DCAA Reports to Congress on FY2016 Activities

DCAA FY2016 activity report
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The Defense Contract Audit Agency’s (DCAA) effort to realign resources and reduce overall audit backlog is certainly paying off. The results of the DCAA’s FY2016 activity report are out, and the numbers tell an uplifting story for government contractors. Below are a series of key findings the agency has released to Congress.

  • The DCAA’s workforce of 4,513 employees issued over 4,200 audit reports. The agency examined $287B in defense contractor expenses, resulting in $9.9B in exceptions.
  • Officials saved $3.6B in defense spending during FY2016 related to DCAA audits. The agency was able to gain efficiencies by completing multi-year incurred cost audits as opposed to single-year audits, saving approximately 40% of their time.
  • Staffing shortages in FY2016 reduced the numbers of total years closed for incurred cost submissions when compared to FY2015. However, the dollars examined increased 20% from FY2015. Through a risk-based audit approach, the DCAA was able to target their audits.
  • The time to complete an incurred cost audit, based on the start date, has decreased from 406 days in FY2012 to 138 days in FY2016.
  • The average incurred cost backlog is now 17.6 months or 4,677 submissions. The current government hiring freeze has made the projected backlog elimination in FY2018 unknown.
  • In FY2016, pre-award audits were completed in half the time (60 days) compared to FY2012 (120 days). In FY2012, the pass/fail rate was approximately 78%/22%, and in FY2016 the pass/fail rate was 90%+/<10%. The shift of more contractors passing the pre-award audit can be attributed to educating small businesses on the necessary components of a passing system.
  • The organizational structure of the agency has been realigned to be more effective, including four Corporate Audit Directorates for major defense contractors, three Regional Directorates for mid-sized and small defense contractors, and one Field Detachment for classified work.
  • The DCAA continues to prioritize audits based on risk. Higher risk audits have the highest payback to warfighters and taxpayers. These types of audits include forward pricing, special audits and incurred costs audits.
  • High-risk audits include significant dollars and poor past performance by the contractor.

Overall, the DCAA has reduced audit spending, audit backlog, and time completing an audit from start to finish. The agency has achieved this by incorporating a risk-based audit approach, improving agency and cross-agency communications, and implementing community outreach programs. Their 2016 activity report confirms that the transformation of the agency is alive and well.

For any questions, please contact La-Tasha Patel at 301.231.6260 or lpatel@aronsonllc.com.

About La-Tasha Patel

La-Tasha S.R. Patel, CPA is a managing consultant in Aron¬son LLC’s Government Contract Services Group. With more than eight years of experience in the government contracting industry, she focuses on cost accounting standards (CAS), business systems, federal acquisition regulation (FAR), and audit support. Throughout her career, La-Tasha has served the government contracting community in several capacities, using her in-depth knowledge of accounting areas related to business combinations, revenue recognition, consolidations, GAAP, internal control systems, financial reporting and analysis, financial risk, indirect rates and account reconciliation. This diverse knowledge gives her the ability to perform an analysis with an understanding of the motivation of the stakeholder from each sector. As a result, La-Tasha is adept at providing practical solutions that achieve positive results for her clients. La-Tasha is a motivated mentor and teacher, committed to sharing her knowledge with peers and helping her clients rethink their business strategies to achieve their goals. La-Tasha earned her bachelor’s degree in accounting from the University of South Florida. La-Tasha is a licensed CPA in the state of Maryland and is a member of the AICPA.

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