Backlog of Unaudited Pentagon Contract Costs Could Reach $1 Trillion

By BRYAN RAHIJA

It's been almost four years since the Government Accountability Office (GAO) issued a scathing report on the Defense Contract Audit Agency (DCAA)--a key contract oversight agency at the Pentagon--and it's time to ask ourselves whether taxpayers are better off as a result of the "improvements" implemented by DCAA.

If performing audits and saving taxpayer dollars is a measure of success, then the answer is a resounding no. As an article by government contract law professor Richard C. Loeb in the latest issue of Government Contract Costs, Pricing & Accounting Report outlines, DCAA has had a reduction of over 400 percent in audits completed in fiscal year 2011 since 2008—a reduction of nearly 23,000 reports per year. The reduction in audits represents almost $330 billion in contract costs going unaudited in FY 2011 alone—and that doesn't count the growing backlog from prior years.

Meanwhile, staffing levels at DCAA have actually increased since 2008.

According to Loeb, this output is unacceptable:

During the peak of the 1990s “acquisition reform” movement, some contractors and others sought to diminish, if not altogether eliminate, DCAA audits. Contractors no longer need to lobby for these reductions in audit oversight. DCAA has now done it to itself. It is unfathomable how anyone would think that potentially building a backlog of audits of over $1 trillion is acceptable. It is unfathomable how anyone would think that a reduction of over 20,000 audits performed per year during the last three years is acceptable. Spending valuable taxpayer dollars documenting audit results far in excess of [generally accepted government auditing standards] GAGAS requirements should be unacceptable to everyone.

We have to agree—drastic action is needed to cure DCAA’s ills. At the current rate of DCAA'S auditing efforts, the backlog of contract cost audits will soon exceed $1 trillion dollars—an amount that is incomprehensible and will take years to complete, if ever. Based on a reading of DCAA's recent report to Congress, there is no specific action plan to get DCAA back to performing audits. We urge the Secretary of Defense to immediately assess the state of DCAA and develop a comprehensive and timely action plan for corrective action.

As the article concludes:

With the billions of taxpayer dollars that are awarded annually in government contracts, there is a need for a DCAA that conducts both qualitatively and quantitatively outstanding audits. The current DCAA approach satisfies neither consideration. It is time for DCAA to more appropriately balance these factors, rather than merely making sure that all “the appropriate boxes are checked.” It’s time for DCAA to concentrate on its core mission, and conduct contract audits.

Bryan Rahija edits POGO's blog.

Comments

[Simone Kerr]

I see alot of DCAA senior management getting the meritorious service awards and I cannot help but ask "did these people save the government any money by virtue of their actions?" Seriously what did these people do?

I was told by someone that Frank Summers got an award for negotiating the dress code with the unions.

How many meritorious awards will be given out to the many management contributors to the new Facebook page? Some of the posts on there are so pretentious too. "I love working at DCAA, it is an outpost of Utopia although I don't understand why everyone is leaving to work for DCMA after spending years with the agency."

[Henry Porter]

DCAA management has the situation under control, DCAA now has a Facebook page. You can't make this stuff up. The place has imploded and we have high level management holding never ending meetings over a Facebook page. DCAA the joke that keeps the laughs coming.

[Feeling like the 300]

One of my recent audits had one person doing the work - me and six reviewers. My last report got held up for two months while me (only auditor doing the work) and the three reviewers argued over what the charts should look like. (Underline or add a row)Yeah, that was value-added.

[Marshall Duncan]

I just watched the trailer for the movie 'Chasing Madoff'. I think if you substituted DCAA for the SEC and any large defense contractor in Bernie's role you would get a very similar, if not identical, movie.

[audit geek]

DCAA is totally out of control now. Uncounted layers of review yet 1/3 of our audits still cann't pass our own quality reviews. SES members who think leadership is presenting headquarters developed powerpoint slides to the staff. A growing number of 13s,14s and 15s will apparently little to do. More promotions to the top with little if any field experience. We can not even let an MRD be issued without revisions every 5 minutes... we perform nothing of value for anyone.

[Taxpayer]

DCAA is gone. I retired early because I could not stand to see the mess that DCAA has created. Management is out of touch with the frustrations of the auditor. Management will take the easy way out and turn their head to costs that should be questioned if the contractor is a "big guy". If the contractor is a "little guy" then they cream them.

It is sad.

[No More Posts]

No more posts because DCAA is now totally irrelevant. DCAA is an upside down pyramid of top heavy management and a few workers. DCAA management has no clue how broken the agency is because they are too busy managing the DCAA bureaucracy. The business of DCAA is DCAA. It has absolutely nothing to do with audits anymore its just a management club. GM failed because of its top heavy bureaucracy. They failed because they could not make a profit anymore. DCAA will not fail because the DoD budget is a Black Hole. Plenty more where all that money came from.

[Bill Read]

Alas, my prediction has come true. No more blog comments and the HQers are off the hook. Until the next time....

I do think we might have set a POGO record for comments to a blog article, though. I guess that counts for something.

[Mr. Pink]

from the Ghost of David E
"If you want to see why DCAA will fail, look at the newest person named as RAM in NE region. There is a history of abusing employees along with an inability to get audits out the door. What in god's name were they thinking?"

I have also multiple confirmations that this is another socially dysfunctional mean spirited person with no life outside the agency.I guess they haven't changed their values in the promotional standards.

[Roger Thornhill]

I mean to write $600B in relation to the incurred cost backlog, not $600M.

[Roger Thornhill]

I think DCAA is on the right track in just sampling the incurred cost submissions under $250M for which risk is low. For new contractors, auditors are still going to perform the initial audit to determine if they're qualified for low risk sampling and after that, provided they stay low risk, why bother to audit every submission? Even the IRS does not audit every high dollar 1040 from a taxpayer with a relatively clean record. DCAA's sampling cuts off at $250M. Above $250M, every submission is audited. I would go a step further and sample $250M+ contractors with clean records. The incurred cost backlog is something to the north of $600M and growing. Sampling is the only solution. I don't see DCAA getting hiring authority to hire several thousand more auditors so every submission can be audited, especially when other regulatory agencies are being forced to cut back. However, the audit steps should not be expanded to in some way compensate for auditing fewer submissions. If you read Beason Nalley's July newsletter, ex-RD Michael Steen has an article titled "The New Challenges Coming from DCAA's Restarting Audits of Indirect Cost Rates for ICPs" (http://www.beasonnalley.com/rgc_files/govnews_july12%20B&N.pdf). Steen describes some very aggressive audit steps that, aside from probably not resulting in sustained questioned costs, would add substantial time to the audits.

[To Fitzgerald Crony]

DCMA did not take our work. DCAA could not get a job done period, so DCMA took the work in house themselves. DCAA can't do anything anymore so no one asks for our services. I hope someone high in DoD can see how broken this system is. When do the RIF's start at DCAA?

[Weazer]

Pogo readers-when dcaa reports on the number of incurred cost audits completed, make sure you get the number that were waived with no work done. Don't let our mgmt fool you. As an auditor I'm astonished. Our quality killed our office for not doing enough testing in the low dollar incurreds. Now we are writing off audits based on lack of professional judgement audits. Now Fitzgerald says no testing at all! What's the story?

[Fitzgerald crony]

Fitzgerald has killed employee morale. What are the branch offices going to do? With the waiver and sampling process there is almost no work left, especially with travel money being a problem. What are the branch offices going to do? Dcma took our work away. There are no promotion opportunities unless your one of fitzgeralds cronies from army audit. It's clear he supports the good old boys club mentality. Those of us who worked hard at dcaa and spent long hours - we don't matter. Cause if it's you versus someone from the outside - you won't be picked for promotion. Why will dcaa be needed soon? There are hardly any proposal requests. We are waiving incurreds. Reimbursables are declining. Dcaa is no longer relevant. Thanks to Fitzgerald and his army audit cronies that have no clue. Are our jobs even secure?

[What I See]

I think Bill Reed is correct. No one gives a hoot about these posts. Look at the former Western Region Director, what are his duties now at DCAA HQ? For allowing a monster to run wild in California while he was asleep at the switch, he is awarded with a no duties assigned job at HQ. You don't think the ruling elite at DCAA see this. Where is Fitzgerald? He has been very quiet of late. Has he started on his 20 year working retirement like Bill Reed or is he working on retiring and returning as a re-hired annuitant?

