DCAA AUDIT RESPONSE

CONTRACTOR'S RESPONSE TO DCAA AUDIT FINDINGS

CONTRACTOR INFORMATION

Contractor Name: [________________________________]

Address: [________________________________]

City, State, ZIP: [________________________________]

DUNS/UEI Number: [________________________________]

CAGE Code: [________________________________]

Telephone: [________________________________]

Email: [________________________________]

Primary Point of Contact for DCAA:

Name: [________________________________]

Title: [________________________________]

Telephone: [________________________________]

Email: [________________________________]

AUDIT INFORMATION

DCAA Branch Office: [________________________________]

Auditor Name: [________________________________]

Audit Assignment Number: [________________________________]

Type of Audit:

☐ Incurred Cost Audit
☐ Forward Pricing Rate Proposal Audit
☐ CAS Compliance Audit
☐ Accounting System Audit
☐ Estimating System Audit
☐ Billing System Audit
☐ Compensation System Audit
☐ Labor Floor Check
☐ Purchasing System Audit
☐ Material Management and Accounting System (MMAS) Audit
☐ Earned Value Management System (EVMS) Audit
☐ Progress Payment Audit
☐ Defective Pricing Audit
☐ Termination Settlement Audit
☐ Other: [________________________________]

Fiscal Year(s) Covered: [________________________________]

Date of Audit Report: [__/__/____]

Date Response Due: [__/__/____]

I. EXECUTIVE SUMMARY

A. Audit Results Summary

B. Contractor's Overall Position

☐ Contractor agrees with all audit findings
☐ Contractor agrees with some findings and disputes others
☐ Contractor disputes all material audit findings

Summary Statement:
[________________________________]
[________________________________]
[________________________________]

II. RESPONSE TO SPECIFIC FINDINGS

Finding 1: [________________________________]

DCAA Finding:
[________________________________]
[________________________________]
[________________________________]

Amount at Issue: $[________________________________]

Contractor Response:

☐ AGREE - Contractor concurs with this finding

☐ DISAGREE - Contractor disputes this finding for the following reasons:

Legal/Regulatory Basis for Disagreement:

Applicable FAR/CAS/Other Authority:
[________________________________]
[________________________________]

Factual Basis for Disagreement:
[________________________________]
[________________________________]
[________________________________]

Supporting Documentation:
☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Contractor's Position on Amount:
Original Amount: $[________________________________]
Contractor's Position: $[________________________________]
Difference: $[________________________________]

Finding 2: [________________________________]

DCAA Finding:
[________________________________]
[________________________________]
[________________________________]

Amount at Issue: $[________________________________]

Contractor Response:

☐ AGREE - Contractor concurs with this finding

☐ DISAGREE - Contractor disputes this finding for the following reasons:

Legal/Regulatory Basis for Disagreement:
[________________________________]
[________________________________]

Factual Basis for Disagreement:
[________________________________]
[________________________________]
[________________________________]

Supporting Documentation:
☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Contractor's Position on Amount:
Original Amount: $[________________________________]
Contractor's Position: $[________________________________]
Difference: $[________________________________]

Finding 3: [________________________________]

DCAA Finding:
[________________________________]
[________________________________]
[________________________________]

Amount at Issue: $[________________________________]

Contractor Response:

☐ AGREE - Contractor concurs with this finding

☐ DISAGREE - Contractor disputes this finding for the following reasons:

Legal/Regulatory Basis for Disagreement:
[________________________________]
[________________________________]

Factual Basis for Disagreement:
[________________________________]
[________________________________]
[________________________________]

Supporting Documentation:
☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

Contractor's Position on Amount:
Original Amount: $[________________________________]
Contractor's Position: $[________________________________]
Difference: $[________________________________]

Finding 4: [________________________________]

DCAA Finding:
[________________________________]
[________________________________]
[________________________________]

Amount at Issue: $[________________________________]

Contractor Response:

☐ AGREE - Contractor concurs with this finding

☐ DISAGREE - Contractor disputes this finding for the following reasons:

Legal/Regulatory Basis for Disagreement:
[________________________________]
[________________________________]

Factual Basis for Disagreement:
[________________________________]
[________________________________]
[________________________________]

Supporting Documentation:
☐ [________________________________]
☐ [________________________________]
☐ [________________________________]

III. SUMMARY OF CONTRACTOR'S POSITION

A. Costs Agreed (If Any)

B. Costs Disputed

IV. RESPONSE TO SYSTEM DEFICIENCIES (IF APPLICABLE)

A. System Deficiency Identified

☐ Accounting System Deficiency
☐ Estimating System Deficiency
☐ Purchasing System Deficiency
☐ MMAS Deficiency
☐ EVMS Deficiency
☐ Other: [________________________________]

