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Audits

ACON 003

DAU GLOSSARY DEFINITION

Systematic examination of records and documents to determine adequacy and effectiveness of budgeting, accounting, financial, and related policies and procedures; compliance with applicable statutes, regulations, policies, and prescribed procedures; reliability, accuracy, and completeness of financial and administrative records and reports; and the extent to which funds and other resources are properly protected and effectively used.

Alternate Definition
Audits in the acquisition arena can be broken into two categories—acquisition oversight audits and contract audits. Acquisition oversight audits are aimed at determining whether Government acquisition activities are properly applying federal procurement and contract administration policies and regulations. Contract audits are performed primarily to analyze the financial/accounting elements of specific Government contracts.
General Information

Acquisition Oversight

 

The Government Accountability Office (GAO) and Department of Defense Inspector General (DoD IG) are the two primary organizations that perform acquisition oversight audits. Known as “the investigative arm of Congress” and “the Congressional watchdog,” the overall mission of GAO is to improve the performance and accountability of the federal government. While its mission encompasses many areas of federal government operations, an important part of that mission focuses on acquisition, to include DoD acquisition. Because DoD’s contracts are created primarily using appropriated funds, Congress has a vital interest in seeing that taxpayer monies are spent in accordance with applicable laws, regulations, and sound business practices.

 

GAO audits may focus on issues such as a specific Government agency’s oversight of a prime contractor, the accuracy of contract data reporting, the visibility and accountability of U.S. military equipment in Iraq and Afghanistan, and whether Government contracting officers are using the right contract type for a certain class of acquisitions. Because GAO is an arm of Congress and DoD is part of the Executive Branch of the U.S. Government, GAO’s audit recommendations are not legally binding on DoD activities. However, audited activities are expected to concur with GAO’s audit recommendation(s) and implement corrective action, or non-concur and offer an explanation for the non-concurrence.

 

The stated mission of DoD IG is to "Promote integrity, accountability, and improvement of Department of Defense personnel, programs and operations to support the Department's mission and serve the public interest." It performs a wide range of activities, including investigating allegations of fraud and reviewing DoD Intelligence programs. An important part of its mission is to review DoD acquisition and contract management activities.

 

DoD IG identifies eight broad areas of acquisition in which it performs audits and reviews:

 

  1. Contract Administration
  2. Contract Pricing and Competitive Sourcing
  3. Construction and Sustainment
  4. Research, Development, Test and Evaluation, and Systems Acquisition
  5. Weapons Acquisition
  6. Acquisition and Contracts Oversight
  7. Acquisition and Contracting
  8. Contracting and Congressional Support

 

Unlike audit recommendations from GAO, DoD IG audit recommendations have the full authority of the Office of the Secretary of Defense behind them. Any noncompliance with audit recommendations will be resolved within the DoD chain of command.

 

In addition to GAO and DoD IG performing audits of DoD acquisition activities, the Air Force Audit Agency, Army Audit Agency, and Naval Audit Service perform acquisition audits (in addition to other audits) that are specific to their military components.

 

Contract Audits

 

The Defense Contract Audit Agency (DCAA) conducts audits of DoD contracts from the proposal stage through contract closeout. Its focus is on the financial/accounting elements of specific contracts. This is in contrast to GAO and DoD IG audits, which focus on broader policy aspects of DoD acquisition.

 

DCAA conducts audits in the following areas:

 

  • Preaward: price proposals, preaward survey support, forward pricing of labor and overhead rates
  • Postaward: incurred costs/annual overhead rates, Truth in Negotiation Act compliance, Cost Accounting Standards compliance, claims, contractor financial capability
  • Contractor Internal Control Systems: accounting, estimating, compensation, billing, material management, labor, purchasing

 

DCAA audit results are provided to contracting officers for developing cost and price targets for contract award, administration, and closeout. DCAA also provides audit services to various non-DoD federal agencies.

 

The Defense Contract Management Agency (DCMA) is not considered an audit activity in the strict sense, but provides a wide range of contract-related reviews to support DoD acquisition activities. It conducts reviews and surveys in areas such as supplier risk, quality assurance, field pricing assistance, earned value management, and accountability over government property.

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