DCAA Audits are significant events but not necessarily a cause for concern. Some audits, such as the Pre-Award Audit, are positive indicators, because it indicates that the contractor is in contention for a contract.
There are three major types of DCAA audits you should prepare for:
- Pre-Award Audit: A sign that you're in contention for a cost-plus contract and DCAA needs to assess whether your accounting systems and internal controls are advanced enough to handle government requirements.
- Post-Award Audit: A comprehensive review of your management systems and cost-accounting practices to ensure you're handling contract billing correctly.
- Incurred Cost Submission Audit: Verifying that your provisional billing rates align with your actuals - this audit ties up contract risk and finalizes billing accuracy.
In addition to these, there’s also the dreaded yet increasingly routine, No-Notice, Real-Time Labor Evaluation Audit, which follows employees around to inspect timesheets on the spot.
In this post, we’ll walk through:
- Why each audit matters
- What DCAA focuses on during each audit
- How to prepare using WrkPlan’s ERP tools
By the end, you’ll know exactly how to equip your organization and your systems to breeze through any DCAA audit.
1. Pre-Award Audit
What It Is
A Pre-Award Audit signals that you're a finalist for a government cost‑plus contract. The Contracting Officer (“CO”) asks DCAA to evaluate whether you have an accounting system and have procedures in place to manage costs and generate the required information.
Why It Matters
- The CO needs to be confident of your ability to incur and track allowable costs.
- This audit can make or break your proposal, so it's critical to establish credibility early.
- Failure could cost you the contract, not just delay the award.
What DCAA Looks For
- Accounting system set-up: Does it capture direct costs, indirect costs, labor, and overhead correctly?
- Policies & procedures: Are cost allocation, billing, and FM policies documented and enforced?
- Job cost tracking: Can your system tie time and expenses to specific contracts?
- Reporting: Can you produce timely, accurate, GAAP-compliant, and FAR-required reports?
How WrkPlan Helps
- Structured project setup with contract-linked cost tracking.
- Automated labor and indirect cost allocation with real-time reports.
- Built-in timekeeping, billing, and audit-ready documentation.
- Internal pre-audit checklists to validate readiness before DCAA arrives.
Implementing WrkPlan before this audit gives your team visibility and control, which allows you to avoid red flags ahead of time.
2. Post-Award Audit
What It Is
Once a contract is underway, DCAA performs a Post-Award Audit to review your management system, accounting policies and practices, revenue recognition, timesheets and labor distribution, how expenses are assigned to your contract or indirect pool cost ledgers, and how those entries are associated with the general ledger.
Why It Matters
- This is a particularly important audit because it establishes the Actual Audited Rates that will be used for contract settlement.
- Deficiencies can lead to findings, disallowed costs, and damaged trust.
- Confirms your systems continue to support cost, time, and billing control.
What DCAA Looks For
- Accounting policies for cost capture, revenue recognition, and cost classification.
- Timesheet accuracy and labor distribution.
- Expense tracking: transparency in how indirect vs. direct costs are coded.
- General Ledger reconciliation to contract-specific cost ledgers.
- Internal controls: segregation of duties, approvals, and overrides.
This audit is far deeper than the pre‑award version. It not only audits your agreements but the daily operational heartbeat.
How WrkPlan Makes It Easier
- Centralized records showing all labor and expenses linked to contract line items.
- Alerts for unbilled direct labor or unallocated costs.
- Drill-down capability to show every dollar assigned to an indirect pool or a direct contract.
3. Incurred Cost Submission Audit
What It Is
For certain types of contracts, you’ll submit an annual Incurred Cost Submission. This audit reconciles billed provisional rates with actual costs to finalize allowable rates.
Why It Matters
- Incorrect incurred cost submissions can generate costly financial adjustments.
- Final Incurred Cost Submission approval settles your indirect rates.
- The outcome of the contract’s final incurred cost audit will determine whether you owe the government a refund or whether you may submit additional billing.
