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Free DCAA Tool

DCAA Readiness
Self-Assessment

A practical way to see where your accounting system stands against the SF 1408. It's the same criteria a DCAA auditor uses. Answer nine questions and get your readiness score, plus the gaps to fix first.

⏱ Takes about 5 minutes · No sign-up required
0/9
1
Can you cleanly separate costs that belong to one contract (direct) from costs shared across the business, like rent, admin and fringe (indirect)?
DCAA's first test: your system must keep direct and indirect costs apart from the start.
2
Can you see the full cost of each individual contract (labor, materials, other direct costs) on demand?
The government needs each contract's cost accumulated separately, not blended into one total.
3
Does every employee record all their hours daily, billable and non-billable, with supervisor approval?
DCAA requires total time accounting. Missing hours break both labor charging and indirect rates.
4
Can labor costs be traced from timesheets through to payroll and the general ledger, and reconciled?
Labor distribution records must reconcile to payroll and to your cost accounts.
5
Are contract costs posted to and reconciled with your general ledger, not just in side spreadsheets?
Your job-cost records must reconcile to the GL control accounts.
6
Do you group indirect costs into pools (fringe, overhead, G&A) and allocate them to contracts on a consistent base?
Indirect costs must be allocated by the benefit each contract receives, using a documented base.
7
Can your system identify and exclude costs FAR 31 doesn't allow (entertainment, alcohol, certain advertising) from government billings?
Unallowable costs must never reach a government invoice.
8
When an entry or timesheet is corrected, does the original stay visible, with a record of who changed what and when?
DCAA wants to see the change history. Corrections that overwrite the original are a red flag.
9
Do you post contract costs to your books at least monthly, so costs stay current?
The system must determine contract costs at least monthly through routine posting.
Answer all nine to see your results
More about DCAA readiness

What is a DCAA-compliant accounting system?

A DCAA-compliant accounting system is one designed to track, segregate, and report costs the way the federal government requires on its contracts. It is worth clearing up a common myth first: DCAA does not certify software, and there is no such thing as “DCAA-certified” QuickBooks or any other tool. What DCAA actually does is review your accounting system and determine whether it is adequate for a government contract. The standard it uses for that review is the SF 1408.

So when contractors say they need to be “DCAA compliant,” what they really need is an accounting system whose design meets the SF 1408 criteria, operated consistently and backed by documentation. The checklist above walks you through those criteria in plain language.

What does the SF 1408 check?

The SF 1408, formally the Pre-Award Survey of Prospective Contractor Accounting System, is the form a DCAA auditor completes to judge your system. It focuses on design, not on how much you have spent. The core questions it asks include whether your system can separate direct costs from indirect costs, accumulate the cost of each contract individually, record all employee labor through a timekeeping system (billable and non-billable alike), distribute labor costs in a way that reconciles to payroll, group indirect costs into pools and allocate them to contracts on a logical and documented base, identify and exclude costs that are unallowable under FAR 31, and post costs to the general ledger at least monthly.

These are the same questions the self-assessment above is built around, so a low score points directly at the criteria you still need to address.

Is QuickBooks DCAA compliant on its own?

This is the most common question small contractors ask, and the honest answer is: not by itself. QuickBooks is a solid GAAP accounting platform, and the vast majority of small and mid-size government contractors already run on it. But out of the box, QuickBooks does not produce job costing by contract, indirect rate calculations, or the labor distribution and audit trail that the SF 1408 expects. You can get part of the way there manually with classes and disciplined bookkeeping, but the segregation stays manual and the audit trail stays partial, which is exactly where contractors run into findings.

The practical path for most small GovCons is not to abandon QuickBooks for an enterprise ERP, but to add a compliance layer on top of the QuickBooks they already use.

Should you get ready before or after you win a contract?

Before. Because the SF 1408 evaluates the design of your system rather than its operation, your system can be found adequate even if it is set up but not yet in full operation. In other words, you can be ready before you submit a proposal, not just after you win the work. Contractors who wait until a contracting officer requests the pre-award survey are already behind. Getting ready early also makes you a stronger teaming partner, since primes prefer subcontractors whose systems can handle flow-down requirements.

What are the most common DCAA readiness gaps?

The gaps that show up most often in a real audit are recording only billable hours instead of all hours, keeping time, payroll, and the general ledger in separate disconnected tools, correcting entries in a way that overwrites the original, and a chart of accounts that does not cleanly separate direct, indirect, and unallowable costs. The self-assessment above flags which of these apply to you and where to start.

How to use this self-assessment

Run through the nine questions honestly, note the gaps it surfaces, and start with the fundamentals: total time accounting and cost segregation come first, because most other criteria depend on them. The right chart of accounts is the foundation under all of it, and getting that structure right is what makes every other criterion fall into place.