Top DCAA Audit Triggers—and How to Stay Ready All Year

David Rosengarten

DCAA audits are often triggered by specific accounting, compliance, or reporting issues—not by random chance. Common triggers include inadequate accounting systems, inconsistent timekeeping, incorrect indirect rates, and incomplete documentation. With the right processes in place, government contractors can stay audit-ready year-round and avoid unnecessary disruption.

 

Why DCAA Audits Happen More Often Than Contractors Expect

Many government contractors assume a DCAA audit only happens after a problem arises. In reality, audits are a routine part of working with cost-type, T&M, and certain fixed-price federal contracts.

 

At A.L. Schmidt CPA, LLC, we work with government contractors in Centerville, Dayton, Cincinnati, Northern Virginia, and nationwide to prepare for audits before DCAA ever sends a notice. Understanding what triggers audits is the first step to staying ahead of them.

 

 

The Most Common DCAA Audit Triggers

 

DCAA audits typically fall into two categories: routine audits and event-driven audits. Both are predictable when you know what to watch for.

 

Common audit triggers include:

  • An accounting system that doesn’t meet SF 1408 “adequacy” standards
  • Weak or inconsistent timekeeping and labor charging
  • Indirect rates that don’t reconcile or lack documentation
  • Incurred cost submissions that are late or incomplete
  • Rapid growth, new cost-type contracts, or contract modifications

Even well-run contractors around Wright-Patterson AFB and other defense hubs can trigger audits simply by scaling quickly or taking on new contract types.

 

 

Routine vs. Special DCAA Audits

 

Routine audits occur as part of normal government oversight. These include incurred cost audits, floor checks, and accounting system reviews.

 

Special audits are triggered by specific events, such as a pre-award SF 1408 survey, questioned costs, or inconsistencies discovered during another review.

 

In both cases, DCAA focuses on whether your systems, documentation, and practices match what your contracts and regulations require—not just whether the numbers add up.

 

Documentation Issues That Raise Red Flags

One of the biggest mistakes contractors make is assuming they can “pull documents together later.” DCAA expects documentation to exist as part of daily operations, not after the fact.

 

Problem areas often include unclear policies, missing support for cost allocations, or records that don’t align with financial statements. Contractors in Dayton, Centerville, and surrounding Ohio markets frequently run into issues here when systems grow faster than internal controls.

 

 

How to Stay Audit-Ready All Year

Audit readiness isn’t about scrambling when a letter arrives—it’s about consistency.

Strong contractors focus on:

  • Clear, documented accounting and timekeeping procedures
  • Regular internal reviews of indirect rates and job cost reports
  • Ongoing reconciliation between financial statements and contract data

At A.L. Schmidt CPA, LLC, we help contractors build processes that hold up under review, not just pass once and fail later.

If you want deeper guidance, our DCAA Audit Support services walk contractors through preparation, live audit support, and follow-up responses - Contact us today.



Don’t Wait for an Audit Letter

The best time to address DCAA risk is before it becomes urgent. Whether you’re a growing contractor in Southwest Ohio, supporting defense programs near Wright-Patterson AFB, or managing contracts across multiple states, proactive readiness saves time, stress, and revenue.

 

If you’re unsure how audit-ready your business really is, reach out to A.L. Schmidt CPA, LLC to request a DCAA readiness assessment. We’ll help you understand where you stand—and what to fix—before DCAA comes knocking.