The DOD’s financial audit efforts are bringing the DCAA down on contractors’ government property systems

The Defense Contract Audit Agency (DCAA) is looking at government property. With that statement, contractors’ ears should be perking up across the *Department of Defense (DOD) contracting space. This is a crossing of the streams between the DCAA and the Defense Contract Management Agency (DCMA), but should contractors be concerned?

As far back as the interim rule around the Defense Federal Acquisition Regulation Supplement (DFARS) contractor business system rules (circa 2011), the six DFARS business systems have been evenly divided between the DCAA, who has responsibility for evaluating the accounting, estimating, and materials management and accounting systems (MMAS) — and DCMA, who has responsibility for purchasing, government property and the earned value management systems (EVMS). Despite the interconnectedness of the business systems, the review organizations have generally stayed within their swim lanes. Lately, though, the streams are starting to cross … sort of.

DCAA’s annual report to congress

The DCAA, in its annual report to congress for fiscal year 2024, published March 31, 2025[1], cited that it had been assisting “DOD’s Financial Improvement and Audit Readiness (FIAR) Posture.”

“DCAA is expanding efforts related to FIAR and is now assisting with DOD's implementation of the strategy to ensure all Government Property in Possession of Contractors is properly controlled, accounted for, and appropriately reported on financial statements of the respective military services and the DLA. DCAA completed an initial inventory of property related to 30 contracts located in 93 locations, finding records were 70 percent accurate. The lessons learned from this inventory will be leveraged as DOD further develops their strategy.”

In its outlook, DCAA stated that:

“DCAA also looks to continue our efforts supporting DOD’s FIAR effort. We recently completed an inventory for the Air Force of Government Furnished Equipment maintained by contractors in 90 locations. We are taking the lessons learned from this effort and will perform an expanded inventory of items and contractors for all services in [fiscal year] 2025. These efforts in determining inventory accuracy and asset value are essential to DOD passing an audit.”