The Pentagon inspector general's office failed to follow proper procedures for conducting audits last year, according to a new report from federal investigators. Defense auditors left out evidence to support their conclusions and occasionally altered investigative paperwork after reports were completed, according to a review conducted by the Health and Human Services Department's inspector general. Agency IG offices conduct peer reviews of each other's work every few years to comply with government auditing standards. HHS looked at 18 of 145 audits conducted by the Pentagon's IG office between April 2000 and March 2001 and gave the department an 'unclean' opinion on its work. For six of the 18 Defense audits reviewed, HHS found that the working papers, which provide evidence supporting the auditors' conclusions, were prepared or changed after the final reports were issued. "If working papers are added or changed after a report is issued, they may no longer support the issued report or clearly support the auditor's conclusions and judgments," the review said. Health and Human Services conducted a review of the Pentagon's IG office after a whistleblower alleged, and a subsequent internal investigation confirmed, that the office had destroyed and altered documents to get a passing grade on a peer review by IRS auditors. Defense auditors who had "gussied up" certain documents to pass the review were fired, according to a Pentagon official who spoke on background.
The Pentagon agreed with HHS' peer review and has started to put in place a series of reforms to root out the waste, fraud and abuse in its own office. All of the Defense Department's audit divisions will be trained in ethics and government auditing standards. The agency has also created a quality management council consisting of senior executives to oversee reviews and ensure accountability. "Like any organization we made mistakes, and we are grateful that we had people from the outside to come in and help us fix them," said David Steensma, acting assistant inspector general for auditing. But the Pentagon may have to go to greater lengths to fix some of the problems in its IG's office, according to Sen. Charles Grassley, R-Iowa, the ranking member of the Finance Committee. "Once President Bush's nominee for the IG job is in place, he will need to clean house from top to bottom," Grassley said. "Heads must roll." Bush has nominated Joseph E. Schmitz for the Pentagon IG's job, but the Senate has not yet confirmed him. Robert Lieberman is the current acting inspector general.