Another Report on Government Auditing

The Center for American Progress issued a report last month entitled "Better Auditing for Better Contracting". In this report, the Center makes a number of recommendations designed to strengthen the federal auditing system. The report is primarily about DCAA (Defense Contract Audit Agency) and chronicles many of its recent problems but its recommendations cover all Governmental audit agencies responsible for contractor oversight. The report states:

In response to the critical GAO report and Congressional hearings, the Defense Contract Audit Agency has attempted difficult shifts in its bureaucratic culture over the past three years. However, many believe that these changes have not been for the better, but have actually lessened oversight of government contractors. In particular, DCAA now seems to be focusing on fewer contracts, and this is clearly not good enough. 

The report goes on to make eight recommendations including:

1. Hiring more qualified auditors at DCAA and other agencies with auditing responsibilities, such as the Department of Energy
2. Giving auditors authority to subpoena contractor records, which they cannot do now.
3. Naming and shaming companies that do not have adequate financial systems.
4. Withholding 10 percent of contractor fees if they do not have adequate business systems in place to create a financial incentive to improve accounting systems.
5. Moving to risk-based audits and random checks rather than excluding certain types of contracts such as limiting proposal audits to fixed-price contracts over $10 million, as is now the practice.
6. Completing pricing reviews within a set number of days so that the contracting agencies can issue contracts in a timely manner
7. Providing the DCAA with its won independent general counsel so that it does not face a conflict of interest by relying on the Pentagon's lawyers.
8. Evaluating whether the DCAA should report directly to Congress rather than to the Pentagon as is presently the case.

There is nothing startling or new in this list except for the recommendation for an evaluation of whether DCAA should report to Congress. That will never happen with an Executive Branch agency and besides, Congress already has the GAO (Government Accountability Audit) with authority to conduct whatever contract audits it chooses to perform.

Some of these recommendations have already been implemented such as the one to hire additional auditors and  paying attention to due dates. The recommendation to withhold 10 percent of fee for contractors with deficient business systems is not as stringent as the regulations already on the books which is 5 percent of all costs, not just the fee.

You can read the entire report at the American Progress website.

April 9, 2012 Update: There have been numerous web news, articles and postings on this report since we published this article. One, representing the view of a government contractors association can be read here.