[Congressional Record (Bound Edition), Volume 157 (2011), Part 9]
[Senate]
[Pages 12300-12301]
[From the U.S. Government Publishing Office, www.gpo.gov]




              DEFENSE DEPARTMENT INSPECTOR GENERAL AUDITS

  Mr. GRASSLEY. Mr. President, at least two times in the last couple of 
months I have come to the floor to tell my colleagues about some work I 
am doing on investigation of waste, fraud, and abuse in the Defense 
Department and primarily to focus them on the work of the Inspector 
General's Office in regard to how they do audits. So I come to the 
floor today to renew my call for better audit reports.
  As a Senator dedicated to watchdogging the taxpayers' money, audits 
are a primary instrument in my toolbox. They are like a hammer and a 
wrench. They are the tools of the trade. But like other Members of 
Congress conducting oversight, I can't do audits. We don't have staff 
for that, so we must rely on the inspectors general of the various 
departments to do the independent audits of the work of those 
departments. So today I speak about the Defense Department inspector 
general.
  The audit should be the inspector general's primary weapon for 
rooting out fraud, waste, and theft. Audits should be the tip of their 
spear, and that spear should have a very sharp point. The mere 
possibility of audit should have the fraudsters--people who commit 
fraud--quaking in their boots, but that is not the way it is, at least 
not at the Defense Department.
  The audit weapon belonging to the Defense Department's inspector 
general is not as effective as it should be. This problem is not 
entirely the inspector general's own doing. The broken Defense 
Department accounting system is also to blame. It is incapable of 
generating accurate and complete finance and accounting data. When the 
books are in shambles, as they are, then there are no audit trails to 
follow, and following the money is how we get to the bottom of things 
when it comes to waste, fraud, abuse, and mismanagement. Of course, 
that makes the auditor's job doubly difficult. So the auditors need to 
adjust the audit strategy to meet the challenge that there is not a 
very good financial management system within the Defense Department.
  As a watchdog, degraded audit capabilities give me serious heartburn. 
It puts the taxpayers' money in harm's way. When we have unreliable 
accounting data coupled with ineffective auditing, theft and waste can 
thrive undetected. Those concerns are the driving force behind my 
ongoing audit oversight review.
  Starting in January of 2009, I began receiving anonymous letters from 
whistleblowers. They alleged gross mismanagement in the audit office. 
In response, my staff initiated an in-depth oversight review. It 
focused on audit reporting by that Inspector General's Office.
  On September 7, 2010, I issued my first report. It evaluated 113 
audit reports issued in fiscal year 2009. That study determined that 
those audits, which cost the taxpayers about $100 million, were not on 
target. I offered 12 recommendations for getting the audit process back 
on track.
  Inspector General Heddell responded to my report in a very positive 
and constructive way. He promised to ``transform the audit 
organization.'' The newly appointed deputy for auditing, Mr. Dan Blair, 
produced a roadmap pointing the way forward. He, too, promised reform 
and transformation and the creation of a ``world-class oversight 
organization.'' All of this, of course, was music to my ears. All 
signals were very encouraging. But the big question before us now is 
this: When will the promised reforms begin to pop up on the radar 
screen? And that radar screen is our further reading of additional 
audits as they come out this fiscal year and into the future. When will 
we see sustained improvement in audit quality?
  To establish a solid baseline for assessing the highly touted 
transformation plan, my staff took another snapshot of recent audits. 
My latest oversight review is best characterized as a report card, and 
it was issued on June 1 of this year. Each of the 113 unclassified 
reports published in fiscal year 2010 was reviewed, evaluated, and 
graded. After each report was graded, all the scores for each report on 
each rating category were added up and averaged. This created a 
composite score for each of the 113 reports.
  Although 15 top-quality audits are highlighted in the report card, 
the overall score for all 113 was D-minus. That is low, I know. Maybe 
the score should have been a little higher. Obviously, the grading 
system isn't perfect. It may need some fine-tuning, and we are working 
on that. But I still believe it provides a rough measure of audit 
quality.
  Clearly, none of the 2010 reports reflected any reforms that 
Inspector General Heddell put in place in December of 2010 because all 
those reports were

[[Page 12301]]

