Thursday, May 5, 2016

DCAA's Fifth Annual Report to Congress

Each March for the past five years, DCAA has prepared a report to Congress summarizing its activities for the most recently completed fiscal year. This reporting requirement was mandated by Section 805 of the Fiscal Year 2012 National Defense Authorization Act (NDAA) and came about at a time when the Agency was under intense Congressional, GAO, DoD-IG and media scrutiny over the conduct of its contract audits.

The first item called out in the 2012 NDAA for inclusion in DCAA's Report to Congress was for a section describing significant problems, abuses, and deficiencies encountered during the conduct of contractor audits. From the beginning, DCAA has not made this topic the premier lead-in to its annual report. Instead, it appears almost at the end of the report. And, the Agency never uses the term "abuse" in its report.

In 2011, the section was entitled "Significant Deficiencies and Recommended Actions to Improve the Audit Process. That year, DCAA was looking to improve the adequacy of contractors' forward pricing proposals, defining contractor business system rules, improving audit access to contractor records and the need to add additional resources to reduce the incurred cost audit backlog.

In 2012, the Agency was still concerned about the adequacy of contractor forward pricing proposals and access to records. There was no mention of business system rules or staffing levels.

In 2013, the same story; adequacy of forward pricing proposals and access to records.

In 2014, DCAA again cited forward pricing proposal adequacy and access to records including access to contractor internal audit reports and unfettered access to contractor employees.

In the latest report, 2015, the focus changed. The section is no longer entitled "Significant Deficiencies and Recommended Actions to Improve the Audit Process". Gone is the term "Significant Deficiencies". The section heading now reads "Summary of Recommended Actions or Resources to Improve the Audit Process". So, in five years, the Agency has evolved out the terms (i) significant problems, (ii) abuses, and (iii) deficiencies. Now it is simply a listing of things DCAA thinks will improve its audit processes.

 For 2015, gone are the concerns about access to contractor records and adequacy of forward pricing proposals. In their places is a plea for more auditors, auditors to perform business system reviews (including floorchecks) and defective pricing (i.e. compliance with the Truth in Negotiations Act or TINA) audits. The Agency stated that it should be conducting 675 business system audits per year but only performed 22. Similarly, DCAA completed only 26 defective pricing audits during the year which it considers woefully short of the number of audits it needs to perform.

Nice though, to see that there are no longer any abuses, significant problems, or deficiencies within the Agency.

You can read the entire Annual Report here.

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