[Bill Reed]

I Don't think DCAA HQ types give a whit about any of this latest buzz about our NOT getting incurred cost work out. The strategy appears to be, " just remain silent on the blog comments" and they'll just fade away. And I think that is not a bad strategy, since the comments to this article have fallen way off. As stated earlier, I don't have an answer for our current woes. But aren't we paying some big SES salaries for that expertise? I'd like to see Paul Phillips, Eastern Regional Director step up to the plate and provide some leadership advise. Ken Saccocia, I'd, Like tohear from you too. Are we getting our problems solved, or not?

[Flow]

Another RAM, Re-Hired Annuitants. DCAA just keeps adding more layers of non value added management. DCAA is the classic example of too many Chiefs and not enough Indians. Merge DCAA with DCMA now. At least DCMA has some perspective while DCAA has lost all sense of reason. Issue no reports, not a problem in DCAA because no one in the higher levels will ever question an office manager who never issues reports. Do you think any of these Regional Directors even understand GAGAS? An office manager can just say we have to follow GAGAS and the SES leaders will say ok fine because they have no clue what GAGAS is. DCAA is all about creating layers of management and no one cares about completing anything.

[Mike]

It is sad that DCAA fell so far under Director Fitzgerald. He was suppose to be the "fresh eyes" and he turned out to be blind to all that illed DCAA. There is no leadership and no direction. It is a free-for-all in the FAOs where some managers are so paralyzed that no reports are issued and others are pushing incurred cost reports out the door at record speed with poor quality. There is a reason there are 57 comments (now 58) to the POGO blog. DCAA is at an all time low and we are no longer effective. POGO, just curious, is 58 comments a record for a POGO blog? How about a follow-up posting on the comments and what does POGO plan to do with DCAA.

[ghost of david e]

If you want to see why DCAA will fail, look at the newest person named as RAM in NE region. There is a history of abusing employees along with an inability to get audits out the door. What in god's name were they thinking?

[Lady GAGAS]

DCAA is at a very awkward moment because as an agency it cannot simply do the work, supervise the work, manage the workforce and provide a service to DoD acquisition community. DCAA is an agency lost in the wilderness of mirrors. The redundant failsafe solution is complete. DCAA will not achieve their GFY productivity goals without taking shortcuts and WAIVE a VIRTUAL magic wand in order up the completed audit count. Little ironic, don’t you think?

[Auto Pilot]

Joe, great post you said it all. Susan, perhaps the RAMs have finally figured out that we have to do something? We have to do something timely. Anything! We can't spend months on risk assessments. At least they are making decisions. Maybe after 3 years these RAMs have figured out that Fitzgerald just does not get it and they have to do things their own way? If this is the case god bless them. Fitzgerald has ruined this place and can walk away with a sweat pension. What does he care? Maybe some more rehired annuitants feeding at the Trough will help. I think even the people who drank the DCAA Kool Aide have come to the conclusion that DCAA is broken beyond repair.

[Susan]

Mr. Fitzgerald, you are sending a huge mixed messsage to the FAOs on the incurred cost backlog. In your letter to Fed Times on June 17th, you said "Choosing the right audits and doing them comprehensively is more effective and beneficial than simply completing more audits."

However, on the incurred cost audit backlog, we are being told by management to hurry up and get as many done as possible even if that means cutting scope. Last Friday, the RAM and manager met with the supervisors and technical specialists in my office (I am one of the supervisors) and we were told that we are not making any progress on the incurred cost backlog. More audits were added this year than we are able to complete. The same as been true since 2009, the year you became director. Our backlog is going at a greater rate than we can complete it.

The RAM told us that we have to complete more audits than we are added to the backlog each year and they changed our proposed program plan to vastly reduce the hours per audit to ensure that it gives the appearance we are planning to complete more audits than we physically think are possible.

When we asked how we were going to complete more audits, they told us to cut scope and do the bare minimun, not only on incurred cost, but on any audit. When we asked about your comments, the RAM said that the Director's comments were to satisying the public and Congress and has nothing to do with how we need to operate to complete the necessary audits.

Talk about a mixed message. What is it, do you want the incurred cost completed or do you want these super thorough audits regardless of the savings and regardless of how many are completed. I agree with the posting about "the extreme DCAA." You are running in a panic and now the field is paying for it because we do not know what you want. More audits or a few audits even if the backlog grows to a trillion dollars.

You need to send a very clear message to the field because right now, the RAMs and managers seem to think that all that matters is increasing the number of audits completed each year.

[Joe]

Director Fitzgerald is panicking over the incurred cost backlog and is making very poor decisions. He speaks of changing DCAA's culture from "production line" to " quality audits, however few it may be," but then makes a horrible decision to bring back as a rehired annuitant the very supervisors that were responsible for the culture and the poor quality audits. A rehired supervisor in my office had assignments that were deemed to not meet the auditing standards by the IG peer review about 6-7 years ago (the last year we had a peer review and although the agency passed the review, the assignments performed under this supervisor did not pass). Didn't anyone check whether the supervisor had quality issues in the past?

In my region, I worked for one of the rehired supervisors when he was a supervisor over 5 years ago. He was obsessed with the metrics, due dates, and productivity. He reduced my rating from exceeds to fully in 2004 when I issued a proposal audit in 31 instead of 30 days and I went over budget on one assignment by 10 hours. I have the written appraisal narrative to prove these points. I had findings on nearly every audit and as a result, I generally needed additional budget hours to draft the report and complete the workpapers. His theory was to complete the workpapers on my own time because he did not want to blow his productivity metrics. The manager is still the manager of the FAO today and it is no wonder he brought him back, they are buddies. However, as a supervisor, he was (and still is) a complete bully.

The supervisor had a history of grievances and EEO complaints filed against him. And yet, Fitzgerald brings this type of bully back to DCAA. WHY? It makes no sense other than the manager wanted his buddy back.

Fitzgerald, you have really lost it as Director. One day you say you want to change DCAA and the next day you rehire the very bullies that got us in the mess we were in. The supervisor is no different today than when he left. The first thing he said was how many incurred cost audits do we need to issue by what date. "We will meet our due dates, or else!" Is this the type of supervisor you want working in DCAA? The mess at DCAA of today is on your hands. It has been almost three years and you can no longer blame any one but yourself.

I have been with DCAA almost 30 years and the rehiring of retired employees that were responsible for poor quality audits before they retired is the worst decision that has been made by a DCAA Director. Fitzgerald, get your story straight, do you want to change DCAA or are you now in panic mode and just want to complete the audits no matter what it takes and regardless if the audits meet the auditing standards? You have lost what little credibility you had.

[Mary]

Re-Hired annuitants, all former high grade employees so out of touch with what's really going on. Absolute greed in the need to double dip and most of them have no life outside of DCAA. Why don't we bring back Bill Reed I'm sure he would like to mentor some trainees and talk about his "vision". POGO please publish the names and duties of these "Double Dippers." I'm sure all the senior DCAA management are looking to game the system doing the same thing and they are the ones who built the monster.

[Michael Hubbs]

Basically we doubled the pay of the people that caused the scandal exposed in 2008 by hiring them back as retired annuitants. They were gm-14s and 15s making 130 to 140 thousand? Now they make almost twice that while doing make work nothing jobs? Can we get a report on this?

[Jersey Shore Mike]

IN THE MID-ATLANTIC REGION WE HAVE 3 REHIRED ANNUITANTS. THE NEWEST ONE IS A FORMER RAM, HE IS DOING AUDIT WORK, BUT HE NEEDS A HELPER AS HE HAS NO SKILL IN DOING ELECTRONIC WORKPAPERS OR AUDITING, HAS NOT DONE AN AUDIT IN OVER 20 SOME YEARS. ANOTHER ONE IS A FORMER HQ GS-14 NOW WORKING AT THE REGIONAL OFFICE BABY SITTING NEW HIRES FOR THE REGION AS THE PERSONS TAX BUSINESS IS SLOW THIS TIME OF YEAR. IT IS A PERSONNEL FUNCTION, BUT WE CAN PAY FOR A BABY SITTER FFOR NEW HIRES AT 100K PLUS. THE LAST ONE IS IN THE WILDERNESS OF WESTERN MARYLAND & WE ALL HAVE LONG SINCE FORGOTTEN WHAT HE WAS DOING. WHY ARE THEY NOT WORKING ON SO CALLED HIGH RISK FORWARD PRICING, CLAIMS OR TERMINATION PROPOSALS WITH ALL THEIR SUPPOSSIVE AUDITING SKILLS. OPM!

