Every year, the Defense Contract Audit Agency (DCAA) provides a report to Congress providing a snapshot of the agency’s operations, challenges, and plans for the coming year.
The DCAA recently released its Fiscal Year 2022 Report to Congress. The DCAA plays a crucial role in providing audit and financial advisory services to the Department of Defense (DoD) and other federal entities, ensuring that taxpayer dollars are allocated responsibly in defense contracts. As a taxpayer myself, I applaud the efforts and role the DCAA plays in the government contracting process.
As someone who monitors the GovCon industry closely, I’d like to share with you my six key takeaways from the report’s findings.
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DCAA has faced workforce challenges
DCAA reduced its authorized workforce strength due to various factors such as Congressional action and initiatives meant to increase efficiency.
Consequently, hiring new auditors has become more challenging, leading to an insufficient workforce level to execute all high-priority contract audits. DCAA has maintained stable productivity levels even in the face of these hurdles.
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Net savings and ROI were down in 2022
In 2022, the DCAA examined $262.3 billion in contract costs, identified over $5.7 billion in audit exceptions, reported $3 billion in net savings and produced a return on investment (ROI) of approximately $4.6 to $1.
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A dip in forward pricing audits
Contracting officers requested a low number of forward pricing audits in FY2021 which led to the year-over-year drop in net savings and ROI.
According to DCAA, forward pricing audits are executed to help keep proposal costs reasonable and federally compliant. These audits are the biggest driver of the current year net savings and ROI.
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There was an increase Business system and Cost Accounting Standard audits
The drop in forward pricing audits gave the DCAA the opportunity to perform more Business System and Cost Accounting Standard audits, which provide long term value to the DOD.
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Incurred Cost audits were the most frequent type of audit
In 2022 DCAA issued 522 incurred cost reports and 2,900 low-risk memos. They completed all cost audits within the 12-month requirement.
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DCAA sees new opportunities for improvement on the horizon
DCAA has plans for new initiatives in FY2023 that aim to continue the momentum of positive change we are seeing with the agency.
First will be a link from the Contractor Submission Portal (CSP) to the systems at DCMA. The initiative will connect the two systems so that contractors make one submission and both agencies receive the needed information, easing the burden on contractors.
The second initiative is to replace the out-of-date management information system with commercial-off-the-shelf (COTS) software.
In addition to leveraging technology to increase effectiveness and efficiency, DCAA is working to be an employer of choice so the organization can attract and retain more employees.
Despite facing numerous challenges, DCAA's Fiscal Year 2022 Report to Congress showcases the agency's dedication to continue providing valuable services to the DOD and taxpayers. Staying informed about these developments is crucial, as they directly impact the GovCon industry and how we conduct business.
Interested in exploring the report’s details further? Read the full document here.
