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ConnectWise and the ITIL Framework

DCAA Compliance

If your company works on federal defense contracts, you are probably familiar with the rules and regulations imposed by the Defense Contract Audit Agency (DCAA). This agency has existed since the 1960's to protect U.S. taxpayers from waste or fraud in contracts with the Department of Defense, and occasionally other government agencies. In the past several years, new guidance has been issued by DCAA that makes it a lot tougher for contractors—especially smaller organizations—to stay in compliance with DCAA rules and respond in a timely manner to record-keeping requests. ConnectWise provides functionality that can help you properly document internal controls and stay on the right side of DCAA.

How to be compliant with DCAA?

The U.S. government reserves the right—and considers it a duty—to routinely audit the records associated with military defense contracts. The compliance agency that performs these audits is the DCAA, and right now, they are busier than ever. In 2008, the Government Accounting Office (GAO) issued a report that pointed out insufficiencies at DCAA, and the DCAA has been stepping up oversight and strengthening procedures ever since.

Gone are the days when DCAA was willing to help contractors get in compliance. The agency no longer reports partially insufficient audits; in the world of contracts, every audit is now “pass/fail”. So it is more important than ever for IT services companies that perform work on government contracts to have complete records, automated time-keeping, accurate billing procedures, and solid internal controls and reporting. Luckily, ConnectWise can help!

What is DCAA? >


What is DCAA?

DCAA stands for the Defense Contract Audit Agency; it’s the federal agency responsible for reviewing and auditing military defense contracts to ensure billing is accurate. The DCAA was formed by the Secretary of Defense in 1965 and reports to the Under Secretary of Defense, who is the Department of Defense Comptroller. The mission of the agency is to help identify ways that the DoD, or other agencies, can reduce or avoid costs on government contracts.

Who is affected by DCAA?
Any company that provides products or services in conjunction with a DoD contract is subject to the DCAA audit rules. Occasionally, the DCAA audits contracts for related agencies other than DoD. You do not have to be the primary contractor in order to be subject to DCAA audit. Their auditing power extends to all subcontractors on DoD contracts as well.

What happens if a contract my company is working on is audited by DCAA?
According to the DCAA publication Information for Contractors, the agency concentrates its efforts on auditing and reviewing the following areas:

  • Internal control systems
  • Management policies
  • Accuracy and reasonableness of cost representations
  • Adequacy and reliability of records and accounting systems
  • Financial capability
  • Contractor compliance with contractual provisions having accounting or financial significance”.

Because of recent procedural tightening, if your company is audited and any part of the review or recordkeeping for the contract is found insufficient, the entire contract will be found “insufficient” and could be subject to a suspension of payment. That can produce a cash-flow crunch if your company is counting on that revenue.

For more information about DCAA guidelines and audit procedures visit

DCAA and ConnectWise >

Demonstrate good audit trails and internal controls

The most important tool for complying with a DCAA audit is a reliable accounting system. But for IT services companies, your accounting system is only going to be as accurate as your billing, timekeeping, and purchasing systems. That's why using ConnectWise as your business operating system with an integrated accounting solution is a powerful combination. Here are the ways that ConnectWise can help your company comply with DCAA audit rules:

Easy-to-use Timesheet

  • Easy-to-use timesheet with comments
  • Allow users to charge time only to projects they have been assigned
  • Configure timesheet to track custom information such as location, cost code, etc.

Project and Client Tracking

  • Define billable and non-billable projects in multi-level hierarchy
  • Set up project milestones and billing phases
  • Monitor Actual Vs Estimated hours  
  • Keep inception-to-date project and task data

Labor Cost and Billing Rates

  • Assign users an hourly cost and track the cost of their hours worked
  • Define billing rates at the project, client or user level
  • Create role rates to bill clients based on the type of work being done

Audit Trail

  • Track history of timesheet changes including original entry, when and why, and who approved the change
  • Require comments for timesheet modifications


  • Define multi-level approval paths
  • Increase integrity with separate approvals for timesheets  and billing information

Security and Permissions

  • Security through password-protected accounts - with https encryption
  • Control access to data through permissions at the company, department, group or user level

Expense Tracking

  • Track billable and non-billable project expenses
  • Attach expense receipts electronically

Overtime and Time Off Tracking

  • Track overtime including uncompensated overtime and time off
  • Configure overtime and business rules
  • Automate accruals and time off policies

E-mail Reminders

  • Schedule e-mail notifications to remind users to log their time daily
  • Alert employees when their timesheets are due/overdue
  • Send e-mails to approvers when timesheets are submitted for review


  • Integrate and transfer records from and to any Payroll or Accounting software using open API's

Real-time Reporting

  • Audit trail reports
  • Filter reports by date range, client, project, user
  • Drill down to get as granular as you need
  • Print reports on the fly, save to PDF, or export to Excel

For more information on how ConnectWise can help you stay in compliance with DCAA regulations, contact us today!

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