Every few years, we reach out relative to the importance of a government contractors’ response to audits performed by the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA), the Department of Labor (DOL) or, for that matter, any other government audit function.
DCAA performs a myriad of audits during proposal, performance, and close-out phases of a procurement. Audits include: price proposal audits, pre-award accounting system assessments, cost realism audits, forward pricing rate audits, incurred cost audits on cost-type contracts, interim billing rate audits, interim payment monitoring, business system compliance, CAS compliance and disclosure statement reviews, real-time (as it’s happening) labor and material audits, truth in negotiation/defective pricing audits, equitable adjustment/claim audits, termination claim audits, final price submissions and final voucher audits. Current priorities center on forward pricing, incurred cost, contractor business system, and truth in negotiation/defective pricing audits.
The first thing that a contractor should do when notified that an audit is to be performed is to understand what is being audited, why it is being audited, who is doing the audit, and when and where is the audit to be performed. Timing of the audit should be established defining when the audit is to be started and what is the anticipated completion date. Variances to this initial planning should be recognized and explainable to ensure the audit is on course to accomplish its original purpose. Once this basic information is obtained the specific audit process should be reviewed and understood. Generally, this can be provided by visiting the agency website (in the case of DCAA at https://www.dcaa.mil/Guidance/Directory-of-Audit-Programs/).
It is important to understand what the auditor hopes to accomplish with the performance of the audit – in essence, what their objective is. It is quite possible that the audit they are planning to perform will not provide them with the results they desire. If this is the case, discuss this with the auditor and their supervisor to save time and money and ensure they get the right answers to the right questions during the performance of the audit.
Once the purpose and objective of the audit have been established with the auditor a single, knowledgeable point of contact within your organization should be established.
All contact with the auditor and all responses to audit requests for information should be coordinated through this single point of contact. This ensures that the auditor receives the correct responses to their requests, is not asking for information that is outside of the initial audit purview, and you as the auditee, are aware of what specific questions are being asked and what response is being provided, hopefully staying one step ahead of the audit process and the early identification of potential audit issues for potential resolution.
Above all, it is important not to, or be perceived to, obstruct the progress of the audit through “stone-walling” the auditor’s data request or delaying your responses. If the requested data is not immediately available be sure to meet your commitment as to when the requested information could be made available. Do not try to buy time by delaying the requested data. Do not accept or agree to an auditor’s negative findings without understanding the data supporting their findings and the true concern of the auditor. It is perfectly acceptable to, question the auditor’s opinion of what they have seen and provide further information where required and available to ensure their understanding and audit position is correct.
You should establish a process of documenting, in writing if possible, each data request from the auditor, when it was received, when the request was full-filled, what data was provided and specifically to whom it was provided and how. If written documentation is not available detailed notes should be made and kept in the files.
It is important to maintain a positive attitude toward the auditor and to recognize that they are professionals and should be treated with respect. Limit your responses to your actual knowledge, do not make or offer assumptions and avoid emotional issues. Do not offer extraneous information not required as a part of your responses.