In February 2012, Venable’s Government Contracts Practice Group released an alert regarding then-recent initiatives to measure the Defense Contract Audit Agency’s (DCAA) access to contractor internal audit reports and the likely impact resulting from these initiatives. As predicted, Congress has taken affirmative steps over the last year in an effort to broaden the statutory authority granting DCAA with the power to request, access and utilize contractor internal audit reports. Indeed, on January 2, 2013, President Obama signed the Fiscal Year (FY) 2013 National Defense Authorization Act (NDAA), which includes Section 832, a noteworthy provision relating to DCAA’s access to contactor internal audit reports.
As outlined below, Section 832 provides DCAA with the statutory authority to access contractor internal audit reports and it establishes procedural frameworks that are intended to limit DCAA’s access to only those reports that are relevant to in-process audits. While Section 832 does include safeguards and protections to avoid the potential for improper access, contractors should nonetheless be aware that DCAA is still entitled to invoke significant remedies in the event that a contractor denies DCAA access to its internal audit reports. Consequently, contractors should be aware of the changing legislative landscape relating to DCAA’s access to their internal audit reports and modify their Policies and Procedures accordingly to ensure adequate protection of their company.
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