Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman, ID-Conn., and Ranking Member Susan Collins, R-Me., reacted strongly Wednesday to the release of a Government Accountability Office (GAO) report on the Defense Contracting Audit Agency (DCAA). The report substantiated whistleblower claims that auditors’ conclusions were overruled by supervisors without adequate supporting evidence and that DCAA came under pressure to change audit conclusions so that contracts under audit could continue to be negotiated and contractors would be paid more quickly, even when their costs and charges had not been properly verified or were actually shown to be inappropriate.

“GAO has substantiated serious whistleblower allegations that show that some DCAA supervisors were cutting corners and pressuring their subordinates to give more favorable audits to contractors than the auditors felt the contractors deserved,” Lieberman said. “This shows a blatant disregard for the safeguards that are supposed to be in place to ensure that contractors charge the government no more than a fair and reasonable price.”

Collins said: “Verifying the accuracy of the cost and accounting systems used by government contractors is essential to ensuring that taxpayer dollars are spent wisely. The audits performed by DCAA are a fundamental part of sound government contracting. As Chairman Lieberman and I suspected when we requested that GAO first conduct an investigation of DCAA’s audit practices in August 2006, this GAO investigation raises serious concerns about DCAA’s ability to effectively fulfill its critical oversight mission. Further work is needed to determine the extent of the problem and what corrective actions are necessary to put DCAA back on the right track. ”

In August 2006, the Homeland Security and Governmental Affairs Committee asked GAO to look into DCAA’s auditing practices, in part because of the whistleblower allegations and because they wanted GAO to determine how pervasive the problems were within DCAA.

GAO initiated the investigative report that was released publicly Wednesday in the fall of 2006. It examined DCAA audits at three locations in DCAA’s southwest division: Huntington Beach, Santa Anna, and El Segundo – all in California.
GAO substantiated the whistleblower allegations that auditors’ opinions and conclusions were being changed by supervisors without adequate supporting documentation and that Department of Defense agencies pressured DCAA to make changes to benefit contractors.

The report also found:

• Contractors and DOD contracting officials improperly influenced the audit scope, conclusions and opinions of some audits;
• DCAA managers took actions against staff, discouraged them from speaking to investigators and created a generally abusive work environment.
• Trainees were assigned to very complex audits. In one case, DCAA issued an audit even though the trainee has lost the work papers for the audit.

Lieberman and Collins have long considered mismanagement of federal contracts to be one of the biggest operational challenges facing the federal government. The two co-authored comprehensive legislation, which has been passed by the Senate, to address the weak oversight and lack of competition in contracting. Parts of the bill were enacted as part of the FY08 National Defense Authorization Act.

Lieberman and Collins have also held hearings to expose waste, fraud, and abuse in government contracts, including Iraqi reconstruction contracts. They are strong supporters of the Special Inspector General for Iraqi Reconstruction and cosponsored legislation to extend the authority and increase the resources for SIGIR.