[Can't live on my 120K Pension]

POGO please FOIA DCAA for all the retired annuitants and ask what their pension is, what the current salary is and finally just what do they do? Someone investigate this massive fraud. We want names, places and duties.

[T. Hartley]

Somebody needs to investigate this hiring of retired annuitants scam. DCAA is hiring back retired RAMs making $125 thousand pension and paying them another $125 thousand in salary to do what? Somebody should FOIA their work products,are they doing anything? Again DCAA seems to care more about themselves then the warfighter or taxpayer.

[William Tell]

DCAA is going to end up like Enron/Arthur Anderson and implode shortly. When OWD runs the 9 month statistics for DCAA on 2 July, there will be bedlam at HQ. The Virtually Incurred Costs teams are not getting much done.

DCAA now has more GS-15 RAMs (Ready another Marriot) more rehired annuitants, more GS-14’s, GS-13’s and more offices than the agency has had since its inception in 1965 and for every 1 success there are 50 plus failures. Plus DCAA just added another bizarre mentoring position for Mr. Daneke, who is a GS-15 RAM without a CPA (there a couple RAMS without CPA’s these days), which is actually a job, our personnel office should be handling.

Here are some easy ways to keep DCAA auditors from leaving the agency, give the staff time to go to the gym like DCMA does, use the 59 minute rule like DCMA does and last but not least provide an opportunity for the whole audit staff to earn a working grade GS-13. The reason DCAA does have a working grade GS-13 audit position is because it would cut the empire in half to pay the higher salaries. DCAA denies that there any working grade GS-13’s position in any other Federal organization, just check USA JOBS and one will see them listed.

[Warfighter]

Despite Patrick Fitzgerald's claim, the very last concern of DCAA is the warfighter and least of all the US taxpayer. DCAA is about a bunch of bureaucrats in absolute KYA mode. No one can make a decision and you can't run an agency by ever changing MRDs. Sure the DoD IG and GAO deserve some of the blame but DCAA has no leadership. At the ground level in DCAA supervisory auditors look for every excuse to not do an audit or cancel the audit. DCAA will implode of its own doing, the only question is when not if.

[Mariana Hill]

I think Fitzgerald's letter in response to the June 11 editorial was written by Dan Hawkins.

In my opinion Fitzgerald made one valid point when he stated that more audit reports do not mean more savings.He is absolutely correct on that point.

Then he stated "But the editorial calls us out for being “thorough to a fault.” I respectfully disagree. The Defense Department, war fighter and taxpayer expect nothing less than for their auditors to vigorously protect their interest. I am proud to say that is exactly what our workforce is doing."

Does he really believe that our war fighter and taxpayers want us to spend more time on making unnecessary perfect workpapers to pass a CIGIE exam and have dozens of CIGIE, IRR and IG reviewers spending their time looking at the files for compliance? Or would our time be better spent looking at contractor files? Should we spend countless hours analyzing our DMIS charge numbers and time sheets or would we be better off looking at contractor time sheets? Do you have any idea how much bickering goes on over what charge numbers to use on the DCAA time sheets? We definitely spend more time and resources having management analyze our own time charges then we do analyzing contractor labor charges.

The current mission of DCAA is to make audit files that will pass oversight inspection and not to save the government money. That is the real reason why we are doing less audits. Audit managers will not complete a file and issue reports because once they do then the file will be eligible for a GAGAS compliance review. So if we have an opportunity to issue a report and save the government money or not issue a report and avoid a possible GIG what do you think the courageous management of DCAA will do ?

If I improve my car's fuel efficiency 100 percent but I don't drive it anywhere because the road conditions need to be perfect or I am afraid of getting a traffic citation then have I really accomplished anything?

Many auditors voice their concerns in these blogs because they have witnessed other auditors who were openly critical of DCAA management or procedures were retaliated against. Then to add insult to injury even after the GAO issues multiple reports on management abuse and retaliation there is no accountability or disciplinary action.

I honestly want to help and I believe that I have ideas for a solution but would anyone listen or will I just be another casualty of retaliation for suggesting that the status quo is unsatisfactory?

[Nicks]

Couple items that DCAA management would prefer you all not know about DCAA's compensation team. The DCAA Comp Team does not have a mathematician or statistician on the team; they purchase several compensation databases which they use to calculate salaries. 90% of the team's results are done by rote. They receive a request from the field to review a contractors 3-5 highest paid executive and they plug those figures in their compensation databases and it provide the compensation auditor with computer generated results which they place on their proforma work papers which adds a range of reasonableness of 10% and they send it back to the field. In other words there is no analysis of the figures derived from their compensation data bases. The compensation team is very important to DCAA because it is a honey hole of a large amount of easy questioned costs as 99% of the contractors do not challenge the results when it is presented by field auditors. In the JF Taylor case Bentz the DCAA supervisor of the compensation team could only comment on the rote process DCAA uses in calculating questioned cost and could provide not any description of detailed analysis of the questioned cost calculations. Put any DCAA GS-12 compensation auditor who performs these reviews on the stand and you will see how little they know except for GIGO. DCAA has now lost 2 compensation cases (JF Taylor & Metron), so contractors should challenge all DCAA calculations and consider a class action type of lawsuit and end the easy questioned cost by DCAA. Another item about DCAA questioned costs statistics provided to Congress. DCAA includes all of every contractor’s voluntary removal of potentially questionable costs. So if these voluntary questioned costs were removed from the DCAA stats the current figure would go down substantially. More news, if DCAA does not complete their new scheme to not audit small incurred costs claims they are finished. Watch for more on Low Dollar Incurred Costs audits. Lastly the letter was ghost written that had Director Fitzgerald’s name on it in the Federal Times at the cost of $25,000 to $50,000 when you consider all the auditors who had to work on it and burn the midnight oil.

[Sarah Belding]

DCAA is at war with a monster right now and that monster is a threat to the very existence of DCAA. More importantly this monster directly harms the taxpapyer and warfighter. This monster is considered so menacing that many in DCAA have sleepless nights,review workpapers exhaustively and send e-mails at all hours of the night to each other to try to avoid being victimized by the monster. Health care costs for stress and anxiety medicine for agency personnel have skyrocketed. I can't even get a Zoloft refill at the local pharmacy by a major DCAA office because they are always out of stock. This monster is scarier than vampires, the Jersey Devil or Freddy from a Nightmare on Elm Street.

The monster DCAA faces is "FEAR OF THE GIG". Yet amazingly the GIG itself is actually relatively harmless. After failing an audit one auditor and his supervisor expected to be waterboarded or other worthy punishment. But they got paid that week and still had their jobs.I expect they will get promoted and more awards too.

The "FEAR of the GIG" however has resulted in total paralysis, stress and agony throughout the agency.

Mr. Fitzgerald had a golden opportunity to address the real problems at DCAA and redirect audit resources to provide effective oversight over taxpayer dollars.Instead he chose a new meaningless metric (faultless workpapers) to replace dollars per hour audited.He also made no meaningful management changes which was the real heart of the problem to begin with. The management promoted atmosphere of fear remains.I was told that some of the young auditors that testified for the GAO were in tears out of fear of retaliation for telling the truth.

The WR DRD that was behind all of the PIPs harassment and retaliation was allowed to stay on 2 years and retire.The Western Region director was "promoted" to Assistant to the Assistant of the Director? The other supervisor referenced in the second GAO report was also promoted to "assistant to the assistant of the Deputy Regional Director or something like that.

We have people at Headquarters who have never done an audit making policy and lengthy audit programs that are unnecessarily long with some seem larger than all of the Harry Potter books combined. Then the field auditors spent their time documenting why so many steps to the audit program do not apply.They were required to make an entire workpapers explaining that the other direct costs audit steps did not apply because there are no other direct costs in the proposal.How insane and wasteful is this? How does this help the save the government money?How many auditor hours were spent making workpapers documenting why audit steps did not apply? Now there is a metric I would like to see. Why don't we total up all of those workpapers and figure out how much auditor time could have been spent with eyeballs on contractor records instead of documenting every irrelevant step in an audit program.

