Report of Defense audit scandal makes waves

Recent findings that managers at a Defense Department oversight agency improperly intimidated auditors have caused a ripple effect at the Pentagon, where officials are seeking an inspector general review, and on Capitol Hill, where a Democratic senator has called for disciplinary action against the supervisors involved.

On Friday, the Defense Contract Audit Agency announced that it had asked the Pentagon's IG to investigate the allegations in a Government Accountability Office report. The report, released earlier last week, found that DCAA managers threatened auditors with personnel action unless they issued findings more favorable to a large contractor. Auditors who later agreed to cooperate with the GAO investigation reportedly were harassed and intimidated. DCAA also is conducting an internal investigation.

"We take the GAO report very seriously," said April Stephenson, DCAA's director. "It is crucial that we have a clear understanding of any problems associated with our audit effort … It is imperative that our agency is not only held to the highest professional standards, but also appears to be beyond reproach. The DCAA is committed to supporting any review of our procedures and is prepared to take immediate action to fix any problems found."

But, those assurances are not enough for Democratic Sen. Claire McCaskill, a former Missouri state auditor.

McCaskill said GAO may have uncovered the "biggest auditing scandal in the history of this town." She called on the Defense Department to immediately fire the supervisors cited in the report.

"This auditing agency has been exposed as being fundamentally corrupt in the way they issue audits," McCaskill said on the floor of the Senate last week. "It calls into question every single audit done by this agency. And if we don't take it seriously, if we don't give it our attention, if we don't demand that the fox get out of the chicken coop and take care of taxpayer dollars, it's ultimately our national security at stake."

McCaskill also took issue with Stephenson's response to the GAO report. The DCAA leader said some of the problems identified had been fixed, but disagreed "with the totality of the GAO's overall conclusions." She also disputed the allegations that DCAA managers pressured employees to be uncooperative when GAO investigated.

The behavior reported should have been treated as a "debacle" and an "embarrassment," McCaskill said in letters Thursday to Stephenson and Defense Secretary Robert Gates. The senator demanded that Stephenson describe remedial actions she is taking, including any disciplinary actions against supervisors that allegedly changed audit reports or intimidated DCAA employees.

McCaskill also said hearings should be held to further investigate the charges. Sen. Joseph Lieberman, I-Conn., chairman of the Senate Homeland Security and Governmental Affairs Committee, which requested the GAO report, did not respond to a request for comment about potential hearings. But a Senate source indicated that plans for such hearings are already in the works.

Lieberman and Sen. Susan Collins, R-Maine, the committee's ranking member, did release a statement last week criticizing DCAA and promising swift action.

"GAO has substantiated serious whistleblower allegations that show that some DCAA supervisors were cutting corners and pressuring their subordinates to give more favorable audits to contractors than the auditors felt the contractors deserved," Lieberman said. "This shows a blatant disregard for the safeguards that are supposed to be in place to ensure that contractors charge the government no more than a fair and reasonable price."

Collins added, "Further work is needed to determine the extent of the problem and what corrective actions are necessary to put DCAA back on the right track."

Are you a current or former DCAA employee who was pressured by a supervisor to change the results of an audit to favor a contractor? Have you been threatened with personnel action or told to limit the scope of your work at the behest of a DCAA manager? Government Executive wants to hear your story. Identities will be protected. Please contact Robert Brodsky at rbrodsky@govexec.com.

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