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Pentagon IG Casts Light on Problems at DCAA

The Department of Defense Inspector General (DoD IG) recently released two reports that expose more about the depth of the problems that plagued, and in some cases continue to frustrate, the effectiveness of the Defense Contract Audit Agency (DCAA).

The first report confirmed allegiations that management in the Western Region harassed a technical analyst by unjustifiably lowering her performance ratings. This impeded "her ability to comply with generally accepted government auditing standards," and created "a highly stressful environment which forced her to take a lower graded position." DCAA's own internal review team had previously substantiated the allegations and sought some remedial actions, including revising past performance evaluations and removing inaccurate documents, but the DoD IG questioned whether DCAA had done enough to ensure that these practices wouldn't continue:

While Internal Review did not recommend disciplinary action against those supervisors and managers who caused the harassment, Western Regional management is ultimately responsible for imposing such discipline...It was also not evident whether Western Region management implemented changes to its procedures in an effort to help prevent future reoccurrences. Failure to take appropriate action sends an unacceptable signal to management and employees that such conduct is, and will be, tolerated. Although two of the four supervisors and managers who participated in the inappropriate treatment have since retired, the remaining two still remain with the Agency in the same managerial pay grade.

Some action has been taken, however. DCAA Director Patrick Fitzgerald released a memo in September that said Susan Barajas—the manager in question—ceased to be an active DCAA employee. While the metrics culture was largely fixed by former DCAA Director April Stephenson, the promotion system problems may still remain, as the IG report suggests. POGO raised similar concerns about the DCAA promotion system's vulnerability to abuse by management.

In response to the IG's findings, DCAA's Internal Review team will reissue its report to the new Western Regional Director, asking him to consider appropriate action.

The DoD IG's second report found that DCAA did not sufficiently respond or disclose fraud in their audit of the Aerospace Corporation (an Air Force-sponsored Federally Funded Research and Development Center, or FFRDC). The IG found that even though DCAA was informed of a full-time Aerospace Corporation employee who worked for another government contractor, they didn't design or perform procedures to identify risks of other labor mischarges—which they were required to do under auditing standards. Instead, they relied on information in permanent files and the auditor's prior experience with the corporation, perhaps in part because the DCAA's guidance manuals lacked sufficient guidance to ensure auditors perform procedures to consider fraud. DCAA also failed to identify in their report the lack of management approval for some billings prior to requesting reimbursement from federal agencies, to adequately test technology internal controls, and have sufficient documents to review compliance of allowable costs under the contract.

POGO has recently questioned a recent Defense Department move to reduce DCAA's role in the contracting process.

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