[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
SAFEGUARDING PROCUREMENT:
EXAMINING FRAUD RISK MANAGEMENT
IN THE DEPARTMENT OF DEFENSE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
U.S.HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
JUNE 4, 2025
__________
Serial No. 119-29
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-680 PDF WASHINGTON : 2025
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JAMES COMER, Kentucky, Chairman
Jim Jordan, Ohio Vacant, Ranking Minority Member
Mike Turner, Ohio Eleanor Holmes Norton, District of
Paul Gosar, Arizona Columbia
Virginia Foxx, North Carolina Stephen Lynch, Massachusetts
Glenn Grothman, Wisconsin Raja Krishnamoorthi, Illinois
Michael Cloud, Texas Ro Khanna, California
Gary Palmer, Alabama Kweisi Mfume, Maryland
Clay Higgins, Louisiana Shontel Brown, Ohio
Pete Sessions, Texas Melanie Stansbury, New Mexico
Andy Biggs, Arizona Robert Garcia, California
Nancy Mace, South Carolina Maxwell Frost, Florida
Pat Fallon, Texas Summer Lee, Pennsylvania
Byron Donalds, Florida Greg Casar, Texas
Scott Perry, Pennsylvania Jasmine Crockett, Texas
William Timmons, South Carolina Emily Randall, Washington
Tim Burchett, Tennessee Suhas Subramanyam, Virginia
Marjorie Taylor Greene, Georgia Yassamin Ansari, Arizona
Lauren Boebert, Colorado Wesley Bell, Missouri
Anna Paulina Luna, Florida Lateefah Simon, California
Nick Langworthy, New York Dave Min, California
Eric Burlison, Missouri Ayanna Pressley, Massachusetts
Eli Crane, Arizona Rashida Tlaib, Michigan
Brian Jack, Georgia
John McGuire, Virginia
Brandon Gill, Texas
------
Mark Marin, Staff Director
James Rust, Deputy Staff Director
Mitch Benzine, General Counsel
Bill Womack, Senior Advisor
Jenn Kamara, Senior Professional Staff Member
Ashlii Dyer, Senior Counsel
Mallory Cogar, Deputy Director of Operations and Chief Clerk
Contact Number: 202-225-5074
Jamie Smith, Minority Staff Director
Contact Number: 202-225-5051
------
Subcommittee On Government Operations
Pete Sessions, Texas, Chairman
Virginia Foxx, North Carolina Kweisi Mfume, Maryland, Ranking
Gary Palmer, Alabama Minority Member
Tim Burchett, Tennessee Eleanor Holmes Norton, District of
Brian Jack, Georgia Columbia
Brandon Gill, Texas Maxwell Frost, Florida
Emily Randall, Washington
C O N T E N T S
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Page
Hearing held on June 4, 2025..................................... 1
Witnesses
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Mr. Kelly P. Mayo, Deputy Inspector General for Investigations,
DoD Office of the Inspector General
Oral Statement................................................... 6
Mr. Seto Bagdoyan, Director, Forensic Audits and Investigative
Services, U.S. Government Accountability Office
Oral Statement................................................... 7
Written opening statements and bios are available on the U.S.
House of Representatives Document Repository at:
docs.house.gov.
Index of Documents
----------
* Article, The Washington Post, ``Pentagon Buries Evidence of
$125 Billion in Bureaucratic Waste''; submitted by Rep. Biggs.
The document listed above is available at: docs.house.gov.
Additional Documents
----------
* Questions for the Record: Mr. Bagdoyan; submitted by Rep.
Sessions.
* Questions for the Record: Mr. Mayo; submitted by Rep.
Sessions.
These documents were submitted after the hearing, and may be
available upon request.
SAFEGUARDING PROCUREMENT:
EXAMINING FRAUD RISK MANAGEMENT
IN THE DEPARTMENT OF DEFENSE
----------
Wednesday, June 4, 2025
U.S. House of Representatives
Committee on Oversight and Government Reform
Subcommittee on Government Operations
Washington, D.C.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 2247, Rayburn House Office Building, Hon. Pete Sessions
[Chairman of the Subcommittee] presiding.
Present: Representatives Sessions, Comer, Foxx, Palmer,
Burchett, Gill, Mfume, Norton, Frost, and Randall.
Also present: Representative Biggs.
Mr. Sessions. The Committee on Government Operations and
the Federal Workforce [sic] will come to order. Good morning,
and welcome to not only the Members who are here today and the
staff, but also those people in the audience in support of the
discussion that we will have today.
Without objection, I may declare a recess at any time.
I recognize myself for the purpose of making an opening
statement.
Today's hearing on the Department of Defense's fraud risk
management efforts and how they work to combat fraud. In 2024,
DoD officials told the GAO that they did not believe there was
much fraud within their department relative to their overall
spending. Reports show that DoD spends over $1 trillion
annually. So, as you can tell, even a small percentage would be
significant.
From 2017 through 2024, DoD reported that about $10.8
billion could be confirmed as fraud--$10.8 billion, when
compared to a trillion is not what they would consider to be a
relative problem. We do. The people who are gathered today,
including Members of Congress on a bipartisan basis, do
consider that $10.8 billion of confirmed fraud is a problem.
This figure mostly relies on dollars that were recovered.
According to GAO, confirmed fraud and the amount recovered may
only reflect a small fraction of the extent of fraud within
DoD.
To accomplish its global mission, DoD relies on contractors
for goods and services. In Fiscal Year 2023, DoD reported that
about $431 billion, or 71 percent of total defense spending,
went to contractors for various products and services in
support of the warfighter--71 percent.
For years, GAO has reported that DoD has struggled to
accurately account for the government property that contractors
possess.
This long-standing issue affects the DoD's ability to
produce fully auditable financial services as we have discussed
in this Subcommittee and in the Committee under our young
Chairman, James Comer, for a number of years. It affects our
ability to ensure that taxpayer money is being spent
appropriately, and our servicemembers are getting actually what
they need because the taxpayer of this country is paying that
bill. It affects our ability to prevent bad actors from
exploiting vulnerabilities in the contracting system. In
essence, it keeps people honest because they know people are
looking.
There have been some notable cases over the years that
highlighted how far fraudsters will go to line their pockets by
defrauding the Federal Government. In the early 2000s, Fat
Leonard orchestrated the worst corruption scheme in U.S. naval
history. He bribed Naval officers to steer business toward his
company, Glenn Defense Marine Asia. This company offered
services to the United States Navy, its ships, and it
overcharged the military by at least $35 million. This scheme
went on for over a decade. This case is still being
investigated so the full scope of damage is going to be put
together, and yet today we do not have the final figure. As far
back as 2006, Navy criminal investigators opened and closed 27
separate investigations into Glenn Defense Marine Asia.
GAO recently reported that DoD's updated fraud risk
management strategy does not include data analytics. Data
analytics would make it easier and clearer for personnel to
verify information and determine eligibility for contractors to
receive Federal awards. It would also help connect the dots
between suspicious activities and those which were legitimate.
Had investigators and the DoD contracted personnel using data
analytics back in 2006, perhaps Fat Leaonard could have been
stopped years before.
Examples like this are horrible, but fraud within the DoD
just does not threaten their financial positions, but it
undermines the opportunity for them to know what they have,
where it is located, and were the services properly provided.
There are real operational impacts that can pose a threat
to our servicemembers. One such case involved Defense Criminal
Investigative Service, involved working against a fraudster who
purposefully falsified documents. These documents included a
fraudulent certificate to conceal the fraudster's company and
failure to maintain required manufacturing standards for a
machine gun part.
This financial impact was only $124,000, but the non-
financial impact was even more troubling. A military engineer
testing one of these machine gun parts saw several
deficiencies. These deficiencies could have harmed our
warfighters, not just in protecting this Nation but also their
lives. Our sons and daughters are fighting for our country, and
they should not have to worry about whether or not a contracted
part for their weapon will function as it was correctly
manufactured.
This Subcommittee is continuing to have conversations with
not only GAO, but also those within the Defense Department,
including the Inspector General community. We are there to make
sure that we work with them. We want to make sure agencies
understand their responsibility to make sure taxpayer money is
wisely spent.
One of our first hearings this Congress was focused on
preventing fraud rather than chasing fraudsters who have
already run away with taxpayers' hard-earned dollars. Shining a
light on contracting fraud within DoD and highlighting some
commonsense strategies that can prevent this fraud is also what
this conversation is about today. Estimating the amount of
fraud within DoD is a hard task, but we are up to that, and I
hope that this conversation as well as those that we are giving
to the two witnesses that we have today, where they will
understand that we will join with them in making sure that the
U.S. Congress speaks with one voice to say that we do not just
expect this to be done; we want it done now. Time must be on
our side.
At this time, I would like to yield to the distinguished
Ranking Member, Mr. Mfume, for any opening statement he would
like to make, and I am delighted that you are here, and good
morning. We made a determination, as I told our witnesses
yesterday, that Mr. Mfume and your side, the Democratic Party,
intends to forthrightly address this issue, come up with real
answers, and we are going to work together on this. The
gentleman is recognized.
Mr. Mfume. Thank you very much, Mr. Chairman. Thank you for
your remarks also. Working together is something that we, on
this side of the aisle, look forward to, particularly when we
are able to discern, as we have been, a great deal of problems
with the Department of Defense, in this case. But thank you. I
want to say good morning to you and to our witnesses and to
everyone else who is here in the meeting room, as well as my
colleagues who have taken time to be here today.
