Tag Archive: DCAA

Comments Regarding “Declining DCAA Role in Oversight of Tens of Billions of Pentagon Contract Dollars


Here are some comments left on one of the articles I posted earlier today.  You will want to check the original article and additional comments.  See link at bottom of this post.  And thanks again, Old Navy Man.  GFS

G. Florence-


It’s not just ‘An Old Navy Man’ that believes there’s a problem.  See comments below.


Good investigative reporting on the part of Mr. Schwellenbach!


An Old Navy Man



Listed below are links to weblogs that reference Declining DCAA Role in Oversight of Tens of Billions of Pentagon Contract Dollars:


Joe   It is a shame that the only reason that DCAA gave away proposal audits under the stated PGI threshold is so that we can put more time in working paper documentation. Not that our audits will be any better or that we will question more cost. No, just the opposite. We gave away millions of dollars of proposal work just to have more time to document our work. Such as waste of effort. This is definately contrary to Secretary Gates efficiency initiative. I am dispoointed that Fitzgerald did not have a backbone and went along with AT&L on this one. Stephenson never would have given away work just to have more time for those picture perfect working papers. What’s next, $500 million and $50 million. Before we know it, Fitzgerald will have each auditor completing only one audit per year. I imagine that Policy is already examining how to raise the desk review incurred cost threshold to $100 million per year. Here’s a clue how to deal with the gap between the audit work that needs to be accomplished and the current funding, provide DCAA more funds. Simple, issue solved. DCAA saves dollar for dollar more than it costs, period. So why won’t Comptroller Hale provide DCAA more money? Oh I get it, he does not want oversight of contractors and neither does our lobbyist Deputy Secretary of Defense. I get it now. We need a change of administration and fast!

Posted on: Oct 30, 2010 at 05:54 PM

Carol   The blog comments are 100% on the mark. In essence, pricing evaluations by DCMA for FFP under $10 million and cost type over $100 million will become nothing more than a rate check. DCMA is not staffed to perform a full price analysis of proposals under these thresholds. This represents a high volume of proposals. Rather DCMA will call DCAA for the latest rates and that will be the extent of the price analysis. It will not matter than the rates are 2-3 years old or perhaps no rate information. The message was been sent by AT&L, pricing actions under these thresholds are immaterial and become a blank check for contractors. I am curious about the independence comment made by Frank. I thought that the Defense Business Board in its October 2008 report stated that DCAA should perform any audits it felt necessary regardless of the DPAP guidance, FAR, DFARS, CAS, etc. How can DPAP decide the audits to be performed by DCAA? This seems to be an independence issue. The PGI guidance was not revised due to a change in law or other legal statute. Perhaps Fitzgerald is confusing Army Audit with DCAA where in Army Audit the Secretary of the Army may decide the audits that are performed. But in DCAA, the responsibility is on the DCAA Director to decide the audits that are necessary, no one else has that responsibility. I believe we have a GAGAS noncompliance. POGO, could you research the independence issue. This could be very serious.

Posted on: Oct 30, 2010 at 08:02 AM

John    Agree with Frank and Mike. The Pentagon has wanted DCAA to get out of the forward pricing audit business for years. Contracting officials want to place as much money on contract as possible and do not want to have to address audit findings while negotiating contracts. However, I would argue that the new thresholds really do not matter because many forward pricing reports are issued too late to be of use to the contracting officer and many others are never issued because the supervisor, manager, region, QA reviewers have an issue with the working papers such as the entrance conference was not thoroughly documented or the sample was too small. All the while, real dollars are wasted especially on FFP contracts. Assignments are cancelled all the time. I recall a time when the FAO had a prepare a detailed explanation for the region when it cancelled an assignment. Now we cancel more assignments that we complete. POGO, you should ask for the number of cancelled assignments for the last five years, you should see a significant increase in FY 2010. Not to mention the millions that have gone unaudited and thousands of audit hours wasted. I guess Army Audit has a very liberal cancellation policy.

Posted on: Oct 29, 2010 at 07:42 PM

Jan   Here’s the next scandle, DCAA spends twice as much to do 25%of the audits. Overpayments and fraud triple due to no oversight. GAO and IG find DCAA’s audit working papers are perfect, but gig DCAA for performing marginal analytical procedures. Wake-up Fitzgerald, you have many hearings in your future so start practicing the opening statement on how the Pentagon made you do it and how important it is to ensure that all the i’s are dotted and t’s are crossed. Oh, and do not forget, you are responsible for DCAA and cannot use the Pentagon or anyone else as an excuse. The independence issue is squarely on you. Keep in mind that Under Secretary Hale and Deputy Lynn will not be around forever to protect you.

