Putting Federal Contract Auditing in the Spotlight

Better Auditing Could Save Taxpayers Billions

Pratap Chatterjee – February 1, 2011 – The Senate Subcommittee on Contracting Oversight hearing today to improve the way federal government agencies audit the half-trillion dollars given to contractors each year is a step toward making our government more efficient and competitive, as President Barack Obama proposed to do in his State of the Union address last week. But senators need to ask the right questions to make sure the auditing process is as effective as possible and taxpayer dollars are not being wasted.

The subcommittee will hear testimony from federal agencies and watchdog groups on how the government audits the $530 billion it doles out to contractors each year. In the spotlight will be the Defense Contract Audit Agency, or DCAA, which is the primary federal authority that audits contracts including defense and most civilian ones.

The senators will consider whether DCAA should be replaced by a more powerful independent agency—perhaps a Federal Contract Audit Agency—that reports to Congress and the White House. Such a move would not be unprecedented: The U.S. Treasury and subsequently the General Accounting Office, which is now the Government Accountability Office, once audited all federal contracts.

DCAA’s oversight of contract dollars has expanded manifold since its inception 46 years ago. It has a formidable role to play with federal procurement at well more than $500 billion. Yet the number of DCAA audit staff has shrunk from a high of some 7,000 in the early 1990s to a low of 4,114 auditors today.

Despite this, the agency considers itself to be a profitable investment for taxpayers. Each dollar spent on DCAA returned $5.10 for a total of $2.7 billion, according to the agency’s own estimates in fiscal 2010.

Patrick Fitzgerald, the director of DCAA, was appointed by Secretary of Defense Robert Gates. He reports to the Defense Department comptroller. Each of the other major federal agencies are responsible for auditing their own contracts. But almost all of them pay DCAA to audit for them because of a lack of capacity. Indeed, even contracts issued by the Government Accountability Office, or GAO, which conducts oversight for Congress, are audited by DCAA staff. (Click HERE for article)

Federal Government Needs Strong, Independent Auditor to Oversee Billions in Contract Spending, POGO Tells Senate Panel

February 1, 2011 - The responsibility of auditing the hundreds of billions of dollars spent each year on defense and civilian contracts should fall to a single, independent agency that is outside of the Pentagon’s chain of command, the Project On Government Oversight (POGO) told a U.S. Senate panel today.

Rather than creating a new bureaucracy, Congress could simply expand the duties of the existing Defense Contract Audit Agency (DCAA), while making it independent of the Department of Defense (DoD), POGO Director of Investigations Nick Schwellenbach told the Senate Homeland Security and Governmental Affairs Committee’s Subcommittee on Contracting Oversight.

Unlike most agencies, a new Federal Contract Audit Agency (FCAA) could save more money each year by uncovering waste and fraud than it would cost to run it. The FCAA would provide a needed check on contractors, ensuring that the government is not overcharged for goods and services.

An independent, central auditor would be more efficient than the current system, under which  contract audits are performed by the DoD’s DCAA, small auditing offices in other agencies, contracted auditors, and various Inspectors General. Non-DoD agencies, which currently can utilize the DCAA for a fee, would have a greater incentive to use a central auditor. (Click HERE for article)