We evaluated the accuracy of data in the Contract Audit Follow-Up (CAFU) System, which DoD Components use to track and manage the status of actions that contracting officers take in response to Defense Contract Audit Agency (DCAA) audit reports. During FY 2014, DCAA audit reports questioned $10.7 billion in proposed DoD contractor costs. The data residing in CAFU are summarized and included in the DoD Inspector General Semiannual Report (SAR) to Congress. The data in CAFU need to be accurate to ensure that reported DCAA audit findings are timely and appropriately resolved and that the SAR is correct.
Of the 50 CAFU reportable audit records we tested, 41 records (82 percent) included inaccurate information in one or more data fields. Each record includes up to 20 data fields with information on each DCAA report. In total, 100 data fields had errors. For example, we found 10 errors associated with the “Questioned Cost” data field because the amounts in the field did not comply with DoD Instruction 7640.02, “Policy for Follow-up on Contract Audit Reports,” April 15, 2015, which establishes record-keeping and reporting requirements for reportable contract audits. The errors caused a $2.6 million overstatement of Questioned Cost in CAFU.
In addition, in 15 instances, DCMA contracting officers entered inaccurate Questioned Cost Sustained amounts in CAFU that resulted in overstating Questioned Cost Sustained in CAFU by $8.4 million.
We have also detected errors in CAFU information while compiling CAFU information for the SAR. For example, a CAFU error could have caused a $1.97 billion overstatement of Questioned Cost Sustained in the March 31, 2014, SAR if we had not detected it.
CAFU data errors adversely impact DoD management’s ability to rely on CAFU as a tool for tracking contracting officer actions on DCAA audit reports. The frequency of the CAFU errors demonstrates the need for DCAA and DCMA to improve CAFU-related procedures and internal controls.
We recommend that the Directors of DCAA and DCMA provide refresher training and modify agency procedures and related internal controls to improve CAFU data accuracy and help ensure compliance with DoD Instruction 7640.02. For example, we recommend that DCMA modify its procedures to ensure contracting officers complete required actions on all DCAA findings before contracting officers close an audit record in the CAFU system (see Recommendation 3.b).
Management Comments and Our Response
The Directors of DCMA and DCAA fully agreed with the recommendations, except the Director, DCMA agreed in part to Recommendation 3.b. DCMA’s plan to update DCMA Instruction 126 in response to Recommendation 3.b would allow contracting officers to inappropriately close a CAFU record before all questioned costs have been addressed. The update would not comply with DoD Instruction 7640.02 and be contrary to DoD’s interest in ensuring that contracting officers appropriately address all audit findings. Therefore, we request that the Director, DCMA provide additional comments on Recommendation 3.b.