Some argue that there is no goal for "perfect workpapers" and that we only seek reasonable compliance with GAGAS.But the workpapers are finessed to perfection and flawlessness for fear that any oversight group may question their adequacy and subject you to the ever dreadful monster of monsters "the GIG".

The entire emphasis now is avoid the monster, the GIG.It would be ok to approve $400 for a hammer just make sure the audit program and workpapers have all the required documentation properly completed.

Stay tuned though, I hear there is a new monster on the horizon called "mandatory completion of cost incurred audits". I hope this monster is less dreadful and fearful than "The GIG".

[Mike]

Regarding Fitzgerald's opinion piece in Fed Times, I find the response very light weight and lacking substance. I differ with several of Fitzgerald's points:

1. Net savings - FY 2011 net savings is not an accurate measure of savings achieved by audits actually issued in FY 2011. In general, there is about a year (or two) lag between the issuance of the audit report and when DCAA can recognize net savings. Many variables come into play including when the negotiations are completed and when the price negotiation memorandum is received and processed by the DCAA office. In my office, in general, FY 2011 net savings represents audits issued in 2009 and 2010. About five years ago or so, my office received four years of PNMs in one year from a major buying command and boy did our net savings look good. Even Bill Reed recognized net savings was not a good performance measure and did not use net savings for the GPRA metrics. Let's face it, Fitzgerald's $3.5 billion in net savings has little do to with his new approach to better auditing implemented in FY 2011.

2. More audits may not mean more savings - REALLY? Auditing more dollars will mean more savings. What is Fitzgerald thinking? Auditing $500 billion each year will have greater savings than $125 billion.

3. No mention of internal controls or CAS - Fitzgerald makes no mention of the importance of internal control audits (of which we no longer perform) and that these audits safeguard against contractors proposing unreasonable prices and protect against unallowable, unallocable, and unreasonable costs. But there are no "net savings" associated with these assignments so Fitzgerald sees no value. There is a correlation between adequate internal controls and questioned costs. Better controls will result in less questioned cost. But Fitzgerald does not care about protecting taxpayer dollars, only being able to provide a big net savings number.

4. "To a Fault" - yes Fitzgerald, your policies are to a fault and are wasting taxpayers dollars. This comment shows how out of touch you really are with DCAA.

Bottom line - instead of rebutting the Fed Times reporter, he should have taken the opportunity to discuss his plan for getting DCAA back in the business of performing audits and for completing the incurred cost backlog. Instead he took the defensive position and it makes him look argumentative and that he does not recognize the horrible state of DCAA. Fitzgerald, you are in denial and your opinion piece demonstrated that you do not understand the value of contract auditing.

[Dear M]

Dear M. It appears you support discrimination of what you refer to as old timers. Discrimination is what I read in one of your posts. Is this how upper mgmt sees the older members of the workforce?

[Bill Reed]

I agree with Ayn Rand, Fitzgerald's response was pretty tepid. But I will give him credit for at least weighing in on the matter. The poster "The Extreme DCAA" makes the most cogent point, in my opinion. We should not be bragging about how much questioned costs we produce. Our goal should be very low questioned costs because we've forced (for lack of a better term) the contractors into instituting strong internal controls so they no longer propose or claim unallowable or unreasonable costs. If we accept that concept, then all of the criticism from
Richard Loeb is legitimate. That is, we're leaving many dollars out there not being audited. Being an Agency of accountant type, we've never been comfortable with the unquantifiable amount of cost savings we generate simply by being the "cop on the corner". Thus, we cling to the somewhat misleading stats of questioned costs and sustained questioned costs to tout overall tax dollars saved. Oh well - I'm in the group of old timers that will just roll with the flow until I can retire in a few years. I'm still proud about having worked a career with DCAA, but I sure wish we'd stop getting all the negative press attention.

[Ayn Rand']

What do people think of Mr. Fitzgerald's respone to the Federal Times editorial? What's the old saying about lies and statistics? I don't believe any of it. Mr. Fitzgerald does not know the depth of short sighted thinking at all levels of DCAA. Whoever wrote that editorial reply for Fitzgerald did a pretty weak job. That weak response does not address the mostly hard working people in DCAA who are let down by elite management who have their own agenda.

[James Duncan]

Does anybody remember this hearing ?

http://www.youtube.com/watch?v=CnuiQhpAqf0

At 2:50 into this video Senator McCaskill asks if a supervisor was fired? Can anybody tell me what has changed since the hearings? And what happened to that supervisor ?

When Mr. Fitzgeral arrived instead of firing the bad management responsible for the DCAA mess he gave them Meritorious Service Awards.

[Ed]

Fitzgerald needs to reassess the vision for DCAA of the perfect GAGAS compliant audit. It comes with a price, not only in the excessive hours to complete the audit, the inordinate number of elapsed days to issue the report, but now industry is stating in public forums that overhead costs are being driven up due to Government compliance. Check out the blog on the website Apogee Consulting that mentions the comments made by Lockheed CEO Bob Stevens. In this age of driving down costs, DCAA cannot afford to be viewed by industry as driving up overhead costs. Remember FASA/FARA days of the 1990s and reducing Government oversight? DCAA was on the chopping block for putting excessive compliance requirements contractors. We are right back to those days, but this time, our GAGAS compliance obsessive Director has gone way beyond reasonable requests from contractors.

There are various examples that I have seen in my office where we are directly responsible for unnecessray increased costs to contractors:

1. We reject forward pricing proposals for insignificant items. Fitzgerald, proposals are an estimate and sometimes the proposals are not 100% compliant with the FAR when submitted. We should be the 80/20 rule. If it is 80% compliant, that should be enough to get the audit started and obtain the rest of the information during the audit. It costs money to resubmit proposals and it costs critical time in the procurement cycle. Procurement is not about DCAA's perfect audits, it is about awarding a contract on time with fair and reasonable prices. Our customers and contractors cannot afford to meet our excessive requirements.

2. Requirement to verify original documents. We have been told by our regional office through HQs, that we must verify the original documents during an incurred cost audit. It is bad enough that we are 5-6 years behind in the audits, but now DCAA management requires that we verify the conversion of original hard copy documents to scanned documents. How crazy is this requiremement in the era of paperless business. There is no GAGAS requirement to verify original hard copy documents. This costs contractor storage costs and time to retrieve original documents. Given the backlog is growing each year, this requirement appears absurd and wasteful. Not to mention the costs in labor in reconciling original documents to scanned documents. By the way, I have yet to find an issue with scanned documents.

3. Backlog of incurred cost audits. The longer it takes to get to the incurred cost audit, the longer the audits will take. Knowledgeable contractor personnel will not be available to answer questions. Time and money will be wasted to audit the growing backlog (once we actually get to the backlog).

Fitzgerald, you need to get out ahead of this one. With industry on the war-path of increased overhead costs due to increased Government compliance, no amount of "GAGAS compliance" will matter. DCAA will be done away with, if not in actuality, then by customers just not requiring DCAA audits and/or the FAR not requiring audits. Any way you look at it, we cannot continue down the path of being so obsessed with GAGAS and going way beyond the requirements that we are responsible for increased prices. You may pass the peer review, but you will lose the war if you are viewed as an impediment and source of increased costs for industry. The comments by Bob Stevens is just the beginning.

[Voice of Reason]

Yes Pat Fitzgerald as the Director of DCAA has to follow GAGAS and he can't manage by Blog Posts but as the leader of the agency, he has to be aware that DCAA has become a mess. DCAA cannot do forward pricing audits to GAGAS!!! Does anyone honestly think that six months for one of these audits is effective? Somehow, Fitzgerald as our leader must convince someone in DoD that GAGAS cannot be followed for these audits. This can be done, but frankly I don't think he or his "management elite" care. The DoD IG and GAO are cluess on the GAGAS count. Both the GAO and DoD IG, miss the point of the need for timely audits. We are now in the perfect work paper business. Layers of management worried about hyper linking the fraud risk indicators to audit steps, re-writting detailed Purpose, Source, Scope, Conclusion steps in multiple places. The APPS packages are redundant and the canned audit programs are poorly written.

As for Dina E, you hit the nail on the head, DCAA management will never address a problem, abusive or someone at a high level who never does their job.

[Dina E]

To understand the problem at DCAA read the linked GAO report.

http://www.dodig.mil/audit/reports/aporeports/D-2011-6-003.pdf

GAO Report No. D-2011-6-003.

