Incurred-Cost Audits.pdf

The US Department of Transportation (DOT) should obtain more incurred-cost audits of procurement contracts to ensure accurate and allowable contractor costs. DOT spends about $6 billion annually on procurement, with $2 billion excluding the Federal Aviation Administration (FAA). The Defense Contract Audit Agency (DCAA) performs most incurred-cost audits, reporting $2.3 billion in net savings to the Federal Government in FY 2006.

An audit of 30 cost-reimbursable contracts found that:
12 contracts had incurred-cost audits, with a total value of over $640 million.
18 contracts did not have audits, with a total value of over $600 million, and lacked required justification for not obtaining them.
* Questioned costs of $600,000 were resolved for 3 audited contracts, but $1 million in questioned costs remained unresolved for 6 contracts.

Historical data from DCAA showed that between FYs 2001-2005, $48 million in questioned costs were identified, with $36 million resolved, leaving $12 million in missed opportunities.

The Office of the Senior Procurement Executive has taken steps to improve the process, including meeting with DCAA to discuss best practices and providing a list of cost-reimbursable contracts for audit. However, as of March 31, 2007, Operating Administrations had implemented less than 3% of the recommended audit hours for high-risk contracts.