Defense Contract Audit Agency The Defense Contract Audit Agency ( DCAA ) , is an agency of the United States Department of Defense under the direction of the Under Secretary of Defense ( Comptroller ) . DCAA is primarily responsible for performing all contract audit s for the Defense Department ( and , to a lesser extent , for other agencies outside DoD ) , and providing cost accounting and financial advisory services regarding contracts and subcontracts to all DoD components responsible for procurement and contract administration . These services are provided in connection with negotiation , administration , and settlement of contracts and subcontracts . DCAA does not provide consulting / advisory services to contractors due to independence requirements . DCAA today . Today , the Defense Contract Audit Agency consists of approximately 4 , 000 people , located at more than 300 field audit offices throughout the United States , Europe , and in the Pacific . The Agency provides standardized contract audit services for the Department of Defense , as well as accounting and financial advisory services regarding contracts and subcontracts to all DoD Components responsible for procurement and contract administration . These services are provided in connection with negotiation , administration , and settlement of contracts and subcontracts . DCAA does not provide consulting / advisory services to contractors due to independence requirements . DCAA also provides contract audit services to some other Government Agencies , as well as to other countries under the Foreign Military Sales ( FMS ) program , on a reimbursable basis . The largest non - DoD agency for which DCAA performs audits is NASA ( primarily since the same government contractors , especially on major programs , do substantial business with both DoD and NASA ) . DCAA ' s headquarters are located at Fort Belvoir , in the same building as the Defense Logistics Agency . DCAA also operates the Defense Contract Audit Institute ( DCAI ) training facility on the Park Avenue Campus of the University of Memphis ; however , this facility will soon close as DCAI will be transferring to a new facility located in Atlanta , GA as of the GFY 2015 . Under headquarters DCAA is organized into five geographic regions and a Field Detachment group , the latter handling contracts involving classified information . The five geographic regions , the location of the regional office , and the ( as of 2011 ) general area of responsibilities are as follows : Within each region are between 15 - 22 field audit offices , referred to as " resident " offices ( if auditing only one contractor , generally used at major facilities or corporate offices ) or " branch " offices if auditing more than one contractor . Branch offices may have sub - offices under them , which have auditors dedicated to one contractor , but not enough to establish a separate office . Recent events . In response to prior years allegations of poor performance , the agency has gone through a recent major overhaul in how it operates . Under the new leadership of Patrick Fitzgerald , the agency is changing on a number of levels including changes in its hiring process , revamping employee training and organizing committees dedicated to promoting change in specific areas of weakness . The new training places heavy emphasis on government auditing standards of quality or Generally Accepted Government Auditing Standards ( GAGAS ) . A new agency culture has emerged centered around critical values such as independence , quality of work , documentation , and timeliness . As a result of this new culture , companies that are subject to DCAA audits today should expect a more thorough audit that has increased audit testing and higher levels of evidence requirements . In addition , adherence to independence requirements prevents DCAA auditors from providing consulting and accounting advisory services to contractors . Current DCAA audits . Companies that are subject to DCAA audits today should expect a more thorough audit that has increased audit testing and higher levels of evidence requirements . This means contractors will have to provide more supporting documentation for claimed and / or proposed costs . Auditors will be looking closer at costs and testing more items than before . Companies that are awarded Cost Type Contracts , Time and Materials Contracts , and other flexibly priced contracts are subject to annual DCAA audits and are required to submit incurred cost claims annually to DCAA . When these claims are audited , contractors are required to maintain and supply detailed supporting documentation for all claimed costs that are selected for testing . This means auditors will be looking at source documents for claimed costs such as original purchase orders , invoices , receipts , timesheets , 941 ' s , general ledgers by contract , and the year end trial balance . In order to prepare for annual incurred cost audits , contractors must maintain and organize accounting records so that they are easily available when requested . This means collecting all these items at each year end and having them available as soon as the audit commences . This is required by FAR 31 . 