Thursday, November 13, 2014

Another DoD-IG Review of DCAA Audits

Last September, the DoD Inspector General issued another one of its oversight reports on the quality and adequacy of DCAA (Defense Contract Audit Agency) audits. The IG reviewed 16 audits that were completed between 2011 and 2013. They found significant inadequacies in 13 of the 16 audits including deficiencies in i) audit planning, ii) evidential matter, iii) working paper documentation, and iv) supervision. They made 96 recommendations of which DCAA agreed with 72. Not happy with the concurrence rate, the IG wants DCAA to reconsider their response to the remaining 24 recommendations.

Someone should try to get through to the DoD-IG's office that DCAA's audits, by any reasonable measure, are pretty darn good. Experienced DCAA auditors have an innate ability to quickly ferret out audit risks and to develop audit procedures commensurate with those risks. Audits are designed to provide "reasonable" assurance that a proposal price is based on adequate cost or pricing data or that incurred costs are allowable, allocable, and reasonable. The IG's expectation seems to be that DCAA should provide "absolute" assurance.

Someone should also tell the IG that no one really cares about their audits of DCAA any longer. Congress has long since lost interest and the press certainly doesn't cover their ad nauseam reports on DCAA any longer. Seriously, is it really a National interest that an auditor somewhere did not comply with GAGAS (Generally Accepted Government Auditing Standards) because he failed to initial off on a working paper. Is National security at stake? Will the defense budget become overrun as a result? The public doesn't understand GAGAS nor will they ever take the time to do so - especially when there's IRS abuses, illegal immigration, and the rising cost of health care premiums to worry about. Come on IG, get a life. You've had your 15 minutes of fame back in 2009. Time to move on.

Compliance audits have got to be the most mundane of any audit type. Picture the (highly paid) IG auditor who sits in a room and pours over a DCAA audit work package - looking for even the most minute infraction. Where's the job satisfaction in that? Are they adding value to the procurement process? In many cases, the IG auditors spend more time reviewing individual DCAA working paper packages than the auditor spent on the entire audit. How does that pencil out? Could private enterprise survive under such circumstances?

We think its time for the Department of Defense to redirect the Inspector General's office toward more productive activities.

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