The Pentagon is falling short in its efforts to combat fraud in defense contracts, according to a draft federal audit obtained by CQ Roll Call.
The Government Accountability Office report, to be made public Monday, credits Defense Department leaders with making some progress in establishing systems to find and root out fraud. But the audit nonetheless documents several ways military and civilian officials are lagging in their efforts.
The auditors cited examples of major defense organizations, such as the Army, not naming representatives to a year-old task force on fighting fraud and not conducting assessments of risks that are recommended in official guidance.
The audit focused on activities during fiscal 2020, when the Pentagon spent $422 billion on contracts.
From fiscal years 2013 to 2017, over $6.6 billion was recovered from defense contracting fraud cases, the report said. In 2020, nearly 20 percent of the 1,716 investigations run by the department’s inspector general were about procurement fraud.
“The scope and scale of this activity makes DOD procurement inherently susceptible to fraud,” the GAO said.
The Pentagon’s efforts to fight such crimes is “a work in progress,” the auditors concluded.
“Given the billions of dollars DOD spends annually on procurement, failing to manage and mitigate fraud effectively may ultimately adversely affect DOD’s ability to support the warfighter,” they said.
The lawmakers who requested the report expressed dismay about its findings.
“The Pentagon doesn’t seem to want to get serious about combating the fraud, waste, and financial mismanagement that has been its legacy for decades,” said Sen. Bernie Sanders, I-Vt., chairman of the Budget Committee, one of two lawmakers who requested the report.
Rep. Carolyn B. Maloney, D-N.Y., who chairs the Committee on Oversight and Reform, was the other.
“This failure to safeguard taxpayer dollars is completely unacceptable, and I urge the Biden Administration to quickly and fully implement GAO’s recommendations and put the Defense Department on a path to operate more efficiently and effectively, with the confidence that it is not spending money on fraudulent contracts,” Maloney said in a statement.
Sluggish response
In the auditors’ report, they cited signs that some in the Defense Department may not be treating the problem with the urgency it deserves.
For example, the department created in 2020 a task force to improve officials’ focus on fraud and gave the military services and other components one week to name representatives.
A year later, nearly 20 percent of the 59 seats on the task force were not filled, the GAO said. The Army — which spent about $100 billion on contracts in fiscal 2020, or nearly a quarter of the department’s total — is among the components without a representative, the report said.
Another sign of a torpid response to the problem, the auditors said, is the failure of major parts of the Defense Department to conduct fraud risk assessments. In fact, three organizations that together obligated $180.1 billion in fiscal 2020 have so far failed to conduct the reviews: the Air Force, the Army and the Washington Headquarters Service, which administers and manages operations at the Pentagon and other facilities.
The fraud at issue takes several forms, the report said. For instance, contractors can overbill for their products, falsify their prices to win a bid, use counterfeit parts, bill for work that was not performed or disguise conflicts of interest.
Sanders, in his statement, said the report shows that the Pentagon does not “want to get serious about spending taxpayer dollars wisely and effectively.” He called that “absolutely unacceptable.”
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