201 - 2 ( d ) : " A contractor is responsible for accounting for costs appropriately and for maintaining records , including supporting documentation , adequate to demonstrate that costs claimed have been incurred , are allocable to the contract , and comply with applicable cost principles in this subpart and agency supplements . The contracting officer may disallow all or part of a claimed cost that is inadequately supported . " Some contractors fail to document the purpose of a trip with enough information for auditors to establish allowability of the trip . Contractors can easily fail to keep this level of documentation for each travel expense , and as a result , be denied reimbursement for such costs . For consulting / outside services costs , contractors should expect to be asked for service agreements and invoices that explain what services were performed . Access to records . Federal Acquisition Regulations ( FAR ) give DCAA auditors the right to view contractor records . Per FAR 4 . 703 ( a ) " contractors shall make available records , which includes books , documents , accounting procedures and practices , and other data , regardless of type and regardless of whether such items are in written form , in the form of computer data , or in any other form , and other supporting evidence to satisfy contract negotiation , administration , and audit requirements of the contracting agencies and the Comptroller General " . Given the oversight authority granted to DCAA , auditors are trained to spot access to records violations . Access to records violations are not limited to failure to provide auditors access to requested documents . Access to records violations also include delaying the audit process by not providing records in a timely manner . DCAA independence requirements . Independence requirements prevent DCAA auditors from providing consulting and accounting advisory services to contractors . This means DCAA auditors are not able to provide guidance to contractors regarding how accounting systems should be set up , how costs should be treated , or how claims should be compiled . The DCAA auditor ' s primary role is to express an audit opinion . Contractors that are not familiar with the federal acquisition process should consult private companies that provide advisory services in this field , or view the resources of information available online . History . Audits of military contracts can be traced back 60 years or more . Initially , the various branches of the military had their own contract audit function and associated instructions and accounting rulings . Uniformity was non - existent . Contractors and government personnel recognized the need for consistency in the areas of contract administration and audit . The U . S . Navy and Army Air Corps made the first attempt to perform joint audits in 1939 . By December 1942 , the Navy , Army Air Corps , and Ordnance Department had established audit coordination committees for selected areas where plants were producing different items under contracts for more than one service . On 18 June 1952 , the three military services jointly issued a Contract Audit Manual ( CAM ) . The Manual prescribed detailed policies and procedures for use in auditing procurement contracts . Because of differences between the procurement organizations and practices of the services , finalizing standard guidelines was difficult . In May 1962 , Secretary , Department of Defense , Robert S . McNamara instituted " Project 60 " to examine the feasibility of centrally managing the field activities concerned with contract administration and audit . An outcome of this study was the decision to establish a single contract audit capability . On 8 January 1965 , the Defense Contract Audit Agency ( DCAA ) was formed . Mr . William B . Petty , formerly the Deputy Comptroller of the U . S . Air Force , was selected as the Director with Mr . Edward T . Cook , formerly Director of Contract Audit for the Navy , selected as the Deputy Director . Allegations of intimidation , retaliation , lax oversight , and poor performance . A report released by the Government Accountability Office ( GAO ) on July 23 , 2008 alleged that DCAA managers threatened a senior auditor with personnel action if he did not remove negative findings from a report criticizing a large federal contractor . The report found a too - cozy relationship between management at the DCAA and some of the contractors they are assigned to audit , including Boeing . GAO also said auditors who complied with the investigation were subject to harassment and intimidation from their supervisors . The DCAA responded on July 25 that it had asked the US Department of Defense ' s ( DoD ) Inspector General ( IG ) office to investigate the GAO ' s claims . " We take the GAO report very seriously , " said April Stephenson , DCAA ' s director . US Senator Claire McCaskill said GAO may have uncovered the " biggest auditing scandal in the history of this town , " and asked the DoD to immediately fire the supervisors cited in the report . An " Associated Press " report on November 10 , 2008 revealed that DCAA challenged $ 4 . 