Hearing Of The Senate Committee On Homeland Security And Governmental Affairs - Defense Contract Audit Agency: Who Is Responsible For Reform?

Statement

With the release of today's Government Accountability Office (GAO) report, we once again focus on extensive problems with the quality of audits at the Defense Contract Audit Agency (DCAA) and with the management of this watchdog agency.
The DCAA is the Department of Defense's (DOD) principal contract auditor. It completes more than 30,000 reviews and audits per year that cover hundreds of billions of dollars in federal contracts.

A well-functioning DCAA is thus vital to our government's responsibility to be frugal stewards of taxpayer funds. It plays a necessary role in ensuring the accountability and transparency of federal contracts.
Unfortunately, the GAO report contains the haunting refrain of disturbing past reports. It cites:
lack of independence from undue influence on audit outcomes by contractors, program managers, and some senior management;
poor or inadequate audit quality;
gross mismanagement of government resources; and,
ineffective audit practices that allow contractors to overbill the government -- in some cases, for millions of dollars.
The Department of Defense and other federal agencies rely on DCAA to detect waste, fraud, and abuse. It is, therefore, unacceptable for this federal policing agency to continue to have significant performance failures.
With more than a little frustration, I note that we are here almost one year to the day since the Committee's last hearing on this very same topic -- DCAA's poor performance.
During the 2008 hearing, I raised significant concerns about mismanagement at DCAA. And yet, here we are again. Three particularly troubling areas still need to be addressed.
First, the GAO report highlights the ongoing lack of rigor and independence of DCAA audits, due to coercion by a few errant contractors, program managers, and, on occasion, even by DCAA management. DCAA auditors cannot be constrained from doing their jobs; they must be able to work in an environment where they are encouraged to conduct their oversight in a fair, unbiased, and principled manner.
There are many principled and dedicated auditors at DCAA who endeavor to conduct themselves with the highest possible ethical standards. The management and culture at DCAA should support these efforts, not undermine them.
Second, I am concerned with the DCAA's lack of urgency in terms of addressing and resolving these problems. Recent reviews of DCAA's reform efforts do not assure me that significant progress has been made over the past year. While DCAA has taken some steps toward improvement, I believe that too little has been done.
To date, the DCAA has rescinded some poor quality audit reports and has issued guidance to improve the audit quality. The agency also plans to hire 700 additional auditors to augment its workforce.
I am concerned, however, that simply adding resources will not address fundamental failings. Indeed, the consequences of mismanagement may only multiply with these additional resources.
Less than a month ago, the DOD Inspector General (IG) completed an investigation that found evidence of such mismanagement. It cited time pressure, uncompensated overtime, unauthorized changes to audit results, and other unprofessional behavior that had created a work environment not conducive to performing quality audits.
What will it take to see progress? DCAA's inability to remedy its mismanagement, despite numerous hearings, investigations, and reports, is truly an epic failure by the agency and the Department.
Third, the GAO report raises significant questions regarding the need for DCAA structural reforms.

How can it be that DCAA auditors spent more than 530 hours auditing a billing system that did not exist and repeatedly change audit findings to make the results acceptable to contractors?
To make matters worse, I am told some supervisors responsible for deficient audits were given performance ratings ranging from "exceeds fully successful" to "outstanding." Let me repeat that. For supervising these questionable audits, these managers were given marks of excellence. This is an outrage, plain and simple.

We rely on the many honest and dedicated employees at DCAA to be the first line of defense to the abuse of tax dollars. When the audit agency fails, the fallout can cascade through the system, and ultimately shortchange our troops in the field. Congress must carefully consider what reforms are needed at DCAA in light of these disclosures.

Reestablishing DCAA as a first-rate audit agency is critical. To date, I have been very disappointed with the lack of leadership from the Office of the Comptroller, which is responsible for overseeing and supporting DCAA.
Action must be taken swiftly to help this agency regain its credibility and restore its oversight mission. Once its performance and image have been repaired, it can again assume its primary objective: ensuring the best value for the American taxpayer on all defense contracts.

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