[CTRL] Pentagon Anti-Fraud Agency Commits Fraud

[William Shannon]

http://dailynews.yahoo.com/h/ap/20010606/pl/watchdog_fraud.html Wednesday June 6 1:59 AM ET Anti-Fraud Agency Fakes Documents By LARRY MARGASAK, Associated Press Writer WASHINGTON (AP) - The Pentagon ( news - web sites) agency charged with rooting out fraud destroyed documents and substituted fakes to win a passing grade in an audit of its own operations, according to an internal inquiry. ``It's a very sad day indeed when the watchdog gets caught cheating,'' Sen. Charles Grassley (news - bio - voting record), R-Iowa, wrote Defense Secretary Donald H. Rumsfeld in demanding to know more about the incident. The document destruction cost the government thousands of dollars last year and ``could adversely affect the confidence of the public'' in Defense Department audits, says the report obtained by The Associated Press. The incident occurred as the Pentagon inspector general's work was about to be reviewed by auditors working for the Internal Revenue Service (news - web sites)'s inspector general. The review was part of a routine program where one government agency's inspector general's office checks the work of another. The unsuspecting IRS reviewers found ``no problems'' with the Pentagon's audit work after poring over the phony documents, concluded the internal report, written by a Defense Department inspector general's employee assigned to investigate her own agency. ``At some point, the majority of original working papers were destroyed,'' the report said. ``The backdating of the re-created working papers misled the ... review team to believe the ... papers were ... done at the time of the audit.'' The inspector general's office and the Defense Department public affairs office refused to discuss the incident. David Williams, the IRS' inspector general, said, ``As soon as we became aware of the allegation and findings, we immediately withdrew our previous opinion'' that gave the Pentagon agency a passing grade. As a result, every Pentagon audit must include a disclaimer that the work fails to meet established audit standards. Grassley, outgoing chairman of the Senate Finance Committee, began investigating the destruction recently after a Pentagon whistle-blower brought it to his attention. While the inspector general is supposed to root out government fraud and waste, the report said, the 983 hours spent creating the fake documents cost the government $63,000. The IRS auditors had selected eight Defense Department audits for review, and senior Pentagon auditors realized that working papers for one of them - a 1988 audit report - would not get a passing grade, the report said. ``Instead of submitting it and suffering the consequences, a decision was made to destroy all the original work papers and to re-create an entirely new set,'' Grassley wrote Rumsfeld. He said 12 to 15 officials in the Defense Department inspector general's office were involved, including senior auditors. Grassley and the internal report said the official who prepared the originals was directed to sign the fake papers even though that auditor did not create the substitutes. The President's Council on Integrity and Efficiency, an organization of federal inspectors general, is investigating the incident. The incident ``has some negative repercussions to the image'' of inspectors general, said Gaston Gianni Jr., vice chairman of the council and inspector general at the Federal Deposit Insurance Corp. Grassley said he's not satisfied with the internal Pentagon review. He wrote Rumsfeld that it ``may have been unwise'' for the Pentagon's deputy inspector general, Robert Lieberman, to have one of his senior deputies conduct the internal investigation and then conclude that Lieberman was not implicated. The senator also said that disciplinary actions were under consideration only for lower-ranking auditors and their immediate supervisors but not senior officials.