Study: DOD Efforts to Combat Waste and Fraud Are Incomplete and Inadequate

The Government Accountability Office (GAO) released a report that found the Department of Defense has not finalized and implemented a comprehensive approach to combat department-wide fraud.

Despite the Pentagon regularly signing contracts worth hundreds of billions of dollars, the Department’s ability to conduct fraud risk assessments and report procurement fraud risk remains incomplete and inadequate. “The Pentagon doesn’t seem to want to get serious about combatting the fraud, waste, and financial mismanagement that has been its legacy for decades,” said Sen. Bernie Sanders of Vermont. “They don’t seem to want to get serious about spending taxpayer dollars wisely and effectively. Well, I think we can all agree, that is absolutely unacceptable.” Senator Bernie SandersSenator Bernie Sanders

Sanders said that the time is long overdue for the Defense Department to be held to the same level of accountability as the rest of the government.  “This independent report shows that the Trump Administration utterly failed to address the Pentagon’s longstanding problems with financial management, including procurement fraud,” said Congresswoman Carolyn Maloney. “This failure to safeguard taxpayer dollars is completely unacceptable, and I urge the Biden Administration to quickly and fully implement GAO’s recommendations and put the Defense Department on a path to operate more efficiently and effectively, with the confidence that it is not spending money on fraudulent contracts.”  The Pentagon is the largest contracting agency in the federal government and generally accounts for about two-thirds of all federal contracting activity, obligating more than all civilian federal agencies combined. GAO’s review examined Department of Defense fraud risk management activities for the period of October 2019 through September 2020. “Fraud poses a significant risk to program integrity and erodes public trust in the government,” according to GAO’s report. “In fiscal year 2020, DOD obligated approximately $422 billion on contracts. The scope and scale of this activity makes DOD procurement inherently susceptible to fraud.” GAO also reported that, “given the billions of dollars DOD spends annually on procurement, failing to manage and mitigate fraud effectively may ultimately adversely affect DOD’s ability to support the warfighter.”  GAO’s findings included:

  • The full extent of fraud associated with Pentagon contracting cannot be fully determined at this time, due to faulty and incomplete reporting and implementation.
  • DOD’s Fraud Reduction Task Force – a cross-functional team tasked with prioritizing fraud risks and identifying solutions – remains incomplete with almost 20% of positions vacant, including representatives from the Air Force and Army.
  • Half of the components evaluated were not reporting on procurement fraud risks in their most recent risk assessments, as required by DOD.

GAO recommended that DOD takes needed steps to combat procurement fraud, such as filling the vacant positions on the task force and updating policies and practices to strengthen fraud risk assessments. Even before Sanders and Maloney requested this report, there was a long-documented history of waste, fraud, and abuse at the Pentagon. In 2018, DOD reported to Congress that from fiscal years 2013 to 2017, over $6.6 billion had been recovered from defense contracting fraud cases. In 2020, the DOD Office of Inspector General reported that 395 of its 1,716 ongoing investigations – or approximately one-in-five – are related to procurement fraud.  Since 1995, DOD financial management has been on GAO’s High-Risk List of operations that are “vulnerable to waste, fraud, abuse, or mismanagement, or in need of transformation.” Congress mandates all federal agencies to comply with annual independent audits, but the Defense Department remains the only U.S. federal agency that is unable to pass a clean audit opinion – preventing GAO from expressing an audit opinion of the entire federal government. Over the past two decades, virtually every major defense contractor in the U.S. has paid billions of dollars in fines and settlements for misconduct and fraud – all while making significant profits on government contracts. About half of the Pentagon’s budget goes directly into the hands of private contractors. Read the full GAO study here.