Pentagon watchdog defends office’s work

The Defense Department's chief watchdog is challenging several of the recommendations outlined in a stinging Senate report, noting they could impede auditor independence and decrease productivity.

While a highly critical analysis of audit functions at Defense's inspector general office released by Republican Sen. Charles Grassley's office on Sept. 9 raises "valid concerns," adopting some of the 12 suggested reforms could do more harm than good, IG Gordon S. Heddell said in a detailed response. The 73-page report found the IG office had strayed from its core mission of detecting waste, fraud and abuse, and was too focused on policy analysis.

For example, Grassley called on Pentagon auditors to focus on "top-to-bottom, end-to-end reviews of the Defense Department's plans and programs for modernizing its finance and accounting systems." But Heddell said end-to-end contract performance and payout audits, while useful in some circumstances, require extensive resources and time, which "would exacerbate the very issues the report highlights involving timeliness."

Heddell said a better use of resources would be to conduct a series of smaller audits based on the risk for particular pieces of the contract process, such as contract administration or vendor payments.

The watchdog also said Grassley's suggestion that every IG audit receive a pass-fail opinion could lead to misleading or inaccurate conclusions. Many program audits identify areas that need to be corrected while also acknowledging their positive aspects.

"A pass-fail grade is too limiting and would constrain auditors in providing a complete perspective in an objective and impartial manner," Heddell wrote. "Audit standards require us to communicate the results in a manner that is less susceptible to misunderstanding and present sufficient evidence to support the findings and conclusions."

The nuanced findings of auditors, the IG said, help managers adopt targeted corrective action plans. "If [the] audit [office] were to assume this responsibility, it would impair our independence," he said.

One of the major findings of Grassley's report was the IG is conducting far too many reviews of Defense policies and procedures and not enough contract audits.

Heddell, however, said policy audits help the Pentagon improve its program performance and identify critical savings for taxpayers. The IG noted one program review led department management to halt the planned procurement of 11,500 Light Tactical Wheeled Vehicles and put $3.84 billion to better use.

And, rather than establishing teams of up to 100 fraud-detecting auditors, as suggested in the report, the IG said he intends to use sophisticated analytical tools focused on forensic auditing, predictive analysis and improper payments.

While the IG is not on board with all of Grassley's recommendations, he noted in the letter -- and in an initial response to the report -- that the office was reforming its procedures. The IG is planning to beef up its contract oversight efforts; direct staff to high-value audits; and expand its review of the departmental efforts to acquire, modernize and implement new accounting systems.

Heddell directed Mary L. Ugone, deputy inspector general for auditing, to provide specific proposals on how to improve the timeliness, focus and relevance of Defense audits by Oct.15.

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