What is DCAA compliance, and how do you achieve it?


Kent Peterson, BambooHR

Uncle Sam is a big spender. Every year, he buys hundreds of billions of dollars worth of products and services from American businesses of almost every size and type. So it’s worth asking yourself: Should your company try to land a lucrative federal government contract? There’s a lot to learn, but if the answer is yes, your efforts may be well worth it.

To qualify, in many cases, you have to follow the rules for DCAA compliance, and it might seem overwhelming at first. What is DCAA compliance? And what does DCAA stand for, anyway? Here are the answers you need to get started.

What is DCAA compliance?

The DCAA, formally known as the Defense Contract Audit Agency, was created in 1965 to make sure U.S. taxpayers get their money’s worth. Think of the DCAA as a watchdog that provides audit and financial advisory services when tax money is spent.

At first, the DCAA focused on military and intelligence contracts for the U.S. Department of Defense, but today it also provides services to a wide variety of other federal entities. In 2017 (the most recent year figures are available for), the DCAA said its audits saved taxpayers $3.5 billion on defense spending alone while also making sure contractors were paid every penny they were entitled to. Both buyers and sellers benefit from the DCAA’s work.

Now that you know what the DCAA is, you need to learn a little about DCAA-compliant policies and procedures. These are the rules your business must follow to meet DCAA requirements. DCAA compliance for small business is the same as it is for big business: strict, far-reaching, and complicated. Accounting procedures can be very different from what you are used to.

It’s essential to get expert advice from a qualified consultant who understands DCAA regulations. You can also learn a lot from other business owners who comply with DCAA requirements.

What about DCAA certification?

You might assume that somewhere there is a DCAA compliance checklist that shows everything you need to do for official DCAA certification. But the federal government does not certify businesses as being DCAA compliant.

Instead, companies are expected to learn and follow DCAA-compliant policies and procedures, and the DCAA audits their contractors carefully to make sure this is done. Before a business can win a government contract, it must pass a DCAA survey of its finances and accounting system.

Is TSheets DCAA-compliant?

Although there’s no government DCAA certification process, TSheets has important features that can help you with a key part of DCAA compliance. The most important is time tracking. By tracking employee time on and off the clock, in addition too tracking sick leave and vacation, the employer has a more accurate how their employees time is spent.

You may be surprised to learn that government contractors have to meticulously account for every employee’s work hours every day, as they happen, whether or not those employees are doing work that’s related to the contract. This applies to both hourly and salaried workers.

Also, even though exempt (often salaried) workers aren’t paid overtime, if they work overtime hours, that time must be accounted for when calculating their hourly rate for DCAA purposes. As you can understand, things can get complicated quickly.

TSheets provides features that make it simpler to comply with DCAA timekeeping requirements, including precise daily time tracking with audit trails for all changes, extensive reporting, specific supervisor approvals, and more. Check out the DCAA compliance checklist for timekeeping.

Remember, no software can guarantee DCAA compliance. It’s up to the people who use it to do it right. However, TSheets makes doing it right a whole lot easier.

Making your decision

Now that you have some idea of what it takes to be DCAA compliant, you may question whether your company can do it and if it’s worth the effort. As you decide, consider that the federal government recently listed more than 28,000 active contracting opportunities. With so many possibilities, plenty of other companies have found that the potential rewards are worth doing what’s needed to qualify.

Whether you’re a new business owner wondering about DCAA certification or a longtime government contractor who wants to make sure your company’s DCAA compliance checklist is up to date, achieving and maintaining DCAA compliance may open the door to important opportunities to grow your business.

Additional resources

Here are additional resources to help you with DCAA compliance, related workplace issues, and other requirements for federal contracting.

  • To learn more about DCAA-compliant policies and procedures, visit the DCAA website for a wealth of information, guidance, checklists, and tools.
  • How do you make sure employees follow new procedures like the ones that are needed for DCAA compliance? How to Ensure Employee Follow Procedures has answers.
  • Wise business owners teach every new worker during onboarding what they must do to help achieve and maintain DCAA compliance. Learn more about the best practices for a successful onboarding program.
  • DCAA compliance isn’t the only requirement for federal government contracts. Read the U.S. government’s beginner’s guide to federal contracting.



Kent Peterson is a writer for BambooHR, the leading human resources software solution for small and medium businesses. He has also produced award-winning work in television and radio.