DoD Buzz

Major Scandal Brewing at Audit Agency

The old Roman question: who will guard the guards themselves has an answer today in the world of defense contracting -- nobody.

As Sen. Claire McCaskill (D-Mo.) just pointed out in an impassioned speech on the Senate floor, "the Defense Contracting Audit Agency has been indicted by their peers in the GAO." McCaskill, former state auditor of Missouri, lambasted the performance of DCAA, saying the GAO findings call "into question every single audit done by this agency." Calling the agency "fundamentally corrupt" she estimated that "conservatively" $150 billion in taxpayers' dollars has been lost to fraud and waste as a result of DCAA's poor standards.

The GAO report http://www.gao.gov/new.items/d08857.pdf found that DCAA supervisors pressured auditors to favor defense companies and generally did not meet the minimum standards required of government auditors. The companies that were audited included Boeing, Northrop Grumman, L-3, we hear.

I spoke with two veteran procurement experts and they both worried that this latest scandal might wipe out whatever reslience remains in the Defense Department's acquisition community. "This could just kill the system for a while if it really is as serrious as the senator is claiming," said one. One of the sources pointed out that there is always a "healthy tension" between auditor and the audited that can sometimes spill into recrimination and suspicion.

The report says that DCAA "managers took actions against staff at two locations, attempting to intimidate auditors, prevent them from speaking with investigators, and creating a generally abusive working environment."

In three cases cited by the GAO, one major aerospace company caught a break when the DCAA "made an upfront agreement with the contractor to limit the scope of work" in the audit. An audit of a company that makes and supports military satellites was changed after the draft audit found the contractor may have overbilled the government by as much as $3.5 million. Two auditors "were replaced" by people who "dropped the findings. The DoD's Inspector General even recommended that the report be rescinded, which DCAA did over a year later. In a third audit, green auditors "lost control" of working papers for an audit involving audits of over $6.4 billion in government contracts of a major weapons system contractor.

McCaskill said someone better lose their job "before nightfall" at DCAA. She sent a letter yesterday to Defense Secretary Robert Gates saying he had "another mess on your hands." In a letter to the director of DCAA, April Stephenson, McCaskill said she read the GAO report with "a mixture of disbelief and anger."

She told Stephenson it was her job to "fix this mess" while adding that she knew the head of DCAA had not been in the job when the flawed audits took place.

DCAA rejected GAO's findings, something that infuriated McCaskill. She said "they think we're not going to pay attention" and hope to wait out the scandal. But the senator from Missouri made very clear she is not going to let this one rest: "If I have to stand on this floor every day for the next six months I will do that."

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