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Overview  

The Defense Contract Audit Agency (DCAA) independently investigates Department of Defense contracts to determine the fairness, accuracy and completeness of financial records and reports, as well as the effectiveness of any transactions the department has made. In other words, the DCAA reviews business deals to make sure everything is aboveboard and acceptably efficient. The agency also provides financial advice to the Department of Defense at every step of the contracting or subcontracting process, from negotiation to final resolution. Contracts for government entities outside the Defense Department may sometimes be audited by the DCAA. Unfortunately, the DCAA itself has been accused of unethical practices, including allowing Boeing and other defense contractors to influence audit reports.

 
History  

Prior to the establishment of the DCAA on Jan. 9, 1965, the Army, Navy and Air Force operated their own auditing agencies, each with different accounting practices. Attempts were made as early as 1952 to create uniform auditing practices; however, they were largely unsuccessful.
 

In May 1962, Defense Secretary Robert S. McNamara launched a study that looked into the feasibility of combining the Defense Department’s auditing programs. The study recommended that auditing be centralized, and three years later, the DCAA was created by order of the deputy secretary of defense. Today, all auditing is performed according to the guidelines laid out in the DCAA Contract Auditing Manual, available on the

DCAA web page

.

 

What it Does  

The DCAA audits approximately 10,000 companies that conduct business with the Defense Department each year, producing some 45,000 audit reports. The total value of the audited contracts is currently more than $200 billion. Department of Defense Directive 5105.36 (PDF), which serves as the agency’s charter, dictates that auditing Defense Department contracts is the sole responsibility of the DCAA.
 
The DCAA is headquartered at Fort Belvoir, VA. There are five regional offices - located in La Mirada, CA; Smyrna, GA; Lowell, MA; Irving, TX; and Philadelphia, PA - that manage more than 300 field audit offices in the United States, Europe and the Pacific. Many auditors assigned to field offices perform so-called “mobile audits,” in which they travel to contractor sites to perform their job. Companies that have significant business with the Department of Defense may have permanent DCAA offices established on-site. The DCAA director reports to the Department of Defense comptroller, who is the department’s chief financial officer.
 
The agency operates the Defense Contract Audit Institute, which trains DCAA auditors, on the campus of the University of Memphis.
 

DCAA’s Electronic Freedom of Information Act Reading Room


 

 

Where Does the Money Go  
Controversies  

The DACC has ignited many controversies through its audits, which sometimes expose wasteful spending or alleged malfeasance on the part of contractors. Unfortunately, the DACC itself has been accused of unprofessional conduct.
 
Corruption in Auditing
A July 2008 report by the Government Accountability Office (GAO) concluded that DCAA auditors had allowed Boeing and other contractors to influence the scope and conclusions of audits and that published audit opinions did not match the information in the audits.  Sen. Clare McCaskill (D-Missouri), a former state auditor herself, said this “could be the biggest auditing scandal in the history of this town.”
 
Iraq War
Largest Iraq contract rife with errors (by Matt Kelley, USA Today)
Pentagon approves disputed Iraq costs (by Matt Kelley, USA Today)
Tester, fellow senators call for wartime-contracting probe (by Noelle Straub, Helena Independent Record)
Statement by DCAA Director William H. Reed (U.S. House Committee on Oversight and Government Reform) (PDF)
 
Hurricane Katrina
Waste, Fraud, and Abuse in Hurricane Katrina Contracts (U.S. House of Representatives Committee on Government Reform) (PDF)
 
Other Issues
Pentagon Reports Improper Charges for Consultants (by John H. Cushman Jr., New York Times)
Homeland Security Contracts Abused (by Griff Witte and Spencer S. Hsu, Washington Post)
DOD stops subcontract pass-through charges (by Richard Rector, Washington Technology)
 
Debate  
Suggested Reforms  
Congressional Oversight  

Senate Committee on Armed Services

 

Former Directors  

Comments  
Don - 9/30/2010 9:14:37 AM              
Finally, some justice, be it very little. Ms. Barajas the DCAA official at the center of most of the corruption allegations is no longer an "active DCAA employee." Her subordinates and many of her peers may well be dancing in the streets. Most people will question whether or not this is in any way truly justice. She may in fact get a handsome retirement package as part of an agreement to leave, who knows? What I'll say is the in the end this is good for all: employees, peers, and most of all tax payers. Let's hope with her departure, there can be a return to productive, high quality audit, that produce the kinds of savings to the tax payers as was once the norm.

