Sep 08, 2010

Grassley: Pentagon Watchdog Failing in Its Anti-Contract Fraud Mission

The Pentagon’s top watchdog is less productive now than at any time in the last 20 years, according to an article today by Reuters’ Scot Paltrow based on an upcoming report by the staff of Senator Chuck Grassley (R-IA). Among the oversight lapses by the Defense Department’s Office of Inspector General (DoD IG): zero audits of any “major or non-major weapons contract or contractor” in fiscal year 2009, according to Reuters.

The DoD IG left “huge sums of the taxpayers’ money vulnerable to fraud and outright theft,” Reuters quoted the Grassley report as saying. Grassley has long been a champion of whistleblowers and fighting fraud and waste at the Pentagon. According to Reuters, his office was tipped off by anonymous insiders at the DoD IG’s office who had concerns.

The Grassley report, slated for release tomorrow, says that the DoD IG now focuses on less important kinds of audits, and in numerous instances has failed to follow up on serious evidence of wrongdoing, Reuters reported.

What the Reuters article doesn’t say is that increasingly the DoD IG has had to focus on issues referred to it by Congress or mandated by law, leaving the Office with less discretion to decide what it does with its resources. As the IG noted in a 2008 report to Congress which was uncovered by POGO:

Our ability to provide discretionary (risk-based) coverage is reduced, however, by the amount of work we are required to perform by statute and other management requests. In FY 2007, about 31% of the reports that we issued were mandated and another 18% were requested by Congress or DoD managers.

This means that in fiscal year 2007 less half of the IG’s work in fiscal year 2007 was of its own choosing, when the 5.3% of audits generated from whistleblower hotline tips are also considered.

That said, huge questions still loom, namely: Is the Pentagon’s overseer doing as good of a job as it should be? It seems the answer is no. Especially in the vulnerable area of defense contracting.

“Discovering that the (inspector general) no longer does genuine contract audits was a startling revelation but one that helps to explain why 765 OIG Office of the Inspector General auditors could not document any measurable fraud in FY 2009,” Grassley wrote to Defense Secretary Robert Gates, according to Reuters.

Again, as POGO earlier reported, in fiscal year 2007, nearly half—$152 billion—of the taxpayer dollars spent on weapons acquisition did not receive sufficient audit coverage by the DoD IG (meaning only $164 billion out of $316 billion did).

Grassley’s report apparently takes issue with recent increases in the staffing at the DoD IG office, saying that despite more auditors there hasn’t been more oversight activity. But as POGO found in 2008, the DoD IG had been left in the dust when the spigot of defense spending opened after 9/11. Recent staffing increases still haven’t given the IG the number of trained auditors and investigators it needs to tackle the enormity of issues at the Defense Department.

More evidence that the DoD IG has been conducting less oversight than it should on contracting is the plummeting number of criminal referrals its investigators have made to federal prosecutors for contracting fraud and corruption.

While a reporter at the Center for Public Integrity, I found that as defense contracting grew from about $200 billion in fiscal year 1993 at the start of the Clinton presidency to nearly $400 billion in FY 2008 at the end of the George W. Bush administration (1993 dollars adjusted for inflation to 2008 dollars), Defense Department investigators during the Bush administration sent 76 percent fewer contracting fraud and corruption cases to the Justice Department for potential criminal prosecution than were referred under Clinton. “

No one is minding the store,” William G. Dupree, a former director of the Defense Criminal Investigative Service (DCIS) told me. DCIS is the wing of the DoD IG which investigates contracting fraud.

We’ll post more when we get to see the Grassley report directly. And if you haven’t seen them yet, check out our two reports on Inspector General independence and effectiveness.

UPDATE: The Washington Post has provided a link to the report.

— Nick Schwellenbach

Please follow link to entire story: