- The Washington Times - Wednesday, April 23, 2014

Contractors for the top four U.S. intelligence agencies have been investigated for billing fraud that cost the federal government millions of dollars over the past decade, according to a new Pentagon watchdog’s report.

The report, released last week by Deputy Inspector General for Intelligence Anthony Thomas, found that out of 128 unclassified cases of contractor misconduct that were investigated, 89 involved false billing claims for work the contractors had not completed resulting in an overall loss to taxpayers of $4.34 million.

According to the report, 68 percent of the cases involved time-and-attendance fraud by individual contractor-employees or groups of contractor employees. In the 86 cases involving individual employees, the loss per employee ranged from $433 to $265,698. The average loss was nearly $42,000 over ten years.

In most cases, the losses were fully recouped from the contractors’ employers, according to the Pentagon report.


The contractors were hired by the National Security Agency, the Defense Intelligence Agency, the National Reconnaissance Office and the National Geospatial-Intelligence Agency.

A spokeswoman for the Pentagon’s inspector general office, Bridget Serchak, told the Center for Public Integrity that because the report was not considered to be an audit or investigation, some details were beyond the office’s scope.

The OIG referred 85 of the 128 cases review to the Department of Justice or local prosecutors.

The names of audited contractors were not included in the report, but the watchdog did indicate that none of the companies had been included on the so-called “Excluded Parties List” with the General Services Administration, which bars companies from further federal contracting. The OIG recommended that GSA officials improve their system to automatically flag suspicious companies for inclusion on the excluded parties list, even if the employees are terminated and no longer have access to classified information.

Some experts say that the current process to disqualify contractors takes too long.

“That’s been a problem in terms of long time lag between the incident and whether the ultimate decision on whether or not to suspend or debar the contractor,” said Neil Gordon, an investigator for the Project on Government Oversight, which has done extensive research on contracting fraud.

While the Defense Intelligence Agency mostly agreed with the auditors recommendations, Director of Security Stephen Norton wrote in his response that continuing to pursue suspension or debarment of government contractors who had already been terminated would be “inconsistent with being good stewards” of taxpayer funds.

Mr. Norton argued that the current system of reporting investigations to one of the intelligence community’s databases on personnel security clearances should be sufficient to flag contractors accused of misconduct.

However, according to the report, the information on the databases was rarely updated. In fact, out of the 128 cases studied, only 34 misconduct investigations were properly indexed. Thus, the watchdog recommended that the intelligence agencies revamp their record-keeping practices to prevent further billing scams.