Posted on: Oct 29, 2010 at 07:01 PM

Mike   This action is very short-sighted by Director Fitzgerald. The ratio of questioned cost to dollars examined on the smaller dollar pricing actions is generally greater than the larger dollars especially the fixed price effort. These are generally smaller, less experienced contractors that do not have adequate pricing systems in place and are not knowledgeable of the FAR and CAS. Last month my office issued a report on a FFP $8 million proposal. We questioned half of the proposed amount ($4 million) because the contractor charged all indirect costs to the Government contract and none to its commercial customers. Reason, the commercial customer would not pay for the indirect costs, but they tried to get the Government to pay it. The CO sustained 100% and reduced the negotiated price accordingly. DCMA does not know contractor accounting records at the level of detail as DCAA and would not have had this finding in their price evaluation. Result, $4 million down the drain. POGO stay with this one, it has scandle written all over it.

Posted on: Oct 29, 2010 at 06:10 PM

Frank   It is an impairment to DCAA’s independence for the Pentagon to dictate the audits that DCAA will perform. If there is a risk such as an inadequate estimating system, history of overbillings, or even fraud referrals, DCAA should be able to perform the pricing audits. This is just the Pentagon’s way of reducing the oversight of contractors. DCMA is not equipped to handle the significant workload associated with pre-award pricing effort on cost-type contracts under $100 million and fixed-price under $10 million.

Posted on: Oct 29, 2010 at 0 http://pogoblog.typepad.com/pogo/2010/10/declining-dcaa-role-in-oversight-of-tens-of-billions-of-pentagon-contract-dollars.html6:02 PM


Head of Defense Contract Audit Agency forced out; Army official assigned as replacement


October 26th, 2009

Defense Department’s top auditor forced out

WASHINGTON — The Defense Department’s chief auditor has been forced from her post and moved to another job inside the Pentagon.

The reassignment of the director of the Defense Contract Audit Agency, April Stephenson, follows sharp criticism of the organization’s performance from members of Congress.

In an e-mail sent Monday to agency employees, Pentagon comptroller Robert Hale said the director of the Army Audit Agency, Patrick Fitzgerald, will replace Stephenson effective Nov. 9.

Hale doesn’t give a specific reason for the shift, but he does mention reports highly critical of the agency from the Government Accountability Office and the Pentagon inspector general.

The e-mail says Stephenson will take a senior position in Hale’s office.


Link to original:  http://blog.taragana.com/n/head-of-defense-contract-audit-agency-forced-out-army-official-assigned-as-replacement-207598/

Link to Government Executive.com: http://www.govexec.com/dailyfed/0808/080608rb1.htm



Former employees say Defense audit agency is ‘broken’

Concern over meeting arbitrary deadlines and other job performance goals is at the heart of recently exposed management problems at the Defense Department’s lead contract oversight unit, nearly a dozen former employees told Government Executive in interviews and correspondence.

The ex-staffers at the Defense Contract Audit Agency, who, with one exception, requested anonymity, came from across the country and ranged in experience from just a few months to more than 30 years. Despite diverse career paths, they told similar stories in reaction to a Government Accountability Office report that DCAA supervisors improperly influenced audits, resulting in findings more favorable to a large federal contractor.

The former employees placed much of the blame on top-level managers — including recently retired DCAA director William Reed — for developing a culture beholden to job performance metrics rather than taxpayers.

They described an environment where supervisors got upset when auditors used the wrong font in their reports or made spelling errors, but appeared unconcerned that serious overbilling mistakes may have slipped through the cracks. And they recalled times when incomplete audits were pushed out the door by managers more concerned with meeting internal quotas and timetables than by the quality of their work.

“They don’t want findings. It makes waves and draws attention so they avoid those types of things so the higher ups don’t come down on them,” said one former auditor who spent nearly three years at DCAA’s Minneapolis branch. “The goal is not to save taxpayers money. People are really too afraid about what they will have to do to back up their findings so they try to avoid them altogether.”

Defense Department spokesman Chris Isleib declined to comment on the former employees’ criticisms. “DCAA is taking the GAO report very seriously,” he said, “and is taking every step necessary to review and address the issues cited in the report. DCAA is committed to supporting any review of its procedures and is prepared to take immediate action to fix any problems found.”

Metrics, Metrics and Metrics

While the former auditors said DCAA’s commitment to oversight has been on a steady decline since the 1980s, they generally did not believe corruption was at fault. None of the former employees could cite an example of agency supervisors taking any form of compensation from contractors for looking the other way about a critical audit.

Rather, they emphasized DCAA’s fixation with performance requirements and audit deadlines that they said are not tailored to the size or complexity of the project.

The problems, according to one 25-year veteran of the agency, can be traced back to the Defense Management Information System, a tool for tracking the status of ongoing audits.

The system assigns auditors specific responsibilities and provides them with a set amount of time — usually 30 days — to complete them. It also measures progress against a multitude of very detailed and specific metrics. Staff members at DCAA headquarters in Fort Belvoir, Va., track the output and compare results across regional offices.

