It’s generally accepted throughout the defense industrial base that DCAA takes too long to issue its audit reports. For example, we’ve reported that DCAA now takes (on average) nearly four years to issue a single “incurred cost” audit report covering a single contractor’s fiscal year. No contractor thinks that’s an acceptable cycle time standard. But that’s not the only metric: there are other examples to discuss, and we’ve devoted several articles to DCAA’s drop-off in productivity—including its challenges in issuing business system follow-up audit reports in a timely fashion.

Interestingly, many in government service (notably those civilians employed by the Defense Contract Management Agency) agree with industry on this point—marking one of the few points of agreement between the Defense Department and its contractors in these adversarial days. Both parties agree that DCAA takes too long to issue its reports, and many (including GAO and the DOD Inspector General) assert that what reports DCAA does manage to squeeze out are of dubious quality and usefulness to contracting officers and buying commands.

Opinions vary as to the root causes of DCAA’s general inability to issue GAGAS-compliant audit reports in a reasonable timeframe. Certainly, many argued that it was DCAA’s focus on cycle time reduction that led to the well-known audit quality failures publicized by the GAO and legislators in the 2008/2009 timeframe. Thus, less focus on the time it takes to generate audit reports and more focus on the quality of those reports would seem to be a good thing. Unfortunately, recent government reports indicate that the quality of DCAA’s audit reports (at least in terms of ability to comply with GAGAS) has not noticeably improved. So DCAA’s management reforms have led to a situation where the only thing that’s changed is that the agency produces fewer and fewer reports.

For its part, DCAA senior management has a tendency to blame contractors for the delays in issuing audit reports. Contractors are not responsive and do not produce supporting documentation timely, so goes the refrain. Contractors do not provide real-time access to accounting systems. Contractors do not provide adequate proposals that comply with the requirements of FAR Table 15-2. Contractors do not provide adequate “incurred cost submissions” that comply with the requirements of FAR clause 52.216-7. Contractors do not provide access to personnel, or to attorney-client privileged information, or to internal audit reports. Liaison personnel don’t facilitate audits; instead, they impede them. The list of alleged contractor failures goes on and on. But in the meantime audit reports don’t get issued.

It’s become apparent that one of the causes for DCAA’s inability to issue timely reports is the multiple layers of management reviews associated with each audit. From Supervisory Auditor review to Technical Specialist review, and from FAO Manager review to Independent Reference Reviewer review, DCAA has redesigned its entire management focus to deploy multiple reviews, designed to ensure that its audits are GAGAS-compliant in all respects. And that new approach has delayed audit report issuance, often for months and sometimes for years.

It’s not like DCAA management hasn’t realized the problem. They obviously realize they’ve created a monster. And they’ve tried to reduce the number of reviews. For example, we reported back in April, 2013, that DCAA had implemented a new Instruction (DCAAI 7642.2) designed to give discretion to the auditor to determine what additional reviews might be necessary (based on risk) and to specify reviews associated with individual audits (activity codes). Unfortunately (as we told readers) DCAA chose not to publish that Instruction, so contractors have no idea what reviews they should expect and thus cannot make an informed estimate regarding the duration of those reviews.

More recently, DCAA issued new guidance (MRD 13-PPS-024(R)) designed to “reduce the number of required reviews” and give the FAO managers more discretion in determining if additional reviews are needed. According to the MRD, “required reviewers include the Supervisory Auditor, FAO Manager and, if applicable, the RAM and/or Independent Reference Reviewer (IRR).” Optional reviewers include FAO Technical Specialists and Regional Technical Programs. DCAAI 7642.2 was modified once again to document the reduced number of management reviews.

The impetus for the changes was said to be “recent town halls and other input venues” that aired “concerns from the field” that the multiple layers of review were not enhancing quality. Instead they were simply slowing down the audit completion process.

Or perhaps, DCAA management may have read our many blog articles complaining about the same thing? (Doubtful.)

Whether the FAO teams will avail themselves of their enhanced discretion to reduce audit report reviews remains to be seen. Accordingly, whether the changes to DCAAI 7642.2 will result in faster issuance of audit reports also remains to be seen.

In the meantime, we are hearing continued reports that DCAA has given up performance of Disclosure Statement adequacy reviews and turned that responsibility over to DCMA. We are hearing reports that DCMA is hiring DCAA auditors as “cost monitors” and “pricing analysts”—and gearing up to evaluate contractor proposals without the benefit of a DCAA audit report. We are hearing that DCMA is preparing to handle business system reviews, and we’ve already reported that DCAA has announced DCMA is going to be negotiating Forward Pricing Rate Agreements (FPRAs) without waiting for a DCAA audit. In other words, DCAA is working hard to take itself out of the defense acquisition system.

The recent attempts to streamline audit report reviews may be a case of “too little, too late.”