Department of Defense Progress in Resolving Contract Audits

AFMD-84-4: Published: Oct 27, 1983. Publicly Released: Nov 21, 1983.

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In response to a congressional request, GAO evaluated the Department of Defense's (DOD) contract audit resolution system to determine whether: (1) procurement officials comply with resolution system requirements; (2) the system meets government standards; and (3) the system needs improving.

Before the 1982 revisions, the contract auditing resolution system did not work as intended because of design weaknesses and procurement officials did not comply with system requirements. Further, DOD experienced mixed results in resolving audits. As of March 31, 1983, there were about 600 contract audits with questioned costs of $1.7 billion which had remained unresolved for more than 6 months. This represented a 55-percent increase over the previous year. While the revisions made in the system corrected many of the weaknesses, the revised system had just become operational and it was too early for GAO to determine the extent of compliance with system requirements. If properly implemented, the system should satisfy almost all government requirements for audit resolution. However, a few changes are still needed to improve effectiveness and ensure the most economical operation.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The DOD Inspector General published its audit report on August 16, 1985, entitled Contracting Officer Decisions on Contract Audit Recommendations.

    Recommendation: The Inspector General, DOD, should periodically audit contracting officer resolution decisions.

    Agency Affected: Department of Defense: Office of the Inspector General

  2. Status: Closed - Implemented

    Comments: DOD and service regulations have implemented this recommendation pending revisions to DOD Directive 7640.2.

    Recommendation: The Secretary of Defense should require performance appraisals to reflect officials' effectiveness in resolving contract audits.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: On June 19, 1985, the Officer of Inspector General notified GAO that the results of its cost analysis showed that current reporting requirements in DOD Directive 7640.2 were cost advantageous.

    Recommendation: The Secretary of Defense should compare the cost of having the Defense Contract Audit Agency report the status of audit resolutions with the cost of current requirements and implement the less costly approach.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Office of the Inspector General changed the format of information presented in the report to better compare questioned costs and those sustained. However, the Inspector General rejected the portion of the recommendation for explaining resolution decisions because he wants to keep the reports brief. He added that Congress could obtain the information in other ways.

    Recommendation: The Inspector General, DOD, should revise the contract auditing resolution information provided to Congress in his semiannual report to explain more fully how DOD uses contract audits.

    Agency Affected: Department of Defense: Office of the Inspector General

 

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