Pentagon Oversight Takes a Step Forward

Washington, DC - During a sparsely attended Senate hearing Wednesday, three senators addressed major flaws in the auditing and oversight mechanism of the world's largest customer - the US Department of Defense (DoD).

The Defense Contract Audit Agency (DCAA) oversees the hundreds of billions of dollars that military officers at the Pentagon spend with private contractors for new weapons. DCAA has come under fire from senators and the Government Accountability Office (GAO) - the nonpartisan investigative arm of Congress - after an investigation demonstrated structural and cultural problems with how DCAA was conducting its mission to save the government money through strict, verifiable oversight.

The GAO investigation found that auditors were under extreme pressure to complete audits of multimillion-dollar contracts quickly and to keep quiet when problems were discovered. Under the current system, auditors are rewarded for completing their reviews quickly and without close scrutiny - instead of being rewarded for discovering waste, fraud and abuse, auditors are punished for delaying the review process. The investigation also found that DCAA supervisors falsified the findings of audits performed by lower-level auditors and retaliated against and intimidated whistleblowers who spoke out against these practices.

Whistleblowers from inside DCAA and Pentagon spending experts say this system has resulted in billions of tax dollars being wasted by DoD. Referring to the amount that may have been wasted, Senator Claire McCaskill (D-Missouri) said that without the graft "we'd have enough money to bail out all the Fannie Maes and Freddie Macs of the world."

Only three members of the Senate Committee on Homeland Security and Governmental Affairs attended the hearing: McCaskill; chairman of the committee Joseph Lieberman (I-Connecticut), and ranking member Susan Collins (R-Maine). They joked about the lack of attention the issue of military procurement oversight received, but the bipartisan group appeared informed and committed to addressing problems. McCaskill vowed to continue pursuing reform despite what she termed "Congress's five-minute attention span."

McCaskill, an attorney and former Missouri state auditor, has taken the lead on the DCAA issue and was the strongest voice at Wednesday's hearing. She continued questioning the witnesses for roughly an hour after the other committee members had left.

After a presentation of the investigation's findings by GAO managing director Gregory Kutz, DCAA director April Stevenson took responsibility for the failings identified in the GAO report and apologized repeatedly to the two whistleblowers who testified about their frustration and mistreatment as a result of their stubborn refusal to go along with a broken system. She repeatedly said instances of misconduct identified by GAO were "unacceptable" and vowed to make any necessary changes.

Stevenson faces the possibility of losing her job as a result of the GAO report. "You may be the fall guy for this," McCaskill warned her.

While admitting that mistakes had been made and outlining steps DCAA has been taking to try to prevent future auditing problems, Stevenson was caught attempting to excuse the behavior of some DCAA officials who tried to stonewall investigators by threatening a whistleblower.

Diem Thi Le, a senior auditor who has worked with DCAA for the past 19 years, discovered flaws in the accounting system of a major weapons contractor. Her findings were changed by her branch manager to essentially let the contractor off the hook. Thi Le's attempt to address the issue within DCAA was rebuffed and she took the risky step of becoming a whistleblower.

After filing a complaint with the Department of Defense Office of the Inspector General (OIG) - the DoD internal watchdog - Thi Le endured "harassment and retaliation," being transferred to a different auditing team, passed over for a performance award and having her performance evaluation slashed.

In August 2007, Thi Le received a letter drafted by an unnamed DCAA lawyer and signed by her supervisor. The letter threatened her with criminal prosecution and firing if she cooperated with investigators who were looking into her complaint.

Stevenson initially claimed the letter was sent to Thi Le to warn her against disclosing proprietary information that could have damaged the contractor she was auditing. However, Senator McCaskill pointed out that the letter specifically mentioned the ongoing investigations and said Thi Le was not to turn over certain internal e-mails and other documents. Those e-mails could not have contained trade secrets.

According to Gordon Heddel, acting DOD inspector general, this threat appears to violate laws meant to protect whistleblowers and facilitate investigations of federal bodies. Heddel also opposed the trade secrets argument, stating that laws are in place to allow disclosure of documents that may contain proprietary information in the course of investigations, as long as the documents are properly identified.

McCaskill appeared put off by the attempt to excuse the possibly criminal threats contained in the letter and called for the identification and disbarment of the lawyer who wrote it.

Heddel was also harshly criticized by the Senate committee for his role in Thi Le's suffering. Heddel's office made a critical error in handling her original complaint. Through her own investigation, Thi Le revealed that OIG had disclosed her identity to the very people she filed the original complaint against.

Heddel's office was further excoriated for failing to act on Thi Le's complaint for three months - a point which Heddel did not contest, but instead blamed on the overwhelming number of complaints filed with his office in the wake of Hurricane Katrina.

Toward the end of the hearing, both Senator McCaskill and Stevenson invited any DCAA auditors who felt like they were being mistreated to call their offices directly.

"Customer Service"

Since the early 1990's, DCAA has been under pressure from successive administrations to become lean and efficient, cutting staff and proving that they can audit defense contracts faster and cheaper than a private auditing firm. As a result of these pressures, discovering waste and recovering money for the government has been given a lower priority in favor of moving contracts through the system and getting money distributed to contractors quickly.

These priorities are reflected in the performance metrics - standardized procedures for evaluating each of the roughly 3,500 auditors under DCAA. The current metrics reward auditors and supervisors who complete audits as fast as possible. Complications such as the discovery of fraud or mistakes delay the process. Thus, an incentive exists to ignore problems with contracts and certify them to keep the wheels turning. Previous metrics emphasized recovering money for the government - a goal which has apparently taken a back seat in recent years.

Thi Le and fellow whistleblower Paul Hackler, a 25-year DCAA auditor, testified that there is a cultural problem at DCAA, stemming from a lack of independence from those it is supposed to be monitoring, It has resulted in auditors ignoring waste on the part of military procurement officers and fraud committed by military contractors. Truthout has received similar information from multiple sources while examining this matter.

Hackler testified that he identified a 15-year accounting scheme that funneled $270,000,000 to defense contractor Boeing in what appeared to be a kind of Air Force-backed bailout using taxpayer money for mistakes Boeing had made in the private sector. Hackler testified that his office was directed by top management in DCAA to "basically play along with this outrageous government bailout!"

Senator Collins compared the lack of independence between auditor and audited to the corporate accounting scandals that rocked stock markets at the beginning of this decade.

As a part of the Department of Defense, the Defense Contract Auditing Agency serves alongside the military leaders who, according to military spending experts, have a "cozy" and sometimes inappropriate relationship with private industry.

Thi Le and Hackler testified that their audits were altered by managers and supervisors to create "customer satisfaction" - in other words, to please the military procurement personnel whose careers depend on spending tax dollars for weapons.

Senator Lieberman pointed out that the "customer" DCAA should be aiming to please is actually the taxpayers whose money and security DoD is entrusted with.

This theme was also taken up by Senator McCaskill, who suggested making DCAA an independent body to give auditors more autonomy. This suggestion is under review by GAO and may be included in its upcoming report on possible changes in how contract oversight is performed at DoD.

"I don't think we should belong to the Department of Defense," Thi Le said, adding "how can you audit DoD contracts when you are reporting to the same agency? I think that's a conflict of interest."

Matt Renner is an editor and Washington reporter for Truthout.

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