[Congressional Record Volume 157, Number 80 (Monday, June 6, 2011)]
[Senate]
[Pages S3478-S3481]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
GOVERNMENT WATCHDOGS
Mr. GRASSLEY. Mr. President, when it comes to doing oversight, I
think I have a reputation of doing just as vigorous oversight when we
have Republican Presidents as when we have Democratic Presidents, and
what I am speaking to the Senate about today has no partisanship in it
because I could have said the same thing--and did say it--when there
was a President Bush or a President Clinton or a President Reagan.
I speak today about watchdogging the watchdogs, as I have done many
times in the past. I first started watchdogging the Pentagon back in
the early 1980s when President Reagan was ramping up defense spending.
Then a group of Defense reformers were examining the pricing of spare
parts of the Defense Department, and we uncovered some real horror
stories, such as $750 toilet seats and $695 ashtrays, all going into
military aircraft. That is ridiculous, of course.
As news reports of these horror stories were hitting the streets,
Offices of Inspectors General--OIGs--were sprouting up in every Federal
agency as a result of a recently passed act of Congress in 1978. The
Defense Department OIG officially opened for business March 20, 1983.
Today, thanks to the Inspector General Act of 1978, and the taxpayers,
we now have a real army of watchdogs. The question is, To what extent
are they doing their business?
This mushrooming IG bureaucracy is very expensive. It costs over $2
billion a year. But it now occupies a pivotal oversight position within
our government, with a very important role to play.
As a Senator dedicated to watchdogging the taxpayers' precious money,
I look to the IGs for help. That is because I just don't have the
resources in my own office to investigate every allegation that might
come my way. Like other Members of Congress, I regularly tap into this
vast reservoir of talent called the inspector general. We count on
them. We put our faith and trust in their independence and honesty. We
rely on them to root out and deter fraud and waste in government
wherever that waste and fraud rears its ugly head.
If--and that is a big ``if''--the IGs are on the ball, then the
taxpayers aren't supposed to worry about things such as $750 toilet
seats. But I underscore the word ``if'' because fraud and waste are
still alive and well in government.
One could legitimately ask: How can this be? We created a huge army
of watchdogs. Yet fraud and waste still exist unchecked.
So I keep asking myself the same question that one might ask: Who is
watchdogging the watchdogs?
True, there is an IG watchdog agency called the Council of Inspectors
General on Integrity and Efficiency. But that is just another toothless
wonder. So the Senator from Iowa has the duty today. I am here to
present another oversight report on the Pentagon watchdog. I call it a
report card on the fiscal year 2010 audits, issued by the Department of
Defense inspector general.
It assesses progress toward improving audit quality in response to
recommendations that I made on an oversight report that I gave to my
fellow Senators last year. After receiving a series of anonymous
letters from whistleblowers alleging gross mismanagement at the Office
of Inspector General and the audit office within that office, my staff
initiated an in-depth oversight review. My staff focused on audit
reporting by that office, and our work began 2 years ago.
On September 7, 2010, I issued my first oversight review. It
evaluated the 113 audit reports issued for fiscal year 2009. It
determined that the Office of Inspector General audit capabilities,
which cost the taxpayers about $100 million a year, were gravely
impaired.
As a watchdog, degraded audit capabilities give me serious heartburn
for one simple reason. It puts the taxpayers' money in harm's way, and
it leaves huge sums of money vulnerable to threat and waste. Audits are
the inspector general's primary tool for rooting out fraud and waste.
Audits are the tip of an inspector general's spear. A good spear always
needs a finely honed cutting edge. Right now, the point of
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that spear is dull, and so the inspector general's audit weapon is
effectively disabled.
In speaking about my first report on the floor last September 15, I
urged Inspector General Heddell to ``hit the audit reset button'' and
get audits to refocus on the core inspector general mission of
detecting and reporting fraud and waste. My report offered 12 specific
recommendations for getting the audit process back on track and lined
up with the Inspector General Act of 1978.