Even after a GAO report publicly exposed high level management promoting supporting a mean spirited and sadistic supervisor there was no actions taken or accountability. All the managers and everyone named in the report received high ratings, awards and promotions. Auditors that complained were punished.

[Bill Reed]

Well, ya know I jusr went back and read the Agency's Report to Congress.
And I think they did a pretty good job of spinning our results. I understand Dr. Loeb's spin on the case, but don't you negative bloggers get the fact that DCAA is trapped by the requirement that we comply with GAGAS? We could certainly crank out forward pricing audits in 30 days (like the old dayys) if we weren't held to GAGAS standards. I have copy/pasted several of the comments on this blog to the anonymous feedback page of the DCAA intranet site. Their silence has been deafening. So I assume that they think all this media buzz is not worth their attention. Fitzgerald told me personally that he could not manager an agency on the basis of blog comments. I'm note sure what the answer is, but I encourage all of you with an interest in this problem to continue commenting. I'm pretty sure the management elite is monitoring the POGO cimments. Maybe we can make a difference. Let's hear from you!!!

[Roger Thornhill]

I think the comments here generally show that the field auditors can still generate a lot of good ideas. However, highly experienced people are leaving in growing numbers, so the body of knowledge as to how the correct the situation is being rapidly eroded. Two or three years from now, another such article won't generate anywhere near as many comments as this one did, because the Agency will have lost much of its talent pool (see "Apogee Consulting, DCAA") and because the current situation will be accepted as the norm among the younger employees. On another point, I spent more than 25 years in the field and some of the audits mentioned by other posters are really not all that useful. Among these I would list operation audits, ICAPS audits (other than accounting and billing, which are hard to do without), employee floor checks and purchases existence & consumption (MAARs 6 and 13, respectively). ICAPS are a great time waster; I saw an estimating system audit drag on for four years, off and on, with hundreds of hours charged, and then cancelled. The current MAARs that I performed seldom resulted in any significant findings and I considered myself a reasonably thorough auditor. I've done hundreds of MAAR 6s and can recall only one case of actual mischarging (and that was in Georgia - the country); sloppiness, yes - you see that frequently with manual timekeeping systems. The current MAAR audits do result in some level of comfort, but the audit steps are so elementary that they seldom result in significant adverse findings. I also think we're over-doing public voucher reviews based on the scarcity of findings. The Agency would do better to stick to its bread and butter audits: Forward pricings and incurred costs, and try to get away from GAGAS whereever possible.

[Fitz's Farewell Tour]

Well if Fitzgerald plans to retire in October, perhaps he should be honest with the DCAA employees and address the problems the agency faces and give his take on the dysfunction. Somehow I think he probably is more concerned with building additional Marriott points to use upon leaving the government. He seems like a nice fellow but he has no idea how miserable DCAA has become for the average worker.

[Zane]

1) DCAA auditors use more sick leave than any agency in DOD. Do people who enjoy their work take excessive sick leave?
2) DCAA has not issued guidance on audits with old/stale work papers because over 3000 audits would have to be cancelled or reworked, costly millions of taxpayers dollars.
3) DCAA's staff is comprised of 50% of the auditor staff has less than 10 years experience and another 40% have over 20 years experience and only 10% of the staff has between 10 and 20 years experience, a whole generation has been driven out of the agency.
4) The agency has 6 regions and a headquarters filled with auditors with outstanding ratings who do no audits. These auditors do not want to get their hands dirty auditing as that is where one gets into trouble. Make DCAA close 4 of the regions and save millions in taxpayers dollars and force these highly rated auditors to do audits, reduce HQ staff by 75%. Let the HQ highly rated auditors do some work in the field.
5) Get rid of the rehired annuitants, they add nothing to the auditing equation and save the taxpayers another million dollars; these positions are based primarily on nepotism.
6) DCAA is hiring anyone who walks in the door and they are being paid for by stimulus funds. Consider the ramifications?
7) DCAA is wasting thousands of hours auditing future estimates as GAGAS audits; why?
8) Finally no one in DCAA knows what target one is supposed to hit while doing an audit, there is nothing but contradictory guidance between HQ, Regions, RAMS and the field.
9) Lastly our director seems like a nice chap. When he retires in October he will have accumulated so many hotel and airline points visiting all the DCAA offices he will have a good time traveling for free for several years.

[Time Waster]

The post by "The Extreme DCAA" sums up the situation pretty well. We can't treat each and every audit as a stand alone audit, without looking at what we have done at the company in recent audits. Why do a risk assessmnet in the first place, if we consider everything "High Risk." DCAA senior leadership needs to do a one month "Risk Assessment" of DCAA and what the purpose of the agency is. They need to address the bloated and overkill audit programs. This is what the DoD IG and GAO found problems with. People were skipping steps becasue they were in many cases "not applicable." I give this one example of the time wasted in DCAA and I have seen it over the course of my career. A supervisor going back and forth (all day) with an employee over the time earned for travel comp. time. The supervisor went on and on over how to calculate the hours earned on the crazy form needed to document the hours earned. The difference was one hour of comp time but this supervisor wasted one day of their time and the workers, over one hour of comp time and how to properly fill out the form. Small example but it speaks volumns to the small minded, time wasting DCAA bureaucracy.

[The Extreme DCAA]

Through out my 30+ years at DCAA, I have learned that we are an agency of extremes. In the 1970s, it was about defective pricing and operations audits. We performed hundreds of these audits and now, virtually none. The 1980s were about the incurred cost backlog (sounds familar) and CAS compliance audits. The early 1990s were about the universities and the mid-to-late 1990s were about "teaming with industry," IPTs, and PWTs. The early 2000s were about productivity and metrics (a reflection on the GPRA required performance metrics and massive budget cuts). Let's not forget Enron and the increase in financial capbility audits and risk assessments and the MOCAS brownout and the hurry-up and get the contracts closed initatives. In all cases, we always went to the extreme and some would argue, over did it and went beyond what was required.

The latest crisis is GAGAS compliance. Again, we are going to such an extreme position that we are not completing the required audits. I have to admint that the current situation seems much more extreme then others and is really damaging to the audit environment. I have to agree with the comment about the lack of real-time audits and the effect it will have on the incurred cost audits, once we get to it. Definately most incurred cost audits will be qualified due to lack of real-time floorchecks.

Fitzgerald, please step back and assess the state of DCAA. All these comments mean something. Just because this was your idea of fixing DCAA, does not mean that it is correct. Just look at our backlog and lack of internal control audits, audits of compliance with the cost accounting standards, labor floor-checks, etc. The lack of these audits will definately lead to an increase in improper payments. Get out of the mentally of focusing on the audits with the most questioned cost potential. You are missing the forest for the trees. Without audits of internal controls, the data may be meaningless. There is a reason we are having a higher percentage of questioned cost on some forward pricing, we are no longer auditing the estimating system and contractor procedures are becoming more lax. Let's correct the issues with the proper controls.

In an environment with effective internal controls, our questioned cost should be very low. But you have it backwards. Remember that there are many proposals that we do not audit. We need to ensure that the prices are reasonable on all proposals, not just the ones we audit. You have lost sight of the purpose of DCAA (or perhaps never truely understood our purpose). It is not to see how much questioned cost we can get, but to ensure that contractors have effective internal controls in place to ensure fair and reasonable prices and allowable, allocable and reasonable costs. Period. Understand?

[Mike]

The author of the article, Professor Loeb, was on Federal News Radio on Friday, June 1st. He did not bash DCAA just for the sake of bushing, but rather made the point that DCAA has lost its way in the quest to avoid being gigged by the GAO or IG. He is right. Although we needed to make some improvements, we have gone so far to the other extreme that we are spending excessive hours on audits and leaving billions unaudited. It is worth listening to. You can hear the recording on the Federal News Radio website and search under "Shows" and then "Federal Drive" and "Federal Drive Interviews - June 1st" and scroll to the bottom for "Richard Loeb." I liked that he made his points without naming names. When the interviewer tried to get him to comment on current leadership at DCAA, he did not take the bait and stayed focused on the issues. He could have gone there and yet he did not (some of you will get what I mean by this comment).

