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Defense Agency Faulted for Wrongful Challenge to Contractor

Pentagon IG requests restoration of $6.6 million in disallowed subcontractor expenses.

The Defense Contract Audit Agency’s decision to reject $6.6 million in a contractor’s claimed costs in fiscal 2008 did not comply with generally accepted government auditing standards, the Defense Department’s watchdog found.

The probe of a complaint received over the inspector general’s hotline substantiated a challenge to methods used by auditors in DCAA’s Central Region.

DCAA had determined that there was insufficient documentation based on a sample of 70 subcontractor invoices comprising $13.5 million of $33 million in claimed costs. “Rather than question all $33 million in subcontract costs based on the statistical sample, the [field audit office] elected to question 20 percent (about $6.6 million) of those costs based on its consideration of contractor performance and product delivery,” the IG found. But the 20 percent sampling was “arbitrary and unsupported,” it said.

The company was not identified.

The report, dated Dec. 23, recommended that DCAA accept the contractor’s disputed $6.6 million charges and improve auditor training. The DCAA director agreed.

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