Thursday, August 29, 2013

Access to Records - Procedures When Denials Occur

We've been discussing generally the last few days about DCAA's (Defense Contract Audit Agency) internal workings when they are confronted with a contractor that doesn't want to provide data that's been requested or grant access to its employees for floorchecks or other types of inquiries. Today we want to look at specific procedures that the auditors, supervisors, and managers should follow when they deem that a contractor is denying them access to records. Perhaps from this, contractors can tell when the situation is turning from chest beating and posturing to something really serious.

First we should point out that under GAGAS (Generally Accepted Government Auditing Standards) it is the auditors responsibility to determine what data is necessary to support the audit results. The auditor determines what comprises competent, relevant, and sufficient evidential matter to form and express an audit opinion a a contractor's proposed or incurred costs. It is not the contractors position to tell them otherwise. This doesn't mean that contractors don't have the right to know the purpose for which the data is being requested or ensure that the data has some nexus to the audit scope. It also doesn't mean that a contractor cannot suggest alternate ways of obtaining the same level of support. Most auditors appreciate suggestions that will expedite an audit or make things more efficient.

Now, for the essence of DCAA Instruction 7640.17, Formal Reporting Procedures for Denial of Access to Contractor Records

  1. When an auditor requests supporting data/documentation from a contractor, the request should clearly state what support is needed and when it should be provided. The contractor is entitled to a reasonable period to provide the data given the specific circumstances. Generally, if an auditor is requesting readily available data such as vendor invoices or payroll records, they expect a quick turnaround (several hours at the most). If the request requires some sort of analysis, compilation, or reports in a certain format, several days may be a reasonable turn-around time.
  2. If the contractor does not provide the requested information by the requested due date, and the contractor has not provided an appropriate explanation for the delay, the auditor will prepare a formal written request to the contractor stating that the information must be provided by a specific date (no later than one week). This written request will be initiated no later than five days after the initial due date.
  3. The written requests should be addressed to the appropriate high-level contractor management official, no lower than the business segment vice president or chief financial officer. A copy will also be sent to the contracting officer.
  4. When the auditor is convinced that the requested data will not be provided based on a categorical denial or the five days have lapsed, the auditor will notify the contractor in writing that a formal denial to records exists and is being reported to appropriate government personnel. The auditor will solicit assistance from the ACO by providing a description of the denied data, why the data are needed, and the cost impact related to the denial of access. The auditor will also prepare and forward to the DCAA Regional Office a description of the denial. The Regional Office will review and approve it and forward it on to Headquarters.
  5. If all previous efforts fail, the Regional Manager will review the matter and determine if a subpoena should be requested. This could be either a DCAA subpoena or a DoD-IG subpoena, depending upon the nature of the audit.

Obviously, its not in anyone's interest (except perhaps for the attorneys) to allow differences to fester on routine matters pertaining to proposal evaluations or incurred cost. Most auditors are reasonable in their expectations and requests and most contractors are responsive to those requests.

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