[Betty]

The article and most of the comments hit the nail on the head. DCAA has leadership that does not care about issuing timely audits. I agree with the comments that discuss endless debates at the FAO on audit procedures and risk assessments. We cannot issue a timely audit to save ourselves. We used to issue progress payment audits in less than a week and in less than 40 hours and that is with questioned cost. Those days are gone. We used to measure elapsed days in days and we now measure in months for forward pricing and years for incurred cost. Most auditors do not know what an ICAPS audit is and have never tested for compliance with CAS and TINA is the name of an auditor rather than a type of audit.

When Fitzgerald took over, the art of auditing was replaced with the art of working papers. Critical thinking was replaced with pretty perfect working papers. Audits that questioned costs based on soound analysis and critcial thinking were replaced by auditors that questioned costs when the print on the invoice was smeared and the numbers could not be read. We cancel more assignments in one year under Fitzgerald than we cancelled in the 20 years prior to Fitzgerald, combined!

I could go on and on, but I need to get back to cross-referencing my working papers for the fifth time this week. At the time Fitzgerald came on board, I posted a blog that said, be careful what you ask for and some people said DCAA could not get any worse than November 2009 (I did not believe we were all that bad in November 2009). Well guess what, it is worse by a mile and I never thought it would get this bad. We waste more money than any agency around and yet our Director states we had the best year yet. More auditors, fewer net savings and fewer audits. Here come the Congressional hearings!

[Janet]

DCAA is at an all time low. The truely sad part is that Fitzgerald and others including Bob Hale, are either in denial or have no idea what to do. The Annual Report to Congress makes it seem that it is okay to issue incurred cost reports in 965 days and proposal audits in 120 days. These stats are no way acceptable and Fitzgerald needed to call it the way it is. We are in trouble. No amount of staff will get us out from under the incurred cost backlog.

We have not performed any of the necessary audits for incurred cost such as floor checks, ICAPS, CAS, etc. Consequently, once we get to the incurred cost, we will have to sample even more transactions which will take even longer and the results will be qualified, at a minimum, since we have not completed the real-time floor checks.

The way I estimate our progress, contractors will have to wait 8 to 10 years to get their final rates from DCAA. That is unacceptable. There is no way the audits will be efficient. The contractor staff will have turned over and no one will be able to answer questions. The good news for Fitzgerald is that the questioned cost will be higher since the contractor will not be able to answer questions and we will be given orders to question anything that is not 100% perfect -- need to keep those stats high. I truely feel sick over our performance.

[Joseph Welch]

I ask of the DCAA Director, the same question, Army council Joseph Welch asked Senator Joseph McCarthy in the 1950's "Have you no decency, sir? At long last, have you left no sense of decency." DCAA is a completely broken government agency. Director Fitzgerald has allowed this agency to become a joke. Can all these posters be wrong? How out of the loop are you sir? All common sense, reason and yes, decency has been lost in this agency under your reign of incompetence. One year risk assessments, audit reports that if ever issued, say nothing and are useless not only to the requester but more importantly the US Taxpayer. Why is everyone so afraid? Someone in management told me recently "why are people upset, there are more promotion opportunities?" If anyone feels good about themselves performing the non value added work DCAA performs these days, they are pathetic. Comptroller Hale DCAA is broken and while we can't pin it all on Fitzgerald, he sure deserves much of the blame. For years under Reed we were told the DCAA work would be outsourced to a cheaper audit provider. Today, hours and time, mean nothing. How can the message change so radically? GAGAS is very open to interpretation and Mr. Fitzgerald you could very easily change what jobs are audited to GAGAS standards but you obviously don't care because you are to busy doing whatever it is you do.

[Mister David]

Seems no one at DCAA seems capable of understanding not everything needs to be perfect and not everything needs to be the subject of an endless review. No DCAA manager (Fitzgerald is useless) seems capable of recognizing the importance of timely work or that timely work requires creative risk assessment, and risk assessments should not take, yes, years in some cases.

An example of DCAA waste - at my FAO we receive a cost proposal to audit. Usually a cost type proposal made up of a few labor rates with some minimal other direct costs. Being honest, I could audit the proposal and prepare a report in a week. My audit would cover the majority of costs, would provide the buying office a reasonable position, and would be timely.

Not so fast young man, my overly incompetent supervisory auditor will take a month or so to do her risk assessment, assign the audit to at least three auditors, and take at least three months to complete the audit. Of course this is only after she typically rejects the proposal for a lack of a written description of the basis of the proposed one percent escalation rate. Yes, those contractors cannot be allowed to submit a proposal without a written explanation for everything.

At an average of 365 days per IC audit, a vast improvement over DCAA's recent success story, it would take every DCAA employee working only on IC audits, over thirty years to complete the current backlog. Astounding!

Why is it no one in Congress can see this mess?

[Dear M]

Dear M. The problem with quality is, you guys only focus on one part of the equation - documentation. You didn't take into consideration the other two parts of the equation, which are essential. Timeliness and affordability. It we can't produce a timely audit, and if the audit can't be completed effectively and efficiently based on the audit risk ESTABLISHED BY THE FAO AUDIT TEAM then it's not a quality audit irregardless of how perfect the documentation is. The corrections recommended by quality added a significant premium to the cost of performing an audit. Maybe for some of the largest audits it makes sense. But the recommendations made and the training given doesn't make sense for all audits. Every audit is not the same and quality didn't consider the cost to implement the guidance and it didn't consider the time factor when establishing its findings. We have lost a lot of work or are giving a lot of work away because we can't get it done using the current audit methods established as a result of the quality reviews. We are cancelling a lot of assignments - more than ever. Every auditor in every FAO can't be wrong. The quality of the audits can't be that bad. Something doesn't make sense. And it appears the criteria used in performing the reviews was faulty. Because we aren't better today then we were a few years ago. It's too expensive to perform an audit. It takes too long to perform an audit. We keep hiring people. And we keep trying to get rid of work to DCMA. You tell me if we're better off today.

[Freddy]

"M" talks a good game but misses the larger point. Sure metrics were abused and went too far but not to many complained about metrics when they ruled DCAA. Now we have passed to the other extreme. The 350 hour progress payment audit for an 80K progress payment number one for material. The incurred cost audits are a black hole that we will never get out of. When is the last time anyone did a labor floor check? A Floor Check, let these companies know people were looking and served as a cop in the streets. What good are pages of hyper linked emails and individual work papers per audit step? DCAA has gone so far to the other side we have lost our way. Mr. Fitzgerald looks more and more pathetic as he reaches almost three years running this place. Pat take a chance, even if you fail, they will put you in the failed SES pool and you will be sent to some other agency to collect your pay.

[M]

Is it better to have billions go unaudited or have billions audited incorrectly and have the audits rescinded when the audit fails to meet minimum standards? No matter how you slice it, the audit product that was being produced under metrics was poor. The opinions were not supported with the workpapers - which is the whole point of being an auditor! You have to document what you do. If you don't like it, then go into an occupation that doesn't require you to do your job in accordance with minimum standards required by GAGAS, GAAS, or any other audit regulatory authority.

[Gerry]

Being DCAA Director is no fun, is it Fitzgerald. You thought you would come into DCAA and be the nice guy that everyone likes and magically DCAA would be all better. But in reality, it is a lot of hard work. Your downfall is that you never understood the DCAA environment and you are trying to run DCAA like Army Audit Agency. It is different. DCAA used to use a systems approach to auditing where each audit at a contractor built on each other. An adequate estimating system meant we did not have to have extensive testing on a price proposal audit and could audit the high risk areas and issue a report in 30 days. For the small contractors, the risk assessment was one page, it was high risk and we would test 50 transations.

But those days are gone and each audit stands on its own under your direction. That means substantially more testing and greater elapsed days. Neither of which results in better audit results. We need to get back to the systems approach to auditing where each audit builds upon the next. We need to determine whether forward pricing needs to be completed as an audit under GAGAS or fiancial advisory services. We need to get back to having a sense of urgency and understand that customers cannot hold a procurement for 4-5 months waiting for an audit.

You need to get back to the core mission of DCAA. But after almost three years as Director, I would have thought you would have a better understanding of DCAA. We are not AAA and no matter how you try to make us AAA, it is not going to happen. In the meantime, you have become a failure to the employees of DCAA. I am counting down the days until you release your video stating that all is good in DCAA.

