DCAA Issues Guidance on New Contractor Business System Rules

Late last month, DCAA issued audit guidance to its staff on the new DFARS (DoD FAR Supplement) final rule regarding contractors' business systems that became effective on February 24, 2012. We've discussed these new rules quite often in this blog (scroll down and click on the label "business systems" to read past posts on this subject). Essentially, the new business system rules are to improve contractor business systems to ensure that such systems provide timely, reliable information for the management of DoD programs. The rules cover six business systems: accounting, estimating, purchasing, EVMS, MMAS (material management), and property management.

Of these six systems, DCAA is responsible for the performance of the accounting system, the estimating system, and the material management and accounting system (MMAS). DCAA is in the process of revising its standard audit programs align its audits with these new rules. DCAA will also assist in reviewing the purchasing system and the EVMS system when and if requested. However, the responsibility of these latter two systems are the purview of the contract administration office.

These new business system rules apply only to contractors that are also covered by CAS (Cost Accounting Standards). Small businesses are exempt from CAS so the applicability of these rules is significantly limited.

Any shortcomings in  a business system that materially affects the ability of DoD officials to rely upon information produced y the system will be reported to the contracting officer. The contracting officer makes the ultimate decision as to whether it will pursue an issue. Deficiencies not corrected could ultimately lead to payment withholds.