Industry has become increasingly concerned with inefficient audit practices within the Department of Defense (DoD) that fail to align with intended program outcomes and agency mission. Audits are key to the government’s compliance-driven acquisition process, however, current audit requirements overwhelm the Defense Contract Audit Agency’s (DCAA) capabilities and resources, and can place significant burden on industry, especially small businesses. Typical industry compliance staffing is one-third of government audit staffing, and incurred cost backlogs required additional costs for records retention and audit support. These costs have a magnified effect on small business. Also, a significant percentage of DCAA auditors have fewer than five years of experience, which combined with vigorous assertions of audit independence, can lead to wasteful and expensive audit practices. Further, inconsistencies across DCAA’s regional offices drive uncertainty for industry and government.
NDIA respects the importance and independence of government auditors, and supports principles that preserve the independence of auditors, while making audit practices more efficient and better aligned with agency goals. NDIA believes that auditors should take a risk-based approach that focuses on materiality, and take an advisory approach to auditing that focuses on bringing vendors into compliance, rather than a punitive approach that seeks to identify every possible error in reporting and documentation.
On April 6, 2017, NDIA's Assistant Vice President for Policy, James Thomas, testified before the House Armed Services Committee, Subcommittee on Oversight and Investigations, on the defense contract auditing process. His written statement can be found here, and a recording of the hearing can be watched below.