[Lauren]

Great posts and all true. The entire risk assessment phase of audits has to be re-worked. You can't treat a Raytheon the same way you treat a three person company but we do. The B-02/risk assessment is make work, then we have to document what was done there in the detailed work papers. So much time killing non value added work. To the poster "M", get a clue. We have many hard working young smart people at DCAA who are already defeated by the DCAA make work mentality. Until DCAA works for the taxpayer in mind and not some mid level bureaucrat within the DCAA bureaucracy, nothing will change.

[Ed]

Note to M: You must be one of Fritzgerald's kool-aid drinking executives or managers. It is not about old-timers not wanting to change! It is about auditors that want to get back to auditing rather than endless documentation and discussions over each and every step in the audit program. If DCAA was so bad, it would not have passed EVERY peer review performed by the IG with an unqualified opinion. If DCAA is so messed-up then so were every peer review performed by the IG. You need to understand that DCAA has always passed a peer review and GAO review until 2008 when the investigation was completed (of note, the IG did a follow-up review of the GAO's findings and did not agree that DCAA's independence was impaired and did not agree with the findings of abusive management). M get with it. The numbers tell the story. DCAA cannot spend hundreds of hours on nonvalue added effort. Billions of dollars of contracts are going unaudited. What is your solution to the growing backlog, not complete the audits and let the Statute of Limitations run out!!!! Stop drinking the kool-aid.

[Waiver Me And Count]

Roger Thornhill - DCAA wants to waive all possible incurred cost audits under $1 million too. And the metrics will show that we actually completed these audits. Waiving 1 low dollar incurred cost = completing 1 (only in DCAA does 0 = 1). Then there's our audit guidance - all of our audit guidance is being written for the largest contractors. Does our upper management get the risks at the nonmajors especially at a time when there is less spending and companies are going out of business or being bought out? When has our upper management ever visited a non-major contractor to know what the risks really are? We can get plenty of these audits done if we had the prior audit programs that were geared towards non-major contractors. The new B2 is overkill and redundant. It's confusing. It's too much for a small contractor where an audit is performed by 1 person. Who really understands it? It's not user-friendly for auditors. Then it appears HQs wants to staff up the largest contractors with more people because that's the only places where risk exists to them. Are those contractor personnel going to be able to respond quickly to all the requests being thrown at them at one time? What are the idle auditors going to do? What are the auditors in the mobile branches going to do? Travel money seems to be going away. So what are the auditors in the mobile branches going to be doing? What is the plan? At the mobile places, the staff knows there is audit risk that shouldn't be overlooked. Then there's the old metrics again. The upper management is holding FAOs accountable for compleing so many incurreds each month. A very stressful situation for those in charge of issuing the most incurred cost reports - you constantly get the emails "how many are you going to get done? How many? Some supervisors have none and others have numerous reports. Then there's the cancelled assignments. How many audit hours were wasted on cancelled assignments this year? Might be enough to complete those "possible waiver" nonmajor audits. DCAA is a mess. There is no consistency in our message anymore other than we're giving away as much work as we can. Our value is declining when DCMA's value is increasing - while our staff is far superior. It's really ashame. If you got rid of upper management and let the FAOS run themselves, based on the risks they see and know a bout, we'd have no problems.

[M]

It sounds like there a bunch of DCAA old-timers that can't handle change. We never audited to GAGAS standards, and whether you agree with it or not, that's what we're putting in our reports. I agree with Roger, forward pricing and some other audits should not be held to that same standard, but they are and that's not changing anytime soon. If we say that we're auditing to the yellow book, then we have to include certain levels of documentation. Coming from the outside (and no, it was not another Fed agency), I was apalled at what I was finding in the audit packages. Auditors were rendering opinions without a single piece of support for that opinion beside "we looked at the invoice" and not stating what about that invoice made the transaction allowable, allocable, or reasonable. I think Fitzgerald is doing the best he can with an obviously broken agency. Until some of these old-timers retire, DCAA will never get any better. DCAA needs fresh blood and people who are willing to take a stand for their reports. It's the retirement-eligible DCCAers that are scared of CIGIE. CIGIE isn't there to tear us down, it's to make sure our audit reports are at a minimum quality level.

[Roger Thornhill]

I agree with most of the comments here. Concerning the incurred cost workload, the plan for getting current is to sample the submissions that are less than $250M. Those that are less than $1M will likely never be audited because HQ views those audits as cost losers, which is no wonder given the amount of prepatory work (the risk assessment, increased transaction testing, and the greater number of reviews) now required. HQ is talking about more and more sampling (leaving more submissions completely unaudited), which will certainly incentivize some contractors to push the envelope when it comes to questioned costs. Both the D and the DD come from the Army Audit Agency, which puts out few, but very high quality, audits. They're basically remaking the DCAA into something resembling the AAA, which is completely the wrong way to go. We do not need a lower volume of reports, audited at the GAGAS level. We need a higher volume of reports, audited at a lower level; geared to the needs of the procurement agencies. In some instances, we don't need "audits". Call the forward pricings ("210s", "230s") advisory consultant reports or whatever. That way, you avoid the Yellow Book. A good report in time is better than a perfect report late. We should not be complying with GAGAS in all instances. If the procurement agencies don't need GAGAS (and many don't seem to understand what it is, other than something that is slowing their audits), why should we audit to that level? Also, I do not believe that more DCAA should be given more hiring authority until they straighten out their act.

[Fitzgerald's Follies]

Fitzgeralds listening tour was a failure. He obviously did not listen. Are Fitgeralds SES crew telling him how bad it is, or are they in the dark also? One poster here said it best, Fitzgerald has to tell Comptroller Hale and in turn Hale has to tell DoD Secretary Panneta how DCAA is not functioning and more layers of management/review is not the answer. It's only a matter of time before the mother of all scandals rocks DCAA to its core. Management is afraid of a poorly documented work paper but can't see the ice berg in front of them. They can't see the big picture.

[Mike]

I agree with One Point of View and many of the other comments. Fitzgerald's only objective is to pass the peer review which is suppose to start next year (may be? Anyone know when it will start?). But one perfect audit does not negagate the paralyzed and risk adverse environment that exists in DCAA today.

The battle used to be with the contractor. Now the battle is with management and the DCAA CIGIE police. We spend more time defending the risk assessment, audit steps, working paper documentation, and stat sampling, than we spend on the audit. We waste so much time on nonvalue effort that there is no time for actual audit work or the audit is so late that it is of no use. But Fitzgerald does not care as long as the working papers are perfect. He does not even care if there are findings. Fitzgerald, remember that DCAA passed the peer review for years. We also passed GAO reviews. It was the recent GAO group that conducted the investigation in Western Region that had the insane intrepretation of the auditing standards.

Your sole job for the next 30 days should be to reach agreement with the GAO and IG on the minimum level of working paper documentation and sample size for the contract audit environment (not Army Audit that may take a year to complete an audit). This is the only way that you will turn DCAA around. No one can afford the "Gold Standard" mentioned by Comptroller Hale, we need to define the minimum level needed to comply with GAGAS and get back to auditing.

[One Point of View]

DCAA has to change their entire business model. Shut it down and start over at square one! Start completely over and keep it simple. Nothing is getting done now, so no one will miss anything as we rebuild. DCAA is looking for perfection in a world where it does not exist. DCAA is loaded with people at all levels who would rather never complete anything than face being questioned. So work on that audit or project for 18 months and then put it aside or cancel it.

[Retired Supervisor]

This is absolutely no surprise to me. I retired in January 2009, right after the famous GAO report. One thing that has not changed is that DCAA is strictly a metrics driven organization. Another issue in DCAA is personnel practices where catholics are favored over non-catholics for promotions and recognition. I once worked for a regional director who wanted perform "ethnic cleansing" in the Western Region to get rid of those who he considered "undesirable."

[Ed]

Bryan - as you can tell from the article and the blog comments, DCAA is in real trouble. It is worse than ever and Director Fitzgerald is in complete denial that there are any issues. The audit process is paralyzed. Does POGO plan to take any action as a result such as talking with members of Congress or writing the Secretary of Defense and requesting action?

[Dexter Bradley]

POGO please stay on the DCAA case. DCAA management believes this is a "Witch Hunt" and do not see that they are the problem. Just let Ms. S know that if she had done something about the abuse in California and did not look the other way or was oblivious to the retaliation then went on there, she may have never been removed. The current Director does not get it and may well be inept but Ms. S allowed innocent people to be tortured.