Description of Deficiency:
[________________________________]
[________________________________]

B. Contractor Response to Deficiency

☐ AGREE - Contractor acknowledges the deficiency

Corrective Action Plan:

☐ DISAGREE - Contractor disputes the deficiency finding

Basis for Disagreement:
[________________________________]
[________________________________]
[________________________________]

V. RATE NEGOTIATION POSITION (IF APPLICABLE)

A. Indirect Rate Positions

B. Basis for Rate Differences

Fringe Benefits:
[________________________________]
[________________________________]

Overhead:
[________________________________]
[________________________________]

G&A:
[________________________________]
[________________________________]

VI. SUPPORTING DOCUMENTATION INDEX

VII. REQUEST FOR DISCUSSION/MEETING

☐ The Contractor requests a meeting with DCAA to discuss the disputed findings

Preferred Dates: [________________________________]

Contractor Attendees:
1. [________________________________] - [Title]
2. [________________________________] - [Title]
3. [________________________________] - [Title]

Topics for Discussion:
1. [________________________________]
2. [________________________________]
3. [________________________________]

VIII. CONTRACTOR CERTIFICATION

I certify that the information provided in this response is accurate and complete to the best of my knowledge and belief. I further certify that the Contractor's records support the positions taken herein.

Signature: [________________________________]

Printed Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

COMMON COST ALLOWABILITY ISSUES

Expressly Unallowable Costs (FAR 31.205)

• Entertainment costs (31.205-14)
• Alcoholic beverages (31.205-51)
• Contributions and donations (31.205-8)
• Fines and penalties (31.205-15)
• Lobbying costs (31.205-22)
• Advertising (except recruiting/required) (31.205-1)
• Bad debts (31.205-3)
• Interest and financing costs (31.205-20)
• Organization costs (31.205-27)
• Goodwill (31.205-49)

Common Audit Issues

1. Timekeeping - Inadequate labor distribution records
2. Uncompensated Overtime - Improper treatment
3. Executive Compensation - Exceeds benchmarks
4. Indirect Cost Allocation - Improper base or method
5. Cost Accounting Standards - Noncompliance
6. Travel Costs - Exceeds per diem or lacks documentation
7. Consultant Costs - Inadequate justification
8. IR&D/B&P - Improper classification
9. Home Office Allocations - Unreasonable methods
10. Subcontract Costs - Inadequate monitoring

IMPORTANT NOTES

DCAA vs. Contracting Officer

DCAA issues audit reports with recommendations, but the Contracting Officer (CO) makes the final determination on cost allowability. Contractors can continue to dispute findings with the CO even after DCAA finalizes its audit.

Record Retention

Contractors must maintain records for 3 years after final payment (or longer if contract requires). Records supporting claimed costs must be available for audit.

Access to Records

Under FAR 52.215-2, contractors must provide DCAA access to records, including subcontractor records. Denial of access can result in disallowance of all related costs.

Billing Implications

Questioned costs may affect current billing. Contractors should coordinate with the CO regarding any billing adjustments pending resolution of disputed findings.

Statute of Limitations

The Government generally has 6 years to recover overpayments. Claims for additional costs must be filed within 6 years of accrual.

Appeal Rights

If the CO issues an adverse final decision on costs, the contractor may appeal to the cognizant Board of Contract Appeals or Court of Federal Claims under the Contract Disputes Act.

RESPONSE BEST PRACTICES

1. Respond Timely - Meet all deadlines for audit responses
2. Be Organized - Use a clear, logical format with specific references
3. Cite Authority - Reference specific FAR, CAS, or other regulatory provisions
4. Provide Documentation - Attach supporting evidence for all positions
5. Distinguish Categories - Separate questioned costs from unsupported costs
6. Address Each Finding - Respond to every audit finding specifically
7. Propose Solutions - Offer alternative treatments where appropriate
8. Maintain Professionalism - Avoid confrontational language
9. Preserve Rights - Do not inadvertently waive appeal rights
10. Seek Expert Help - Consult attorneys and CPAs for complex issues

SOURCES AND REFERENCES

• DCAA Contract Audit Manual (DCAAM 7640.1): https://www.dcaa.mil/Guidance/CAM-Contract-Audit-Manual/
• FAR Part 31 - Contract Cost Principles
• FAR Part 42 - Contract Administration
• DFARS Part 242 - Contract Administration
• Cost Accounting Standards (48 CFR Chapter 99)
• DCAA Information for Contractors (DCAAM 7641.90)