A post-award accounting system audit is a review conducted by the DCAA after a contract has been awarded. Its purpose is to determine whether your accounting system is fully compliant and operating as intended—a review driven by Defense Federal Acquisition Regulation Supplement (DFARS) requirements.
Where the pre-award audit evaluates design, the post-award audit evaluates execution. Auditors move from reviewing policies and procedures on paper to testing whether those systems are working as intended across billing, timekeeping, labor charging, unallowable cost controls, and indirect cost accumulation.
A pre-award audit—evaluated against Standard Form (SF) 1408—is conducted before a contract is awarded to assess whether your accounting system is designed to support a cost-type contract, a determination driven by Federal Acquisition Regulation (FAR) requirements.
A post-award audit goes further. Rather than assessing design, the SF 1408 pre-award audit establishes the baseline; the post-award audit confirms that the system operates as approved. Auditors are testing execution, not intent.
Not every government contract automatically leads to a post-award accounting system audit. According to the DCAA’s own published guidance, most DCAA audit activity on firm-fixed-price contracts takes place during the proposal stage rather than after costs are incurred. The reverse is true for cost-reimbursable contracts, where the allowable costs included in final pricing are generally determined after they have been incurred and reviewed. As a result, post-award accounting system audits are most commonly associated with cost-reimbursable and time-and-materials contracts.
That said, contractors should not assume that a fixed-price contract eliminates audit exposure entirely. The DCAA’s contractor manual confirms that auditors may self-initiate a post-award accounting system audit based on their own risk assessment. The nature, dollar value, and history of your government work all factor into how likely a review becomes. Growth (taking on more contracts and larger awards) can increase that likelihood, which is why building a compliant accounting infrastructure from the start is worth the investment.
The DCAA’s contractor manual identifies two primary scenarios that lead to a post-award accounting system audit: a pre-award survey was completed and recommended further review, or no pre-award survey was conducted, and the contracting officer subsequently determines that one is now necessary.
Beyond those two paths, auditors may also initiate a review on their own, and audits can arise on a recurring, cyclical basis or when concerns surface during other government oversight activities. Certain circumstances also tend to draw scrutiny. A significant jump in contract volume or dollar value, concerns raised during an incurred cost submission audit, issues identified during a real-time labor floor check, or deficiencies flagged in other government reviews can all prompt a closer look. Contractors with prior audit findings are particularly likely to face continued attention going forward.
When auditors conduct a post-award accounting system review, they are testing whether your system holds up in practice—not just on paper. Based on the requirements outlined in DFARS 252.242-7006(c), post-award audits typically cover whether:
For most post-award accounting system audits, you will receive some form of advance notice. The DCAA typically begins with an entrance conference—a scheduled meeting where the auditor explains the scope and purpose of the review, outlines the timeline, and may ask general questions about your firm and its operations. From there, auditors may request a facility tour, provide a list of records they will need, and either schedule a return visit or request that materials be submitted electronically.
However, not every DCAA review comes with a heads-up. Real-time labor evaluations—a specific type of review focused entirely on timekeeping compliance—are conducted without advance notice. An auditor may arrive at your location unannounced to observe whether employees are recording their time accurately and in real time. This is a meaningful reminder that audit readiness is not something you prepare for only after receiving notice. It needs to be part of how you operate every day.
Post-award audits are document-intensive. Drawing from the DCAA’s published guidance and the requirements in DFARS 252.242-7006(c), you should expect auditors to request a broad range of financial and operational records. This typically includes:
Auditors will also typically request access to your accounting system itself to observe how it functions and verify that actual practice matches the system’s design. Organized and reconciled records that can be produced quickly signal system adequacy to the DCAA. Disorganized records—or records that do not reconcile—are often what turn a routine review into a significant finding.
Audit readiness is not a sprint. The contractors who move through post-award reviews smoothly are the ones who have built compliance into their daily operations—not the ones who begin organizing records after receiving an audit notice.
Practical steps include maintaining timekeeping records that are current and signed, reconciling payroll to the general ledger on a regular basis, calculating indirect cost rates monthly, and screening costs against FAR Part 31 unallowable cost provisions before billing. Our government contracting team works with contractors to build compliant accounting systems, maintain audit-ready documentation, and respond effectively when the DCAA initiates a review.
Post-award audits do not have to be a crisis. If you have questions about your current compliance posture or want to get ahead of a potential audit, contact us using the form below.
