A highly publicized GAO report recently stated that 14 audits by DCAA field offices in Southern California (1) failed to comply with several auditing standards (2) working papers did not support reported opinions (3) supervisors dropped findings and changed audit opinions without adequate evidence and (4) insufficient work was performed to support audit opinions and conclusions. The report also asserted that DCAA supervisors used intimidation, harassment and threats to get their employees to alter audits in favor of contractors.

In his summary of the GAO report in testimony to a September 10 Senate Committee hearing on the report, Gregory Kutz of the GAO said DCAA took “short cuts” due to pressure from the contracting community and buying commands for favorable opinions to expedite negotiations and from DCAA management to meet performance metrics, report favorable opinions to reduce future audit work and allow contractors to have direct billing authority.  Kutz stated that two supervisory auditors told him that contracting officers told them to issue reports within 20 days with whatever information they had at the time and not to qualify the report with audit scope limitations so the quality of the audits suffered.  Sen. Joseph Leiberman stated one of the reasons for DCAA issuing favorable audits to contractors is because the agency is “obsessed with speed of the process rather than accuracy of results.”

DCAA Director April Stephenson also testified assuring senators that DCAA took the report “very seriously” and had taken several key actions including (1) assessing the need for additional staffing (2) determining whether appropriate metrics and benchmarks are being used (3) increasing the number of levels of management to resolve disagreement (4) termination of DCAA participation in integrated product teams (i.e. mechanisms adopted several years ago to expedite both assessment of contractor bid proposals and resolutions of outstanding issues) to allay concerns such participation compromises DCAA’s independence and (5) requesting DOD office of inspector general to investigate allegations of inappropriate management actions against agency personnel. The Director stated with respect to deficient working papers and audit work the agency agreed that audit work should have been better documented and that in some cases, supervisors should have assessed the need to perform additional work. Discussions with the affected management team revealed the pressure they felt to issue reports by the due date resulted in the inappropriate decision to remove audit findings rather than take the additional steps to determine the merit of the findings.  Stephenson added that audit work must be completed prior to issuing a report or in the case of constraints the report should clearly state the reasons why the report could not be completed. Moreover, supervisors and managers that change audit findings should document their decisions in the working papers.

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