All of this comes against a backdrop of seven straight
failed audits by the Department of Defense, which is really
hard to fathom. Some of you may be hearing this for the first
time, but seven straight audits deserves an exclamation point
behind it, because when we are dealing with the largest
appropriation within our Nation's budget, we deserve to be
served correctly.
Oversight of the public purse really is not a partisan
talking point. It is, indeed, a constitutional promise that we
make to every taxpayer and to every servicemember who wears the
uniform. No Federal agency, as I indicated, spends more on
contracts than the Department of Defense. In Fiscal Year 2023,
it obligated roughly $456 billion, well over half of all
contract dollars, and the current continuing resolution boosts
defense discretionary spending to $892 billion. It is kind of
hard to get your arms around a number like that, but that is
the case, $892 billion.
When a balance sheet is, obviously, that large, even a 1
percent error drains nearly $9 billion from our troops, our
readiness, and our modernization.
Yet, the Government Accounting Office still places DoD's
business system on a fraud risk management, as the Chairman
said earlier, a High Risk List, confirming that at least $10
billion in fraudulent payments have gone out since 2017, and
then further warning us that the full extent is far higher than
that.
GAO's message is really rather blunt. Until senior
leadership sustains a commitment to every defense dollar, all
defense dollars remain at risk. The leadership gap should
concern this Committee, contracting offices across the
services, and others, because although there are many that do
historic, or heroic, I should say, work, they need clear
direction from the top, and right now that is not where they
are essentially getting it.
Congress must, therefore, hold DoD and all of its
contractors accountable when fraud erodes readiness, when it
squeezes small businesses, and when it undermines the public
trust.
Disturbingly, the Trump Administration has moved us in the
wrong direction on this matter, because within days of taking
office it fired the DoD Inspector General, the Department's
chief watchdog, and has since proposed rolling back key
acquisition safeguards.
You know, speed has its virtues. I do not deny that. But
dismantling guardrails and silencing oversight is not
efficiency. It is an engraved invitation to fraud.
And so, as we look at DoD's progress today, I think that
our focus ought to be threefold. No. 1, drive leadership
commitment through every aspect of the agency. Fraud risk
management cannot be relegated to the back office. Secretary
Hegseth and service secretaries who serve with him must own it,
resource it, and insist on measurable results.
No. 2, modernize the prevention tools. GAO has found that
DoD still lacks the real-time analytics needed to expose
phantom vendors and collusive bidding. So, data must be able to
talk to data before the money walks out of the door. I am not
suggesting that is how you fail seven straight audits, but it
is certainly not the way that you pass them.
No. 3, enforce accountability, with consequences. When
fraud occurs, suspension, disbarment, and criminal action must
be swift, public, and proportional. Anything less rewards the
bad actors and punishes all the honest ones.
Colleagues, today every fraudulent invoice paid is a weapon
system delayed, a housing unit deferred, or a veterans' clinic
understaffed. When we achieve and maintain the strongest
military on Earth, we have a clear obligation to make sure that
every defense dollar works as hard as it possibly can for the
men and women it is meant to serve.
So, I look forward to the testimony of our witnesses. I
look forward to working with Chairman Sessions and my other
colleagues on both sides of the aisle here, to try to find a
way, how do we translate all of their insights into some sort
of concrete reform, because reform is clearly, clearly needed.
With genuine leadership commitment and a vigilant congressional
oversight ongoing effort, I think we can safeguard, or
eventually we will be able to safeguard procurement, protect
the taxpayers' investment, and then, of course, strengthen our
national defense. Without it, we do a disservice to the
American taxpayer. Without it, we do a disservice to the men
and women who put on a uniform. And without it, we give up the
obligation that we have to make sure that waste, fraud, abuse,
breaking the law, finding ways to skirt the process, and then
ultimately making a profit off the system, that will be with us
forever if we do not act, and act swiftly.
So, I want to yield back, and again thank the Chairman. I
want to thank the members present and all those who are here
out of a genuine concern to find a way to straighten out what
has been a very nasty, ugly problem affecting our Department of
Defense.
I yield back.
Mr. Sessions. Mr. Mfume, thank you very much, and not just
for your conversation but remembering and seeing, as you look
up today, we have many young students that are here, that are
here for a summer to learn not just about what might be
democracy and the role of Congress but also to understand that
Congress, too, has not just a role to play but an important
role to play. And it is my hope that they see that we have two
people, not just Republicans and Democrats, but two people who
are equally committed to the needs to make sure that their
future is brighter and better also, because they, while they
may be voters now, they soon will be taking our place, and want
to tell the story about their future. And it does reside around
the national security issues of the United States military. And
I want to thank you very, very much.
I would ask unanimous consent that Congressman Andy Biggs
from Arizona be waived on today's hearing for the purpose of
asking questions. Without objection, so ordered.
I also note that today we have our young Chairman, James
Comer, the Chairman of the whole Committee on Government
Reform. Mr. Chairman, we are delighted that you have taken time
to join us.
Chairman Comer. Thank you, and I appreciate the ``young''
comment. I really appreciate that, Mr. Chairman.
Mr. Sessions. Well, you earned it. How about that.
I am pleased today to welcome our witnesses, Kelly P. Mayo
and Seto Bagdoyen. Mr. Mayo is Deputy Inspector General for
Investigations at the Department of Defense's Office of
Inspector General. Mr. Bagdoyan is the Director of Forensic
Audits and Investigative Services at the United States GAO,
Government Accounting [sic] Office. We look forward to having
you join us today, and when we met yesterday I assured you that
your comments, your insight, and the things which you would
bring to the table are not aimed at anything other than
resolution, information to where we are able to work with you.
And I also assured you that you would come before a
subcommittee that, while we have deep issues and problems, it
is shared by both of us, not only on a bipartisan basis but in
the best interest of the warfighter, who represents the
husbands and wives of men and women who want their children to
be taken care of properly as a fighting force to protect
America.
So, pursuant to Committee Rule 9(g), the witnesses are
asked to please stand and to raise their right hand to be sworn
in.
Do you solemnly swear or affirm that the testimony that you
are about to give today is the truth, the whole truth, and
nothing but the truth, so help you God?
[Chorus of ayes.]
Mr. Sessions. Let the record reflect that the witnesses
have both answered in the affirmative. Both of you may take
your seat, and thank you very much.
I now would like to recognize the witnesses for their
opening statement. Let me remind the witnesses that we have
read your written statement and it will appear in full in the
hearing record.
As we spoke about yesterday, we are going to limit your
oral statement to 5 minutes, but we want you to make your
points, if you sneak over that. But certainly, in questions
from the Members that come here, we would like for you to give
full and complete thoughts that you have that enable us to
better understand the role that you play.
As a reminder, please push the button on the microphone in
front of you so that the Members can hear you, and when you
begin to speak the light in front of you will turn green. You
will also see, after 4 minutes or so, the light will turn
yellow, and then the red light will come on. I encourage you to
please make sure that your conversation with us fits not only
within that timeframe but you are able to complete your work
properly, because we need to use your time to help us in
recognition of what we are trying to accomplish.
I now recognize Mr. Mayo for his opening statement. The
gentleman is recognized.
STATEMENT OF KELLY P. MAYO
DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS
DOD OFFICE OF THE INSPECTOR GENERAL
Mr. Mayo. Thank you, sir. Chairman Sessions, Ranking Member
Mfume, and Members of the Subcommittee, thank you for the
opportunity to testify today regarding the important topic of
procurement fraud within the Department of Defense.
As the Deputy Inspector General for Investigations, I lead
the Defense Criminal Investigative Service. We are the criminal
investigative arm of the DoD's Office of Inspector General,
which is mandated by Congress to oversee DoD programs and
operations.
In support of the DoD IG's broader independent oversight
mission, DCIS conducts criminal and civil investigations to
ensure that resources meant for America's servicemembers are
not stolen, wasted, or compromised. My testimony today reflects
the experience of hundreds of DCIS special agents, analysts,
and other talented professionals who are dedicated to exposing
fraud and protecting the integrity of the U.S. defense spending
at home and abroad.
My message for the Subcommittee today is clear and simple.
Investigating procurement fraud within the DoD is a top
priority for DCIS. Fraud harms military readiness, it puts
servicemembers at risk and erodes the trust of the American
taxpayers. That is why DCIS has been aggressively holding
fraudsters accountable since we were established more than 40
years ago.
DCIS defines fraud as any intentional act or scheme to
obtain something of value from the DoD through false
statements, deception, or misrepresentation. It can be
perpetrated by individuals inside and outside of the government
and by the private sector companies providing products and
services to the DoD.
DCIS targets fraud that threatens national security,
including product substitution, bid rigging, cybersecurity,
from domestic contractors. Our investigations routinely lead to
criminal convictions, Civil False Claims Act recoveries, and
contractor debarments, returning billions of dollars to the
government and preventing future losses.
For example, in just the 6-month period from October 2024
through March 2025, DCIS investigations resulted in more than
$3 billion recovered for taxpayers.
