16.  DCAA Audit Standards

Comment: DCAA auditors apply a higher standard for identifying a deficiency in an accounting system ("less than a remote possibility that potential unallowable costs would be immaterial") than set forth in the rule. DCAA is not able to distinguish systemic errors or significant deficiencies from normal human errors or minor deficiencies. The rule may state that it is DCAA policy to report only deficiencies determined to be significant deficiencies or material weaknesses, however the DCAA December 19, 2008 MRD (titled Audit Guidance on Significant Deficiencies/Material Weaknesses and Audit Opinions on Internal Control Systems) instructs auditors that anything which is subject to DCAA review should be considered significant.

Response: DCAA will report significant deficiencies in accordance with the definition of significant deficiency in this rule, as set forth in section 893 of the NDAA and the Generally Accepted Government Auditing Standards (GAGAS). Based on the definition in GAGAS, a significant deficiency is a deficiency, or combination of deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report data reliably. The GAGAS definition is consistent with the definition of significant deficiency in the contractor business systems clause. Additionally, contracting officers will administer this rule according to the requirements in section 893 of the NDAA.