The Department of Defense (DoD) reported almost $11 billion in confirmed fraud between 2017 and 2024, and lawmakers and government watchdogs argued today that the Pentagon is not taking its rampant procurement fraud problem seriously enough.

During a June 4 hearing before the House Oversight and Government Reform Subcommittee on Government Operations, lawmakers and an official from the Government Accountability Office (GAO) said that fraud risk management is not a top priority for DoD leadership.

GAO has published three reports since 2019 on DoD procurement fraud risk management, and this February, GAO added fraud risk management to the existing DoD financial management area on GAO’s High Risk List.

“Against this backdrop, DoD asserted that fraud isn’t a significant problem, challenged our adding fraud risk management to the High Risk List, and disagreed with key findings and more than half of our recommendations in our three reports,” Seto Bagdoyen, a director of forensic audits and investigative services at GAO, told lawmakers.

“Regrettably then, DoD’s indifferent posture, including lack of timely action, suggests that fraud risk management isn’t yet a top leadership priority,” he said. “Unless it comes from the very top, it’s not going to happen.”

Notably, subcommittee Chairman Pete Sessions, R-Texas, said that he and Ranking Member Kweisi Mfume, D-Md., plan on “going across the river to DoD to make sure that they understand that this is unacceptable,” adding, “They’ve got to understand there is fraud.”

Rep. Sessions also asked if Rep. James Comer, R-Ky., chairman of the full House Oversight and Accountability Committee, would join them on the trip along with the ranking member of the full committee, to which Rep. Comer said, “Absolutely.”

Chairman Sessions stressed that while he and Ranking Member Mfume are concerned about the procurement fraud within the DoD, they are even more alarmed by the department’s apparent refusal to acknowledge it.

“We are more concerned that they ignore [the fact] that fraud is present in this,” Chairman Sessions said.

“The hope is now, with a new administration, a new secretary, that there will be an emphasis not only on attempting to do something but be willing to open up their eyes to the recommendations that have come from professional groups like GAO and inspectors general,” he added.

Data Analytics Called a ‘Good Starting Point’

Despite the resistance from the DoD to GAO’s recommendations, Bagdoyen said he is also hopeful that the new administration will prioritize fraud risk management.

He noted that some of that resistance “seems to have softened over time,” adding, “The people we’re working with at DoD are trying to implement the recommendations.”

For example, Bagdoyen said he believes implementing data analytics would be “a good starting point” for the DoD – something he said Pentagon officials he’s talked with plan to prioritize.

Bagdoyen explained that data analytics activities to identify and assess fraud risks “are essentially nonexistent” across the DoD currently, something that a February GAO report revealed.

The report explained that while DoD updated its fraud risk management strategy in August 2023, the new strategy doesn’t include data analytics as a method for managing fraud risk nor does it provide direction to conduct data analytics.

Notably, when asked by Ranking Member Mfume to characterize the current state of DoD data integration for fraud detection, Bagdoyen put it bluntly: “Being at the starting line would be a charitable way to describe it.”

“They’re just not there. The data are massive. They are difficult to work with. We spent months cleaning up the data,” Bagdoyen added.

He urged the department to prioritize building a data analytics capability, and then move on to the data, “to clean them up, to make them usable, make them reliable and analyzable … to make sure that the end result is actionable.”

Ranking Member Mfume joined him in that call, saying, “Data must be able to talk to data before the money walks out of the door. I’m not suggesting that’s how you fail seven straight audits, but it’s certainly not the way that you pass them.”

Bagdoyen said that GAO expects to receive an updated fraud risk management strategy from DoD “later next month, and it’s our understanding that DoD will make data analytics an explicit requirement in that strategy.”

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Grace Dille
Grace Dille is MeriTalk's Assistant Managing Editor covering the intersection of government and technology.
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