DCAA's Second Annual Report to Congress

DCAA's Second Annual Report to Congress, dated 29 March 2013 was recently posted on DCAA's website. This annual report is a product of the National Defense Authorization Act for Fiscal Year 2012 (now codified at 10 U.S.C. 2313a) and provides an overview of DCAA's mission, audit performance and recommendations to address significant deficiencies identified by DCAA during the conduct of its audits.

The report includes a lot of data, charts and narrative to explain why the Agency feels that fiscal year 2012 "...was a very successful year for DCAA." Among its accomplishments were (i) recommended cost reductions of $12.4 billion and (ii) a return on taxpayer's investments of $6.70 for each dollar spent by the Agency.

From a contractor's perspective, the most interesting thing in the report is Section 4,Significant Deficiencies and Recommended Actions to Improve the Audit Process. In this section, DCAA tells Congress what statutes or regulations need changing in order for them to do their job better. Here are some of those.

1. DCAA continues to face insufficient commercial pricing documentation and the lack of express authority to review "data other than certified cost or pricing data". DCAA wants contracting officers to become better trained on commercial item determinations. DCAA also want authority to review and subpoena "data other than certified cost or pricing data".
2. Access to contractor internal audit reports continues to pose significant challenges to DCAA auditors. DCAA acknowledges that the 2013 NDAA falls short of requiring contractors to fork over their internal audit report. Look for renewed attempts to force contractors to provide them.
3. The lack of access to contractor online data is another area of growing concern to DCAA. Read-only access would greatly assist DCAA to effectively plan and perform its audits. Some contractors have denied such access so DCAA is contemplating a legislative proposal that would require contractors to provide online access to electronic data.
4. DCAA strongly believes that having access to contractor employees to conduct interviews and observations is critical to ensure compliance with GAGAS (Generally Accepted Government Auditing Standards). Because some contractors have denied such access, DCAA believes that changes to FAR (Federal Acquisition Regulations) is necessary to ensure that auditors have timely access to contractor employees. Because there is no specific language in FAR stating DCAA has access to interview employees, DCAA plans to submit a legislative proposal to support DCAA’s right of access to contractor employees and to avoid future confusion on DCAA’s ability to interview employees. 

We might see some of these proposals submitted in connection with the 2014 NDAA (National Defense Authorization Act).