Tuesday, June 11, 2013

Impairments to Independence

A number of years ago, DCAA assigned a supervisor to audit a particular contractor. The supervisor informed the Agency that he had a brother who worked for the contractor. Upon review, it was determined that there was no real or perceived conflict of interest - the brother worked for a commercial division in another city. Later, the brother was reassigned to the same division being audited by the supervisor. The contractor cam forth and challenged the propriety of the supervisor's involvement in the audit.

The first reaction was that the contractor transferred the brother purposefully as part of a scheme to have a particularly effective supervisor transferred away from his current engagement. DCAA even suggested that the contractor re-reassign the brother. Ultimately, the Agency blinked first and had to reassign its supervisor.

This is not a particularly isolated incident. Spouses, children, and other family members need jobs too and often times, find employment with government contractors. DCAA has quite a rigorous program to avoid even the appearance of a lack of independence. Auditors are required to self-disclose any real or perceived conflicts.

The Agency recently issued guidance on how to proceed when contractors lodge complaints about circumstances or behavior that indicate, or appear to indicate, auditor bias, which in turn may indicate a threat to independence.

First, the Agency must determine the credibility of the complaint. Disagreements between auditors and contractor personnel over audit issues can and do occur during audits. Such disagreements do not indicate bias or lack of objectivity. However, if the complaint is about inappropriate behavior, close relationships with contractor employees, or any of the other myriad ways in which independence could be impaired, the Agency will make an "inquiry". If, based on the inquiry there is some merit to the complaint, the Agency will initiate an investigation and temporarily, at least, remove the auditor from the affected audits.

If no significant threat to independence exists, the auditor will be returned to his/her position. If independence is impaired, either actual or in appearance, management will eliminate the threat - most likely by reassigning the auditor to another engagement.

Contractors should never hesitate to bring up potential impairments to independence to DCAA or DCMA or any other type of Government oversight to appropriate levels. Ultimately, it will help these Agencies perform their jobs efficiently and effectively.

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