Originally published 04:45 a.m., October 5, 2009, updated 03:50 p.m.,

October 5, 2009

Pentagon auditor deemed serial failure





Some members of Congress are so disturbed by failures and malfeasance

described in a recent government report that they are considering

removing the agency that audits hundreds of billions of dollars in

Defense Department contracts from Pentagon supervision.


One legislator said he felt physically sickened by the report.


The lawmakers were reacting to findings by the Government

Accountability Office (GAO), the investigative arm of Congress, about

the Defense Contract Auditing Agency (DCAA).


The agency, which last year was responsible for ensuring that

taxpayers got good value for more than a half-trillion dollars in

defense contracts, revised audits to curry favor with contractors,

promoted a supervisor responsible for such revisions to a top position

and rushed through other audits out of fear that the work would be

outsourced if employees took too much time, the GAO said.


“Unbelievable problems at Def Contrctng Agncy [sic],” Sen. Claire

McCaskill, Missouri Democrat, wrote on her Twitter account just before

a recent hearing on the report. “Top of my head is about to pop off.”


“I read a summary of the GAO report last night and quite frankly got

sick,” said Sen. Tom Coburn, Oklahoma Republican, adding that he would

not use all his allotted time for questions because he was “a little

bit too upset to go where I really want to go.”


“Each and every audit that GAO reviewed for this report was out of

compliance with auditing standards,” said Sen. Joe Lieberman,

Connecticut independent and chairman of the Homeland Security and

Governmental Affairs Committee. The DCAA “has a unique role,” as a

steward of taxpayer dollars, and consequently “needs to have

independence. It needs to stand up to pressures from both agencies and

contractors,” he said. “Perhaps it’s time for us to consider

separating DCAA from the Department of Defense and … making it an

independent auditing agency.”


The flaws identified by the GAO “allow contractors to overbill the

government in some cases for millions of dollars,” said the committees

ranking Republican, Sen. Susan Collins of Maine.


Calling the DCAAs performance “completely unacceptable,” she noted

that when the agency failed, “the fallout can cascade throughout the

system and ultimately shortchange our troops in the field.”


Pentagon officials told the hearing that the GAO investigation

examined audits conducted years ago and that a series of remedial

measures already had been implemented, including a new oversight

committee of all the service comptrollers.


Robert Hale, the undersecretary of defense who serves as the

departments comptroller and chief financial officer, and the official

to whom the DCAA currently reports, said it might take time for the

reforms to show results and argued against any change in the agencys



Nonetheless, Ms. Collins declared her “frustration” – a sentiment

widely shared by lawmakers at the hearing.


In one case, DCAA officials had attempted an audit of a major U.S.

defense contractor doing reconstruction work in Iraq. The contractor

was not named in the report, but a person familiar with the

investigation told The Washington Times that it was Parsons Corp., a

Pasadena, Calif.-based engineering firm whose work in the past has

been criticized as shoddy.


The GAO report said the firm did almost $900 million of U.S.

government contracting in 2004, the year the audit started, a

quarter-billion dollars worth of it in Iraq.


Two years after the DCAA began a review, in 2006, Stuart Bowen,

special inspector general for Iraq reconstruction, pledged to

investigate all of the $1 billion worth of contracting Parsons had

done in Iraq, after evidence emerged about unfinished and substandard

work. Last year, he released a report charging that the firm had been

paid $142 million for canceled reconstruction projects.


The initial DCAA audit identified eight serious deficiencies in the

firms billing system. But after the contractor objected, a supervisor

ordered DCAA staff to delete some of the documents the audit had

generated and revise others, the GAO found. When the final audit was

published, five of the eight deficiencies had been removed altogether

and the other three downgraded to suggestions, meaning the firm got a

“clean” audit rating.


That supervisor was subsequently promoted to become the quality

assurance manager for the DCAAs Western region, serving as the last

line of quality control over thousands of audits every year –

including many that ended up being questioned by the GAO – a

circumstance Ms. Collins called “devastating” to morale at the agency.


Erin Kuhlman, Parsons vice president for corporate relations, said the

company would not comment on the findings.


The GAOs top forensic accountant, Gregory Kutz, told lawmakers that

his staff had found a “lack of independence” at the DCAA, which had a

“production-focused culture resulting in part from flawed metrics …

intended to show that they could do their work faster and cheaper than

public accounting firms,” partly because it feared its work might

otherwise be outsourced.


“Taking time to find and address issues was discouraged,” he added,

concluding that “thousands of good auditors [are] trapped in a broken

system” at the agency.


The GAO said that, in the short term, Congress could legislate to

provide the agency with the same budgetary and legal independence that

inspector generals have.


“This change could strengthen leadership, independence and

transparency,” Mr. Kutz said.


In the longer term, he said, lawmakers could consider elevating the

agency to a “component agency” of the Department of Defense, reporting

directly to the Pentagons powerful deputy secretary; or even moving it

outside the department altogether, creating an independent audit



Mr. Hale, the Pentagon comptroller, told the hearing that the

administration opposed any such move.


Instead, he said, officials were working to strengthen the agencys

independence within the department, boosting resources and improving

oversight by establishing a special committee of defense auditors to

look at the agency’s work.


DCAA Director April Stephenson told lawmakers that the agency hoped to

hire 700 more people for training over the next three years and had

already “completely revamped” its quality assurance processes.


Mr. Hale pointed out that the audits reviewed by GAO and the inspector

general “were completed three to five years ago,” and that officials

had begun implementing corrective actions late last year, after the

problems were first identified by a DCAA whistleblower.


But he acknowledged that the effects of those reforms might not be visible.


“It took us years to get into this problem. It may take several years

for the full benefit of these actions to be realized,” Mr. Hale said.