WASHINGTON, D.C. – U.S. Senator Claire McCaskill today took to the Senate floor to demand accountability from the Department of Defense in the wake of a Government Accountability Office (GAO) report uncovering serious problems at the Defense Contract Audit Agency (DCAA), the agency tasked with reviewing billions of dollars spent on Department of Defense contracts.  In a report released yesterday, the GAO found that supervisors at the DCAA used intimidation and threats to get their employees to alter audits in favor of contractors. 

 

McCaskill, the former state auditor of Missouri, said in her speech, “[The DCAA has] gotten caught in what could be the biggest auditing scandal in the history of this town, and I'm not exaggerating here. I will guarantee you, as auditors around the country learn about this, they're going to have disbelief and raw anger that this agency has impugned the integrity of government auditors everywhere by these kinds of irresponsible actions.”

 

After reading the GAO report on Wednesday, McCaskill sent letters to Secretary of Defense Robert Gates and April G. Stephenson, the director of the DCAA calling for people to be held accountable.  McCaskill, in her floor speech today, again called for terminations at the DCAA, and plans to ask for congressional hearings to further investigate the issue.

 

“What we have found out in the last 24 hours is no one is paying attention to the way we're spending that money,” McCaskill said in her speech. “It makes me sick to my stomach, and I'm angry. I will tell you this senator is not going away on this issue.”

 

 

 

Mr. President, there was an incredibly dark cloud that passed over Washington yesterday. I think the saddest thing about this very dark cloud is the fact that there wasn't an immediate outcry from every corner of this building and every office in the Pentagon. One of the most frustrating things about Washington is the attention span of so many in Washington and the search for the headline that is the most sensational.  So it's no wonder that news about auditing doesn't bust out.  But I come to the floor right now to try to emphasize the crisis that we are facing right now in terms of the Pentagon and of taxpayer dollars.

 

Let me briefly explain the two agencies involved. One is the Defense Contracting Audit Agency (DCAA).  Now, what is DCAA? That is part of the problem. Nobody knows what it is. Nobody knows what it does. DCAA is the auditing agency in the Department of Defense that is responsible for auditing the contractors. Now think about that for a minute – 3,500 people are employed by this agency, and they are our eyes and ears into contractor practices at the Department of Defense. Now, we're talking serious money here.  We're talking about hundreds and hundreds and hundreds of billions of dollars.

 

Now, you would think if we have 3,500 people working full time to audit the contractors, that we should all feel good about that. And, frankly, before yesterday I kind of felt good about it. As I learned about all the auditors at the Department of Defense, I thought, well, I'm glad we have an agency whose responsibility it is to get to the bottom of the money that comes out of our treasury for contractors – until yesterday.

 

Now, the other agency involved is the GAO.  I know the initials GAO are thrown around all the time, but let me explain what GAO is. GAO is the Government Accountability Office. They are what I would call the ‘papa bear’ of auditors in government. They are the auditors that look at all parts of government, many times in response to requests by Congress, but many times in response to a hotline call they've gotten from people within government.

 

The GAO started getting hotline calls about the practices at DCAA. Well, this is enough to worry an auditing agency, that they're getting hotline calls on an auditing agency. This is enough to get their attention. So GAO started this audit of the Defense Contract Audit Agency based on complaints made to their fraud hotline. And here's the allegation – are you ready for this?  Here's the allegation: that these audits were being changed with no factual basis at the direction of supervisors, without evidence to support the changes, to help the contractors. This is a wildly sensational claim within the world of auditing.  This is the kind of claim that, frankly, most auditors would probably not take seriously because it's so outrageous. But because there had been so many calls at the hotline, GAO went to work – over 100 interviews, months and months and months of work.

 

Yesterday they issued the report. They looked at 13 different audits named in the complaints and found that, in every single audit, favorable findings for the contractors had no backup in the work papers. What's that mean?  If you're an auditor, your job is to find the facts.  So everything you put in an audit has to be backed up by what are called ‘work papers’. That means that anybody at any time could go in and find the factual evidence to support every line in the audit. That is part of government auditing standards. 

 

What else did GAO find?  You're not going to believe this; you're not going to believe how bad this is. They found that supervisors dropped findings and changed opinions without the evidence to support it. They found several instances where auditors were threatened if they did not change their findings to support what the supervisors wanted. GAO found this practice to be so pervasive at two of the three locations, they called it – and I'm quoting now – ‘a pattern of frequent management actions that served to intimidate auditors and create an abusive environment’.

 

These auditors were intimidated by supervisors and made to tell them what they were telling GAO. So not only were the supervisors on the auditors to do findings favorable to the contractors, they also got on them when they started talking to GAO. They intimidated them into telling them what they were telling the investigators, the auditors from GAO. Their supervisors made them feel their jobs were threatened. At one location auditors were sometimes given 20 days to finish an audit. And if it wasn't enough time to do the audit work, they said just do it. Just do it with what you've got. Supervisors admitted to not reviewing the work papers.

 

Okay, that doesn't sound like a big deal, right?  Who reviews work papers? Let me tell you, in the world of auditing, it is a very big deal, because this is how an audit works. The field auditors gather information, the work papers, the factual information, and then it goes through a series of reviews and checks. It is the ultimate quality control in an audit, and it is unheard of for an audit to be issued without review up the line. That review is how you cull out the information that is incorrect and make sure that everything in that audit is factual and objective.