To date, DCIS has 1,864 open investigations, including 478
cases of procurement fraud. I cannot discuss any ongoing or
open investigations during today's hearing, to maintain the
integrity of the investigative process. However, I can
certainly talk about closed investigations.
In conclusion, the procurement fraud is not a technical
irregularity for the DoD. It is a strategic vulnerability that
siphons taxpayers' funds and undermines public trust. Ongoing
engagement and support from the Congress are essential to
reinforcing the DCIS mission and upholding the trust placed in
us by the American people and those who we serve. We look
forward to working with a continued partnership with the
Subcommittee to uphold the standards of our warfighters that
our taxpayer expect. Thank you again for the opportunity to
testify today. I will welcome your questions.
But if I may, I have 1 minute left, I would like to say
that I am incredibly honored to be here. I was a blue-collar
kid, homeless for a while, and this is a privilege of a
lifetime. Thank you very much, ladies and gentlemen.
Mr. Sessions. Mr. Mayo, thank you very much, and the
gentleman yields back his time.
I now would like to recognize Mr. Bagdoyan. Mr. Bagdoyan,
you are recognized.
STATEMENT OF SETO BAGDOYAN
DIRECTOR
FORENSIC AUDITS AND INVESTIGATIVE SERVICES
U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Bagdoyan. Thank you. Chairman Sessions, Ranking Member
Mfume, and Members of the Subcommittee, I am pleased to discuss
today GAO's extensive work on procurement fraud risk management
at DoD.
The President recently proposed a $1 trillion Fiscal Year
2026 budget for the Department, a substantial share of which is
for procurement, an operational area inherently at risk for
fraud. In general, fraud risk in Federal programs is a function
of weak controls as well as high spending levels, sprawling
scope and scale, and complex, often restrictive,
configurations. These causal factors are all present in DoD
activities, making effective fraud risk management very
challenging. In this regard, DoD faces significant financial
and non-financial fraud risks which, coupled with weak fraud
risk management, compromise the integrity of its programs,
resulting in operational readiness and national security
impacts.
An example from our reporting underscores such impacts,
namely an ineligible foreign manufacturer, through opaque
ownership of U.S. shell companies, obtained contracts, accessed
and exported sensitive military data, and produced
nonconforming parts, which resulted in the grounding of 47
fighter jet aircraft.
My remarks today aggregate the results of three GAO reports
since 2019 on DoD procurement fraud risk management, the
addition in February 2025 of fraud risk management to the
existing DoD financial management area on GAO's High Risk List,
and recent related GAO testimony before this Subcommittee.
Against this backdrop, DoD asserted that fraud is not a
significant problem, challenged our adding fraud risk
management to the High Risk List, and disagreed with key
findings and more than half of our recommendations in our three
reports. These recommendations are fundamental to effective
fraud risk management. Thirteen of these recommendations,
including two designated as priority--which means ``must do''
recommendations--remain open, and though risks are immediate,
DoD has repeatedly delayed their implementation.
Regrettably then, DoD's indifferent posture, including lack
of timely action, suggests that fraud risk management is not
yet a top leadership priority. With the foregoing as context, I
will make two principal points about the state of fraud risk
management at DoD.
First, our analyses of about 2,700 adjudicated procurement
fraud causes, covering fiscal years 2015 to 2021, conclusively
showed that, assertions to the contrary notwithstanding, fraud
and risk is indeed a problem at DoD.
Second, DoD's capacity to manage fraud risks falls well
short across multiple fundaments. For example, the DoD
antifraud strategy has not established clear roles,
responsibilities, and authorities across components for fraud
risk management, including the entity charged with leading this
effort. Accordingly, this entity cannot readily compel timely
and comprehensive action by components.
Data analytics activities to identify and assess fraud
risks are essentially nonexistent across components, including
investigative units, missing a major opportunity to
significantly enhance fraud risk management decision-making and
action.
I will close by underscoring that managing fraud risks
effectively is serious business, as their multiple impacts are
significant. Accordingly, for DoD to address such risks
successfully and safeguard its assets, it must promptly do
three vital things.
First, acknowledge fraud risks are a problem, rather than
downplay their existence and significance. Second, determine
their extent, nature, and implications at the institutional as
well as the component levels. And third, act decisively and
timely as part of an integrated anti-fraud approach to fully
implement all our recommendations and build and sustain an
effective fraud risk management capacity.
Chairman Sessions, Ranking Member Mfume, this concludes my
remarks. I now welcome your questions. Thank you.
Mr. Sessions. Mr. Bagdoyan, thank you very much. The
gentleman yields back his time.
I am first going to go to our young Chairman of the full
Committee, the gentleman from Kentucky, Mr. Comer. Sir, you are
recognized.
Chairman Comer. Thank you, Chairman Sessions, and I want to
thank you and Ranking Member Mfume for the work you do on this
Subcommittee. You all do it right, and I appreciate that.
My first question for both witnesses, I assume you all will
both agree that fraud is a problem at DoD. Correct?
Mr. Mayo. Yes, sir.
Mr. Bagdoyan. Yes.
Chairman Comer. So, do you, sir, Mr. Bagdoyan, do you have
an estimate of how much fraud there is at the Department of
Defense?
Mr. Bagdoyan. I do not, Mr. Chairman. The numbers we have
are based on what Mr. Sessions mentioned in his opening
remarks, essentially confirmed fraud, which is----
Chairman Comer. Massive, massive. And it has been mentioned
several times. The DoD, the Pentagon, continues to fail audits,
which is unacceptable, but they continue to do that.
Mr. Bagdoyan. Yes. If I may add, that what is confirmed is
what has been detected, investigated, and adjudicated. So, I do
not know what has been missed.
Chairman Comer. Right. Well, let me ask both of you. Does
the Department of Defense agree? I think I know where Secretary
Hegseth is, but do the rank and file employees, bureaucrats,
whatever you want to call them, at the Department of Defense,
do they agree that there is massive fraud in the Department of
Defense? Mr. Mayo?
Mr. Mayo. I do not know that I can speak to that broadly,
sir. I think many of the people in the Pentagon do understand
this. I have not discussed this with them, but I think the
people in the DoD, many of them do the same.
Mr. Bagdoyan. Yes, I would agree with Mr. Mayo. I cannot
speak to the rank and file in broad terms, but the people we
are working with to implement our recommendations seem to have
their hearts and minds in the right place. They do believe it
is a problem that needs to be addressed, but in terms of
personally verifying and vouching for that, I cannot do that.
Chairman Comer. So, what advice do you all have for
Congress, for this specific Subcommittee, that is sincere. This
Subcommittee is quality. Everyone is sincere about wanting to
eliminate waste, fraud, and abuse and mismanagement in the
Federal Government. I think everyone knows the Department of
Defense is the poster child for waste, fraud, abuse, and
mismanagement in the Federal Government. We talk about it, but
nothing gets done. What advice would you all have, real quick,
for this Subcommittee and this Congress to actually get
something done to rein in the excessive spending, just the
exuberant waste at the Pentagon? Mr. Mayo?
Mr. Mayo. Yes, sir. I think that we are doing it right now.
With your help, with your substantive help, I think we can make
some, not DCIS, but the government writ large.
Chairman Comer. Sir?
Mr. Bagdoyan. Yes, I would agree with that. Sustained,
regular oversight is very important.
Chairman Comer. Let me ask you this. Is it Congress' fault?
We hear about Congress, you know, that the Pentagon will make a
suggestion on a certain type of aircraft, that maybe they do
not need as many or they do not need them at all, and a Member
of Congress that has a facility in their district will change
that and say, ``No, we are going to order three times as many
as we need.'' Is it Congress' fault? Who do you lay the blame
on? Is it Congress or the bureaucrats at the Department of
Defense? Mr. Mayo? We have to blame someone. Someone is at
fault for the way the Department of Defense continues to fail
audits, it continues to be, you know, efficient with taxpayer
dollars. Is that our fault? When I say ``our,'' I am talking
about Congress just from way, way back, you know, not Mr.
Burchett and myself, or Mr. Biggs. We are relatively new here.
Mr. Sessions. You want to blame me.
Chairman Comer. Well, no, no, no. You are one of the good
guys, Mr. Sessions. But who do you blame for this?
Mr. Mayo. I would not know, sir. I think it is a pervasive
thing across the DoD. I think they are working hard to get
things done, and a lot of these things are slipping through the
cracks. It is certainly not your fault. I do not think so at
all.
Chairman Comer. This is something--I have been here 8
years, and Mr. Biggs and I got here at the same time--it is not
getting any better. I mean, it gets worse. And, you know, I
think that the good thing we have now with President Trump,
with the overall objective of the DOGE movement, is, we cannot
continue to spend $2 trillion a year more than we take in. We
have got to tighten our belts. Jamie Dimon talks about it, the
bond market is concerned, and we cannot continue this excessive
spending. And we want a strong military. We want to support our
troops. But we cannot continue to waste money.
And I appreciate the witnesses here today. I appreciate the
hearing, Mr. Chairman and Ranking Member. Hopefully, we can
come together in a bipartisan way to solve this problem of
excessiveness at the Department of Defense.
I yield back.
Mr. Sessions. The gentleman yields back his time. While the
young Chairman is here, I would like to bend his ear for just a
second, on a bipartisan basis. We believe that what we are
doing today is also to point out that the Department of
Defense, when they respond back to the investigations that have
been done, the findings of fact and conclusions that the GAO
and IG have presented to the management of DoD, in writing,
they come back and say they are noncompliant, which means they
do not agree with the findings of professionals like the IG or
GAO.
