[Congressional Record (Bound Edition), Volume 157 (2011), Part 6]
[Senate]
[Pages 8711-8714]
[From the U.S. 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 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

[[Page 8712]]

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 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.

[[Page 8713]]

  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. 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;

[[Page 8714]]

  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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