The response of the Office of Inspector General to my report has been
very positive and very constructive. In a letter to me, dated December
17 last year, Inspector General Heddell promised to ``transform the
Audit organization,'' consistent with recommendations in my report. The
newly appointed deputy IG for auditing, Mr. Dan Blair, produced a
roadmap pointing the way forward. Blair's report, dated December 15,
laid out a plan for improving ``timeliness, focus, and relevance of
audit reports.'' He promised to create a ``world-class oversight
organization providing benefit to the Department, the Congress, and the
taxpayer.''
As part of their response to my report, the audit office also tasked
two independent consulting firms--Qwest Government Services and
Knowledge Consulting Group--to conduct an organizational assessment of
the audit office and its reports. These independent professionals
seemed to reach the very same conclusions I had. The Qwest report,
issued October 2010, put it this way:
We do not believe Audit is selecting the best audits to
detail fraud, waste, and abuse.
The auditors, the Qwest report states, have lost sight of that goal
and ``need to step back and refocus on the IG's core mission.''
That is exactly what I saw last year and what I continue to see
today. However, I wish to be not totally pessimistic. All the signals
coming since my report from the IG's office are encouraging. They tell
me I am on the right track. The key question before us is this: When
will the promised reforms begin to pop up on the radar screen?
The fiscal year 2010 reports examined in my report card were issued
between October 2009 and September 2010. They were set in concrete, so
to speak, long before Mr. Blair's transformation was approved. So the
full impact of those reforms will not begin to surface in published
reports until later this year or in the fiscal year 2011-2012 reports.
However, that is not to say some improvement is not possible any time
now, since discussions regarding the need for audit reform actually
began in June 2009.
As we will soon see, there is no sign of sustained improvement--not
yet today--but a faint glimmer of light can be seen in the distant
horizon. In order to establish a solid baseline for assessing the IG's
transformation efforts, my staff has taken another snapshot of recent
audits. My latest overview report is best characterized as a report
card because that is exactly what it is.
Each of the 113 unclassified audits issued in fiscal year 2010 was
reviewed, evaluated, and graded in five categories as follows: category
No. 1 was relevance; category No. 2, connecting the dots on the money
trail; No. 3, strength and accuracy of recommendations; No. 4, fraud
and waste meter; and No. 5, timeliness. Grades of A to F were awarded
in each category. To average, it was necessary, obviously, to use
numerical grades of 1 to 5 and then convert them to standard A to F
grades.
Scoring was based on answers to key questions such as this: Was the
audit aligned with the core inspector general mission? Did the audit
connect all the dots in the cycle of transactions from contract to
payment? Did the audit verify the scope of alleged fraud and waste
using primary source accounting records? Were the recommendations tough
and appropriate? Lastly, how quickly was the audit completed?
Each report was then given a score called the junkyard dog index.
That is an overall average of the grades awarded in the five evaluation
categories.
For grading timeliness, the following procedure was used: Audits
completed in 6 months or less received a grade of A; those completed in
6 to 9 months, a B; those completed 9 to 12 months, a C; those taking
12 to 15 months, a D; and those that took over 15 months, an F.
After each report was graded individually, all the scores for each
report in each rating category were added and averaged to create a
composite score for all 113 audit reports.
The overall composite score awarded to the 113 reports was D minus.
This is very low, indeed. Admittedly, the grading system used is
subjective. However, as subjective as it may be, my oversight staff has
determined it is a reasonable or rough measure of audit quality. Right
now, overall audit quality is poor.
The low mark is driven by pervasive deficiencies that surfaced in
every report examined--with 15 notable exceptions out of the 113. Those
deficiencies are the same ones pinpointed by the Qwest report
previously referred to. Instead of being hard core, fraud-busting
contract and financial audits, most reports were policy and compliance
reviews having no redeeming value whatsoever. Those are basically the
findings I gave to the inspector general last September, when I
criticized then what they were doing--spending too much time on policy
audits and not enough time on chasing the money--on the waste of the
taxpayers' money.
You have to follow the money if you are to find out where there is
waste, fraud, and abuse--particularly the fraud. So what has been done
in most of these has no redeeming value whatsoever because they did not
pursue fraud-busting contract and financial audits but instead policy
and compliance reviews. Quite simply, the auditors were not on the
money trail 24/7, where they need to be to root out fraud and waste as
mandated by the IG Act.