Keith J. Kunz - 7/15/2010 7:00:23 AM              
I have been employed by well-known corporation since November 2005 providing professional services to the Department of Defense primarily as a senior system analyst. Can you refer me to a government entity or agency or legal firm that could assist me in filing a discrimination claim against my employer. Thank you for your assistance.

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Table of Contents

Founded: 1965
Annual Budget: $396 million (2008)
Employees: 4,261 (2009)

Defense Contract Audit Agency
Fitzgerald, Patrick
Director

In the wake of April Stephenson’s removal in late October 2009 as head of the Defense Contract Audit Agency, U.S. Army Auditor General Patrick J. Fitzgerald was chosen by President Barack Obama to take over the embattled agency. Fitzgerald, who has spent his entire career in the Army’s auditing wing, will be expected to clean up DCAA’s reputation following numerous controversies that included auditors whitewashing their investigations to appease military contractors.

 
Fitzgerald went to college at the University of Baltimore, where he received his Bachelor of Science in business administration and accounting (Summa Cum Laude) in 1980.
 
That same year he accepted a position as an auditor in the East Central Region for the U.S. Army Audit Agency (USAAA). Six years later he was promoted to supervisor in the Special Programs Division at USAAA Headquarters. In 1989, he was promoted again, to audit manager, and in 1990, he was made chief of the Strategic Planning Branch.
 
Fitzgerald was moved to USAAA’s Southeastern Region in 1991, serving as audit manager. In 1995, he was made field office manager of the Hanover Field Office, and a year later, program director in charge of audits involving the Army Corps of Engineers and information technology within USAAA.
 
He was elevated to Deputy Auditor General for Forces and Financial Management in 1998, overseeing all auditing matters pertaining to the Army’s major functional areas of forces and manpower management; financial operations; information technology; Corps of Engineers and civil works; and the USAAA’s Pacific Region.
 
In 2001, Fitzgerald became Deputy Auditor General of Policy and Operations Management, and three years later he was promoted to Principal Deputy Auditor General for all of USAAA. His responsibilities included developing and overseeing strategic audit plans, and he collaborated with other auditing operations handled by the Department of Defense Inspector General and the Government Accountability Office on issues concerning USAAA’s audit plans, projects, and results.
 
Fitzgerald took over as the Auditor General of the U.S. Army on March 20, 2006. His promotion did not stop him from continuing his education, and in 2007, he received his master’s in policy and management from Georgetown University.
 
 
Stephenson, April
Previous Director

April G. Stephenson served as Director of the Defense Contract Audit Agency (DCAA) from July 2008 October 26, 2009. Stephenson earned a B.S. in Business Administration from California State University, Chico, in 1987, and an M.A. in Administration from Central Michigan University. She began her career with DCAA in 1987 as an auditor trainee in Mountain View, California, and progressed through various positions such as supervisory auditor, program manager, branch manager, and various positions in the policy directorate at DCAA Headquarters. She served as Deputy Director from June 2005 through January 2008, and assumed the responsibilities of Director in February 2008, although she did not obtain the title until July 2008. She also served as the Defense Secretary’s appointee on the Cost Accounting Standards Board.

 
Stephenson is a licensed CPA in the State of North Carolina. She is a member of several professional organizations, including the American Institute of Certified Public Accountants and the Institute of Management Accountants.
 
On July 23, 2008, very shortly after Stephenson took the helm, the Government Accountability Office (GAO) issued a report concluding that DCAA had failed to conduct all fourteen audits investigated in a professional and appropriate manner. After initially questioning the findings of the GAO audit, Stephenson took a different approach in her testimony before Congress, stating that DCAA took the findings “very seriously.” By February 2009, Stephenson was advising contractors that a “New Day” of auditing toughness had arrived. 
 
Current and former DCAA auditors placed most of the blame on Stephenson’s predecessor, William Reed, who stepped down less than three weeks before the release of the GAO report. However, a second critical GAO report led to Stephenson herself being removed from the position and reassigned to the staff of the Defense Department’s Comptroller.
 
Former employees say Defense audit agency is 'broken' (by Robert Brodsky and Elizabeth Newell, Government Executive)
Is DCAA cutting corners? (by Elise Castelli, Federal Times)
 


 
 
 
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