published 3 months before the reforms went into place before October 1, 
2010. That was a good 3 months before those reforms were approved.
  Shortly after my report card was issued, Inspector General Heddell 
pounced on it. He objected to the low score. He complained that it did 
not adequately reflect $4.2 billion in what he calls ``achieved 
monetary benefits'' identified in the 2010 audits.
  To address Mr. Heddell's concerns, I had my staff ask the audit 
office to prepare an information paper on the reported savings. That 
document was provided to me on June 20. I call it a ``crosswalk.'' It 
takes me to the exact page in each report where savings are discussed 
and identified. This document lists $4.2 billion in ``identified 
potential monetary benefits'' and $4.2 billion in ``collections.'' 
These alleged savings were uncovered in 19 reports, including one 
classified report we didn't look at.
  After reviewing the crosswalk, I concluded that Inspector General 
Heddell had a legitimate gripe about the report card. The report card 
should have included a section on savings. The first time around, we 
did not give sufficient credit for those accomplishments. As a 
practical matter, we gave those reports only partial credit for 
pinpointing waste. I say partial credit because six of those reports 
were given top scores in my report card, so they did get some credit--
just not enough credit.
  In order to fully assess Mr. Heddell's complaints, I directed my 
staff to reassess the scoring process for all 18 unclassified audits. 
In rescoring the reports, we asked ourselves key questions such as, Was 
the audit objective aligned with the inspector general's core mission? 
Did contract audits connect all the dots in the cycle of transactions? 
Did they match contract requirements with payments? Did the audits 
answer the key oversight question, which is, Did the government receive 
what it ordered at an agreed-upon price and schedule? Did the audit 
verify the exact dollar amount of alleged fraud and waste using primary 
source payment records? I do not have time to go into this, but the use 
of primary source payment records is very important if we are going to 
follow the money, and following the money is where we determine whether 
there is fraud, waste, and abuse.
  Other key questions we asked were: Were the recommendations tough and 
appropriate? Did they recommend accountability for waste and 
mismanagement? Did they propose workable remedies for recovering 
improper payments? How quickly were the audits completed?
  The answers to these questions take us right to the heart and the 
soul of an audit--any audit, in any department. They are a good 
yardstick for measuring audit quality.
  This is my bottom line: Were the audits hard-hitting, down-in-the-
trenches audits that produced results or were they softball audits with 
no redeeming value?
  After completing the review, my staff upped the overall score of 
those 18 reports from a D-plus to a solid C.
  Excellence in several reporting categories pushed the scores up as 
follows: All reports were highly relevant and were aligned with the 
core mission. They detected and reported $4 billion in waste. Most 
reports offered reasonable recommendations for recovering unauthorized 
payments.
  Poor performance in other categories pulled scores down as follows: 
Most reports did not verify exact dollar amounts of waste using primary 
source payment records. I wish to emphasize again the necessity of 
using primary source pay records. Follow the money. Most dollar amounts 
for alleged savings were taken from untested Army budget documents. 
Most did not offer meaningful recommendations for holding responsible 
officials accountable for waste and mismanagement. Of course, in 
government, if people are not held responsible for what they do and 
accountable for what they do, then, of course, we do not see change in 
culture. So accountability and responsibility and holding people 
responsible is very important if we are going to bring changes. Then, 
lastly, I would say, most reports were old and stale, having taken far 
too long to complete.
  I wish to point this out by saying, the single biggest factor that 
keeps dragging the scores down into the pits is timeliness or lack of 
it and, in most cases, the lack of it. The Audit Office continues to 
publish old, stale reports. Of these 18 reports we reviewed and on 
which I am reporting to you, they took an average of 17 months to 
complete. Eight took a total of 168 months to complete, and none of 
these numbers includes the 4 to 6 months it takes to get an audit 
started. So we are looking at a minimum of 2 years to complete top-
quality audits.
  Under my scoring system, audits completed in 6 months or less earn a 
grade A, those completed in 12 months earn a C, and those that take 
more than 15 months get an F.
  These 18 reports, of course, as we can see from my comments, were 
over the top. So they earned a grade of F for taking so long to finish.
  I have said this before, and I wish to say it again. The power of 
top-quality audit work is greatly diminished by stale information. Out-
of-date audits have little impact--with the passage of time, records 
disappear, particularly financial records--because following the money 
is a very important part of good auditing. People retire and move on. 
Money cannot be recovered and no one can be held accountable, and 
without people being held accountable, we do not change the culture of 
organizations.
  The new Deputy for Auditing, Mr. Blair, is part of the problem. He 
has not set any goals for audit completion times. I hope he will do 
that. Reasonable goals need to be established.
  I would like to summarize. In my summarization, I would point out 
that I wish to talk about the $4 billion that was potential waste and 
was saved. These 18 reports clearly put the spotlight on $4 billion of 
potential waste. The auditors detected it. They reported it. They did 
exactly what they are supposed to do. That is a major accomplishment 
worthy of recognition and praise. So they ferreted out waste. They 
presumably saved the money.
  But what happened to the $4 billion? Busting $4 billion in waste did 
not produce $4 billion in savings. The savings touted by Inspector 
General Heddell were lost, in a sense.
  Then there is a technical lingo around government: The money got 
reprogrammed. In plain English, that means it got put to better use but 
not necessarily saved. As seen through the eyes of this skeptical 
watchdog, all the loose change got scooped up and shoveled out the 
backdoor and into the jaws of the Pentagon spending machine on some 
other program. That machine is known to have an insatiable appetite for 
money.
  The disappearance of the savings is part semantics. The word 
``waste'' is not in the audit lexicon. Sprinkling waste with perfume 
and calling it savings does not make it savings. Perhaps if the 
auditors started calling it what it is--waste--it might be easier to 
reach the Promised Land, but they never got there. Mr. President, 99.9 
percent of the $4 billion got spent. Only in government could we spend 
all the money and still claim savings.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. THUNE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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