The Department of Defense’s Defense Contract Audit Agency is responsible for performing all contract audits at the department. Unfortunately, the agency seems to have developed an excessively cozy relationship with the contractors that it is supposed to be overseeing. That is bad news for taxpayers because of the massive size of DoD’s contracting activities.
GAO found substantial evidence of widespread audit quality problems at DCAA. In the face of this evidence, DOD, Congress, and American taxpayers lack reasonable assurance that billions of dollars in federal contract payments are being appropriately scrutinized for fraud, waste, abuse, and mismanagement.
For example, while auditing the satellite launch proposal for a major U.S. defense contractor, a DCAA manager experienced pressure from the contractor and the DOD buying command to drop adverse findings. The manager directed his auditors to drop the findings, and DCAA issued a more favorable opinion, allowing the contractor to win a contract that improperly compensated the contractor for hundreds of millions of dollars in commercial business losses.
For example, of the 69 audits and cost-related assignments GAO reviewed, 65 exhibited serious deficiencies that rendered them unreliable for decisions on contract awards, management, and oversight…GAO determined that quality problems are widespread because DCAA’s management environment and quality assurance structure were based on a production-oriented mission that prevented DCAA from protecting the public interest while also facilitating DoD contracting.
At a meeting of Defense Contract Audit Agency staff in California last May, auditor Acacia Rodriguez used a 24-page PowerPoint briefing to describe how she and her co-workers struggled with the Bechtel Group’s “chronic failure” to provide the financial records required to prove tax dollars were being spent properly…If her bosses were upset over the contractor’s foot-dragging, they didn’t show it, according to an auditor who attended the meeting…Five days later, the agency issued a report rating Bechtel’s internal accounting procedures as “adequate,” a passing grade that meant defense auditors could ease up on the company. The report made no mention of the records delays.
There is no way to know how often DCAA withholds payments because it does not keep track. And it has not used its subpoena power in 20 years…In 2007 alone, DCAA performed nearly 34,000 audits covering $391 billion in contractor costs. Of that total, auditors challenged $4.6 billion, or 1.2 percent, as lacking necessary documentation. The question is, how much more could they have caught?
Compared with other federal oversight organizations, such as the Government Accountability Office, DCAA’s return on investment is weak. For every dollar GAO spends, it saves taxpayers $94. At DCAA, the ratio is $5 saved for every one spent.