In fiscal 2009, the Defense Department Inspector General's Audit Office did not investigate any "major or nonmajor weapons contract or contractor," the report released on Thursday by the office of Sen. Charles Grassley, R-Iowa, said. The IG left that mission to the Defense Contract Audit Agency, Senate staffers said, adding DCAA is not independent from Pentagon management and has its own potential competency issues.
"As the [Office of Inspector General] has drifted away from its core mission of conducting contract audits, it chose to move in an ill-advised direction," the 73-page report said. "Today, the majority of audits appear to be nothing more than quasi-academic reviews of DoD policies and procedures. The DoD OIG has become the department's 'policy police.' "
Potential criminal activity also has become less of a focus, Grassley's office found. The DoD IG Audit Office made nine referrals to the Defense Criminal Investigative Service in fiscal 2009. None resulted in criminal prosecution, the report said.
Overall, the 765-person audit office issued just 113 reports in fiscal 2009, its lowest total in two decades. In 1995, when the office had 717 auditors, the IG published 264 reports, the Senate staffers said. The productivity level at Defense also pales in comparison to auditors at the Health and Human Services, Housing and Urban Development, and Homeland Security departments, investigators found.
And despite conducting less labor-intensive contract audits, the office is averaging 18 months to issue reports, Grassley's staff found. Some audits have dragged on longer than three years, and others have taken so long the IG eventually scrapped them.
Investigators also found audit teams were no longer able to conduct full-scope, end-to-end contract audits. Supervisors told Grassley's staff auditors no longer verify payments at the primary source -- the Defense Finance and Accounting Service -- because of the difficulty of the effort. If auditors do not check payments and match them with contracts and deliveries, then it is unlikely they will discover fraud and waste, the report noted.
"If audit capabilities are seriously degraded or crippled, as suggested in this report, then OIG oversight is gravely impaired, leaving huge sums of the taxpayers' money vulnerable to fraud and outright theft," the report said. "The OIG Audit junkyard dog has been defanged and rendered harmless."
Grassley sent the findings to Defense Secretary Robert Gates on Tuesday. In the letter, the senator called for a major retooling of the inspector general's office, noting that without significant audit reforms, the Pentagon would not be able to meet its goal of rooting out $100 billion in wasteful spending during the next five years.
"You need a better mix of weapons in your arsenal to get the job done," Grassley wrote. "You need independent backup and audit support from the Office of the Inspector General."
Investigators recommended the office create significantly larger audit teams of up to 100 staffers to tackle the department's most egregious contract problems.
If the office's slide continues, Grassley suggested Congress might not provide the Defense IG with requested funds to hire 235 additional auditors during the next five years.
Defense IG Gordon S. Heddell acknowledged the Senate findings and said he was addressing audit timeliness and relevance.
"The observations and recommendations made by Sen. Grassley are relevant -- and important -- but they are only one piece of a much bigger transformation that I embarked upon well over a year ago when I was confirmed by the Senate as IG," Heddell said in a statement.
IG officials said some audit successes are being overlooked. Documents the office provided highlighted recent staff awards and critical reports that have resulted in funds being returned to taxpayers.
"This year alone, our auditors have saved the department $4.1 billion," said Mary L. Ugone, deputy inspector general for auditing. "We have placed significant emphasis on life and safety issues affecting our men and women in uniform, such as testing body armor and acquiring counter [improvised explosive] devices. The work of audit is not just about dollars; it's about protecting the warfighter."