Regulation (FAR) – Policies and procedures regarding the procurement processes that must be adhered to.

Contract Audit Manual (CAM) – Provides detailed guidance for the DCAA audit process.  

Ways to ensure your DCAA compliance:

1. Incorporate sound ERP software, with strong vendor support, that supports DCAA requirements.

2. Documented policies and procedures.

3. Permissive authority structured payroll system that tracks hourly wages.

4. Detailed cost accounting (direct, indirect, human resource costs, billing, etc.).

Defense contracting is a rewarding field that requires due diligence.  Leading defense manufacturers stay current with industry standards and use top tier ERP software firms to help keep them compliant. Visibility professionals will be more than happy to answer any questions or concerns.   

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Topics: Manufacturing, ERP

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