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3. 3 Established in 1965. Separate Agency of the Department of Defense. Reports to DoD Controller. Provides Service to all DoD Components. Provide all necessary contract audit for DoD. Provide accounting and financial advisory services for DoD. Approximately 600,000 hours of reimbursable work for customers outside DOD.

4. 4 Headquarters - Fort Belvoir, VA Five Regional Offices & Field Detachment Approximately 350 FAOs/Suboffices Defense Contract Audit Institute –Memphis, TN

5. 5 EASTERN REGION: Regional Director – Richard Buhre

6. 6 DCAA Mission Statement DCAA’s mission is to perform all necessary contract audits for the Department of Defense and provide accounting and financial advisory services for the negotiation, administration, and settlement of contracts and subcontracts. The charter also authorizes providing these services to other federal agencies on a reimbursable basis.

7. 7 Services and Staff On a reimbursable basis, provides contract audit, accounting, and financial advisory services to non-DoD customers. Agency staffing of approximately 4,000. Professional auditors comprise 83% of staff. CPAs comprise 37% of the total auditors. CPAs comprise 79% of management positions.

8. 8 Types of Audit Services Preaward Financial Capability Incurred Cost Accounting Systems Internal Controls Contractor Operations Cost Accounting Standards Disclosure Statements Equitable Adjustments Contract Terminations Delay/Disruption Defective Pricing Proposals Progress Payments Public Vouchers Negotiation Support

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12. 12 Agency for International Development Army Corps of Engineers Department of Agriculture Department of Commerce Department of Education Department of Energy Department of Health and Human Services Department of Housing and Urban Development Department of Interior Department of Justice Department of Labor Department of State Department of the Treasury Department of Transportation Department of Veterans Affairs Environmental Protection Agency Federal Emergency Management Agency General Services Administration Government Printing Office NASA National Science Foundation

13. 13 Nuclear Regulatory Commission United States Postal Service Arms Control and Disarmament Agency Community Services Administration Defense Nuclear Facilities Safety Board Executive Office of the President Export-Import Bank of the US Federal Energy Regulatory Commission General Accounting Office Interstate Commerce Commission Library of Congress National Archives National Transportation Safety Board Peace Corps Small Business Administration Smithsonian Institute Social Security Administration US Information Agency US Railroad Retirement Board

14. 14 DCAA has the expertise to provide timely audit services in different areas. DCAA’s professional staff has the flexibility to adapt to a variety of audit requirements.

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18. 18 European Branch Office Pacific Branch Office Tampa Bay Branch Office Rapid Deployment Team Based in United States 72 Hours notice

19. 19 Providers of Unique Items Base Maintenance Contracts Training and Logistic Support Foreign Military Sales European Participating Governments Corps of Engineers Federal Emergency Management Assistance (FEMA)

20. 20 USAID NASA Department of Energy Department of Transportation Health and Human Services U. S. Postal Services Fish and Wildlife

21. 21 Hurricane Mitch

22. 22 Restoration of Infrastructure

23. 23 Reconstruction and emergency work: Limited time for evaluation/qualification for the program prior to award. Adequacy of systems unknown. Diversity of contractors involved. Quick turnaround on programs. Materiality of individual contracts.

24. 24 Overcame infrastructure challenge to: Work closely with technical personnel. Ensure desired results achieved as planned. Provide real-time concurrent results. Enabled customer to timely: Report program status to Congress. Make necessary program adjustments.

25. 25 Hurricane Georges

26. 26 Emergency Repair/Clean-up

27. 27 Overcame infrastructure barriers: Transportation Infrastructure Lack of customer audit scope Conducted on-site discussions with customer to agree on: Necessary audit scope Acceptable reporting format

28. 28 Audit Planning Initial Considerations Specific Guidelines Type of Program/ Procurement Logistical Barriers Available Timeframe Market Conditions No Banking System Advance Payments Claims Specific problems that should be addressed [This should illuminate why they need DCAA] Nature of type of program / procurement Logistical barriers Available timeframe for procurement process Market circumstances Potential for fraud and corruption Cost / consequences of fraud and corruption What fraud/corruption costs you [Pose good questions to them to ask themselves to convince themselves they have a need for our services] How did you handle … How would you handle … What would you do if …Specific problems that should be addressed [This should illuminate why they need DCAA] Nature of type of program / procurement Logistical barriers Available timeframe for procurement process Market circumstances Potential for fraud and corruption Cost / consequences of fraud and corruption What fraud/corruption costs you [Pose good questions to them to ask themselves to convince themselves they have a need for our services] How did you handle … How would you handle … What would you do if …

29. 29 DCAA developed real-time auditing and reporting procedures to ensure: Improvements in contractor operations and safety. Quick resolution of issues. No delay in emergency operations.

