Patrick Fitzgerald, Director
June 3, 2010
Contract Auditing
Supporting the Warfighter & Getting the Best Value for the Taxpayer
DCAA Mission Statement
The DCAA, while serving the public interest as its
primary customer, shall perform all necessary
contract audits for the Department of Defense and
provide accounting and financial advisory services
regarding contracts and subcontracts to all DoD
components responsible for procurement and contract
administration. These services shall be provided in
connection with negotiation, administration, and
settlement of contracts and subcontracts to ensure
taxpayer dollars are spent on fair and reasonable
contract prices. DCAA shall provide contract audit
services to other Federal agencies, as appropriate.
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DCAA Mission
 DCAA was established in 1965 by transferring the existing
contract audit functions from each of the military services
into a single contract audit agency (DoD Directive 5105.36)
 Single mission organization
 Audit contractor accounting books and records and other
submissions for contracting officials use
 Audit at all stages of the contract life-cycle
 Provides financial advice regarding contractors and
regulations governing contract costs
 Mission does not include audits of Government organizations
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Audit Responsibilities of
DoD Audit Organizations
 DCAA –
 performs contract audit functions for all DoD
Components
 DoDIG –
 performs audits of the entire procurement and acquisition
process, including the performance of contractors and
contract administration officials.
 Military Depts (Army/Air Force/Navy Audit Agencies) –
 performs other than contract audits of the operations and
programs of the Military Department components and the
Combatant Commands.
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DCAA Organization
Internal Review
Karen Cash
Assistant Director,
Operations
Pat Letzler (Acting)
Executive Officer
Joe Garcia
Director
Patrick Fitzgerald
Deputy Director
Frank Summers
Assistant Director,
Policy & Plans
Ken Saccoccia
General Counsel
Defense Legal
Service
John Farenish
Assistant Director,
Resources
Philip Anderson
Assistant Director,
Integrity &
Quality Assurance
Don McKenzie
Headquarters
Regions
Central
Region
Ed Nelson
Tim Carr
Eastern
Region
Paul Phillips
Gary Spjut
Northeastern
Region
Ron Meldonian
William Adie
Mid-Atlantic
Region
David Eck
Steve Hernandez
Western
Region
Chris Andrezze
Susan Barajas
Field
Detachment
Tom Peters
Terry Schneider
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Regional Boundaries
Afghanistan Br
European Br
3
Iraq BO
2
6
R
2
4
R
3
3
9
8
2
R
10
3
Pacific Br
No. of Field Audit Offices
Eastern
Northeastern
18
Central
Mid-Atlantic
21
21
Western
22
FD
11
R
7
2
R
2
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R = Regional Office
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Field Office Organizations
 112 Offices – at contractor facilities or strategic geographic locations
 Over 260 suboffices - extensions of branch offices when needed
 Typical office composition:
 One manager per office
 Multiple supervisors
 Several technical specialists – may assist more than one office
 Auditors
 GS-12 senior auditor
 GS-11 semi-senior auditor
 GS-09 junior auditor
 GS-07 trainee
 Administrative staff
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Typical Audit Effort

Before contract award
 Preaward accounting
system survey
 Evaluate contractor’s
estimating system
 Evaluate contractor’s
initial price proposal
 Attend negotiation
conferences
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Typical Audit Effort

After contract award
 Audit postaward
accounting system
 Audit contractor’s
incurred costs
 Process contractor’s
public vouchers and
conduct payment
reviews
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Typical Audit Effort