So, while you are worried about, and we are too, what we
spend, we are more concerned that they ignore----
Chairman Comer. Exactly.
Mr. Sessions [continuing]. That fraud is present in this.
And you will find that as a result of this hearing today, Mr.
Mfume and I will be requesting you and the Ranking Member of
the Committee join us in going to, across the river, to DoD, to
make sure that they understand that this is unacceptable and
that they have got to understand there is fraud.
Chairman Comer. Absolutely. Well, thank you all for what
you are doing, and I appreciate this hearing and look forward
to the rest of it.
Mr. Sessions. Mr. Chairman, thank you very much. Mr. Mfume?
Mr. Mfume. Thank you very much, Mr. Chairman. I have got a
couple of questions about GAO and their risk management, if you
do not mind. Mr. Bagdoyan, in your view--and I do not have a
lot of time here, so if you can kind of quickly walk through
these with me--what leadership actions would have the greatest
immediate impact on lowering DoD's fraud risk profile?
Mr. Bagdoyan. Yes. The key action here is to make it the
top priority for action, and make sure that that translates
down to the various levels, the various components that we have
audited over time. So, it has to come from the Secretary to
make sure that his staff are aware of that priority and start
building a culture of fraud risk management. Without that, all
the rest is not going to work.
Mr. Mfume. Yes, and I think that is one of the clear things
we are going to be communicating to Secretary Hegseth. It has
got to start at the top, and it has got to be sustained.
Otherwise, we will be here 8 years from now, talking about 15
failed audits.
How would you characterize the current state of DoD's data
integration for fraud detection? In other words, are we at the
starting line, the halfway point, or near the finish line?
Mr. Bagdoyan. Being at the starting line would be a
charitable way to describe it. They are just not there. The
data are massive. They are difficult to work with. We spent
months cleaning up the data. One of my colleagues in the
audience did that as his full-time job for a long period of
time, before we could even analyze the data. So, that needs to
be looked at before they do any other work with the data.
Mr. Mfume. Thank you for the characterizations. What
specific analytics and capabilities related to analytics should
DoD prioritize over the next 12 to 18 months to improve early
detection of fraudulent activity, early detection.
Mr. Bagdoyan. Yes, early detection. Of course, make
building a data analytics capacity the priority. Then move on
to the data themselves, to clean them up, to make them usable,
make them reliable, and analyzable, if that is a word, to make
sure that the end result is actionable.
Mr. Mfume. And could you highlight two or three, four
maybe, GAO recommendations that if implemented this year would
deliver the biggest return on investment for taxpayers?
Mr. Bagdoyan. Well, to start with, we expect the anti-fraud
strategy from DoD toward the end of next month, I believe, that
they have promised, will include data analytics as a top
priority. So, that is a good starting point. And then the
second priority recommendation that I alluded to earlier
involves doing thorough fraud risk assessments and responding
to the results. Giving me a piece of paper to close a
recommendation is the beginning. But they have to go out and
operationalize what they have done. Otherwise, it is not going
to work.
Mr. Mfume. And where do you see the greatest barriers? Is
it budget? Is it culture? Is it technology? When I say
``barriers,'' I mean barriers to closing those recommendations.
Mr. Bagdoyan. Well, as I believe the Chairman mentioned
earlier, there was a resistance from leadership to our
reporting, to our recommendations, to the designation of the
high risk as part of financial management. So, that seems to
have softened over time because the people we are working with
at DoD are trying to implement the recommendations, and we
expect some of their products to come through later this month
and through next month.
Mr. Mfume. And do you and Mr. Mayo communicate with one
another?
Mr. Bagdoyan. We met this week. I expect that we will be in
touch.
Mr. Mfume. Yes, I think it is important. I mean, I sense
his sincerity and yours, but unless there is some sort of
communication here, you know, we are still taking baby steps
instead of giant steps.
I have one final question. Do you see any new, emerging
fraud schemes that perhaps are enabled by new technologies? In
other words, how do we stay one step ahead of the bad guys who
are finding ways, through technology, to evade capture?
Mr. Bagdoyan. Unfortunately, the fraudsters are ahead of us
in multiple agencies, programs, and so on. The two most common
schemes that we flagged through our analyses are false claims
and overcharging. There is a whole slew of others, false bids
and so on. So, whatever analytics that DoD implements will have
to be very tactically focused on those fraud schemes, but I
cannot speak to one being more prevalent than the other.
Mr. Mfume. Thank you very much. Mr. Chairman, I yield back.
Mr. Sessions. The gentleman yields back his time. I would
now like to go to the gentleman who was here well early and who
I know has other obligations, the distinguished gentleman from
Arizona, Mr. Biggs. You are now recognized, sir.
Mr. Biggs. Thank you, Mr. Chairman, and I thank you and the
Ranking Member for this hearing today, and thank you, Mr. Mayo
and Mr. Bagdoyan, for being here.
The DoD spends a ton of money. We have talked about that.
Yet, we are still seeing fraud, overbilling, fake shell
companies, bad parts, and the system looks the other way, way
too often. And so, I want to highlight something, Mr. Bagdoyan,
real quickly, that you mentioned. You talked about 47 aircraft
had to be grounded due to nonconforming parts provided from a
foreign company through essentially U.S. cutouts. And this gets
to one of the things you talked about is how you get there. You
have got to get them to acknowledge there is fraud. Then you
have to extract the nature and the implications of that fraud.
Now, the implications of this fraud looks to me--and I want
to ask this question. Is there any evidence that these
nonconforming parts were a malevolent attempt to actually, by
some bad actor, to ground our planes or cause us problems, or
was this simply a scam and they did not care what happened,
they just wanted the money.
Mr. Bagdoyan. Yes, that is a great question.
Mr. Biggs. Is your mic on?
Mr. Bagdoyan. Yes, apologies for that. Yes, we did come up
with some detailed information on that particular case. Let me
scurry through and see what I can attempt. But I do not believe
there was any malevolent intent. These parts, they are wing
parts, if you will. The total cost of the fraud is about
$180,000. But the grounding of the aircraft obviously was a
national security impact. But it was a very small part, made in
India, from a non-eligible manufacturer, through two shell
companies, which were basically a single person operating out
of their residence.
Mr. Biggs. Yes, so this is the kind of implication that
fraud has on a national security, because you ground the planes
over a very small, simple contract and a scam that should have
been caught.
We have been dealing with this type of thing for decades.
In fact, I appreciated Mr. Mfume showing his chart. But as far
as my research has shown me is, I have never seen that the
Pentagon ever has actually survived and passed a full
comprehensive audit. In fact, I have actually heard them say
they are too big to be audited that way.
And so, I want to focus on something fairly straightforward
here. What makes a contract high risk? What red flags do you
see again and again, and most importantly, how do we stop it
before the money is already out the door? So, it is not about
politics. This is a bipartisan issue. We have had this problem
for decades, under both brands. So, we just want to make sure
the system works.
So, my question for you--I will begin with Mr. Bagdoyan and
then go to Mr. Mayo--I am guessing you know that some contracts
are more prone to fraud than others, and what are the common
traits that tend to show up in a higher risk contract?
Mr. Bagdoyan. I would say based on what I have seen, the
big-ticket items seem to be more prone, and also the
subcontractor universe is even more susceptible than the
primes, basically. You know, there is only a handful of prime
contractors. They integrate many, many others. So, the
subcontracting may be an area of particular interest.
Mr. Biggs. Mr. Mayo, same question for you.
Mr. Mayo. Yes, sir, and I would agree with my colleague.
Really, it is about subcontractors is a significant issue,
because we do not see down there. We do not see underneath the
contract, so we do not see what is going on with the
contractors.
Mr. Biggs. So, once those types of high-risk contracts are
identified, what is the best way to put a watchdog on them and
make sure that you are not going to be prone or actually
defrauded?
Mr. Mayo. Well, our audit component does a lot of audits in
that regard.
Mr. Biggs. But that is post. I am talking about pre. So,
you have identified a certain kind of contract as really a
problem. How do you get in there and actually put down
guardrails? Mr. Mfune talked about guardrails.
Mr. Mayo. Yes, sir. That would not be our role as the
investigative agency.
Mr. Bagdoyan. I would say robust due diligence process,
past history, for example, should be looked at, and if there is
a risk----
Mr. Biggs. Of the contractor.
Mr. Bagdoyan. Of the contractor, right. Forget the contract
itself. It is the player that needs to the attention, first and
foremost.
Mr. Biggs. Right. OK. And so, that leads to kind of a weird
dichotomy here. In Mr. Mayo's reporting, you have got a massive
contractor, a defense contractor, and I hate to even bring it
up because they are located in my home state. But Raytheon, in
2024, paid $950 million to resolve allegations involving
defective pricing, bribery, and export control violations. Is
that accurate, Mr. Mayo?
Mr. Mayo. That is, sir.
Mr. Biggs. That is a billion dollars that one company can
afford to pay back after some very egregious and serious
allegations. And I see I am out of time. I do have, Mr.
Chairman, a submission for the record.
Mr. Sessions. Without objection.
Mr. Biggs. Thank you very much. And with that, thank you
for letting me be here today.
