WASHINGTON--The Pentagon's top watchdog has abandoned efforts to do in-depth audits of defense contracts, leaving billions of dollars in taxpayer money at risk because of overpayments and fraud, according to an investigative report due to be made public on Thursday.
The report, written by Republican Senator Chuck Grassley's staff and obtained by Reuters, concludes that the Defense Department's Office of Inspector General has focused instead on less important types of audits, and that its productivity has plunged in recent years. It said the inspector general's office in fiscal 2009, which ended Sept. 30, 2009, did not audit any "major or non-major weapons contract or contractor."
The report contends too that the inspector general's office has failed to follow up even when it finds evidence of serious misdeeds. In one example, auditors in 2007 stumbled upon a recurring error in the Pentagon's overall financial statements, because military officials had failed to record $1 billion in proceeds from the sale of closed U.S. military bases in Europe.
They also found that about $107 million of the money had disappeared. However, senior officials turned down the auditors' recommendation to launch an investigation.
The watchdog's poor performance, the report says, has resulted in little oversight in recent years of annual payments to contractors, which currently total more than $390 billion, up from $154 billion in 2001. The report said that misdirected efforts by the watchdog left "huge sums of the taxpayers' money vulnerable to fraud and outright theft."
It said this lack of thorough audits occurred despite a 35 percent increase in the inspector general's staff since 2003, to 765 employees.
The Grassley report, however, also puts heavy blame on the Defense Department itself for inadequate oversight of contracts. It says that the Pentagon's accounting systems are in disarray and that vast quantities of payment records are missing, leaving little trail for auditors to follow.
The report comes shortly after Defense Secretary Robert Gates and the White House announced plans to cut waste from defense spending, mainly by cutting back on unnecessary projects and reducing personnel costs. But the Grassley report says great savings could be achieved by rigorously auditing defense contracts.
"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 said in a letter to Gates about the forthcoming report.
The letter urges Gates to focus more on the Defense Department's "broken accounting system" and improving oversight by the inspector general.
Gary Comerford, a spokesman for the inspector general's office, said it hadn't yet received a copy of the Grassley report. "We haven't seen it. We haven't read it and there's really nothing we can say until we've had an opportunity to take a look at" it, he said.