Patrick Fitzgerald, DCAA Director, and Robert Hale, DoD comptroller, acknowledge in an online editorial for federaltimes.com that “DCAA’s reputation has been tarnished in recent years by complaints involving poor audit quality and abusive management.” GAO has been particularly critical, releasing a report last October titled “Widespread DCAA Audit Problems Leave Billions of Taxpayer Dollars Vulnerable to Fraud, Waste, Abuse, and Mismanagement.”
The report found “widespread audit quality problems at DCAA,” findings that were confirmed by DoD’s Inspector General. GAO’s recommendations included replacing production metrics with new standards that focus on achieving quality audits, establishing an anonymous website for whistle blowers, revising policy to increase auditor independence, and enlisting assistance from other agencies to maximize human capital.
To address these problems, DCAA is making some major changes. First, and foremost, DCAA has a new mission statement, “emphasizing the agency’s role in making certain that taxpayer dollars are spent on contracts with fair and reasonable prices.”
Also, DCAA took GAO’s advice on human capital, and is “is developing a human capital plan to focus its efforts.” Like the DCMA, which is responsible for management and oversight of government contracts, the DCAA is understaffed, and that’s probably their single biggest problem. Mr. Fitzgerald and Mr. Hale “realize the ultimate success of DCAA depends on its skilled and dedicated work force.”
Additionally, to fill a “key executive position “” the Regional Director for Western Region “” [DCAA] appointed an individual from outside DCAA who has had extensive experience in both the public and private sectors.” This is “first time in recent years” that a key position has been filled from outside the agency.
Fitzgerald and Hale continue, “we recognize that DCAA’s present workload exceeds the capacity of its staff. To close this gap, the agency hired 375 new auditors in 2009 and plans to hire more.”
DCAA is also revamping its auditing procedure, prioritizing “audits that pose the highest risk to the government and have the potential for saving taxpayers the most money,” and is strengthening the independence of auditors “by allowing disagreements to be elevated to the undersecretary of Defense level for resolution, if necessary.” Also, management of the agency hotline has been moved outside DCAA to the Senior Executive Service.
To improve audit quality, DCAA is moving away from its production metrics and requiring all auditors to finish Generally Accepted Government Auditing Standards (GAGAS) training. “By Oct. 1, the highest-priority audits will be performed in full compliance with GAGAS.”
Since Defense Secretary Robert Gates has mandated a 10% reduction in contractor spending each year for the next three years, it’s no surprise that DCAA’s new mission statement emphasizes “fair and reasonable prices” for services. It’s probable that DCAA recommendations on value will factor into DoD decisions to cut contracts, so it’s particularly salient that the deadline for “highest-priority” (largest) audits to achieve GAGAS compliance matches up with the start of the new fiscal year.
There’s no surefire way to avoid the widespread spending cuts DoD has proposed, particularly if you work in one of the sectors Ashton Carter, Undersecretary of Defense for Acquisitions, singled out in June as “overcapitalized.” However, if you’re facing a DCAA audit, be sure to emphasize your value proposition and have all your fiscal ducks in a row, as increased auditor independence, a new mission statement and an emphasis on austerity from the top down mean that DCAA guidance could be a deciding factor in major contractor spending cuts.