[Terry]

I agree with all the comments. The article is spot-on and the truth hurts, but the truth is the truth and the numbers do not lie. Fitzgerald was never a leader for DCAA and it shows. It took a few years, but now everyone can see the distruction he thrust on DCAA auditors. On top of it, he tries to bluff his way through the annual report to congress and it just shows his lack of integrity and incompentence. At the end of the day, DCAA has one mission, issue audit reports. If we cannot issue reports, no matter how thorough the few audits are that we accomplish and no matter how perfect the working papers, we have failed as an agency. The numbers tell the story, we have failed as an audit agency. Congratulations Fitzgerald, your fresh eyes failed. Happy now Comptroller Hale?

[Ed]

Excellant article and blog by POGO. Time to expose DCAA. The primary issue is that Fitzgerald wants to show that the percentage of questioned cost increased under his leadership and he wants to say that we are performing more in-depth audits. We hear it over and over. The way we do it is to focus soley on forward pricing proposals and audit the proposals like an incurred cost proposal. If DCAA historically only focused on forward pricing, of course the percentage of question cost to total dollars audited would be higher. But, Fitzgerald's plan has major flaws. First, our "more thorough approach" to forward pricing results in spending months auditing proposals that become outdated before we issue the report or the award is made prior to issuing the report and it is worthless. Second, the findings that we are counting as questioned cost are not real questioned cost. We count unsupported cost as questioned cost which we never did in prior years so we do not have an apples-to-apples comparison. Third, this approach completly misses the reason for DCAA. We are suppose to audit cost-type contracts after contract award. We have stopped auditing contract costs after award. We do not audit internal controls or compliance with CAS. There are no questioned dollars with these assignments so Fitzgerald does not want us to waste our time with these audits. But these audit are exactly why DCAA exists. Loeb is correct that we need to get back to our core mission and audit contract costs and stop the wasteful spending on proposals. We need to accomplish the internal controls, CAS, and costs incurred on cost-type contracts. The risk of overpayments has sky-rocketed because the traffic cop is not auditing the costs. We have lost our way and it is due to Fitzgerald and his obsession with the percentage of questioned cost and with perfect audits. So we have a perfect forward pricing audit. In the meantime, overpayments are occuring all over the place and DCAA is no where to be found. Just wait until a major contractor is found to have mischarging and some one asks where was DCAA, we were performing more in-depth forward pricing and we'll get to those cost-type contracts sometime around 2016. POGO, we need an advocate. Please go to the hill and requests hearings and investigations be held. DCAA has becomne an agency of smoke and mirrors. Anyone that works at DCAA knows that the new annual report to congress is merely a shell game and Fitzgerald is sitting on a house of cards that is ready to crumble.

[DCAA Auditor]

DCAAA is a total disgrace!!!! The agency is controlled by fear. A fear of being second guessed by the internal police. So what do people do? We do nothing but document files to an insane level. Managers have work piling up on their desks as they agonize over approving a risk assessment. God forbid we don't have the perfect fomat. How do these managers make the decision to get out of bed in the morning? How can they be sure they don't slip in the shower, have a car accident? Is it worth the risk? Why not just lay in bed, it's not worth the risk.

Mr. Loeb's article is spot on. The truth hurts and Mr. Loeb has pretty much told it like it is. So is Nick Sanders of Apogee consulting in his writings on the dusfuntional DCAA. Google "Apogee Consulting DCAA".

Time for Mr. Fitzgerald to go, enough is enough. I had faith in him at the start but he has proven to be a complete empty suit. Not only has it gotten worse at DCAA, he seems to not care. DCAA's waste makes the GSA Las Vegas conference small potatos. We have 4,200 DCAA employees adding zero value everyday.

[Karen]

The POGO blog and the Loeb article make me want to give a word of thanks to those that contributed to DCAA's extraordinary performance in 2011. Thank you GAO, Senator McCaskill, Bob Hale, and Pat Fitzgerald, for destroying a once successful agency. No one denies that DCAA had to make some changes. But no one will find the 2011 results acceptable unless they have no idea that as an audit agency, DCAA is suppose to complete audits. And we failed miserably at accomplishing our mission in 2011. Fitzgerald is in such denial that he actually believes that DCAA is stronger than ever. Fitzgerald, you are wearing no clothes and DCAA is worse than ever. No matter how often you say that DCAA is accomplishing more thorough audits, the backlog continues to grow and DCAA has become an non-entity in the procurement world. Time for you to go.

[John]

As a manager of DCAA, I am truely embarrassed with our performance. My office has not completed an incurred cost audit or ICAPS audit since 2009. We were required to develop a plan to get current on our incurred cost by 2016 and it is a phoney plan. There is no way we will get current without approving incurred cost claims with no audit (defeats the purpose of having an audit agency). Pat Fitzgerald knows that all of the "get well plans" are phoney and he just hopes he can bluff his way to retirement. If he keeps saying we are doing more thorough audits, he hopes everyone will thinks DCAA is just fine. We are worse than ever! The numbers presented in the article speak for themselves. The reality is that we spend millions of dollars on management reviews that are meaningless. We are so inefficient that it is embarrassing. My office accomplished more audits in one month in 2007 than we accomplished for 12 months in 2011. If I was eligible to retire, I would be out the door today. I am truely embarrassed to say I am a manager in DCAA. I used to be proud.

[Henry]

Unbelieveable that DCAA completed only 7,390 audits in FY 2011. That equates to about 2 per auditor per year. When I worked for DCAA, we completed about 2 per auditor per month. What is going on over there? DCAA's productivity must be about $10 per auditor per hour. I agree with the author that DCAA's performance is unfathomable. What a waste of money. That is what happens when you put a director in that does not understand or appreciate the contracting environment. Fitzgerald, Bob Hale will not be around much longer to protect you!

[Joe]

I hope this article serves as a wake-up call to Fitzgerald and Comptroller Hale. Fitzgerald is in denial that DCAA is worse than ever. The DCAA annual report to Congress is pathetic (available at www.dcaa.mil). Fitzgerald states that DCAA made progress in FY 2011; here's a clue, the only progress we made was to spend more time on working papers than actual audits and we made progress on increasing our backlog of incurred cost audits by leaps and bounds. Fitzgerald, let me point out a few facts from your own report demonstrating that DCAA's performance is unacceptable:

Page 4 - DCAA accomplished 349 incurred cost audits. This is unacceptable. DCAA has over 10,000 incurred cost audits that need to be completed each year and our backlog is headed to $1 trillion. How do you expect a rate of 349 per year to ever get through the backlog. Oh yeah, you plan to give the audits to DCMA to completed (they are not auditors by the way!).

Page 7 - DCAA took on average 120 days to complete audits of forward pricing proposals. Here's another clue, proposals are outdated after 30-60 days. By the time the audit is issued, it is worthless. Contracting officers cannot sit on procurements waiting for DCAA to issue audit reports. Completely unacceptable.

Page 7 - DCAA took 965 days to complete incurred cost audits. How, did DCAA accomplished 349 audits in an average of 965 days is beyond me. If I have to explain why this is unacceptable then you have no business being director.

Fitzgerald, you should have told Congress that DCAA is in trouble rather than giving the rosey picture of DCAA. For any of you reading this blog, here's my last clue and it is a slap in the face, DCAA is no longer performing audits. We waste millions of dollars everyday. Our Director has no idea how to fix DCAA and that is unchanged since November 2009. We need help and we need help now. Someone hold a hearing and expose DCAA. POGO, please stay with this one and do not let go until DCAA is back to the glory days of 30,000 audits and billion in savings.

[Mike]

The article is absolutely spot-on. Under Fitzgerald, DCAA has become a highly inefficient and highly ineffective organization. DCAA is the next scandle and GSA's $850,000 on the Las Vegas conference is nothing compared to the wasteful procedures at DCAA. Giving DCAA more resources is not the answer. It would be like giving the managers an eye-dropper to put out a fire. The solution is that we have to stop with all the non-value added administrative effort. There is no that way we can work through a backlog of $1 trillion unless we stop the non-value added effort. Wake-up Fitzgerald, you destroyed DCAA and you can no longer blame the prior Director. This is all on you. Get ready to explain to Congress why DCAA is no longer performing audits. One perfect audit does not negagate billions of dollars that are going unaudited.