Mr. Sessions. Does the gentleman seek additional time?
Mr. Biggs. Mr. Chairman, I could probably go all day on
this. I have got a whole truckload of questions, but I think I
will submit them in writing to Mr. Bagdoyan and Mr. Mayo. And
then, I will share with the Committee the responses.
Mr. Sessions. We respect that and appreciate your line of
questioning. The gentleman yields back his time. The
distinguished gentlewoman from the District of Columbia, Ms.
Norton, is recognized.
Ms. Norton. Thank you, Mr. Chairman. For over three
decades, GAO has maintained a High Risk List to identify
critical government programs and services most vulnerable to
waste, fraud, and abuse, or most in need of transformation. GAO
added financial management at the Department of Defense to that
list in 1995, and it has remained on it ever since.
I have grave concerns that the chaos we are seeing at the
Pentagon under the Trump Administration is threatening the
progress we have made toward a clean audit. Secretary Hegseth
has proven, time and again, that he cannot be trusted to lead
the Department or with any national security. The Trump
Administration has also purged independent expert and
nonpartisan leaders at DoD, including the Inspector General.
President Trump and the Department of Government Efficiency are
also decimating the Federal workforce which serves and protects
Americans, and DoD is not exempt from this purge. Secretary
Hegseth has announced plans to reduce DoD civilian personnel by
five to eight percent, which will result in tens of thousands
of jobs being cut from the Department.
Mr. Mayo, would you agree that having adequate staffing is
important for carrying out your office's important work?
Mr. Mayo. Yes, ma'am, I would agree with that.
Ms. Norton. Mr. Mayo, have you had any staffers accept the
deferred resignation plan that the Administration offered?
Mr. Mayo. Yes, ma'am. We did have some people that left.
Ms. Norton. Mr. Bagdoyan, has DoD speed and responsiveness
improved in recent months?
Mr. Bagdoyan. Speed and responsiveness to recommendations,
for example? I am not sure if I understand your question fully.
Apologies. Like DoD responding to GAO requests? Yes, we have
seen some improvement in that regard. Things are still delayed,
but they were delayed over the 5 or 6 years of our auditing, so
it has been a pervasive problem.
Ms. Norton. DoD's high risk challenges, especially related
to financial management, are pervasive, complex, and
intertwined. The Department needs skilled and committed public
servants to effectively address those challenges. In hearing
this Committee held last fall on this topic, GAO testified
about the importance of the, quote, ``tone at the top,'' close
quote, in reducing fraud.
Mr. Bagdoyan, what does GAO mean by ``tone at the top'' and
what is important to financial management at DoD?
Mr. Bagdoyan. Yes. ``Tone at the top'' comes from the top
leader, in this case it would be the Secretary of Defense, to
make fraud risk management, financial auditability one of his
top priorities, and make sure that his subordinates realize
that that is a top priority. And then working from that top
level to start instilling a culture of fraud risk management
and auditability, among other priorities, of course.
But, as I mentioned to Mr. Mfume previously, unless it
comes from the very top it is not going to happen.
Ms. Norton. I hope this Department will hear our concerns
and take steps necessary to safeguard taxpayer money and our
national security.
And I yield back.
Mr. Sessions. The gentlewoman yields back her time. The
gentleman from Tennessee, my friend, Mr. Burchett, you are
recognized, sir.
Mr. Burchett. Thank you, Mr. Chair. Mr. Mayo, I share your
enthusiasm. When I look back on my life I did not have anything
like yours. I had two wonderful parents, and they are both in
heaven, and they were the best influence in my life and a lot
of my buddies' lives. But I still, every day I am up here, I
think it is just an incredible gift. More people played pro
baseball than have been in Congress. So, thank you for what you
said, brother.
And I think fraud is just a part of the military heritage,
almost. My daddy was in the Pacific in the Second World War,
and they know they are going to be in the tropics and it is
going to be raining and it is going to be hot, and they had
this old, crappy raingear that did not keep you dry. And it was
just a nightmare, and they never fixed it. They had guns that
did not work correctly, looked like they were made by a
committee in Washington, not by somebody in combat.
You know, and currently we are building aircraft carriers,
and everybody will tell you, it is not going to be my daddy's
war. The Japanese are not going to bomb Pearl Harbor. Six to 8
months later, America's might is not going to roll out across
the Pacific and destroy a very evil enemy. And if you go
onsites like Unusual Whales, you will see the abuse that goes
on by Members of Congress, and it is never going to change.
One of the things that would change is if we eliminate
individual stock trades, but that is not going to happen. We
will come up with a good bipartisan bill. We are working on it,
me and Pramila Jayapal and AOC and Chip Roy and some others,
very bipartisan. But I have no doubt that it will pass--I mean,
there is no inclination it will pass because we do not have the
guts, because this town is as crooked as a dog's leg and it is
part of our heritage. And that disgusts me.
But saying all that--I guess you are my therapist today,
Mr. Mayo--Department of Defense leadership says that you do not
believe there is a significant fraud at DoD. Based on your
work, do you agree with that?
Mr. Mayo. I disagree. Yes, sir. I disagree with that.
Mr. Burchett. You disagree with that. On what basis do you?
Mr. Mayo. Our work shows that there is a lot of, and in my
statement, there was significant procurement fraud across the
panoply of the DoD, overseas. So, we have a problem.
Mr. Burchett. Yes. I think part of the problem is we have
got a lot of war pimps at the Pentagon, and they are not the
ones going to go be dying. It is going to be people like my
little girl and some of the kids in this audience that are
going to die in some of these worthless wars we are in.
How much do you think the Department of Defense loses every
year to fraud?
Mr. Mayo. I could not say, sir. I could probably ask people
smarter than me in my staff, but I can get back to you on that.
Mr. Burchett. See, that is part of the problem. They send
you two guys in here, and I suspect you all are pretty honest
guys. And you cannot answer the dadgum questions, and to me
that just shows an inherent arrogance that we have at the
Pentagon. And they have not passed eight audits. They have not
even attempted to finish the dadgum audits. And yet, they come
up here and we give them more money. Again, our greed. Old men
make decisions and young men are going to die.
What fraud practice in the Department of Defense are
especially vulnerable to? If either one of you all want to take
a shot at that, it would be all right.
Mr. Mayo. Procurement fraud is especially the one that we
see the most of, and we target the most, because that is the
big dollar projects. So, that would be my answer to that.
Mr. Burchett. It just seems like we are letting these
people steal from us, and I just do not think that will ever
stop. I can remember in a meeting one time they started
pointing out--on an aircraft carrier, which we know are
antiquated. We are not going to need them in the future. All
the people tell us, that are in the know, tell us we are not
going to need them. You are going to have half a trillion
dollars' worth of apparatus sitting on the deck and some
uneducated country is going to send a $100,000 missile and sink
it all. And you can put a million dollars' worth of drones up
in the air and knock down a half a trillion dollar jet. And yet
we are continuing down that path.
And part of the problem is, as they did in the meeting,
they started pointing out in people's district what apparatus
was made in their district. And even though we are going to
mothball this stuff, we are going to put it on a shelf, people
are going to go without in this country, yet the war pimps
still tend to profit, and we allow it. I just do not think it
is ever going to change.
I think people up here are sincere. I would say our
Chairman and Ranking Member Mfume are some of the most honest,
honorable people I have ever served with. But I think this is
the type of committee, they just pat us on the head and tell
us, ``Oh, you are doing a great job,'' and then the corruption
continues. And it is both dadgum parties, and we ought to be
ashamed of ourselves.
Thank you, Mr. Chairman.
Mr. Sessions. The gentleman yields back his time. I would
like to see if I could try and begin to answer one of the
questions that is in testimony. From 2017 to 2024, DoD reported
$10.8 billion in confirmed fraud. The reason why they do not
know that exact number is because DoD fails to even put the
hooks in place to discover more, and we do not have enough
people on the front line stopping it. But $10.8 billion is very
significant. I appreciate the gentleman's, not only line of
questioning, but holding accountable the significant amount of
that.
Mr. Burchett. Mr. Chairman, we just do not have the guts to
do anything about it. We are going to sit up here and make
platitudes--not you all, but other Members of Congress will--
and then they will walk out and wink and nod to the K Street
lobbyists who profit from this.
So, thank you, Mr. Chairman.
Mr. Sessions. I thank the gentleman very much. The
distinguished gentleman from Florida, Mr. Frost, you are
recognized.
Mr. Frost. Thank you so much, Mr. Chairman, and I agree
with the comments we just heard from my colleague,
Representative Burchett. And hopefully, as years go on and more
people come to the institution, we actually get the guts to
deal with this waste, fraud, and abuse in the DoD and with our
military contractors that, yes, are stealing from us.
And I think it is despicable that so much of our taxpayer
money goes to these companies. And yet I will tell you one
place I was last week. I was on the picket line with the UAW in
my district in front of Lockheed Martin, because they are not
paying the assembly line workers and the people creating all
this stuff enough money to be able to pay their damn rent in
Orlando.
Mr. Mayo, but before we can even talk about having the
courage at some time and place we are unsure of, we have got to
talk about what is going on right now. Mr. Mayo, this past week
the Pentagon announced that DOGE had been authorized to review
most unclassified Pentagon contracts to root out inefficiency.