There is one bright spot, however. The auditors got it right--mostly
right--in 5 reports and partially right in 10 other reports. Clearly,
this is a drop in the bucket, but these 15 reports--which constituted
just 13 percent of the total we reviewed for fiscal year 2010 output--
prove that the audit office is capable of producing quality reports.
The 15 best reports earned grades of good to very good overall, with
excellent grades in several categories. They involved very credible and
commendable audit work. Each one deserves a gold star. While the top
five reports earned overall scores of C-plus to B-minus, those scores
would have been much higher were it not for long completion times. The
average time to complete the top five reports was 21 months. Long
completion times make for stale information and, of course, that makes
the reports irrelevant.
Had they been completed in 6 months, for example, they could have
earned a high B-plus score. Such long completion times clearly show
that doing the nitty-gritty, down-in-the- trenches audit work requires
large audit teams, if--and I want to emphasize ``if''--they are to be
completed in a reasonable length of time.
Right now, there are no specified goals for audit completion times.
They are desperately needed. Then audit teams can be organized with the
right skill sets to meet those goals.
My report includes seven individual report cards--six on the best
reports and one on the worst report. I think the best way for my
colleagues to understand my audit report card is to briefly walk
through two of them--the best and the worst.
The highest grade was awarded to an audit that the Department of
Defense entitled ``Foreign Allowances and Differentials Paid to DOD
Civilian Employees Supporting Overseas Contingency Operations.'' This
report examined the accuracy of $213 million in payments to 11,700 DOD
civilians in fiscal years 2007-2008 for overseas ``danger and
hardship'' allowances.
After reviewing the relevant payment records, the auditors determined
that the Defense Finance and Accounting Service--and I am going to
refer to that as their acronym, DFAS--had made improper payments--
underpayments and overpayments--totaling $57.7 million. The audit
recommended that the DFAS Director ``take appropriate corrective action
to reimburse or recover the improper payments'' and that new policies
and procedures be put in place to preclude erroneous payments in the
future.
This report received an overall grade of B-minus. However, it
received excellent grades--A minuses in three categories: relevance,
connecting the dots on the money trail and fraud and waste meter. But
it earned a B-minus for incomplete recommendations and an F
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for timeliness because it took too long--over 21 months--to complete,
and so it was stale at that point.
The auditors went to the primary source records to verify the exact
amount of erroneous payments. I wish to emphasize to the auditors at
the IG this move is the one reason why this report earned high scores.
Very few audits--just a handful--actually verified dollar amounts using
primary source accounting records. That is why I emphasize so often on
the need to follow the money trail if you are going to find the fraud
and the waste.
In this report, the recommendations were good but did not go far
enough. Recommending recovery or reimbursement of overpayments or
underpayments was worth a B-minus, but responsible officials were not
identified and held accountable for the sloppy accounting work that
produced $57.7 million in erroneous payments.
It is kind of a rule of thumb around this place. If you don't
identify who screwed up and make them feel personally responsible and
send a message to other people, how are you going to bring about
change? Did the audit office follow up to determine whether the DFAS
Director had taken steps to reimburse underpayment or recover
overpayments? The answer is probably no. In fact, nothing has been
done. On February 23, 2011, in response to a question from my office,
DFAS reported that the Department of Defense is still ``developing a
policy'' to fix the problem. Isn't it funny that they have to develop a
policy for what is so obviously wrong? Once that process is completed,
though, DFAS will ``take appropriate corrective action to reimburse and
initiate collection action.''
When auditors make good recommendations, such as here in this audit,
and nothing happens, it is as though they are kind of howling in the
wilderness. That has to be very demoralizing.
At this late hour the probability of correcting these mistakes is
fading fast. For starters, this audit work started over 2 years ago.
Couple that with the fact that it is in connection with payments made
in 2006. That is 5 years ago. With the passage of so much time, this
has become essentially an academic exercise.
That is exactly why reports need to focus on current problems and why
they must be completed promptly. That is exactly why this one, which
took 16 months to complete, earned an F for timeliness, but otherwise
was a pretty good audit.
