DCAA Furlough
An Auditor’s Comments

 

Sequestration and the resulting furlough of Federal Employees is a very bad idea. Measured objectively, government employees have lost more than 60% of their purchasing power since 1996.  This long term neglect coupled with looming pay cuts have degraded and will continue to degrade performance across the public sector.

The Office of Personnel Management’s Credo says they’re:

Recruiting, Training and Honoring a World-Class Workforce to Serve the American People.

Purchasing power losses and unilateral pay cuts show a different reality.

 

The Facts:

In 1996 a GS 9 Step 1 was paid $28,245/year in the Dallas Fort Worth Metroplex (DFW). Fast forward to 2011. A GS 9 Step 1 now earns $50,154. This is an increase of 56% in sixteen years equating to an annual increase of 2.76%.

We need something to measure the 2.76% against. We’ll use two indices to ascertain whether the aforementioned increase is fair and equitable. As we are the Defense Contract Audit Agency (DCAA) we have the Contract Auditing Manual (CAM).  Within the CAM, we have paragraph 6414.7.  It’s at this location that we find guidance dealing with maximum compensation levels for contractor personnel.  We learn that maximum compensation in 1996 was $200,000/year for contractor personnel.  This then increases to $763,029/year in 2011.  This is an increase of $563,029 in sixteen years equating to an annual increase of 9.7%.

Operating in a vacuum, without a mechanism to convert 1996 dollars to 2011 dollars, you could conclude anything. You might think Federal Employees are under compensated while Contractor employees are over compensated, or, depending on your perspective, you might conclude the opposite.  Look at the ratios, contractors are earning nearly four times ($763,029/$200,000 = 3.82) what they were earning in 1996, while the Federal Employee is earning less than two times what he was earning in 1996 ($50,154/$28,245 = 1.78).  Is that good? Is that bad? How do we know?

The only way to know for certain if your purchasing power has been preserved is by comparison with an immutable index. Only one index is immutable, that index is gold.

In 1996, gold was selling for $387.81/oz.  In 2011 the same ounce of gold sold for $1,571.52.  That represents an increase in cost of over four times ($1,571.52/$387.81 = 4.05).  The aforementioned represents an inflation driven increase of 9.8%.

1996 GS Compensation – 2011 GS Compensation – Gold Price.

The Results:

 

Permitting employees to stagnate in the face of rampant inflation has both immediate and long term results. None of these results improve performance or retention.

Measuring compensation against a stationary target, we see that Contractor Employees are fairly compensated while DCAA employee’s compensation is woefully inadequate.

Since 1996, in each of the past 16 years, Federal Employees have lost OVER 7% of their purchasing power.  Were the 1996 GS9 to be made whole, as contractor personnel have remained whole, that Federal Employee would presently be earning $137,178 per year.  If that person would have been granted HALF of his lost wages, he would be earning $65,548 per year.

It’s a sad state of affairs when a 50% loss of wages represents a significant pay raise.  That’s where DCAA employees are.  That is not “Honoring a World-Class Workforce.”

Now, in addition to sixteen consecutive years of lost purchasing power, DCAA professionals are suffering a 20% pay cut. That’s neither justice nor honor.

As you can see, through the intervening 16 years, contractor employees have maintained their standard of living while DCAA employees working directly beside them, have suffered a consistent, significant deterioration in their quality of life.   

The “World Class Workforce” that the Federal Government has been Recruiting and Training would very much appreciate a restoration of our previous compensation.  Not a pay cut, not a pay increase, a restoration to where we were in 1996.   

   
The Impact: 

The steady decline of real wages for more than a decade compels employees to leave the Agency, or, to seek additional employment outside of the agency. The Biblical admonition against serving two masters is true.  No one can do it well.

I can use myself to illustrate.  The following is about what I’ve done and want to do.  I can’t speak for others, but I’m confident that colleagues at DCAA have similar stories and desire to undertake similar tasks.

I’ve been with the Agency only a short time, less than two years at this writing.  It’s always been my desire to approach a position and go “All In.”   “All in” in my vernacular means that I’m focused on the job, I’m looking for ways to do the job better, I think about the job in numerous contexts, I read, write and communicate about things that may be of service to my colleagues and my Agency.

I’ve done it before.

When compensated adequately at another employer, I wrote programs to expedite costing matters, developed a database inventory program that was adopted nationally, published a paper in a refereed publication regarding the same and other things.  It was a lot. I could not have accomplished it if I’d been forced to accept a part time job.

That’s not the case with DCAA.

With flat lining DCAA salaries, imminent real salary cuts and poor prospects for improvement, it’s imperative for many DCAA employees to find another source of income. I’ve been able to find work as an adjunct professor at an on-line university. Others are not so lucky. I’ve talked to professionals who are government auditors by day and convenience store clerks by night.

This is not Honoring the Work Force.

Recently, I’ve switched to “All In” with the Agency. For the past several months, I’ve taken a break from the University.  During this time, I’ve set up a system to research topics of interest that may produce insights and actionable information to save taxpayer dollars.  Topics include Benford’s Law, Audit Analytics, Continuous Auditing, and others.  To precipitate and facilitate communication with colleagues both internal and external to the agency, I’ve launched AuditorReport.com.  Within this site, I’ve published two articles on Benford’s Law. One is explanatory; the other is a practical application of Benford’s. More will follow on other topics.

