Monday, December 10, 2012

Annual Audit Planning Meetings with Contractors

At contractor locations with a significant amount of planned audit activity, the Defense Contract Audit Agency (DCAA) conducts what they term, "Annual Audit Planning and Requirements Planning Meetings" with contractor representatives and contracting officers.

These meetings are typically held during the first quarter of the Government fiscal year (i.e. October -December time frame). At these meetings, the auditors present the various types of audits they plan to conduct in the current year. Applicable audit guidance also instructs them to solicit contractor and contracting officer input into the planned audit schedule.

Regardless of the meetings' ostensible purpose to solicit input from contractors and contracting officers, by the time the meeting rolls around, the audit plan for the year is very much fixed.. We know of no situation where the audit plan was changed as a result of input from either the contractor or the contracting officer.

Even though contractors have no real input into the annual audit plan, these meetings are informative for learning what the auditor(s) plan to do during the year. It is especially important to know which internal control systems will be audited, which CAS standards will be reviewed for compliance, and which contracts have been selected for defective pricing audits (compliance with TINA, or the Truth in Negotiating Act). Knowing this information will help contractors prepare for the audit and compile information and data that is likely to be required/requested.

Many times, contractors sit passively through these meetings, taking a few notes, and nodding once in awhile.   We think it is much better to use this time to engage the auditor. Once the audits begin, auditors are not likely to be very conversant. Now is the time to ask them why they chose to schedule a particular internal control audit, how they view the existing system, what were the results of audit the last time they audited and whether there are any risk indicators currently. When the discussion turns to defective pricing, be sure to ask them your PASS rating and the objective and subjective elements that made up the rating. Challenge the auditors to explain why particular CAS standards are applicable or not applicable.

Sometimes the auditors want to "call it in" rather than face to face. We don't believe that annual planning meetings make efficient conference calls - its too difficult to have meaningful communications. Have the auditors come out and make their presentations.

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