Six months after scathing review, problems at Defense audit agency persist

The head of the Defense Contract Audit Agency this week issued a memorandum documenting progress in addressing widespread management problems identified in a July 2008 Government Accountability Office report, but DCAA employees told Government Executive that little has improved.

DCAA officials have overhauled most of the agency's job performance metrics and launched an anonymous Web site to obtain employee feedback, DCAA Director April Stephenson wrote in the Feb. 17 memo to staff. In December 2008, DCAA issued guidance clarifying what constitutes a significant contractor deficiency, she added. Officials also are analyzing the results of a workforce survey the Office of Personnel Management conducted and recommendations by an independent review panel.

But employees said these and other reforms in the wake of the report, which found that DCAA managers improperly influenced audit results, are cosmetic changes and that the new performance measures have been either ineffective or enforced sporadically.

A follow-up GAO report, expected to be released this spring, could support employees' claims.

GAO examined the quality of internal control audits, in which DCAA officials determined if contractors' accounting, billing, information technology and estimating systems were adequate and reliable. Employees who have seen GAO's preliminary findings said only three of 34 audits reviewed met government standards, yet DCAA managers signed off on all 34.

DCAA spokesman Darryn James would not comment directly on the forthcoming report because the agency has yet to receive a copy. But, based on preliminary information, the agency has rescinded some of the audits criticized by GAO, he said.

"DCAA is using a back-to-basics approach to improve audit services by focusing on the core mission of auditing contractor costs for compliance with contract terms, acquisition regulations and accounting standards," James said.

A Path Forward

Stephenson noted in her memo that DCAA has developed a detailed strategy for implementing recommendations issued by the independent Defense Business Board last month after its own assessment of the agency's management problems, and has established a council to monitor progress.

But employees said the board's advice, which included redefining DCAA's mission, writing a new human capital and annual performance plan, centralizing management, hiring a chief operating officer, and establishing a chief of internal review to serve as an ombudsman between staff and management, did not go far enough.

Nearly all the half dozen staffers interviewed for this story said DCAA needed to become a stand-alone agency, similar to GAO, to regain its independence. One auditor in the West Coast region said additional oversight by the Defense comptroller and inspector general's offices, as suggested in the Defense Business Board report, would "only serve to compromise independence."

Others complained that internal procedures remain too rigid. For example, DCAA auditors must document and charge to an account virtually every hour of every workday. And, while some agencies require that reports be issued by a specific date, DCAA recommends that audits be completed within a certain number of budgeted hours, employees said.

Auditors presented documents and e-mails indicating that they still are being pressured to hand in their work prematurely.

For instance, a California auditor said her supervisor told her to ignore an access to records problem during a December 2008 audit. The auditor completed her work but documented the problem. DCAA's new headquarters quality assurance personnel later selected the audit for a post-issuance quality review, according to documents. But, the review panel also ignored the auditor's concerns and gave the audit a clean bill of health.

Others said reforms intended to ensure high-quality work have backfired.

A supervisor in the Central region who has been with the agency for 24 years said that since the controversy broke, managers have become so concerned about making mistakes they have added extra layers of review. Virtually every audit is examined by a regional manager, the supervisor said.

"[There is] no more Mr. Nice Guy," the supervisor said. "Management's general approach on just about everything we do now is nothing we look at from the contractors is acceptable."

Another manager in the West Coast region said managers essentially have assumed the role of first- and second-level supervisors, reviewing reports and work papers and slowing the process considerably.

"We have an excellent relationship with the procurement offices but in general, they are all complaining about the longer times to issue reports," the manager said. "I have heard several stories about contracting officers contacting DCAA headquarters to complain about the long delays in getting reports, even for 'critical' negotiations."

A senior auditor in the West Coast region, where GAO discovered the most problems, argued that DCAA must reform its promotion standards, which place a higher premium on a supervisor's annual performance evaluation than on experience or Certified Public Accountant qualifications.

"DCAA has promoted loyalty over competent judgment, and has, therefore, hobbled, or even disabled, the possibilities of real internal reform," the auditor said.

James said the agency is looking into promotion policies. "DCAA periodically reviews the potential criteria and several years ago added expanded additional criteria on leadership attributes," he said.

Impatient for Change

Stephenson's Feb. 17 memo did not address the topic still front and center on the minds of many agency employees: the prospect of disciplinary action against managers and supervisors accused by GAO of changing audit reports and then harassing auditors who complained.

During a September 2008 Senate Homeland Security and Governmental Affairs Committee hearing, Stephenson said she would hold off on disciplining any of the supervisors involved until the Defense Department inspector general completed a follow-up investigation. The findings of that probe are scheduled to be released in May, according to the IG's office.

But some staffers have grown impatient.

Diem Thi Le, an auditor in DCAA's California office who allegedly suffered retaliation for cooperating with GAO investigators, said she is particularly disturbed that the managers involved in her case not only remain in charge of supervising audits, but also teach training courses.

"Field management and auditors do not take [headquarters'] message of change seriously because we have not seen anyone held accountable for what was reported by the GAO and DoD IG in the September congressional hearing," said Le, during her first public interview. "On the contrary, we observed that the personnel who committed the reported inappropriate behavior have been allowed to retire without retribution, promoted, transferred to other offices, or presented as role models conducting training on behalf of the agency."

Additional sources confirmed that several of the supervisors cited for misconduct have been assigned to lead training programs. Some of the programs -- such as a session on how to obtain documents from contractors -- were initiated in response to GAO's 2008 investigation.

"The hypocrisy is amazing," said one senior auditor in the West Coast region. "They ignored the problem and now they are leading the training."

DCAA's James urged employees to sit tight.

"There are reviews in progress, but in accordance with personnel regulations, these investigations must be completed and individuals afforded their due process rights before any determination of disciplinary action is made," James said. "But let there be no doubt that DCAA leaders are committed to taking any disciplinary actions deemed appropriate as a result of these investigations."

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