Monday, April 7, 2014

DCAA Issues Its Annual Performance Report

The Defense Contract Audit Agency (DCAA)* recently issued its third annual Year in Review report. This report highlights DCAA's activities during the year from its own unique perspective. This year's report, which can be downloaded and/or read here , provides the following summary of last year's activities.
In Fiscal Year 2013 (the 12-month period ended September 30, 2013), DCAA (Defense Contract Audit Agency) examined $160 billion in contractor costs, conducted 13,600 reviews, and produced over 6,200 audit reports. Overall, DCAA's efforts resulted in $4.4 billion in net savings to the government - the highest in Agency history and nearly 75 percent higher than the average savings achieved during Fiscal Years 2003 - 2009. Based on these net savings, the return on taxpayers' investment in DCAA was approximately $7.30 for each dollar invested.
The report details nine specific examples of how the savings were achieved. Most of these related to evaluations of price proposals and termination settlement proposals. The report includes a section dealing with reaching out to small businesses. DCAA cannot advise contractors on how to comply with Government rules and regulations nor can they advise them on how to set up their accounting and timekeeping systems. What they can do and have been doing is participating in a series of seminars throughout the US helping to educate those small businesses on the role of DCAA in the acquisition process and helping them understand the importance of implementing adequate estimating, accounting, billing, and timekeeping systems, among others. The Agency also makes available on its website reference material designed to help small businesses understand the basics of accounting for costs under government contracts.

Perhaps the most interesting piece in this report is not what DCAA has done in the past but its priorities for the coming year. The report lists four priorities:

  • Increase momentum to reduce the backlog of incurred cost audits
  • Increased priority on performing high-risk, time-sensitive labor and material reviews (floorchecks)
  • More emphasis on disclosure statements (descriptions of accounting policies, procedures, and practices)
  • More responsive to demand work from contracting officers

Reducing the incurred cost backlog is good news for contractors who are waiting to close out old contracts. Increasing the number of floorchecks should be of some concern to contractors - more auditors kicking around taking valuable time by interviewing employees. The disclosure statement emphasis only impacts CAS covered contractors required to maintain CAS Disclosure Statements.

* The Defense Contract Audit Agency (DCAA) provides audit and financial advisory services to Department of Defense (DoD) and other federal entities responsible for acquisition and contract administration. It helps ensure DoD gets the best value for every dollar spent on defense contracting by conducting contract audits and related financial advisory services. Contract audits are independent, professional reviews of financial representations made by defense contractors. Specifically, DCAA assists in determining whether contract costs are allowable, allocable, and reasonable. The type and extent of DCAA's audit work varies based on the type of contract awarded, but its audit services are generally limited to acquisitions under Federal Acquisition Regulation Part 15 (Contracting by Negotiation). DCAA audits only contractors - it has no internal audit responsibilities in DoD.

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