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TITLE VIII--ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS

Subtitle G—Other Matters

P. L. 114-

House Conference Report. 114-270

(a) Prohibition on performance of non-defense audits by DCAA.—

(1) IN GENERAL.—Effective on the date of the enactment of this Act, the Defense Contract Audit Agency may not provide audit support for non-Defense Agencies unless the Secretary of Defense certifies that the backlog for incurred cost audits is less than 18 months of incurred cost inventory.

(2) ADJUSTMENT IN FUNDING FOR REIMBURSEMENTS FROM NON-DEFENSE AGENCIES.—The amount appropriated and otherwise available to the Defense Contract Audit Agency for a fiscal year beginning after September 30, 2016, shall be reduced by an amount equivalent to any reimbursements received by the Agency from non-Defense Agencies for audit support provided.

(b) Amendments to Defense Contract Audit Agency annual report.—Section 2313a(a) of title 10, United States Code, is amended—

(1) in paragraph (2), by amending subparagraph (D) to read as follows:

“(D) the total costs of sustained or recovered costs both as a total number and as a percentage of questioned costs; and”;

(2) in paragraph (3), by striking “; and” and inserting a semicolon;

(3) by redesignating paragraph (4) as paragraph (5); and

(4) by inserting after paragraph (3) the following new paragraph:

“(4) a description of outreach actions toward industry to promote more effective use of audit resources; and”.

(c) Review of acquisition oversight and audits.—

(1) REVIEW REQUIRED.—The Secretary of Defense shall review the oversight and audit structure of the Department of Defense with the goals of—

(A) enhancing the productivity of oversight and program and contract auditing to avoid duplicative audits; and

(B) streamlining of oversight reviews.

(2) RECOMMENDATIONS.—The Secretary shall ensure streamlined oversight reviews and avoidance of duplicative audits and make recommendations in the report required under paragraph (3) for any necessary changes in law.

(3) REPORT.—

(A) Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on actions taken to avoid duplicative audits and streamline oversight reviews.

(B) The report required under this paragraph shall include the following elements:

(i) A description of actions taken to avoid duplicative audits and streamline oversight reviews based on the review conducted under paragraph (1).

(ii) A comparison of commercial industry accounting practices, including requirements under the Sarbanes-Oxley Act of 2002 (Public Law 107–204; 15 U.S.C. 7201 et seq.), with the cost accounting standards prescribed under chapter 15 of title 41, United States Code, to determine if some portions of cost accounting standards compliance can be met through such practices or requirements.

(iii) A description of standards of materiality used by the Defense Contract Audit Agency and the Inspector General of the Department of Defense for defense contract audits.

(iv) An estimate of average delay and range of delays in contract awards due to the time necessary for the Defense Contract Audit Agency to complete pre-award audits.

(v) The total costs of sustained or recovered costs both as a total number and as a percentage of questioned costs.

(d) Incurred cost inventory defined.—In this section, the term “incurred cost inventory” means the level of contractor incurred cost proposals in inventory from prior fiscal years that are currently being audited by the Defense Contract Audit Agency.

The House bill contained no similar provision.

The House recedes with an amendment that would prohibit the DCAA from providing outside audit support to non-Defense Agencies until DCAA certifies that the backlog for incurred costs is less than 18 months of incurred-cost inventory, not require the Secretary of Defense to use outside auditing staff to help address DCAA's audit backlog, and streamline reporting requirements.

Senate Report 114-49 to accompany S. 1376 as it was reported out of the Senate Armed Services Committee.

Improved auditing of contracts (sec. 878)

The committee recommends a provision that would authorize the Defense Contract Audit Agency (DCAA) to provide outside audit support to non-Defense Agencies upon certification that the backlog for incurred cost audits is less than 12 months of incurred cost inventory. The committee understands that DCAA has made progress in reducing its incurred cost audit backlog but this has come at the expense of a reduction in the number of audits and increased backlogs in other areas of its responsibilities. The committee believes that DCAA management should not be distracted by directing and managing the audit responsibilities of other agencies until its own house is completely in order. The provision would require the Secretary of Defense to use up to 5 percent of the auditing staff of the Office of the Inspector General of the Department of Defense and the service audit agencies and, if necessary, augmented by private audit firms to help address DCAA's audit backlog. The provision would also require the Secretary to review the oversight and audit structure of the Department of Defense with the goal of improving productivity, avoiding duplicative program and contract audits, and streamlining oversight reviews.