Is DOGE answering to you or the DoD IG in this effort?
Mr. Mayo. We have not talked to DOGE at all.
Mr. Frost. You have not spoken with DOGE, at all.
Mr. Mayo. No. They have not----
Mr. Frost. When was your office consulted about DOGE input
into the contract review process?
Mr. Mayo. I cannot answer that, sir. I do not know.
Mr. Frost. You do not know. Because, to me, you know, if
your job is to find waste, fraud, and abuse, and then you have
DOGE, which is supposedly supposed to be looking for waste,
fraud, and abuse, would you agree that the only efficient way
to go about that would be to work together?
Mr. Mayo. Yes, sir, perhaps.
Mr. Frost. In the contract review process run by the DoD
IG, how would you typically prevent political interference?
Mr. Mayo. Please restate that.
Mr. Frost. In the contract review process that the IG's
office runs in DoD, how do you typically go about preventing
political interference?
Mr. Mayo. I have no answer for that because that is not
part of what we do. But I can certainly get back to you on that
and get some answers.
Mr. Frost. So, do you have any idea of how your office is
ensuring that DOGE has the strongest controls possible to
prevent this kind of abuse that we are talking about?
Mr. Mayo. Well, I do not know, because DOGE has not come to
the OIG at this point. We have not seen anybody from DOGE.
Mr. Frost. Yes. I mean, under DOGE it feels like efficiency
and anti-fraud have been actively defunded, deregulated,
dismantled, and disregarded. And this is part of the problem,
is we can sit up here and talk about working in a bipartisan
way all we want, and I think that is really important. In fact,
the Chair of the Committee, Comer, said during his comments,
quote, ``DoD is the poster child for waste, fraud, and abuse,''
but voted yes on a budget that would give the Department of
Defense more money than they have ever had, over a trillion
dollars.
And then, on the other hand, they talk about waste, fraud,
and abuse in food assistance, in Medicaid, and slash that to
the tunes of hundreds of billions of dollars. That means they
are taking more of an aggressive approach on working families
and people who depend on some of these services for their
health care and to feed their children than they will with the
military contractors. That is why, and Burchett is being really
nice about it, but that is part of the reason why we are not
going to handle this. We can sit up here and talk to you all
day. The fact of the matter is right in front of us. The
Majority is moving through a budget that would give the
Department of Defense the most money they have ever had while
they are, quote/unquote, ``the poster child for waste, fraud,
and abuse.''
Americans need to know which Pentagon dollars are going to
servicemembers and national defense and which are lining the
pockets of unethical contractors, over 50 percent of the DoD
budget.
According to the recent GAO testimony before this
Committee, the DoD thinks there is very little fraud in their
procurement. Mr. Bagdoyan, do you agree with the DoD's
assessment?
Mr. Bagdoyan. I do not.
Mr. Frost. And Mr. Mayo, do you agree with the DoD's
assessment, that there is little fraud?
Mr. Mayo. I do not.
Mr. Frost. From where you sit, have the DOGE staff firings
and reduction of resources from the IG's office to other
offices, has this helped you investigate fraud cases?
Mr. Mayo. No.
Mr. Frost. Does it hurt?
Mr. Mayo. I think we are doing the same thing we have
always done.
Mr. Frost. So----
Mr. Mayo. Which, we continue to just run cases, run
investigations like we have done. And we just do what we are
supposed to do. And I do not think it has impacted us as an
investigative agency.
Mr. Frost. All right. Thank you. I have been watching the
limited progress toward getting DoD to be able to pass a
financial audit. The Marine Corps recently explained that the
personnel cuts will likely erase the progress they have made,
when last year they become the first of our service branches to
be able to pass a financial audit.
I do not know what the path we are on is right now. I think
it is hurting these efforts. But my hope is that we will be
able to take this seriously moving ahead and not just put in
our sights food assistance and Medicaid, when it comes to
cutting budgets, because of perceived waste, fraud, and abuse.
But look at the biggest ledger item that we have, and the
poster child of waste, fraud, and abuse, as said by our
Chairman of the full Committee, the Department of Defense.
Thank you. I yield back.
Mr. Sessions. The gentleman yields back his time. Thank you
very much. The distinguished young Chairman, who sits on this
Committee and who has distinguished service to the U.S.
Congress, Ms. Foxx, is recognized. Dr. Fox is recognized.
Ms. Foxx. Thank you, Mr. Chairman, for your distinguished
service.
My question is for both of our witnesses. I will start with
Mr. Bagdoyan. You can answer first.
We can all agree we must hold bad actors accountable for
poor performance and fraud. Federal agencies, including DoD,
may suspend or disbar contractors for sustained poor
performance or serious lack of business honesty or integrity.
Suspended or debarred entities are prohibited from entering
into new contracts with Federal agencies, with suspensions
lasting no more than 12 months, and debarments usually lasting
3 years.
According to an industry study, there has been a
significant decline in suspensions and debarments in recent
years. Do you believe that instances of contractor poor
performance and dishonesty are actually declining or are they
being reported less often?
Mr. Bagdoyan. That is a good question. I am glad you asked
it, Dr. Foxx. I will have to get back to you on this. This is
beyond my area of expertise, but we do have people at GAO who
may be able to provide an answer for you.
Ms. Foxx. I do want an answer.
Mr. Bagdoyan. Absolutely.
Ms. Foxx. Mr. Mayo, do you have anything to add to that?
Mr. Mayo. It has not impacted us, but I think you are
probably correct.
Ms. Foxx. OK. Mr. Bagdoyan, a GAO report from early 2024
notes that data analytics can help inform fraud risk management
and are a significant tool for helping agencies transition from
a costly pay-and-chase model to an approach that is more
focused on fraud prevention. While the DoD's fraud risk
management strategy refers generally to data analytics it is
not established as a specific fraud risk management control
activity.
In your opinion, is this a missed opportunity for the
Department to root out fraud, and what benefits and cost
savings could be achieved if DoD made greater use of data
analytics?
Mr. Bagdoyan. Sure. Thank you again for your question. It
is a very good question. It is a timely one. As I mentioned
earlier, in response to another Member's question, we do expect
an updated anti-fraud strategy later next month, and it is our
understanding that DoD will make data analytics an explicit
requirement in that strategy. Of course, that remains to be
seen. We will give it a very good scrub to make sure that
whatever DoD is proposing to do is responsive to our
recommendation.
But the key point is, if they implement the recommendation
on paper, they send me something over to look and review, that
is the start. Then they have to go operationalize that and
achieve results. So, having a requirement for data analytics is
not the end of the story.
Ms. Foxx. I understand that. What do you think is the
biggest obstacle for DoD identifying cases of fraud or abuse
before they occur? Is that lack of having analytics?
Mr. Bagdoyan. That is a significant part of it. Also, it is
the commitment to look. If you do not acknowledge you have
fraud then you are not really going to bother to have controls
in place to figure it out.
Ms. Foxx. Are you aware of other Federal agencies doing a
good job fighting procurement fraud, and if you do, what
lessons can we learn from those examples?
Mr. Bagdoyan. Sure. Unfortunately, I have been doing fraud
risk management work for about 11 years now at GAO, and many
agencies--big, intermediate, and small--struggle with this. But
one of the ones that we have pointed out as being a success
story is the Export-Import Bank of the United States. They
started a ``tone at the top,'' made it a priority, and then
took all the steps necessary to implement fraud risk management
capacity. We are in the process of starting a mandated review
of where they are, and we should be reporting on that sometime
next year. So, we will go back and make sure that what they did
put in place remains effective.
Ms. Foxx. Thank you. Mr. Chairman, I think what Mr.
Bagdoyan, especially, has pointed out is that there has to be
the willingness to look for fraud, first of all, and there is a
need, I think, for us, as an oversight committee, to stay on
top of this issue, and to push for that.
You know, it is really, really sad that so many people who
work for the Federal Government do not understand that it is
the hardworking taxpayers who provide the funds for these
programs, and that all of us deserve them to have that attitude
where they want to save every penny. I have that attitude. The
people in my office have that attitude. And some way or
another, we have to infuse the entire Federal Government with
that attitude.
Thank you for your indulgence, Mr. Chairman.
Mr. Sessions. The gentlewoman yields back. To clarify a
little bit of what you have spoken about, which I think is on
point, and that was yesterday when I met with both these
gentlemen, separately, I asked the question that was asked by
Mr. Randall, and that essentially was, ``Do you believe that
there is a problem?'' And both of these gentlemen virtually
leapt out of their chair in violent agreement that there is a
problem. And we came to a quick resolution. I knew where they
stood.
Thank you very much. We next would move to the gentlewoman
from Washington. Ms. Randall, you are recognized.
Ms. Randall. Thank you so much, Chairman. And, you know, I
am so grateful for our witnesses for being here, and I just
want to start with additional grounding and gratitude for my
constituents, nearly 27,000 of whom are Federal employees,
working for the DoD, who each individually do want to deliver
the best results possible, know they are using taxpayer
dollars, and are fighting to deliver for the mission, often
with parts that they are responsible for piecemealing together,
using old equipment, scrapping naval vessels in order to use
every piece possible to deliver results for the mission.
So, I do believe that we have work to do to ensure that the
Department of Defense is accountable and is able to pass an
audit, because that is important. That is our oversight
responsibility. But we have to make sure that the folks on the
ground, doing the work, delivering these results for mission
readiness, have all of the resources that they need in order to
meet the mission.
