How Government Contractors Can Prepare for DCAA's New Focus on Business Systems
The GAO reported that of the business systems assessments they reviewed, it took between 15 months to five years, with 50 percent taking longer than four years to go from initial finding to system approval. This history, coupled with the business system backlog, makes the prospect of having an initial assessment of business system deficiencies that stick around for quite some time a very real possibility. A contractor may have fixed instances of deficiencies relatively quickly but have a difficult time getting DCAA to return and review the corrective action. In other instances, a corrective action may need to run its course through the system for several months before a substantive sample can be generated for testing. Bottom line: having a system with deficiencies is potentially worse than having an unassessed system, and it can be a detrimental purgatory of an existence until deficiencies are remediated and retested.
Self-awareness is sound business practice: there is no reason to tempt fate when contractors can be proactive and perform business system readiness assessments to learn of any potential deficiencies before the government does. All business systems require care and feeding year over year to be compliant. Compliancy includes updating policies and procedures to current practices, required training, and self-assessment. In response to diminished oversight, many contractors have been lax in these annual duties around business systems. This is the time to re-engage in these responsibilities. In addition, DCAA also released new accounting and estimating system audit work programs with which many contractors are not yet familiar. A readiness assessment measures compliance with annual requirements as well as any new work program steps and guidance. Readiness assessments also allow for the time necessary to adopt corrective action plans and flow transactions and artifacts through the system before the government makes its sample selections.
Proactive compliance is generally less expensive than reactive compliance. CohnReznick sees a significantly higher first-time pass rate of contractors who perform readiness assessments versus those who do not. This is based on the experience of our clients as well as the business system audits we perform on behalf of civilian agencies. When auditing business systems under CohnReznick’s civilian agency contracts, one of the questions the firm asks in entrance conferences is whether a readiness assessment has been performed to gauge contractor sophistication and assess risk.
Take a proactive and savvy approach to this shift. Assess which business systems may be imminently subject to audit with our Business System Applicability Tool and start planning with these readiness assessments.
This has been prepared for informational purposes, is general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without first obtaining professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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