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NeoSystems Corporation

Government Contracting

Is DCAA About to Shrink?

January 22, 2016 | BY: NeoSystems
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In the 2016 National Defense Authorization Act, signed by President Obama on November 25, 2015, Congress prohibited DCAA from providing audit support for non-Defense Agencies unless “the Secretary of Defense certifies that the backlog for incurred cost audits is less than 18 months.” It’s in Section 893 of the Act, “Improved Auditing of Contracts.” Read it here.

If you have followed DCAA’s backlog debacle the last couple of years, you know the current backlog is in the neighborhood of six or seven years. It won’t approach 18 months for years to come, if ever.

You might be tempted to think that focusing DCAA’s efforts exclusively on DOD will shrink that backlog more rapidly.  You would probably be wrong.

You see, DCAA is reimbursed for those non-DOD audits by the agencies they work for. Those reimbursements are part of the funding that pays for the workforce. Without those reimbursements, DCAA will almost certainly have to reduce their workforce to fit their (now reduced) funding. Lest you think the amount is trivial, it’s not.  It’s tens of millions of dollars and hundreds of auditors.

In 2014, I asked DCAA via a Freedom of Information Act (FOIA) request exactly how much it was reimbursed by civilian agencies and from whom.  They buried me in documents. The inter-agency agreement with NASA alone approached $20 Million.  The Department of State, AID and certain other three-letter agencies accounted for another $20 Million or so. The rest of the civilian agencies brought the combined total within a stone’s throw of $50M.

So, just how many auditors is that? At the billing rates in the documents I received in response to my FOIA request, and allowing for support, supervision and management (included in the rate, but not billed by the hour), it’s probably somewhere around 400. DCAA’s 2015 report to Congress is not yet available, but according to the 2014 report, the agency’s total headcount was just over 5,000. Loss of funding for 400 people represents an 8% cut and that would put DCAA back to 2010 staffing levels.

Reducing the backlog is certainly a worthwhile goal, but that doesn’t seem to be what this is about. Congress didn’t just say “keep your work in house until you have the backlog under control.” They also put a provision in the NDAA saying “The amount appropriated and otherwise available to the Defense Contract Audit Agency for a fiscal year beginning after September 30, 2016, shall be reduced by an amount equivalent to any reimbursements received by the Agency from non-Defense Agencies for audit support provided.” Congress appears to be limiting DCAA to the number of people their appropriation will support even after the backlog is under control – no more hiring auditors to sell to other agencies!

Just in case you’re thinking DCAA will have some time to wind up their civilian agency work, the NDAA prohibition was effective the day the NDAA was signed. The word on the street is that DCAA auditors working on non-DOD audits laid down their pencils and left that day.

Yes, it appears that DCAA may shrink. And, that may bring with it all the turmoil usually associated with a reduction in force – something DCAA can ill afford at this juncture. The only question now is when? And, what will that mean to the DOD contractors they WILL audit?

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