A Fortune 500 defense contractor recently paid $8.7 million in penalties after DCAA auditors discovered systematic violations of tangible asset capitalization requirements under CAS 404. The contractor’s $1,000 capitalization threshold—considered “industry standard” by their CFO—directly violated federal cost accounting standards, resulting in questioned costs, contract suspensions, and a two-year remediation process that cost an additional…
Recent Government Accountability Office reports indicate that NASA contract obligations exceeded $665 billion annually, making proper oversight essential for taxpayer protection. However, industry data suggests that first-time NASA contractors face compliance failure rates approaching 40%, with timekeeping deficiencies representing the most common audit finding. Audit Frequency and Scope Analysis NASA audits follow predictable patterns that…
A Fortune 500 defense contractor learned the hard way that misallocating material costs can trigger a $47 million cost adjustment under CAS 418. Their error? Using headcount to allocate material handling costs when square footage was the appropriate allocation base. The Defense Contract Audit Agency (DCAA) didn’t just reject their methodology—they demanded repayment of previously…
Government contractors face an increasingly complex landscape when it comes to maintaining compliance with Defense Contract Audit Agency (DCAA) regulations. The Defense Contract Audit Agency (DCAA) is the governing agency responsible for ensuring that government contracts are executed with transparency, accuracy and adherence to established regulations. For contractors seeking to win and maintain government contracts,…
In January 2024, a Tennessee-based defense contractor learned the catastrophic cost of CAS 402 disclosure failures when DCAA auditors discovered systematic inconsistencies between disclosed cost accounting practices and actual operations spanning 22 months. The contractor faced $18.3 million in questioned costs, immediate contract suspension, and potential debarment after investigators found that disclosed indirect cost allocation…
In September 2024, a Virginia-based aerospace contractor discovered the devastating cost of treating employee timesheet signatures as a mere formality when DCAA auditors uncovered systematic certification failures across 14 months of operations. The contractor faced $12.7 million in questioned costs and immediate contract suspension after investigators found that 73% of employee timesheets lacked proper certification…
A major defense contractor’s systematic misallocation of overtime premium costs resulted in an $8.7 million settlement with the Department of Justice after DCAA auditors discovered the company had improperly charged overtime premiums directly to cost-plus contracts while allocating the same costs to overhead pools on fixed-price work. This violation pattern, which DOJ characterized as “knowingly…
If you’re a government contractor, few phrases can trigger anxiety quite like “DCAA floor check.” Whether you’re new to government contracting or a seasoned professional, understanding what happens during these audits and how to prepare for them is crucial for maintaining compliance and protecting your contracts. What Is a DCAA Floor Check? A DCAA (Defense…
In March 2024, a mid-sized defense contractor learned the brutal cost of inadequate remote work timekeeping when DCAA auditors discovered systematic violations spanning 18 months of hybrid work arrangements. The contractor faced $8.4 million in penalties and contract suspension after auditors found employees routinely batch-entering weekly time records, insufficient supervisory controls for remote work validation,…
A defense contractor learned this lesson the hard way when an 18-month suspension from federal contracting resulted from improper after-hours timesheet corrections that DCAA classified as fraudulent mischarging rather than administrative errors. The financial impact exceeded $2.3 million in lost contract opportunities, demonstrating how a seemingly minor timekeeping practice can trigger severe enforcement actions under…
