How to Record DCAA Audit Settlements
Recording the resolution of questioned costs following a DCAA audit settlement where the contractor agrees to a reduction in billed rates.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Reserve for Indirect Rate Adjustments | Liability | 120,000.00 | - |
| Accounts Receivable - Government | Asset | - | 120,000.00 |
💡 Accountant's Note
This entry settles the liability previously accrued for potential audit findings by reducing the outstanding receivables or paying back the government for over-billings in prior periods.
Practitioner & Systems Framework
💻 ERP Architecture
Adjustments should be made using a 'prior period' or 'audit adjustment' journal type to avoid skewing current year performance.
⚠️ Audit Flags
Significant variances between provisional billing rates and final negotiated rates.
📄 Required Documentation
Negotiated Indirect Cost Rate Agreement (NICRA) or DCAA Form 1 settlement letter.
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