These efforts are a component of my self-education/edification effort to learn more, more quickly.  It was impossible to do these things while working full time for DCAA and part time for the University.

My future is with the Agency, not the University. I don’t want a part-time job.  I want one full-time job.  It will be horrifically aggravating to be forced to put DCAA career development efforts on hold while I scramble to make up the 20% pay cut.

Duplicate my consternation across 5,000 DCAA professionals.  The wasted time and effort is unfathomable.  Imagine what our professional workforce might accomplish if they didn’t feel compelled to write letters like this one.  If I’m taking the time to write it, you know tens, if not hundreds more DCAA employees are thinking it.

I wouldn’t want my employees thinking about, or dwelling on this topic.  The travesty is, they shouldn’t have to.  There is much work to be done.  We can easily pay our own way.

The Director’s 2012 Report to Congress dated 20130329 asserted that DCAA savings over the last three years averaged $3.5 Billion dollars representing a $6.70 return for each invested dollar.  Imagine the savings from DCAA if employees were “All In.” I believe the results would be astounding.

 

The Attrition:  

DCAA employees are rocking along now, doing what they’re doing.  I speak with very talented colleagues at my location.  I hear many making tentative plans to depart.  These are mostly young professionals with advanced degrees and specialized certifications.  They’re among the hundreds hired in the aftermath of the DoDIG report delineating DCAA issues requiring attention.  They were to be the “New Blood” upon which DCAA was building its future.

During the week I spent at Intermediate Auditing in Memphis, I asked the instructor how long before a new auditor felt comfortable picking up any assignment and working it through to completion?  She said most people feel very comfortable undertaking any assignment after five to seven years with the Agency.

Many of the people I’m referring to have been with the agency between three and five years.  These employees are very well educated, very valuable people recruited and trained at very great expense and are now contemplating departing Federal Service at the precise time they should be coming into their own.  They now possess the education and experience permitting them to work autonomously with confidence.  Tragically, many are looking for work elsewhere.

Why are they contemplating departure?  Because they’ve been declared non-essential personnel and forced to endure a unilateral 20% pay cut from wages already too low to support their families.

It’s as if it were the goal of the Agency to drive away all the young recruits we’ve hired in the last 60 months. I’m deeply concerned that we may be extraordinarily successful in accelerating their departure.

Our Trainers?:  

In my research and reading, I’ve found numerous blogs, consultants and commentators on Federal Service in general and DCAA in particular.

This article of 20130415 from the “Redstone Blog” caught my attention.

“The Retraining of the DCAA Auditor”

The article’s opening sentences says:

“The continuing trend toward the diminution of pay and benefits for Government employees will have a negative impact on DCAA for many years to come. Over recent years, and especially the past few, DCAA has lost and will continue to lose its experience and knowledge base.  Once those that can retire and those who can find employment elsewhere do so, the “preeminent” government audit agency with the primary goal of contract audits will be a mere shell of its former self, and many would argue that has already come to pass.”

To compensate for our perceived deficiencies, this author believes contractors should take on training responsibilities for DCAA. He writes:

“….. So, one of those elements is now missing, that of the experienced auditor and supervisor to provide direction.  Therefore, although it may sound counterintuitive to help the auditor to be a better more well-trained auditor, this writer maintains that this is exactly what defense contractors should do.”

Is this what we want?  Isn’t this exactly the problem we had five years ago?  Weren’t we chastised for being too close to contractors?  Weren’t there many reported instances where contractors would “help” the auditor to get his report completed?  Do we want to return to that deplorable situation?  Do we want to drive away hundreds of new employees?  Do we want to throw away the training?  Do we want to start over?

I hope not.

To View Complete Article – Click Here.

Summarizing:  

I don’t know who will read this. For all who may see this, I assure you it’s delivered without rancor. My goal is to help by communicating what I know and what I see in my corner of DCAA.

I think DCAA is uniquely vulnerable.  While making significant progress, we haven’t fully addressed lingering DoDIG issues.  Nevertheless, there’s much cause for optimism.  Every day, the hundreds of new people we’ve hired are gaining experience and confidence permitting them to work with increasing efficacy.  The resulting improvements are evident.  The Director’s 2012 report to Congress reflected a tremendous increase in sustained questioned costs.  The time period 2002 – 2009 averaged $2.5 Billion in annual net savings. Over the last three years, the Agency has saved the taxpayer an average of $3.5 Billion, a 40% increase in savings.  We are MORE than paying our way

What do newly minted DCAA professionals get for their efforts? They’re rewarded with a 20% pay reduction.

The Federal Service is playing a very, very dangerous game. We’re subjecting employees to furloughs, sequestrations, significant long term reductions in living standards, and, in DCAA’s case, persisting at a working grade 12 when working grade 13 is the norm. These actions only serve to enervate fatigue and weaken a very capable, very valuable, and very mobile work force.

After the furlough, I’m hopeful that DCAA takes immediate, direct and forceful steps to right these wrongs.

 

Respectfully,
Dave Zenker, CPA, MA