IG turns 'blind eye' to DFAS' fudged financial records, Grassley reports

Tuesday - 11/26/2013, 6:59am EST

The numbers simply don't add up. That's the verdict from Sen. Chuck Grassley (R-Iowa) on financial statements from the Defense Department's accounting agency, the Defense Finance and Accounting Service (DFAS).

In addition to potentially falsified financial statements, Grassley reported on the possibility of audit misconduct at DoD. In a press release, the senator said the department's inspector general "seems to have turned a blind eye" to the inaccuracies in DFAS' financial records.

"Audits are a primary oversight tool for rooting out fraud and waste in the government. To protect taxpayers, these government audits must be as good as they can be," Grassley wrote in a joint letter to Defense Secretary Chuck Hagel and DoD IG Jon Rymer.

In Grassley's staff oversight report, he found the work performed by DFAS to be substandard.


"Instead of helping identify where savings can be made, it looks like the Defense Finance and Accounting Service may be trying to hide its own problems by pretending their books are in order."

— Sen. Chuck Grassley


"The DFAS audits were deliberately fumbled and fudged, and all the bungling that took place acted to screen pervasive inaccuracies in DoD's financial reports from public view," the report stated.

The report also said the outside CPA firm used defective audit methods to assess DFAS' practices. Grassley speculated the IG buckled under pressure from DFAS when it tried to conduct oversight on the agency, thus compromising the integrity of the audit process.

"As long as the Inspector General's audit shop remains weak and ineffective, the probability of rooting out much fraud and waste during sequestration is very low," he said. "And, instead of helping identify where savings can be made, it looks like the Defense Finance and Accounting Service may be trying to hide its own problems by pretending their books are in order and then running roughshod over anybody who dares to question their 'clean' audit."

The quality of DoD's IG audits is not a new issue.

"They've made a lot of progress. However, they still have a very, very long way to go," Maj. Gen. Arnold Punaro told Francis Rose on Pentagon Solutions. "So we shouldn't be looking as much at how far they've come, but how far they still have to go."

From 2010 to 2012, Grassley received many anonymous reports from whisteblowers, suggesting weak or falsified IG reports in DoD. In April 2012, Grassley received allegations of misconduct on audits of DFAS' financial statements.

"DFAS' apparent inability to accurately report on its own internal 'housekeeping' accounts of $1.5 billion casts doubt on its ability to accurately report on the hundreds of billions DoD spends each year - as it is required to do under the law," Grassley's report said.

Grassley said his review of the IG audit reports is a "mere snapshot," but it could likely be characteristic of the work performed by DoD's IG as a whole.

"DoD does not know and does not track what it costs them to do activities. They don't know what the full burden cost of an active duty personnel is, they don't know what the full burden cost of a defense civilian is," Punaro said. "You have to know what things cost. If you don't know that, you're not going to be able to make the improvements."

Punaro said the agency could more easily make the improvements by modernizing its practices and technology.

"DFAS, like a lot of other elements of the Department of Defense, is mired in antiquated procedures, antiquated technology that do not measure up to world class business standards that we use in modern business to deal with these kind of issues," he said.

The issues with oversight are not limited just to DoD, Punaro said. "The lack of accountability in government is a huge issue. And we see it on everything from the [HealthCare.gov] website, the rollout of the new health care plan. ... They are not using world class business practices."

RELATED STORIES:

Fake numbers add up to trouble for DFAS

Leadership from the top, well-trained workforce are key to DoD audits, experts say

DoD on track to achieve audit readiness