“In my opinion, the end result was a massive bloated, soulless bureaucracy that totally lost touch with the taxpayer,” the 25-year-employee said, adding that the pressure to close out jobs and produce clean metrics — or green lights in the stoplight-style measurement system — was intense and often distracted from efforts to question contractor costs.

“In the end, defense contractors big and small are getting away with murder because they know we at DCAA are slaves to the metrics,” the former employee said.

Ivan Juric, a 20-year veteran of DCAA as both an auditor and program manager in the mid-Atlantic region, said the burdensome internal regulations prevent auditors from following their instincts. Audits, he said, are rarely dictated by documents or interviews, but rather by the established budget hours allowed to perform a review.

“There’s got to be a balance somewhere, but I think in DCAA headquarters’ strive to become a lean, mean audit machine, they swung the pendulum too far to the right,” Juric said. “And by doing that they kind of shot themselves in the foot.”

Pressure From Above

Last month’s GAO report also cited cases of intimidation. Supervisors in the California region threatened agency auditors with personnel action if they did not change reports to favor large contractors, GAO said. Unsupervised trainees allegedly were responsible for handling complex multimillion-dollar audits, leading to major mistakes. And, auditors who agreed to speak with GAO investigators reportedly were subject to harassment from managers.

Some of the former DCAA employees interviewed by Government Executive reported similar experiences.

The ex-staffer in Minneapolis said a branch manager once asked him to falsify a work paper because the supervisor was concerned that a report was late. Uncomfortable with the request, the former auditor appealed to another boss who instructed him “not to make waves with these people and to do what I was asked.” He eventually agreed to falsify the document.

The Minneapolis employee later quit, as did nearly half the new auditors he trained with at the Defense Contract Audit Institute.

Meanwhile, a retired DCAA supervisor with 30 years on the job said he was specifically told not to report fraud. “I was told that I could call the 800 hot line if I wanted,” the auditor explained. “However, I was reminded that GS-13 positions were coming open and that if I wanted to be promoted I should not report the fraud outside the agency. I did not call the hot line.”

An auditor who worked in the Maryland region for a brief time in 2005 said he was warned early on not to be overtly critical of contractors.

“My understanding was that when contractors complain about any particular auditor, bad things happen to that auditor,” said the former auditor, who now works for another federal agency. “When I was there I always had to keep in mind how I interacted with the contractor because if the contractor complained about me it would definitely get back to my supervisor. And there would be some sort of personnel actions or retaliation.”

Another former auditor with 25 years of experience in the Philadelphia region said supervisors forced him to change audits because of a fear that delays with a complicated audit could hurt the boss’ chances at a bonus.

Sometimes, the requests were more subtle. A former auditor with 17 years of experience in the Houston and Florida regions said supervisors would sit on critical reports for more than a year. Other times, managers would direct him to give contractors extra time before releasing an audit.

“They would say, ‘Give them an opportunity to support the findings, give them another chance to support it,'” said the 17-year auditor, who eventually quit the profession because of his experiences at DCAA. “It was a repetitive, ‘Don’t you think it’s getting better?’ type pressure. You almost get to the point where you feel you are not going to get anywhere … This agency is broken.”


·                       When I worked for DCAA (The Audit Agency) most of the auditors were hard working and conscientious. Our management did not lose sight of their goal, even in the face of ever increasing bureaucratic red tape. DCAA auditors were, and are, some of the brightest auditors working for the US of A.

·                       First off, having spent 11 years as DCAA CPA Senior Auditor, it is ironic that an internal control weakness finally brought down the “House of Cards that Bill Built”. What happened to the “Periodic Rotation of Employee Duties” to prevent / detect fraud, waste, and abuse in DCAA? Unfortunately, Bill Reed was above that internal control standard. I guess we are doomed to the repeat the past since we learned absolutely nothing from the scandalous J Edgar Hoovers (endless) reign at FBI. How can we prevent this problem from occurring in the future? First, since Bill Reed spent 25+ plus years as DCAA’s Director, we must acknowledge that the DCAA senior executives are thoroughly entrenched in the Bill Reed management paradigm. Furthermore, DoD needs to fully implement periodic rotation at the senior executive level to prevent this from occurring in the future. Periodic senior management rotation will prevent “metrics system gaming” provide increased accountability and ultimately taxpayer savings.

·                       It’s “circle the wagons” time, folks. Mediocrity and incompetance will continue to protect its own. I love the “August is audit quality month” stand-down day idea, where Regional and Deputy Regional Directors will lead discussions on audit quality. Aren’t these the guys who started and perpetuated this mess? If Ms Stephenson wants to give credibility to her efforts to reform DCAA, she had better start with an outside, completely independent group with no attachments to this scandal.