describe the imageThe Department of Defense Inspector General(DOD IG) issued a March 7, 2013 report charging that the Defense Contract Audit Agency (DCAA) failed to “exercise sufficient professional judgment” while performing certain audits between 2006 and 2010 signaling another bump in the long road ahead for the Agency's return to compliance with GAGAS. 

The DCAA Director, Patrick Fitzgerald and Pentagon Comptroller Robert Hale were caught off guard by the report, since the IG reported findings are based on testing of two to three year old audit file data for fifty DCAA reports issued between October 2009 and March 2010.   The extensive time span between the period during which IG tested adherence to professional standards and the release of the 2013 report (two to three years) renders the IG findings and recommendations outdated and therefore of little value to DOD since the IG report does not consider DCAA corrective action implemented  over the past two or three years. 

The IG’s  report identifies instances of DCAA audit judgment issues to include independence impairments; insufficient communication with audit requester and contractor personnel; inadequate audit file documentation to support significant judgments and conclusions;  poorly trained and/or inexperienced auditors undertaking assignments above their level of competence; unsupported or untimely reports; insufficient contractor evidential data reviewed to support conclusions, and; ineffective supervision and quality control. 

The problem with the IG report is that since the data tested, supporting the IG’s conclusions, is not current in relation to the time the report is released, the outdated data reviewed is not sufficient to support those findings, hence a GAGAS circumvention.  This standard of matching currency of data tested to close proximity of the report date is one that DOD IG has affirmed in a prior IG report (September 2011) regarding DCAA’s lack of currency in data tested. Thus the IG’s issuance of its current reported findings based on data outdated by three years is nothing short of the frog (IG) calling the toad (DCAA) ugly. 

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Written by Darryl Walker

Darryl Walker Darryl Walker is a Emeritus Advisor for Government Compliance with Redstone Government Consulting, Inc., and formerly served as an Owner and Technical Director for the Beason & Nalley Government contract consulting group for over ten years. He provides content for our Government Insights Newsletter, provides training courses to government contractor and business community leaders, and consults with government contractors regarding a vast range of issues including cost proposals and presentations, internal controls, proposal preparation, compliance with the FAR and Cost Accounting Standards, litigation support, specialized claims, defective pricing issues, liaison with procurement and DCAA audit officials, and accounting and management systems compliance. Prior to joining Redstone Government Consulting, Darryl worked with the Defense Contract Audit Agency (DCAA) for almost 34 years in a variety of technical and management capacities. During his tenure with DCAA, Darryl provided audit services to a wide range of government agencies, including the Department of Defense, NASA, Department of Energy, Department of Interior, General Services Administration, and Department of Justice. During his experience with DCAA, Darryl audited over 3,000 government contractors throughout the Southeastern United States, Europe, and the Middle East. Education Darryl is a graduate of Texas Wesleyan College with a major in accounting and minor in economics.

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, Defense Contractors, DOD IG, DCAA Audit Support