The results are out and the statistics tell the story. DCAA had a workforce of 4,225 auditors as of September 30, 2011 and released 7,390 audit reports, so let’s do the math: each auditor released less than two audit reports. Well, that’s impressive – no wonder those incurred cost audits are still open! Only 349 incurred cost reports were release in FY2011. How many do you think were submitted in 2011? My guess is a lot more than 349. The average incurred cost audit took 965 days from the start of the audit to the release of the report. YES, contracting community, I feel your pain and the statistic confirm that we have a problem. DCAA claims the lack of incurred cost audits and the time lag in the release of reports was due to a lack of staffing and inadequate incurred cost proposals by contactors – yes, that means you.
DCAA has a plan to “resolve each outstanding incurred cost submission by 2016.” That is a bold statement and, based on 2011’s results, there is a lot of work to do. Their plan includes the following:
- Hiring more auditors
- Revising the low risk sampling process. This will allow DCAA to close out low risk incurred cost proposals. Your proposal will only be considered low risk if adequate, below a “to be determined” dollar threshold, and not include any other “to be determined” DCAA risk factors.
Now onto another topic: let’s talk about questioned costs. DCAA states: “the return on the taxpayers’ investment in DCAA was approximately $5.80 for each dollar invested.” Well, we know based on the low number of reports released, they must be questioning a lot of cost. Here is another startling fact: in 2001, DCAA questioned 2.19% of costs to dollars examined. Fast forward to 2011 and we see that DCAA questioned 9.85% of costs to dollars examined.
The report is a great read for contractors and those who follow the industry, and it confirms what we already knew. On a positive note, the report is the first step in the corrective action to transform the agency – we hope for the better.
To access the full report please follow this link and enjoy your reading!
Please contact Nicole Mitchell at 301.222.8231 or email@example.com for DCAA compliance support.
About the author: Nicole Mitchell, CPA, is a Partner in Aronson LLC’s Government Contract Services Group, where she provides consulting and accounting services to government contractors, including financial regulatory compliance, contract pricing, and complex cost accounting structures.
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