A recent article in the Federal Times discussed some troubling concerns with the Defense Contract Audit Agency (DCAA) and its rising backlog of audits that can result in billions of dollars in un-audited defense contract costs.

From the article:

“The number of audits performed by the Defense Contract Audit Agency, which ensures that costs charged to the government by contractors are allowable and reasonable, has plummeted in recent years. Last year, the agency performed roughly a quarter the number of audits it did in 2008.”

The issue of rising backlogs, as the article states, is that it creates a lag in time to respond to older audits. This makes it “more difficult to track information and people, which could result in billions of dollars that cannot be disputed,” according to Richard Loeb, a former federal procurement official.

As a response to this issue, the DCAA is seeking to hire hundreds of more auditors to ensure costs that are charged to the government by contractors are reasonable and acceptable. The DCAA is also looking into prioritizing some of the older audits and incorporating some help from the Defense Management Agency to ensure terms and conditions of contracts are being met.

There is another strategy that unfortunately is not mentioned in the article. The reporting of Level-3 financial data on purchases made by government contractors can help the DCAA reduce the time it takes to audit contracts using the GSA SmartPay card, the world’s largest government spending card.

As we’ve mentioned in previous editorials here on Government Charge Card, having access to Level-3 line item data is beneficial for agencies, as greater transparency and detail of purchases being made are reported.

Government contractors that are already Level-3 compliant with their financial processing are able to provide such granular line item details on purchases from cardholders, thus helping contract audit agencies like the DCAA ease auditing backlogs.

Hiring more auditors seems to make sense. But contractors can also make the entire purchasing process more transparent simply by more quickly adopting Level-3.