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Federal agencies are increasingly reliant on contractors but many struggle to manage them and therefore expose billions in taxpayer dollars to fraud, waste and mismanagement.

The Government Accountability Office identified management weaknesses and internal control deficiencies as roadblocks to contractor oversight. The watchdog also found problems with the Defense Contract Audit Agency, the Pentagon’s contract management office. The agency experienced conflicts of interest between auditors and contractors, insufficient audit testing, and inadequate supervision.

The Department of Defense accounts for 70 percent of federal contract spending, which amounts to $367 billion. Since 2005, the cost of federal contracts has increased by $100 billion.

“The sheer size of federal contract spending poses significant risks if effective processes, controls and oversight are not in place,” the GAO said.

The GAO singled out the Pentagon, Department of Energy, and National Aeronautics and Space Administration as agencies with risky contractor oversight. The GAO also said the Centers for Medicare and Medicaid Services failed to review contractor rates and identified $90 million in questionable costs.

The report highlights a multibillion-dollar, nuclear construction project in which the Department of Energy relied entirely on the DCAA, which performs contract oversight for other government agencies as well. The Department performed little to no review of contractor invoices, which amounted to $40 million to $60 million per month.

“DCAA has taken action on many of our recommendation but continues to experience significant auditing quality problems across offices in all DCAA regions,” the GAO said. The watchdog attributes the shortfalls to an office culture focused on facilitating contract awards and an ineffective audit structure.

FAST FACT: The cost of federal contracts in 2010 totaled $535 billion.

Following are other new watchdog reports released by the Government Accountability Office (GAO), various federal Offices of Inspector General (OIG), and other government entities.


• Housing an archive of lethal bacteria strains does have an advantage: it could help to determine the origins of epidemics or biological warfare attacks. The defense advisory panel suggests creating a “Library of Congress” for disease-causing pathogens. The National Biodefense Reference Collection already has 30,000 samples of bacteria, viruses and toxins. (JASON)

• Rare tropical diseases, like dengue fever and leprosy, are at risk of affecting 2 billion people worldwide. The diseases are concentrated among the world’s poorest, killing an estimated 534,000 people annually. Population shifts and climate changes increase the vulnerability of the U.S. population to these diseases. (Congressional Research Service)


• A Texas-based food export company knowingly shipped expired food to troops in the Middle East. The owner had employees change expiration dates on food products and conspired with the owner of a transportation company to file false claims and overstate the cost of shipping the food. The company owner will pay $15 million and faces two years in prison. (USDA Inspector General)

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