Defense Contract Audits

Pursuant to a congressional request, GAO reviewed contract auditing within the Department of Defense (DOD), focusing on: (1) the delineation of contract auditing responsibilities; (2) the determination of Defense Contract Audit Agency (DCAA) priorities and changes in work load since the establishment of the DOD Inspector General (IG); and (3) alternative organizational structures.

GAO found that: (1) DCAA was responsible for performing contract audits for all DOD components responsible for procurement and contract administration; (2) the DOD Comptroller exercised management control over DCAA; (3) the DOD IG exercised oversight responsibility to ensure that DCAA practices complied with laws, regulations, and auditing standards; (4) DOD organizations responsible for acquisitions influenced DCAA audit priorities by requesting that DCAA perform contract audits in accordance with federal acquisition regulations; (5) DCAA coordinated annual audit plans and priorities with acquisition officials; and (6) DCAA audit priorities remained the same, and its work load has increased in most audit components, since the establishment of DOD IG. In addition, GAO found that the three proposed organizational alternatives included: (1) placing DCAA under the Under Secretary of Defense; (2) placing DCAA under DOD IG; and (3) transferring responsibility for postcontract audits to DOD IG. GAO also noted that audit independence and oversight could be impaired if DCAA were placed within another office.