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If you go to Pasadena, California in the summer time, you may not notice that there is a mountain immediately to the north. It is a good-sized mountain, by coastal California standards, but its existence is obscured by the smog, just as DCAA’s progress in reducing its backlog of incurred cost submission (ICS) audits is obscured by the lack of context in its report to congress. To provide a little context, here is a comparison of FY 2011 and 2012 backlog metrics:
ICS Backlog Metrics
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FY 2011
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FY 2012
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Submissions
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Submissions
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Adequate
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15,000
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17,000
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ICS Audits
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349
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2,735
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Backlog (years)
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43
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6
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Pending Adequacy
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9,000
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9,000
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Days to Complete Audit
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965
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1,184
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Note: in FY 2012 DCAA completed 1,795 ICS audits covering 2,735 contractor fiscal years.
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We see that DCAA has substantially increased the number of ICS years audited and that the backlog in years has gone down as a result, but the number of submissions has increased by almost the same amount as the increase in ICS years audited. DCAA is not even treading water. Maybe if the agency can double the number of ICS years audited it will start making progress on the backlog.
Note that the backlog in years corresponds to the Contracts Disputes Act Statute of Limitations (SOL), which is making progress in the courts. If your cost disclosures in your incurred cost submissions are sufficient to start the SOL clock running, DCAA might be left out of luck, so to speak, when they attempt to question your costs.
The metrics for ”pending adequacy” and “days to complete audit” leaves us bewildered and searching for context. Buried in the days to complete metric is the fact that DCAA incurred cost audits typically take from several months to over a year to complete and that DCAA has historically considered itself current when it is auditing contractor fiscal years that are from five to seven years old. Now consider that the days to complete metric starts at the point when DCAA determines that the submission is adequate, and see if you can estimate the odds of receiving a timely determination of adequacy. Historically the odds have not been good. Are the odds improving? We doubt it, but it is hard to say without data showing the aging of the backlog. Company / client management should understand that the odds of receiving a timely determination of adequacy are not good and adjust their expectations accordingly. (There are ways to improve your chances of having a timely determination of adequacy, but that may be the subject of a future article.)
Look for our next articles in our series on the Second Annual DCAA report to Congress that will address DCAA’s suggestions for improvement, overseas contingency operations (wars), and audit metrics.
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