What We Need is a Federal Contract Audit Agency

The Project on Government Oversight (POGO) is a nonpartisan independent watchdog that investigates and exposes waste, corruption, abuse of power and when the government fails to serve the public or silences those who report wrongdoing. Since its founding in 1981, it has investigated a number of high profile cases of fraud, waste, and abuse within the Government and has consistently been a strong supporter of DCAA (Defense Contract Audit Agency) activities.

In addition to highlighting problems, POGO desires to be part of the solution by making recommendations to Congress and the Executive Branch to address harms exposed by its findings. Last month, POGO published the "Baker's Dozen: 13 Policy Areas that Require Congressional Action". The seventh of the thirteen recommendations is entitled: Commonsense Contract Reforms to Protect the Taxpayer. Withing this recommendation, there are six sub-recommendations regarding the need for contract reform. We will look at a few of these recommendations beginning today with a recommendation to establish a federal contract audit agency to conduct all contract audits.

The idea of establishing a federal contract audit agency is nothing new. We recall the recommendation being bandied about in the early 80's. DCAA was never officially in favor of it (wink wink) because DoD was opposed to it. In reality, there were many within the DCAA hierarchy that believed it was a good idea, not only for the empire building opportunities such an agency provided, but for consistency in auditing contracts across the full spectrum of Government purchases.

POGO has now resurrected the idea of a Federal Contract Audit Agency. In its report, POGO states:

Audits are among the most useful tools we have to check on federal contracts and ensure the money was spent wisely. But currently, contract audits are performed by numerous federal offices, including DoD's Defense Contract Audit Agency, small auditing offices in other agencies, contracted auditors, and various inspectors general. This sprawling fragmented system means missed opportunities, patchwork coverage, and limited effectiveness. A single consolidated federal contract audit agency could save more than it would cost to run by uncovering waste and fraud across the federal government.

Its recommendation to resolve this fragmentation issue and streamline the audit process is obvious:

Congress should establish a consolidated agency to provide all federal agencies with a needed check on contractors, ensuring by pre- and post-award audits that the government is not being overcharged for goods and services. Such an office would be more effective than provisions passed in the FY 2017 National Defense Authorization Act that allow defense contractors to choose their own private auditors. Those provisions should be repealed to maintain government oversight of federal defense contracts.

The reference to the FY 2017 NDAA includes a provision that DoD contract out a minimum of 20 percent of the incurred cost audit workload to private CPA firms.

See Baker's Dozen for the full report.