Other
 Review contractor’s
compliance with Cost
Accounting Standards
(Public Law 91-379)
 Audit of claims
 Perform Post Award
reviews for compliance with
Truth-In-Negotiations Act
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FY 2010 Agency Priorities
 Strengthening DCAA’s Talented Workforce
 Delivering High Quality Services and Products
 Requirements/Workload and Resources
 Supporting Overseas Contingency Operations
 Improve Communications and Working
Relationships with Stakeholders
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Staffing
FY 2006
FY 2007
FY 2008
FY 2009
Total (End Strength)
4,056
4,124
4,216
4,317
Auditors
86%
86%
86%
87%
College Graduate
(Auditors)
99%
99%
99%
99%
Advanced Degrees
(Auditors)
25%
26%
26%
29%
CPAs
(Auditors)
37%
35%
33%
30%
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High-Quality Services and Products
 Quality Services & Products are non-negotiable
 A DCAA Audit Must Be:
 Performed in accordance with GAGAS
 Meaningful, Relevant, and Timely
 Independent and Objective
 Executed on a Risk Driven Basis
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Procurement/RDT&E Budget Authority in Constant Dollars
vs. DCAA Staffing % Change from FY 1980 Values
$254.5B
140%
120%
$223.1B
6,893
100%
$190.3 B
80%
60%
40%
3,906
5,150
20%
$110.5B
0%
3,457
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-20%
*Source: March 2010 National Defense
Budget Estimates for FY 2011 (Green
Book), Table 6-8
DCAA Staffing
Procurement/RDT&E
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DCAA Auditor Experience Level
1400
1346
1200
1050
1000
800
600
552
624
400
289
200
0
0 -3
3-5
5 - 10
10 - 20
20 plus
Years
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Supporting Overseas Contingency Operations
(OCO)
 High Risk Audit Environment
 Developing an Agency Strategy to Support OCO
Workload
 Real Time Testing
 CONUS V. OCONUS Coordination
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Overseas Contingency Operations Offices
AFGHANISTAN
BRANCH OFFICE
IRAQ BRANCH
OFFICE
KUWAIT
SUBOFFICE
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Communications and Working Relationship
 Mutually Beneficial Relationships
 No Surprises – More Frequent Communication

Sufficient Lead Time for DCAA Services and Products

Timely Access to Records

Responsive and Timely Services to Agency Stakeholders

Obtaining Adequate Contractor’s Assertions
 DPAP 12/4/2009 Memorandum – Resolving Contract Audit
Recommendations
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DCAA FY 2009 Audit Results
By Audit Area
Audit Are a
1. Incurred Cost
Dollars
Exce ption
Audite d
Dollars
(in Billions ) (in Billions )
7,864
$71.8
$0.3
Number
of
Reviews
2. Forward Pricing
7,004
$219.2
$18.8
3. Special Audits
4,867
$10.6
$1.0
4. Other
1,541
$28.9
$0.3
Total
21,276
$330.5
$20.4
1. Incurred Cost. Includes audits of historical costs, internal control systems, and final contract closings.
2. Forward Pricing. Includes audits of price proposals, estimating systems, and forward pricing rate agreements.
3. Special Audits. Includes audits of terminations proposals, other claims, progress payments, financial capability, and
earned value management systems.
4. Other. Includes Cost Accounting Standards, operations audits, and Truth-in-Negotiations (Defective Pricing Audits).
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Summary of DCAA Audit Results
Effective
Auditing
Produces
Results
$3.3
$2.3
$2.6
$2.4
Net Savings
(in Billions)
Fiscal Year
Sustention Rate
Return on
Investment
2006
2007
2008
2009
63.5%
62.9%
63.6%
59.0%
$5.2 to 1
$5.3 to 1
$7.0 to 1
$5.1 to 1
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Return to Stakeholders
 Contractor issued $9.8 million check
 Audit found materials were included in estimates for both
the prime and subcontractor
 DCAA suspended $6.2 million
 Audit found billing exceeded actual costs
 Contract Price reduction of $130 million
 Audit found proposed Engineering Services were overstated
on Navy contract
 Disallowed $2.65 million
 Audit found estimated lease costs were fully recovered
through cost of ownership
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Defense Contract Audit Agency
Additional information on DCAA
and Points of Contact available at
www.dcaa.mil
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