GAO: DOD Audit Oversight Has "Widespread Problems"

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The Pentagon's Defense Contract Audit Agency - thefederal watchdog responsible for providing critical accounting and auditingoversight of military contractors - is riddled with audit quality problems thatinclude inadequate audit planning and supervision, as well as serious breachesof auditor independence, congressional investigators charged.

In a report to the Senate Homeland Security Committee,investigators from the Government Accountability Office cited a series ofdisturbing and "widespread problems with audit quality" at theagency, and issued a laundry list of recommendations to Congress and theDepartment of Defense to correct these problems.

As part of the probe of DOD contracting audit snafus, theGAO reviewed 69 separate audit assignments designed to support contract awardsand administrative decisions affecting billions of dollars in Pentagonexpenditures.

The problems uncovered by the investigation includedwaste of time and resources by the audit agency. As an example, the GAO notedthat DCAA auditors spent 530 hours to support an audit of the cash managementsystem at a research and development grantee, only to discover that the billingsystem was non-existent.

During a separate billing system audit of a supplier ofcombat systems, "Auditors deleted key audit steps related to thecontractor policies and internal controls over progress payments withoutexplanation." One DCAA auditor told the GAO he did not perform detailedtests because, "The contractor would not appreciate it."

Even more red flags were raised when a militarycontractor involved in the Iraq reconstruction project objected to a draft of aDCAA audit report that cited eight significant deficiencies in the firm'saccounting system.

In response, "Auditors dropped five significantdeficiencies and downgraded three others to suggestions to improve withoutperforming new work," the GAO told Congress.



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