The rest of the audits examined in my report card--98 in all, or 87
percent, of the total output for fiscal year 2010--were of poor quality
and earned grades of D and F. These are primary examples of the kind of
audits targeted in the Qwest Report previously referred to. That is an
outside report. They had the Department of Defense bring them in to do
so some investigating that is not questionable because they do not have
an interest in what comes out. But these audits were not designed to
detect fraud and waste. That is what the IG ought to be doing,
following the money trail.
It happens they did not document and verify financial transactions.
They were not on the money trail where they needed to be and where
their audit manuals tell auditors to go to detect fraud and waste. They
did not audit what truly needs to be audited. They had little or no
monetary value or impact.
Some were mandated by Congress, including 27 memo-style audits of
stimulus projects. That is from the stimulus act we passed here in
2009. Tiger Teams should have been formed to tackle these audits.
Unfortunately the exact opposite happened. These were the worst of the
worst. They contained no findings of any consequence. They offered few
if any recommendations. Most did not even identify the costs of the
project audited. The taxpayers were deeply concerned about the value of
these so-called shovel-ready jobs that were supposed to be quickly
consummated by the stimulus bill of 2009.
Taxpayers were looking for aggressive oversight. Taxpayers wanted
assurances that huge sums of money were not wasted. Taxpayers got none
of the objectives they sought. Instead of probing audits, the taxpayers
got the equivalent of an inspector general stamp of approval, like a
rubberstamp that reads, ``OK, approved.''
I will now review the worst report. It typifies the ineffectiveness
and wastefulness of the bulk of the fiscal year 2010 audit production.
I remind my colleagues, each one of these reports costs an estimated
$800,000.
The report that received the lowest score is entitled by the auditor
``Defense Contract Management Agency Acquisition Workforce for
Southwest Asia.'' It received an F score in every category, across the
board. The purpose of this report was to determine whether the Defense
Contract Management Agency had adequate manpower to oversee contracts
in southwest Asia. It concluded that the Defense Contract Management
Agency was unable to determine those requirements and there was no plan
for doing so. The report recommended that the Defense Contract
Management Agency ``define acquisition workforce requirements for
southwest Asia.''
This is one of many OIG policy reviews, but this one is unique in
that it took 18 months to review a policy that did not even exist. This
audit should have been terminated early on, but as the Qwest Report
points out, the inspector general's office has no process ``for
stopping audits that are no longer relevant.'' So this is like a
runaway train. What redeeming value did this report offer to the
taxpayers? None that I can see. This is the stuff for a Department of
Defense staff study, or some think tank analysis, not for an
independent officer or inspector general audit.
This audit, like so many others like it, did not focus on fraud and
waste and, not surprisingly, found no fraud or waste.
The Defense Contract Management Agency has a long history of
exercising lax contract oversight. The Office of Inspector General
resources would have been better spent auditing one of the Defense
Contract Management Agency's $1.3 trillion in contracts. Go where the
money is, if you want to find the fraud, follow the money.
The inclusion of individual report cards on the best and worst audits
is meant to be a constructive educational exercise. So I am hoping the
analysis accompanying these report cards will serve as a guide and a
learning tool for auditors and managers alike.
I am hoping the auditors will read my report and use it to sharpen
their skills. I hope it will help guide them on a path to reform and
transformation. If the auditors adopt and follow the simple guidelines
used to gauge the quality of the best or worst reports, they will begin
producing top-quality audits that are fully aligned with the core IG's
mission prescribed by that 1978 law.
Before wrapping up my comments I wish to call the attention of my
colleagues to several very interesting charts presented in the final
section of my report card. They appear in the chapter entitled
``Comparative Performance with Other OIG Audit Offices.'' These two
sets of charts highlight striking contrasts. They show the Department
of Defense auditors are being significantly outperformed by their peers
at three other agencies: the Department of Health and Human Services,
Housing and Urban Development, and Homeland Security--and by very
substantial margins indeed. Their peers may be five times more
productive than they are at the Department of Defense, and able to
produce audits at one-quarter of their costs.
