Tuesday, February 6, 2018

Statutory Due Dates for DCAA Audits - A Recommendation

We've been discussing some of the recommendations coming out of the Section 809 Panel for the past few days and we want to continue in that vein by highlighting another recommendation for re-making DCAA (Defense Contract Audit Agency) into a vital component of the Defense acquisition process. This one deals with the timeliness of audits, or the timeliness any any advisory services provided by DCAA.

The Panel's 8th recommendation is to establish statutory time limits for defense oversight activities. Note that the recommendation regards statutory time limits, not a lesser regulatory provision or a policy or another form of guidance. That's an important distinction

According to the Panel, financial and business system oversight of DoD's contractors often starts too late and takes too long (no one can argue with that observation). These delays cause problems for both contracting officers and defense contractors and reduce the utility of oversight findings. To be effective and efficient, DoD's system of internal controls must operate in a timely manner.

Time limits are commonplace in both private industry and the Federal Government concerning performance of audits and other forms of advisory engagements. Independent Public Accountants (IPAs) must complete audits by financial reporting deadlines established by the SEC. Auditors for federal agencies must complete agency financial statement audits under deadlines established by the Chief Financial Officers Act of 1990. GAO must also complete congressional-requested audits and reviews in accordance with statutory due dates. These professional service providers both in and out of Government complete their work in accordance with professional standards within time-frames established before work begins.

Not so with DCAA. DCAA's work is untimely, which causes delays in contract awards, as well as other negative effects on the contract life cycle, through and including contract closeout. For example, in fiscal year 2016, DCAA did not begin work on final indirect cost rate proposals until more than two years after contractors' submissions. Contracting officers need DCAA's work to close out flexibly priced contracts.

DoD's system of acquisition internal controls operates most effectively when controls are applied in a timely way. Statutory time limits for various oversight activities will improve their effectiveness.

The Panel's recommendations goes on to suggest due dates for the various types of audits performed by DCAA. Although the recommendations would be an improvement overs DCAA's performance, they are still very generous and not likely to satisfy many procurement professionals.

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