Report | July 16, 2013

DoD Oversight Improvements Are Needed on the Contractor Accounting System for the Army’s Cost- Reimbursable Stryker Logistics Support Contract

DODIG-2013-104

What We Did

We evaluated the effectiveness of the contractor logistics support (CLS) strategy for the Stryker family of vehicles. This report is the third in a series of three reports and addresses contractor billings. The first report addressed contract type and performance metrics. The second report addressed controls over Government property.

What We Found

The Project Management Office Stryker Brigade Combat Team (PMO Stryker) and Defense Contract Management Agency (DCMA)-Detroit officials did not verify that General Dynamics Land Systems (GDLS)-Canada’s accounting system was adequate on the cost-reimbursable services contract for logistics support of Stryker vehicles. This condition occurred because PMO Stryker and DCMA-Detroit did not establish an adequate system of internal controls to verify that the billing system for vouchers reconciled to the appropriate cost accounts. Additionally, due to inadequately defined audit standards, DCMA-Detroit did not coordinate with Public Works and Government Services, Canada (PWGSC) to develop adequate verification procedures for GDLS-Canada’s material charges on its consolidated interim vouchers.

As a result, GDLS-Canada potentially charged as much as $866.8 million of incurred reimbursable costs to the incorrect contract line item numbers and fiscal appropriations. Additionally, PMO Stryker risked potentially violating the Antideficiency Act (ADA) by paying the misapplied charges. Further, as of February 2013, PMO Stryker paid approximately $1.5 billion on the Stryker CLS contract without verifying that GDLS-Canada’s portion of the reimbursable costs was accurate.

What We Recommend

Among other recommendations, the Director, Defense Procurement and Acquisition Policy should continue to negotiate an agreement between the U.S. and Canadian governments that allows PWGSC to perform audit support services that comply with applicable U.S. fiscal laws and accounting standards on U.S. contracts with Canadian companies. Additionally, the Director, DCMA should request that PWGSC review GDLS-Canada accounting system for adequacy by verifying that actual costs are tracked to the appropriate project tasks and billed to the proper appropriation. Further, PMO Stryker, with support from the Army Contracting Command-Warren, should report any potential ADA violations to the Assistant Secretary of the Army (Financial Management and Comptroller).

Management Comments and Our Response

Management comments were responsive.