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DCAA’s auditing triage continues to draw criticism

Pentagon inspector general says execution of risk-based approach missed $250 million in savings.

The Defense Contract Audit Agency’s two-year-old effort to review fewer contracts and focus on high-dollar returns continues to attract critics.

A recent Pentagon inspector general’s report found problems with the newly reorganized DCAA’s execution of a bid to revamp its audit procedures to stress quality over quantity. The approach -- which involves raising by tenfold the dollar amounts that trigger detailed audits -- could leave as much as $250 million a year in unjustified costs unrecovered, the IG said. Specifically, the report said the Office of Defense Procurement and Acquisition Policy had not performed a “business case analysis” to support the decision to alter DCAA’s priorities in choosing contracts to review.

“Had DPAP evaluated rates of return across the DCAA audit portfolio, DPAP could have achieved the same results by redirecting DCAA resources from low-risk audits and services to higher risk areas of the portfolio,” the report said. It also said DCAA has failed to implement a risk-based planning process as recommended by the Business Board, and criticized a decision to turn over certain auditing duties to the Defense Contract Management Agency that DCMA was not prepared to reliably accomplish.

The IG recommended that DCAA return to its old thresholds for auditing until it has put in place a risk-based audit planning process, and that DCMA proceed with scheduled corrective actions.

DCAA managers, responding to a draft of the report, agreed only with one of the recommendations. They said the $250 million estimate of potentially lost savings was “overstated” by about half.

A group of specialists at Apogee Consulting Inc., who have long reported on DCAA’s management troubles as documented by the Government Accountability Office, published a critique in late November sounding an alarm about the IG report. “We’re not saying that these reports are so damning that the people called out by them should be fired,” the specialists wrote. “But we do believe that these reports are so damning that the people called out by them should consider resigning their positions, and letting more effective leaders take their turns in the batter’s box.”