6 billion , or only 1 . 2 percent , of the contracts it audited as lacking necessary documentation . The agency has not used its subpoena authority in over 20 years to produce the required paperwork from defense contractors under audit . According to the Associated Press , in contrast to the GAO , which saves taxpayers $ 94 for every dollar it spends , DCAA ' s return on investment is only $ 7 . As an example , the Associated Press reported that a May 2008 audit of Bechtel Group , supervised by DCAA regional director Christopher Andrezze , showed a " chronic failure " by Bechtel to produce the required documentation for the audit . In spite of this , DCAA issued a report rating Bechtel ' s internal accounting procedures as " adequate , " a passing grade which meant DoD auditors could ease up on the company . The DCAA report did not mention the company ' s failure to produce the required documentation . A Government Accountability Office ( GAO ) report in September 2009 found that agency auditors failed to follow basic auditing standards in 65 of 69 audits . The GAO noted that the agency lacks independence from the contractors it audits and the DoD agencies doing business with those contractors . The GAO concluded that pressure from outside groups helped create a hostile work environment which caused agency auditors to rush reviews of contractor billing systems , falsify audit reports , and appease contractors when auditing their business methods and systems . Said Senator Joe Lieberman in response to the report , " This organization needs bold changes . The larger question … is whether , as [ GAO ] suggested , we ought to take a look at creating a totally independent auditing agency for the federal government overall and go back to the idea of an auditor general . " The DoD IG released a report of its investigation into the agency on August 31 , 2009 . The IG found that the DCAA has an " environment not conducive to performing quality audits . " The IG report cited an audit of Boeing in which the company was allowed to keep $ 217 million in taxpayer ' s money because a DCAA regional auditor did not perform his / her duties properly . When Boeing was unresponsive to a request for information , the regional auditor ordered a subordinate to change the audit report in Boeing ' s favor . Said Senator Tom Coburn about the agency in response to the report , " It ’ s atrocious . Several of those people ought to be fired . " Added Senator Claire McCaskill , " This report is just further confirmation that DCAA is fundamentally broken . I certainly hope the Department of Defense takes these accusations seriously . As I said before , if somebody is not held accountable for the shoddy audits the DCAA has produced , nobody should take this agency or their work seriously in the future . " DCAA director Stephenson stated in the IG report that her agency concurred with the IG ' s recommendations . In the wake of the investigations , Stephenson was removed from her position as director of the agency by DoD comptroller Robert Hale and reassigned to Hale ' s staff effective November 9 , 2009 . She was replaced by Patrick Fitzgerald , previously the Auditor General of the United States Army Audit Agency . Notable cases . In the 1990s DCAA supported a 9 agency Federal Task Force investigation , led by NASA ' s Office of Inspector General , into an elaborate multi - million dollar embezzlement and money laundering scheme perpetrated by Ralph Montijo , owner of Omniplan Corporation . Omniplan was a NASA prime contractor and subcontractor under Rockwell Space Operations Company . This investigation led to the largest count indictment and conviction in NASA ' s history . Ralph Montijo was indicted on 285 counts and convicted of 179 felonies . Five of his companies were also convicted of felonies , they were , Omniplan , Papa Primo ' s of Texas , Papa Primo ' s of Arizona , Omnipoint Production Services and Mercury Trust . These five companies , together with two unincorporated companies , Space Industries Leasing and Space Industries Properties , were ordered liquidated . Each embezzlement count was associated with a corresponding money laundering count which resulted in dozens of convictions for money laundering . In a New York Times story NASA ' s Office of Inspector General Senior Special Agent Joseph Gutheinz , who led the Omniplan task force investigation , was quoted as saying : " We didn ' t get any pizzas , but we got the bills " , referring to the fact that some of the alleged mischarging to the NASA contract also involved costs associated with two of Ralph Montijo ' s pizza companies , Papa Primo ' s of Texas , and Papa Primo ' s of Arizona . " Mr . Gutheinz said the Montijo case was the most significant ( case ) the space agency had had . "