Common DCAA Audits: Floor Checks and Material Cost Audits

DCAA conducts a series of specialized incurred cost audit activities that are known as Mandatory Annual Audit Requirements, or MAARs. As with other incurred cost audits, the objective is to review costs that contractors have spent to ensure they are accurate and acceptable.

Two types of MAAR audits require significant contractor participation and site visits: MAAR 6 for labor costs (often referred to as “floor checks”), and MAAR 13 for materials and services costs.

MAAR 6 Audits or Floor Checks

MAAR 6 activities include observing employees at work and conducting interviews to:

• Verify the existence of employees who bill to the contract;
• Evaluate timekeeping internal control procedures; and
• Evaluate the accuracy of labor hour charges to the contract.

During these audits, DCAA auditors may:

• Interview or floor check employees at their work site, with an unannounced visit.
• Discuss and observe work to determine whether employees are performing in the proper labor categories and charging time correctly.
• Review timekeeping procedures to determine compliance with the contract.
• Reconcile observations on employees' labor charges with payroll records, and follow up on any discrepancies.
• Trace labor charges to contract requirements.

MAAR 13 or Material Cost Audits

Material purchases and inventory management costs are significant for manufacturing, research and development, and production contracts. The purpose of this audit is to verify that purchased materials were received, as well as:

• Needed for and used for the contract;
• Purchased in reasonable quantities and at prudent prices; and
• Properly accounted for during the initial charge, transfer in or out, or for residual value.

During these audits, DCAA auditors may:

• Use a sample of materials charged to a government contract and physically locate all items in the sample;
• Obtain purchase orders for the sampled items and trace the purchase orders to receiving reports;
• Compare purchase orders to contract requirements and/or bills of materials; and
• Verify that purchases were made at optimal quantities.

Identifying problems through MAAR audits helps contracting officials avoid overpayment for work completed, and may help contractors avoid similar problems in future contracts.