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Defense Audits Kept Behind Closed Doors

Examinations of military purchases rarely face public scrutiny. Officials value confidentiality, but critics worry about waste and fraud.

November 21, 2004|Paul Pringle | Times Staff Writer

A Pentagon inspector general's report made headlines this summer by slamming the Air Force's purchase of 50 transport planes that jumped in price and remained unfit for combat duty five years after delivery of the first aircraft.

But the findings were old news to the Defense Department's own contract auditors. Internal Pentagon memos show that the auditors raised many of the same concerns about the plane, Lockheed Martin Corp.'s C-130J, in the late 1990s.

The memos on the rising costs had scant effect within the Defense Department, but "would have made a difference if they had been public," said a veteran auditor familiar with the C-130J.

In nearly all Pentagon acquisition programs, however, the auditors' work is routinely shielded from the public. Despite spending scandals that seem to afflict the military like a recurring virus, a fraction of the 40,000 audits performed annually faces outside scrutiny.

Officials say the procurement business requires confidentiality, but watchdog groups, whistle-blowers and some congressional critics don't buy it. They say the lack of disclosure at the little-known Defense Contract Audit Agency can allow millions in cost overruns, waste and fraud to fester for years before any corrective action is taken.

The auditors pore over acquisition proposals before contracts are awarded. They later examine billings and payments. If they discover evidence of fraud, they are required to report it to the inspector general. The auditors themselves have no enforcement power.

Other federal agencies, though not all, publicize most of their audits. They include the Government Accountability Office, which conducts audits for Congress.

The advocates for more disclosure say that the 3,500 defense auditors form a front line of resistance against rip-offs, and examine the full range of military contracts in the greatest detail. They also say the need for public access to the audits has become urgent because of the billions of dollars flowing to Iraq. But ferreting out the documents is harder under the Bush administration's post-Sept. 11 restrictions on access to defense-related material, they say.

And they contend that a decade-long push to streamline procurement has allowed contractors to undermine the auditors' mission.

"Things are much worse," said Dina Rasor, an investigator for the Military Money Project, a watchdog organization.

She said publicizing audit summaries might have prevented or reduced cost overruns on numerous weapons systems and military spare-parts acquisitions since the 1980s, when she began advising Pentagon whistle-blowers.

The Defense Department apparently has released just a handful of Iraq-related audits. The Times asked the Army for a precise count two months ago, but had not received an answer as of last week.

Even audits that have been discussed in open congressional hearings are kept from the public. One found that San Diego-based Titan Corp. had deficient payroll records for private translators working for the Army in Iraq, which prompted the Defense Department to withhold payments.

In a Freedom of Information Act request filed about four months ago, The Times sought that audit and others involving Titan in recent years. As of last week, the Pentagon had yet to release even a list of the audits.

Sen. Charles E. Grassley (R-Iowa), in a written statement, said that audits frequently "disappear into a black hole, never to be seen again."

Peter W. Singer, a national security fellow at the Brookings Institution, said taxpayers had no way of knowing if they were getting their money's worth. "That's really where you're going to catch cost overruns in real time -- in time to do something about it," Singer said of the audits.

Pentagon managers and defense industry representatives say audits like those on the C-130J must stay locked away to safeguard the government's negotiating strategies and contractors' private data. They add that audits can contain errors that might unfairly tarnish contractors if publicized.

"The biggest fear that any company has is that their proprietary information would be made public," said Larry Allen, executive vice president of the Coalition for Government Procurement, a contractors lobby association.

William Reed, director of the Defense Contract Audit Agency, declined to be interviewed, but in written answers to questions said that many audits were "part of the deliberative process.... Hence, disclosing even the name of the program or contractor could impair the negotiation."

The agency does publicize the annual savings the auditors net for taxpayers. Last year, the figure was $2.2 billion, down from $2.5 billion in 2002 and $3.2 billion in 2001.

Proponents of increased oversight say they take little comfort in those numbers because the auditors' hush-hush culture makes it impossible to determine whether many instances of reckless spending go undetected. They also say contractors can use the proprietary exemption as a smoke screen.

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