Your company paid your CEO $875,000 in total compensation and charged the full amount to indirect pools allocating across all contracts including government work. During your incurred cost audit, DCAA applied the executive compensation benchmark limitation—currently $487,000 for the relevant year—and questioned $388,000 in excess compensation plus the associated fringe benefits and overhead allocation, totaling…
Your company allocated IT department costs using headcount—each employee charged equal share regardless of actual technology consumption—while facilities costs allocated based on direct labor hours even though office space usage had no relationship to project effort. During your accounting system audit, DCAA discovered that your engineering contracts requiring minimal IT resources subsidized administrative operations with…
Your company calculated fringe benefit rates by dividing total fringe costs by total payroll including both direct and indirect labor, then applied those rates to direct labor only when charging contracts—effectively allocating indirect employee fringe costs to direct contracts while excluding them from overhead calculations. During your incurred cost audit, DCAA discovered this inconsistency and…
Your company operated with a single overhead rate pooling all indirect costs—engineering support, facilities, administrative staff, and executive management—and allocating them to contracts using total direct labor as the base. During your DCAA audit, investigators discovered that your manufacturing operations consumed substantially more facility and equipment resources than your professional services work, yet both received…
Your DCAA auditor traced September labor costs from contract invoices backward through job costing to general ledger to payroll registers to approved timesheets—and discovered that timesheet hours totaled 8,240 for the month while payroll processed 8,460 hours and general ledger recorded $486,000 in labor costs that didn’t reconcile to either source. The 220-hour discrepancy, combined…
Your company discovered that salaried engineers routinely worked fifty to sixty hours weekly but recorded only forty hours on timesheets because “that’s what management expects from exempt employees.” During DCAA’s incurred cost audit, investigators found systematic underreporting of actual hours worked, concluded your labor distribution didn’t reflect reality, and questioned $1.3 million in direct labor…
Your company migrated to a popular cloud-based timekeeping platform promising “DCAA compliance in minutes” with automated features, mobile access, and seamless integration. During your accounting system audit, DCAA discovered the system allowed employees to edit historical timesheets without supervisor re-approval, lacked audit trails showing who changed what and when, permitted supervisors to modify employee entries…
