Tuesday, August 15, 2017

DCAA Questions $50 Million of a Contractor's Incurred Costs

About a year ago, DCAA (Defense Contract Audit Agency) issued an audit report on costs incurred by Legacy East, New Century Consulting (NCC) questioning more than $50 million in costs billed to the Army between 2008 and 2013. This audit report just came to light after Senator McCaskill (MO) publicized the findings in a letter to the Secretary of Defense.

According to McCaskill's letter, DCAA questioned costs related to seven luxury cars including Porsches, Alfa romeos, a Bentley, an Aston Martin, and a Land Rover. Although NCC claimed the vehicles were available to all employees, the audit found that the vehicles were used exclusively by the CEO, the COO, the CFO, and their "significant others". NCC was unable to provide adequate documentation to justify the need for luxury automobiles or show that their usage was in accordance with contract requirements. NCC admitted to using the cars during non-working hours but kept no records of non-work use.

NCC employed the "significant others" of the CEO and CFO as executive assistants even though these assistants worked from home and never traveled to customer locations. NCC was unable to provide evidence that these executive assistants actually performed any work at all. NCC could not even provide a single email from these assistants. Despite the lack of documentation of proof of their work, in 2012, their average salary exceeded an astounding $400 thousand per year.

The auditors disclosed that together, the CEO and CFO earned more than $2 million in 2013 which was $680 thousand more than similar executive earned elsewhere. The audit disclosed other compensation-related issues including compensation paid to consultants that exceeded their consulting agreements.

The auditors also questioned costs for alcoholic beverages, automatic weapons, severance payment, rent, unnecessary licensing fees, extensive austerity pay, and other personal expenses.

The Senator expressed concern that despite all of these findings, the Army continues to utilize this contractor and has requested the Army respond to a series of questions (see McCaskill's letter).

The contractor has disputed the DCAA findings. The Army reports that its contracting officer will make a final decision on the disposition of audit findings.

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