30. 30 Conditions Inadequate reporting where costs are not accounted and accumulated by cost elements. Accounting records consist of check register or Excel Spreadsheet. Basis Lack of adequate accounting system. Lack of Job Cost Ledger. Recommendations Request accounting system surveys for prospective contractors. Follow up on adequate corrective action to auditors recommendations.

31. 31 Conditions Inadequate procurement system, where lowest bidder not always selected. Inadequate documentation for vendor selection. Internal controls over purchasing procedures weak or non-existent. Basis Lack of written policies and procedures. Purchasing practices not similar to those in U.S. Recommendations Request surveys that cover the purchasing system. Follow up on auditors recommendations.

32. 32 Condition Inadequate support for transactions and payments. Basis Lack of voucher system to maintain supporting documentation for each transaction. Numerous petty cash transactions. Lack of adequate accounting system policies and procedures. Recommendations Request accounting system survey. Ensure the contractor implement adequate corrective action to auditors recommendations.

33. 33 Condition Unusual amount of transactions involving petty cash funds. Basis Extensive use of local suppliers at remote location. Lack of knowledge on checks usage. Limited access to banking institutions at remote locations. Recommendations Educate contractor’s to reduce the use of petty cash to a minimum. When checks are not an option, accounting systems should provide for proper documentation on cash transactions.

34. 34 Conditions Noncompliance with specific regulations. Ineligible costs claimed. Inconsistent treatment of expenses. Basis Lack of knowledge of applicable U.S. Regulations. Recommendations Familiarize all parties, including auditors, contractor, and requestor with the specific regulations under the program. Monitor for compliance with regulations, program requirements, and objectives.

35. 35 Condition Requested cash advances exceeded projected period costs. Basis Limited cash flow. Poor estimation of program costs and budget preparation. Recommendations Request financial capability reviews of prospective contractors. Review the records as soon as possible to detect potential overpayment and large amounts of money outstanding. Design audit steps to ascertain that money is not being used on other programs and it is reconciled to the books and records.

36. 36 Conditions Indirect rates agreed to were too high. Contractor does not have a calculated indirect rate. There is no proper segregation of direct and indirect costs. Basis Lack of policies and procedures to calculate an indirect rate. Lack of knowledge on proper determination of an indirect rate pool and it’s allocation base. Recommendations Request an Indirect Rate review. Establish projected indirect rates based on adequate budgets and estimates.

37. 37 Conditions Numerous revisions to costs reported under the programs. Significant amount of time dedicated to correct errors in the reports. Basis Lack of knowledge of U.S. contracting and reporting requirements. Recommendation Request concurrent audits to obtain real-time audit results and recommendations during the program.

38. 38 Conditions Undefined Scope of Work. Numerous changes and modifications. Basis Emergency nature of the program. Unforeseen adjustments to program objectives. Availability of funds. Recommendations Notify auditors as soon as possible of changes. Adjust audit scope as necessary to address new conditions.

39. 39 Conditions Inadequate selection of subcontractors. Inadequate monitoring of subcontractors. Basis Lack of knowledge on requirements regarding subcontractors. Limited resources to monitor subcontractor’s performance. Recommendations Request the contractor to perform adequate review of subcontractor’s accounting system and records. If contractor not able to perform review of subcontractor, have auditors perform simultaneous audit of the subcontractor under the program.

40. 40 Condition Accounting records for accumulation of counterpart or outside contributions inadequate. Basis Lack of knowledge of specific requirements and regulations. Remote office locations do not report to home office on a timely basis. Lack of knowledge of eligible contributions. Recommendation Request audit of complete program including counterpart contributions.

41. 41 RISK MANAGEMENT

42. 42 Request preaward surveys of prospective contractors. Involve the auditors as soon as possible when a program starts. Keep auditors involved throughout the entire process. Provide feedback on services to maintain open communication with all parties.

43. 43 Program and Audit Planning: Coordinate promptly with auditors. Consider timeframe limitations. Express specific or unique requirements. Survey Prospective Contractors: Accounting system. Financial capability. Indirect rate agreements.

44. 44 Concurrent Audits: Request audits as soon as possible. Provide environment that allows for timely audit results. Implement corrective actions. Incurred Costs: Request audit of long programs prior to their completion. Communicate program changes/modifications to auditors. Audits provide monitoring of compliance with objectives.

45. 45 Claims: Ensure claim submission is adequate. Provide auditors with all facts, auditors determine quantum, not entitlement. Closeouts: Timely audit requests allow for faster closeouts. Timely audit results provide for adjustment to obligated funds.

46. 46 The success of any program depends on its proper planning and execution. Most of the obstacles we have encountered relate to the selection of contractors with inadequate systems to perform the work. Involving the auditors in the preaward, as well as the postaward phase, prevents a significant amount of situations that often result in additional program costs.

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