Is DCAAs New Audit Report Format More Professional, Redstone Government ConsultingIn 2014 DCAA quietly rolled out its new audit report format which generated some obvious questions:

  1. Why would DCAA focus any resources on its audit report format at a time when DCAA needs to focus its resources on its huge incurred cost backlog?
  2. Why focus on audit report format when DCAA issues fewer and fewer audit reports with each passing each year?
  3. Is DCAA’s new audit report format more professional? (one of the primary reasons why DCAA made the change)

Although we may never know the answers to the first two questions, the third question is presumably more important although we need to clarify that per DCAA, the 2014 changes were designed to enhance the professional appearance of their audit reports (perhaps we are splitting hairs, but professional appearance isn’t exactly the same as enhancing the professional content of the audit reports).   Regarding the professional appearance, one can’t help but notice that DCAA now has color graphics within the DCAA letterhead as well as in the header and footer. We are absolutely certain that everyone would agree that having the footer, “For Official Use Only” in white with a blue banner is far more professional than black text on a white background. In fact, we suspect that DCAA could consider further enhancements which could include subtle watermarks such as Mt. Rushmore or perhaps Mt. Denali (the mountain formerly known as Mt. Denali, then Mt. McKinley and now back to Mt. Denali).

Beyond the all-important insertion of color graphics, we made note of the fact that DCAA’s EXECUTIVE SUMMARY is all in “caps”, another spectacular move toward a more professional appearing audit report.   On that same page, DCAA’s report now has a paragraph “ABOUT THIS AUDIT”, which is unbelievably more professional than the old terminology, “Subject of Audit”. One can study the two different phrases and the newly enhanced professional appearance simply leaps off the page leaving one spellbound. In one recent case, “ABOUT THIS AUDIT” had an initial sentence “As you requested”; unfortunately “you” were not identified before or after this sentence. We now realize that DCAA has shown exceptional creativity and dexterity by allowing any reader to assume the role of “you”).   DCAA follows this paragraph with “WHAT WE FOUND”, a very noticeable change from the previous “Results of Audit”.   We aren’t sure that it is more professional but it is undeniably more accurate to refer to “WHAT WE FOUND” as if DCAA is engaged in a treasure hunt rather than an audit. After all DCAA’s new mantra is to protect the taxpayer and how better than to find and report hidden treasures (cost exceptions which are so hidden as to not exist as evidenced by DCAA’s dismal cost questioned sustention rate).

Of passing interest, DCAA did not invent the use of “WHAT WE FOUND” (as the result of an audit), the GAO (Government Accountability Office) uses the same terminology (which is why DCAA uses it). Fortunately, DCAA has not embraced every GAO reporting nuance, including GAO’s reference to “why we did this study” in reference to audits. We’ve also noted DCAA “audit” reports with less than precise terminology such as “our review disclosed”. For those who are actually in the audit profession, a study has never been synonymous with and audit, nor is a review the same as an audit. However, we’ve apparently missed the obvious, that imprecisely mixing terminology (study = audit = review) is enhancing the professional appearance of audit reports (or studies or reviews).   A professional audit report would not mix and match terminology, but there’s nothing unique about that phenomena given that DCAA audit reports embellish their regulatory references (insert a word here or there).

One other peculiar notion within DCAA’s roll-out of the new report, it kept a statement within the audit report that DCAA auditors are available to discuss the audit report before and after the report is issued. Although it would seem to be impossible to issue a report while offering to discuss it before it was issued, we suspect that DCAA simply embraced the concept of time travel and/or was highly impressed with the movie “Back-to-the Future”.

We can hardly wait for future actions (GAO, then DCAA) to enhance the professional appearance of audit reports. Perhaps hyperlinks to popular gaming software embedded in the audit report or inserting photos of the auditor’s family and pets. Of course, DCAA could not possibly include photos of all auditors involved in any given audit because DCAA uses extended teams on the risk assessment and each of the failed attempts to actually complete an audit.

As noted earlier in this blog, enhancing the professional appearance isn’t the same as enhancing the professional quality of an audit report unless one believes that color graphics will overcome unsustainable audit results/exceptions. Oops, I meant to say “WHAT WE FOUND”, not audit results.

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Written by Michael Steen

Mike Steen is a Senior Advisor 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: Contracts Administration, DCAA Audit Support