In March 2025 the Defense Contract Audit Agency (DCAA) released its Annual Report to Congress. The report covers the Agency’s audit activities in FY 2024 and plans for FY 2025. The areas addressed in the report include Forward Pricing, Incurred Cost, Claims and Terminations, Business Systems, Cost Accounting Standards (CAS) & Truth in Negotiations.
In FY 24, DCAA examined $599.8 billion in contract costs, a 137% increase from FY 23. DCAA does not provide information on what caused the vast increases in dollars examined. DCAA issued 2,645 audit reports and identified $15.9 billion in audit exceptions, which is $10.5 billion more in exceptions than those identified in FY 2023. DCAA reported $5.1 billion in net savings (questioned costs sustained, minus the aggregate cost of performing the audits) and a “return on investment” (net savings/aggregate cost) of roughly $7.2 for every $1 spent – increases of 46% and 41%, respectively, from FY 23.
DCAA also monitors the extent to which its exceptions are sustained by the contracting officer (CO). In FY 24, CO’s sustained $5.9 billion of $12.0 billion of exceptions (many of these exceptions come from audit reports issued in prior years). FY 24’s 49% sustainment rate is a slight increase from FY 23’s rate of 43%. The table below outlines the number of exceptions and sustainments by audit type.
FY 2024
| Audit Type | Audit Exceptions (in millions) |
Exceptions Sustained (in millions) |
Percent Sustained |
| Incurred Cost | $3,042 | $955 | 31.4% |
| Forward Pricing | $4,391 | $2,543 | 57.9% |
| Systems, CAS & TINA | $3,774 | $2,009 | 53.2% |
| Claims & Terminations | $814 | $370 | 45.4% |
| Total | $12,021 | $5,877 | 48.9% |
DCAA believes it had success in FY 24 with initiatives such as revising the incurred cost audit program to reduce or streamline audit steps, assisting the Air Force in taking inventory of government furnished equipment (GFE) maintained by contractors, and publishing their strategic plan for 2024-2030. Looking ahead to FY 25, DCAA will continue to assist the Air Force by taking an expanded inventory of GFE and contractors for all services in FY 2025. They will also update their audit quality management system to align with the 2024 Government Auditing Standards from the Government Accountability Office. Additionally, the agency is planning to reduce its physical footprint by divesting a portion of the 220 offices it currently occupies to decrease costs. DCAA also plans to develop a team to focus on the DoD’s top priority acquisitions.
Our team of professionals has extensive experience working with contractors on all types of DCAA audit matters and is ready to assist with any questions.
The full DCAA Report to Congress can be found here.