The Department of Defense Office of Inspector General, or DOD OIG, has issued a report that evaluated the compliance of non-federal auditors with government auditing standards when they conducted audits of DOD contractors’ incurred costs.
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What Are the OIG Report’s Findings?
DOD OIG said Thursday it evaluated 16 incurred cost audits between October 2018 and September 2022 and found noncompliance with government auditing standards for 69 percent of such audits.
The office identified 34 instances of noncompliance among the 11 audits, including failure to obtain sufficient evidence to support their reported compliance for eight audits and inability to use a sufficient sample methodology to back conclusions for four audits.
For 11 audits, OIG found that non-federal auditors did not inquire about audit-related legal or investigative proceedings with DOD contractor management.
“Government Auditing Standards are crucial because they ensure the integrity, accountability, and transparency of Government operations,” said DOD Inspector General Robert Storch.
“By adhering to rigorous guidelines, auditors can identify inefficiencies, detect fraud, and recommend improvements, thereby enhancing the economy, efficiency, and effectiveness of Government programs. The significant concerns identified by the OIG in this evaluation go to the core of the DoD’s responsibility to serve as a careful steward of a large volume of taxpayer funds,” added Storch.
OIG Recommendations
The report recommends that the director of the Defense Contract Audit Agency, or DCAA, determine if the eight reports where the auditors did not obtain sufficient evidence should be revised or rescinded.
The inspector general’s office also recommends that the DCAA director, in coordination with the head of the Defense Logistics Agency, assess and make any revisions to performance work statements of all future contracts with auditors to ensure that DCAA contracting officer’s representatives have sufficient responsibility and authority to assess non-federal auditor work for compliance with standards.
According to the report, the DCAA chief should work with the DLA director in requiring auditors to address compliance with the standards in their quality control plans.