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

Subtitle D--Accountability in Contracting

NDAA Section

House Conference Report 110-477

SEC. 845. DISCLOSURE OF GOVERNMENT CONTRACTOR AUDIT FINDINGS.

(a) Required Annex on Significant Audit Findings-

(1) IN GENERAL- Each Inspector General appointed under the Inspector General Act of 1978 shall submit, as part of the semiannual report submitted to Congress pursuant to section 5 of such Act, an annex on final, completed contract audit reports issued to the contracting activity containing significant audit findings issued during the period covered by the semiannual report concerned.

(2) ELEMENTS- Such annex shall include--

(A) a list of such contract audit reports;

(B) for each audit report, a brief description of the nature of the significant audit findings in the report; and

(C) for each audit report, the specific amounts of costs identified as unsupported, questioned, or disallowed.

(3) INFORMATION EXEMPT FROM PUBLIC DISCLOSURE- (A) Nothing in this subsection shall be construed to require the release of information to the public that is exempt from public disclosure under section 552(b) of title 5, United States Code.

(B) For each element required by paragraph (2), the Inspector General concerned shall note each instance where information has been redacted in accordance with the requirements of section 552(b) of title 5, United States Code, and submit an unredacted annex to the committees listed in subsection (d)(2) within 7 days after the issuance of the semiannual report.

(b) Defense Contract Audit Agency Included- For purposes of subsection (a), audits of the Defense Contract Audit Agency shall be included in the annex provided by the Inspector General of the Department of Defense if they include significant audit findings.

(c) Exception- Subsection (a) shall not apply to an Inspector General if no audits described in such subsection were issued during the covered period.

(d) Submission of Individual Audits-

(1) REQUIREMENT- The head of each Federal department or agency shall provide, within 14 days after a request in writing by the chairman or ranking member of any committee listed in paragraph (2), a full and unredacted copy of any audit described in subsection (a). Such copy shall include an identification of information in the audit exempt from public disclosure under section 552(b) of title 5, United States Code.

(2) COMMITTEES- The committees listed in this paragraph are the following:

(A) The Committee on Oversight and Government Reform of the House of Representatives.

(B) The Committee on Homeland Security and Governmental Affairs of the Senate.

(C) The Committees on Appropriations of the House of Representatives and the Senate.

(D) With respect to the Department of Defense and the Department of Energy, the Committees on Armed Services of the Senate and House of Representatives.

(E) The Committees of primary jurisdiction over the agency or department to which the request is made.

(e) Classified Information- Nothing in this section shall be interpreted to require the handling of classified information or information relating to intelligence sources and methods in a manner inconsistent with any law, regulation, executive order, or rule of the House of Representatives or of the Senate relating to the handling or protection of such information.

(f) Definitions- In this section:

(1) SIGNIFICANT AUDIT FINDINGS- The term `significant audit findings' includes--

(A) unsupported, questioned, or disallowed costs in an amount in excess of $10,000,000; or

(B) other findings that the Inspector General of the agency or department concerned determines to be significant.

(2) CONTRACT- The term `contract' includes a contract, an order placed under a task or delivery order contract, or a subcontract.

The House bill contained a provision (sec. 824) that would require the head of each federal agency to submit quarterly reports to Congress on completed audits of contractors performed by the agency or department.

The Senate amendment contained no similar provision.

The Senate recedes with an amendment that would require the inclusion of significant findings in final, completed audits of contractors in the semiannual reports submitted to Congress by Inspectors General pursuant to section 5 of the Inspector General Act (Public Law 95-452, as amended). The provision would provide for the redaction from such reports of information that is exempt from public disclosure under the Freedom of Information Act (section 552(b) of title 5, United States Code).

House Armed Services Committee Report 110-146

SECTION 824--DISCLOSURE OF GOVERNMENT CONTRACTOR AUDIT FINDINGS

This section would require the head of each federal agency or department, in the case of the Department of Defense, the Under Secretary of Defense for Acquisition, Technology and Logistics, to submit quarterly reports to Congress on completed audits of contractors performed by the agency or department. Such reports would describe contractor costs in excess of $10.0 million that a completed audit identified as unjustified, unsupported, questioned, or unreasonable. This section would also require such reports to list completed audits identifying material performance deficiencies of a contractor or a contractor business system.

This section would also require the head of each federal agency or department to provide, within 14 days after a request in writing by the chairman or ranking member of the House Committee on Oversight and Government Reform, the Senate Committee on Homeland Security and Governmental Affairs, the Senate Committee on Appropriations and the House Committee on Appropriations, and in the case of audits performed by the Department of Defense or the Department of Energy, the Senate Committee on Armed Services and the House Committee on Armed Services, and the committees of primary jurisdiction, a full and unredacted copy of any completed audit referenced in a quarterly report. This section would require such a copy to identify information exempt from public disclosure under the Freedom of Information Act (5 U.S.C. 552).

The committee does not intend this section to alter current procedures, formats, or findings of completed audits. The committee seeks to create a mechanism to make Congress aware of major audit findings, while also seeking to minimize the administrative burden of the requirement. In particular, this section requires only the transmission of audits that have been completed, and does not extend to interim audit findings. Also, the committee expects that the lists of audits will focus on those audits which specifically evaluate the legitimacy of contractor cost claims and contract performance evaluations. The committee expects that this will consist of completed incurred-cost audits and audits of policies, procedures, and internal controls relative to accounting and management systems. Such a report should only include completed audits that document material findings of noncompliance with disclosed or established practices, cost accounting standards, or the Federal Acquisition Regulation, or material performance deficiencies.

The committee notes that the threshold for reporting audit findings relating to contractor costs was established to ensure that issues of significance and material importance would be brought to the attention of Congress. The committee expects that agency heads will not modify or subdivide contracts or task orders in order to remain below the threshold of this provision, and expects that audit agencies will continue to review contracts according to the audit procedures established by the Comptroller General.