Naval Base Kitsap and Puget Sound Naval Shipyard are two of
the installations in my district, and I recently met with the
superintendents at these military installations. They have
voiced some important reasonable steps that we should implement
in order to root out fraud and improve procurement and
contracting and operations. But there are steps that should be
done, not with a chainsaw but with a tactical approach, that we
are not currently seeing with the DOGE efforts, to slash a
budget and infuse additional dollars into the Department of
Defense without real thought to how we deliver on these
mission-critical efforts.
Mr. Bagdoyan, can you discuss instances of counterfeit or
substandard equipment that may have compromised the safety of
our service members?
Mr. Bagdoyan. Sure. Thank you for your question. I will
refer back to the example that I cited in my opening remarks.
This occurred about 15 years ago. It took a couple of years to
investigate, given the complexity of the scheme. But
essentially it involved two shell companies, co-owned by a
company in India. The shell companies obtained exported plans
and schematics of military equipment, in this case jet
fighters. And the wing part for the F-15 fighter aircraft--that
is the type of plane involved here--was defective because it
was not conforming to what the contract required. So, whether
it was poor workmanship or some other factor contributing to
that, but it did result in the grounding of 47 aircraft over a
period of time. And it involved not a lot of cost, $180,000 if
I recall correctly. But I would be happy to look into some more
details and send them over to you if you would like.
Ms. Randall. Sure. Thank you. I would appreciate reviewing
that. I also want to bring up another example. In August 2024,
Austal USA, a shipbuilder for the Navy, pleaded guilty to a
scheme involving faulty butterfly valves used in ships. And
Austal charged the Navy for military-grade valves but failed to
actually test the valves to make sure that they reached the
proper safety and operational standards. These faulty valves
could potentially lead to leaks in a ship's hull, and Austal's
actions put the individuals of our military at grave risk. And
these we are talking about are two examples, and I am sure they
are not the only two.
Mr. Mayo, what proactive measures does your office take? I
know you have referenced how your office is not responsible for
creating, sort of, fraud detection policies or procedures. That
is not your work. Your job is to investigate claims. But have
you made any proactive recommendations to DoD for ways that
they might address fraudulent criminal activities by
contractors or vendors?
Mr. Mayo. I have not talked to DoD, but I really appreciate
you asking that question because I have a good answer.
In 2017--I came on board in 2016--in 2017, I saw the need
for data analytics, and in the succeeding years we now have an
organic data analysis that we utilize. It is not predictive of
crime, but it has tools that we can help with our
investigations. And that is organic to DCIS. So, I wanted to
highlight that for the people here.
So, we do have that capability, and we have some very, very
smart people that do these things. And the OIG has their
capacity also, and they work with us seamlessly to deal with
these types of criminal investigations.
Ms. Randall. Thank you, Mr. Chairman. I yield back my time.
Mr. Sessions. The gentlewoman yields back her time. Thank
you so much for the line of questioning. It is most
constructive for people who also are in the room who have the
same expectation that you do, corresponding with Mr. Mfume and
myself.
We next go to the distinguished gentleman from Denton,
Texas. The gentleman, Mr. Gill, is recognized.
Mr. Gill. Thank you, Mr. Chairman, and thank you for
holding this hearing. And I would also like to say thank you to
the witnesses for taking the time and coming here.
Mr. Bagdoyan, I want to start with you. A recent report by
the GAO found that for fiscal years 2017 through 2024, DoD
reported about $10.8 billion in confirmed fraud. The report
went on to say, quote, ``The full extent of fraud affecting DoD
is not known but is potentially significant.''
Do you have a monetary estimate of the fraud that takes
place annually within the DoD, perhaps beyond that number?
Mr. Bagdoyan. I do not, and actually, the figure you quoted
is for all fraud around DoD, not just procurement. The
recovered amount, that is about $7 billion over a number of
years, is for procurement. So, those are two different sets of
numbers. Plus, for the confirmed fraud, we did notice, and I
believe the IG may have flagged this, as well, that DoD
reported the same figure, $2.4 billion, for two consecutive
fiscal years. So, that raises some questions about the
reliability of what has been reported. I believe in the past
the OIG has questioned the process of arriving at those types
of numbers.
So, I would urge some caution in using those numbers, but
they do represent what is basically known through adjudication.
So, they have to be detected first, investigated, then
adjudicated. So, we have no idea what is being missed.
Mr. Gill. If you were to guess, would you guess that total
fraud at the DoD is higher than that number?
Mr. Bagdoyan. I would suspect it is, yes.
Mr. Gill. And how many open recommendations issued by the
GAO are there that would improve financial management within
the DoD?
Mr. Bagdoyan. For financial management, I will have to get
back to you. On fraud risk management, based on the three
reports that I have responsible over the last 6 years or so, we
still have 13 open recommendations. We are expecting responses
from DoD, as I mentioned before, throughout June and into next
month. We just sent over the list of priority recommendations
to the Secretary of Defense, Mr. Hegseth, for his personal
attention. So, that letter will be made public early next week.
Mr. Gill. But either way it is a substantial number.
Mr. Bagdoyan. It is a substantial number. The risks are
immediate, so delaying implementation exacerbates that risk.
Mr. Gill. Why do you think they have delayed
implementation, and how long should it take for the DoD to
implement some of the recommendations that have been given to
them?
Mr. Bagdoyan. Yes. To be fair it does take time to do this
and to do it right. But we have encountered pretty significant
delays, I think, over time that may reflect lack of attention,
lack of urgency, lack of priority. That is speculative on my
part, but it is consistent with what we have encountered with
other agencies.
Mr. Gill. Got it. Thank you. And Mr. Mayo, a couple of
questions for you. The DoD Inspector General has identified 17
scope-limiting weaknesses that are significant roadblocks to
the DoD's clean audit opinion goal. What steps do you think the
DoD can take, or needs to take, to obtain a clean audit by
2028?
Mr. Mayo. Sir, that is a great question and really outside
my expertise. I can go back to the audit component and get some
data for you and get back to you on that.
Mr. Gill. Got it. OK. Thank you. And with that, Mr.
Chairman, I will yield back the remainder of my time.
Mr. Sessions. The gentleman yields back his time.
I would like to, if I can, answer one of the questions that
the distinguished gentleman asked, because we have two
witnesses who are trying to professionally represent not only
themselves but their departments, GAO and the IGs.
The bottom line is, is that there is plenty of
documentation that shows that DoD, at least over a period of
several years, said, ``It is not a problem. The things you
bring to us, it is not a problem. We are not going to even take
this conversation further.'' So, that is the conversation that
both of these gentlemen are operating under. And the hope is
now, with a new Administration, a new Secretary, that there
will be an emphasis not only on attempting to do something but
be willing to opening up their eyes to the recommendations that
have come from professional groups like GAO and Inspectors
General.
So, it is not a matter of them wanting to do or not do.
They deny its existence. And this is the part, why both of
these gentlemen literally came out of their chairs yesterday,
in my office, when we posed this issue.
So, I want you to know that your line of questioning is
most instructive. They also were trying to be very polite back
to you. So, that is in defense of these young men.
Thank you very much. The gentleman yields back his time. We
now move to the distinguished gentleman, the young Chairman
from Alabama, Mr. Palmer. You are recognized, sir.
Mr. Palmer. Thank you, Mr. Chairman. I am going to direct
my questions a little bit differently, and I wanted to
participate in this hearing because I have been looking at some
of these issues for quite a while. And I realize this is
focused predominantly on fraud risk management.
But one of the things that I think creates an opportunity
for fraud mismanagement is how we handle big projects at the
Department of Defense, whether it is a construction project or
a new weapon system. And I just want to ask each of you to
comment on this if you think you are able to do that.
I think a lot of times when Congress approves a major
weapon system or a major construction project, and this is
particularly problematic on construction projects overseas,
there is a tendency on the part of the Department of Defense to
start those projects before the design is complete, and it
results in a huge amount of change orders. I am working on some
ideas on how to mitigate that from the congressional side in
terms of ensuring that the money will be there so that they do
not feel the pressure to start these construction projects or
other projects or weapon systems before the design is ready.
But would you comment on how that, when your design is not
complete, you are issuing lots of change orders, how that opens
us up to mismanagement and potential fraud?
Mr. Mayo. Me, sir?
Mr. Palmer. Yes.
Mr. Mayo. I would not be able to discuss that, but in a
different sphere I would submit that what you are talking
about, large procurements of weapon systems, they are really
hybrids for fraud, because of, like you said, the complex
nature, and when they come online, when the parts come online.
So, we do have a lot of worry about large weapon systems, and
we have a lot of fraud work in the past and now in those kinds
of things, when they are in that phase. So, that would be my
feedback for you.
Mr. Palmer. Mr. Bagdoyan?
Mr. Bagdoyan. Yes, I would fully agree with Mr. Mayo's
comments. I mean, this is an element of hyper-complexity,
basically. You have a big system. It has the prime contractor,
I assume, leading the effort, and then the whole army of
subcontractors, which is a key element of risk here. I am not a
procurement expert by any means, but I do believe that element
of complexity, uncertainty, long lead times, all kinds of
different things add to heightened risk. Definitely.
