Administration replaces beleaguered director of Defense agency

The embattled director of the Defense Contract Audit Agency has been replaced and reassigned to the Pentagon comptroller's office.

April Stephenson had come under fire the past 15 months after two damaging reports by the Government Accountability Office questioned the quality of contractor audit reports and the management of DCAA offices. Stephenson will be reassigned as of Nov. 9 to a Senior Executive Service position on the staff of Robert Hale, Defense undersecretary and chief financial officer.

Patrick Fitzgerald, the Army's auditor general, will serve as the new DCAA director.

Defense Department officials said the change was intended to bring fresh perspective and leadership.

"DoD leaders recognize that there is more work to be done to improve DCAA and Patrick Fitzgerald is the best qualified person to continue moving the agency in the right direction," said DCAA spokesman Cmdr. Darryn James.

The spokesman insists the reassignment decision was made internally and Pentagon officials were not pressured by members of Congress to make a switch. Lawmakers interrogated Stephenson during oversight hearings in September 2008 and 2009.

"A change in leadership is an important first step, but that alone will not solve DCAA's deep-seated organizational problems," Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman, I-Conn., said in a statement on Monday.

In an e-mail to staff, Stephenson thanked employees for their "tireless efforts in auditing contractor costs. … Without the efforts of all DCAA employees, billions of dollars of contractor overpayments and unallowable costs would go undetected."

Acknowledging her agency's recent struggles, Stephenson noted that fiscal 2009 "was a challenging year with the implementation of many improvements across the agency. I appreciate the dedication and can-do attitude of the DCAA workforce. The many employee suggestions received throughout the year were essential in developing new initiatives and refining prior processes."

Sources said Stephenson is unlikely to remain very long in the comptroller's office and is expected to eventually leave the agency.

Stephenson began her career with DCAA in 1987 as an auditor trainee in Mountain View, Calif., and progressed through the ranks, holding various supervisory positions. She became director in February 2008 after longtime director William Reed retired.

Stephenson initiated at least 50 improvements to address negative findings by the GAO and Defense inspector general. But, problems at the agency -- some of which dated back more than five years -- continued to surface and the agency's troubles became a source of embarrassment and frustration at the Pentagon, sources said.

One government watchdog group said the management change will not solve all that ails DCAA.

"I think this is a mistake," said Danielle Brian, executive director of the Project on Government Oversight. "I don't think April was the problem."

Brian fears that management change at DCAA actually will benefit the contractors that have been fighting new auditing requirements the agency has mandated.

"Removing the director of DCAA does not address congressional and taxpayer concerns that this agency lacks the independence and clout necessary to serve taxpayer interests," she said. "It would be unfortunate and ironic if congressional inquiries into the independence and strength of DCAA ultimately serves to strengthen the hand of contractors."

While technically an outsider to Defense's lead auditing agency, Fitzgerald should be well-acquainted with the issues it faces. He leads the DCAA Oversight Committee, an improvement initiative Hale established to review DCAA operations.

Fitzgerald is a certified public accountant with almost 30 years of audit experience. He has never worked for DCAA, however, a fact that staffers could view as a plus. Auditors repeatedly have criticized the agency for hiring its executives only from within, leading to unhelpful group think.

In an e-mail to staff, Hale said DCAA's reform efforts are not complete. "We must carefully address the concerns raised about DCAA in recent reports issued by the GAO and the DoD IG," he wrote. "I want to work with Mr. Fitzgerald and the agency's employees to address those concerns in ways that strengthen the organization and permit it to continue performing its important role."

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