Watchdogs rap Defense information office for improper fee collection

The former administrator of a Defense Department office that collects vital scientific and business-related information engaged in "gross mismanagement" by failing to stop employees from improperly collecting millions of dollars in fees from its Pentagon customers, according to documents the Office of Special Counsel released this week.

The findings conclude a nearly two-year investigation by OSC and the Defense Department Inspector General's Office into questionable business practices by the Defense Technical Information Center, which reports to the undersecretary of Defense for acquisition, technology and logistics.

Investigators found that during a recent two-year period, DTIC employees improperly charged indirect costs for the goods and services they provided to their federal customers through their Information Analysis Center program.

"DTIC collected fees in excess of its actual costs and did not return its surpluses to its customers," OSC wrote in a Sept. 29 letter to President Obama. "As a result, DoD overcharged its customers by $12.1 million in FY 2007 and $9.7 million in FY 2008."

The IG audit report concluded the office violated the 1933 Economy Act when it used the fee surpluses to augment its budget and finance DTIC-wide investment opportunities -- a violation of federal accounting principles.

The allegations were first disclosed by a whistleblower, Russ Daul, the former director of the Resource Management Directorate at DTIC. Daul allowed OSC to release his name, the letter said.

IG investigators also found that R. Paul Ryan, the former administrator of DTIC, was notified of the improper accounting of fees but failed to establish a process to correct the errors, or to accumulate actual costs.

"We conclude that Mr. Ryan's actions … constituted gross mismanagement as defined by applicable standards," the IG wrote in the June report. "However, we found insufficient evidence to substantiate the allegation of abuse of authority."

Ryan's actions jeopardized DTIC's ability to perform its mission by damaging the office's reputation and credibility among its customers and with Congress, the audit said.

The former administrator disagreed with the conclusions, telling the IG that his actions "may have constituted simple negligence," but did not rise to the level of gross mismanagement. Ryan added the office's fee management process was well-known and tacitly approved of by other authorities, and the collected fees represented approximated actual costs.

In July, Ryan was moved out of DTIC and detailed to a nonsupervisory position in the Defense Department's chief technology office. The department has not yet named a new permanent administrator.

In response to the investigative findings, Defense has begun a comprehensive review of DTIC operations, including a full assessment of the office's financial accounting systems. In addition, a new review board will establish a plan for determining and returning the surplus fees, the OSC letter said.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.