Partner Post by: Aronson
The Defense Contract Audit Agency’s (DCAA) effort to realign resources and reduce overall audit backlog is certainly paying off. The results of the DCAA’s FY2016 activity report are out, and the numbers tell an uplifting story for government contractors. Below are a series of key findings the agency has released to Congress.
• The DCAA’s workforce of 4,513 employees issued over 4,200 audit reports. The agency examined $287B in defense contractor expenses, resulting in $9.9B in exceptions.
• Officials saved $3.6B in defense spending during FY2016 related to DCAA audits. The agency was able to gain efficiencies by completing multi-year incurred cost audits as opposed to single-year audits, saving approximately 40% of their time.
• Staffing shortages in FY2016 reduced the numbers of total years closed for incurred cost submissions when compared to FY2015. However, the dollars examined increased 20% from FY2015. Through a risk-based audit approach, the DCAA was able to target their audits.
• The time to complete an incurred cost audit, based on the start date, has decreased from 406 days in FY2012 to 138 days in FY2016.
• The average incurred cost backlog is now 17.6 months or 4,677 submissions. The current government hiring freeze has made the projected backlog elimination in FY2018 unknown.
• In FY2016, pre-award audits were completed in half the time (60 days) compared to FY2012 (120 days). In FY2012, the pass/fail rate was approximately 78%/22%, and in FY2016 the pass/fail rate was 90%+/<10%. The shift of more contractors passing the pre-award audit can be attributed to educating small businesses on the necessary components of a passing system.
• The organizational structure of the agency has been realigned to be more effective, including four Corporate Audit Directorates for major defense contractors, three Regional Directorates for mid-sized and small defense contractors, and one Field Detachment for classified work.
• The DCAA continues to prioritize audits based on risk. Higher risk audits have the highest payback to warfighters and taxpayers. These types of audits include forward pricing, special audits and incurred costs audits.
• High-risk audits include significant dollars and poor past performance by the contractor.
Overall, the DCAA has reduced audit spending, audit backlog, and time completing an audit from start to finish. The agency has achieved this by incorporating a risk-based audit approach, improving agency and cross-agency communications, and implementing community outreach programs. Their 2016 activity report confirms that the transformation of the agency is alive and well.
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