Financial Executives International (FEI) Board Member John Panetta Offers Insight on Government Audit Practices to Congress

Abstract

In many cases, congressionally appropriated funds assigned to specific contracts expire waiting for final rate settlements. As such, the service branch then is required to request the use of current year funds appropriated for ongoing missions to pay prior period costs. If the Defense Contract Audit Agency (DCAA) continues to lag behind this is something that will need to be addressed. Audit validated incurred costs and indirect rates play an important part in establishing agreed to bidding rates used in negotiating follow-on and new contracts. The absence of recent years' finalized rates causes the Government and contractors to expend more resources (administrative and bid and proposal support costs) in executing contracts. This in turn slows down the delivery of goods and services to the warfighter. The Committee on Government Business believes reducing the audit backlog of incurred cost rates and contracts awaiting close out will require implementation of efficient audit management practices focused on risk mitigation and materiality. At the same time, the acquisition community requires a cultural change in how the success of an audit and oversight is measured to effect real and beneficial change.