Reforming DCAA: Are new staff hires the answer?
October 22nd, 2009 by JD KathuriaWhen it comes to the Defense Contract Auditing Agency, here’s a sobering statistic to chomp on, courtesy of the AP: Compared with other federal oversight organizations (like the GAO), DCAA’s return on investment is pretty slim. For every dollar GAO spends, it saves taxpayers $94. At DCAA, the ratio is $5 saved for every dollar spent.
Recently, DCAA officials offered members of the House Armed Services Defense Acquisition Reform Panel this reason: The agency is understaffed and employees are often under the gun to deliver audit reports to Pentagon contracting officers far too soon. “There is a clear disparity between resources and requirements,” testified Gregory Kutz, managing director of forensic audits and special investigations at the Government Accountability Office. DCAA is set to hire 300 auditor trainees this year and 200 more in 2010 to address the issue. The agency may also bring on board 200 hires in 2011, reports Robert Brodsky of Government Executive.
But will that really solve the problem? Some have doubts. “I wonder if 700 new people is helpful or will create new problems,” said Rep. Jim Cooper, D-Tenn. “What we want is new solutions, not just hiring new people.” Even DCAA Director April Stephenson has stated that the agency has a lighter workload than in recent years.
Tad DeHaven over at Cato Institute offers this point to consider: “The GAO’s relative independence when conducting oversight is a chief reason why it outperforms the DCAA, which is housed under the DOD chain of command. Thus, an obvious reform would be to have contract auditing at DOD, and perhaps throughout the federal government, performed by an independent agency.”
What’s it going to take to reform DCAA? You tell us.
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DCAA’s indepenced, or lack thereof, is not the problem. The problem is ineffective audit procedures leading to poor quality audit findings. Hiring staff will help, but the real solution lies in doing things differently. If necessary, DCAA should stop trying to comply with GAGAS.
DCAA’s savings is based on the amount that is sustained by DCMA and contracting officers. Currently, DCMA’s metrics aren’t tied to any cost savings. They are tied to getting the military’s services and equipment when the military wants them delivered. So, they don’t negotiate too hard when the clock is ticking down. DCAA would have a lot more of savings if DCMA had to answer for why they don’t sustain DCAA’s findings.
I was employeed by DCAA for 32 years. The agency changed significantly during those years. One of the reasons the DCAA payback is small is that they do not properly use the resources they have. There lack of consideration of risk an materiality has to be changed. They perform too many reviews in areas such as labor floorchecks for which there is minimum payback. While these reviews may cite internal control problems, there genenerally is no significant issues that are a risk. Also, a part of the problem are the audits they are requested to perform. When the FAR requirements related to review of initial pricing propsals there should have been a significant reduction in the amount of initial pricing reviews performed by DCAA. They have not reduced. This is not totally DCAA’s fault since they are a service agency and are only performing reviews for which they are requested. Someone should increase emphasis of the FAR requirements and only request cost analysis of price proposals when a reasonable price cannot be determined based on price analysis.
DCAA’s savings may be slim compared to GAO’s, but at least we get audit reports issued in a more timely manner. The GAO reports on DCAA had been in the works for literally years. They were started in 2005 and not issued until 2008 and 2009. How is this timely and helpful to the government agency or the taxpayer? In addition, GAO’s version of the events are not questioned. Who is looking over their shoulder to ensure that what they have reported is accurate? Who has looked into their claimed $94 rate of return? Is this real savings or estimated savings based on an operations audit type of computation? In September 2008, the Congress asked GAO to look into DCAA’s work nation wide to see if the problems they reported in July 2008 were occuring accross the agency. Did GAO start a new audit? No, they continued with an audit began years earlier, looking at audits from the same time frame as the original report. Did they really expect to find anything different? What has been done to evaluate the changes in the agency since the GAO report was issued in July 2008? Nothing. Isn’t that what we should be looking at, how is DCAA correcting the problem.