Redstone-DCAA’s 2018 New Year ResolutionsAs we near the end of calendar year 2017, many will be thinking of some resolutions for the upcoming “Year of the Dog” (the 2018 animal per the Chinese Calendar). In fact, we’ve discovered that Government agencies sometimes consider similar resolutions, and in the case of DCAA (Defense Contract Audit Agency), we’ve accidentally been copied on one of the unofficial versions of its 2018 New Year’s resolutions (which are three months late, given the government fiscal year started October 1, 2017).

DCAA’s 2018 Resolutions

Coincidentally, DCAA’s overall theme appears to have a distant connection to the year of the dog; specifically, DCAA hopes that the contractor community will think of DCAA as more of a professionally trained guide-dog as opposed to a Doberman-Pitbull Mix. It remains to be seen if or when DCAA will formalize and implement its New Year’s resolutions, which include (or theoretically could include) the following, “DCAA resolves to”:

  1. COST PROPOSALS: Stop inventing, unilaterally revising or secretly reinterpreting DCAA’s “adequacy checklists.” For example, DCAA has routinely revised its adequacy checklist for incurred cost proposals, the latest occurring in June 2016, although the underlying regulation (FAR 52.216-7(d)) hasn’t changed since May 2011. DCAA’s actions bypass any of the Federal rulemaking procedures and its revisions cause contractors to unnecessarily rework previously submitted indirect cost rate proposals.   Such a resolution would tacitly acknowledge that DCAA shouldn’t be changing checklists, then applying the new checklist to previously submitted contractor proposals. Even more exciting, we understand that DCAA will “try its best” to explain this to field auditors.
  2. DROP THE ARBITRARY “LIST”: Train auditors to use checklists as something other than a thoughtless list of “to-do’s.”   When a contractor asks why the auditor needs some information, if the auditor’s only explanation is “because it’s on the list,” withdraw the question and send the auditor to remedial training.
  3. HANDS OFF THE RECORDS: Retrain the entire agency on exactly what contractor records are accessible (FAR 52.215-2) and stop insisting that the contractor sort, filter, reformat, or convert existing data into formats or reports “preferred by the DCAA auditor.” Perhaps the most egregious example of this is DCAA’s audit program and its checklist for contractor claims (such as request for equitable adjustment) for which DCAA acknowledges there is no regulation which defines an adequate claim, yet inexplicably directs the auditor to insist on obtaining an “adequate submission in electronic format readable on DCAA computers.” Retrain auditors (and the Agency) to recognize that nothing in FAR includes an “access to contractor records” provision based solely on the concept of making life easier for the auditor.
  4. ASKING IS MERELY A QUESTION: Train DCAA auditors to recognize that nothing in FAR requires a contractor to complete a lengthy list of audit inquiries which are nothing more than papering the file for the auditors “risk assessment.”   Auditors will be retrained to recognize that contractors are only required to provide existing data which directly supports the contractor’s proposal, that DCAA can “ask” contractors to voluntarily complete DCAA questionnaires, but contractors are under no contractual obligation to create anything (including written answers to DCAA questionnaires) just because DCAA “asks.”    
  5. TEACH AUDITORS FAR AND CAS: Train auditors in terms of FAR and CAS before assigning them to an engagement which involves an evaluation of a contractor’s compliance with FAR. Merely reading DCAA guidance isn’t the same as reading FAR or CAS. Additionally, train auditors to quote FAR exactly as it is written instead of re-wording the FAR to better support an audit assertion (cost questioned).   Perhaps this is a tacit acknowledgment that DCAA’s auditors sometimes re-write FAR, but that is a “sort of” rational, since auditing standards dictate that auditors apply professional judgment (which apparently has meant that auditors can “professionally judge” a regulation and reword it as necessary).
  6. GET OFF THE FLOOR (CHECKS): Stop with the exhaustive and overly intrusive labor floor-checks which now involve hordes of audit teams simultaneously descending on a contractor’s facility and disrupting operations for hours. Perhaps DCAA should consider that DCAA is the only auditor (or agency) which interprets Government Auditing Standards to require employee interviews and/or verifying the physical existence of a contractor employee(s) as if they were in inventory.
  7. DROP THE FAKE CIVILITY: Train DCAA auditors to stop sending emails with disingenuous politeness; some of the best examples are those auditors whose requests are introduced with something like “may I please ask for thousands of records…and I need them by close of business tomorrow, which is Friday (even though Friday is my flex-day off and I most certainly don’t work weekends).”   Superficial politeness cannot mask auditor arrogance.
  8. WORK WITH THE INDUSTRY: Expand DCAA’s outreach programs to include presentations designed to seek contractor feedback instead of merely telling contractors “what to expect from DCAA.” And when making a presentation to a Congressional Subcommittee, have the courtesy to stick around to listen to the statements made by the industry (contractor) representatives.

DCAA’s New Approach in 2018

Perhaps none of these will make the cut (DCAA’s 2018 New Years Resolutions), but we can always hope that DCAA will someday get back to auditing contractor assertions based upon reasonably acceptable contractor records, policies and procedures such as they are written, not as DCAA would prefer them to be.    

Let the Redstone Government Consulting team help you deal with DCAA audits and incurred cost proposals. We can assist you with information gathering, organizing responses, and preparing for the audit process. Additionally, we provide consulting and training, and provide a thorough education on government audits.

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Written by Michael Steen

Mike Steen is a Senior Director with Redstone Government Consulting, Inc. and a specialist in complex compliance issues to include major contractor cost accounting & business system regulations, financial compliance, resolution of DCAA audit issues, Cost Accounting Standards application, litigation support, and claims preparation. Prior to joining Redstone Government Consulting, Mike served in a number of capacities with DCAA for over thirty years, and upon his retirement, he was one of the top seven senior executives with DCAA. Mike Served as a Regional Director for two DCAA regions, and during that time was responsible for audits of approximately $25B and 800 employees. In October 2001, he was selected for the Senior Executive Service and in 2006 he received the Presidential Rank Award. During Mike’s tenure with DCAA, he was involved in conducting or managing a variety of compliance audits, to include cost proposals, billing systems, Cost Accounting Standards, claims, defective pricing, and then-evolving programs such as restructuring, financial capability and agreed-upon procedures. He directly supported the government litigation team on significant contract disputes and has prepared and presented various lectures and seminars to DCAA staff and business community leaders. Since joining Redstone Government Consulting in June 2007, Mike has developed and presented training and seminars on Government Contracts Compliance to NCMA, Federal Publications Seminars and various clients. Mike also is a prolific contributor of written articles to government contracting publications, as well as to our own Government Insights Newsletter. Mike also serves as the director of our training service offerings, with responsibilities for preparing and developing course content as well as instructing our seminars to clients and general audiences throughout the U.S. Mike also serves as a faculty instructor for the Federal Publications Seminars organization. Education Mike has a BS Degree in Business Administration from Wichita State University. He is also a graduate of the DCAA Director’s Fellowship Program in Management, and has a Masters Degree in Administration from Central Michigan University. Mr. Steen also completed a number of OPM’s management and executive development courses.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Defense Contractors, DCAA Audit Support