I would offer one caveat of what I said about the other departments'
IGs. While I have reviewed comparisons of cost and productivity data
from all four audit offices, I have not evaluated the quality of the
other reports issued by the other three OIGs, meaning the Department of
Health and Human Services, Department of Homeland Security, and Housing
and Urban Development, as I did the report on quality of the Department
of Defense report card. I believe it is a fair apples-to-apples
comparison. It may not be. I want to say I do not know for sure.
Deputy IG of Auditing Mr. Blair needs to provide a satisfactory
explanation for these apparent disparities. Otherwise he may need to
hit the reset button once again on audit production and costs--as well
as what he has said he is doing now. While Inspector General Heddell
cannot be happy with an overall audit grade of D-minus, I think he
understands the problem and I believe his heart is in the right place
and he has taken the right steps to fix it.
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His apparent commitment to audit reform and Mr. Blair's promise to
create ``a modern, world-class'' auditing oversight organization--those
words happen to be music to my ears. They bode well for the future. In
other words, they bode well for the future where, if these people do
their job and do it right, fraud and waste will be rooted out and
people would fear to commit it in the first place, considering the fact
that people are going to be on their tail and find out about it.
For right now, though, I cannot report that I see sustained
improvement in audit quality--not yet, not by a long shot. But the
signals coming my way are good. I said that at the beginning of my
comments. The ray of hope can be seen on the distant horizon. Maybe we
will see it in the next batch of audits and I will be here to report to
my colleagues what those audits show. I hope I can give every one of
them Bs and As.
The 15 best reports show that the Department of Defense Office of
Inspector General Audit Office is capable of producing quality reports.
That number is obviously a drop in the bucket but these fine reports
could be a solid foundation for building the future. Repeat them 10
times and Mr. Blair could well be on his way to creating that world-
class auditing operation, one that would be capable of detecting--not
only detecting but, because people are going to be so scared of them,
that would be capable of detecting and deterring fraud and waste.
Before those lofty goals can be achieved, Mr. Heddell and Mr. Blair
need to tear down some walls. I call them the top 10 audit roadblocks,
and these roadblocks are these:
No. 1, top management lacks a clear and common vision of and
commitment to the Inspector General's core mission, a problem that
adversely affects every aspect of auditing;
No. 2, most audits are policy-compliant reviews that yield zero
financial benefit to the taxpayers;
No. 3, auditors are not on the money trail 24-7, where they need to
be to detect fraud and waste;
No. 4, auditors consistently fail to verify potential fraud and waste
by connecting all the dots in the cycle of transactions. They need to
match contract requirements with deliveries and payments using primary
source documents. By making these matchups, auditors will be positioned
to address key oversight questions such as: Did the government receive
what it ordered at an agreed-upon price and schedule, or did the
government get ripped off, and if so ripped off by how much money?
Roadblock No. 5, most audits take so long to complete that they are
stale and irrelevant by the time they are published. Reasonable time-
to-complete goals need to be set and the audit team then can be
organized with the right skills, the skill sets to meet these goals.
Roadblock No. 6, until the Department of Defense accounting system is
fixed, complex audits will require large audit teams if reports are to
be completed within a reasonable length of time.
Roadblock No. 7, audit findings and recommendations are usually weak,
responsible officials are rarely held accountable, and waste or stolen
money is rarely recommended for recovery or returning to the Treasury.
Roadblock No. 8, while relentless followup is an important part of
audit effectiveness, it is not practiced by the audit office.
The last roadblock, No. 9, since the Department of Defense broken
accounting system is obstructing the audit process, contracts designed
to fix that system need to be assigned a much higher audit priority.
These mighty barriers stand between all the promises and reality. IG
Heddell and Deputy Blair must find a way to tear down these walls.
Otherwise, audit reform and transformation will never happen. These
unresolved issues will demand tenacious watchdogging by my oversight
team and by all other oversight bodies as well, including the
Committees on Armed Services and Appropriations. My oversight staff
will keep reading and evaluating the Office of Inspector General audits
until steady improvement is popping up on my oversight radar screen
every day.
I yield the floor.
I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
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