 

Now, here is a very good example of how serious and systemic this problem is. DCAA actually agreed with a contractor – one of the five largest contractors in the country – ahead of time what items would be reviewed for the audit. It's like giving a kid the answers to the test. There's no point in doing an audit if you tell the auditee ahead of time, ‘we're going to test you on this.’ Here's the amazing thing: even with the inside info, the DCAA auditors found the practice to be impracticable. The new auditor was threatened with personnel action. In every single one – all 13 audits that were reviewed – the GAO found that government auditing standards were not followed.

 

There's a book in auditing called the yellow book. It's the bible of auditing. It is the generally accepted government auditing standards, and every government auditor is required to follow these standards. Once again, auditors have a lot of professional pride about the objectivity of their work and about the standards they follow. It wouldn't be effective if you had auditors that were auditing the government of Michigan and auditors auditing the government in San Francisco and auditors auditing the Pentagon all using different methodology to do audits. So this standard is in fact revered within the government auditing world.

 

Now here's what's amazing. 13 audits were looked at. Did one of them not meet standards?  No. Did two of them not meet standards? No. Every single audit failed government auditing standards. 13 out of 13 – 100 percent. This is mind-boggling that we would have 3,500 people watching Defense Department contractors in this country, and every audit that was looked at failed by government auditing standards. 9 of the 13 had audit opinions changed without documentation and without work papers to support the charges. Three had evidence that showed the DCAA auditor tried to perform his or her job and his independence was impaired by his supervisors. 9 of the 13 auditors had conclusions not supported by the work of the auditors.

 

Now, they got caught. They've gotten caught in what could be the biggest auditing scandal in the history of this town, and I'm not exaggerating here. I will guarantee you, as auditors around the country learn about this, they're going to have disbelief and raw anger that this agency has impugned the integrity of government auditors everywhere by these kinds of irresponsible actions. So, you would think – and, by the way, auditors are really conservative with other auditors. Every auditing agency has peer review. By the way, GAO has always passed all of their peer review without any problem.

 

I know when we were getting peer reviewed when I was the state auditor in Missouri it was a very nervous time because auditors come into your office from all over the country and they pore through your work. They go through your work papers. They check all of your review. They, in fact, as an objective third party, look and make sure you are doing objective, professional government auditing work. But they're very conservative because, you know, it's peer to peer, right? It's hard to criticize your peers. It's hard to call out another auditor. That's why this is such a big deal. It is damning. This audit is damning of DCAA, the job it should be doing to protect government taxpayers from the incredible waste and inefficiency in the contracting of the Department of Defense.

 

So another part of the audit is you respond to the audit. The auditee gets an opportunity to speak in the audit. It's a very good thing, because the auditee, if they really firmly believe that the audit is not justified, they have an ability to give their side of the story. It also allows the opportunity to make sure you're exchanging information. So that response in the audit is also a part of government auditing standards.

 

Now, let me tell you when [DCAA] got this audit, it was a dark day for them. And they had a choice. DCAA had a choice. They could have come forward and said we've got a big problem here, and we've got to clean house, and announce that they were firing people in all of these offices, that supervisors were being fired and that they were going to clean up their act. That was one choice they had. To admit they'd been caught in this scandal and to admit they would make it better.

 

But what did they do?  What did DCAA do as a result of this incredible audit report? They disputed – they disagreed – quote, unquote – ‘the totality of the audit’. Here's what's so insulting about them disagreeing with the totality of the audit: they have no evidence to back it up. They have nothing to refute the voluminous – I mean, this is not, this is not a small audit.  This is page after page after page of documentation. They dispute the facts about the contractor being given prior notice that he would be audited in the above case, even though there's clear evidence, clear evidence, to support this conclusion in the DCAA work papers. They said, believe it or not – wait until you hear this – quote – "they are currently operating at a satisfactory level of compliance with government auditing standards."

 

Well, satisfactory?  13 out of 13 failing government standards, and that is satisfactory?  How dare they. How dare they say that is satisfactory. They flatly stated they don't believe any supervisor's harassed or intimidated staff to removed findings. The evidence is there. The fact that they are denying the evidence that is there shows the level of dysfunction in this auditing agency.  They don't seem to be too concerned about zero percent of these audits meeting government standards.

 

You know, the Department of Defense has been on the high risk list of this government for more than a decade. Scandal after scandal has rolled out of the Department of Defense on contracting. It is very conservative. I took a trip to Iraq just on contract oversight with an auditor's eye, meeting with the people that oversee the contracts in Iraq. And I will tell you conservatively – and auditors are very conservative – conservatively, I think we burned up more than $150 billion in just pure contracting abuse. We've had hearings where weapons systems after weapons systems come in 100 percent more expensive three or four years off time. And all this time that we have been wasting hundreds and billions of dollars, the fox was in the chicken coop.

 

This situation demands hearings and if somebody doesn't lose their job at DCAA before nightfall it’s because they think they can sweat it out. They think we're not going to pay attention. They think we're going to move on to the next headline, the next campaign stop. They think we're so worried about all the other problems that no one is going to notice.

 

This auditing agency has been exposed as being fundamentally corrupt in the way they issue audits. It calls into question every single audit done by this agency. And if we don't take it seriously, if we don't give it our attention, if we don't demand that the fox get out of the chicken coop and take care of taxpayer dollars, it’s ultimately our national security at stake.  All the needs we have for our men and women who fight for us, all the needs of our active military, all the technology that we need to stay secure and safe, all of it is so important to our nation.

 

What we have found out in the last 24 hours is no one is paying attention to the way we're spending that money. It makes me sick to my stomach and I'm angry. I will tell you this senator is not going away on this issue. If I have to stand on this floor every day for the next six months I'll do it to get someone fired at that agency and to get them to clean up their act.