Navigating the labyrinth of compliance with the Defense Contract Audit Agency (DCAA) regulations is a daunting yet vital task for government contractors, especially in regions with a strong presence of defense contractors like Dracut, Massachusetts, and the broader MA area. Achieving compliance is not only a matter of following rules; it’s about understanding the intricacies of government contracting and leveraging specialized knowledge to thrive in a highly regulated environment.

The DCAA is tasked with ensuring that government contractors adhere to strict financial management and accounting standards. This involves rigorous audits to review and evaluate contractors’ financial records, pricing, labor charges, and compliance with Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).

Key Compliance Areas

1.Accounting System Requirements

DCAA compliance starts with an adequate accounting system. This system must be capable of segregating direct and indirect costs, tracking job costs, and ensuring timely and accurate billing. For businesses in Dracut, MA, adapting to these requirements can mean the difference between winning a government contract and being passed over.

2.Timekeeping and Labor Charging

Labor costs are often the most significant expenses on government contracts. A robust timekeeping system that accurately records and allocates employee labor hours to specific contracts or tasks is essential. DCAA will closely scrutinize this aspect to prevent mischarging or misallocation of labor hours.

3.Indirect Cost Allocation

Understanding and correctly applying indirect cost rates is crucial. Indirect costs must be allocated in a manner consistent with DCAA guidelines. This includes developing an appropriate indirect cost rate proposal and consistently applying it across contracts.

4.Policies and Procedures

Contractors must have well-documented policies and procedures in place. These should cover all aspects of financial management and be in line with GAAP, FAR, and CAS. Regular training and internal audits are key to ensuring these policies are understood and followed by all employees.

5.Audit Preparation and Response

Being audit-ready at all times is imperative. This means maintaining organized, up-to-date records, and being able to promptly provide any requested documentation during a DCAA audit.

The Role of a Specialized CPA

A CPA specializing in government contract accounting, particularly one familiar with the dynamics of regions like Dracut, MA, can be a contractor’s greatest asset. They bring a nuanced understanding of local and federal regulations and can provide invaluable guidance in setting up compliant accounting systems, preparing indirect cost rate proposals, and navigating DCAA audits.

Staying Current and Proactive

In the ever-evolving landscape of government contracting, staying informed about changes in regulations and DCAA audit trends is crucial. Contractors should proactively seek updates and adjust their practices accordingly.

Building a Culture of Compliance

Creating a culture of compliance within the organization goes a long way in ensuring DCAA compliance. This means instilling a mindset where adherence to regulations and ethical practices are not just mandated but are part of the organizational ethos.


For government contractors in Dracut, MA, and throughout Massachusetts, mastering DCAA compliance is a journey that requires diligence, expertise, and a proactive approach. Partnering with a specialized CPA and fostering a robust compliance culture are pivotal steps in this journey. Remember, in the world of government contracting, being compliant is not just about following rules; it’s about setting the foundation for sustainable growth and success in a highly competitive and regulated industry.