DCAA audit assistance explained

Thursday - 11/11/2010, 9:44am EST

Tom Temin and Amy Morris

Click below to hear the discussion on the Federal Drive

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Federal News Radio told you about how the Defense Contract Audit Agency is setting new dollar thresholds for reviews of Pentagon procurements. The idea is to reduce the amount of the number of audits they conduct.

An internal memo says that in most cases, DCAA will accept requests for audit help only for fixed-price proposals of more than $10 million dollars. The threshold for cost-type proposals is $100 million.

The memo was first made public by the Project on Government Oversight.

A Pentagon spokesperson cited in GovExec says the change will actually save money, because it will allow the audit agency to focus on high-risk areas

Of course, this led to even more questions.

While the DCAA declined an interview about the story, they were willing to answer a couple of questions in email.

    Federal News Radio: Of most interest to us is why the threshold for cost-type proposals is being raised to $100 million. We were under the impression that these kinds of contracts tend to be more risky than fixed-price contracts.

    DoD: DCAA is employing a risk-based approach to focus our resources on the higher-risk areas to the Department requiring DCAA audits. Generally, cost-type contracts are higher risk than fixed price contracts during the performance of the contract. However, at the time when proposals are being reviewed, cost-type contracts represent a lower risk compared to fixed price contracts because DCAA will subsequently audit the actual costs for those cost-type contracts during the performance of the contract. DCAA will audit the costs for allowability, allocability and reasonableness in accordance with the Federal Acquisition Regulations.

    Federal News Radio: We're also curious to explore the cost-saving opportunities. How exactly does DoD expect to save money from this?

    DoD: DCAA has plans to use the resources (staffing) that would have been used on audits under the new threshold on higher risk efforts that provide a higher payback to the Department. Historically, the payback to the taxpayer for audits under the threshold has been relatively low compared with cost questioned for audits over the threshold. The additional resources will be dedicated to high payback areas such as high risk proposals, operations audits and post-award audits. In addition, we are working other initiatives with significant payback to the Department. DCAA and DCMA recently launched a joint agency initiative aimed at aggressively targeting contractual opportunities to recover taxpayer dollars.