Mr. Palmer. And when you add to that just a myriad of
change orders----
Mr. Bagdoyan. That is right.
Mr. Palmer [continuing]. Which I think is problematic. And
then when you start talking about construction projects, and
particularly in remote locations, I think it makes it very
difficult for inventory management. And again, if the design is
not complete and you are making all these changes, isn't that
an area where we need to really bear down?
And Mr. Chairman, I have been giving quite a bit of thought
to this, and I have actually been thinking about this for 6 or
8 years, about how we appropriate for major defense programs,
and maybe thinking about saying that if the project design or
the weapon system design is not ready that we carry the funding
over into the next fiscal year, so that we give the Department
of Defense time to get the design right. And I think that will
reduce a lot of the fraud and mismanagement and save us a lot
of money in those areas.
And Mr. Mayo and Mr. Bagdoyan, you can comment on that, and
you may have already commented sufficiently. But that is one of
the areas where I really want to focus, Mr. Chairman, in terms
of trying to reduce the amount of waste that we have in our
defense procurement programs.
And with that, I will be happy to yield back.
Mr. Bagdoyan. If I may answer Mr. Palmer's question, Mr.
Chairman, each element of complexity in a program, as I alluded
to in my opening remarks, that is one of the key drivers of
fraud risk in Federal programs is their complex configuration,
what someone can do, cannot do, and so on. So, it is almost
like risk is built in. And if you add multiple layers in a big,
complex program of DoD, then that really exacerbates risk. So,
trying to control for that as part of the up-front due
diligence, for example, would be an important step.
Mr. Palmer. I thank the witnesses. Thank you, Mr. Chairman.
Mr. Sessions. The gentleman yields back his time. Thank you
very much. I now would yield myself time.
Gentlemen, thank you very much. This time that we are
spending with you is just one of many areas where this
Subcommittee, including Mr. Mfume and myself, are concerned
about not just waste, fraud, and abuse, but also misdirected
payments. And we have looked at and determined that it is a
governmentwide problem. And while there is discussion
necessarily up here that could be a disagreement between the
parties, something called DOGE, which is government efficiency,
is a necessary item whereby we bring in fresh eyes to look at,
actually, the data and information that most of the time,
Congress, and perhaps even you, do not see. And that is an
observation about the amount of money that flies out the door.
One of the most instructive things that I have learned is
that there is approximately, at this time, documented, some
$400 billion that went out from big government--we are talking
about all the agencies, some $400 billion--that went out the
door from the day after the election to the day that President
Trump was inaugurated. And it was a determination made by
someone to move forward on decisions to spend money, knowing
that there needed to be a review, knowing that waste, fraud,
and abuse not only existed across government but that it
increasingly was an issue that they were challenged with.
So, regardless of that, I think it is important that you
have confidence that Mr. Mfume and I, not looking back to blame
someone but rather moving forward, we want to hear from FEMA,
we want to hear from DoD, we want hear from the newest of the
secretaries and those management organizations, what are their
plans? How do they intend to structure now, based upon
information that I think DOGE has provided, that have become
public, that are not hidden, that are not whispered about, but
that become generally available.
And so, I want you to know that both organizations--
Inspectors General, Mr. Mayo; Mr. Bagdoyan, the GAO--that you
represent organizations that we will continue, on a bipartisan
basis, both of us, to look at, and instead of looking back we
will have the vision to how are we going to fix it.
You both have specialized in DoD. You have heard person
after person this morning to describe to you our desire to
engage the Department of Defense at the highest level--not
levels, level--and to extract from that person, once they are
able to understand, not just from DOGE but also your
accounting, of the significant impairment of a delivery of
dollars and material and equipment that would be available to
the warfighter. And I just want you to know that the
conversation today, as you go back home tonight or as you have
the conversation among your colleagues, is it is a bipartisan
issue. It is seen very many times the same way. And it should
reinvigorate your organizations to know that the day-to-day job
that they do, when they are told by some organization it did
not matter, we are noncompliant, we do not care, that they
still do their job, that they still write the reports, that
they still point up those things that are factual basis, that
they continue to be on point for understanding that while they
may not be in DoD, we support the men and women that defend
this Nation. That they are people who are professional and well
balanced, and that Members of Congress that are here will be
supportive of them and not give up that hunt.
So, to both of you and your staffs that appeared in my
office yesterday and the hundreds of people that work for you,
please reinforce to them that they are part of the answer, not
the denial of a problem.
I want to thank both of you for being here. I am now going
to move to the distinguished gentleman from Maryland for any
closing comments that he would like to make, and then I will do
the same. The gentleman is recognized.
Mr. Mfume. Thank you again, Mr. Chairman, and my thanks,
obviously, to both of our witnesses for being here and for
being as forthcoming as you could be.
I think one of the things, for me at least, is common
sense, which is not always common, as we know in life. And it
just would appear to me that with these ongoing failures to
meet an audit, with huge fraud being publicized, as it was just
recently in the Raytheon case, where they agreed to pay $950
million, not because of an error but because they got caught.
And when you consider also the fact that this conversation
predates many of us on this panel. It just goes back years and
years and years. And when you consider the fact that all
branches of the service, save the Marine Corps, continue to
find ways not to be compliant with basic law. And when you hear
GAO report, as it has done today and has done previously, about
all these things that are going on, common sense tells me that
it is important for the Secretary of Defense to speak with a
clear tongue and a clear idea of what has to be done down the
ranks. That is where the order has to come from.
We know that with respect to the Marine Corps, it was
testified here in previous meetings that the Commandant said,
``Look, we are going to do it this way. It is the right way.
And anybody that does not do it that way is out of here.'' I
think we need the same kind of determination and the same kind
of commitment from, as the Chairman said, the top level, which
is Secretary Hegseth.
And I would hope that he would come before this Committee
and be prepared to talk about what we have been talking about
now for years, that he has inherited this, and what he plans to
do about it.
I am glad to hear about the Export-Import Bank. I did not
know that they had kind of established a pattern that could, in
fact, be something that could be looked at by other parts of
DoD and other agencies. But we have got to find a way to ask
ourselves why does the Department of Defense, for years,
continue to be on the High Risk List? People come in and they
go. Secretaries die. They move on. And this is an
embarrassment. It is an embarrassment, and it is thumbing the
nose of the government right at taxpayers. Our taxpayers really
want to expect that if we are going to be, as we say,
efficient, that we are doing something in a real way to be
efficient.
I mean, DOGE, with all due respect, was this Committee.
This is what we have been dealing with for years and years and
years, until all of a sudden there was a new entity, DOGE, that
claims to be doing exactly that. We have got the playbook. We
have got the information. We have got the data. We have got the
research. We have got the examples. So, this is sort of like
reinventing the wheel for no necessary purpose, and at the same
time not being able to deal with the real question of, in this
current spending resolution before the Congress, we are
prepared to be voting on a package that includes $892 billion
for the Pentagon. Which is why I have opposed that spending
package altogether, because you cannot do that and at the same
time cut money, in my opinion, from Medicare, and say you have
to cut it, when you really do not have to. What you need to do
is tighten your belt and find moneys elsewhere, like within
this budget that we continue to see, talked about over and over
and over again. As I said before, the budget is so large, just
a 1 percent error is the equivalent of $9 billion. We should
not take that lightly.
And, you know, I am going to say it again, Mr. Chairman. I
swear I am tired of saying this over and over again. And like
you are, and I really appreciate your efforts here. We want to
see progress, and if we do not see progress, I think we have
got to go before the full Congress and to argue and to
forcefully debate and to make the case that no action is not
sufficient.
So, we heard the stories today, and we know that in many
respects people are wondering how are you going to cut this,
you are going to cut SNAP assistance for children and women.
You are going to reduce Medicaid, Medicare. You are going to
threaten, even though it has not been said yet, to make Social
Security unstable. Just the thought of it being unstable causes
problems. And then look at what is happening in the bond
markets and what is going on with investors in other countries
around the globe, as they look at our credit worthiness and
whether or not we, in fact, mean what we say.
So, I am going to get off of my little soapbox. I just can
tell you that this is bad. There is no justification for this,
whatsoever.
Thank you, Mr. Chairman. I yield back.
Mr. Sessions. The gentleman yields back his time, and I
want to publicly, once again, thank the distinguished gentleman
for not only working us and with me, but for your insistence
that we can make progress. And I think that it is important
that the GAO community and the IG community, as well as these
organizations in government--yes, I am talking about Article
II--that they understand that there are several people on the
Hill who will not kick the can down the road, that we will
decide that a mark has been laid in the road. Because it is
important that the American people have confidence in what we
are doing, because we expect results.
So, I want to thank the distinguished gentleman. I want to
thank both of you. I did this in my comments, but I want to
thank both of you for taking time. I find you both not only
genuine men of honesty but of representation of professional
product. And both of you took my questions yesterday, and have
taken them today, that we believe must be resolved. And so, for
your staff and for the people that you represent, we are very
proud of the work that you are doing.
And I see no further questions from the Subcommittee. We
will now conclude this hearing. And I want to thank each of you
very much.
This concludes the hearing of the Subcommittee on
Government Reform and Oversight for Federal Government
Operations and the Workforce [sic].
[Whereupon, at 11:50 a.m., the Subcommittee was adjourned.]
[all]