What DCAA Looks For
- Historical accuracy: Did your provisional rates reflect real, allowable costs?
- Documentation sufficiency: time records, purchase orders, payroll.
- Cost allocations: Did indirect pools allocate properly to applicable contracts?
- Auditable trail: full transparency across ledgers, invoices, hours, and expenses.
This audit can take months, especially if your bookkeeping and timesheets lack clarity.
How WrkPlan Works in Your Favor
- WrkPlan generates schedules A to O of the incurred cost submission - almost entirely entered in the normal course of business.
- Up‑to‑date indirect pools and cost ledgers - minimizes post‑submission scrambling.
4. No-Notice Labor Evaluation Audit
What It Is
This is the audit that everyone dreads: random, same-day labor evaluations. DCAA auditors show up unannounced and ask to see timesheets for employees doing contract-related work.
Why It Matters
- They want to verify that time is logged promptly and not end-of-week "back‑date shopping."
- Timing errors create "unallowable cost" exposure and even fraud allegations.
- This audit tests real-time procedural enforcement not just records but actual behavior.
What DCAA Looks For
- Individual timesheets that are completed through the previous day.
- Consistency in time logged vs. work in progress.
- Awareness and training: do employees know how and when to record time?
- Policy adherence: is there oversight to deter fraud or sloppy/changed entries?
How WrkPlan Helps You Pass
- Mobile/web time entry prevents delays—employees log time in real time.
- Dashboards show unsubmitted hours or workflow bottlenecks.
- Alerts and approval workflows flag missing or late entries.
- Changes or late entries can be strictly controlled.
With WrkPlan's real-time tracking, this once-intimidating audit becomes just another checkmark.
5. Other Less Common Audits
While pre-award, post-award, Incurred Cost Submission, and labor evaluations cover the bulk of DCAA activity, there are two other audit types worth mentioning:
- Forward-Pricing Rate Proposal (“FPRP”) Audit: for contractors estimating future cost rates.
- Employee Labor or Fringe Benefit Audits: deep dives into payroll, fringe, and compliance with benefits policies.
These are less frequent, but still serious. Programs like WrkPlan support these too through detailed labor, fringe, and cost pool tracking and reporting.
6. Best Practices to Stay Audit-Ready Year-Round
To help your organization remain audit-ready and minimize stress, follow these best practices:
- Document Everything
- Written policies for timekeeping, cost allocation, and billing.
- Require consistent supporting documentation, e.g. timesheets, receipts, vendor invoices.
- Use Centralized Systems
- Keep data in one easily auditable system like WrkPlan.
- Avoid manual spreadsheets or shadow systems that can lead to inconsistencies.
- Enforce Timely Data Entry
- Train staff on importance and tool functionality.
- Use approvals and alerts to catch delays or anomalies.
- Review Regularly
- Run internal mini‑audits quarterly or biannually.
- Reconcile contract costs, ledgers, and overhead allocations.
- Break down disallowed vs. approved cost types
- Don’t Wait for DCAA
- Conduct mock audits before your official DCAA review.
- Focus on weakest areas—timesheet compliance, cost codes, or labor allocations.
Conclusion
DCAA audits don’t have to feel like a threat, especially when your WrkPlan ERP system is equipped to support compliance, documentation, and clarity.
By using WrkPlan, you're investing in:
- Audit-ready infrastructure: built to meet DCAA’s requirement from day one.
- Real-time controls: so no timesheet goes unwritten, and no expense goes untracked.
- Automatic reporting: Incurred Cost Submission templates, labor inspections, cost allocations are all built in.
- Peace of mind: reducing stress, audit prep time, and risk of non-compliance findings.
Visit our website (www.wrkplan.com) to see how our platform guides government contractors through every type of DCAA audit from pre-award walkthroughs to real-time labor checks. We’ll help you build the compliance muscle before the auditors ever show up.
With WrkPlan in your corner, audits become just another element of your success story: well-prepared, data-driven, and confidently handled.
