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DCAA Indirect Costs Preparation By The Experts

The Defense Contract Audit Agency or the DCAA is a monitoring body that performs a strict audit before awarding contracts to any civil body. They do not conduct the audits by themselves but are asked to do so, on behalf of different military and even some civil wings. The strict audit is done to ensure that the taxpayer’s money are well spent. Thus, there are several clauses and sub-clauses to abide by to pass the audit and secure the government contract. For this, you have to prepare an account that is DCAA compliant.

Separating the indirect costs

The prime task is to determine if your company accounts are adequate in accordance with the DCAA stipulations especially concerning the DCAA indirect costs accounts. The indirect costs are rates that can be quantified in any contract. The direct cost comprises of expenditures like the cost of materials, worker wages for the project in question, expenditures for the sub-contractors and the like. The indirect costs on the other hand are specified by the FAR and have to be explained properly.

Categorizing the costs

All recognized DCAA indirect costs can be more or less categorized in three groups the benefits of employees, the total overhead costs, and the general administrative costs. Employee benefits like those of the health, pension plans, paid leave allowances have to be clearly maintained in records so that there is no discrepancy when the audit comes. This is usually done by way of good time-keeping that can be either manual or electronic. Such records must have a consistency for at least a period of time and not made overnight for the audit.

Covering the areas of operations

Concerning the overhead costs, the records have to be in existence at the time when money was actually spent for the purpose. They may also include sections like research and development, shared facility costs and those of the electricity and the heating systems too. Costs that are associated with the management of the business like the office space, the salaries of the workers and the management engaged in one or even multiple projects and the like.

Proper projection of the accounts

The way you maintain your accounts of the indirect costs will largely depend on the type of business that you are engaged in and also the size of your business. You will have to submit all such accounts within six months of the end of the fiscal year. It is not in the capacity of regularly qualified accountants to prepare the needful as the specifications are largely different in certain areas. The best way to avoid being penalized is to take the help of the professional accountants that not only have experience in preparing these accounts but have once served for the DCAA.


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