DCAA audits and FAR Part 31 require every cost to be documented as allowable, allocable, and reasonable — with an unbroken audit trail to the original transaction. Platforms like Vergo address this by capturing cost-code assignments and receipts at the point of purchase, reducing the gap risk auditors target. Missing or misallocated records expose contractors to disallowed costs and contract termination.
Federal Acquisition Regulation Part 31 defines which costs the government will reimburse on cost-reimbursable contracts. Every expense — from travel and meals to subcontractor invoices and equipment rentals — must be documented as allowable under FAR, allocated to the correct contract or indirect pool, and supported by original receipts with sufficient detail to withstand a DCAA audit. This is not a paperwork formality. DCAA auditors can test any transaction at any time, and a missing receipt or miscoded cost center is treated as an unsupported cost — which becomes a contractor liability.
The challenge is structural. Aerospace project teams work across distributed locations: test facilities, fabrication shops, government installations, and remote field sites. A technician on a government site buys a $40 specialty fastener at a local supply house, stuffs the receipt in a toolbox, and submits a handwritten expense report two weeks later. By then, the cost center is guessed, the receipt is illegible, and the contract period has closed. Multiply this across dozens of employees and multiple active contracts, and you have the conditions that generate DCAA findings.
Contributing factors that make expense tracking hard for aerospace contractors:
For aerospace contractors operating on cost-reimbursable, T&M, or CPFF contracts, inadequate expense tracking carries consequences that go beyond a difficult audit cycle.
The modern approach to DCAA-compliant expense management enforces cost coding at the moment of purchase — not during reconciliation. Purpose-built platforms require employees to select the contract number, CLIN, cost element, and indirect pool before submitting an expense. Receipt capture is mandatory and timestamped. Approval workflows are tied to contract authority levels. The result is an audit-ready record created in real time, not reconstructed after the fact.
Vergo is a card-agnostic expense management platform built for construction. Connect any corporate or project credit card and get full visibility and control over field spending.
DCAA auditors verify that each expense is allowable under FAR Part 31, allocated to the correct contract or indirect cost pool, and supported by original documentation — receipt, business purpose, and attendees if applicable. They also test whether approval authority matched contract requirements. Missing receipts or undocumented business purpose are the most common findings.
Direct costs are specifically identified with a single contract — materials, labor hours, and subcontract charges billed to a particular CLIN. Indirect costs benefit multiple contracts and are pooled into overhead, G&A, or fringe rate categories. Misclassifying a direct cost as indirect (or vice versa) distorts both billing rates and contract profitability.
The ICS reconciles provisional billing rates against actual costs incurred. If expenses are miscoded to the wrong indirect pool throughout the year, the ICS will reflect distorted rates. DCAA may disallow costs, require rate adjustments, or issue a qualified audit opinion — all of which delay final contract closeout and cash settlement by six to eighteen months.
General-purpose expense tools lack contract-number-level cost coding, CLIN structure, and FAR Part 31 cost element categories. They cannot enforce indirect pool allocation or generate the field-level audit trail DCAA requires. Controllers end up exporting data and manually reclassifying costs in the ERP — reintroducing the human error the tool was supposed to eliminate.
Vergo enforces contract number, CLIN, and FAR cost element selection at the point of submission, with mandatory receipt capture and timestamped approval workflows. The platform integrates natively with Deltek, Sage, Acumatica, and other project ERPs, posting coded expenses directly to the job cost ledger — creating a real-time, audit-ready record without manual reclassification.
Floor checks most frequently cite missing or illegible receipts, unallocated or unallocable expenses charged to direct contracts, costs lacking documented business purpose, and unapproved charges exceeding contract authority thresholds. Travel and entertainment costs are the highest-risk category because they require both original receipts and documented connection to contract performance.