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NATIONAL CONTRACT MANAGEMENT ASSOCIATION BETHESDA NORTH MARRIOTT HOTEL & CONFERENCE CENTER  BETHESDA, MD.

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Presentation on theme: "NATIONAL CONTRACT MANAGEMENT ASSOCIATION BETHESDA NORTH MARRIOTT HOTEL & CONFERENCE CENTER  BETHESDA, MD."— Presentation transcript:

1 NATIONAL CONTRACT MANAGEMENT ASSOCIATION BETHESDA NORTH MARRIOTT HOTEL & CONFERENCE CENTER  BETHESDA, MD

2 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 1 GAO Report: Unmet Professional Standards in DCAA Audits Stephen D. Knight Smith Pachter McWhorter PLC Thursday, November 20, :40am – 12:40pm

3 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 2 GAO Report Findings GAO investigated 13 “cases” at 3 contractor locations Impairment to auditor independence – 3 Working papers did not support reported opinions – 13 Draft audit opinions changed without sufficient documentation – 9 Auditor did not perform sufficient work to support conclusions – 10

4 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 3 DCAA’s Response Discontinue DCAA Participation in IPTs Audit Alert on Working Paper Documentation Audit Alert on Handling Disagreements on Audit Findings Audit Guidance on DCAA Audit Services Performed in Support of IPTs –Auditors will not provide input to contractors on, e.g., draft proposals, draft policies/procedures, draft CAS DS –Auditors required to report “significant deficiencies” discovered during audit even when contractor corrects during audit

5 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 4 DCAA’s Response Audit Guidance on In-Process IPT Assignments and Other Teaming Arrangements Involving Contractor –“ Audit reports related to contracting officers’ IPTs or similar teaming arrangements involving the contractor... should be qualified for the impact of DCAA’s participation on auditor independence”

6 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 5 DCAA’s Response FY 2009 Audit Performance Measures “Keys for Success” include: –At no time should FAO change an audit opinion at request of requestor –Enforce contractor’s responsibility to provide timely supporting data – 3 days? –Lack of timely data should result in costs questioned or unsupported –Significant questioned or unsupported costs should result in flash estimating system deficiency

7 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 6 DCAA’s Response “ Keys for Success” include: –“ The decision on whether an incurred cost proposal is adequate for audit is made by DCAA.” –Lack of adequate incurred cost proposals or timely support of proposal indicates serious accounting system deficiency; flash accounting system deficiency report

8 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 7 DCAA’s Response “Keys for Success” include: –“Maximize the issuance of the Form 1 during audit to help expedite timely resolution of audit issues.” –“Question costs as appropriate regardless of the probability of sustention by the contracting officer.”

9 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 8 Effect of DCAA’s Response? Isolation, not Independence –No more team efforts –Cut off communications with contractors on drafts –Proceed regardless whether CO sustains position Polarization DCAA Adopting Draconian Methods Audit Process Becomes End to Itself rather than Support to Acquisition System

10 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 9 DCAA’s Proper Role GAGAS § 2.08 “Integrity” –“ Public confidence in government is maintained and strengthened by auditors’ performing their professional responsibilities with integrity. Integrity includes auditors’ conducting their work with an attitude that is objective, fact- based, nonpartisan, and nonideological with regard to audited entities and users of the auditors’ reports.”

11 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 10 DCAA’s Proper Role GAGAS § 2.08 “Integrity” –“[C]ommunications with the audited entity, those charged with governance, and the individuals contracting for or requesting the audit are expected to be honest, candid, and constructive.”

12 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 11 DCAA’s Proper Role GAGAS § 2.10 “Objectivity” –“The credibility of auditing in the government sector is based on auditors’ objectivity in discharging their professional responsibilities. Objectivity includes being independent in fact and appearance when providing audit and attestation engagements, maintaining an attitude of impartiality, having intellectual honesty, and being free of conflicts of interest... “

13 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 12 DCAA’s Proper Role DCAM § 1-102: Providing accounting and financial advisory services, in connection with the negotiation, administration and settlement of contracts and subcontracts, to all DoD procurement and contract administration activities Contracting Officer is Decisionmaker DCAA does not operate in vacuum

14 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 13 Untenable Situation GAGAS requires DCAA to be independent, objective, impartial, nonpartisan, nonideological, intellectually honest DCAM sees DCAA as part of acquisition process GAO/Congress require DCAA to be aggressive, based on belief contractors seek to take advantage of government –Tends to push DCAA outside acquisition system

15 NATIONAL CONTRACT MANAGEMENT ASSOCIATION 14 Recommendations Recognize DCAA for what it is: aggressive, not impartial, and not always correct Since DCAA is not impartial, and not always correct, CO must exercise authority and discretion to determine merits of DCAA position Do not let the audit tail wag the procurement dog.


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