Oversight of Contractor Pension Costs Could Be Improved

NSIAD-86-85: Published: Jun 23, 1986. Publicly Released: Jun 23, 1986.

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GAO assessed the adequacy of the Department of Defense's (DOD) audits of contract pension costs. DOD relies on the Defense Contract Audit Agency (DCAA) and the Defense Contract Administration Services (DCAS) to monitor such costs.

GAO found that: (1) while the combined DCAA and DCAS efforts have resulted in adequate audit coverage of defense contractors' pension costs, the agencies have performed independent reviews covering the same contractors without coordinating their efforts; (2) DOD policies require DCAA and DCAS to coordinate their pension audits; (3) during its review, DCAA and DCAS regions were attempting to improve coordination; and (4) DCAA and DCAS need to improve their monitoring of unallowable costs resulting from contractors' delays in funding their pension plans.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD agreed with this recommendation and has taken action to improve coordination of reviews by DCAA and DCAS. DLA was tasked to define and fix responsibilities for such reviews.

    Recommendation: The Secretary of Defense should take steps to ensure that DCAA and DCAS improve coordination and adhere more closely to procedures requiring coordinated pension reviews.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD did not concur with this recommendation.

    Recommendation: The Secretary of Defense should revise Federal Acquisition Regulation 31.205-6 to require that unallowable costs resulting from late funding of a contractor's pension plan be computed using short-term Treasury bill interest rates or other readily identifiable short-term rates in lieu of actuarially determined interest rates.

    Agency Affected: Department of Defense


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