By Calvin Biesecker
Problems uncovered a year ago at some of the auditing offices of the Pentagon agency that scrutinizes defense contracts turn out to be more widespread throughout the agency according to a new government investigation, demonstrating that the Defense Contract Audit Agency’s (DCAA) independence needs to be “strengthened,” possibly by making it independent altogether, the chairman of the Senate committee that oversees governmental affairs said yesterday.
“Perhaps its time to consider separating DCAA from the Department of Defense and either separately, or as part of a larger operation, making it an independent auditing agency,” Sen. Joseph Lieberman (I/D-Conn.), chairman of the Senate Homeland Security and Governmental Affairs Committee, said at the outset of a hearing to review the DCAA.
Audit quality control problems at DCAA are “nationwide,” Gregory Kutz, managing director, Forensic Audits and Special Investigations at the Government Accountability Office (GAO), told the panel. Those problems relate to generally accepted government auditing standards such as evidence that was “insufficient” or that didn’t match with audit conclusions, as well as “unsupported opinions on contractor internal controls,” he said.
Factors that have led to these quality control problems stem from a management culture that didn’t want to get in the way of contract awards as well as “an ineffective audit quality assurance structure,” Kutz said. Moreover, DCAA has been too focused on quantity over quality, that is, doing more audits than its staff can reasonably do well instead of taking deeper dives into fewer contracts, he said.
“Taking time to find and address issues was discouraged,” Kutz said.
Kutz said that in some instances DCAA delayed issuing reports, giving contractors time to resolve problems and thereby avoid being cited for deficiencies. He also said that in many instances auditors never tested contractor accounting systems, instead of ensuring that they had adequate policies in procedures in place. Kutz also said that unsupported audit opinions meant that audits were unreliable in making contract decisions.
The DCAA has 4,200 employees spread over 104 field offices. The agency conducted over 30,000 audits in FY ’08 and issued over 24,000 reports.
Only a few members of the committee were at the hearing but most agreed that a risk-based approach to audits is the way to go.
Pentagon Comptroller Robert Hale, whose office provides oversight of DCAA in addition to other DoD financial systems and services, said DCAA does need to find the right balance between what it audits and the comprehensiveness of those audits but he isn’t ready to settle on a risk-based approach yet. He also said that the GAO report looked at DCAA audits that were done several years ago and that changes the agency has made in the last year may take a few years for the benefits to materialize.
To improve oversight of the DCAA, Hale said he has assigned a senior staffer within his office to assist those efforts. And during the next two years resources are being used to add 500 more auditors to DCAA, he said. He also said that the agency should not be separated from DoD
Gayle Fisher, assistant director, Financial Management and Assurance at GAO, said that DCAA auditors that have approached GAO since the agency began to make changes have a “greater comfort level” about how things are proceeding.
None of the senators present had much good to say about the DCAA’s performance as outlined in a new GAO report on the agency as well as an investigation into DCAA by the Pentagon Inspector General based on the findings of the 2008 report by the GAO into the agency. The 2008 report was undertaken after a whistleblower at DCAA tipped off investigators about quality control problems in the agency’s Western Region.
Sen. Claire McCaskill (D-Mo.), said the findings in the GAO report amount to a “capital crime” at DCAA.
Sen. Susan Collins (R-Me.), the ranking member on the committee, early on said she is “baffled by the lack of urgency in addressing and resolving these problems” and later said that it “appears virtually nothing has changed” in the past year, which is “unacceptable.”
McCaskill did say that part of the problem of the DCAA doing too many audits resides with Congress always mandating that audits be done for various programs.
Lieberman asked Hale to provide monthly updates on the progress that is being made at DCAA and said there will likely be additional hearings on the matter.