The Department of Defense Office of Inspector General (DoD OIG) announced today that it released the “Evaluation of Incurred Cost Audits Performed by Non-Federal Auditors for Compliance with Government Auditing Standards.”
“Government Auditing Standards are crucial because they ensure the integrity, accountability, and transparency of Government operations,” said IG Robert Storch. “By adhering to rigorous guidelines, auditors can identify inefficiencies, detect fraud, and recommend improvements, thereby enhancing the economy, efficiency, and effectiveness of Government programs. The significant concerns identified by the OIG in this evaluation go to the core of the DoD’s responsibility to serve as a careful steward of a large volume of taxpayer funds.”
The evaluation identified that non-Federal auditors did not comply with Government Auditing Standards for 69 percent of selected audits (11 of 16). The DoD OIG identified 34 instances from the 11 audits in which non-Federal auditors did not comply with Government Auditing Standards. For example, non-Federal auditors completed eight audits without obtaining sufficient evidence to determine that the DoD contractor’s claimed costs complied with applicable Federal regulations. For 11 audits, non-Federal auditors did not inquire with DoD contractor management about legal or investigative proceedings related to the audit, as Government Auditing Standards require.
The DoD OIG recommended that the Defense Logistics Agency (DLA) and Defense Contract Audit Agency (DCAA) update contracts to define the roles and responsibilities of contracting officer’s representatives for verifying that non-Federal audit work complies with Government Auditing Standards. In addition, the DoD OIG recommended that the DCAA determine if the eight audit reports issued without sufficient evidence should be withdrawn or revised.
The DoD OIG will monitor the progress toward fully implementing these recommendations.