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DOD's Audit Follow-up System Is Inaccurate and Incomplete

NSIAD-92-138: Published: May 28, 1992. Publicly Released: Jun 4, 1992.

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Paul F. Math
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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) audit follow-up system coverage of cost-estimating reports issued by the Defense Contract Audit Agency (DCAA), focusing on whether the DOD audit follow-up system provides DOD managers with reliable information so that they can oversee the progress contractors make in correcting cost-estimating system deficiencies.

GAO found that: (1) the DOD audit follow-up system data were inaccurate or incomplete for 35 of the 49, or 71 percent, of the high-risk contractors; (2) the follow-up system was missing reports on 13 contractors, understated the length of time cost-estimating deficiencies remained uncorrected for another 17 contractors, and incorrectly showed that 5 contractors had corrected deficiencies; (3) some reports are not included in the follow-up system because of administrative contracting officers' decisions about whether an audit report should be in the follow-up system or the contractor has adequately responded to audit recommendations; (4) the age of outstanding deficiencies is understated because audit follow-up system procedures require current reports to supercede earlier reports, even though the earlier deficiencies have not been corrected; and (5) DOD has proposed changes to improve the accuracy and completeness of audit system follow-up data and has recently taken action to ensure that the audit follow-up system contains information on when DCAA initially reported cost-estimating system deficiencies.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: On March 30, 1992, DLA issued guidance to ACO to hold open audit reports until all deficiencies were corrected.

    Recommendation: The Secretary of Defense should direct the Director of the Defense Logistics Agency (DLA) to ensure that administrative contracting officers (ACO) verify that contractors have corrected all deficiencies cited in DCAA audits of cost-estimating systems before reporting disposition of the audit.

    Agency Affected: Department of Defense


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