Buried deep in the current version of the NDAA (Act) for fiscal year 2016 is a provision (Sec. 893. Improved Auditing of Contracts) that will prohibit the DCAA from providing audit services to non-defense agencies. This prohibition is effective upon enactment of the Act and will remain in effect until the Secretary of Defense certifies that the incurred cost audit backlog inventory is less than 18 months. The President is expected to sign the recently vetoed Act later this month. The specific language from the Act is:
“(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-De fense Agencies unless the Secretary of Defense certifies that the backlog for incurred cost audits is less than 18 months of incurred cost inventory.”
This means that currently, and for the foreseeable future, the DCAA will be focused exclusively on auditing defense contractors – based on the current state of the incurred cost audit backlog. Conversely, non-Defense contractors will not receive these audit services. This may sound appealing to contractors performing under non-Defense contracts; however, the audits still need to get done and the non-defense agencies will need to look to other resources. A likely alternative resource is public accounting firms. This may be good or may not, largely depending on the capability of the accounting firm and detailed working knowledge of pertinent government contract compliance requirements and regulations.
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