We are now on our fifth and final installment covering the results of a recent study conducted jointly by the Department of Defense and one of the Departments FFRDCs (Federally Funded Research and Development Company). The title of this study is "Eliminating Requirements Imposed on Industry Where Costs Exceed Benefits" and the full report can be downloaded and/or read by clicking here. Although this study covered several areas such as acquisition of commercial items, application of earned-value management (EVM), the Truth in Negotiations Act (TINA), and application of the Buy American Act (BAA), we are limiting our coverage to the topic called "Contract Auditing and Management" of which there were five recommendations. Previously we covered Reducing the Time for Record Retention, Eliminating Duplicative Effort in Reviewing Forward Pricing Rates, Eliminating Contract Closeout Backlogs, and reducing the incurred cost audit backlog. Today we will be covering a recommendation to reduce DCAA's (Defense Contract Audit Agency's) incurred cost backlog. In this final installment, we will cover a recommendation that would have the Government rely on other auditors work besides DCAA (Defense Contract Audit Agency).
Many of the 12 contractors participating in this study asserted that many sub-processes examined in SOX (Sarbanes Oxley) duplicate or overlap with DFARS (DoD FAR Supplement) business system processes. In particular, one contractor identified multiple SOX-DFARS overlaps for the Accounting System and some overlaps for the Purchasing System and Material Management and Accounting System). Other participants noted that their internal audit staffs' work overlapped to varying degrees the audit procedures performed by DCAA.
DCAA, of course, would readily agree that the potential for overlap exists. In fact, the Agency has been trying for years to access both SOX audits and internal audits. We know first hand that some of the largest DoD contractors have steadfastly refused to share SOX audits with the Government, claiming that there is no statutory or regulatory requirement that they do so. Additionally, DCAA has been trying for years to obtain routine access to internal audit reports and working papers, going so far as to introduce legislative proposals to that effect. So on one hand, contractors claim that there is duplicative effort but on the other hand, will not share the results of other audits with the Government in order to assess what can and cannot be relied upon during audits of contractor business systems.
The recommendation bears this out. The study recommended that DoD put together a team to engage with willing contractors on proposed approaches and provide an assessment. The key phrase here is "willing contractors". It is obvious that there is not a statutory or regulatory requirement that compels contractors to provide Government access to other audits so in order for this recommendation to proceed, the DoD must find "willing contractors" who will voluntarily share their audit reports.