Selected Provisional Payments Under Regional Defense Contracts

GAO examined selected provisional payments under contracts administered by the Defense Contract Administration Services Region (DCASR), Boston. In conducting its investigation, GAO visited the DCASR regional offices in Boston and the management area offices in Boston and Hartford. The purpose of the visits was to examine the procedures and controls related to provisional approval of contractor reimbursement vouchers. GAO also visited offices of the Defense Contract Audit Agency (DCAA) to examine the procedures related to provisional approval by DCAA of the contractor reimbursement vouchers and to discuss the results of its examinations as related to DCAA.

The GAO examination of specific contract payment vouchers disclosed instances in which: (1) contract reserves were not withheld or were improperly withheld, (2) subcontract and consultant labor costs were improperly billed, (3) costs were improperly billed before they were paid, (4) facilities cost of money was improperly billed, (5) general and administrative costs were improperly allocated to facilities cost of money, (6) costs were improperly billed before they were incurred, (7) precontract costs were improperly billed, and (8) subcontract labor was misclassified and billed as direct material. As discrepancies were disclosed, GAO brought them to the attention of DCASR administrative contracting officers (ACO) or the DCAA auditors responsible for the approval of the vouchers to take action as necessary in the specific instances. GAO found that the regulations and policy guidelines which govern DCAS and DCAA administrative and audit responsibilities are adequate. However, as indicated by the GAO examination, weaknesses do exist in actual practice. GAO concluded that, if the ACO's and DCAA auditors exercise greater care in discharging their responsibilities, many of the weaknesses would be eliminated.