Do you remember back in 2008 when the Government Accountability Office gave a very critical review of the DCAA audit practices? DCAA was told to be more independent.
Now, several years after DCAA criticism, government contractors are finally going to start feeling the effects. Instead of DCAA acting as a friendly business partner with contractors, DCAA is taking the remote, big-brother approach.
In the past, DCAA would point out all the various deficiencies in systems, internal controls and processes that government contractors are subject to. Then, the DCAA would also give recommendations and guidance through fixing these problems. If you thought that DCAA was tough before, just wait until your next audit!
The new face of DCAA will still point out all the deficiencies but contractors will be on their own to find remedies for fixing them. All of the findings from a DCAA audit will have to be investigated independently. Once adequate solutions have been found for the problems, then the contractor must also defend the solutions to the new, unfriendly DCAA.
To make matters worse, DCAA is becoming a much larger entity. Instead of having just 4,000 employees as it did back in 2008 when the critical report was released, DCAA now has 4,700 employees. Since a whopping 85% of DCAA employees are auditors, that means there will be more audits. In 2011, DCAA intends on upping hires for even more auditors. As many of us have probably experienced, larger entities of oversight generally mean less-friendly business practices.
In 2011, government contractors can also expect many more requirements just for proposal requests. For example, now the contractor must have a certified business system already in place in order to be applicable as a bidder.
Contractors are going to have a much harder time renewing contracts and bidding on new ones. If anything, we can expect even harsher standards in the future from DCAA. Many government contractors are preparing for the harsher regulations already and seeking out third party help to make assessments. Of course, this means investing money for an independent evaluation on a contract, which the company is not even guaranteed to win.
Another main issue with DCAA is that the pre-award audits are not being carried out in a consistent manner. Each DCAA auditor spends a different amount of time going over the procedures. Then, even if the bid is won, there can still be additional audits before the bid is officially awarded.
Even though recent DCAA news has shown that audits are going to be limited to larger contract jobs, the intensity of the audits is going to drastically increase. We can expect that the DCAA audits are going to delve into all aspects of transactions, documentation, timekeeping, and so forth. There is a lot of room for DCAA to delve into. If you go to the DCAA’s website, you will find 98 types of audits that a government contractor can be subjected to.